Greetings, and welcome to the LKQ Corporation Fourth Quarter and Full Year 2014 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation (Operator Instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joe Boutross, Investor Relations for LKQ Corporation. Thank you. Mr. Boutross, you may begin.

Thanks, Devon. Good morning, everyone, and thank you for joining us today. This morning, we released our fourth quarter and full year 2014 financial results and provided our full year 2015 guidance. In the room with me today are Rob Wagman, President and Chief Executive Officer; and John Quinn, Executive Vice President and Chief Financial Officer. Rob and John has some prepared remarks and then we will open the call up for questions. In addition to the telephone access for today's call, we are providing an audiocast via the LKQ website. A replay of the audiocast and conference call will be available shortly after the conclusion of this call. Before we begin our discussion, I would like to remind everyone that the statements made in this call that are not historical in nature, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, hopes, intentions or strategies. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us. Actual events or results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors. We assume no obligation to update any forward-looking statement to reflect events or circumstances arising after the date on which it was made except as required by law. Please refer to our Form 10-K and other subsequent documents filed with the SEC and the press release we issued this morning for more information on potential risks. Also note that guidance for 2014 is based on current conditions, including acquisitions completed through February 26, 2015, and excludes any impact of restructuring and acquisition-related expenses, gains or losses related to acquisitions or divestitures, including changes in the fair value of contingent consideration liabilities, loss on debt extinguishment and any capital spending related to future business acquisitions. Hopefully, everyone has had a chance to look at our 8-K, which we filed with the SEC earlier today. And as normal, we are planning to file our 10-K in the next few days. And with that, I am happy to turn the call over to Mr. Rob Wagman.

Thanks, Joe. Good morning and thank you for joining us on the call today. All things considered, a reasonable quarter to end the good year. With respect to activities under our control, the Company performed well. Unfortunately, there are items we don’t control and they has negative impact on our financial results. Global revenue reached $1.68 billion in the quarter, an increase of 27.9% as compared to Q4 2013. Net income for the fourth quarter was $80.5 million and diluted earnings per share were $0.26, which was flat year-over-year. Adjusted diluted EPS was $0.27 for the quarter compared to $0.26 in the prior year, an increase of 3.8%. During the quarter, we experienced significant impacts from deteriorating scrap markets, FX and tax rates. Adjusted diluted EPS for the fourth quarter of 2014 was negative affected by $0.04 as a result of these items. Without them, diluted adjusted EPS in the fourth quarter of 2014 would have increased 15% versus the fourth quarter of 2013. During the quarter, we achieved companywide organic revenue growth and acquisition revenue growth for products and services of 8.7% and 23.9% respectively. I continue to be pleased with the North American organic revenue growth for products and services, which during the quarter grew 6.2% despite facing a seasonably mild December. While we can’t say for certain, having the Christmas holiday in the middle of the week also seen slightly negative to results. European organic growth for the quarter was a robust 13.8%. For full year 2014, revenue reached 6.7 billion in 2014, an increase of 33% as compared to 2013. Net income for the full year was 381.5 million compared with 311.6 million for the prior year, an increase of 22.4%. Importantly, organic revenue growth for products and service for 2014 was 9%, a clear indication…

Thank you, Rob. Good morning and thank you for joining us today. Revenue for Q4 2014 was $1.7 billion, an increase of $367 million or 28% over the $1.3 billion we achieved in Q4 2013. Net income in Q4 2014 of $80.5 million was 3.3% higher than Q4 2013. Obviously we expected better pull through of the top line growth to the bottom line as opposed to the net income margin compression we saw. As Rob said, some of the drivers of the lower margin are outside of our control but we are taking actions in an attempt to mitigate them. Before I get into the details on the high level as I characterize the quarter’s results is having the strong top line and organic growth set by a difficult scrap and foreign exchange environment. Also the relative performance of Europe caused our tax rate to increase. As I will discuss in a moment the scrap and foreign exchange issues continue through Q1, but we believe we’ll eventually stabilize and at least in the case of scrap possibly improve over time. We also believe the European operations will improve over time helping not only our pretax income but also our tax rate. The revenue growth breakdown as follows, for Q4 our total organic revenue growth was 7.1% and we delivered an additional growth of 22.2% from acquisitions, the foreign exchange being negative 1.4%. Organic growth in products and services was 8.7% and within that we saw our North American operations grow organically 6.2% while the European segment to 13.8%. North American organic growth of 6.2% was 30 basis higher than that reported in Q4 2013. There are no definitive statistics available but our sense is that while the weather in Q4 2014 was not as favorable to us as in…

