I know it’s a weird dynamic there. So still waiting for some clarity on that. We would prefer not to make 454 – not to be 410A for manufacturing efficiency and other reasons, but we are just at a stage that we’ve got to see how the final rules plays out and how each of the state adopts it, too.
Operator: We’ll take our next question from Jeff Sprague with Vertical Research.
Jeff Sprague : Two quick ones from me. Just back to kind of M&A, maybe just a little bit of color on where your comfort zone is on leverage. I think you talked about kind of normal leverage targets before. But like where is the flex target for something bigger that you’d be comfortable to work down from?
Alok Maskara: I think when the time is right, we’ll have that discussion with the board and put it all together. I mean, from our perspective, that have to be an opportunistic discussion on something that’s attractive to the company. But yes, if it’s attractive to our shareholders and we need to lever up. The key question would be is, would we get back to our preferred leverage range within a year or 2. I mean that’s what our focus is going to be. So you can do the math backwards, right? I mean as long as we think there’s real cash, and then we can use that cash to get back to our long-term leverage goals within a couple of years. I think we could make that work. But investment grade thing is important to us, right? I mean we are not in [indiscernible] shop or anything else like that. We’ll maintain investment grade.
Jeff Sprague : Understood. And then just on CapEx. Has the amount of CapEx expected for the total program, the new plant and otherwise changed. I think you were talking about $150 million in CapEx for 2024 previously. Now we’re at [175]. I was just kind of getting through it faster. Maybe you could just provide a little additional color there.
Joe Reitmeier: The total program is still the same. We just have some additional CapEx that we have in 2024 to prepare for the new refrigerant products and investments with [tanks] and new refrigerant lines within the factory that also come in this year.
Jeff Sprague : And normal CapEx when we’re all through this is $75 million to $100 million a year?
Joe Reitmeier: Yes, with inflation, probably not closer to 100 like…
Alok Maskara: Yes, I think it’d be closer to 100 million, 110, not 75 to 100. Just growth and maintenance built into that, right? Maintenance might be 75, 80, but to support our growth, we probably will add more. So I would say it’s north of 100.
Operator: We’ll take our next question from Steve Tusa with JP Morgan.
Steve Tusa : Yes, I missed you at HR. I’d say attendance of investors was also at a record which may be inversely correlated to multiples someday, but we’ll see.
Alok Maskara: I saw you from far in a different company booth, but you’re holding a good audience, I didn’t interrupt.
Steve Tusa : Yes, yes, yes. Lots of great details of that show, for sure. Just on the price capture dynamics. I think you guys had talked about doing some midyear price increases this year, your capture was in the fourth quarter around 2%. Can you maybe just talk about how — what types of things you were doing at midyear and what your kind of net realization was and how that waterfall works?
Alok Maskara: Sure. I’ll start. So I think the overall, as we talked about price increases, we talked about doing residential new construction price increase in the middle of 2023. That did go ahead as expected and as we looked at the overall drop-through that is about what we expected, maybe a share worse than we expected, to be honest. And I think that just came down to the mix between residential new construction and the seasonality baked in there. Not a whole lot of R&C gets shipped towards in the Q4 time frame. So from that perspective, that went as we expected. We have key account price increases going into effect this year, mostly early this year, and we know we announced a price increase, broader 1 and that goes into effect in February. So all the pricing actions that we talked about is gone as we had expected. We remain comfortable on where we are. And it’s been good to see that the whole industry moving in that direction as well.
Steve Tusa : Yes. And I guess just on a unit basis, what was the actual revenue for the captive business in fourth quarter? And what was the — putting parts aside, what was the unit volume for that business, the captive resi business?
Joe Reitmeier: Yes. So total revenue through distributors was down high to mid-teens and then the direct was up high single digits for Q4.
Steve Tusa : So your unit volume in Q4 for that business was actually up.
Joe Reitmeier: Correct. Low single digits.
Steve Tusa : Okay. And one last one, just on the new A2L product. When is first call for you guys? And what’s your — when will you be able to actually ship that product? When will the distributors like see the specs and a physical product, like what’s kind of the schedule of that rollout just on the ground physically?
Alok Maskara: Sure. So I think with the key distributor, they’re already seeing the spec. We’re already going through the training and all that. First physical product probably comes out in the second half of this year. And we will start with sort of the high-end products, I think the consumer’s appetite for going to R54B is going to be more and faster. And then we will slowly transition towards the lower year and the lower-end products. So we’ll start with the higher end towards the middle of the year. And we are on track or ahead of schedule on each of those things. We don’t expect any R454B for meaningful sales, can we put on a showcase on display booths in first half of this year, yes. But for somebody to actually place a PU and buy would be in the second half of this year.
