Company: HOVVB
Filing Date: 2025-02-19
Form Type: CORRESP
Source: 0001753926-25-000257
Chunk: 1

Company: HOVNANIAN ENTERPRISES INC
Filing Date: 2025-02-19
Form: CORRESP
Chunk 1
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 adjusted EBIT ROI is generally calculated as the ratio of (1) adjusted earnings before interest expense and income taxes (“adjusted EBIT”) , a non-GAAP measure for which the most directly comparable GAAP measure is net income, to (2) adjusted investment (“Adjusted Investment ” ) , a non-GAAP measure for which the most directly comparable GAAP measure is total inventories. The ratio is calculated as reflected in Exhibit A hereto and explained below:

As shown in Exhibit A , net income is first adjusted to add back income tax provision and interest expense to determine earnings before interest expense and income taxes (“EBIT”), a non-GAAP measure, for which the most directly comparable GAAP financial measure is net income. EBIT is further adjusted for land-related charges (which are non-cash charges relating to inventory impairment loss and land option write-offs, including instances where the Company has walked away from lots it controlled under option contracts) and loss (gain) on the extinguishment of debt, net to calculate adjusted earnings before interest expense and income taxes (“adjusted EBIT”), a non-GAAP measure, for which the most directly comparable GAAP financial measure is net income. The Company presents EBIT and adjusted EBIT as they are standard measures commonly reported and widely used by analysts, investors and others to measure and benchmark the Company’s financial performance without the effects of certain items the Company does not believe are characteristic of its ongoing operating performance. Total inventories is adjusted to subtract liabilities from inventory not owned, net of debt issuance costs and interest capitalized, a non-GAAP financial measure for which the most directly comparable financial measure is total inventories , and to add investments in and advances to unconsolidated joint ventures to determine Adjusted Investment, a non-GAAP financial measure for which the most directly comparable GAAP financial measure is total inventories. The Company presents Adjusted Investment because it more accurately reflects inventory ow n ed (whether directly or through joint ventures) by the Company and excludes inventory that is off - balance sheet in nature, such as inventory subject to land banking transactions. Adjusted EBIT ROI is ultimately calculated as the ratio of a djusted EBIT for the trailing twelve months (the summation of the prior four fiscal quarters) to the average Adjusted Investment for the prior five fiscal quarters (to account for the average of the beginning and end of measurement period inventory amounts). The Company measures the ratio of adjusted EBIT ROI in this manner as it is reflective of a more appropriate, longer-term period required to build and sell homes