Good day, ladies and gentlemen. Welcome to the KAR Auction Services Incorporated Q4 2014 Earnings Conference Call. Please note today's conference is being recorded. At this time I will turn the conference over to Mr. Jonathan Peisner, Treasurer and Vice President of Investor Relations. Please go ahead, sir

Thanks, Holly. Good morning. Thank you for joining us today for the KAR Auction Services' fourth quarter and year-end 2014 earnings conference call. Today, we will discuss the financial performance of KAR Auction Services for the quarter and year ended December 31, 2014. After concluding our commentary, we will take questions from participants. Before Jim kicks off our discussion, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risk and uncertainties that may affect KAR's business prospects and results of operations and such risks are fully detailed in our SEC filings. In providing forward-looking statements, the company expressly disclaims any obligation to update these statements. Lastly, let me mention that throughout this conference call, we will be referencing both GAAP and non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the applicable GAAP financial measures can be found in the press release that we issues yesterday, which is also available in the Investor Relations, section of our website. Now I would like to turn this call over to KAR Auction Services' CEO, Jim Hallett. Jim?

Great. Thank you, Jon. Good morning, ladies and gentlemen. Welcome to our call. I am very pleased to report our fourth quarter results and our full year results for 2014. Even more important, I am looking forward to sharing our outlook for 2015 as we move forward. Today on the call, I want to give you an overview of our performance; I want to update you on a number of initiatives, provide guidance and our outlook for 2015 and then talk a little bit about capital allocation. Starting with the KAR performance, KAR had a very good year with a very strong finish in the fourth quarter. Our adjusted EBITDA came in at $599 million, which was right at the top of our range in terms of our guidance and we experienced this through a 9% growth in revenue. We were able to expand our gross profit percentage and we did a good job of controlling our SG&A, and we saw our adjusted EBITDA margin climb to 25.3% and our cash flow came in at $321 million. As I turn to the business segments, starting with ADESA, ADESA's revenues were up 9% for the year and 13% for the fourth quarter, adjusted EBITDA came in at $285 million, which was 11% increase year-over-year. If I can focus on the fourth quarter for just a moment, in the fourth quarter, we have seen a 7% increase in volumes at the physical auction, as well we saw revenue per unit at the physical auction grow to $700.00 per vehicle sold. This is exactly what we have been waiting on. We started talking about this last year in the second quarter when I got out of the predicting business and then we saw it rise to above 4% in the third quarter. Now,…

Thank you, Jim. I believe Jim's commentary and our earnings release and supplement issued last night provide adequate description of our performance in the fourth quarter and for 2014. I would like to clarify a couple of items and then provide a little more detail on our guidance for 2015. First, you will notice that we have provided additional disclosure this year on our fourth quarter performance. In past years, we provided management's discussion and analysis of the full year and left it to our investors to back into the fourth quarter results. I hope you find our additional disclosure helpful in seeing our fourth quarter performance separate from the full year, and we will include this disclosure in our Annual Report on Form 10-K, which we expect to file later today. Now, let me speak to our SG&A for 2014. There is one particular item that I want to highlight. This is stock-based compensation expense that was $28 million in 2014. This includes about $7 million in expense related to recent grants to directors and officers of the company. The remaining $21 million relates to accounting for grants of options that were issued prior to our 2009 IPO. This is the last of the expense related to these old grants. As a result, I expect a decline in stock-based compensation in 2015, as compared to 2014. Our long-term incentive grants generally vest over a period of three or four years. We had a relatively small number of grants in 2014 and have introduced a broad based program in 2015. Only about one-third of the expense of this broad based program will be recognized in 2015. We anticipate our long-term incentive program will have annual grants, so we will see the expense for long-term incentives increase in 2016 and 2017…

Thank you so much. [Operator Instructions] Our first question today will come from Ryan Brinkman with JPMorgan.

Hi. Congrats on the quarter. Thanks for taking my question.

Thank you. Good morning.

Could you just elaborate on the drivers of the improvement in Odessa physical auction volume? Was it primarily a continuation of the factors that benefited you in 3Q like repo cars or was it a result of the improvement in off lease volume as you have been calling for? How does the composition of the type of volume at physical auctions in 4Q cause you to maybe think differently about how it might trend in the future?

