Q4 2020 Penske Automotive Group Inc Earnings Call
[music].
Good afternoon, ladies and gentlemen, and welcome to the Penske Automotive group fourth quarter, 'twenty and 'twenty earnings Conference call. Today's call is being recorded and will be available for replay approximately one hour. After completion through February 17th 'twenty 'twenty, one and the company's website under the investors tab at Www Dot pen.
Ski automotive dot com.
I will now introduce Anthony part and the company's executive Vice President of Investor Relations and corporate development. Sir. Please go ahead.
Thank you Regina good afternoon, everyone and thank you for joining US today, a press release detailing Penske automotive group's fourth quarter 2020 financial results was issued this morning and is posted on our website along with a presentation designed to assist you and understanding the company's results as always I'm available by email or phone for any follow.
Up questions you may have joining me for today's call are Roger Penske, Our chairman J D Carlson, Chief Financial Officer, and Shelley Hall group, our corporate controller.
Our discussion today may include forward looking statements about our operations earnings potential outlook future events growth plans liquidity and assessment of business conditions in light of the COVID-19 pandemic. We also may discuss certain non-GAAP financial measures such as adjusted earnings before taxes adjusted.
<unk> selling general and administrative expenses adjusted income from continuing operations adjusted earnings per share and earnings before interest taxes, depreciation and amortization or EBITDA and adjusted EBITDA. We have prominently presented the comparable GAAP measures and have reconciled the non-GAAP measures and this morning's press.
Release, and Investor presentation, which is available on our website to the most directly comparable GAAP measures are actual results may vary because of risks and uncertainties outlined in today's press release, which may cause the actual results to differ materially from expectations.
I do direct you to our SEC filings, including our form 10-K for additional discussion and factors that could cause results to differ materially at this time I will now turn the call over to Roger Penske.
Thank you Tony and good afternoon, everyone and thank you for joining us today.
This morning, we reported record results for our business in 2020, including a very strong fourth quarter for the quarter earnings before taxes increased 89%.
The $263 million and income from continuing operations increased 97%.
The 200 million and related earnings per share increased 19, 9% to $2 49.
SG&A expense as a percentage of gross profit declined 940 basis points to 69, 7%.
And declined 800 basis points on an adjusted basis to 71.
And 1%.
Our success in this area can be attributed to a reduction and TNT.
Advertising vehicle maintenance and administrative personnel and other fixed costs.
We estimate that approximately $125 million to $150 million and SG&A costs had been eliminated across.
Our various businesses.
During Q4, our retail automotive segment income increased 127%.
This increase was driven by higher gross profit per unit retailed.
Expense leverage and lower interest cost due to a reduction and inventory and lower overall debt levels.
Retail automotive same store revenue increased 1%.
Same store gross profit increased nearly 6% Inc.
<unk> and 80 basis point increase.
And our overall gross margin to 15, 5% and.
And our same store basis, gross profit increased $870 or 25% to 4004 hundred $27.
Total same store New news unit retailed declined eight 6% as Covid impacted the U S and U K, new vehicle markets, including a complete lockdown of our showrooms and the UK and November.
Moving on to our used vehicle supercenters. This business represents a significant future growth opportunity.
We expanded to 17 locations after opening Nottingham and the UK and December.
This new Super Center is expected to retail approximately 6000 units and earn between four and 5 million EBT annually during the fourth quarter. Our supercenter sold nearly 12000 units down 23% as volume was impacted by Covid. Despite the decline.
Variable gross was increased 19% as we improve vehicle sourcing about using our internal online auction and buy your car now purchases.
Turning to the retail commercial truck dealership business. We currently operate 25 medium and heavy duty truck dealerships and the U S and Canada.
During the fourth quarter, we sold 4300 new.
And used trucks compared to 3700, and the same period last year, representing an increase of 16%.
Our new units were up one 4% used units were up 106% the increase and new units compares favorably to the North American class six to eight truck market, which declined 10% during the same period.
Our Q4 revenue and 579 million and.
And our return on sales was four 4%.
