Peter Arment: Appreciate the color. Thanks, Dan.
Dan Crowley: Thanks.
Operator: Our next question will come from Sheila Kahyaoglu with Jefferies. You may now go ahead.
Sheila Kahyaoglu: Sure. Good morning, Dan and Jim, and thank you for the time. Jim, my first one is for you. How do you think about range of outcomes in terms of the debt refinancing? I know you’re not going to the bank and asking for 12% debt. So what are the sort of potential options here? And how much cash do you need on the balance sheet to operate?
Jim McCabe: Thanks, Sheila. Well, with the businesses we divested, those were the biggest cash volatile businesses that had a lot of working capital associated with them. So as we change the portfolio, we find less and less need for cash moving forward, because there’s less volatility. And right now, we have $127 million of cash availability and that’s sufficient for what we need, especially with the strong cash generation we expect in Q4. We talked about our confidence in refinancing. And as you watch the markets, you start to see them open up again. These high yield markets were shut down for the second — for the last quarter and they’re just starting to open up and we’re seeing opportunities for us to go back. We still have well over a year before the first maturities are due in €˜24.
And we continue to work with advisers and without give you details of the exact plans, we do have plans and contingency plans around the refinancing of those as we get closer to them going current. But we see markets opening and we see opportunities to expand on that favorable rates and not 12%.
Dan Crowley: She asked about cash as well.
Jim McCabe: Yes, that’s essentially about $127 million right now, it’s sufficient. And I don’t see a need for a lot more than that going forward except for growth initiatives. We continue to invest our capital in our existing technologies alongside of our customers, who are investing with us to take our technologies on their new platforms. So we do want to keep in reinvesting cash to keep the business sustained and growing. And then eventually, we’ll look outside after we get that reduction down for opportunities to grow externally.
Dan Crowley: Yes, Sheila, you’ve been a post follower of our stock for many years and you remember, two years ago, we were about an 8% EBITDA business. Last year, we were 11%, this year we were about 14% and we’re headed North from that in the coming years. And so we’ve been on a path to deleverage just through earnings and cash flow pre-pandemic. And I remember briefing the Board and we were I think three or four quarters away from achieving our leverage goals. So now we’re resetting for that. And we enjoy a lot of interest and support from the investment banks and bondholders. So we’re confident we can get refinanced.
Sheila Kahyaoglu: That makes a lot of sense. Thank you for that. And maybe just a shorter follow-up. I think, Dan, in your prepared remarks, you mentioned $130 million of new wins, but the backlog went up $20 million or $30 million. Can you maybe square that a little bit?
Dan Crowley: So I’m going to — Tom Quigley to respond on that.
Tom Quigley: Hey, Sheila. As you recall, our backlog is really only next two years of orders. So that’s the thing that we’ve received firm orders on where contract win maybe a five-year or beyond orders and we’re taking into account. What do we expect to earn on that portion of that contract?
Sheila Kahyaoglu: Got it. Thank you so much.
Dan Crowley: Thanks, Sheila.
Operator: Our next question will come from David Strauss with Barclays. You may now go ahead.
David Strauss: Thanks. Good morning.
Dan Crowley: Good morning.
David Strauss: Just wanted to ask about working capital, it looks like if my math is right, you’re assuming like $50 million in positive working capital in the fourth quarter? Is that correct, Jim? And then your comment around getting to positive free cash flow in 2020 for fiscal ’24. What are you assuming for working capital in there?
Jim McCabe: Yes. So directionally, as I mentioned, working capital is going to be contributing to cash flow in Q4. It will be a meaningful part of the $60 million generation, because we are shipping out a lot of product in the fourth quarter, both seasonally and from the stronger demand. I don’t have specific working capital assumptions for next year. But what’s happened with working capital is on time in full has improved substantially. I think it was about 10-point improvement just over one quarter. And that’s a leading indicator to working capital coming down. We’ve seen working capital be a little higher because of supply chain disruptions, but that’s improving, and we’re looking forward to that improving into next year as well. And with the new portfolio, we should be a little less working capital dependent than we were in the past.
David Strauss: Okay. And any sort of early thoughts on pension for next year, both from a — I guess, from an income standpoint and whether you’ll need to make any cash contributions?
Jim McCabe: Yes. Too early to say what the year-end valuation is going to say, but we have put disclosure language in there about the risk with the assets, depending on how the markets do and how interest rates are. There could be some increased funding in the out years. But next year, it should not be material at all.
David Strauss: Okay. Thanks very much.
Operator: Our next question will come from Myles Walton with Wolfe Research. You may now go ahead.
Myles Walton: Thanks, good morning.
Dan Crowley: Good morning.
