Al Nahmad: We do not expect political risk. And we are not going to talk about that. Next questions.
Operator: The Next question comes from Nigel Coe with Wolfe Research. Please go ahead.
Al Nahmad: Good morning, Nigel.
Nigel Coe: Thanks. Hi, guys. Thanks for the questions. So inventory. Can we talk about where we stand right now on inventory? I think you’ve said in previous calls, maybe $200 million of reduction for the full year. Are we still on that track?
Al Nahmad: Well, that’s a good question, and I’ll turn it over to the executive that’s taking care of that for me. Go ahead, Paul.
Paul Johnston: Alright. Yes, we can expect that. We’ve been delayering our inventory now since the season ended, and we’re seeing great progress. We’ve set goals for each one of our operating units. We track them daily with our ability to identify what we have on order and what our sales through is – sales output is. And we’re seeing definite reductions month over month, day over day.
Nigel Coe: Okay. So that implies fourth quarter should be a big source of funds from inventory. That’s the way to read that?
Paul Johnston: It better be. I would – Okay. I would not want to pigeon hold into that. We’re not give you that kind of…
Nigel Coe: Okay. I think just – with the question.
Al Nahmad: Yes, we’re very focused on it. Don’t forget that during the – all these delivery issues that we had to do things that we normally don’t do, the producers couldn’t ship partial the order and that sort of thing. And it takes a while to get that inventory we have to be what it should be in terms of complete systems and that sort of thing. But we’re working very focused. And yes, I do plan to take out that kind of number and improve our cash flow along with it.
Nigel Coe: Okay. That’s great. And my follow-up question is around the 410a phaseouts. I mean I think the EPA, the way that it was written right now, I think it’s an installation deadline as of 1 Jan 2025 as opposed to a production deadline. So how are you guys thinking about that in terms of managing 410a inventory levels? And how do you think the 454B availability will come through next year?
Paul Johnston: Are you asking about the new EPA?
Nigel Coe: Yes, I think…
Paul Johnston: Yes, it came out last Friday night. Yes, everybody is still working their way through it. Basically, what it provided was that the outdoor unit becomes a component and hence, can be replaced as a repair item or a system that you can’t install systems, indoor and outdoor units, but you can repair the by putting in an outer unit. And that’s got a lot of ramifications, which I don’t know if really have been thought all the way through by the people who wrote it up. For instance, how can you make sure that the coil on the inside matches the outdoor unit, which is only going to be the higher efficiency product. So if you’re putting in a 15.3 outdoor unit with a 13 or 14 SEER indoor unit, you’re not going to get the efficiency that you’re paying for, for the outdoor.
And then secondly, I think we’re looking at a difference from when we went through the transition between R22 and 410a. This one is different. It’s different in the regard that there is no replacement for 410a. There were other replacements that you could drop in that would replace the R22 that aren’t going to be available with the new product. Also, a lot of questions that I think we need to ask our OEMs, and OEMs will have to answer the question what’s going to happen to the price of the 410 units because, obviously, the production will be lower from the OEM, will that raise the price of the product? What’s going to happen to the availability of 410a to make the repair cost so the repair cost would be acceptable to the consumer.