Used truck margins have really improved and were up 730 basis points and steadily improved since the first half.
2020.
Service and parts operations represented 66%.
Of our total gross profit and fixed cost absorption.
128%.
Right now we feel the freight market is very strong and as a result ACP is forecasting.
A 25% increase and retail sales to 290000 units for the North American class eight truck market and.
And 2021.
At December 31 to class eight heavy market backlog was 178000 units, which represents a 44% increase from the same period a year ago.
We expect a strong market will provide tailwind to our commercial truck and truck leasing businesses. This year.
Turning to Penske transportation solutions as you know we operate a fleet of over 327000 vehicles and Q4, Pts generated $2 4 billion in revenue and net income of $196 million are and eight 3% return on sales as a result, our equity earnings.
<unk>, 55%.
The $56 5 million and our.
Full service leasing and contract sales were up 8%.
Commercial and consumer rental demand continues to be strong with utilization rates and many of our classes over 88% today, we have almost 80000 trucks and our rental fleet.
And we look at logistics automotive grocery and retail volumes are operating at higher than previously expected levels and the gain on sale of used trucks is much stronger and so North America and class eight heavy duty market continues to improve and the fourth quarter, Pts acquired Black course carriers, which is expected to generate approximately <unk> <unk>.
$600 million and annualized revenue, which represents a revenue growth overall of 7%.
For the year, Pts generated $8 9 billion and.
And total revenue and income of $569 million as a result, our equity earnings increased 16% to $164 5 million compared to 142 and the prior year.
For 2020.
The <unk> investment provided $137 million and cash flow through distributions and tax benefits. If we look at the balance sheet and cash flow our balance sheets and great shape. Our total inventory the $3 4 billion, which is down $835 million from December last year, our new vehicle inventory is down 500.
And $35 million and really remains and short supply for most of the brands and we expect this to continue throughout.
And throughout the beginning of the year.
Inventory was down approximately $60 million and.
Commercial truck inventory was down over 240 million.
And you look at our day supply with 50 day supply for new and a 48 day supply for used.
And 2020.
We generated $1 2 billion and cash flow from operations and as of December 31 debt to capitalization was 33, 7%.
Compared to.
And to 45, 6%.
We used the cash flow, obviously to help and reduce our long term debt.
During the year by $670 million.
We generated 943 million and EBITDA during 2020 and finished the year with a leverage ratio of one eight and improvement from two nine at the end of 2019.
We also refinanced $550 million of 575% subordinated notes due in 2022 with $500 million of.
Of new notes at three and 5% reducing interest rate by 225 basis points.
We estimate the debt repayment and re financing of our subordinated notes will reduce future interest expense by $27 million annually.
We invest and a net $145 million and capital expenditures, including 13 million to buy at a lease property and 11 million to acquire land for future expansion.
As we returned a 103 million to shareholders through our dividends and share purchases. During the year. We ended December with $1 billion and liquidity under our various credit agreements.
Moving on to our digital initiatives, we continue to grow expand and enhance our digital footprint, including the introduction of new tools and technologies. We currently have 54000 vehicles online and our digital marketing efforts and the U S represented 50% of our unit sales in the quarter, our multichannel marketing.
<unk> focuses on creating a connection with our customers through various channels.
Our digital retailing too and the U S.
Preferred purchase it's implemented and every dealership and offers flexible buying options. The tool can accommodate a customer at any point and they are buying journey and generated sales with 2600 vehicles and in the fourth quarter with a 24% closing ratio.
And our online schedule tools continue to gain traction and service and parts and Q4, we had 100000 servicer points were scheduled online and another 400000 that were scheduled through our business development centers.
And the U K, our multichannel process click and collect allows a customer to complete each step of the buying process digitally the customer can receive the reserve a car for $99 apply for finance through our proprietary platform receive instant credit approval and obtained a guaranteed trade and price.
<unk> or process digitally and the customer can choose from over 100 location to collect their vehicle.
These channels, we delivered 12000 cars and November when all showrooms were closed and the U K.
