Ladies and gentlemen, thank you for standing by. Welcome to the General Mills’ Third Quarter 2016 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, March 23, 2016. I would now like to turn the conference over to Jeff Siemon, Director of Investor Relations. Please go ahead, sir.

Thanks, Denise, and good morning, everyone. I’m here with Ken Powell, our CEO; Don Mulligan, our CFO; and Jeff Harmening, Chief Operating Officer for our U.S. Retail Segment. I’ll turn the call over to them in just a minute, but first let me cover my usual housekeeping items. A press release on third quarter results was issued over the wire services earlier this morning, is also posted on our website, and you can find slides on our website that supplement this morning’s presentation. Our remarks will include forward-looking statements that are based on management’s current views and assumptions. And the second slide in today’s presentation lists factors that could cause our future results to be different than our current estimates. And with that I’ll turn you over to my colleagues, beginning with Don.

Thanks, Jeff. Good morning, everyone. Thank you for joining us today. As noted in our press release, General Mills’ third quarter results were in line with our expectations. Net sales, total segment operating profit and adjusted diluted EPS results declined, reflecting the effects of foreign exchange and the Green Giant divestiture. Net sales growth continues to be impacted by high levels of competitive activity in U.S. Yoghurt and lower display merchandising for U.S. Retail. However, our effort to drive more from the core is leading to improved sales trends across a number of key U.S. Retail businesses, which Jeff will expand upon in a moment. We continue to maintain strong margin discipline as evidenced by our fifth consecutive quarter of adjusted operating profit margin expansion. Based on our results through nine months, we are reaffirming our fiscal 2016 growth targets. Slide 5 summarizes our results for the third quarter. Net sales totaled $4 billion down 8% as reported and down 4% in constant currency. Total segment operating profit totaled $679 million down 1% on a constant currency basis. Net earnings increased 5% to $362 million and diluted earnings per share were $0.59 as reported. These results include $44 million of restructuring, and project related expenses and mark-to-market valuation effects. Adjusted diluted EPS, which excludes certain items affecting comparability, were $0.65, down 7% from last year’s third quarter. Constant currency adjusted diluted EPS decreased 6% compared to a year ago. Slide 6 shows the components of total company net sales growth. Pound volume reduced sales by 5 percentage points. Positive sales mix and net price realization increased sales by one point while foreign currency exchange reduced sales by 4 points. The Green Giant divestiture reduced contribution from volume growth by 4 points and reduced net sales growth by 3 points in…

Thank you, Don. And, good morning, everyone. I appreciate the opportunity to give you an update on our U.S. retail performance. On Slide 20, I’ve summarized three main messages, I want to leave you with today. First, we delivered strong profit growth and marginal results so far this year. Second, we’re continuing to experience headwinds in our Yogurt business, and in Display Merchandising, that are dampening our sales results. And we’re actively working to address these headwinds. And third, we’re encouraged by the progress we’re making with our Consumer First Efforts in a number of key businesses. Now let me go a bit deeper on each of these areas. Through nine months, U.S. retail and net sales of $7.8 billion are down 2%, including one point of decline from acquisitions and divestitures. Year-to-date segment operating profit of $1.7 billion is up double-digits versus the prior year. This significant profit performance reflects our continued focus on cost savings. We’re generating strong cost of good HMM savings, in addition to the benefits from incremental cost savings projects including Project Century. This gives us even greater confidence that our Century initiative will help unlock future HMM opportunities. x: We continue to see growth in our categories with aggregate Nielsen measured retail sales up for the fourth consecutive quarter. We estimate that our categories grew more than 1% in the third quarter, when including faster growing non-measured channels. Our net sales results have not kept pace with category of growth. As I mentioned, our year-to-date net sales declined 2%. The Annie’s acquisition and the Green Giant divestiture combined to contribute one point of that sales decline, with the impact falling most significantly on the Meals, which would up excluding our M&A activity. Net sales for our Yogurt operating unit have been impacted by high…