Ryan, thank you for your question, I would say all of the above. To break that down for you, we had a good performance in dealer consignment; we saw our dealer consignment rise by 3%. That continues to be impressive with the number of leased cars and commercial cars that we see coming. Then when you think about the commercial sector, all those segments actually did well. Not only we recognize the off lease cars, but certainly the factory volumes grew and the repossessions in rental cars grew as well, so it was kind of a combination of all of those things. Then you asked about going forward. We are hopeful that we can maintain those levels on dealer consignment. This is really an initiative that started several years ago as you know and we thought that dealer consignment could possibly fall with the increased commercial volumes. Hopefully, we can continue the dealer consignment trends, but there is no question that we are expecting an additional 700,000 off-lease cars to come to the market in 2015, so I think the outlook is that those off lease cars will continue to drive commercial volumes which ultimately we feel will continue to improve the number of cars that get to a physical auction where we can provide those ancillary services and continue to offer or continue to grow those revenues.

Okay. Great. Then just switching from ADESA volume to ADESA ARPU, it continues to grow. You mentioned ancillary services as a driver in your prepared remarks, but what about the other puts and takes? For example it looks like your online-only ARPU also improved, so what happened there? Then how to think about the impact of the Canadian dollar? Maybe just remind investors of your exposure to Canada. I think it is a bit higher than most appreciate. Then does that then mean that adjust for FX that really ADESA ARPU would have been even higher?

I think the ARPU on the online sales was a result of the mix of vehicles and the customer mix just the way that they came in. In terms of the ancillary services, I think obviously we continue to be able to offer those ancillary services on the cars we get to physical auction. Although sometimes the margin is a little bit less on those cars, but overall we came in at $700 and we would expect that that trend would continue. I will defer to Eric perhaps to talk a little bit more about the Canadian currency here.

Sure Jim. I will go back on ancillary services, real strength in transportation and that is across the board for us, cars getting to auction, moving cars between dealers as they are doing business with us online or at the physical auction. Then we have also seen success in other services like our repossession business. Again, it goes across the board. In terms of the Canadian dollar, Canadian revenues make up about 15% of our total revenue in the business. A little bit more than that in terms of adjusted EBITDA, so it is a pretty significant factor and that is a bit of a headwind and will continue in our opinion to be a headwind and has been factored into our guidance for 2015.

Okay. Great. I will just finish with a housekeeping item. You know, does the EPS outlook include the impact of any repurchases you might do? Then did you do any repurchases in 4Q? I know sometimes it takes a bit of time to get the mechanics about the plan in place? Thanks.

Ryan good point, yes it did. We put the buyback plan in place. It took some time to get the mechanics in and again to put a plan in place and a cooling off period, but now we are active in the marketplace and our guidance contemplates while we are not giving disclosure specifically about the numbers, yes, our guidance contemplates that we will continue with the stock repurchase program throughout 2015.

Great. Appreciate it. Thank you.

You are welcome.

Thank you. Our next question will come from Bret Jordan with BB&T Capital Markets.

Hi. Good morning, guys.

Hi, Bret.

Good morning.

A couple quick questions and one on TradeRev. I assume that there was more expense attached to TradeRev than there was the income in the quarter. Could you give a sort of a feeling on how many pennies you spent on that initiative and sort of what your thoughts are in it turning towards profitability in 2015 or 2016?

Well, let me speak to it was not even pennies. The good news is, Jim mentioned Canada was doing well. That is paying for again our share of that loss was very insignificant both, for the quarter and full year. It rounds to zero, not to a penny, so it is that small. The success we are contemplating is really just getting the velocity up in the United States, right Jim?

Exactly. In fact, we really had not factored anything material into our 2015 numbers from the outset, so again it is getting it rolled out to new markets here with a sense of urgency.

Just a reminder, we use equity accounting, because we only own 50%, so it does not have any impact on adjusted EBITDA. It does run through per share, but not adjusted EBITDA.

Okay. Then a question on IAA with your inventory being pretty robust at the end of the quarter, how are we looking on cycle times on the salvage side of the business? I think it had slowed a bit in the beginning of last year and maybe we are about to anniversary that. Is inventory high, because there are just a lot of products coming to you or is inventory up 15%, because we are still seeing sort of a delay on cycle times on a comparable basis?

Yes. Bret, thank you. Two things, number one, is there is no question. We feel we continue to gain share and continue to grow our volumes there, but the other thing that we mentioned in previous calls which plays into this is, we do have one major customer who has changed their internal processes in terms of how they want to process their vehicles and they have been holding inventory back. As a result of those vehicles, those vehicles are going through a slower cycle than our other customers, so it's a little bit of a buildup from both.

Okay. Great. Thank you.

