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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
___ to ___.
Commission file number: 1-07908
ADAMS RESOURCES & ENERGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
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74-1753147
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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17 South Briar Hollow Lane, Suite 100
Houston, Texas 77027
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(Address of Principal Executive Offices, including Zip
Code)
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(713) 881-3600
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, $0.10 Par Value |
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AE |
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NYSE American LLC |
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files).
Yes þ
No
¨
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth
company. See definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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☐ |
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Accelerated filer
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☐ |
Non-accelerated filer
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☑ |
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Smaller reporting company
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☑ |
Emerging growth company
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☐ |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
o
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
þ
A total of 4,367,866 shares of Common Stock were outstanding at
May 1, 2022.
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
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March 31, |
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December 31, |
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2022 |
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2021 |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
99,295 |
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$ |
97,825 |
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Restricted cash |
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8,850 |
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9,492 |
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Accounts receivable, net of allowance for doubtful |
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accounts of $103 and $108, respectively
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212,454 |
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137,789 |
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Accounts receivable – related party |
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1 |
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2 |
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Inventory |
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42,382 |
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18,942 |
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Derivative assets |
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1,145 |
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347 |
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Income tax receivable |
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5,140 |
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6,424 |
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Prepayments and other current assets |
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1,705 |
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2,389 |
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Total current assets |
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370,972 |
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273,210 |
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Property and equipment, net |
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86,543 |
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88,036 |
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Operating lease right-of-use assets, net |
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6,699 |
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7,113 |
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Intangible assets, net |
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3,126 |
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3,317 |
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Other assets |
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2,777 |
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3,027 |
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Total assets |
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$ |
470,117 |
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$ |
374,703 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
259,451 |
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$ |
168,224 |
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Accounts payable – related party |
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47 |
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— |
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Derivative liabilities |
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1,102 |
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324 |
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Current portion of finance lease obligations |
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3,293 |
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3,663 |
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Current portion of operating lease liabilities |
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2,258 |
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2,178 |
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Other current liabilities |
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10,828 |
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11,622 |
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Total current liabilities |
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276,979 |
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186,011 |
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Other long-term liabilities: |
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Asset retirement obligations |
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2,391 |
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2,376 |
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Finance lease obligations |
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8,903 |
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9,672 |
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Operating lease liabilities |
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4,445 |
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4,938 |
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Deferred taxes and other liabilities |
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11,878 |
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11,320 |
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Total liabilities |
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304,596 |
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214,317 |
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Commitments and contingencies (Note 14)
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Shareholders’ equity: |
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Preferred stock – $1.00 par value, 960,000 shares
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authorized, none outstanding
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— |
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— |
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Common stock – $0.10 par value, 7,500,000 shares
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authorized, 4,367,866 and 4,355,001 shares outstanding,
respectively
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435 |
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433 |
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Contributed capital |
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17,020 |
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16,913 |
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Retained earnings |
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148,066 |
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143,040 |
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Total shareholders’ equity |
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165,521 |
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160,386 |
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Total liabilities and shareholders’ equity |
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$ |
470,117 |
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$ |
374,703 |
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See Notes to Unaudited Condensed Consolidated Financial
Statements.
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per share data)
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Three Months Ended |
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March 31, |
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2022 |
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2021 |
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Revenues: |
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Marketing |
$ |
747,555 |
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$ |
304,023 |
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Transportation |
26,690 |
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21,235 |
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Pipeline and storage |
— |
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233 |
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Total revenues |
774,245 |
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325,491 |
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Costs and expenses: |
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Marketing |
735,647 |
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295,207 |
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Transportation |
20,865 |
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17,460 |
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Pipeline and storage |
554 |
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544 |
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General and administrative |
4,018 |
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3,376 |
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Depreciation and amortization |
5,013 |
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5,053 |
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Total costs and expenses |
766,097 |
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321,640 |
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Operating earnings |
8,148 |
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3,851 |
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Other income (expense): |
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Interest and other income |
24 |
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134 |
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Interest expense |
(114) |
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(220) |
|
|
|
|
|
Total other (expense) income, net |
(90) |
|
|
(86) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
8,058 |
|
|
3,765 |
|
|
|
|
|
Income tax provision |
(1,968) |
|
|
(957) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
$ |
6,090 |
|
|
$ |
2,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic net earnings per common share |
$ |
1.40 |
|
|
$ |
0.66 |
|
|
|
|
|
Diluted net earnings per common share |
$ |
1.39 |
|
|
$ |
0.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share |
$ |
0.24 |
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial
Statements.
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2022 |
|
2021 |
Operating activities: |
|
|
|
Net earnings |
$ |
6,090 |
|
|
$ |
2,808 |
|
Adjustments to reconcile net earnings to net cash |
|
|
|
provided by operating activities: |
|
|
|
Depreciation and amortization |
5,013 |
|
|
5,053 |
|
Gains on sales of property |
(491) |
|
|
(83) |
|
Provision for doubtful accounts |
(5) |
|
|
(1) |
|
Stock-based compensation expense |
195 |
|
|
185 |
|
Deferred income taxes |
561 |
|
|
(829) |
|
Net change in fair value contracts |
(20) |
|
|
(21) |
|
Changes in assets and liabilities: |
|
|
|
Accounts receivable |
(74,660) |
|
|
(11,268) |
|
Accounts receivable/payable, affiliates |
48 |
|
|
(13) |
|
Inventories |
(23,440) |
|
|
(9,887) |
|
Income tax receivable |
1,284 |
|
|
1,650 |
|
Prepayments and other current assets |
684 |
|
|
(657) |
|
Accounts payable |
91,211 |
|
|
36,127 |
|
Accrued liabilities |
(775) |
|
|
51 |
|
Other |
178 |
|
|
(114) |
|
Net cash provided by operating activities |
5,873 |
|
|
23,001 |
|
|
|
|
|
Investing activities: |
|
|
|
Property and equipment additions |
(3,694) |
|
|
(170) |
|
|
|
|
|
Proceeds from property sales |
856 |
|
|
1,005 |
|
|
|
|
|
Net cash (used in) provided by investing activities |
(2,838) |
|
|
835 |
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
Principal repayments of finance lease obligations |
(1,139) |
|
|
(1,014) |
|
Payment for financed portion of VEX acquisition |
— |
|
|
(2,500) |
|
|
|
|
|
Dividends paid on common stock |
(1,068) |
|
|
(1,025) |
|
Net cash used in financing activities |
(2,207) |
|
|
(4,539) |
|
|
|
|
|
Increase in cash and cash equivalents, including restricted
cash |
828 |
|
|
19,297 |
|
Cash and cash equivalents, including restricted cash, at beginning
of period |
107,317 |
|
|
52,065 |
|
Cash and cash equivalents, including restricted cash, at end of
period |
$ |
108,145 |
|
|
$ |
71,362 |
|
See Notes to Unaudited Condensed Consolidated Financial
Statements.
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Common |
|
Contributed |
|
Retained |
|
Shareholders’ |
|
|
Stock |
|
Capital |
|
Earnings |
|
Equity |
|
|
|
|
|
|
|
|
|
Balance, January 1, 2022
|
|
$ |
433 |
|
|
$ |
16,913 |
|
|
$ |
143,040 |
|
|
$ |
160,386 |
|
Net earnings |
|
— |
|
|
— |
|
|
6,090 |
|
|
6,090 |
|
Stock-based compensation expense |
|
— |
|
|
195 |
|
|
— |
|
|
195 |
|
Vesting of restricted awards |
|
2 |
|
|
(2) |
|
|
— |
|
|
— |
|
Cancellation of shares withheld to cover |
|
|
|
|
|
|
|
|
taxes upon vesting of restricted awards |
|
— |
|
|
(86) |
|
|
— |
|
|
(86) |
|
Dividends declared: |
|
|
|
|
|
|
|
|
Common stock, $0.24/share
|
|
— |
|
|
— |
|
|
(1,048) |
|
|
(1,048) |
|
Awards under LTIP, $0.24/share
|
|
— |
|
|
— |
|
|
(16) |
|
|
(16) |
|
Balance, March 31, 2022
|
|
$ |
435 |
|
|
$ |
17,020 |
|
|
$ |
148,066 |
|
|
$ |
165,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Common |
|
Contributed |
|
Retained |
|
Shareholders’ |
|
|
Stock |
|
Capital |
|
Earnings |
|
Equity |
|
|
|
|
|
|
|
|
|
Balance, January 1, 2021
|
|
$ |
423 |
|
|
$ |
13,340 |
|
|
$ |
135,329 |
|
|
$ |
149,092 |
|
Net earnings |
|
— |
|
|
— |
|
|
2,808 |
|
|
2,808 |
|
Stock-based compensation expense |
|
— |
|
|
185 |
|
|
— |
|
|
185 |
|
Cancellation of shares withheld to cover |
|
|
|
|
|
|
|
|
taxes upon vesting of restricted awards |
|
— |
|
|
(31) |
|
|
— |
|
|
(31) |
|
Dividends declared: |
|
|
|
|
|
|
|
|
Common stock, $0.24/share
|
|
— |
|
|
— |
|
|
(1,019) |
|
|
(1,019) |
|
Awards under LTIP, $0.24/share
|
|
— |
|
|
— |
|
|
(18) |
|
|
(18) |
|
Balance, March 31, 2021
|
|
$ |
423 |
|
|
$ |
13,494 |
|
|
$ |
137,100 |
|
|
$ |
151,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Unaudited Condensed Consolidated Financial
Statements.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 1. Organization and Basis of Presentation
Organization
Adams Resources & Energy, Inc. is a publicly traded Delaware
corporation organized in 1973, the common shares of which are
listed on the NYSE American LLC under the ticker symbol “AE”.
