Kevin Zdimal: Yes, capital structure, we’re looking to have net debt EBITDA in the range of 1x to 2x. And at times looks like above that if it’s the right acquisition, like we did with Henry and then our plan is to pay that back within 18 to 24 months to get us back in that 1 to 2x net debt-to-EBITDA ratio.
Saree Boroditsky: And so I guess, given where kind of the M&A pipeline is, you talked about half of the proceeds for buyback within your guidance, you have about $20 million of net interest expense. But given that you’re expecting to hold on to some of these cash proceeds, should you not realize some interest income on that? And how do you think about earnings interest income within your guidance?
Kevin Zdimal: Yes. So interest expense is around $70 million. And then yes, we have about $50 million of interest income. So $70 million, $50 million and then the net $20 million.
Operator: Your next question comes from the line of Garik Shmois from Loop Capital.
Garik Shmois: Great. Just wondering if you could just speak to a little bit more of your view of the market in CCM being down 2 to 3 points. I appreciate that the view is that the repair side could be flat to slightly up and the new down high single-digits or so. But just curious as where are you seeing maybe some upside or downside risk to that market outlook, would it be more repair versus new or anything you can add this into how you’re assessing variance around the market outlook.
Chris Koch: Yes. I think, Garik, the biggest thing for me is this idea that this interest rate environment that we’ve been facing in the economy, I mean, we’re not unique in this idea that we’re going into the year. First, we hear there’s going to be three interest rate cuts, okay, that’s super positive. We like that. Then we hear now, we’re going to pull back on that. I think cash carry came out, [indiscernible] said and said maybe it’s too soon to talk about that. So we’ve got that. We’ve got the economy that everybody is on pins and needles about with, obviously, employment and other things like that. So I think as we sit here, the hard thing for us to do is to be sitting in January, which is in the first quarter, our lightest, as Kevin mentioned, 20% of overall sales and trying to forecast that with the real construction season is going to be in the spring and summer.
So right now, we’re saying, as we did on the 2030 video that things are relatively stable and they’re moving along as we expect — and so we’re kind of looking at historical averages, really what we get from the market, what our sales teams are telling us what we’re seeing in project pipeline. We also get to things like value but we actually read your reports. When you do your surveys and your pulse checks and those kind of things and take all into account. So I think the biggest thing for us is just — it all feels optimistic right now, and we like that. But when we get down to granularity, I’m looking at the economy to be the biggest variable. And then we look at specifically into some of the verticals. And when you look at ’24, we see that continued, I’d say, pressure on warehouses, specifically.
But to call out one that seems to be the biggest decliner would probably be warehouses. I think Dodge has it somewhere in the high teens, low 20s forecast for ’24. Education looks pretty good. Retail stores, health care, we still think there’s a trend there. And seems to be happening with aging population that we’ll see more long-term care. Medical seems to be good. There seems to be a lot of money in medical. And then we get the reshoring of manufacturing, which think Dodge estimated was somewhere around 8% in ’23. And then I think the last 1 really is the office building. So we don’t deal on the tall buildings that we had Citicorp and there was a lot of distress there with the work from home, but we’re more in the low 3, 4-story buildings, and we think that’s good and suburban office buildings have been pretty good.
So that’s kind of how we see the verticals then. I think we just layer in the reroofing on top of that. And obviously, that’s a little bit less vertical dependent and more dependent on the age of the — so again, optimistic about ’24. I think specifically, if we are — continue to see the economy perform as it is, and we do get a couple of cuts that could be a pretty good year going forward, especially with the fact that I would say that there’s been — we have the destocking, but we haven’t really had in this winter period, a return to restocking, which typically back four or five years ago before COVID, the result was a load-in in the spring in the March, April time frame. So there may be some of that to — if the economy turns around and things look good.
Garik Shmois: I appreciate the plug. I guess a follow-up question is just on CWT, maybe similar, you touched on some of these things in the prior answer. But coming down to 3Q, you specifically indicated that there were some more project delays than you anticipated and CWT, certainly is more on the commercial side than residential. But just curious has that maybe pacing continued? Or maybe from the sounds of it, you’re seeing some stabilization, but just wondering if you could address some of those project delays in CWT and what occurred in the fourth quarter.
Mehul Patel: Yes. Garik, it’s Mehul here. I’ll take that one. So overall, to your point, 2023 was very challenging, given the dynamic nature of the macro environment. That’s what impacted the project delays in 2023. The way we see it now, it’s basically stabilized. I think more or less, the economy is kind of what it is around higher interest rates and what’s going on with nonresidential. So I’d characterize it as being stable. And then overall, on the CWT side, specifically on the commercial side, we’re mainly focused around the institutions, medical, education and government. So those tend to be a little bit more stable as well.
