Universal Logistics (NASDAQ: ULH), which at the end of the third quarter was carrying a balance sheet of $768 million, has just lined up $350 million in new financing.
In announcing the new credit facilities, Universal said it was planning to “continue its acquisition strategy,” which this year saw the company make two purchases.
Those two acquisitions earlier in 2018 were for a total of about $100 million. In August, it bought Southern Counties Express, a southern California drayage provider, for $65.7 million. Earlier in the year, it bought Fore Transportation, which had activities in the intermodal and drayage sectors, for $35.1 million.
But the new financing is not just for acquisition. In the prepared statement announcing its new lines of credit, Universal said “certain proceeds” from the new credit facility were used to pay off some existing debt and to for fees in connection with the new credit line.
The new credit line is in two parts. There is a $150 million term loan and a $200 million revolving credit line. But after borrowings and fees, Universal said that the outstanding balance under the new credit facility at closing was $186.6 million, so just over half of the available credit.
Jude Beres, the company’s CFO, said in the statement: “”Closing this new credit facility is a significant milestone in Universal’s continued transformation. It gives us the flexibility and dry powder to make strategic acquisitions, expand our North American footprint, and clears a path for Universal’s continued success.”
Universal’s financial performance, according to research firm CFRA, has been mixed. On the one hand, its compound annual growth rate measured by revenue as of November 21 was 19.1%, which was more than the average S&P 500 growth rate of 9.8%, but less than the CFRA peer average of 47.5%. The three-year and five-year comparison to peers is 6.7% vs. 11.6% for three years, and 6.1% vs. 10.2% for five years. But Universal’s CAGR has consistently topped the S&P 500 during that period.
However, the peer companies listed for Universal by CFRA are not all logistics firms. They also include truckload carriers such as Heartland Express.
CFRA has a buy rating on the Universal stock. The stock has tumbled by approximately a third in the last three months. According to CFRA, $10,000 invested in Universal five years ago had sunk to $9,150 by November 21.