Through our subsidiaries, we are primarily engaged in crude oil
marketing, transportation, terminalling and storage in various
crude oil and natural gas basins in the lower 48 states of the
United States (“U.S.”). We also conduct tank truck transportation
of liquid chemicals, pressurized gases, asphalt and dry bulk
primarily in the lower 48 states of the U.S. with deliveries into
Canada and Mexico, and with nineteen terminals across the U.S.
Unless the context requires otherwise, references to “we,” “us,”
“our” or “Company” are intended to mean the business and operations
of Adams Resources & Energy, Inc. and its consolidated
subsidiaries.
We operate and report in three business segments: (i) crude oil
marketing, transportation and storage; (ii) tank truck
transportation of liquid chemicals, pressurized gases, asphalt and
dry bulk; and (iii) pipeline transportation, terminalling and
storage of crude oil. See Note 7 for further information regarding
our business segments.
Basis of Presentation
Our results of operations for the three months ended March 31,
2022 are not necessarily indicative of results expected for the
full year of 2022. In the opinion of management, the accompanying
unaudited condensed consolidated financial statements reflect all
adjustments consisting of normal recurring accruals necessary for
fair presentation. The condensed consolidated financial
statements and the accompanying notes are prepared in accordance
with U.S. generally accepted accounting principles (“GAAP”) for
interim financial statements and the rules of the U.S. Securities
and Exchange Commission (“SEC”). Certain information and footnote
disclosures required by GAAP for complete annual financial
statements have been omitted and, therefore, these interim
financial statements should be read in conjunction with our audited
consolidated financial statements included in our Annual Report on
Form 10-K for the year ended December 31, 2021 (the “2021 Form
10-K”) filed with the SEC on March 9, 2022. All significant
intercompany transactions and balances have been eliminated in
consolidation.
Use of Estimates
The preparation of our financial statements in conformity with GAAP
requires management to use estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. We base our estimates and judgments on
historical experience and on various other assumptions and
information we believe to be reasonable under the circumstances.
Estimates and assumptions about future events and their effects
cannot be perceived with certainty and, accordingly, these
estimates may change as new events occur, as more experience is
acquired, as additional information is obtained and as the
operating environment changes. While we believe the estimates and
assumptions used in the preparation of these condensed consolidated
financial statements are appropriate, actual results could differ
from those estimates.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 2. Summary of Significant Accounting Policies
Cash, Cash Equivalents and Restricted Cash
The following table provides a reconciliation of cash and cash
equivalents and restricted cash as reported in the unaudited
condensed consolidated balance sheets that totals to the amounts
shown in the unaudited condensed consolidated statements of cash
flows at the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2022 |
|
2021 |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
99,295 |
|
|
$ |
97,825 |
|
Restricted cash: |
|
|
|
|
|
|
|
|
|
Captive insurance subsidiary
(1)
|
|
8,850 |
|
|
9,492 |
|
Total cash, cash equivalents and restricted cash shown in
the |
|
|
|
|
unaudited condensed consolidated statements of cash
flows |
|
$ |
108,145 |
|
|
$ |
107,317 |
|
_____________
(1)$1.5
million of the restricted cash balance relates to the initial
capitalization of our captive insurance company formed in late
2020, and the remainder represents amounts paid to our captive
insurance company for insurance premiums.
Common Shares Outstanding
The following table reconciles our outstanding common stock for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
shares |
|
|
|
Balance, January 1, 2022
|
|
4,355,001 |
|
Vesting of restricted stock unit awards (see Note 11)
|
|
15,966 |
|
Shares withheld to cover taxes upon vesting of restricted stock
unit awards |
|
(3,101) |
|
Balance, March 31, 2022
|
|
4,367,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Agreement
At March 31, 2022, we had no borrowings outstanding under our
$40.0 million Credit Agreement with Wells Fargo Bank, National
Association (“Credit Agreement”) and $6.1 million of letters of
credit issued under the Credit Agreement at a fee of 1.75 percent
per annum. At March 31, 2022, we were in compliance with all
covenants under the Credit Agreement.
Earnings Per Share
Basic earnings (losses) per share is computed by dividing our net
earnings (losses) by the weighted average number of common shares
outstanding during the period. Diluted earnings (losses) per share
is computed by giving effect to all potential common shares
outstanding, including our shares related to unvested restricted
stock unit awards. Unvested restricted stock unit awards granted
under the Adams Resources & Energy, Inc. 2018 Long-Term
Incentive Plan (“2018 LTIP”) are not considered to be participating
securities as the holders of these shares do not have
non-forfeitable dividend rights in the event of our declaration of
a dividend for common shares (see Note 11 for further
discussion).
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
A reconciliation of the calculation of basic and diluted earnings
per share was as follows for the periods indicated (in thousands,
except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
Earnings per share — numerator: |
|
|
|
|
|
|
|
Net earnings |
$ |
6,090 |
|
|
$ |
2,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
Basic weighted average number of shares outstanding |
4,359 |
|
|
4,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ |
1.40 |
|
|
$ |
0.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share: |
|
|
|
|
|
|
|
Diluted weighted average number of shares outstanding: |
|
|
|
|
|
|
|
Common shares |
4,359 |
|
|
4,246 |
|
|
|
|
|
Restricted stock unit awards |
24 |
|
|
18 |
|
|
|
|
|
Performance share unit awards
(1)
|
11 |
|
|
7 |
|
|
|
|
|
Total diluted shares |
4,394 |
|
|
4,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
$ |
1.39 |
|
|
$ |
0.66 |
|
|
|
|
|
_______________
(1)The
dilutive effect of performance share awards are included in the
calculation of diluted earnings per share when the performance
share award performance conditions have been achieved.
Fair Value Measurements
The carrying amounts reported in the unaudited condensed
consolidated balance sheets for cash and cash equivalents, accounts
receivable and accounts payable approximates fair value because of
the immediate or short-term maturity of these financial
instruments. Marketable securities are recorded at fair value based
on market quotations from actively traded liquid
markets.
A three-tier hierarchy has been established that classifies fair
value amounts recognized in the financial statements based on the
observability of inputs used to estimate these fair
values. The hierarchy considers fair value amounts based
on observable inputs (Levels 1 and 2) to be more reliable and
predictable than those based primarily on unobservable inputs
(Level 3). At each balance sheet reporting date, we
categorize our financial assets and liabilities using this
hierarchy.
Fair value contracts consist of derivative financial instruments
and are recorded as either an asset or liability measured at its
fair value. Changes in fair value are recognized immediately in
earnings unless the derivatives qualify for, and we elect, cash
flow hedge accounting. We had no contracts designated for hedge
accounting during any current reporting periods (see Note 10 for
further information).
Income Taxes
Income taxes are accounted for using the asset and liability
method. Under this approach, deferred tax assets and liabilities
are recognized based on anticipated future tax consequences
attributable to differences between financial statement carrying
amounts of these items and their respective tax basis.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
On March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”) was enacted and signed into law in
response to the COVID-19 pandemic. The CARES Act, among other
things, permits net operating losses (“NOL”) incurred in tax years
2018, 2019 and 2020 to offset 100 percent of taxable income and be
carried back to each of the five preceding taxable years to
generate a refund of previously paid income taxes.
We have determined that the NOL carryback provision in the CARES
Act would result in a cash benefit to us for the fiscal year 2020.
We have an income tax receivable at March 31, 2022, of
approximately $6.8 million for the benefit of carrying back the NOL
for the fiscal year 2020 to 2015 and 2016. As we are carrying the
losses back to years beginning before January 1, 2018, the
receivable was recorded at the previous 35 percent federal tax rate
rather than the current statutory rate of 21 percent.
Inventory
Inventory consists of crude oil held in storage tanks and at
third-party pipelines as part of our crude oil marketing and
pipeline and storage operations. Crude oil inventory is carried at
the lower of cost or net realizable value. At the end of each
reporting period, we assess the carrying value of our inventory and
make adjustments necessary to reduce the carrying value to the
applicable net realizable value. Any resulting adjustments are a
component of marketing costs and expenses or pipeline and storage
expenses on our consolidated statements of operations. No charges
were recognized during the three months ended March 31, 2022
and 2021.
Property and Equipment
Property and equipment is recorded at cost. Expenditures for
additions, improvements and other enhancements to property and
equipment are capitalized, and minor replacements, maintenance and
repairs that do not extend asset life or add value are charged to
expense as incurred. When property and equipment assets are retired
or otherwise disposed of, the related cost and accumulated
depreciation is removed from the accounts and any resulting gain or
loss is included in results of operations in operating costs and
expenses for the respective period. Property and equipment, except
for land, is depreciated using the straight-line method over the
estimated average useful lives ranging from
two to thirty-nine years.
We review our long-lived assets for impairment whenever there is
evidence that the carrying value of these assets may not be
recoverable. Any impairment recognized is permanent and may not be
restored. Property and equipment is reviewed at the lowest level of
identifiable cash flows. For property and equipment requiring
impairment, the fair value is estimated based on an internal
discounted cash flow model of future cash flows.
See Note 5 for additional information regarding our property and
equipment.
Stock-Based Compensation
We measure all share-based payment awards, including the issuance
of restricted stock unit awards and performance share unit awards
to employees and board members, using a fair-value based method.