All right. Well, thank you, Jeff and good morning everybody. You just heard about our performance in our U.S. Retail segment. So let me give you an update on our other two business segments starting with Convenience Stores and Foodservice. Net sales for our Convenience Stores and Foodservice segment are down 2% so far this year due to index pricing on bakery flour and business exits. However, our six focus platforms of cereal, snacks, biscuits, mixes, yogurt and frozen meals continue to deliver excellent sales growth with combined net sales up 6% year-to-date. This sales performance combined with continued benefits from cost savings initiatives is translating into margin expansion for our Convenience Stores and Foodservice business. Segment operating profit is up 8% so far this year increasing this segments profit margin to 19%. Frozen meals are leading our performance in Convenience Stores and Foodservice with strong double-digit-sales growth year-to-date. Mini Bagel continues to grow as part of school breakfast programs and we applied our consumer first approach to product development in this channel when we introduce products for school lunches a year ago. Pillsbury, Cheesy Pull-Aparts are our most recent introduction launched in November these individually rapped versions of cheese stuffed bread are heating and served right in their packaging, saving labor costs and waste. Our bulk packs in schools are driving mid-single-digit growth for our cereal business fiscal year-to-date. As we’re leveraging our no artificial colors or flavors messaging with food service operators. In our Yogurt business also is posting mid-single-digit net sales growth so far this year on the strength of Yoplait Parfait Pro in a verity of food service channels from colleges to hospitals. We also saw good momentum on our Kid Yogurt in the third quarter as we gain distribution for our Simply Go-GURT products in…

[Operator Instructions] Our first question comes from the line of David Driscoll with Citigroup. Please proceed.

Great, thank you, and good morning.

Hi, David.

Good morning.

Great, thank you and good morning.

Hi David.

Good morning.

Wanted to ask a little bit about the sales growth expectations in the Fourth Quarter. So what you guys wrote in the press release and stated on the call is that you expect fourth quarter is expected to be positive on a comparable basis for sales but can you discuss kind of what has to happen for the guidance to work out as recent U.S. and European Nielsen data shows some fairly significant declines. And then maybe related to this, could you also comment on what your take is on the February Nielsen data which showed a market decline from the trend line that we were seeing and this doesn’t just relate to General Mills, it relates much more broadly to all U.S. food. Thank you.

Thanks. Well I would say David for our U.S. business, what has to happen and what we’re expecting to happen in the Fourth Quarter is for our sales growth to accelerate. And we expect behind a couple of important businesses. One is Cereal and the second is Snacks. And we expect that because we are starting to lap the merchandising headwind we’ve seen as one of our biggest customers in the fourth quarter and because our advertising is going to be up significantly on both Grain and Cereal because we really believe in what we’re seeing, the results from our renovation efforts. We also think even though Yogurt will continue to be a head wind in the fourth quarter, that that business will improve behind the merchandising we talked about in the second quarter. So for us to see improved U.S. sales results really it is a matter of cereal and snacking behind things we understand in the merchandising area and behind great advertising.

And I’ll just comment on the other two segments because we expect all three segments, David, to improve and accelerate in Q4 versus year-to-date or versus Q3 in particular. As Jeff alluded to higher advertising we’re going to see it in USRO, we’re also to going to see it in international. International, also which Ken alluded to, has a number of new products both innovation and renovation in the marketplace and that will continue to build in the quarter. In addition there’s some other things that we are lapping similar to the merchandise in USRO. We had business exiting in our C&F business in Q4 last year that will lap the index pricing we talked about in basically flour in C&F that is profit neutral because we price with the market. But the grain price has really started coming down last year in Q4 so we will begin lapping that it will be less bad in Q4 which will help our comparable sales growth. And then we’ll have continued growth acceleration in our emerging markets, including some pricing in Latin America. So there’s a number of factors that go into improved performance in Q4.

Ken or Jeff, can you guys just comment on that, that February…

Yes.

Question I had about macro U.S. the big picture, thank you.

Yes, yes. We’re going to do that.

