Earnings Per Share and Capital Stock

12 Months Ended

Dec. 31, 2021

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 2016 employee plans and the 2003 and 2013 directors' 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 for calculating basic net income per share:


Basic:	For The Years Ended December 31,
(in thousands, except per share amounts)	2021		2020		2019
Net income	$	94,347	$	86,425	$	84,342
Less: (a) Distributed earnings to common shareholders	51,689		47,206		42,702
Distributed earnings to participating securities	134		158		180
Undistributed earnings	42,524		39,061		41,460

(b) Undistributed earnings allocated to common shareholders	42,414		38,930		41,285
Undistributed earnings allocated to participating securities	110		131		175
Total income available to common shareholders, basic (a)+(b)	$	94,103	$	86,136	$	83,987

Weighted average Common Shares outstanding, basic	36,921		36,880		36,814

Basic earnings per Common Share	$	2.55	$	2.34	$	2.28

Diluted EPS is based upon the weighted average number of Common Shares, including both outstanding shares and shares potentially issuable in connection with restricted stock units granted under AWR’s 2016 employee plans, and the 2003 and 2013 directors' plans, and net income. At December 31, 2021, there were also 100,020 restricted stock units outstanding, 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 Years Ended December 31,
(in thousands, except per share amounts)	2021		2020		2019
Common shareholders earnings, basic	$	94,103	$	86,136	$	83,987
Undistributed earnings for dilutive stock options and restricted stock units	110		131		175
Total common shareholders earnings, diluted	$	94,213	$	86,267	$	84,162

Weighted average Common Shares outstanding, basic	36,921		36,880		36,814
Stock-based compensation (1)	89		115		150
Weighted average Common Shares outstanding, diluted	37,010		36,995		36,964

Diluted earnings per Common Share	$	2.55	$	2.33	$	2.28

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 100,020 restricted stock units, including performance awards, at December 31, 2021 were deemed to be outstanding in accordance with accounting guidance on earnings per share.

During the years ended December 31, 2021, 2020 and 2019, AWR issued Common Shares totaling 47,182, 42,489 and 88,772, respectively, under AWR's employee stock incentive plans and the non-employee directors' plans. In addition, during the years 2020 and 2019, AWR issued 1,800 and 30,998 Common Shares for approximately $30,000 and $519,000, respectively, as a result of the exercise of stock options. No shares were issued during 2021 as a result of the exercise of stock options. During 2021, 2020 and 2019, no cash proceeds received by AWR as a result of the exercise of stock options were distributed to any of AWR's subsidiaries. AWR has not issued any Common Shares during 2021, 2020 and 2019 under AWR's Common Share Purchase and Dividend Reinvestment Plan ("DRP") and the 401(k) Plan. Shares reserved for the 401(k) Plan are in relation to AWR’s matching contributions and investment by participants. As of December 31, 2021, there were 1,055,948 and 387,300 Common Shares authorized for issuance directly by AWR but unissued under the DRP and the 401(k) Plan, respectively.

During 2020, GSWC issued five Common Shares to AWR for $60 million. The majority of the proceeds from these stock issuances were used by GSWC to pay down its intercompany borrowings from AWR. The CPUC requires GSWC to pay down all intercompany borrowings from AWR within a 24-month period. No shares were issued by GSWC during 2021 and 2019.

During the years ended December 31, 2021, 2020 and 2019, AWR and GSWC made payments 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. GSWC’s outstanding common shares are owned entirely by its parent, AWR. To the extent GSWC does not reimburse AWR for stock-based compensation awarded under various stock compensation plans, such amounts increase the value of GSWC’s common shareholder’s equity.