The cost of services received from employees and non-employee board
members in exchange for awards of equity instruments is recognized
in the consolidated statements of operations based on the estimated
fair value of those awards on the grant date and is amortized on a
straight-line basis over the requisite service period. The fair
value of restricted stock unit awards and performance share unit
awards is based on the closing price of our common stock on the
grant date. We account for forfeitures as they occur. See Note 11
for additional information regarding our 2018 LTIP.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 3. Revenue Recognition
Revenue Disaggregation
The following table disaggregates our revenue by segment and by
major source for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Segments |
|
|
Crude Oil Marketing |
|
Transportation |
|
Pipeline and storage |
|
Total |
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
Revenues from contracts with customers |
$ |
736,034 |
|
|
$ |
26,690 |
|
|
$ |
— |
|
|
$ |
762,724 |
|
Other
(1)
|
11,521 |
|
|
— |
|
|
— |
|
|
11,521 |
|
Total revenues |
$ |
747,555 |
|
|
$ |
26,690 |
|
|
$ |
— |
|
|
$ |
774,245 |
|
|
|
|
|
|
|
|
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
Goods transferred at a point in time |
$ |
736,034 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
736,034 |
|
Services transferred over time |
— |
|
|
26,690 |
|
|
— |
|
|
26,690 |
|
Total revenues from contracts with customers |
$ |
736,034 |
|
|
$ |
26,690 |
|
|
$ |
— |
|
|
$ |
762,724 |
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021 |
|
|
|
|
|
|
|
Revenues from contracts with customers |
$ |
297,475 |
|
|
$ |
21,235 |
|
|
$ |
233 |
|
|
$ |
318,943 |
|
Other
(1)
|
6,548 |
|
|
— |
|
|
— |
|
|
6,548 |
|
Total revenues |
$ |
304,023 |
|
|
$ |
21,235 |
|
|
$ |
233 |
|
|
$ |
325,491 |
|
|
|
|
|
|
|
|
|
Timing of revenue recognition: |
|
|
|
|
|
|
|
Goods transferred at a point in time |
$ |
297,475 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
297,475 |
|
Services transferred over time |
— |
|
|
21,235 |
|
|
233 |
|
|
21,468 |
|
Total revenues from contracts with customers |
$ |
297,475 |
|
|
$ |
21,235 |
|
|
$ |
233 |
|
|
$ |
318,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________
(1)Other
crude oil marketing revenues are recognized under Accounting
Standards Codification (“ASC”) 815,
Derivatives and Hedging,
and ASC 845,
Nonmonetary Transactions – Purchases and Sales of Inventory with
the Same Counterparty.
Other Crude Oil Marketing Revenue
Certain of the commodity purchase and sale contracts utilized by
our crude oil marketing business qualify as derivative instruments
with certain specifically identified contracts also designated as
trading activity. From the time of contract origination, these
contracts are marked-to-market and recorded on a net revenue basis
in the accompanying consolidated financial statements.
Certain of our crude oil contracts may be with a single
counterparty to provide for similar quantities of crude oil to be
bought and sold at different locations. These contracts are entered
into for a variety of reasons, including effecting the
transportation of the commodity, to minimize credit exposure,
and/or to meet the competitive demands of the customer. These
buy/sell arrangements are reflected on a net revenue basis in the
accompanying consolidated financial statements.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Reporting these crude oil contracts on a gross revenue basis would
increase our reported revenues as follows for the periods indicated
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue gross-up |
$ |
307,386 |
|
|
$ |
134,866 |
|
|
|
|
|
Note 4. Prepayments and Other Current Assets
The components of prepayments and other current assets were as
follows at the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
Insurance premiums |
$ |
501 |
|
|
$ |
641 |
|
Vendor prepayment |
— |
|
|
602 |
|
Rents, licenses and other |
1,204 |
|
|
1,146 |
|
Total prepayments and other current assets |
$ |
1,705 |
|
|
$ |
2,389 |
|
Note 5. Property and Equipment
The historical costs of our property and equipment and related
accumulated depreciation and amortization balances were as follows
at the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated |
|
|
|
|
|
Useful Life |
|
March 31, |
|
December 31, |
|
in Years |
|
2022 |
|
2021 |
|
|
|
|
|
|
Tractors and trailers |
5 – 6
|
|
$ |
109,643 |
|
|
$ |
106,558 |
|
Field equipment |
2 – 5
|
|
22,904 |
|
|
22,851 |
|
Finance lease ROU assets
(1)
|
3 – 6
|
|
22,349 |
|
|
22,349 |
|
Pipeline and related facilities |
20 – 25
|
|
20,363 |
|
|
20,336 |
|
Linefill and base gas
(2)
|
N/A |
|
3,922 |
|
|
3,922 |
|
Buildings |
5 – 39
|
|
16,163 |
|
|
16,163 |
|
Office equipment |
2 – 5
|
|
2,880 |
|
|
2,060 |
|
Land |
N/A |
|
2,008 |
|
|
2,008 |
|
Construction in progress |
N/A |
|
2,036 |
|
|
3,396 |
|
Total |
|
|
202,268 |
|
|
199,643 |
|
Less accumulated depreciation and amortization |
|
|
(115,725) |
|
|
(111,607) |
|
Property and equipment, net |
|
|
$ |
86,543 |
|
|
$ |
88,036 |
|
_______________
(1)Our
finance lease right-of-use (“ROU)” assets arise from leasing
arrangements for the right to use various classes of underlying
assets including tractors, trailers, a tank storage and throughput
arrangement and office equipment (see Note 13 for further
information). Accumulated amortization of the assets presented as
“Finance lease ROU assets” was $11.0 million and $9.8 million at
March 31, 2022 and December 31, 2021,
respectively.
(2)Linefill
and base gas represents crude oil in the VEX pipeline and storage
tanks we own, and the crude oil is recorded at historical
cost.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Components of depreciation and amortization expense were as follows
for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization, excluding amounts under finance
leases |
$ |
3,805 |
|
|
$ |
3,913 |
|
|
|
|
|
Amortization of property and equipment under finance
leases |
1,208 |
|
|
1,140 |
|
|
|
|
|
Total depreciation and amortization |
$ |
5,013 |
|
|
$ |
5,053 |
|
|
|
|
|
Note 6. Other Assets
Components of other assets were as follows at the dates indicated
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
Amounts associated with liability insurance program: |
|
|
|
Insurance collateral deposits |
$ |
405 |
|
|
$ |
721 |
|
Excess loss fund |
622 |
|
|
622 |
|
Accumulated interest income |
489 |
|
|
489 |
|
Other amounts: |
|
|
|
State collateral deposits |
36 |
|
|
36 |
|
Materials and supplies |
675 |
|
|
574 |
|
Debt issuance costs |
260 |
|
|
292 |
|
Other |
290 |
|
|
293 |
|
Total other assets |
$ |
2,777 |
|
|
$ |
3,027 |
|
We have established certain deposits to support participation in
our liability insurance program and remittance of state crude oil
severance taxes and other state collateral deposits. Insurance
collateral deposits are held by the insurance company to cover past
or potential open claims based upon a percentage of the maximum
assessment under our insurance policies. Insurance collateral
deposits are invested at the discretion of our insurance carrier.
Excess amounts in our loss fund represent premium payments in
excess of claims incurred to date that we may be entitled to
recover through settlement or commutation as claim periods are
closed. Interest income is earned on the majority of amounts held
by the insurance companies and will be paid to us upon settlement
of policy years.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 7. Segment Reporting
We operate and report in three business segments: (i) crude oil
marketing, transportation and storage; (ii) tank truck
transportation of liquid chemicals, pressurized gases, asphalt and
dry bulk; and (iii) pipeline transportation, terminalling and
storage of crude oil.
Financial information by reporting segment was as follows for the
periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reporting Segments |
|
|
|
Crude Oil Marketing |
|
Transportation |
|
Pipeline and storage |
|
Other |
|
Total |
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2022 |
|
|
|
|
|
|
|
|
Segment revenues
(1)
|
$ |
747,555 |
|
|
$ |
26,718 |
|
|
$ |
897 |
|
|
$ |
— |
|
|
$ |
775,170 |
|
Less: Intersegment revenues
(1)
|
— |
|
|
(28) |
|
|
(897) |
|
|
— |
|
|
(925) |
|
Revenues |
$ |
747,555 |
|
|
$ |
26,690 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
774,245 |
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings (losses)
(2)
|
10,120 |
|
|
2,868 |
|
|
(822) |
|
|
— |
|
|
12,166 |
|
Depreciation and amortization |
1,788 |
|
|
2,957 |
|
|
268 |
|
|
— |
|
|
5,013 |
|
Property and equipment additions
(3) (4)
|
3,124 |
|
|
535 |
|
|
27 |
|
|
8 |
|
|
3,694 |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2021 |
|
|
|
|
|
|
|
|
Segment revenues
(1)
|
$ |
304,023 |
|
|
$ |
21,268 |
|
|
$ |
419 |
|
|
$ |
— |
|
|
$ |
325,710 |
|
Less: Intersegment revenues
(1)
|
— |
|
|
(33) |
|
|
(186) |
|
|
— |
|
|
(219) |
|
Revenues |
$ |
304,023 |
|
|
$ |
21,235 |
|
|
$ |
233 |
|
|
$ |
— |
|
|
$ |
325,491 |
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings (losses)
(2)
|
7,018 |
|
|
774 |
|
|
(565) |
|
|
— |
|
|
7,227 |
|
Depreciation and amortization |
1,798 |
|
|
3,001 |
|
|
254 |
|
|
— |
|
|
5,053 |
|
Property and equipment additions
(3) (4)
|
210 |
|
|
(58) |
|
|
10 |
|
|
8 |
|
|
170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________
(1)Segment
revenues include intersegment amounts that are eliminated due to
consolidation in operating costs and expenses in our unaudited
condensed consolidated statements of operations. Intersegment
activities are conducted at posted tariff rates where applicable,
or otherwise at rates similar to those charged to third parties or
rates that we believe approximate market at the time the agreement
is executed.
(2)Our
crude oil marketing segment’s operating earnings included inventory
liquidation gains of $8.7 million and $6.9 million for the three
months ended March 31, 2022 and 2021,
respectively.