Happy to do that. As we look at it, what I would say in general Nielsen data was up more than it had been in the month of January and it was down more than we had seen in the month of February. And there is nothing fundamental that we see that has changed between January and February. Certainly it could be the effects of weather at the end of January and stock effects that happened this year, whereas last year we had a couple of big weather events in the northeast in particular in February. So there could be some weather related activity and we certainly see that. But there is nothing fundamental that we see and that would have changed the categories from January to February. And our focus remains clearly on the things that we can control, which are marketing and innovation activities.

Thank you.

Okay.

Our next question comes from the line of Matthew Grainger with Morgan Stanley. Please proceed.

Great. Thanks, good morning everyone.

Hi, Matthew.

Jeff, I wanted to come back, I think we’ve kind of talked about this Cagny in recent quarters. But just to the big picture on your merchandising levels in the U.S. and then even though they are down at the key customer you mentioned. Your levels of trade promotions still appear to index fairly high relative to the industry average in a lot of your key categories and I know you’re planning to take some of these higher. So given that the industry trend is typically going in the other direction, how are you thinking about the right level of merchandising going forward? Is there really room to cut in the scope of how you plan to run the business or is that less feasible given that you need to support the categories in your competitive positions?

Yes, thanks for the question, Matthew. Let me start by kind of saying that this fiscal year we’ve actually seen price appreciation. As we’ve seen in our categories and we’ve also seen the effectiveness of our merchandising improve as we cut back lower ROI trade activities and focus on high ROI activities. As I think I’ve mentioned, we view how we look at trade as we do HMM and other areas and we’re always looking to get more effective than we are right now and we’ve seen good gains in HMM on our trade which is why we see the less improving in the ROIs improving in our area of trade. But that will continue to focus on that area because one of the things we find with HMM is that the more we look the more we find and I am certain with as big and complex as the trade bucket is that we will continue to find opportunities to further improve our effectiveness and our efficiency in the area of trade.

Okay, thanks, Jeff. And just one follow-up I probably for Don. I just wanted to ask about the margins and convenience in foodservice they’ve been pretty strong in the past two quarters surprised to see 20% margins. And so those recent months, so how should we think about the sustainability there? Is there a big benefit from grain merchandising in that number or are we at the stage where just the mix of the portfolio has really improved that much in that operating segment?

Yes, very pleased to say it’s the latter. Grain merch will have a quarterly impact year-on-year but if you look overall business, the fundamental change in the margins because of the business structure and the improving you’re seeing this year is primarily driven by the fact that we’re seeing 6% year-to-date growth on our focus six platforms which all have higher than average margin, higher than segment average margins, higher than company average margins as well. And combine that with the cost savings initiatives Catalyst and Century that we initiated last year we had some benefit to CNF as well. So, very much a substantial and sustainable change in the margin structure for that business?

I would just maybe to gild the lily a little bit here Matthew, if you go back five or six years in this business, we’ve nearly doubled the margins I mean it’s been more than the last couple of years it’s been continuous improvement over a long period of time as we’ve completely restructured that business so that it’s, as Don said, I’m very, very focused on the best channels in our most profitable categories.

In this year similar, Jeff talk about his business increasing margins by over 100 basis points, we’ll see the same thing in our CNF business this year.

All right. Great, thanks again everyone.

Our next question comes from the line of Ken Goldman with JPMorgan. Please proceed.

Hi, good morning. Thank you for taking the question. Jeff, you highlighted your – this is my phrase, you’re sort of lack of interest in chasing yogurt prices lower. But looking forward milk remains cheap. One of your competitors, I think continues to have a capacity utilization issue and I guess they’re incented to drive volumes. So, how do you – unless you’re paying more to get that promotional space you get – you’re expecting to get how do you – how should we have confidence that this will really turnaround for you and how should we have confidence that you’ll get that merchandising that you didn’t get as you expected this past quarter?

Well, look we’re always looking to balance growth and return as we talked about at Cagny. And our yogurt returns have been pretty good as we have been very disciplined. And what we need to do is make sure we balance that out with some growth as well and that’s what Ken mentioned in the second quarter when he said our merchandising activity will improve in the second half and we’ll see that in the fourth quarter. And so as we look into the fourth quarter, we will improve our merchandising competitiveness because we need to improve our growth. At the same time, we’re also mindful of maintaining our returns and so we will balance that out a little bit in the fourth quarter. But we’ve got a good line of sight now to win our merchandising is going to occur and what merchandising is going to occur and have high level of confidence that will improve in the fourth quarter.