You are welcome.

Thank you. Next we will hear from Matthew Fassler with Goldman Sachs.

Thanks a lot. Good morning to you.

Good morning.

My first question, just to be clear, of the 15% of the business that comes from Canada, which division does that show up in, is that primarily ADESA or is this spread evenly?

It's spread fairly evenly, Matt. It is in actually all three major segments. The one segment that is not impact as much would be the holding company. We actually have most of that in the U.S., but in terms of the operating segments, it's spread across all three.

Then a couple of questions on ADESA metrics, one to follow-up on a question that Ryan asked. You talked about your growth in revenue per car sold at auction. I guess that was up 4%. Is that number inclusive of dilution from currency translation or does that exclude the currency translation?

It's inclusive.

In other words, it would have been up more than 4% had you not had the burden of currency translation?

That is a fair assessment. Yes.

Got it. Then also on the ADESA piece, your revenue per car sold, the physical, is very nicely up 6%. Last quarter it had been up 9%, not to quibble over two or three percentage points. Was there any meaningful difference in trend other than currency that would have led to that deceleration? As a follow-up to that, what do you of sustainable? In other words, can this metric continue to grow in 2015?

Matt, I would tell you, as you know, last quarter was 697. This quarter is 700. That is not a rounded number. That is the actual number and we disclosed those numbers. It's really the comps that are the issue. I think it is really just the maturation of the use of ancillary services. Jim, you and I would have both agreed that there is room for more.

Yes. The other thing is not only the ancillary services that you see at physical auctions, but there is other revenue from other services that can grow as well. As we think about things like High Tech Locksmith and our dent business and other businesses as well, so I would feel comfortable in saying we do feel that it is a sustainable number and there is room for growth there.

Great. Then my final follow-up, Eric, just relates to your shift to operating adjusted EPS. Can you just clarify for us one more time which type of depreciation you are going to exclude and which you are going to include in operating results?

Sure. All depreciation and amortization will be included except for amortization that is related to intangibles typically through acquisitions, the intangibles that are [ph] that are not tied to an annual spend in CapEx.

That D&A tends to show up if you look at your three divisions and then your corporate line, which of those four divisional disclosures would that D&A typically follow?

It's actually in all four. There would be very little in holding company, because the acquisitions are not there. In our current disclosure, it is a head's up amortization includes amortization of capitalized software costs. We will be breaking that out separately, so that you can get to the amortization number that is added back in the reconciliation of net income to operating adjusted earnings per share.

You said that will be about $0.20 a share, which it sounds like if we are just thinking about the upticks, would more than offset the hit that you are going to take by not adding back an adjustment for LTIP next year.

Well, the impact of long-term incentive this year was I think I said 6%. Let me check my notes, $0.06.

I think you said $0.06. Okay.

The $0.20 is a net of tax number. They are independent. I am not going to say they net, but yes, the long-term incentive in total for 2014 was $0.09 and that was a full amount, so I think the two numbers, the long-term incentive would be less than that $0.20 that I am adding back for the amortization.

Got it. Thank you so much.

You are welcome.

Thank you. Our next question will come from Craig Kennison with Robert W. Baird.

Good morning. Thanks for taking my question. Eric, I want to thank you for the additional disclosure as well this quarter, very helpful. Jim, you have mentioned the acquisitions and you hinted at bricks-and-mortar. I am curious about your geographic aspirations and then whether you are more just in salvage of whole car-type acquisitions?

Yes. Thank you. A couple of things, I would say, we are interested in acquisitions in both of those businesses. Both, at ADESA and at Insurance Auto Auctions, we have told you in the past that there are some holes in the footprint that we feel that we would like to fill and we continue to look at filling those opportunities, but we would not let those opportunities stand in the way if something came before. I would say that we identified three markets in the past that we said there was a hole and I can speak to those. They were in the Detroit market, the Chicago market and the South Florida market. Certainly, we would not limit it to that. If there was an acquisition to surface and it made sense from the metrics that we look at, we would certainly be prepared to act on that as well.

As a second question, Jim, in the past you have outlined the Kontos outlook on whole car volumes for the upcoming years. What is the Tom Kontos' opinion of volume this year and also in 2016 and 2017, if you have those figures?

Yes. That will be actually summarized in our 10-K, Craig, but we think we were right on this 2014 year and we have 2015 moving to about 9.5 million units; 2016 at about 9.8 million units and then about 10 million units in 2017. That is the disclosure we will have in our 10-K and you will see that in our investor presentations that we will put out within the next couple of weeks.