(3)Our
segment property and equipment additions do not include assets
acquired under finance leases during the three months ended
March 31, 2022 and 2021. See Note 13 for further
information.
(4)Amounts
included in property and equipment additions for Other are
additions for computer equipment at our corporate headquarters,
which were not attributed or allocated to any of our reporting
segments.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Segment operating earnings reflect revenues net of operating costs
and depreciation and amortization expense and are reconciled to
earnings before income taxes, as follows for the periods indicated
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings |
$ |
12,166 |
|
|
$ |
7,227 |
|
|
|
|
|
General and administrative |
(4,018) |
|
|
(3,376) |
|
|
|
|
|
Operating earnings |
8,148 |
|
|
3,851 |
|
|
|
|
|
Interest and other income |
24 |
|
|
134 |
|
|
|
|
|
Interest expense |
(114) |
|
|
(220) |
|
|
|
|
|
Earnings before income taxes |
$ |
8,058 |
|
|
$ |
3,765 |
|
|
|
|
|
Identifiable assets by business segment were as follows at the
dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
Reporting segment: |
|
|
|
Crude oil marketing |
$ |
260,844 |
|
|
$ |
162,770 |
|
Transportation |
65,608 |
|
|
67,167 |
|
Pipeline and storage |
25,363 |
|
|
25,569 |
|
Cash and other
(1)
|
118,302 |
|
|
119,197 |
|
Total assets |
$ |
470,117 |
|
|
$ |
374,703 |
|
_______________
(1)Other
identifiable assets are primarily corporate cash, corporate
accounts receivable, properties and operating lease right-of-use
assets not identified with any specific segment of our
business.
Accounting policies for transactions between reportable segments
are consistent with applicable accounting policies as disclosed
herein.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 8. Transactions with Affiliates
We enter into certain transactions in the normal course of business
with affiliated entities including direct cost reimbursement for
shared phone and administrative services from KSA Industries, Inc.
(“KSA”), an affiliated entity. We lease our corporate office space
in a building operated by 17 South Briar Hollow Lane, LLC, an
affiliate of KSA.
Activities with affiliates were as follows for the periods
indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Affiliate billings to us |
$ |
6 |
|
|
$ |
12 |
|
|
|
|
|
Billings to affiliates |
5 |
|
|
1 |
|
|
|
|
|
Rentals paid to affiliate |
114 |
|
|
174 |
|
|
|
|
|
During the three months ended March 31, 2022, we paid West
Point Buick GMC, an affiliate of KSA, a total of approximately $0.1
million (net of trade-in values) for the purchase of two pickup
trucks.
Note 9. Other Current Liabilities
The components of other current liabilities were as follows at the
dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
Accrual for payroll, benefits and bonuses |
$ |
4,038 |
|
|
$ |
5,210 |
|
Accrued automobile and workers’ compensation claims |
4,306 |
|
|
4,127 |
|
Accrued medical claims |
1,333 |
|
|
1,100 |
|
Accrued taxes |
458 |
|
|
534 |
|
Other |
693 |
|
|
651 |
|
Total other current liabilities |
$ |
10,828 |
|
|
$ |
11,622 |
|
Note 10. Derivative Instruments and Fair Value
Measurements
Derivative Instruments
In the normal course of our operations, our crude oil marketing
segment purchases and sells crude oil. We seek to profit by
procuring the commodity as it is produced and then delivering the
material to the end users or the intermediate use marketplace. As
typical for the industry, these transactions are made pursuant to
the terms of forward month commodity purchase and/or sale
contracts. Some of these contracts meet the definition of a
derivative instrument, and therefore, we account for these
contracts at fair value, unless the normal purchase and sale
exception is applicable. These types of underlying contracts are
standard for the industry and are the governing document for our
crude oil marketing segment. None of our derivative instruments
have been designated as hedging instruments.
At March 31, 2022, we had in place four commodity purchase and
sale contracts which had a fair value associated with them as the
contractual prices of crude oil were outside of the range of prices
specified in the agreements. These commodity purchase and sale
contracts encompass approximately 324 barrels per day of crude oil
during April 2022 through December 2022.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
At December 31, 2021, we had in place four commodity purchase
and sale contracts, of which two had a fair value associated with
them as the contractual prices of crude oil were outside the range
of prices specified in the agreements. These commodity purchase and
sale contracts encompassed approximately 324 barrels per day of
crude oil during January 2022 through December 2022.
The estimated fair value of forward month commodity contracts
(derivatives) reflected in the accompanying unaudited condensed
consolidated balance sheets were as follows at the dates indicated
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Location and Amount |
|
Current |
|
Other |
|
Current |
|
Other |
|
Assets |
|
Assets |
|
Liabilities |
|
Liabilities |
March 31, 2022 |
|
|
|
|
|
|
|
Asset derivatives: |
|
|
|
|
|
|
|
Fair value forward hydrocarbon commodity |
|
|
|
|
|
|
|
contracts at gross valuation |
$ |
1,145 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Liability derivatives: |
|
|
|
|
|
|
|
Fair value forward hydrocarbon commodity |
|
|
|
|
|
|
|
contracts at gross valuation |
— |
|
|
— |
|
|
1,102 |
|
|
— |
|
Less counterparty offsets |
— |
|
|
— |
|
|
— |
|
|
— |
|
As reported fair value contracts |
$ |
1,145 |
|
|
$ |
— |
|
|
$ |
1,102 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
December 31, 2021
|
|
|
|
|
|
|
|
Asset derivatives: |
|
|
|
|
|
|
|
Fair value forward hydrocarbon commodity |
|
|
|
|
|
|
|
contracts at gross valuation |
$ |
347 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Liability derivatives: |
|
|
|
|
|
|
|
Fair value forward hydrocarbon commodity |
|
|
|
|
|
|
|
contracts at gross valuation |
— |
|
|
— |
|
|
324 |
|
|
— |
|
Less counterparty offsets |
— |
|
|
— |
|
|
— |
|
|
— |
|
As reported fair value contracts |
$ |
347 |
|
|
$ |
— |
|
|
$ |
324 |
|
|
$ |
— |
|
We only enter into commodity contracts with creditworthy
counterparties and evaluate our exposure to significant
counterparties on an ongoing basis. At March 31, 2022 and
December 31, 2021, we were not holding nor have we posted any
collateral to support our forward month fair value derivative
activity. We are not subject to any credit-risk related trigger
events. We have no other financial investment arrangements that
would serve to offset our derivative contracts.
Forward month commodity contracts (derivatives) reflected in the
accompanying unaudited condensed consolidated statements of
operations were as follows for the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) |
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues – marketing |
$ |
19 |
|
|
$ |
20 |
|
|
|
|
|
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Fair Value Measurements
The following tables set forth, by level with the Level 1, 2 and 3
fair value hierarchy, the carrying values of our financial assets
and liabilities at the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
Quoted Prices |
|
|
|
|
|
|
|
|
|
in Active |
|
Significant |
|
|
|
|
|
|
|
Markets for |
|
Other |
|
Significant |
|
|
|
|
|
Identical Assets |
|
Observable |
|
Unobservable |
|
|
|
|
|
and Liabilities |
|
Inputs |
|
Inputs |
|
Counterparty |
|
|
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
Offsets |
|
Total |
March 31, 2022 |
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
Current assets |
$ |
— |
|
|
$ |
1,145 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,145 |
|
Current liabilities |
— |
|
|
(1,102) |
|
|
— |
|
|
— |
|
|
(1,102) |
|
Net value |
$ |
— |
|
|
$ |
43 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
43 |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
Current assets |
$ |
— |
|
|
$ |
347 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
347 |
|
Current liabilities |
— |
|
|
(324) |
|
|
— |
|
|
— |
|
|
(324) |
|
Net value |
$ |
— |
|
|
$ |
23 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
23 |
|
These assets and liabilities are measured on a recurring basis and
are classified based on the lowest level of input used to estimate
their fair value. Our assessment of the relative significance of
these inputs requires judgments.
When determining fair value measurements, we make credit valuation
adjustments to reflect both our own nonperformance risk and our
counterparty’s nonperformance risk. When adjusting the fair value
of derivative contracts for the effect of nonperformance risk, we
consider the impact of netting and any applicable credit
enhancements. Credit valuation adjustments utilize Level 3 inputs,
such as credit scores to evaluate the likelihood of default by us
or our counterparties. At March 31, 2022 and December 31,
2021, credit valuation adjustments were not significant to the
overall valuation of our fair value contracts. As a result,
applicable fair value assets and liabilities are included in their
entirety in the fair value hierarchy.
Note 11. Stock-Based Compensation Plan
We have in place a long-term incentive plan in which any employee
or non-employee director who provides services to us is eligible to
participate. The 2018 LTIP, which is overseen by the Compensation
Committee of our Board of Directors, provides for the grant of
various types of equity awards, of which restricted stock unit
awards and performance-based compensation awards have been granted.
The maximum number of shares authorized for issuance under the 2018
LTIP is 150,000 shares, and the 2018 LTIP is effective until May 8,
2028. After giving effect to awards granted and forfeitures made
under the 2018 LTIP and assuming the potential achievement of the
maximum amounts of the performance factors through March 31,
2022, a total of 2,261 shares were available for
issuance.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Compensation expense recognized in connection with equity-based
awards was as follows for the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Compensation expense |
$ |
195 |
|
|
$ |
185 |
|
|
|
|
|
At March 31, 2022 and December 31, 2021, we had $83,500
and $82,500, respectively, of accrued dividend amounts for awards
granted under the 2018 LTIP.