But I guess that means, if you’re rebalancing a little bit that you have to pay a little bit more and perhaps you should expect a little bit better sales growth but a little bit worse margin on the yogurt business in the fourth quarter or is that the wrong way to look at it?

No, I think that’s a fair way to look at it. I think that is a very fair way to look at it and we’ll still see good margins because of the dairy pricing but maybe not as high as they are right now. And we expect our growth to improve.

Can I ask a quick follow-up? There’s sort of a growing assumption among industry observers that food producers over time will sort of follow the 3G model slash promo spending and not really spend much back to offset it but you’ve talked in the recent past about I guess higher in-store marketing and you said today you’re not just cutting trade you’re really looking to shift that to better ROI projects. Is that the right way to look at it? Do you think that maybe some observers were calling for massive trade promo that all flows to the bottom line? Is that true, is that overstated at this point as people look at the whole food industry. I know you can’t answer for everyone else, but you guys are obviously one of the larger cap ones out there. I’m just curious how you think about that whole balance there.

So we think about it. Ken, in the following terms. We think that a sustainable business model needs to have both margin expansion and top-line growth. So we are very, as we said many, many times we are very focused on both clearly, we acknowledged that the bar is higher now than it used to be on expectations for margin. And we’re addressing them very diligently through HMM, which we’ve had going for many years and the many other restructuring initiatives and other cost savings activities that you’ve seen us initiate over the last several years. So we are very highly focused on the margin piece and you’re seeing that this year with good gains and we expect that to continue once we go forward. But the additional part for us is that you got to have top-line growth. And so we’re very focused on innovation and being responsive to the consumer by keeping our core brands relevant advertising that works. And to drive growth and where we’re getting that formula right, we’re seeing good growth in our core category. So for us it’s finding that balance both we think that’s the key to sustainability in this environment. And in particular the focus on innovation and consumer first we think is critically important in an environment where consumer attitudes and values about food as you guys all know are changing very, very rapidly. So that’s really how we approach it.

Thank you. That’s helpful.

Our next question comes from the line of Michael Lavery with CLSA. Please proceed.

Good morning.

Good morning.

Good morning.

Just looking at cereal, you talked about how you’re seeing the lift from gluten-free Cheerios or some of the renovation on the other big brands but in total on the quarter it still was down 2%. So what’s the offset there and how big are those declines and what’s the outlook for where that can go, have you seen it stabilize or is there improvement on the way?

Yes, Michael, look the biggest offset by far is one that I mentioned earlier which is our cereal merchandising at one of our biggest customers and we’ve got a good line of sight to seeing that improve in the fourth quarter. So by far that is our biggest headwind in cereal because we feel great about the renovation initiatives that we have and the innovation we’ve just launched in the third quarter so we’re confident we will see that business continue to improve as it did in the third quarter, continue to improve in the fourth quarter as we lap that merchandising.

Well, I guess I understand that but I guess I’m looking at it when you’re talking by brand you’re seeing Cheerios and they are not all third quarter on Slide 26 for instance but Cheerios is up 2% the other seven are up six and you still have momentum it looks like on Cinnamon Toast Crunch. So regardless of channel that’s your whole business I assume, is that correct and so if that’s the case then which brands are the drag is Chex or Wheaties down double-digits or what’s the total picture look like?

We don’t have. Michael, we don’t have any one brand that’s dragging it down, so there’s not a smoking gun of one particular business. If you look at particular brands, there are a couple businesses in particular. One we’re lapping a lot of Cheerios protein from a year earlier which is of course is not gluten-free and the second is our adult brand Fiber One is not performing particularly well. And our Chex business is down a little bit but there is not one of those that you point to and say look that is, yes, it’s a biggest challenge we have is certainly the merchandising but within our brand portfolio those are ones that are not performing as well as they did a year ago.

