Vince Morales: And just a couple of other items of note, Kevin, we expect Europe to stabilize, which really reflects a lack of a destock. We experienced a destocking, especially in the first half of 2023, and that’s — we feel that’s won its course. So stabilization in Europe, which has been a negative for us. And again, China on the 2023, first half basis was light. So again, as that normalizes the pandemic effect of that hopefully is behind us. And as that normalizes, provides us with some uplift. And we are — we do have this backlog that Tim alluded to in the opening remarks in aerospace. So we continue to produce more products at our manufacturing sites and that we expect that to continue to grow throughout the year to work down that backlog, which is more than a half a year backlog for us.
Operator: Our next question comes from Michael Leithead with Barclays. Your line is open. Please go ahead.
Michael Leithead: Great. Thanks. Good morning, guys. I wanted to ask around cash deployment. Your net leverage ended the year towards the lower end of where it’s historically been. I guess, three very brief questions. One, can you just remind us roughly what target leverage you intend to maintain? Two, how does the M&A market look today, say, relative to returning more cash to shareholders this year? And then third, I think you’re guiding to $15 million of interest in 1Q, but about $95 million for the year. So why does that step up so much? I’m assuming that takes into consideration of more cash deployment. Could you just help clarify that? Thank you.
TimKnavish: Yes. Hi. Mike, it’s Tim. I’ll start. Target, we don’t write a target in pen because it changes with time, depending on where we are in the execution of our strategy. We’re doing some portfolio things. You’ve seen some announcements in that regard. And where we are on our strength of our balance sheet, very strong right now, but it would be different as the environment changes. M&A, it has — it was a little quiet there for some time. We’re seeing some things come across our desk now. Nothing huge in the pipeline, but we’re seeing some assets come across, and we’re evaluating those. Overall, on the strength of the balance sheet and deployment, consistent with what I said throughout last year, number one, we’re going to focus on continuing to generate strong cash.
That gives us a great deal of flexibility. I’m very proud of what the team did in 2023. Just to be very clear, we will not let cash sit on the balance sheet. We’ll do what we need to do from dividends. We’ve got some good organic growth investments that we’ll invest in. Love to do some shareholder value accretion — accretive acquisitions. And if that doesn’t come along, then we’ll return cash by buying shares. We did some in Q4 for the first time in a long time. And if we’ve got excess cash sitting on the balance sheet, you can be assured that that’s what we’ll do. Now Q1, we’re sitting with a lot of cash right now, but we typically consume significant cash in Q1. And so we’ll be a little cautious here in Q1 so that we don’t get back into paying high interest cost debt, which we just got out of.
But beyond that, you should expect us to not let the cash sit there.
Vince Morales: Yes. Let me just add. This is Vince. I just want to reemphasize the key comment Tim said, we prefer a strong balance sheet. Due to the optionality, it gives us on many fronts. We feel where we are today. We don’t need to let cash grow. We will consume cash through April. That’s our traditional seasonality of our businesses. So the $1.5 billion that sits on the balance sheet, we will consume them through April. That allows us to not enter the debt markets as significantly as we normally would for commercial paper. At this time of the year, we’re typically adding commercial paper throughout — from now through the end of April. So that’s why our interest cost in Q1 will be lower, because we’re going to use the cash on hand to fund that seasonal inventory build.
That cash will then what we typically generate strong cash in the back half of the year, which is we’ll deplete our interest income. And then, as we generate that strong cash in the back half of the year, we’ll look at other uses.
Operator: Our next question comes from Jeff Zekauskas with JPMorgan. Your line is open. Please go ahead.
Jeff Zekauskas: Thanks very much. I was wondering whether you could comment on the direction of titanium dioxide prices. Secondly, you make a fuss over the difference between or you make a plus over your LIFO inventories. So if you would value things on LIFO instead of FIFO? What might the difference have been at the end of the year? And then finally, in your accounts payable and accrued liabilities line, your year-over-year increase that is a benefit was about $380 million. And sequentially, maybe it was $250 million. Now you guys don’t disaggregate accounts payable from accrued liabilities. Can you explain what’s going on there and that many, many companies had much lower accounts payable this year, and it seems to have really worked in the other direction for you?
TimKnavish: Hi Jeff, it’s Tim. I’ll take titanium dioxide question. And Vince, you can take the more finance-related questions there. TiO2, we see very good availability. We see a long supply chain upstream of us, it’s still quite long. And so we’re seeing some modestly lower pricing on TiO2 than what we would have seen last year. It’s not down as much as some other parts of our basket, but it’s definitely down from where we were last year, Jeff. And on TiO2, in addition to pricing, I do have to mention that a key part of our strategy is to continue the research work that we do to reduce our titanium dioxide content in our formulas every year without sacrificing any performance. And our team has done a great job there. We’re down about 1% per formula over the last several years, and we achieved that again in 2023.