Restricted Stock Unit Awards
The following table presents restricted stock unit award activity
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
Average Grant |
|
Number of |
|
Date Fair Value |
|
Shares |
|
per Share
(1)
|
|
|
|
|
Restricted stock unit awards at January 1, 2022
|
38,265 |
|
|
$ |
28.78 |
|
Granted
(2)
|
26,796 |
|
|
$ |
31.83 |
|
Vested |
(15,966) |
|
|
$ |
28.20 |
|
Forfeited |
(164) |
|
|
$ |
29.70 |
|
Restricted stock unit awards at March 31, 2022
|
48,931 |
|
|
$ |
30.64 |
|
_______________
(1)Determined
by dividing the aggregate grant date fair value of awards by the
number of awards issued.
(2)The
aggregate grant date fair value of restricted stock unit awards
issued during 2022 was $0.9 million based on a grant date market
price of our common shares ranging from $31.80 to $37.42 per
share.
Unrecognized compensation cost associated with restricted stock
unit awards was approximately $1.1 million at March 31, 2022.
Due to the graded vesting provisions of these awards, we expect to
recognize the remaining compensation cost for these awards over a
weighted-average period of 1.7 years.
Performance Share Unit Awards
The following table presents performance share unit award activity
for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
Average Grant |
|
|
Number of |
|
Date Fair Value |
|
|
Shares |
|
per Share
(1)
|
|
|
|
|
|
Performance share unit awards at January 1, 2022
|
|
21,492 |
|
|
$ |
26.64 |
|
Granted
(2)
|
|
13,458 |
|
|
$ |
31.80 |
|
|
|
|
|
|
Vested |
|
— |
|
|
$ |
— |
|
Forfeited |
|
— |
|
|
$ |
— |
|
Performance share unit awards at March 31, 2022
|
|
34,950 |
|
|
$ |
28.63 |
|
_______________
(1)Determined
by dividing the aggregate grant date fair value of awards by the
number of awards issued.
(2)The
aggregate grant date fair value of performance share unit awards
issued during 2022 was $0.4 million based on a grant date
market price of our common shares of $31.80 per share and assuming
a performance factor of 100 percent.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Unrecognized compensation cost associated with performance share
unit awards was approximately $0.7 million at March 31, 2022.
We expect to recognize the remaining compensation cost for these
awards over a weighted-average period of 2.4 years.
Note 12. Supplemental Cash Flow Information
Supplemental cash flows and non-cash transactions were as follows
for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2022 |
|
2021 |
|
|
|
|
Cash paid for interest |
$ |
114 |
|
|
$ |
220 |
|
Cash paid for federal and state income taxes |
— |
|
|
2 |
|
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
Change in accounts payable related to property and equipment
additions |
— |
|
|
(44) |
|
Property and equipment acquired under finance leases |
— |
|
|
2,091 |
|
See Note 13 for information related to other non-cash transactions
related to leases.
Note 13. Leases
The following table provides the components of lease expense for
the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
March 31, |
|
|
|
|
2022 |
|
2021 |
|
|
|
|
Finance lease cost: |
|
|
|
|
|
|
|
|
Amortization of ROU assets |
|
$ |
1,207 |
|
|
$ |
1,140 |
|
|
|
|
|
Interest on lease liabilities |
|
80 |
|
|
110 |
|
|
|
|
|
Operating lease cost |
|
673 |
|
|
623 |
|
|
|
|
|
Short-term lease cost |
|
3,781 |
|
|
3,212 |
|
|
|
|
|
Variable lease cost |
|
6 |
|
|
1 |
|
|
|
|
|
Total lease expense |
|
$ |
5,747 |
|
|
$ |
5,086 |
|
|
|
|
|
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The following table provides supplemental cash flow and other
information related to leases for the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2022 |
|
2021 |
Cash paid for amounts included in measurement of lease
liabilities: |
|
|
|
|
Operating cash flows from operating leases
(1)
|
|
$ |
673 |
|
|
$ |
622 |
|
Operating cash flows from finance leases |
|
80 |
|
|
109 |
|
Financing cash flows from finance leases |
|
1,139 |
|
|
1,014 |
|
|
|
|
|
|
ROU assets obtained in exchange for new lease
liabilities: |
|
|
|
|
Finance leases |
|
— |
|
|
2,091 |
|
Operating leases |
|
196 |
|
|
264 |
|
______________
(1)Amounts
are included in Other operating activities on the unaudited
condensed consolidated statements of cash flows.
The following table provides the lease terms and discount rates for
the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, |
|
|
2022 |
|
2021 |
Weighted-average remaining lease term (years): |
|
|
|
|
Finance leases |
|
3.39 |
|
4.10 |
Operating leases |
|
3.63 |
|
4.32 |
|
|
|
|
|
Weighted-average discount rate: |
|
|
|
|
Finance leases |
|
2.6% |
|
2.8% |
Operating leases |
|
3.7% |
|
4.2% |
The following table provides supplemental balance sheet information
related to leases at the dates indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
2022 |
|
2021 |
Assets |
|
|
|
|
Finance lease ROU assets
(1)
|
|
$ |
11,382 |
|
|
$ |
12,590 |
|
Operating lease ROU assets |
|
6,699 |
|
|
7,113 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Current |
|
|
|
|
Finance lease liabilities |
|
3,293 |
|
|
3,663 |
|
Operating lease liabilities |
|
2,258 |
|
|
2,178 |
|
Noncurrent |
|
|
|
|
Finance lease liabilities |
|
8,903 |
|
|
9,672 |
|
Operating lease liabilities |
|
4,445 |
|
|
4,938 |
|
______________
(1)Amounts
are included in Property and equipment, net on the unaudited
condensed consolidated balance sheets.
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The following table provides maturities of undiscounted lease
liabilities at March 31, 2022 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance |
|
Operating |
|
|
Lease |
|
Lease |
|
|
|
|
|
Remainder of 2022 |
|
$ |
2,722 |
|
|
$ |
1,923 |
|
2023 |
|
3,143 |
|
|
2,080 |
|
2024 |
|
2,348 |
|
|
1,911 |
|
2025 |
|
3,771 |
|
|
394 |
|
2026 |
|
801 |
|
|
333 |
|
Thereafter |
|
— |
|
|
455 |
|
Total lease payments |
|
12,785 |
|
|
7,096 |
|
Less: Interest |
|
(589) |
|
|
(393) |
|
Present value of lease liabilities |
|
12,196 |
|
|
6,703 |
|
Less: Current portion of lease obligation |
|
(3,293) |
|
|
(2,258) |
|
Total long-term lease obligation |
|
$ |
8,903 |
|
|
$ |
4,445 |
|
The following table provides maturities of undiscounted lease
liabilities at December 31, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance |
|
Operating |
|
|
Lease |
|
Lease |
|
|
|
|
|
2022 |
|
$ |
3,941 |
|
|
$ |
2,399 |
|
2023 |
|
3,143 |
|
|
2,080 |
|
2024 |
|
2,348 |
|
|
1,911 |
|
2025 |
|
3,771 |
|
|
394 |
|
2026 |
|
801 |
|
|
333 |
|
Thereafter |
|
— |
|
|
455 |
|
Total lease payments |
|
14,004 |
|
|
7,572 |
|
Less: Interest |
|
(669) |
|
|
(456) |
|
Present value of lease liabilities |
|
13,335 |
|
|
7,116 |
|
Less: Current portion of lease obligation |
|
(3,663) |
|
|
(2,178) |
|
Total long-term lease obligation |
|
$ |
9,672 |
|
|
$ |
4,938 |
|
Table of Contents
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 14. Commitments and Contingencies
Insurance
We have accrued liabilities for estimated workers’ compensation and
other casualty claims incurred based upon claim reserves plus an
estimate for loss development and incurred but not reported claims.
We self-insure a significant portion of expected losses relating to
workers’ compensation, general liability and automobile liability,
with a self-insured retention of $1.0 million. Insurance is
purchased over our retention to reduce our exposure to catastrophic
events. Estimates are recorded for potential and incurred
outstanding liabilities for workers’ compensation, auto and general
liability claims and claims that are incurred but not reported.
Estimates are based on adjusters’ estimates, historical experience
and statistical methods commonly used within the insurance industry
that we believe are reliable. We have also engaged a third-party
actuary to perform a review of our accrued liability for these
claims as well as potential funded losses in our captive insurance
company. Insurance estimates include certain assumptions and
management judgments regarding the frequency and severity of
claims, claim development and settlement practices and the
selection of estimated loss among estimates derived using different
methods. Unanticipated changes in these factors may produce
materially different amounts of expense that would be reported
under these programs.
On October 1, 2020, we elected to utilize a wholly owned insurance
captive to insure the self-insured retention for our workers’
compensation, general liability and automobile liability insurance
programs.
All accrued liabilities associated with periods from October 1,
2017 through current were transferred to the captive.
We maintain excess property and casualty programs with third-party
insurers in an effort to limit the financial impact of significant
events covered under these programs. Our operating subsidiaries pay
premiums to both the excess and reinsurance carriers and our
captive for the estimated losses based on an external actuarial
analysis. These premiums held by our wholly owned captive are
currently held in a restricted account, resulting in a transfer of
risk from our operating subsidiaries to the captive.
We also maintain
a self-insurance program for managing employee medical claims in
excess of employee deductibles. As claims are paid, the liability
is relieved.
We also maintain third party insurance stop-loss coverage for
individual medical claims exceeding a certain minimum
threshold.
In addition, we maintain $1.2 million of umbrella insurance
coverage for annual aggregate medical claims exceeding
approximately $11.5 million.
