Earnings per Share/Capital Stock:

In accordance with the accounting guidance for participating securities and earnings per share (“EPS”), Registrant uses the “two-class” method of computing EPS. The “two-class” method is an earnings allocation formula that determines EPS for each class of common stock and participating security. AWR has participating securities related to restricted stock units that earn dividend equivalents on an equal basis with AWR’s Common Shares that have been issued under AWR's 2000 and 2008 Stock Incentive Plans and the 2003 and 2013 Non-Employee Directors Stock Plans. In applying the “two-class” method, undistributed earnings are allocated to both common shares and participating securities.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding used for calculating basic net income per share:



Basic:	For The Three Months Ended June 30,				For The Six Months Ended June 30,
(in thousands, except per share amounts)	2016		2015		2016		2015
Net income	$	16,742	$	15,648	26,892		27,797
Less: (a) Distributed earnings to common shareholders	8,188		8,016		16,369		16,171
Distributed earnings to participating securities	50		47		94		89
Undistributed earnings	8,504		7,585		10,429		11,537

(b) Undistributed earnings allocated to common shareholders	8,453		7,541		10,369		11,474
Undistributed earnings allocated to participating securities	51		44		60		63

Total income available to common shareholders, basic (a)+(b)	$	16,641	$	15,557	$	26,738	$	27,645

Weighted average Common Shares outstanding, basic	36,554		37,702		36,538		37,952

Basic earnings per Common Share	$	0.46	$	0.41	$	0.73	$	0.73

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with stock options and restricted stock units granted under AWR’s 2000 and 2008 Stock Incentive Plans, and the 2003 and 2013 Non-Employee Directors Stock Plans, and net income. At June 30, 2016 and 2015, there were 142,402 and 187,152 options outstanding, respectively, under these Plans. At June 30, 2016 and 2015, there were also 227,364 and 225,074 restricted stock units outstanding, respectively, including performance shares awarded to officers of the Registrant.

The following is a reconciliation of Registrant’s net income and weighted average Common Shares outstanding for calculating diluted net income per share:



Diluted:	For The Three Months Ended June 30,				For The Six Months Ended June 30,
(in thousands, except per share amounts)	2016		2015		2016		2015
Common shareholders earnings, basic	$	16,641	$	15,557	$	26,738	$	27,645
Undistributed earnings for dilutive stock-based awards	51		44		60		63
Total common shareholders earnings, diluted	$	16,692	$	15,601	$	26,798	$	27,708

Weighted average common shares outstanding, basic	36,554		37,702		36,538		37,952
Stock-based compensation (1)	198		207		192		201
Weighted average common shares outstanding, diluted	36,752		37,909		36,730		38,153

Diluted earnings per Common Share	$	0.45	$	0.41	$	0.73	$	0.73

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 142,402 and 187,152 stock options at June 30, 2016 and 2015, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 227,364 and 225,074 restricted stock units at June 30, 2016 and 2015, respectively, were included in the calculation of diluted EPS for the six months ended June 30, 2016 and 2015.

No stock options outstanding at June 30, 2016 had an exercise price greater than the average market price of AWR’s Common Shares for the six months ended June 30, 2016. There were no stock options outstanding at June 30, 2016 or 2015 that were anti-dilutive.

During the six months ended June 30, 2016 and 2015, AWR issued 52,212 and 69,617 common shares, for approximately $126,000 and $512,000, respectively, under Registrant’s Common Share Purchase and Dividend Reinvestment Plan, the 401(k) Plan, the 2000 and 2008 Stock Incentive Plans and the 2003 and 2013 Non-Employee Directors Stock Plans.

In 2014 and 2015, AWR's Board of Directors approved stock repurchase programs, authorizing AWR to repurchase up to 2.45 million shares of its Common Shares from time to time through June 30, 2016. Both programs were completed during 2015. Under these programs, Registrant repurchased 1.1 million shares during the six months ended June 30, 2015. The repurchase of Common Shares is restricted by California law under the same standards which apply to dividend distributions.

During the three months ended June 30, 2016 and 2015, AWR paid quarterly dividends of approximately $8.2 million, or $0.224 per share, and $8.0 million, or $0.213 per share, respectively. During the six months ended June 30, 2016 and 2015, AWR paid quarterly dividends to shareholders of approximately $16.4 million, or $0.448 per share, and $16.2 million, or $0.426 per share, respectively.