Thanks John. To summarize we faced significant headwinds in the fourth quarter many of which were outside of our control. Yet despite these challenges we delivered solid results in 2014. Looking ahead in North America the recent upswing in miles driven, lower gas prices and increased new car sale should provide a nice tailwind to our collision business. In addition the recent inclement weather in North America could provide some momentum as we enter the second quarter. For our aftermarket parts business, we continue to see improvement in our full SKU offering as well as our certified parts offering both growing 6% and 18.6% respectively. In UK, new car registrations reached a level not seen since 2005 which we believe boards well for ECP’s mechanical parts business and their growing alternative collision parts business. Also with UK insurance premiums down 13% since 2012 we continue to believe that the value proposition of alternative collision parts is attractive to carriers trying to mirage cost. Also we continue to be pleased with the performance of our specialty segment and the timing of our entry into the large and highly fragmented market. In 2013 the specialty equipment market produced the highest growth rate since the recent recession posting a 7% gain and pushing the overall market to over 33 billion. These dynamics coupled with the projected increase in SAR over the next four years positions us well for 2015 and beyond within this segment. In closing I am proud of hard work and dedication our 29,000 plus employees delivered for the company, our stockholders and most importantly our customers in 2014. I am equally proud of our team’s commitment to effectively manage the dynamics of our business that they can control while not losing focus on growing the business, developing our people and continuously looking for opportunities to generate leverage and synergies from our existing and recently acquired operations. Finally, as you probably saw in our second press release John Quinn has been appointed to head our European operations. I want to thank John for his five years of service as our CFO. Our commitment to Europe requires strong leadership. John has extensive knowledge of European business market having held key positions there in previous company. He is ideal person to take our European operations for the next level. Also, I want to welcome Nick Zarcone as our new CFO. Nick has extensive CFO experience and a great knowledge of our company. He was the key person at our lead underwriter Baird during our IPO in 2003 follow on offerings in 2005 and 2007 and has advised on several of our strategic initiatives over the years. We are fortunate to have him join our team. And Devon with that we are now prepared to open the call for Q&A.

Thank you. We will now be conducting the question-and-answer session (Operator Instructions). Our first question comes from the line of Nate Brochmann, William Blair. Please proceed with your question.

Hey, wanted to talk a little bit. I get all the noise certainly created by scrap and FX and the tax rate, and thank you for explaining that very well. There still seems to be an ounce of a gap in terms of guidance. I get the fact that there's some lingering issues in the fourth quarter in terms of cost with Europe and some margin things here and there. But in terms of guidance, you talked about the expectations that those things would get better, but there still seems to be a little bit of a gap between where expectations were, even adjusting for scrap and FX and kind of where guidance is. Some of that seems to be a little bit of a gap in terms of operational, some of that, again, still might be some gross margin. Some of that may be higher cost with Europe, and just getting the platform established in 2015. Wondering if you could go through a little bit more in detail where the perception on the gap might be?

Just I guess the way that we look at where came out with guidance if you look at the fundamentals of the company and there was Q4 underperformed a bit in terms of European operations obviously that drove the tax rate little bit higher and there is a pickup year-to-date increase in the tax rate we have the pickup in Q4. We also have some increases in the amortization on some of the intangibles. So if take that component then roll it forward say we have a $1.27 on adjusted basis in 2014. If you drove that in any kind of reasonable rate probably be in the $1.45 to $1.50 range, we then see about a $0.10 headwind within this scrap and the FX impact. And that’s kind of where we ended up on the guidance. Keep in mind we don’t have a lot of big acquisitions in these numbers, back if you look in 2011 maybe you see peak coming into 2012 we had the benefit of Keystone Automotive last year. The fundamentals of the business, I think are quite strong. We do have this scrap which is we view is been a temporary headwind, I don’t know when FX is going to turn or if it ever does, but there are some things we are obviously doing and trying to improve those things as well. Not all the currencies moved in the same direction at the same time and if that does a little bit of an opportunity for arbitress and some of the procurement as we look in that so if you can mitigate or mitigating some of these impacts. The FX is not just and we have to accept that there are some things we can do to move cost around from different currencies.