Our accruals for automobile, workers’ compensation and medical
claims were as follows at the dates indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
Pre-funded premiums for losses incurred but not
reported |
$ |
33 |
|
|
$ |
50 |
|
Accrued automobile and workers’ compensation claims |
4,306 |
|
|
4,127 |
|
Accrued medical claims |
1,333 |
|
|
1,100 |
|
Litigation
From time to time as incidental to our operations, we may become
involved in various lawsuits and/or disputes. Primarily as an
operator of an extensive trucking fleet, we are a party to motor
vehicle accidents, worker compensation claims and other items of
general liability as would be typical for the industry. We are
presently unaware of any claims against us that are either outside
the scope of insurance coverage or that may exceed the level of
insurance coverage and could potentially represent a material
adverse effect on our financial position, results of operations or
cash flows.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The following information should be read in conjunction with our
Unaudited Condensed Consolidated Financial Statements and
accompanying Notes included in this quarterly report on Form 10-Q
and the Audited Consolidated Financial Statements and related
Notes, together with our discussion and analysis of financial
position and results of operations, included in our annual report
on Form 10-K for the year ended December 31, 2021 (the “2021 Form
10-K”), as filed on March 9, 2022 with the U.S. Securities and
Exchange Commission (“SEC”). Our financial statements
have been prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”).
Cautionary Statement Regarding Forward-Looking
Information
This quarterly report on Form 10-Q contains various forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”) and information that are
based on our beliefs, as well as assumptions made by us and
information currently available to us. When used in this document,
words such as “anticipate,” “project,” “expect,” “plan,” “seek,”
“goal,” “estimate,” “forecast,” “intend,” “could,” “should,”
“would,” “will,” “believe,” “may,” “potential” and similar
expressions and statements regarding our plans and objectives for
future operations are intended to identify forward-looking
statements. Although we believe that our expectations reflected in
such forward-looking statements are reasonable, we cannot give any
assurances that such expectations will prove to be
correct. Forward-looking statements are subject to a
variety of risks, uncertainties and assumptions as described in
more detail under Part I, Item 1A of our 2021 Form
10-K. If one or more of these risks or uncertainties
materialize, or if underlying assumptions prove incorrect, our
actual results may vary materially from those anticipated,
estimated, projected or expected. You should not put
undue reliance on any forward-looking statements. The
forward-looking statements in this quarterly report speak only as
of the date hereof. Except as required by federal and
state securities laws, we undertake no obligation to publicly
update or revise any forward-looking statements, whether as a
result of new information, future events or any other
reason.
Overview of Business
Adams Resources & Energy, Inc., a Delaware corporation
organized in 1973, and its subsidiaries are primarily engaged in
crude oil marketing, transportation, terminalling and storage in
various crude oil and natural gas basins in the lower 48 states of
the United States (“U.S.”). We also conduct tank truck
transportation of liquid chemicals, pressurized gases, asphalt and
dry bulk primarily in the lower 48 states of the U.S. with
deliveries into Canada and Mexico, and with nineteen terminals
across the U.S. Unless the context requires otherwise, references
to “we,” “us,” “our” or the “Company” are intended to mean the
business and operations of Adams Resources & Energy, Inc. and
its consolidated subsidiaries.
We operate and report in three business segments: (i) crude oil
marketing, transportation and storage; (ii) tank truck
transportation of liquid chemicals, pressurized gases, asphalt and
dry bulk; and (iii) pipeline transportation, terminalling and
storage of crude oil. See Note 7 in the Notes to Unaudited
Condensed Consolidated Financial Statements for further information
regarding our business segments.
Results of Operations
Crude Oil Marketing
Our crude oil marketing segment revenues, operating earnings and
selected costs were as follows for the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
|
2022 |
|
2021 |
|
Change
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
747,555 |
|
|
$ |
304,023 |
|
|
146 |
% |
|
|
|
|
|
|
Operating earnings
(2)
|
10,120 |
|
|
7,018 |
|
|
44 |
% |
|
|
|
|
|
|
Depreciation and amortization |
1,788 |
|
|
1,798 |
|
|
(1 |
%) |
|
|
|
|
|
|
Driver compensation |
4,626 |
|
|
4,390 |
|
|
5 |
% |
|
|
|
|
|
|
Insurance |
1,734 |
|
|
1,977 |
|
|
(12 |
%) |
|
|
|
|
|
|
Fuel |
2,546 |
|
|
1,741 |
|
|
46 |
% |
|
|
|
|
|
|
_______________
(1)Represents
the percentage increase (decrease) from the prior year
period.
(2)Operating
earnings included inventory liquidation gains of $8.7 million and
$6.9 million for the three months ended March 31, 2022 and
2021, respectively, as discussed further below.
Volume and price information were as follows for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
Field level purchase volumes – per day
(1)
|
|
|
|
|
|
|
|
Crude oil – barrels |
90,385 |
|
|
82,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average purchase price |
|
|
|
|
|
|
|
Crude oil – per barrel |
$ |
92.70 |
|
|
$ |
54.91 |
|
|
|
|
|
_______________
(1)Reflects
the volume purchased from third parties at the field level of
operations.
Crude oil marketing revenues increased by $443.5 million during the
three months ended March 31, 2022 as compared to the three
months ended March 31, 2021, primarily as a result of an
increase in the market price of crude oil, which increased revenues
by approximately $389.1 million and higher overall crude oil
volumes, which increased revenues by approximately $54.4 million.
The average crude oil price received was $54.91 during the three
months ended March 31, 2021, which increased to $92.70 during
the three months ended March 31, 2022. Revenues from legacy
volumes are based upon the market price primarily in our Gulf Coast
market area. The market price of crude oil has continued to
increase in 2022, as it did throughout 2021, and is now in excess
of $100 per barrel. U.S. producers are exercising capital
discipline, maintaining oil production plans in spite of the crude
oil price, and are focusing capital on share buy-backs and
renewables. Contributing to the volatility in price has been the
war in Europe, as well as COVID-19 outbreaks in China, supply chain
issues and labor shortages, creating uncertainty for demand growth.
OPEC+ has also maintained a disciplined approach, allowing only
modest production increases.
Our crude oil marketing operating earnings increased by $3.1
million during the three months ended March 31, 2022 as
compared to the same period in 2021, primarily due to higher crude
oil prices and volumes and inventory valuation changes (as shown in
the table below), partially offset by higher fuel costs and driver
compensation.
Driver compensation increased by $0.2 million during the three
months ended March 31, 2022 as compared to the same period in
2021, primarily as a result of higher volumes transported in the
2022 period as compared to the same period in 2021.
Insurance costs decreased by $0.2 million during the three months
ended March 31, 2022 as compared to the same period in 2021,
primarily due in part to our safety performance in the prior year,
and to a lower overall driver count in the 2022 period. Fuel costs
increased by $0.8 million during the three months ended
March 31, 2022 as compared to the same period in 2021,
consistent with an increase in crude oil volumes in the current
period and higher fuel prices.
Depreciation and amortization expense during the three months ended
March 31, 2022 was consistent with the same period in 2021,
primarily due to the timing of purchases and retirements of
tractors and other field equipment during 2021 and
2022.
Field Level Operating Earnings (Non-GAAP Financial
Measure).
Inventory valuations and forward commodity contract (derivatives or
mark-to-market) valuations are two factors affecting comparative
crude oil marketing segment operating earnings (losses), of which
inventory valuations is the most significant. As a purchaser and
shipper of crude oil, we hold inventory in storage tanks and
third-party pipelines. During periods of increasing crude oil
prices, we recognize inventory liquidation gains while during
periods of falling prices, we recognize inventory liquidation and
valuation losses.
Crude oil marketing operating earnings (losses) can be affected by
the valuations of our forward month commodity contracts (derivative
instruments), if material. These non-cash valuations are calculated
and recorded at each period end based on the underlying data
existing as of such date. We generally enter into these derivative
contracts as part of a pricing strategy based on crude oil
purchases at the wellhead (field level). The valuation of
derivative instruments at period end requires the recognition of
non-cash “mark-to-market” gains and losses.
The impact of inventory liquidations and valuations and derivative
valuations on our crude oil marketing segment operating earnings is
summarized in the following reconciliation of our non-GAAP
financial measure and provides management a measure of the business
unit’s performance without the impact of inventory valuation and
liquidation adjustments for the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
As reported segment operating earnings
(1)
|
$ |
10,120 |
|
|
$ |
7,018 |
|
|
|
|
|
Add (subtract): |
|
|
|
|
|
|
|
Inventory liquidation gains |
(8,717) |
|
|
(6,943) |
|
|
|
|
|
Inventory valuation losses |
— |
|
|
— |
|
|
|
|
|
Derivative valuation (gains) losses |
(19) |
|
|
(20) |
|
|
|
|
|
Field level operating earnings
(2)
|
$ |
1,384 |
|
|
$ |
55 |
|
|
|
|
|
_______________
(1)Our
crude oil marketing segment’s operating earnings included inventory
liquidation gains of $8.7 million and $6.9 million for the three
months ended March 31, 2022 and 2021,
respectively.
(2)The
use of field level operating earnings is unique to us, not a
substitute for a GAAP measure and may not be comparable to any
similar measures developed by industry participants. We utilize
this data to evaluate the profitability of our
operations.
Field level operating earnings and field level purchase volumes
depict our day-to-day operation of acquiring crude oil at the
wellhead, transporting the product and delivering the product to
market sales point. Field level operating earnings increased during
the three months ended March 31, 2022 as compared to the same
period in 2021 primarily due to higher crude oil prices and volumes
and lower insurance costs, partially offset by higher fuel costs
and driver compensation.
We held crude oil inventory at a weighted average composite price
as follows at the dates indicated (in barrels):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2022 |
|
December 31, 2021 |
|
|
|
Average |
|
|
|
Average |
|
Barrels |
|
Price |
|
Barrels |
|
Price |
|
|
|
|
|
|
|
|
Crude oil inventory |
404,636 |
|
|
$ |
104.02 |
|
|
259,489 |
|
|
$ |
71.86 |
|
Prices received for crude oil have been volatile and unpredictable
with price volatility expected to continue. See “Part I, Item
1A.