We now are going to introduce to our channel of used car Super centers the same capability.
The next step on online sales.
And you combine preferred purchase.
By online click and collect online scheduling and bill pay we have the tools to allow our customer to perform any part of the transaction online or to shorten their visit.
Our shores.
Looking at growth and expansion. We currently are constructing new franchise dealerships and are identified acquisition targets were expected to add $600 million and annualized revenue and this would include and.
LEED certified second Porsche dealership, serving the Washington D. C Metro area, we opened in January and new Audi dealership, and Southern California, and 100 dealership and Texas both of which are currently under construction.
We also intend to grow our supercenter business with the opening of Nottingham dealership and in the U K and December we've started the next phase of.
From our expansion plan.
To open a new location and the U S and May in fact on March 1st we're changing the name of the U S business from car to.
To car shop, we will have one global brand to drive the business forward.
And Q1, we intend to incorporate and automated buying process within the U S Supercenter business offering and end to end, 100% online capability.
As we look across the next three years, we plan to execute our growth plan to increase car.
Car shop, Supercenter and footprints from 17 locations to 40 by the end of 2023.
At that time, we expect supercenter business will generate and at least 150000 and unit sales revenue between two five and $3 billion that.
And that would be doubling the size of our current business. Our goal for Super centers is to earn between three and five and 4% on sales while generating earnings before taxes at that time of approximately $100 million.
And finally, as we look across our diversified portfolio of businesses over the next three years. Our goal is to grow earnings before taxes EBT to over $1 billion through the combination of acquisitions Super Center.
<unk> and organic growth.
Before closing and I've mentioned, our performance I'd like to mention our performance and highlight some of our achievements from the recently completed year and 2020.
2020, pag retailed more than 400000, new and used vehicles, while increasing our new to use ratio to one three to one.
Earnings before taxes increased 20% to a record $708 million.
Increased income from containing operations by 25% to.
$543 million and earnings per share increased 28% to $6 74.
We reduced our selling general and administrative expenses as a percentage of gross profit.
By 360 basis points, we drove cost reductions that are anticipated to yield $125 million to $150 million and annual savings.
We generated strong cash flow of $1 2 billion and reduce long term debt by $670 million.
We returned 103 million to shareholders through dividends and stock repurchases.
Before I close here I'd like to thank our team for their significant work and effort. During these unprecedented times as I look forward to future I remain confident about the opportunities I see across our diversified enterprise.
Thanks, again for joining us on our call today and for your continued support of Pag at this time I'd like to turn the call back to the operator and she'll open up the line. Thank you.
At this time, if you'd like to ask a question simply press star followed by the number one on your telephone keypad again. It is star one our first question will come from the line of Rajat Gupta with Jpmorgan. Please go ahead.
Hi, Roger.
Hi, good afternoon, Roger and Ron and Jamie.
Thanks, Paul and thanks for taking all my questions.
Just trying to have the first question.
The EBIT growth the growth plan.
And specifically.
The franchise dealer acquisitions.
And the 600 million and revenue.
Could you give us a sense of just the timeline of that.
And what kind of.
Brands are you looking at.
And what regions, you're targeting or any color you can give us on just.
The multiples.
And youre looking to be from.
And the ones that youre acquiring.
And then on the used on the new business.
Oh, sorry, sorry go ahead.
Uh huh.
Let me let me just try to answer the first question as you think about the growth between now and 2023.
Estimating about $1 billion and EBT and I think they are really probably three areas.
And would be our commercial vehicle business and transportation solutions would be growth would be about 25% net area and then our organic growth would be our U S and UK businesses on the retail side would grow at 30% and we'd have acquisitions, including our supercharged. It about 45%. So that gives you the three buckets.
And of growth I think when we look at the return on investment.
We're seeing probably on the used car superstores will invest about $200 million and we think the return on those would be about 30% on the truck side, we probably see 20 to 25 and today I think if you look at it nationally here at lease in the U S.
Talking about the U K, it's probably 10% to 15% return on capital So we're going to focus.
For the right businesses, giving us the right Ray.
Returns.
