Earnings per Share/Capital Stock

9 Months Ended

Sep. 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 September 30,				For the Nine Months Ended September 30,
(in thousands, except per share amounts)	2019		2018		2019		2018
Net income	$	28,006	$	22,952	$	67,642	$	50,082
Less: (a) Distributed earnings to common shareholders	11,234		10,102		31,466		28,831
Distributed earnings to participating securities	50		54		137		151
Undistributed earnings	16,722		12,796		36,039		21,100

(b) Undistributed earnings allocated to common shareholders	16,647		12,727		35,882		20,991
Undistributed earnings allocated to participating securities	75		69		157		109
Total income available to common shareholders, basic (a)+(b)	$	27,881	$	22,829	$	67,348	$	49,822

Weighted average Common Shares outstanding, basic	36,835		36,737		36,804		36,728
Basic earnings per Common Share	$	0.76	$	0.62	$	1.83	$	1.36

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 September 30, 2019 and 2018, there were 8,556 and 47,792 options outstanding, respectively, under these plans. At September 30, 2019 and 2018, there were also 165,783 and 198,613 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)	2019		2018		2019		2018
Common shareholders earnings, basic	$	27,881	$	22,829	$	67,348	$	49,822
Undistributed earnings for dilutive stock-based awards	75		69		157		109
Total common shareholders earnings, diluted	$	27,956	$	22,898	$	67,505	$	49,931

Weighted average common shares outstanding, basic	36,835		36,737		36,804		36,728
Stock-based compensation (1)	161		213		156		207
Weighted average common shares outstanding, diluted	36,996		36,950		36,960		36,935

Diluted earnings per Common Share	$	0.76	$	0.62	$	1.83	$	1.35

(1) In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 8,556 and 47,792 stock options at September 30, 2019 and 2018, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share. All of the 165,783 and 198,613 restricted stock units at September 30, 2019 and 2018, respectively, were included in the calculation of diluted EPS for the three and nine months ended September 30, 2019 and 2018.

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

During the nine months ended September 30, 2019 and 2018, AWR issued 81,459 and 64,245 common shares, for approximately $416,000 and $348,000, 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 nine months ended September 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 nine months ended September 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 September 30, 2019 and 2018, AWR paid quarterly dividends of approximately $11.2 million, or $0.305 per share, and $10.1 million, or $0.275 per share, respectively. During the nine months ended September 30, 2019 and 2018, AWR paid quarterly dividends of approximately $31.5 million, or $0.855 per share, and $28.8 million, or $0.785 per share, respectively.

During the three months ended September 30, 2019, GSWC did not pay a dividend to AWR. Instead, during the three months ended September 30, 2019, ASUS paid a $11.3 million dividend to AWR. During the three months ended September 30, 2018, GSWC paid dividends of $10.1 million, to AWR. During the nine months ended September 30, 2019 and 2018, GSWC paid dividends of $20.2 million and $28.9 million respectively, to AWR.