David Barry: And then overall, still on inflation/deflation. So looking — starting with 2023, we actually finished the year with net inflation in the P&L. If you take into account materials and freight having slight deflation offset by labor and indirect with continued inflation. Now looking forward, we do have areas of deflation on the balance sheet that will come off into the P&L. But again, we see inflation above trend in things like labor and indirect and as Nick mentioned, seeing some pressure on freight from what’s going on with both the Middle East and through Panama Canal with water shortage and restrictions on capacity. So I would characterize for 2024, our overall COGS base, if you think of that is $2.7 billion. We would expect roughly less than 1% of net deflation when looking at all the inputs and costs over that base.
Philip Ng: Okay, super helpful. Thank you.
Operator: Thank you. Our next question is from John Lovallo with UBS. Please proceed with your question.
John Lovallo : Good evening guys and thank you for taking my question. The first one is on the $650 million new share repo authorization, which is on top of the $435 million. Just curious how you’re sort of thinking about that in the context of doing $150 million last year. But if you go back to ’21, you did $450 million. I think you did $580 in 2022. So how aggressive could you guys be? And where do repos kind of fit within the capital allocation priority list?
Nicholas Fink: John, great question. So that $650 million in addition too, but that other one expires much first. And so then the $650 million will be our go forward until we authorize more. In fact now our track record has been to do share repurchases really opportunistically and to look for dislocations in value. We run a returns-focused model against our own plans. And we’ve over time, done really, really well. I mean if you look at how it has tended to play out, it’s from a sort of priority perspective, always, first and foremost, in our own organic opportunities. Those are the most surest and highest returns. And then just interestingly, the way it tended to work out is kind of 50-50 between share repurchase and acquisition opportunities over the long run.
Now with acquisitions, we also remain very returns focused. And so there are some nice things we may take a pass on if we don’t feel comfortable that the returns are there. And those might be times where share repurchase is preferable. There will be plenty of capacity, and we’ll continue to look opportunistically. But when there are those dislocations, I think our track record speaks for itself. We will be there.
David Barry: Yes, I think if you — John, if you look at 2023, as a good example, we had an acquisition that was of nice size, fewer share repurchases. So it really is that interplay between — right, is there attractive accretive M&A? And if not, what — can we opportunistically buy back shares? The other lever that we watch is our leverage ratio. And we’ve delevered faster than we expected following the ASSA acquisition and our continued path to delever further in 2024. And as long as cash flow remains strong as we think it will, it gives us opportunity to deploy it effectively, we’ll continue to do.
John Lovallo : That’s helpful. And then on the $55 million of production impact that you guys are lapping. I know you don’t anticipate recovering all of that. But can you just sort of remind us of the magnitude of the impact by each segment? And will most of this reversal, whatever the number is, be a first half phenomenon?
David Barry: Yes. So if you think about — just to put it into context, right, we’re coming off of a year in 2022 with extremely high production and sales. Sales started to slow second half of ’22, and then we pulled back our supply chain hard late ’22 into early ’23. Our 2024 plan has production more balanced to sales, but we’re not at that level that we were in 2022. So that’s why we’re not fully recovering the overhang that we experienced in the P&L in ’23. I think if you look at the split, it is split between Water and Outdoors, probably a bit more towards Water than Outdoors, maybe 60-40 and the timing of it, yes, it will recover a bit more through the year as we’re building — as we’re producing in line with demand. And you’re not going to have these big production ramps and large favorable absorption in any one quarter.
John Lovallo : Great, thanks guys.
Operator: Thank you. Our next question is from Adam Baumgarten with Zelman & Associates. Please proceed with your question.
Adam Baumgarten : Hey, good afternoon, everyone. Just going back to your comment around demand potentially troughing. I think there is a bit more optimism out there. And you cited some of the macro indicators. But anything you’re seeing in the business? I know you talked about sequential improvement in a lot of areas throughout the year. But I think you’re seeing maybe January side given some of the weather that gives more confidence that we’re maybe close to a bottom here?
Nicholas Fink: Yes. I’d say it’s more sort of the longer — when I say longer, I mean, more than like three weeks a series of data item. So when we look at the sequential improvement, we look at the drivers, we look at the search data, look at purchasing and things like that. I’d say just given January is a lower volume time of the year anyway, and then you throw — I mean here in this region where we are that we’ve coldest sequential data temperature since 1996. On top of that, it just SKUs. The data is very hard to read through. I mean, in that BofA data that Dave referenced well, it was consistent with ours, things like snow blowers and shovels were way up. And so I think we’ll need a few more weeks before we can see it definitively in the shorter series, but longer series stuff would point towards that.
Adam Baumgarten : Okay. Got it. Makes sense. And then just on SG&A, maybe how you’re thinking about that in 2024 and what a good percentage of sales is from a long term perspective, just given the shift in the portfolio over the last year.
David Barry: Yes. Still, I’m driving a lot of transformation. And so you’ll see some incremental investments in 2024, contemplated within the margin guide that we gave. I’d say the team have built a plan to be thoughtful around those investments and pace them so that we are seeing the top line come through and seeing the margin appreciation come through before we make them but we’re pacing those investments. And then I think longer term, as we drive transformation, our goal is to be a top quartile performer. We want to be efficient. We want to continue to invest in brands and innovation and a lot of the transformation investments we’re making today are to get as efficient as we can in the non-core activities in the back of the house activities that aren’t as value creating and some of our investments in branded innovation.
