Earnings per Share/Capital Stock:

6 Months Ended

Jun. 30, 2011

Earnings per Share/Capital Stock:

Earnings per Share/Capital Stock:

Note 3 — 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 stock options and restricted stock units that earn dividend equivalents on an equal basis with AWR’s Common Shares (the “Common Shares”) that have been issued under AWR’s 2000 and 2008 Employee Plans and the 2003 Directors Plan. 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 Three MonthsEnded June 30,				For The Six MonthsEnded June 30,
(in thousands, except per share amounts)			2011		2010		2011		2010
Net income from continuing operations			$	12,728	$	8,870	$	19,683	$	17,160
Net income from discontinued operations			3,234		105		3,868		305
Total net income			15,962		8,975		23,551		17,465
Less: (a)		Distributed earnings to common shareholders	5,227		4,830		10,075		9,652
		Distributed earnings to participating securities	36		26		64		48
Undistributed earnings			10,699		4,119		13,412		7,765
(b)	Undistributed earnings allocated to common shareholders		10,625		4,098		13,327		7,727
	Undistributed earnings allocated to participating securities		74		21		85		38
Total income available to common shareholders, basic (a)+(b)			$	15,852	$	8,928	$	23,402	$	17,379
Weighted average Common Shares outstanding, basic			18,668		18,576		18,658		18,561
Basic earnings per Common Share:
Income from continuing operations			$	0.68	$	0.47	$	1.05	$	0.92
Income from discontinued operations			0.17		0.01		0.20		0.02
Net Income			$	0.85	$	0.48	$	1.25	$	0.94

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 granted under Registrant’s 2000 and 2008 Employee Plans, and the 2003 Directors Plan, and net income. At June 30, 2011 and 2010, there were 708,345 and 742,387 options outstanding, respectively, under these Plans. At June 30, 2011 and 2010, there were also 135,611 and 104,498 restricted stock units outstanding, respectively.

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 MonthsEnded June 30,				For The Six MonthsEnded June 30,
(in thousands, except per share amounts)	2011		2010		2011		2010
Common shareholders earnings, basic	$	15,852	$	8,928	$	23,402	$	17,379
Undistributed earnings for dilutive stock options	74		21		85		38
Total common shareholders earnings, diluted	$	15,926	$	8,949	$	23,487	$	17,417
Weighted average common shares outstanding, basic	18,668		18,576		18,658		18,561
Stock-based compensation (1)	70		144		139		134
Weighted average common shares outstanding, diluted	18,738		18,720		18,797		18,695
Diluted earnings per Common Share:
Income from continuing operations	$	0.68	$	0.47	$	1.05	$	0.91
Income from discontinued operations	0.17		0.01		0.20		0.02
Net Income	$	0.85	$	0.48	$	1.25	$	0.93

(1)In applying the treasury stock method of reflecting the dilutive effect of outstanding stock-based compensation in the calculation of diluted EPS, 465,824 and 395,833 stock options at June 30, 2011 and 2010, respectively, were deemed to be outstanding in accordance with accounting guidance on earnings per share.  All of the 135,611 and 104,498 restricted stock units at June 30, 2011 and 2010, respectively, were included in the calculation of diluted EPS for the six months ended June 30, 2011 and 2010.

Stock options of 241,921 and 112,026 were outstanding at June 30, 2011 and 2010, respectively, but not included in the computation of diluted EPS because the related option exercise price was greater than the average market price of AWR’s Common Shares for the six months ended June 30, 2011 and 2010.  Stock options of 600 and 234,528 were outstanding at June 30, 2011 and 2010, respectively, but not included in the computation of diluted EPS because they were anti-dilutive.

During the six months ended June 30, 2011 and 2010, Registrant issued 49,456 and 57,299 Common Shares, for approximately $953,000 and $1,316,000, respectively, under Registrant’s Common Share Purchase and Dividend Reinvestment Plan, the 401(k) Plan, and the stock incentive plans. In addition, Registrant purchased 159,383 and 67,241 Common Shares on the open market during the six months ended June 30, 2011 and 2010, respectively, under Registrant’s 401(k) Plan and the Common Share Purchase and Dividend Reinvestment Plan. The Common Shares purchased by Registrant were used to satisfy the requirements of these plans.

During the three months ended June 30, 2011 and 2010, AWR paid quarterly dividends of approximately $5.2 million, or $0.28 per share, and $4.8 million, or $0.26 per share, respectively.  During the six months ended June 30, 2011 and 2010, AWR paid quarterly dividends to shareholders of approximately $10.1 million, or $0.54 per share, and $9.7 million, or $0.52 per share.