Okay, that's fair. I know that obviously you guys been very successful with your strategy in terms of buying acquisitions and the putting them into the business. Clearly, the top-line revenue remains fairly impressive, and certainly within expectations. Again, I'm sure that the answer will be no, we're not going to change what we're doing. Again, I wouldn't expect necessarily you to as you've been successful with that. But at some point you wonder, with the stock price bring down here, whether you might look for shareholder returns that could be a little bit better, whether that's buying back stock, or whether that's kind of laying off anything very large. I know timing's always unpredictable. I know that if you go back to the couple years post-Keystone one, you showed some impressive margin improvement, whether there would be an opportunity to be able to do that and kind of enhance the quality of the earnings and overall shareholder value, or whether that's just really not in the cards and there's just so much opportunity that, that's really still the foremost thing to ultimately create shareholder value.

I am going to just touch a little bit on the acquisition front and then let Rob to address your second question which was shareholder and buybacks or something. In terms of the acquisition strategy I called out specifically the Keystone Automotive acquisition we did last year which we paid about roughly $450 million for that acquisition. We got some good synergies out of it and it looks like last year first year multiples are around 5.7 times. I still believe that what interest rates where they are, our credit facility allows us to borrow that’s good opportunity create shareholder value of multiple. One-third business get go into relatively low capital intensity business, and lot of additional CapEx required becomes very attractive distribution business from our perspective. To the extend we can identify additional opportunities like that actually that is the best use of the capital. in terms of just on comment in terms of some other foreign exchange issues that we have, it does impact the income when we buy assets in foreign countries be it Canada or Europe then we try to match that with a foreign currency hedge in so much as we try to borrow as much of the currency in the foreign currency we can. So underlying the foreign currency cash flows coming in with the foreign currency debt. So although we end up with volatility in the income statement and we know we understand that’s important. The underlying economics we do create hedge on the asset itself. Do you want to comment on the others?

I will comment on the stock buyback, it’s something that we consider every quarter, we meet with our Board and we discuss that and honestly to your point as of today, we just believe there are other opportunities that issues of our capital it's not to say that it wouldn’t change at some point but it's the topic that we discuss regularly with our Board and as we stated our plan right now was to continue the path we’re on. Acquisition as you said are sticky, they come and go and could have big yield come on play tomorrow absolutely it could and if we didn’t have a good balance sheet which we’re and the great position to do. So, our liquidity is great at this time, I think we’re going to continue with the strategy of trying to build up a network. We think there is first move advantages in many markets and those opportunities are something that we just kept as up at this point.

Thank you. Our next question comes from the line of Craig Kennison from Robert W. Baird. Please proceed with your question.

Thanks for taking my questions. Wanted to start with Europe and the European margins. Clearly, they have been under significant pressure in the last year and there are some outside factors. I'm asking, are you getting the synergy you expect to get out of that business? And then maybe, Rob, you could cover the two to three year margin outlook for that business. John, maybe you can talk about your priorities as you move into a leadership role there.