Very helpful. Thank you.

Good. Thank you.

Thank you, Craig. Our next question will come from John Healy with Northcoast Research.

Thanks, guys, kind of a bigger picture question. A year ago at this timeframe, we were debating if ARPU would ever turn positive and now it is headed in the right direction at a nice pace and I feel like we should be thinking about where the potential is for that? You and Eric both, seem to feel like that, we are not there yet from a mix standpoint and an attachment standpoint, but is there a way you can think about maybe a milestone or goal or maybe just aspirationally where you think ARPU might be able to get to from a dollar standpoint hypothetically for the company over maybe the next two years, three years?

Well, I always get accused of being too optimistic, so I am going to allow Eric to answer that.

John that is a good question. We do not want our guidance to get that level of detail, because there are so many variables. I think, as you look at the business just in general, we have talked in the past when you take an off-lease car, you could have as much as $900 to $1,000 in ancillary services, so the question is, what's the mix? How many cars are using a heavy dose of ancillary services and how many cars are just using transportation, which would be a much lower number? We think the upside is really as the mix changes and the heavier uses of ancillary services grow, that number will continue to grow, but I do not want to put a number out there, because it would be nothing more than a guess.

Again, it is going to be highly driven by the number of vehicles that get to the physical auction site.

The way we look at it, John, again, I will just reiterate it, if it is more off-lease cars, we do assume higher than $700 in ancillary services. That is what makes the number go, not inflation of the value of ancillary services.

Fair enough. That makes sense. I wanted to ask about the Insurance Auto Auction business. You have done really well there for a while. How do you feel you are positioned from a share standpoint? Are you picking up share versus the market? Technically, what is on the RFP docket for 2015 and 2016, maybe not naming names, but are they very active years where there's opportunities out there or are they fairly normal years?

Yes. Again, we feel that we have grown our share and we feel we have grown our share with the major providers in the fastest growing companies. In terms of RFPs coming, I would term it as just part of the ongoing business. We are always dealing with RFPs, and as you say or you alluded to, we don't get specific with customers. It is just part of what we deal with on a daily basis.

I would like to just reminder you 2014, we acknowledge what is going to be a very light year, because there had been a very active period in 2012 and 2013. Now, we are probably back to a more normal cycle. It is really part of that business. It happens all the time, back to a more normal cycle of RFPs

Okay. Good. Thank you, guys.

You are welcome.

Thank you. Next we will hear from John Lovallo with Bank of America Merrill Lynch.

Hey, guys. Thanks for taking the call.

You are welcome.

Hi, John.

First question is, there appear to be again solid pull through, through the physical auctions which was pretty encouraging, but I thought what was interesting too is it seemed to be at the top of the funnel and more closed sales versus perhaps open sales which kind of lowered the revenue per vehicle on the online channel, so it seems like at the top of the funnel, the bottom of the funnel there was increased activity. Am I thinking about that correctly? How should we think about that dynamic?

I think it is just the result of more cars going into the funnel, right? There are more vehicles coming off and there is more activity. As you said, I think you said, I think there is more activity at the top and certainly more activity resulting at the bottom as they make their way through. You did see, as you look back from a year ago, the number of vehicles sold as a percentage at the top of funnel was the higher percentage than what it actually was in the fourth quarter, which obviously demonstrated more cars getting to the physical.

Yes. John, you actually right that a year ago in the fourth quarter, we were $115 per car sold online only, and now 106 that is the top of the funnel, but compared to the last two quarters, we had fewer grounding dealer sales where we get even less revenue than we do in the closed transaction at the top of the funnel.

That is very helpful. This next question may seem a little bit odd, but given the severity of the weather that we have experienced in the first quarter, is it possible that the weather is actually too severe where people were not driving at all, which maybe actually reduced accidents or do you expect that really bad weather that we have had is going to result in pretty good inventory even going into the next quarter?

Well, I think if you are in Boston that would be a problem. Other than that, we would tell you and we have said it in the past, we are dealing with weather all the time. At the end of the day, we consider it to be a push. In fact, I would tell you we had relatively good weather in the fourth quarter and that has been offset a little bit this in the first quarter with some of the weather that we have experienced recently. Again, I think at the end of the day it is just something that we deal with. We know it’s going to take place at one point or another and then it just evens itself out over the course of a year.

Okay. That is helpful. Finally, in the AFC Division, very strong volume, but revenue per loan, I believe, was flat year-over-year. I guess the question is, are we reaching kind of isotropic limits on what that revenue per loan could be or is there still room for upset there?

