Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Andrea Wirth - Robert W. Baird
Andrea Wirth - Robert W. Baird
On your institutional segment in terms of the promotion impact, are you expecting, because of the change that your institutional business will actually, revenue will be down in the first quarter.
Michael Monahan
Including the impact of the promotional reduction yes. We would look for it to be flat to up slightly adjusted for that change.
Andrea Wirth - Robert W. Baird
Including that change you mean.
Michael Monahan
No excluding the change we would look for it to be flat to up, including the change we’ll look for it to be down.
Andrea Wirth - Robert W. Baird
You say in your press release you’re expecting moderate growth in the first quarter, I’m assuming that excludes the promotion then because with the promotion having your institutional business down, I think it would be tough to still see moderate growth for your overall business.
Douglas Baker
I think we still expect to have modest growth and we’re taking this at its most literal point but we expect to have, at management rates or at fixed rates, to have growth in the first quarter even including the impact.
Andrea Wirth - Robert W. Baird
Can you try to quantify what kind of revenue impact is built into that $0.03 a share EPS impact.
Douglas Baker
Its about $18 million in sales and fundamentally what we’re doing here is we have had a pattern and been promoting in advance of what I’ll call peak season for a number of years and this is we increase distributor inventories through promotion dollars through to the very end of Q1, we continue to carry those or have distributors carry those higher inventories and then we let the inventories decline in Q4. And this is a pattern that we’ve had for a while. The rationale for the pattern historically was a number of them, the different competitive environment, high pile moves faster, you wanted to make sure that you were dominating the slots at a number of things.
A lot of these strategies were very, were right for a number of years. I would just say fundamentally we think the calculus has changed. And as we look at the amount of money that we invest in this versus the benefits that we get we don’t believe that this is the right business move anymore. We spent 2008 studying this. We understand it very deeply. We have all the out information from all the distributors. We know precisely where our products go and so we can track quite clearly the results of these promotions for those distributors that take part and those that don’t.
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