(Adding new information on government policy toward publicly-traded companies getting PPP loans.)
A publicly-traded Phoenix-based trucking company that received $10 million under the Paycheck Protection Program (PPP) has been asked to give it back.
The company, EVO Transportation and Energy Services, mostly hauls for the U.S. Postal Service. Much of its fleet appears to be powered by compressed natural gas (CNG). The company’s 10-K filing for 2018—the most recent 10-K submitted—said the USPS accounted for 95% of the company’s revenue.
In a letter sent Friday to EVO’s Chief Executive Officer Tom Abood, James Clyburn, the chairman of the United States House Select Subcommittee on the Coronavirus Crisis, told Abood, in so many words, this money wasn’t for people like you.
“We did not intend for these funds to be used by large corporations that have a substantial investor base and access to capital markets,” Clyburn wrote.
Clyburn, a South Carolina Democrat, went on to note that some bigger companies did receive funds under PPP. But when controversy erupted over that, many of these companies gave the money back, Clyburn wrote. “However, other companies—including yours—still not have returned these funds.”
EVO received $10 million under the PPP, according to a filing it made on April 30 with the U.S. Securities and Exchange Commission (SEC).
Greg Feary, president and managing partner of the law firm of Scopelitis, Garvin, Light, Hanson & Feary, said in an email to FreightWaves that the Small Business Administration and the Internal Revenue Service issued an FAQ on April 23 that “publicly traded corporations cannot make a good faith certification (as required under the CARES Act) that they need PPP loans because they have access to other readily available funding sources. “
That would mean that EVO’s filing with the SEC about its approval came one week after that guidance issued by the SBA and IRS.
Although a good chunk of money has gone to a publicly-traded firm that Clyburn’s letter maintains has “a substantial investor base and access to capital markets,” the financial stability of EVO is murky. It has not released earnings since the second quarter of 2019 when it made numerous acquisitions.
According to its 2018 10-K, EVO had 259 full-time employees and 31 part-time employees. It employed 269 drivers as of December 31, 2018. Although the number of drivers exceeds the number of full-time employees, the company does not specify whether the number of full-time workers includes the drivers. EVO also had 15 independent contractors, who in 2018 accounted for about 38% of all miles driven, according to the 10-K.
In the company’s September 2019 announcement of Abood’s hiring as CEO, EVO reported it had 1,400 employees with a fleet of 1,100 trucks and tractors, 160 of which were powered by CNG.
“EVO Inc. has identified a compelling opportunity in an evolving ecosystem of USPS transportation contractors, and we have refocused our corporate strategy to leverage our footprint of CNG stations with the approximately 200 CNG trucks and relationships with owner-operators to build a national fleet of haulers and in turn drive additional CNG sales to our company-owned stations,” EVO said in an SEC filing.
EVO also describes itself as an “emerging transportation operator and next generation supplier for the USPS.”
In its 10-Q for the second quarter of last year, the most recent one available, EVO recaps various financing issues before saying its projections assume it will remain a “going concern.” “However, the above conditions raise substantial doubt about the Company’s ability to do so,” the report said.
In the second quarter of 2019, EVO reported trucking revenue of $36.1 million, a huge increase from the prior year given its acquisitions. But it had a net operating loss of $5.65 million and a net loss of just more than $7 million.
According to data from Marketwatch, EVO is traded on the “pink sheets” over-the-counter markets where small cap companies trade. As of the close Friday, its stock was $11.21, the highest in the 52-week range, the $2.50 as the lowest. Its market capitalization is $123.6 million. It trades, on average, between 23 and 24 shares per day.
Yet Clyburn’s letter gives no hint that a potentially precarious financial situation at EVO was a factor in whether it should receive PPP funding. “Since your company is a public entity with a substantial investor base and access to capital markets, we ask that you return these funds immediately,” Clyburn wrote.
Clyburn also lays down the deadline of Monday, May 11 for EVO to inform the committee whether the $10 million will be returned.
If the company doesn’t agree to return the funds, the committee is asking for EVO to submit all records related to the application and the grant.
In its filing with the SEC announcing receipt of the PPP funds, EVO said that the Bank of Oklahoma had serviced the loan.
An email to EVO officials had not been responded to at publication time.