Risk Factors”
in our 2021 Form 10-K.
Transportation
Our transportation segment revenues, operating earnings and
selected costs were as follows for the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
|
2022 |
|
2021 |
|
Change
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
$ |
26,690 |
|
|
$ |
21,235 |
|
|
26 |
% |
|
|
|
|
|
|
Operating earnings |
$ |
2,868 |
|
|
$ |
774 |
|
|
271 |
% |
|
|
|
|
|
|
Depreciation and amortization |
$ |
2,957 |
|
|
$ |
3,001 |
|
|
(1 |
%) |
|
|
|
|
|
|
Driver commissions |
$ |
3,765 |
|
|
$ |
3,596 |
|
|
5 |
% |
|
|
|
|
|
|
Insurance |
$ |
2,149 |
|
|
$ |
2,148 |
|
|
— |
% |
|
|
|
|
|
|
Fuel |
$ |
2,802 |
|
|
$ |
1,875 |
|
|
49 |
% |
|
|
|
|
|
|
Maintenance expense |
$ |
1,248 |
|
|
$ |
913 |
|
|
37 |
% |
|
|
|
|
|
|
Mileage (000s) |
6,798 |
|
|
6,932 |
|
|
(2 |
%) |
|
|
|
|
|
|
_______________
(1)Represents
the percentage increase (decrease) from the prior year
period.
Our revenue rate structure includes a component for fuel costs in
which fuel cost fluctuations are largely passed through to the
customer. Revenues, net of fuel costs, were as follows for the
periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
Total transportation revenue |
$ |
26,690 |
|
|
$ |
21,235 |
|
|
|
|
|
Diesel fuel cost |
(2,802) |
|
|
(1,875) |
|
|
|
|
|
Revenues, net of fuel costs
(1)
|
$ |
23,888 |
|
|
$ |
19,360 |
|
|
|
|
|
_______________
(1) Revenues, net of fuel costs, is a non-GAAP financial measure
and is utilized for internal analysis of the results of our
transportation segment.
Transportation revenues increased by $5.5 million during the three
months ended March 31, 2022 as compared to the three months
ended March 31, 2021. Transportation revenues, net of fuel
costs, increased by $4.5 million during the three months ended
March 31, 2022, as compared to the prior year period. These
increases were primarily due to increased transportation rates
during the 2022 period, as we have continued working with our
customers to increase our transportation rates. In addition, as a
result of customer demand, we opened four new terminals during the
second half of 2021. These terminals, located in West Memphis,
Arkansas, Charleston, West Virginia, Augusta, Georgia, and Joliet,
Illinois, increased revenues by approximately $2.1 million during
the first quarter of 2022. In February 2021, a severe winter storm
and resulting power outages affected Texas, which resulted in a
significant decline in transportation services for over a week and
a temporary loss of revenues in the 2021 period.
Our transportation operating earnings increased by $2.1 million for
the three months ended March 31, 2022 as compared to the same
period in 2021, primarily due to increased transportation rates,
higher revenues as a result of increased transportation rates, new
terminals and lower revenues in the 2021 period as a result of a
winter storm and lower depreciation and amortization expense
related to the timing of new assets placed into service, partially
offset by higher maintenance expense, driver commissions and fuel
costs.
Driver commissions increased by $0.2 million during the three
months ended March 31, 2022 as compared to the three months
ended March 31, 2021, primarily due to an increase in driver
pay, partially offset by lower mileage during the 2022
period.
Fuel costs increased by $0.9 million during the three months
ended March 31, 2022 as compared to the same period in 2021,
primarily as a result of an increase in the price of fuel during
the 2022 period. Insurance costs remained constant during the three
months ended March 31, 2022 as compared to the same period in
2021, primarily due to consistent insurance premiums during the
2021 and 2022 periods.
Depreciation and amortization expense was relatively consistent
during the three months ended March 31, 2022 as compared to
the same period in 2021, primarily as a result of the timing of
purchases of new tractors and trailers in 2022 and
2021.
Pipeline and Storage
Our pipeline and storage segment revenues, operating losses and
selected costs were as follows for the period indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2022 |
|
2021 |
|
Change
(1)
|
|
|
|
|
|
|
Segment revenues
(2)
|
$ |
897 |
|
|
$ |
419 |
|
|
114 |
% |
Less: Intersegment revenues
(2)
|
(897) |
|
|
(186) |
|
|
382 |
% |
Revenues |
$ |
— |
|
|
$ |
233 |
|
|
(100 |
%) |
|
|
|
|
|
|
Operating losses |
(822) |
|
|
(565) |
|
|
45 |
% |
Depreciation and amortization |
268 |
|
|
254 |
|
|
6 |
% |
Insurance |
200 |
|
|
210 |
|
|
(5 |
%) |
_______________
(1)Represents
the percentage increase (decrease) from the prior year
period.
(2)Segment
revenues include intersegment revenues from our crude oil marketing
segment, which are eliminated due to consolidation in our unaudited
condensed consolidated statements of operations.
Volume information was as follows for the periods indicated (in
barrels per day):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2022 |
|
2021 |
|
|
|
|
Pipeline throughput |
10,486 |
|
|
2,956 |
|
Terminalling |
10,948 |
|
|
4,912 |
|
During the three months ended March 31, 2022, all pipeline and
storage segment revenues were earned from an affiliated shipper,
while during the three months ended March 31, 2021, pipeline and
storage revenues included revenues from third party shippers.
Revenues earned from an affiliated shipper are eliminated due to
consolidation, with the offset to marketing costs and expenses in
our unaudited condensed consolidated statements of
operations.
We are continuing to focus on opportunities to increase our
pipeline and storage capacity utilization, by identifying
opportunities with our existing and new customers to increase
volumes. In addition, we are exploring new connections for the
pipeline system both upstream and downstream of the pipeline, to
increase the crude oil supply and take-away capability of the
system.
General and Administrative Expense
General and administrative expense increased by $0.6 million during
the three months ended March 31, 2022 as compared to the same
period in 2021, primarily due to higher salaries and wages and
related personnel costs and legal fees, partially offset by lower
outside service costs.
Income Taxes
Provision for (benefit from) income taxes is based upon federal and
state tax rates, and variations in amounts are consistent with
taxable income (loss) in the respective accounting
periods.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”) was enacted and signed into law in
response to the COVID-19 pandemic. The CARES Act, among other
things, permits net operating losses (“NOL”) incurred in tax years
2018, 2019 and 2020 to offset 100 percent of taxable income and be
carried back to each of the five preceding taxable years to
generate a refund of previously paid income taxes.
We have determined that the NOL carryback provision in the CARES
Act would result in a cash benefit to us for the fiscal year 2020.
We have an income tax receivable at March 31, 2022, of
approximately $6.8 million for the benefit of carrying back the NOL
for the fiscal year 2020 to 2015 and 2016. As we are carrying the
losses back to years beginning before January 1, 2018, the
receivable was recorded at the previous 35 percent federal tax rate
rather than the current statutory rate of 21 percent.
Liquidity and Capital Resources
Liquidity
Our primary sources of liquidity are (i) our cash balance, (ii)
cash flow from operating activities, (iii) borrowings under our
$40.0 million credit agreement (“Credit Agreement”) and (iv) funds
received from the sale of equity securities. Our primary cash
requirements include, but are not limited to, (i) ordinary course
of business uses, such as the payment of amounts related to the
purchase of crude oil, and other expenses, (ii) discretionary
capital spending for investments in our business and (iii)
dividends to our shareholders. We believe we will have sufficient
liquidity through our current cash balances, availability under our
Credit Agreement, expected cash generated from future operations,
and the ease of financing tractor and trailer additions through
leasing arrangements (should the need arise) to meet our short-term
and long-term liquidity needs for the reasonably foreseeable
future. Our cash balance and cash flow from operating activities is
dependent on the success of future operations. If our cash inflow
subsides or turns negative, we will evaluate our investment plan
accordingly and remain flexible.
We maintain cash balances in order to meet the timing of day-to-day
cash needs. Cash and cash equivalents (excluding restricted cash)
and working capital, the excess of current assets over current
liabilities, were as follows at the dates indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
Cash and cash equivalents |
$ |
99,295 |
|
|
$ |
97,825 |
|
Working capital |
93,993 |
|
|
87,199 |
|
Our cash balance at March 31, 2022 increased by 2 percent from
December 31, 2021, as discussed further below.
At March 31, 2022, we had $6.1 million of letters of credit
issued under the Credit Agreement at a fee of 1.75 percent per
annum. See Note 2 in the Notes to Unaudited Condensed Consolidated
Financial Statements for further information.
We have in place an At Market Issuance Sales Agreement (“ATM
Agreement”) with B. Riley Securities, Inc., as agent (the “Agent”),
in which we may offer to sell shares of our common stock through or
to the Agent for cash from time to time. We did not sell any shares
of common stock under the ATM Agreement during the first quarter of
2022.
We utilize cash from operations to make discretionary investments
in our crude oil marketing, transportation and pipeline and storage
businesses. With the exception of operating and finance lease
commitments primarily associated with storage tank terminal
arrangements, leased office space, tractors, trailers and other
equipment, and borrowings outstanding under the Credit Agreement,
our future commitments and planned investments can be readily
curtailed if operating cash flows decrease. See “Material Cash
Requirements” below for information regarding our operating and
finance lease obligations.
The most significant item affecting future increases or decreases
in liquidity is earnings from operations, and these earnings are
dependent on the success of future operations. See “Part I, Item
1A.