Jim mentioned competition at the beginning. I mean, it is a competitive environment. I think it has been fairly stable. You know the main factors that are influence that are going to be loan losses and foreign currency. That is really what is going to impact it. I am not going to say we do not have opportunities to take price once in a while, but I probably would tell you there would not be much of that as long as we are going competitively against another large company. It is probably in the right pricing range right now. As such, you look at our margins, John. I mean, we have to be a little careful, not to charge too much.

Okay. Thanks a lot guys. Appreciate it.

You are welcome.

Thank you. Our next question will come from Shreyas Patil with Credit Suisse.

Hi. Thanks for taking my question.

You are welcome.

I just wanted to follow-up on the previous question, where it looks like online-only volumes decreased, sequentially, for the second quarter in a row. I am not that is a seasonal trend, but should we continue to think about online-only as outpacing physical as we look ahead to '15 and maybe even '16?

Shreyas, I think you are referring to the growth rate in online-only volumes has decreased two quarters in a row. The absolute number is up actually 17% in Q4. I think it was only 11% or 12% in Q3, but I do not have that right in front of me. We think that is good. That means we are back to normal, and while there will be growth in online-only as more cars come to market, again, we believe that they will get to physical auction, because there’s not more demand in the online-only venue than what can be met as that market reaches back to its stable levels, because it is a limited number of days that it’s in that venue. Jim you may want to add some color to that or is that enough?

No. I think that pretty much gets it. I guess one thing I could add is that is these vehicles get priced at the top of the funnel. They normally get priced at a premium. And sometimes when you have that much volume coming, the franchise dealer is now taking a look to buy this thing at the top of the funnel or do I let it work its way to the physical auction where I might be able to buy the car for considerably less.

Jim you would find that true, because there are so many cars. They know there will be cars that make it through the funnel.

Right.

When there is a limited number of cars they buy it because they are not going to be there at the end. Is that correct?

Right, exactly. When you have that oversupply, you know, and I go back to my dealer days, you can be more selective. Then the other thing that plays into it a little bit, actually, maybe I will add one more thing, the other thing that plays into it a little bit is when the dealer is buying the car at the physical auction, he is buying the car now fully reconditioned and not having to spend a number of days to turn that car to get it to the front line and he basically can buy the car and put the car on his lot for sale that same day. There are advantages when you have oversupply to waiting to buy the car at the physical auction that don’t necessarily happen when you have a tight supply like we seen in ’11 and ’12.

Okay got it. Then looking at IAA, I mean obviously the volumes have been really good for the last few quarters, but look like the ARPU growth slowed a little bit in the fourth quarter. I guess I am just trying to think about how those two dynamics could play out going forward. I mean, should volume growth still be relatively strong in '15 and maybe ARPU growth kind of slows or how do you guys think about that?

Well, you know, in terms of revenue per unit, the place we are seeing the most pressure is the low-end of the market, the very low value car that probably has limited recycled parts available from it and it is more of a scrap vehicle and that is where we probably see the pressure on revenue per unit in the salvage business. The rest of the market, it has been moderating softening somewhat, but staying quite strong relative to historical patterns other than again the peak of '11 and '12 that everybody experienced. The way we look at it is, we are going to perhaps - the moves will be moderate and they will be focused on the low-end car is where we think there will be the most pressure and that will really just tie to commodities prices. In our guidance, we contemplated various scenarios under that. We feel any reasonable outcome is covered by the range of our guidance.

Okay. Then just lastly, On incremental EBITDA margins, I mean, it looks like you guys did really well in '14 at about 32% for the total company. That is well above sort of the run rate for the last few years. I think they were sort of in the mid-teens. Is 30% sort of a reasonable run rate for you guys given how well you are doing on SG&A and some of the other factors?

Well, I do not want to get into a reasonable run rate, because that might border on guidance, but I will tell you we have said in the past, as the incremental margin comes from ADESA, IAA, utilization [ph] especially now ADESA and AFC growing, it has strong re-attributes than we saw over the past few years when they were still coming to the bottom of the cycle and growing a little less slowly. I really think you are seeing the leverage of the business model that we have, Again, IAA has been at top of its game in performance and now ADESA and AFC are seeing the volumes come back and that is where you are going to see the real improvement in incremental margins. I think it is a fair reflection. However, you are calculating it. People do it different ways. You are seeing the power of ADESA's strength of performance coming through, because that is our biggest operating unit that has been under the most pressure for several years.

