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#So going into fiscal 2016 we had what we considered to be an appropriate level of spending behind A&C.
Given the strength of the year, we chose to increase it above what we considered to be an ongoing level of required A&C, and entering 2017 we will have a budgeting start point of normalcy.
To the extent the business supports it, we would continue to reinvest in A&C, but that is not our starting point.
We view it as more of a dynamic budgeting tool than a fixed decision with which we enter the year.
So I would not at all want to say it did not work.
It looks in fact like it did work but it was an unusually high level, so we are simply creating cushion around the overall portfolio performance by normalizing the budget.
Thank you.
So my comment was more intermediate than specifically to the fourth quarter, although the fourth quarter could participate in that as well.
The balance of the portfolio that will pick up the slack was the comments I made around annualizing synergies already achieved, incremental synergy, and I am in our cereal business now.
Annualizing synergy is already achieved, incremental synergies that are being realized in 2017.
The pullback of the incremental spending, I just mentioned with <UNK>; within Active Nutrition the normalization of costs at Dymatize, ongoing growth of the Premier shake business with new distribution, and terrific velocities.
And finally, within private brands, the growth in each of the lines of business that result in the capacity expansions that are currently underway.
So the comment is true in the fourth quarter but really a longer term, more intermediate comment than that.
Well, that is what I am attempting to address.
Is making a distinction between the Company over-earning and an individual segment within the Company over-earning.
We do expect to see some mean reversion within the Michael business to be the other side of that over-earning, but that it be offset by other opportunities in the balance of the portfolio, such that the conclusion on a 2-year basis will be that the Company did not over-earn, even though one segment may have over-earned.
I am not going to comment specifically on where our focus has been, other than that we have had a rich pipeline throughout the year.
We have looked at a lot of opportunities.
And in a year in which our business was growing as significantly as it has, perhaps our focus shifted slightly towards an internal orientation but that we are no less engaged in M&A than we ever have been.
And part of what we are paid to do is sometimes not do M&A when the opportunity is not the right one.
So we are quite active in the M&A market, and as I made the comment in my prepared remarks, that quiet and inactivity should not be construed as, or quiet should not be construed as inactivity.
There is a lot of activity.
Thank you, <UNK>.
Hey, <UNK>.
So let me start with normalization.
We think normalization lands at a premium to the pre-AI levels as a result of better mix and an AI insurance premium built into our go-forward pricing model.
I think you are accurately reflecting the potential.
I would not necessarily want to tie it specifically to the next couple of quarters because there is some uncertainty about the timing of the grain-based supply and the interactions with the urner barry, but that is a potential that exists in the near to intermediate term as we see those different variables operating in different directions.
So that is why I caution that it is better to look at Michael over a 12-month basis than to try to make any near-term prediction on one or two quarters.
And we will try to further illuminate that when we come back with a fourth quarter call.
So we will give you the incremental spend.
In aggregate it is $25 million.
On PCB it is $15 million specifically.
What we are not going to do is line item go into synergies.
What we are wanting to come back with is consistently improving profit and margin levels such that the synergy is self-evident, but that we do not want to be focused on and accountable for delivering a specific synergy so that we can make realtime dynamic decision it is throughout the year that may choose to lead into something different than a synergy number.
The synergies are real and significant and will be baked into all of our guidance numbers but we are not going to line item provide them.
Thanks, <UNK>.
Hey, <UNK>.
So that is somewhat what I was alluding to in the ---+ my answer to <UNK>, is that we will make on a dynamic basis decisions around investing in longer term so that if we have the opportunities, as we did this year, to lean into certain programs with less near-term but more long-term benefit, we may do that.
Otherwise the answer to your question is "yes.
"
If you look at EBITDA margins, we in all likelihood would want to maintain it at that level or actually bring it down as we spend more behind the brand and see additional growth and distribution in velocities.
It is a very rapidly-growing brand and we do not want to bleed it by over focusing on margin structure during its growth phase of its product life cycle.
So what you are going to see in the very near term is a heavier marketing spend, which will have a dampening effect on near-term EBITDA margins.
Long-term we think it is a mid- to high-teens EBITDA margin structure business once you get to a more mature segment or a more mature portion of its product life cycle and we are spending less behind A&C.
Sure.
Specifically what we are talking about is the input costs that they have been incurring for their primary protein inputs, raw materials.
As we have commented before, they were along a higher-priced contract compared to market throughout this entire fiscal year.
We are now seeing visibility into the fact that towards the tail end of our fiscal fourth quarter, we will start to be able to get through that contract and buy on the open market.
And we discussed before the order of magnitude, if Dymatize was able to buy on the current market, which of course is not a given but if it could for a full fiscal year, the order of magnitude is in the $12 million to $15 million range.
Well be the predicate for being able to do that, of course, is the return of full supply.
And we would anticipate, as we mentioned in the comments, that that would occur by year-end.
So in the time frame that you mentioned, we certainly would have the capacity to pursue and meet that demand.
Really no update since last time we talked, and my earlier comments that we expect, between the shift and that premium, there to be a normalization at a higher level than pre-AI.
Throughout this year, because of some of the unusual characteristics of the AI phenomenon, we have been trying to give previews into 2017 and a bit longer term than we frankly are comfortable giving, given the timing of our planning process.
So many of these questions will become more clear as we go through our annual planning.
So I am going to limit it to directionally, rather than put a specific quantification of it.
Again, directionally, we think it will be better.
Quantification will take a little more time.
Last year's fourth quarter had the significant write-offs in it, if you recall.
So last year's comp is very negative.
Look at it more sequentially.
We expect third and fourth quarter to be relatively comparable, although there is some investment, as we mentioned, occurring in the fourth quarter in the Dymatize brand as well.
So it probably will be slightly down on a sequential basis.
Sorry.
Go ahead.
We are past the damage but again the comps are not comparable because the fourth quarter would have been the first quarter last year, after we have we had closed our plant.
Thanks, <UNK>.
Hi, <UNK>.
Well, we have ---+ you almost have to go through that segment by segment.
The cereal business is a flat to potentially 1% up business, with cost reduction allowing us to manage EBITDA to the 1% to 2%, and I am making that comment on the other side of full synergy realization.
So that really does not kick in until 2018.
We see significant growth in our Active Nutrition portfolio well ahead of the CPG peer group.
And then within the Michaels segment, once we get past the AI supply situation, we think that is a mid-single digit grower as the increased consumption of protein portends well for its unit volume growth as it represents one of the cleanest and most affordable forms of protein consumption.
Private brands is very specifically tied currently to a few segments of nut butter, which have some very positive dynamics behind it.
So on average I would say we have an internal growth algorithm which is slightly ahead, on a blended basis, of our peers.
And then I would argue we have potentially greater M&A optionality.
As I mentioned, we think about it in the terms of the mid-teens for EBITDA.
Well, as always, thank you for your participation, and next call we will look forward to giving you both the results of a really solid fiscal 2016 and give you our formal guidance as we look further into 2017.
So thank you and we will talk to you soon.
