EXHIBIT 11.1
HEADLANDS MORTGAGE COMPANY
STATEMENT RE COMPUTATION OF PRO FORMA PER SHARE EARNINGS
FOR THE
NINE MONTHS
ENDED FOR THE
SEPTEMBER YEAR ENDED
30, DECEMBER
1997 31, 1996
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Primary and fully diluted pro forma income per
share:
Pro forma net income available to common
Stockholders(1) $22,201,556 $10,614,060
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Weighted average shares outstanding(2)....... 15,631,128 15,631,128
Pro forma net income per share............... $1.42 $0.68
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(1) Prior to the closing of the Offering, the Company will be treated as an S
corporation for federal and state income tax purposes. The pro forma
presentation reflects the provision for income taxes as if the Company had
always been fully subject to federal and state taxes as a C corporation at
the effective tax rate of 42%.
(2) Options have been considered to be outstanding for all periods presented
and an estimated initial offering of $15.00 per share and an assumed
option exercise price of $4.06 per share has been used in applying the
treasury stock method. Weighted average shares outstanding includes the
effect of the assumed issuance of 1,253,334 shares of common stock to
generate sufficient cash to pay the Shareholder Distribution Amount of
$18.8 million. The assumed issuance of common stock was based on an
assumed price of $15.00, the midpoint of the estimated range of the
initial public offering price.
STATEMENT RE COMPUTATION OF SUPPLEMENTAL PRO FORMA PER SHARE EARNINGS
GIVING EFFECT TO RETIREMENT OF DEBT
Supplemental pro forma net income available to com-
mon
Stockholders(1)................................... 22,577,363 10,812,289
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Supplemental weighted average shares outstand-
ing(2)............................................ 16,331,128 15,922,795
Supplemental pro forma net income per share........ 1.38 0.68
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(1) The supplemental pro forma presentation reflects (a) the provision for
income taxes described in Note (1) above; and (b) the effect on earnings
during the periods presented if the Notes payable to stockholders and
related accrued and unpaid interest ($10.5 million at September 30, 1997)
were retired in July 1996, the inception of such Notes.
(2) Weighted average shares outstanding includes (a) the effect of the options
and payment of the Shareholder Distribution Amount described in Note (2)
above; and (b) the effect of the assumed issuance of 700,000 shares of
common stock in July 1996 to retire the Notes payable to stockholders.