Let me just talk about the ECP gross margin first Craig, for Q4 after the Unipart bankruptcy basically, there was a grab for a lot of the business and it got quite competitive in the marketplace. So that is behind us now, we certainly think things are starting now to settle down in terms of that. We have put in pricing programs not only for single customers, but also for our national accounts. We are now truly the only national player for all of UK, there are other competitors that can team up together, but we’re the only true single company that can do that. So, we do a special margin expansion there as well. We constantly are working on our front cost initiative with vendors and we’re going to start seeing some progress there as well. Just a little bit of a drag on ECP’s margins, gross margins was -- that win Unipart going down we did pick up some more national accounts which are obviously slightly dilutive to your overall margins. But I think we’re going to start to see some nice turns in the margins of ECP certainly through January, February very pleased with that. As far as Sator goes in the margin year, we are still building hope the three step and two step model, we have 64 locations now I report in the last quarter that we wanted to have about 80, we’ll have that done by 2015 and at that point we’ll get the significant synergies. In terms of your second questions, are we seeing the synergies, we probably are going to see. We’re about 80% done with the purchasing synergies between Sator and ECP is just 20% more to go and I think that will continue to comment we continue to grow mass and size on being able to leverage that with our vendors. John as far as….

First, we believe we have a great set of management teams both in the Netherlands and in the UK, so this is not my new role s not change things there is really a focus of making through the integration between those goes a little bit better in terms of things like cataloging and some of the non-procurement related synergies and some of those other back office we can do a little bit better. And then I’ll be focusing on the integration trying to reduce the cost structure over there and improve the value proposition to the customer in terms of some of the ecommerce things that we could do, we have a decent ECP ecommerce strategy we like to bring that to the year. And then looking for additional acquisition both in terms of things that we can adjacencies where we can tuck and things, so as a example we did the paint deals in UK, we don’t distribute paint to the Netherlands that’s collision we don’t do in the Netherlands. So once we get our footprint build out in the Netherlands will be looking to further our adjacencies. And then additional markets, we’ve talk many times here large car park, large in the U.S. and then you define it and we think that, that is a good opportunity. Rob talked about the first-mover advantages. We do also have a couple of large projects going on there ECP is building a new warehouse necessarily large project. So we just going to be focusing on making sure we’ve got execution on that front.

That's really helpful. So when we look at European EBITDA margins, I think you finished the year with a quarter of 8.2% EBITDA margin. For the full year, it was probably closer to 9%, down from maybe approximately 11% last year. What is the right outlook? Can that business get back to double-digit EBITDA margins within the next two, three years?

I believe it can, we’re carrying a lot of cost there associated with the start-ups with the Unipart branches that we took over that they are not generating as much revenue in Q4 and we’re still carrying the fair amount of duplicate cost in terms of some of the infrastructure is around the Sator acquisitions. As we expanded the collision business, you know we opened additional warehousing space in the UK which is causing additional distribution cost, I mentioned a moment ago the project rationalize that’s probably a 2017, 2018 project whether that actually it's a large we have to start it now. So eventually those things will bring down our average cost from the distribution front and some of I think talked about in terms of rationalize in the cataloging and some of those other expenses, we believe there is opportunity there. Yes, we definitely targeting to get back to double-digit.

I’ll answer that Craig, in 2012, after we did the aggressive branch opening at ECP we did 42 in 2012 we took the first half of 2013 on but we saw margin expansions. We’re 189 now we’ve always said the right number of somewhere between 200 and 225. I believe in two to three years you will see that margin expansions will be done with that build out and you will starting to see those margin expansion like we did in 2013.

Thank you. Our next question comes from the line of James Albertine with Stifel, Nicolaus. Please proceed with your question.

Great, thanks for taking the question. Let me just thank John for his years of service. Wish him the best of luck in his new role and welcome, Nick, to the team here at the outset. Lots of moving pieces, Rob, as you said, some of which are out of your control. Just a quick history lesson. Has there ever been a period of sustained scrap pressures while wholesale pricing, at least the Manheim index, moves higher? It seems like those, generally if they move down together and move up together. Do you recall a period where you've ever gone through what we're seeing today?