Some cloudiness and the future here as we go through.
2021, and we want to be sure that we're poised to move forward and 22 and 'twenty three certainly on the used car Super centers.
We will be investing as I mentioned earlier $200 million roughly and to build that network from 17 to 40 net buy and includes both in new car shop, both U S and in the UK and on the truck side, obviously, we're the largest freightliner group today and.
And the U S and we're continuing to look for opportunities to add on to our network of 25 locations here and the U S and Canada. So we feel good about that and then the open points. We've been awarded by the the manufacturers. These are great brands and they fit our they fit our mix and I think that day.
Open points, probably would generate $150 million and then what we have and processes and other $450 million and we'll see and 2020.
Does that give you.
Good enough answer.
No that's super helpful.
And for 50 million.
What are you seeing out there in terms of like the deal environment and.
Just the kind of multiples or the pricing for some of those assets out there.
Well I think its location and brand and size and Theres been some.
Real good purchases made by some of our peers I don't know what the numbers are but I'm, assuming that you're you're looking at six to eight times for some of these.
Really premium sites and then we look on the truck side, we're probably paying half that when you look at that and you don't have the Capex you don't have the Ci you have to deal with so we're going to be very selective and obviously when you can build a store up from the ground youre shortly here shortly and better shape, but I would say this there's lots of activity right now.
Got it that's super helpful.
And one more from a modeling standpoint from an SG&A to gross profit ratio perspective you.
Reiterated the $125 $215 million.
And thoughts out.
And once you're through with some of these.
Near term gross margin tailwind, especially on the beer side and.
You are back to a more normalized level.
How should we be thinking about the SG&A to gross profit level.
On a more on a run rate basis going forward.
I think we're and 73 to 74, and we should still be down three to 400 basis points. When you look at our traditional.
Got it okay, great. Thanks, so much.
And get back in queue.
Thank you.
Your next question comes from the line of John Murphy with Bank of America. Please go ahead Sir.
Good afternoon Roger.
Thanks for all the info.
First question, maybe just staying on the used car business.
Business, I mean, obviously youre, making a big commitment going from 17 to 40.
Outlets here, but the way you're talking about the numbers are a little bit linear sort of with the expansion and the and the physical footprint and so I'm. Just curious you know as you overlay your digital efforts and.
And then maybe leverage some of the other assets whether it would be.
Pts and <unk>.
And logistics side or whether it be your other locations whether it be new vehicle dealers is the other potential to maybe.
Really.
You really hit the ball a little bit more than just sort of on a linear basis here because.
And you've got a lot of different asset that you might be able to leverage and in addition to these used car shopping centers.
Well, let's just let's just I'm talking about car shop, now and because we show a rocky during 2020 and just wanted to do really.
Look at exactly what is the.
Where we are from from a steady state, but let's say, it's 50000 and we're looking to grow that.
This point.
We're looking to grow it to 150000 during the three year period, and with that we're talking about $200 million, roughly and the Capex and investment, but one thing that obviously by doing that we're going to continue.
To increase our capabilities technically.
Through <unk> through.
And through our tools that we have.
Certainly online, but when you talk about delivery locations. We certainly have the opportunity <unk> has over 800 locations and the U S. And there is no question that we could activate those and <unk>.
Model going forward that we could use those for delivery locations and then and over the logistics capability we have.
The ability to move move vehicles anywhere across the country. So I think as you said can we stretch or can we leverage those other assets. We have I would say definitely and then of course the systems and we are able to test. Many of these some of these and the U K some of them and the U S and good news, we have one global brand and with that brand we can continue.
And to build out across many of the markets and I think that when we look at.
The scale of our footprint, where we will be and we will have some will be large we look theres, one and I think other material and Tony sent out. This morning. There is information on one and the U K, where we will have 900 cars and stock and they'll do five 500 cars monthly so less and a 60 day supply.
And to me and we pull all that together, it's going to be able will be able to drive and meet that goal. We have in our plan. We have the metrics. We have the Ci identified we have our marketing plans and I think tying that together with best in class tools that we have and the UK that we can also that can pivot and move those into <unk>.