Risk Factors”
in our 2021 Form 10-K.
Cash Flows from Operating, Investing and Financing
Activities
Our consolidated cash flows from operating, investing and financing
activities were as follows for the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2022 |
|
2021 |
|
|
|
|
Cash provided by (used in): |
|
|
|
Operating activities |
$ |
5,873 |
|
|
$ |
23,001 |
|
Investing activities |
(2,838) |
|
|
835 |
|
Financing activities |
(2,207) |
|
|
(4,539) |
|
Operating activities.
Net cash flows provided by operating activities for the three
months ended March 31, 2022 decreased by $17.1 million as
compared to the same period in 2021. The decrease in net cash flows
from operating activities was primarily due to changes in our
working capital accounts, partially offset by higher earnings in
the current period.
At various times each month, we may make cash prepayments and/or
early payments in advance of the normal due date to certain
suppliers of crude oil within our crude oil marketing operations.
Crude oil supply prepayments are recouped and advanced from month
to month as the suppliers deliver product to us. In addition, in
order to secure crude oil supply, we may also “early pay” our
suppliers in advance of the normal payment due date of the
twentieth of the month following the month of production. These
“early payments” reduce cash and accounts payable as of the balance
sheet date.
We also require certain customers to make similar early payments or
to post cash collateral with us in order to support their purchases
from us. Early payments and cash collateral received from customers
increases cash and reduces accounts receivable as of the balance
sheet date.
Early payments received from customers and prepayments to suppliers
were as follows at the dates indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
Early payments received |
$ |
72,761 |
|
|
$ |
52,841 |
|
Prepayments to suppliers |
31,365 |
|
|
5,732 |
|
We rely heavily on our ability to obtain open-line trade credit
from our suppliers especially with respect to our crude oil
marketing operations. During December 2021 and March 2022, we
received early payments from certain customers in our crude oil
marketing operations as noted in the table above. Our cash balance
increased by approximately $1.5 million as of March 31, 2022
relative to the year ended December 31, 2021 primarily as a result
of the timing of the receipt of these early payments received and
prepayments made to suppliers during each period resulting from an
increase in crude oil marketing activities.
Investing activities.
Net cash flows used in investing activities was $2.8 million for
the three months ended March 31, 2022 as compared to net cash
flows provided by investing activities of $0.8 million for the
three months ended March 31, 2021. The increase in net cash
flows used in investing activities of $3.7 million was primarily
due to an increase of $3.5 million in capital spending for property
and equipment (see following table) and a decrease of $0.1 million
in cash proceeds from the sales of assets.
Capital spending was as follows for the periods indicated (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
March 31, |
|
2022 |
|
2021 |
Crude oil marketing
(1)
|
$ |
3,124 |
|
|
$ |
210 |
|
Transportation
(2)
|
535 |
|
|
(58) |
|
Pipeline and storage
(3)
|
27 |
|
|
10 |
|
Other |
8 |
|
|
8 |
|
Capital spending |
$ |
3,694 |
|
|
$ |
170 |
|
_______________
(1)2022
amount relates to the purchase of 13 tractors and other field
equipment, and the 2021 amount primarily relates to the purchase of
field equipment.
(2)2022
amount relates to the purchase of three tractors and other field
equipment. During the three months ended March 31, 2021, we
received a refund of approximately $0.3 million for amounts
previously spent in our transportation segment, which has been
reflected as a reduction in property and equipment additions. The
remaining 2021 amount relates to the purchase of two trailers and
computer software and equipment.
(3)2022
amount relates to the purchase of field equipment.
Financing activities.
Net cash used in financing activities for the three months ended
March 31, 2022 decreased by $2.3 million as compared to the
same period in 2021. The decrease was primarily due to the payment
in the 2021 period of the first $2.5 million installment related to
the purchase of the VEX pipeline in October 2020, the full amount
of which was repaid in May 2021, and an increase of $0.1 million in
principal repayments made for finance lease obligations. See
“Material Cash Requirements” below for further information
regarding our finance leases. During each of the three months ended
March 31, 2022 and 2021, we paid cash dividends of $0.24 per
common share, or a total of $1.1 million.
Material Cash Requirements
The following table summarizes our contractual obligations with
material cash requirements at March 31, 2022 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
Contractual Obligations |
|
Total |
|
Less than 1 year |
|
1-3 years |
|
3-5 years |
|
More than 5 years |
|
|
|
|
|
|
|
|
|
|
|
Finance lease obligations
(1)
|
|
$ |
12,785 |
|
|
$ |
3,545 |
|
|
$ |
5,246 |
|
|
$ |
3,994 |
|
|
$ |
— |
|
Operating lease obligations
(2)
|
|
7,096 |
|
|
2,458 |
|
|
3,556 |
|
|
681 |
|
|
401 |
|
Purchase obligations
(3)
|
|
16,069 |
|
|
16,069 |
|
|
— |
|
|
— |
|
|
— |
|
Total contractual obligations |
|
$ |
35,950 |
|
|
$ |
22,072 |
|
|
$ |
8,802 |
|
|
$ |
4,675 |
|
|
$ |
401 |
|
_______________
(1)Amounts
represent our principal contractual commitments, including
interest, outstanding under finance leases for certain tractors,
trailers, tank storage and throughput arrangements and other
equipment.
(2)Amounts
represent rental obligations under non-cancelable operating leases
and terminal arrangements with terms in excess of one
year.
(3)Amount
represents commitments to purchase 35 new tractors and 40 new
trailers in our transportation business and 39 new tractors and two
new trailers in our crude oil marketing business.
See Note 13 in the Notes to Unaudited Condensed Consolidated
Financial Statements for further information regarding our finance
and operating leases.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are
reasonably expected to have a material current or future effect on
our financial position, results of operations or cash
flows.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see
Note 2 in the Notes to Unaudited Condensed Consolidated Financial
Statements.
Related Party Transactions
For more information regarding related party transactions, see Note
8 in the Notes to Unaudited Condensed Consolidated Financial
Statements.
Critical Accounting Policies and Use of Estimates
A discussion of our critical accounting policies and estimates is
included in our 2021 Form 10-K. Certain of these accounting
policies require the use of estimates. There have been no material
changes to our accounting policies since the disclosures provided
in our 2021 Form 10-K.
Item 3.
Quantitative and Qualitative Disclosures About Market
Risk
There have been no other material changes to our “Quantitative and
Qualitative Disclosures about Market Risk” that have occurred since
the disclosures provided in our 2021 Form 10-K.
Item 4.
Controls and Procedures
As of the end of the period covered by this quarterly report, our
management carried out an evaluation, with the participation of our
Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures pursuant to
Rule 13a-15 and 15d-15(e) of the Exchange Act. Based on this
evaluation, as of the end of the period covered by this quarterly
report, our Chief Executive Officer and our Chief Financial Officer
concluded:
(i)that
our disclosure controls and procedures are designed to ensure that
information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including our principal executive
and financial officers, as appropriate to allow for timely
decisions regarding required disclosures; and
(ii)that
our disclosure controls and procedures are effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting (as defined in Rule 13a-15(f) and 15d-15(e) under the
Exchange Act) during the fiscal quarter ended March 31, 2022,
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
From time to time as incidental to our operations, we may become
involved in various lawsuits and/or disputes. Primarily as an
operator of an extensive trucking fleet, we are a party to motor
vehicle accidents, worker compensation claims and other items of
general liability as would be typical for the industry. We are
presently unaware of any claims against us that are either outside
the scope of insurance coverage or that may exceed the level of
insurance coverage and could potentially represent a material
adverse effect on our financial position or results of
operations.
Item 1A.
Risk Factors
In addition to the other information set forth in this Quarterly
Report, you should carefully consider the risk factors and other
cautionary statements described under the heading “Item 1A.
Risk Factors”
included in our 2021 Form 10-K and the risk factors and other
cautionary statements contained in our other SEC filings, which
could materially affect our businesses, financial condition or
future results. Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial also may
materially adversely affect our business, financial condition or
future results. There have been no material changes in our Risk
Factors from those disclosed in Item 1A of our 2021 Form 10-K or
our other SEC filings.
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item 3.
Defaults Upon Senior Securities
None.
Item 4.
Mine Safety Disclosures
Not applicable.
Item 5.
Other Information
None.
Item 6.
Exhibits
|
|
|
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
|
3.1 |
|
|
3.2 |
|
|
10.1+* |
|
|
31.1*
|
|
|
31.2*
|
|
|
32.1*
|
|
|
32.2*
|
|
|
101.CAL*
|
|
Inline XBRL Calculation Linkbase Document |
101.DEF*
|
|
Inline XBRL Definition Linkbase Document |
101.INS*
|
|
Inline XBRL Instance Document — the instance document does not
appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document. |
101.LAB*
|
|
Inline XBRL Labels Linkbase Document |
101.PRE*
|
|
Inline XBRL Presentation Linkbase Document |
101.SCH*
|
|
Inline XBRL Schema Document |
104* |
|
Cover Page Interactive Data File (formatted as inline XBRL and
contained in Exhibit 101) |
____________
* Filed or furnished (in the case of Exhibits 32.1 and 32.2) with
this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly
authorized.
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|
ADAMS RESOURCES & ENERGY, INC. |
|
|
|
(Registrant) |
|
|
|
|
|
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|
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|
Date: |
May 16, 2022 |
By: |
/s/ Kevin J. Roycraft |
|
|
|
Kevin J. Roycraft |
|
|
|
Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
By: |
/s/ Tracy E. Ohmart |
|
|
|
Tracy E. Ohmart |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer and Principal |
|
|
|
Accounting Officer) |
Adams Resources and Energy (AMEX:AE)
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Adams Resources and Energy (AMEX:AE)
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