Okay. Great. Thanks a lot.

You are welcome.

Thank you. Our next question will come from John Lawrence with Stephens.

Good morning, guys.

Good morning, John.

Good morning John.

Just quickly, can you take that as far as most everything has been addressed on ADESA, but geography across the country, can you give us sense of what places were strong and weak, was it pretty even? Even from the de-sell in the third quarter, how did the flow of the quarter go?

I would say it is pretty much consistent across the country, across all markets and I would say the flow was consistent as well. I mean, you know, without diving into the details of each specific market, it is contributions from across the country.

Then secondly on TradeRev. any kind of idea what kind of CapEx was spent this year and you got four U.S. markets, where would you expect to be, say, by the end of '15?

In terms of the CapEx, you know, TradeRev. is a 50% venture, so it is not consolidated, so there is no CapEx related to it. Again, as a technology company, it is really just paying technology people whether that is capitalized or expense. TradeRev. actually probably expenses that right now, as opposed to capitalizing it, but it is not requiring cash. It is sub-sufficient. Back to the expectations…

Yes. In terms of markets, the simple answer is as many as we can. Obviously, we are in four now. We are continuing to push with a sense of urgency. You know, there is not a specific target. My goal would be to be in every market in the country, but that probably is not going to happen.

Right. All right, good luck. Thanks guys.

Thank you.

Thanks, John.

Thank you. Our next question will come from Bob Labick with CJS Securities.

Good morning. This is Robert [ph] filling in for Bob.

Good morning, Robert.

Good morning, Robert.

Despite higher volumes gross margins were down year-over-year. What were the key factors and where do you expect gross margins to settle out?

Well, the key factor is really it is impacted a little bit by the average selling price, especially at the low-end, and a little bit of impact was with the strong inventory we built up at the end of the year and throughout the year. It has increased our field costs for the lots and the costs that we incur on the ground, which hopefully will lead to higher margins later on as we sell more cars. I think the outlook is fairly stable. I mean, we are down what was it, about 50 basis points year-over-year is what I show I think Robert. Again, I do not think anybody looking at that business could be more precise than that. That is more just a function of how the costs come in.

Great. Thank you.

You are welcome.

Thank you. Our next question will come from Bill Armstrong with C.L. King & Associates.

Good morning, guys. I will also add my appreciation for the additional fourth quarter disclosure. You just answered my question on gross margins at IAA for the quarter. What sort of margin trends are you kind of baking into your forecast for 2015 for IAA?

Well, again, we don’t want to get into anything specific. I think, it is a stable industry, it is a stable business at IAA, the growth has been sustained over a long period of time and we are settling in at a gross profit profile that is in the high 30s nearing 40. I mean, I do not want to be more specific than that, but I think that is what we are seeing.

Okay. Great

My point is, we are not seeing a lot of pressure other than, again, what is the mix of the vehicles, are they more high-end, more low-end, that is really and then what is our, again, field costs relative to occupancy as we store more inventory or we sell more, you know, sell more than we store. It will vary because of those factors.

That sounds like that is something that could kind of bounce around from quarter to quarter, but we are not necessarily seeing a big trend up or down?

That is correct.

That is a good way to put it. Like I said, there is lesser than 1% change in the margin percentage as I have looked at Q4 year-over-year and the year year-over-year. It is fairly modest. I know it changed, but it is fairly modest in the big scheme.

Understood. Okay. Then I just wanted to go back and clarify on the LTIP. I want to make sure I have this right, so I think you said that LTIP costs $0.09 a share in 2014?

In 2014, the add back to calculate adjusted EPS is $0.09 per share. By the way, that is not all of the long term incentive. That is only the portion related to the historical grants. There is a little bit more than that. You can do the calculation. I told you it was $28 million, $21 million of which related to those old grants, so that was the gross SG&A was $21 million. That number now will not be added back and it is impact of $0.06

Okay. An impact of $0 06 for 2015?

That is correct.

Got it. Okay. Thank you very much.

You are welcome.

Thank you, Bill. [Operator Instructions] At this time, we have no further questions in the queue. Mr. Hallett, I will turn it back over to you for any additional or closing remarks.

Okay. Thank you. Just quickly, I will say thank you very much for joining our call today and the interest you have in our company. Obviously, we enjoy reporting these calls a little bit more in recent quarters. We are optimistic and looking forward to a good 2015, so thank you and appreciate your support.

Thank you. Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation.