Brian Lee: Okay, fair enough. Makes sense. And then maybe just with interest rates backing up here and the macro, I think a lot of focus around kind of what it meant for your Pool business all year long. Are you seeing anything beyond the resi sector in your kind of end-market exposures that are having any impacts or constraints on spending when it comes to that sort of cost of capital environment and just financing condition is getting a little bit tougher here? Anything you can speak to at kind of a high level? Thanks.
John Stauch: Yeah. I mean I think you’re calling it. I think we’re seeing it everywhere to be honest with you in little bits. I mean, as a reminder, 75% of our end customers are small dealers and professional trade channel people and their borrowing of capital is higher and harder to get access to capital. I think that slows down some of the projects that we’re working on. We’re not exposed to commercial buildings more than a $100 million or a couple of hundred million, but I think you’re going to see financing be tougher on the building side. And so an elevated higher interest rates for long, just I think produces a sluggish environment is the way we’re looking at it, which is why we’re really putting that accelerator on the transformation initiatives we have, pricing selectively, making sure that we understand the market back and how to position our products and services effectively in the industries and then making sure that we’re managing the cost structure well within the company.
Brian Lee: All right. Appreciate it guys. Thank you.
John Stauch: Thank you.
Operator: Our next question will come from Bryan Blair with Oppenheimer. You may now go ahead.
Bryan Blair: Thank you. Good morning, everyone.
John Stauch: Morning.
Bryan Blair: Just hoping to drill down a little bit more on commercial water solutions trends. It sounds like underlying market activity remains pretty solid. Just curious if your team is seeing anything shift on a sequential basis. I know a lot of questions have been asked already in terms of macro backdrop, higher for longer rate environment, et cetera. Specific to that platform, are you seeing anything as we get into Q4 or the outlook for 2024 that concerns your team in terms of the strength that you’ve been leveraging recently?
Bob Fishman: There’s no doubt that commercial water solutions has had a excellent 2023, going to market with end-to-end solution of water quality. Ice and services has been very compelling. Manitowoc has had an excellent year. And we’ve done well in North America filtration. So overall, we continue to see the market within the restaurants, primarily the quick service restaurant space being solid for us. The challenge for us is bumping up against a tough compares next year. But overall, the markets that we serve are doing well.
John Stauch: Just to give you some indication of point-to-point, I mean, despite the fact that we’re going to see significant shipments in Manitowoc this year and feel really good about their progress, the overall CAGR from 2019 to the end of 2023 is about 8%-ish or slightly a little bit higher than that which we had slightly normal than — or higher than the mid-single digits that we had forecast the business to have. So just a reminder that the markets, as Bob mentioned, are recovering globally and they continue to participate in that recovery.
Bryan Blair: I appreciate the color. That’s very helpful. You mentioned the end-to-end solution and there’s no doubt that the value proposition combining Everpure, KBI, Man Ice, that’s resonating with your customer base. Can you speak to direct cross-selling traction within the platform, what’s been realized to date for your legacy businesses, not just the lift to Man Ice?
John Stauch: Yeah, I mean I would I would quantify that value is a couple of points of incremental growth as the overall commercial water solutions business from those synergies. I mean, lots of excitement and putting Everpure in the trade shows, next to the Manitowoc Ice and vice-versa and helping our customers which are a distributor and an installer realize the benefits of promoting both. And I think when you have a good filtered solution on an ice machine, you’re extending the life of the ice machine. And then it also leads to the service capabilities we have and the fact that we can offer some of those services. More importantly, just understand what the service provider is up against, so that we can redesign for service and also work with our partners to help them get in and out of those end markets faster.
So I mean there’s a lot of energy and excitement and we couldn’t be more pleased with the synergies and the go-to-market strategies of these three businesses put together.
Bryan Blair: All makes sense. Thanks for the color.
John Stauch: Thank you.
Operator: Our next question will come from Mike Halloran with Baird. You may now go ahead.
Mike Halloran: Hey, good morning, everyone. So two quick ones here. First on the destocking impact last quarter, you talked about a $150 million impact on destock this year. Is that still the number we should be thinking about or has that changed now?
John Stauch: No. I think there’s nothing that’s changed in that number. It played out as we said as expected.
Mike Halloran: Thanks for that. And then on the balance sheet side of things, you’re two times levered now on a net basis. Bob talked to debt paydown is still the priority. Maybe you could just talk to, given the changes in interest rates, how your financing terms are. Is there a — has there been any shifts in what kind of leverage levels you’re looking at going forward or, maybe better put, where would you — what kind of leverage levels would you want to see before you became more aggressive using your balance sheet, whether it’s for buybacks and M&A, whatever it is?
John Stauch: Mike, I promised myself I wouldn’t give a target today. I think right now, I think we all have to be mindful of access to capital and managing with our capital framework and I think paying down the debt right now is a good use of it. Obviously, we’re always looking at strategic complementary businesses to our current business units. The market is not robust though at the moment. And even when you’re seeing assets availability, you’ve got to question how those interest rates environments affect their business. So you’re not seeing transactions happen. So I think just paying down the debt right now and giving ourselves the maximum flexibility is where Bob and I are focused for the remainder of this year and into next year.
Bob Fishman: Yeah. I would just add to that, that obviously staying investment-grade is hugely important to us. As the variable rates have crept up, we did undertake the interest rate swap and the collar, so that turned out to be a smart move where when you include the collar, effectively 65% of our debt is fixed. That brings us to kind of a weighted average rate of 5.3% in the quarter, maybe 5.5% going forward. So overall, we’ve done some good things to manage within this environment and paying down the debt has certainly helped from an overall perspective.
