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, 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 March 31,
(in thousands, except per share amounts)	2019		2018
Net income	$	12,852	$	10,782
Less: (a) Distributed earnings to common shareholders	10,113		9,362
Distributed earnings to participating securities	47		46
Undistributed earnings	2,692		1,374

(b) Undistributed earnings allocated to common shareholders	2,679		1,367
Undistributed earnings allocated to participating securities	13		7
Total income available to common shareholders, basic (a)+(b)	$	12,792	$	10,729

Weighted average Common Shares outstanding, basic	36,773		36,712
Basic earnings per Common Share	$	0.35	$	0.29

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 March 31, 2019 and 2018, there were 29,160 and 47,792 options outstanding, respectively, under these plans. At March 31, 2019 and 2018, there were also 184,833 and 193,740 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 March 31,
(in thousands, except per share amounts)	2019		2018
Common shareholders earnings, basic	$	12,792	$	10,729
Undistributed earnings for dilutive stock-based awards	13		8
Total common shareholders earnings, diluted	$	12,805	$	10,737

Weighted average common shares outstanding, basic	36,773		36,712
Stock-based compensation (1)	178		162
Weighted average common shares outstanding, diluted	36,951		36,874

Diluted earnings per Common Share	$	0.35	$	0.29

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 29,160 and 47,792 stock options at March 31, 2019 and 2018, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 184,833 and 193,740 restricted stock units at March 31, 2019 and 2018, respectively, were included in the calculation of diluted EPS for the three months ended March 31, 2019 and 2018.

No stock options outstanding at March 31, 2019 had an exercise price greater than the average market price of AWR’s Common Shares for the three months ended March 31, 2019. There were no stock options outstanding at March 31, 2019 or 2018 that were anti-dilutive.

During the three months ended March 31, 2019 and 2018, AWR issued 37,376 and 52,622 common shares, for approximately $75,000 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 three months ended March 31, 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 three months ended March 31, 2019 and 2018, GSWC paid $1.3 million and $1.0 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 March 31, 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 three months ended March 31, 2019 and 2018, GSWC paid dividends of $10.1 million and $9.4 million respectively, to AWR.