We did go through it in a way Jamie I believe Manheim actually came down in ’08 but we’re seeing Manheim go up but scrap actually imploded in 2008 so just in a way now though is our weight was very sudden the scrap went from about $325 a ton as I recall down to very, very low numbers. This has been more gradual and actually ’08 from our perspective was better because it went down so quickly it drilled down the cost of our salvage so much. It is interesting when I look at what we’re paying in auction. In Q4, we paid $1990 on average sequentially it was down $48 in Q3 so we’re starting to see the scrap impact at the auctions. Because Manheim went up, you would think that our prices were gone so we believe that the decrease in the car cost of $48 was related to the scrap. So the problem is, we see a gradual drop but we did see this in ’08, ’09 and ’10 were good years for us as scrap recovered. One or two things was going to happen here either scrap will recover and that will be obviously a good thing or scrap will continue to be low and then we can adjust our buying appropriately which is one of the things that John mentioned one of the things we’re actively doing we’re driving down our cost on the acquisition side. So you will start to see that margin improve as that scrap stabilizes.

Got it. Very helpful. As relates to your guidance for organic growth, first of all, looking back it FY14, 9% looks quite strong. Just kind of stuck out with me that the range of 6.5 % to 9% seems fairly wide. What are the key swing factors that you are seeing there or anticipating? Particularly in light of what John mentioned around the sweet spot. Starting see the early stages of the benefits from SARs -- the SAR recovery, if you will.

The wide range is a couple of factors obviously winter we think we’re having a good winter obviously and we started about the quarter so far I am sure someone to ask that anyway on January we were on plan for our numbers, February has been a interesting month because there was such weather inclement weather we had obviously major shutdowns in Boston and I understand Atlanta was shutdown yesterday by the governor. So February is going to be interesting months because of the inclement weather we certain do believe it’s going to be a snapback whether it’d be in March or April in the Q2 most likely due to it’s going to be likely have a snapback on all those cars getting into the repair shops. We are up against a huge comp in Q1 though. As you will recall last winter was really strong winter in terms of being very snowy very icy for the entire Untied States actually Atlanta had two ice clumps last year so we’re up against the top comp but we certainly believe this weather has been good to us. And in terms of our European organic growth ECP continue to built out so there are more opportunities there. As we get Sator through that three sub to two sub again which we’ve completed this year I think we’ll start to see some running there on the organic growth rate. So I think it’s some good things there are some headwinds of course in terms of just the core in back of the collision losses and where they are going to be in the spring and fall but we’re pretty bullish actually on our organic growth.

Again, very helpful. If I could sneak one more in, as it relates to your leverage ratio, just getting a kind of a sense of where you ended up at the end of FY14 and really with an eye toward your comments around the interest rate environment being favorable. There's some deals you can't pass up. Have you adjusted your max ratio, the most leverage that you could take on and still feel comfortable running the business day to day? Thanks.

I think we really adjusted it in the -- if you look at just on the reported EBITDA basis I think we’re around 2.4 times if you adjust for the main covenant where we get credit for acquisitions we did late in the year and so forward and we’re closer to 2 times leverage. So leverage right now is very modest I would say and reasonable. And we haven’t changed if you just model during a very large acquisitions a $1 billion acquisition intent we had a reasonable multiple however did go up around 3 times. We’re still very comfortable with that. Historically we’ve had taken the leverage higher and one time back 2007 we ended up to about 4.8 times after the Keystone Automotive. I don’t see us that high but just because of the math it would be very difficult to do that. So it’s good opportunity in terms of we have take no leverage up before if we start doing acquisitions, the Company generates a lot of cash flow. Somebody just handed me a note. I think I misspoke. Our cash flow guidance, I think said $450 million approximately. It should be $425 million approximately, according to Press Release. So the company would deliver fairly quickly if we would ever stop doing acquisitions and as I said earlier if we can sign good accretive deals we are continue to try to do that.

Our next question comes from the line of John Lawrence with Stephens. Please proceed with your question.

It's actually Ben Bienvenu on for John. I wanted to talk about the ECP branch growth anticipated for next year, the 13 units. Do any of those include Unipart sites? And then as you look at your longer-term opportunity for ECP branches, as market dynamics change and as you learn more data about the customer set in that market, is there are opportunity for that to move up? Or do you think we're fairly zeroed in on what the opportunity is?

The new branches do consume Unipart conversions, it’s a tricky question because some of those branches move. We are taking one branch ECP brand and UA branch and bringing them together. So overall though it’s a combination of both new branches and combined branches as well.

