Rafe Jadrosich: Hi, good morning. It’s Rafe. Thanks for taking my question. First, I just want to add on the Mineral Fiber revenue guidance. What are you assuming for share gains, your performance relative to the market in ‘24? And then it sounds like there was a mix headwind in ‘23 and, Vic, you just mentioned to an earlier question that there’s some expectation of retail destocking in ‘24. Do you expect the mix sort of headwinds to reverse in ‘24? Is there anything that’s changed in your overall mix going forward?
Vic Grizzle: Yes. No, I think mix is going to be a positive contributor in ‘24 for a lot of the same reasons why it was a headwind in ‘23, which is this channel imbalance between the retail channel and some of our higher AUV channels. So, yes, I think we expect some of that inventory to come out of the retail channel, which again brings it more back into the balance of our higher AV, which allows then the product mix, which is ultimately the driver of our mix as a Company is the product mix is able to shine through and contribute when the channels are better in balance. And hopefully that makes sense. But that’s one of the drivers of this business is 70% of our business is renovation work. And when architects and designers and building owners renovate, they don’t put the old stuff back in, they put new stuff back in.
So, it naturally wants to mix up to higher value, higher performing products that’s happened for over a decade and we would expect that to happen for the next decade that this natural industry dynamic is going to continue. And, that’s what will begin to shine through in ‘24 again once these channels come back into their proportional balance.
Rafe Jadrosich: And then just on the share gain assumption for 2024?
Vic Grizzle: Yes, we’re not assuming any share gain in our assumption. Again, we’re driving category expansion with our initiatives, and we’re getting our proportional share of that expansion. So, the growth dynamics for us really around what the market is doing offset by our positive contribution from growth initiatives.
Rafe Jadrosich: And then just on the Mineral Fiber, margin assumptions, can you just because natural gas prices have moved so much or come down so much, can you talk about the assumptions embedded in your guidance? What is sort of the tailwind from energy in ‘24? And then, can you talk about the strategy around hedging going forward? Like what’s rolling off there, and where are you resetting?
Vic Grizzle: Chris, you want to take that?
Chris Calzaretta: Yes, so sure. Remember about 30% of our Mineral Fiber inputs are tied to raw materials, 10% freight, 10% energy. So, as I shared earlier, raw materials, we’re expecting inflation in the low-single-digit range. Freight, again, to be slightly inflationary low-single-digits. And, then really a tailwind on deflation largely driven by nat gas. And as we model that, we look at a bunch of, different inputs to that. Obviously the NYMEX forward curve, kind of shapes and influences that. But again, looking back at recent history with nat gas, it’s really hard to call and hard to peg. But we do have nat gas as a deflationary item, in ‘24 and that’s really driving that inventory that energy category. I’d say from a hedge position perspective, we have a little bit carried over into 2024 really immaterial when I think about it and to a much lesser extent, than we had, in terms of price locks in ‘23.
Kind of that said going forward, don’t expect as much of a volatile nat gas environment as we saw, in ‘22 and ‘23. So, not looking to really hedge or do any price locking longer term.
Rafe Jadrosich: Good. Thank you. Very helpful.
Chris Calzaretta: You’re welcome.
Operator: Our next question comes from the line of Stephen Kim with Evercore ISI. Please go ahead.
Stephen Kim: Yes, thanks very much guys. Appreciate all the color so far. Wanted to just talk a little bit about the inventory drawdown at the home centers, it’s been discussed a bit already, but it looks like you didn’t see it show up last year. You’re expecting it again in 2024. I was just wondering if you could give us a sense for why it didn’t show up as you expected over the last couple of quarters, and are you expecting this to materialize in the first quarter or some other time later in 2024 in your planning?
Vic Grizzle: No, I think this is really hard as you know Stephen, for us to control or let alone and predict it for sure, let alone control it. But what we expect is we’ve just kind of sprinkled this in throughout the year that they’ll come to some, normalization around their inventories. Why these home centers is a good question. It’s a different answer for different home centers, but there’s timing in which they are re-merchandising, their shelves, around ceilings, for example. So, that can drive a different behavior around inventory build across their stores. And again, we see that, on the other side too, when they draw them down in anticipation of a merchandising change. So, it’s kind of in-line with what we see periodically with these, these home centers.
Sometimes they’re out of phase with one another and it’s a little quieter and sometimes they’re in phase with one another and we feel it and we have to talk about it a little bit more. But, it’s really timing related and they do come to some normalization, over time in their inventory channels, with our good service and they’re able to do that. So, again, we’re not loading it into the first quarter. We don’t expect that. We expect that probably to just normalize over the transition from quarter-to-quarter throughout the year.