Sharp U S. I think it will give us a real real and it started in the business.
Yes.
And then just a second question and you know right now youre seeing incredibly strong pricing and as a result, big Gpus for you on the used and the new site it.
It seems like things are going to remain kind of quite here with this chip shortage on the new vehicle side and that'll probably overflow into tightness and the used market just curious how much longer you think the industry.
And used specifically and your dealerships.
And manage what is really great performance in sort of a challenging volume environments.
Well I think that we probably fell at the end of Q1.
Start decision deterioration on new and Theres been a little bit.
On used I would say, but not any greater degrees we look.
Moving into January because our margins were up one 2% on new and one four and used last year I think with this chip announcements and some of the news and come out here and the last few days I think it's going to be probably Q2 to Q3 before the supply chain starts to meet the demand and where that case, where.
And then have less inventory, so we'll have less cost of floor plan, and and certainly and our salespeople and used to getting big grocers and getting there on a variable pay plan most of them. So I don't really see much deterioration as we look at.
And we're in the premium luxury side, there's probably less there than we'd see and a high volume I think that's important and one of the benefits. We got during if you got any benefit at all during the Covid situation is where we reduced head count about 11% on the sales side, we actually took out to lower performers and we're seeing that.
We're getting more units for sale or for salesman and the margins are higher so I think that dynamic will continue and I think the chip really is really going to be the question Mark, but we can drive and but I think youll see that pretty much over.
We had a nice increase almost $900 last year on new so to me I think what we have to really look at.
If you look at January from the standpoint of.
Where we are our new unit volume was up.
3%.
Which I think.
And we saw good grosses and when you think when you think overall and in the U S to have it up 3% during what's going on and I think Thats key and certainly and when you look at and.
And overall.
Overall percentage I think you're probably going to probably going to see some deterioration and the U K.
Stores closed, but if we can utilize.
And the click and collect it we have to deliver the 11000 units in January and when I look at the March Order Board, which is a registration month, John we're seeing grosses are up.
Net order board and we're also seeing an increase of 11% over 19, which would be the best benchmark versus talking about 'twenty.
It seems like a pretty good environment, even though it looks a little bit choppy.
Gladly.
And the debt Paydown and I appreciate youre going to be.
And in good position.
And Steve a lot on interest.
Yes, theres a lot of opportunity as youre kind of highlighting and funny you to deploy capital and capital right now.
Particularly even on the debt side is relatively inexpensive so I'm just curious.
If there is an appetite.
And reload.
And maybe leverage the additional above and beyond $1 billion plus of liquidity you have right now.
And really go after some of these opportunities maybe more aggressively than you are talking about now.
Yes, I would say this that under the right circumstance and that's how we built the business.
And we would take our leverage to.
Two and a half maybe to three three times, if we had to theirs.
We don't have a door closed at all but I think when you really look back.
What we did in 'twenty and our balance sheet, we divested of about $450 million and revenue of non performers or at least they didn't meet our benchmark requirements and I think and net following about $450 million of previous year. So we've called out a number of underperforming businesses and the U S and also and.
The U K and I think thats paid off so once we've done that and you start to look at.
And the quality of our management team and what they're able to perform and even with January quite honestly, the only thing I see and I think I've mentioned it before.
Probably some deterioration.
And from the parts and service because talking to the OEM key people. They are saying there is a about a 14% less miles driven if you look at the last 90 day. So you have to factor there and I can't tell you when thats going to do to our to our margin and gross profit and parts and service and Q1, but I think it's something that we all got to talk about.
Okay. That's very helpful. Thank you very much.
Thanks, John.
Your next question comes from the line of Rick Nelson with Stephens.
Thanks, Good afternoon, and Roger Tony.
Correct Yeah.
And that's a roadmap.
Get to those $1 billion and pretax net income for <unk>.
2023.
Curious.
And how you're going to fund.
The growth.
C.
Ratios picking up to do that or can you fund the bulk of it.
With your internally generated cash flow.