Okay, that’s very helpful. And then just on Venezuela with that divestiture would that have been a material contributor to the double-digit sales growth in Latin America from the third quarter?

No. Venezuela is 0.1% or 0.2% of our sales so very small it will be immaterial.

Okay. Perfect. Thanks a lot.

Our next question comes from the line of Jason English with Goldman Sachs. Please proceed.

Hey, good morning folks.

Hey, Jason.

Good morning.

Thank you for – let me ask the question. I want to come back to Jeff if you have the U.S. retail trends. You guys have kind of condition just over the years to focus on base trends and say kind of ignore the incremental, its noise and you’re chalking up the weakness this quarter to some of that incremental noise merchandising, competitive dynamics. But when you look at base trends they are eroding pretty hard and pretty fast for your overall U.S. retail portfolio. So can you talk more about the drivers of the underlying base sales weakness in your portfolio probably speaking?

Yes, Jason, as we look at our third quarter baseline results, remember there are two things that we talked about one was the merchandising, one of our key customers, the other is yogurt. And our base sales trends on yogurt are really driving the negativity for our baseline sales for the U.S. RO categories in the third quarter. And that is largely due to the competitive activity we talked about it earlier. So we’ve seen double-digit baseline declines on our yogurt business, which is due to competitive activity, which has served to bring down the – if you look across the baseline performance of the portfolio.

Okay. And another question for Don then, gross margins, Don, you’re calling for a negative inflection in the fourth quarter. By our math maybe Green Giant divestments adding 30 bps to 40 bps of gross margin, is that fair? And if so sort of the implied underlying weakness in the fourth quarter is even more substantial. Is this really an inflection that we should expect as we lean into next year or is it just a blip due to timing factors?

Yes, it’s a later, as we’ve – as the years unfolded in the fourth quarter, we’re still going to benefit obviously from strong HMM, but the merch timing that we talked about and particularly what we’re lapping a lower merch period last year was higher this year. The inflation which is actually the single biggest factor, because last year Q4 was our lowest inflation of the year, this year it’s our highest inflation of the year. Last year is really when – in the fourth quarter is when dairy and grains came down, and while they’re still down, there are decelerating more, so we’re lapping there. And we have continued inflation in our manufacturing logistics, sugar, nuts, fruit, eggs, and obviously I’d say more broadly just in the Latin American region, and again more broadly. So, it is – it’s very much an inflation story in the quarter. That just – the phasing of it is different this year than last year with a low point last year and a high point this year. I wouldn’t read anything into it as we look into F 2017, and we’ll share more full guidance with you for F 2017 in a couple of months. But as we’ve talked about at Cagny, we are projecting 200 basis points of margin expansion by 2020 and we expect the majority of that calls [ph] to come through cogs and come through gross margin.

Very good. Thank you very much.

And our next question comes from the line of Eric Katzman with Deutsche Bank. Please proceed.

Hi. Good morning, everybody.

Hi, Eric.

Good morning, Eric.

Two questions if I could, I guess, one is question for Ken. I’ve heard from a number of other CEOs both currently in the industry and formerly in the industry who are getting more concerned about the pressure to cut costs and the risks to food safety and quality. I know you guys have done a very good job over time, but even you had to recall earlier. And so I’m wondering if you could maybe speak with an industry had on about the choices that are being made as the – as the market pressures the industry to cut costs. And then second around I think at Cagny, last couple of years, Ken, you’ve talked about kind of how some of these companies get distribution to a certain point they hit a wall and that’s – that wall is where the large cap companies such as yourself can really leverage that capability. But it seems like in yogurt, it just keeps going the other way. There are so many brands out there now. It doesn’t seem like they are hitting that wall, I mean it seems like the only company that pulled back was actually the PepsiCo, Müller joint venture. Otherwise, there is just more, more brands being added to the category and Annie’s is just another example of that. And how long does it take for scale to really I guess wind out if it does. Thanks.

Okay. So well, let me – I’ll answer the first one first, and I can’t really – I understand the observation Eric and the concern that you might hear. I can’t speak for the industry. I can only speak for us. And clearly we are very, very focused on product safety and product quality. It’s sort of central to our mission and that’s the kind of capability that we would maintain and actually build upon even in this environment, because we just think that consumer trust is sort of is job one for us. So but it goes to – your question goes to the earlier question as well about what are we trying to do, and we’re trying to do two things. We’re very, very focused on margin expansion, and we think we have a good line of sight, and we’ve performed well there over the last couple of years. We have a good line of sight on other things we can do to continue to – continue that good work. But we’re equally focused on maintaining the capabilities that we need in order to drive top line growth. And so we’re preserving. We’ve got a very strong marketing organization in CI. We’ve got excellent R&D. And so those are very important things and our product quality organization has been maintained at a very high level. So that’s how we look at it. I understand the question and I understand the concern, but that is the sort of – we would not compromise in that area. To your comments on yogurt, there is – I don’t have the numbers in front of me – from what’s come in and what’s has gone out over the last couple of years, Jeff may have those. And so there is a tremendous amount of new product activity in the yogurt area, lots of them don’t stick around for very long. So it is – there are a lot of them though and its become a more competitive category. But again, where we focus on the right innovation and the right – the right renovation, like expanding Annie’s into the yogurt dairy case, and other yogurt innovation initiatives that we will announce this summer, where we have good ones. We are able to succeed, because of the scale and the distribution power that we have. So we are confident that we can continue to grow there, it is an exciting space, it is a huge category globally, we have very high capability. And so we are just going to stay focused on the kind of innovation that will work in the category. I can come back to you, Eric, we can get some numbers maybe on how many have come in and how many have gone out. But your observation that there is a lot more in yogurt, I think is correct. I don’t know if you want to add anything Jeff.

Yes. The observation that there are a lot of players in yogurt is extremely correct. And it is also true that we’ve grown distribution over this time as well. But if we think more broadly about the kind of capabilities, a big company in the scale that General Mills can bring. I don’t think you have to look further than Annie’s. We have driven double-digit distribution increases on Annie’s over the last two years in the grocery trade. But even beyond that, looking at the club channel, we have grown distribution in our foodservice area. We are growing Annie’s in our foodservice channels. And so broadly speaking we see the kind of capability that General Mills can add to some of these smaller players and when they hit the wall, how much better we can do. And you were starting to see the same thing with EPIC even though we just bought that business. And we have a high degree of confidence that we will be able to do a lot more faster than the founders alone could have done with their limited resources.

Thank you. That’s all.

And our next question comes from the line of John Baumgartner with Wells Fargo. Please proceed.

Good morning. Thanks for the question. Jeff, I’d like to ask in terms of the U.S. retail business the top 450 SKUs that you’ve isolated first in past. Maybe if you could update your progress in building distribution for that group, how the increasing merchandising plays into that and maybe how we should thinking about the magnitude of those SKUs on sales for the next two quarters?

Yes. Look, we’re really pleased with what we’ve seen with developing the distribution of our top 450 SKUs. We’re right on track where we thought we would be. We’re up over 5% and distribution of top 450 SKUs and really pleased with that performance. And it’s pretty broad performance over a number of categories. And we’ve even seen the benefits of things that we’ve discontinued. We discontinued a line on Hamburger Helper. And we’ve seen the distribution there decrease, but we’ve seen the increase on our top SKUs. And as a result, we are actually starting to see our turns increase on Hamburger Helper. We’ve also seen the benefits of distribution on our Pillsbury Doughboy. And one of the things that’s driving growth on our Pillsbury business is getting out of SKUs that were relatively unproductive and getting into more SKUs are relatively productive. And so we’re really pleased with the progress we’ve seen, we have more to do. We’ll keep that as a multi-year plan to get all of our distribution on our top items, but we’re progressing as we thought we would, and we see more room to go. The more we see that we can do, the more we like this initiative.

Great. And then just a follow-up in terms of Yogurt and the comments around the innovation in the category and the competition there. Aside from the merchandising increase in Q4, can you speak to any opportunities you’ll see to maybe improve your mix or maybe where you’re under mixing right now? And why we should be comfortable that we’re not seeing the beginning of another kind of 2011, 2012, given performance there.