In the question on the longer-term opportunity, do you feel like you've zeroed in on that or is there an opportunity for that to move?

I think in terms of the once we get the branch builder we are going to continue to expand the commission business in UK. We got the pretty much coverage in terms of country in terms of paint but the penetration of commission part is still relatively low when you compare the UK to the U.S. We believe there is a penetration of alternative parts is probably still maybe little bit under 10% versus 36% 37% in North America. So there is a quite a bit of opportunity for expansion on the commission business as well. And then just looking at other penetration as I mentioned the e-commerce business is been growing fairly well which is getting that a retail customer more than traditional mechanical repaired market.

Just one other thing I would add to that for the UK down the road. I did mention on the call that we entered Swedish salvage market this is still an opportunity we are looking at. So that’s an opportunity as all remanufactured. We have a remanufactured base here in the United States and we are looking to bring that into the UK as well as the continent as well. So that’s could be an opportunity for us. You will see us move on that within the next year or so.

That's very helpful color, thanks. The second question, just related to State Farm, I assumed if there was any meaningful change in the activity there we would have heard something. I'd just like to get an update on what you are seeing there on terms of their buying of alternative parts.

They continue to by our chrome bumpers the one that they did allow about year-ago. Our chrome bumper sales were up 22.3% for us. So they will continue to buy those products and we are cautiously optimistic that and we know they are happy with the results they told us that, we are cautiously optimistic that they actually turn up more and more parks. So nothing new update other than the fact that they continue to our chrome bumpers at a very healthy rate.

Our next question comes from the line of Scott Stember with Sidoti & Company. Please proceed with your question.

Could you talk about how fuel costs, assuming they stay as low as they are right now, how that will impact margin as regards to your distribution set?

John speaking, we did see a little bit of benefit in Q2 -- excuse me in Q4. We have our annual spend is about $90 million on fuel and that will be offset to some of these other negatives that we have been talking about and really in 2015.

Okay. Rob, you mentioned the West Coast ports earlier. Could you maybe talk about what you have been doing and what you plan to do? Are you diverting parts shipments to other ports throughout the country?

We did do that Scott, the good news is that they have resolved and they are I believe the union has approved it. That was the one thing that was left outstanding but they have come to a settlement there is a backlog at the ports we are in very good shape actually. Our purchasing department done a phenomenal job of diverting cans from West Coast to the East Coast to north ports to other ports as well. So we are in good shape, we think it’s going to be a month or two before that backlog comes out. As John mentioned in his prepared remarks we did move some of that buying in the Q4, we did see this coming. So actually we are in great shape our fuel rate. No major concerns there at all.

And last, just touching base on the commentary you made about the collision parts, potentially selling them in Sweden. Could you talk about penetration within the core European markets, such as where Sator is right now?

The rents are just about identical, although interesting about last quarter we reported that UK alternate part rates are now up 9%, when we got into business at 7. We believe the economy is more on a 7 right now and we think there is an opportunity as I mentioned in my remarks that right there in programs with us in UK are ready on continent as well. So there should be a great opportunity all the way for us as far as to get that three step to two step model done, so we can get everybody on the same page, get our synergies and bring those products in. So, hopefully we’ll start seeing some parts moving in the side of the business by the end of this year.

Thank you. Our next question comes from the line of Bret Jordan with BB&T Capital Markets. Please proceed with your question.

Just a little bit more color on the ECP margin issues, and I guess trying to understand was there brief price war that has since ended? I guess you are talking about seeing some recovery there. I'm just trying to understand what did impact the traditional auto parts market?

Yes, there absolutely was what I’ll call ramp grab to that business, I think quite competitive it was also another entry into the marketplace that we have since acquired quite frankly APX Autopart. So it did quite aggressive for little bit, those days are behind us now and that we had in January and February margins of come out nicely in the UK business.

What’s your market share, do you think, in traditional parts through ECP?

