Earnings per Share/Capital Stock

6 Months Ended

Jun. 30, 2019

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, and that have been issued under AWR's stock incentive plans for employees and the 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)	2019		2018		2019		2018
Net income	$	26,784	$	16,348	$	39,636	$	27,130
Less: (a) Distributed earnings to common shareholders	10,119		9,367		20,232		18,729
Distributed earnings to participating securities	46		51		88		96
Undistributed earnings	16,619		6,930		19,316		8,305

(b) Undistributed earnings allocated to common shareholders	16,543		6,894		19,232		8,263
Undistributed earnings allocated to participating securities	76		36		84		42
Total income available to common shareholders, basic (a)+(b)	$	26,662	$	16,261	$	39,464	$	26,992

Weighted average Common Shares outstanding, basic	36,804		36,733		36,788		36,723
Basic earnings per Common Share	$	0.72	$	0.44	$	1.07	$	0.74

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 stock incentive plans for employees and the non-employee directors stock plans, and net income. At June 30, 2019 and 2018, there were 11,556 and 47,792 options outstanding, respectively, under these plans. At June 30, 2019 and 2018, there were also 170,372 and 204,909 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)	2019		2018		2019		2018
Common shareholders earnings, basic	$	26,662	$	16,261	$	39,464	$	26,992
Undistributed earnings for dilutive stock-based awards	75		36		84		42
Total common shareholders earnings, diluted	$	26,737	$	16,297	$	39,548	$	27,034

Weighted average common shares outstanding, basic	36,804		36,733		36,788		36,723
Stock-based compensation (1)	159		179		154		173
Weighted average common shares outstanding, diluted	36,963		36,912		36,942		36,896

Diluted earnings per Common Share	$	0.72	$	0.44	$	1.07	$	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, 11,556 and 47,792 stock options at June 30, 2019 and 2018, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 170,372 and 204,909 restricted stock units at June 30, 2019 and 2018, respectively, were included in the calculation of diluted EPS for the three and six months ended June 30, 2019 and 2018.

No stock options outstanding at June 30, 2019 had an exercise price greater than the average market price of AWR’s Common Shares for the three and six months ended June 30, 2019. There were no stock options outstanding at June 30, 2019 or 2018 that were anti-dilutive.

During the six months ended June 30, 2019 and 2018, AWR issued 73,854 and 52,712 common shares, for approximately $366,000 and $340,000, respectively, under Registrant’s Common Share Purchase and Dividend Reinvestment Plan, the 401(k) Plan, the stock incentive plans for employees, and the non-employee directors stock plans.

During the six months ended June 30, 2019 and 2018, AWR paid $1.6 million and $1.2 million, respectively, to taxing authorities on employees' behalf for shares withheld related to net share settlements. During the six months ended June 30, 2019 and 2018, GSWC paid $1.3 million and $1.1 million, respectively, to taxing authorities on employees' behalf for shares withheld related to net share settlements. These payments are included in the stock-based compensation caption of the statements of equity.

During the three months ended June 30, 2019 and 2018, AWR paid quarterly dividends of approximately $10.1 million, or $0.275 per share, and $9.4 million, or $0.255 per share, respectively. During the six months ended June 30, 2019 and 2018, AWR paid quarterly dividends of approximately $20.2 million, or $0.550 per share, and $18.7 million, or $0.51 per share, respectively.

During the three months ended June 30, 2019 and 2018, GSWC paid dividends of $10.1 million and $9.4 million respectively, to AWR. During the six months ended June 30, 2019 and 2018, GSWC paid dividends of $20.2 million and $18.8 million respectively, to AWR.