Well, on the innovation front, we feel good about some of the innovation that we have launched. And we see some more good innovation on the way. So for example, our Greek Whips! which we launched a year ago are doing quite well. And we see an opportunity to expand those further. We have seen good initial results from our Annie’s organic Yogurt and we see an opportunity to expand Annie’s further and yogurt, as well as expanding into some other organic areas. So we feel good about the innovation we’ve done, but as we look ahead – actually we see even greater potential for innovation in some faster growing segments and whether that’s building on things like Whips or getting into even further into organic. There is certainly a runway ahead of us for innovation. And we know in a category like Yogurt just like in cereal, it is going to be the innovation and the marketing that drives long-term growth. Because dairy prices are 20-year low and we’ll see how long they stay there, but eventually they will go back up. And it will be a matter of innovation and marketing is going to win the day in Yogurt.

Great. Thank you very much.

I think we have time for one more question, Denise.

And our next question comes from the line of Chris Growe with Stifel. Please proceed.

Hi, good morning.

Hey, Chris.

Hi. Sort of a question for you if I could on, as you think about all the incremental cost savings coming through this year from all the various programs, Catalyst and all those programs, just should we still expect about half of those to be reinvested back in the business is that occurring. It sounds like you’re going to have an increase in overall investment in the fourth quarter. Are you kind of really accelerating the investment and should that continue into 2017 as well?

Yes, Chris this is Don. Yes, I think the mix that we talked in beginning of the year about reinvesting roughly half of our savings is still where we’re at. It is facing a little bit differently. As we said, I think advertising some of merchants a little more back loaded than we had originally anticipated, but for the full year it will be in that same range. And next year – obviously we haven’t completed our plans for next year, so I can’t give you an exact figure, but you would expect that we’re going to be continuing to reinvest some of those savings back and next year we also expect to have a little more leverage from higher top-line growth to add to the margin expansion.

Okay. And I just have a follow-up question if I could on the International topics. We’re a little bit softer at this quarter underlying what I expected. Can you talk about some of the key factors involved in that you gave a little bit of an overview early on in the discussion, but maybe from just to give an idea like in the fourth quarter, you will see those profits improved and maybe some of the key factors in area that are leading to that weakness in this quarter?

Yes, sure. First off our International business, in total, we feel good about where the top-line has moved solid growth in developed markets really at that low-single digit level that will continue even if it’s tempered by some of the Yogurt pricing in Europe. Encouraging acceleration in emerging markets that Ken took you through, which is both innovation, our execution and some pricing. And as with other segments, we expect that to strengthen in the fourth quarter. In terms of the margins, there are a couple of things that are at play. One is obviously Green Giant does impact our profit in International. We sold the North American business, so Canada you’re seeing the impact of that. And that’s a low-to-mid single digit drag on the earnings for International. The other you see, we mentioned that the currency driven inflation on certain products I mean that’s a long way of saying we have some transaction FX impact for businesses that we source across border. So, for example, much of our Canadian product is sourced from the U.S., so as the Canadian dollar weakens that increases the cost in Canada and we have the same thing across some borders in Europe. And that has been a larger drag in the second half just due to currency movements and some hedge positions that we had. And that’s what you’re seeing in the quarter and it will continue into the fourth quarter as well. But if you strip out Green Giant in some of the transaction FX, the underlying growth, profit growth, we’re seeing at International is holding up quite well and that’s what we would expect to continue to see as we move into 2017.

Thank you. Don, just to be clear, is the $0.08 FX drag that you have outlined, does that include – that’s exclusive of the transaction FX?

No, that does not include any transaction, that’s all translation FX.

Okay.

Thank you for asking that to clarify.

Yes, I just want to make sure. Thanks for the clarification.

The $0.08 is all translation.

Okay. Denise, I think that’s all the time we have. So, I know some of you were queued up and we couldn’t get to your question. So, I’m available all day on the phone, so please give me ring. And thanks so much for your attention and questions this morning.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.