Well I would say right now where the cash.
Cash flow, we generated last year, the net cash flow to pay down 670, we've reinstituted our.
Our dividend so that'll take some I think our Capex plan and we've been very I think judicious on our Capex plan to keep that in line I think that will.
And we will be able to utilize our cash flow from operations and all cases, and I think that the only big impact would be if I looked at it right now over the three year period would be $50 million.
$250 million four for the Super centers, and then any other acquisitions and we would probably in many cases, where we had to build a building. The Oems are giving us long term money 10, and 15 year money through their captives, which is quite attractive so from a real estate perspective I don't.
See I don't see any reason that we'd have to go and the markets, but on the other hand, we've we've had very good rates, both the Pts side and the <unk> side here and the last a couple of deals and we put into the market. So I think that when you. If you looked at acquisitions, we probably.
We have 4% to 500 million that we could have available for acquisitions over the three year period easily.
Great great.
And then just to follow up on.
Acquisition and the environment.
U S U K commercial trucks.
And here.
And home for add on.
<unk> dot and today Youre looking at our current sorry ground.
Whereas the shopping most car.
So at the moment.
Well I guess I said it earlier I think we want to win.
The best return on our capital employed and.
Seeing the Super centers and they don't have the Ci, we don't have a lot of other restrictions.
Market areas and certain framework agreements, so that would be that's going to certainly be a focus and continue to and we will grow that car shop, both in the U S and and the UK and the other hand.
<unk> been consolidation going on in them and the.
And heavy duty truck business, and we would expect to see us active and Ed area and then as I said earlier.
We're not out in the auto business at all and I think that we're just not that we're going to be mindful and not overpay for potential Capex and I would say, we really had the lights off non capex I assume on acquisitions.
And 2020, because we really wanted to focus on building and the balance sheet being sure that we were able to remediate or disc.
Dispose of non performing assets, and then being having to be able to deal with.
The U K, particularly and we haven't had it here and the U S and when they say every one of your showrooms closed and I would tell you that the job that our people have done and the UK Darren Edwards and his team has been amazing to think about delivering 12000 vehicles and a month and you don't have your showroom opened I mean this is a.
Great great.
Effort that was given by those guys and I think from our perspective.
<unk> and the U S. Obviously, our people here have been able to deal with Covid, because we had just closed down locations and we had people out and many times four or five people and the same location. So I think that.
And where the job that we've done and.
And that area has been.
Really really been amazing so I think that.
And when I look at where we're going all markets really are open for us and I like contiguous I like as you noticed the open points. We're getting this is where we already have scale and I think youll see that on the auto side.
Okay.
Great great color. Thanks.
Roger Tony and good luck.
That's correct.
Your next question comes from the line of Stephanie Benjamin with true waste.
Hi, Stephanie Hi, Good afternoon, Hi, Roger Hi, Tony Hi.
Hi, Stephanie.
I wanted to switch gears here at Premier Truck Group Division and maybe you can talk a little bit about what you believe are the key drivers and just the demand that we've seen.
Particularly on the used unit side, but also on new and what your expectations for our parts and service.
And this and for this segment as we go through 'twenty and 'twenty one.
Well I think number one with all the commerce going on and whether it's small boxes or big boxes.
Freight market is up.
Spot rates are up.
We can see that the carriers are now switching where they were really trying to de fleet. They are.
Fleeting up and net that.
Bodes well for us as a retailer of heavy duty trucks and I think we're seeing the benefit of that and with the used values going up guy sit on their trucks, when the values and the market and in our <unk>.
Under water with those numbers of compound and heavy duty tractor, we've seen and move up 5% to 6000 units and with that there is no question.
And without that gives them the ability to sell their trucks and the market and that's been a big big help to us when we look at doing deals going forward, but I would say is freight.
There is no question and now there's a pent up demand for equipment and the new technology.
And the emissions fuel economy, and some of the telematics is all driving this and for me from our perspective, the parts and service.
And that's really the heart of the of the truck business because when you are running at 120 to 130 to 140 <unk>.