Is very difficult to say it include the dealers, other -- dealers are still very important part of distribution network. We do include the dealers generally speaking Bret because they are selling parts as well of course into their maintenance sort of market. When you throw them in their it's in the 20% range, 20% to 25% range.

Okay. And then a question on alternative parts penetration in North America. I think John might have thrown a number out there, but what's your feeling for 2014 ending? Was it the use of 36 or 37?

It's going to be in that number for sure. One of the downsides of course the strong rate is the fact almost gets -- almost all they get OEM parts when they are [random moving parts] when they are new parallel. So, when those parts walk their way through to two, three, four years old out, we do expect that to take back up again, but it will mean the 36, 37 range again.

Thank you. Our next question comes from the line of Bill Armstrong with CL King & Associates. Please proceed with your question.

My question also is on the potential pricing pressure. You discussed the UK. Any other pressure in the parts and service in North America or perhaps on the Continent, either from competitive pricing or from any softening in demand?

I’ll talk about the buying environment, as I mentioned though the stronger dollar is, I think on acute some of the exporters on the marketplace here, so I think we’ll be able to buy little bit better on salvage. We’ve seen though price pressure on the aftermarket side of the business both on the buy and sell. So, I don’t think we’re going to see any pressure on either sides of presence is here.

Did I hear you say before that Sator will have higher costs as you migrate to a two-step model from a three-step? If I got that right, why -- what sort of costs would increase? Why would that happen?

So, and there if you think on the traditional three step model we buy the product we ship it out one to date our customers and typically in large loads with on semi-trucks, when you go to a two step distribution model we’re still starting those same locations, but then we have the additional distribution accounts to take it to that final model as you will to smaller van to deliver with half hour, one hour service. So you got all those additional distribution cost. What you should be able to pick up is the margin, the gross margin from that distributor gets added to our gross margin so to speak you can met them obviously, but you do pick up the two margins instead of the one. So ultimately we believe the overall EBITDA margin when you take out all the cost individual customers should be better than operating independently. But in terms of the SG&A and in terms of the distribution cost it doesn’t go up slightly when you go into a two step distribution model versus a three step -- if you use the three step ever, does that make sense?

Yes, that completely makes sense. And just one last quick question. What sort of income tax rate are you baking into your guidance for the new year?

Some are between 34.5 and 35 given their size that can drive the $0.02 other way, it really going to depend on the mix, we don’t anticipating the changes I the taxes, the rates in the individual countries and as I mentioned in Q4 the income shifted for the full year more to the U.S. and way from some of the lower tax jurisdiction including the UK and the Netherlands and so is really you going to come down where the mix comes out.

To your earlier question about the margins in the U.S. and I just want to comment on some of just macro trends we’re seeing here, why, I think the margins won’t be get too much pressures because some of the tailwinds we’re seeing in the businesses likely to be strong. We got some of these but gas price is coming down and miles driving is increasing, unemployment is coming down, so see more people go to work and be it on the roads. Sator remain strong, which is really great for our KAO business. So it's interesting with the new car we got this information from CCC with the new strong rate total losses are actually flat now because there are much higher dollar cars coming to the repair process. So, we think the repair market is going to get a nice shot in the arm here. It’s pretty interesting they also pulled us repair costs are trending up 3.4% again also likely because of the newer car part which again bodes well for us because insurance companies are looking to drive the cost out. The other stack that CCC gave us which was really shocking to me is the 0.4 more parts per estimate being used in 2014 versus 2013 based on 19 million repairable so that’s roughly 7 million new parts coming on to estimates that weren’t there a year ago so that’s also impressive. The other thing that they told us which really caught me off guard quite frankly in 2009 39% of estimates had at least one aftermarket part on it in 2014 15% of estimates had at least one aftermarket part on it. So aftermarket continues to gain market share so I really think all those considered we’re in really good shape for the growth for the business and the core business remains strong and scrap deals and it will heal itself there is no doubt in my mind and FX will eventually the foreign exchange rates will settle down at some point I think we’re going to be in good shape.

I think that’s it. So I want to thank everyone for the time this morning. And look forward to speak to you in April for our first quarter results. Thanks everybody. Have a good day.