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 September 30,				For The Nine Months Ended September 30,
(in thousands, except per share amounts)	2016		2015		2016		2015
Net income	$	21,639	$	21,079	$	48,531	$	48,876
Less: (a) Distributed earnings to common shareholders	8,189		8,326		24,558		24,497
Distributed earnings to participating securities	48		47		141		134
Undistributed earnings	13,402		12,706		23,832		24,245

(b) Undistributed earnings allocated to common shareholders	13,323		12,633		23,696		24,114
Undistributed earnings allocated to participating securities	79		73		136		131

Total income available to common shareholders, basic (a)+(b)	$	21,512	$	20,959	$	48,254	$	48,611

Weighted average Common Shares outstanding, basic	36,561		37,063		36,546		37,653

Basic earnings per Common Share	$	0.59	$	0.57	$	1.32	$	1.29

Diluted EPS is based upon net income and 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. At September 30, 2016 and 2015, there were 138,060 and 174,306 options outstanding, respectively, under these Plans. At September 30, 2016 and 2015, there were also 216,733 and 211,406 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 September 30,				For The Nine Months Ended September 30,
(in thousands, except per share amounts)	2016		2015		2016		2015
Common shareholders earnings, basic	$	21,512	$	20,959	$	48,254	$	48,611
Undistributed earnings for dilutive stock-based awards	79		73		136		131
Total common shareholders earnings, diluted	$	21,591	$	21,032	$	48,390	$	48,742

Weighted average common shares outstanding, basic	36,561		37,063		36,546		37,653
Stock-based compensation (1)	201		203		197		200
Weighted average common shares outstanding, diluted	36,762		37,266		36,743		37,853

Diluted earnings per Common Share	$	0.59	$	0.56	$	1.32	$	1.29

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 138,060 and 174,306 stock options at September 30, 2016 and 2015, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 216,733 and 211,406 restricted stock units at September 30, 2016 and 2015, respectively, were included in the calculation of diluted EPS for the nine months ended September 30, 2016 and 2015.

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

During the nine months ended September 30, 2016 and 2015, AWR issued 67,832 and 96,157 Common Shares, for approximately $210,000 and $746,000, 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, 2017. Both programs were completed during 2015. Under these programs, Registrant repurchased 1.7 million shares during the nine months ended September 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 September 30, 2016 and 2015, AWR paid quarterly dividends of approximately $8.2 million, or $0.224 per share, and $8.3 million, or $0.224 per share, respectively. During the nine months ended September 30, 2016 and 2015, AWR paid quarterly dividends to shareholders of approximately $24.6 million, or $0.672 per share, and $24.5 million, or $0.65 per share, respectively.