Coverage of your fixed costs and many months, we cover all our costs and parts and service and when you look at a return on sales.
Certainly when we look in Q4 were four 5% and.
And when the market is going to be close to 300000 remember we had 320 330 I think it was in and 19 and we thought the 'twenty was down which it was but this really snapback.
I just see it.
Great.
From pent up demand is better used truck prices and technology.
And that's really helpful and just as a follow up and I know you've talked broadly about M&A.
The retail auto side as well as you know discussing your expansion and to build out your used vehicle stores you know whats your appetite of continuing to build out your presence on the commercial truck dealership side.
I would say, it's one of our three pillars going forward in order to go forward, we have the team and I think the appetite is strong.
Yes.
Got it well that's it from me. Thank you so much thank you Stephanie.
And once again for any questions. Please press star one we do have a follow up from the line and we got group <unk> with J P. Morgan.
Great.
Thanks, Brian and thanks for getting me back in the queue.
Yes.
Was curious like.
Can you provide some color on joined and 21 earlier and.
Anything you could get on PPL, specifically, given how strong the exit rate has been.
And it's just more of a temporary.
Benefit and we should expect in the near term or are we at.
New run rate of like roughly $169 million and equity income last year.
Is that kind of a good base to work golf balls, and the economy recovers and win.
When you looked at the business.
And our business did 569 million and I think it was the number for the year.
The return on sales was 6% almost 9% and a quarter.
And are all guns are loaded and we are absolutely from a from a rental.
Utilization there is absolutely no question that the market is strong driven by used truck prices I think the fact that.
We have the flexibility we're signing.
Many.
Long term leases.
Interest and interest rates are down obviously, our borrowing costs are in great shape and I think our overall footprint is key and we're seeing our one way business systems rented here leave it there is way up because people are fleeing from these major cities, which I think is really key and when we look at that we're getting margin now that we've net.
Ever seen before so I think with a contract sales the rental business I think we head out to some other people like Fedex and <unk>, we had almost 20000 units on rental out to them during the holiday and some of those havent come back because theres, so much traffic going on and the lighter freight area I think the remarketing.
Which is gain on sale is much better than we would have we would have expected and we have a big turn to fleet as we go into 'twenty, one and <unk> and 'twenty two so.
And I would assume and thinking that we were we were under some real lockdown earlier there in March and April and you just take that out and look at the run rate in the last six months and figure $200 million.
What they did and the in the fourth quarter.
You look at that and fast forward that we really have a real strong market going forward and I think the.
And our team got almost over 30000 people and the locations we have and our Capex has been strong there continues to be and we're executing and I think the brand is strong and we've got great customer and when we look at liquidity.
Obviously, we did a bond offering I think $700 million right around 2%.
For five years.
Which is which is really good for us from an acquisition capital perspective, the black horse, which is the logistics arm.
Operation was out and Chicago, well regarded in the industry and that was and negotiated bid at 600 million and revenue for 2021 that will move our revenue up to 7% alone and so we will continue to invest.
Properly there but.
Right now one of our problems is going to be that we probably reduced our fleet down on the rental side, maybe a little too low and we're going to have to try to get slots in order to get trucks and order to fill those as we go forward and the second and third quarter. So overall I would say this.
And that business has never been better and we're all.
All time records and many of these areas every month.
Great. Thanks for the thanks for that color and good luck.
Thanks and support.
And there are no further questions at this time and I will turn the call back over to Mr. Penske for any further remarks.
Well, thanks, everybody for joining us great.
Great year in 2020 other than what we're dealing with and <unk> et cetera, I hope everybody is safe and healthy and we feel good about our business. We've got a great team here and the U S and it really <unk>.
Super job internationally and theirs.
No question, when you think about Spain, and Germany, and Italy, and Australia. Every one of these areas has created another opportunity and also issues we had to deal with so I want to thank the team hopefully somewhere on the line here, but we will see you next quarter. Thanks.
Ladies and gentlemen that will conclude today's call. Thank you all for joining and you may now disconnect.
Okay.
And.
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