Table of Contents

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 ~~September 30, 2022~~March 31, 2023

☐ 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)


Delaware						74-1753147
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)


17 South Briar Hollow Lane, Suite 100 Houston, Texas 77027
(Address of Principal Executive Offices, including Zip Code)

(713) 881-3600

(Registrant’s Telephone Number, including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.10 Par Value

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.

Large accelerated filer

☐

Accelerated filer

☐☑

Non-accelerated filer

☑☐

Smaller reporting company

☑

Emerging growth company

☐

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 ~~2,452,404~~2,534,685 shares of Common Stock were outstanding at ~~November~~May 1, ~~2022.~~2023.

Table of Contents

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets	2
	Unaudited Condensed Consolidated Statements of Operations	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity	5
	Notes to Unaudited Condensed Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3227
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4538
Item 4.	Controls and Procedures	4538

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4539
Item 1A.	Risk Factors	4539
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4639
Item 3.	Defaults Upon Senior Securities	4639
Item 4.	Mine Safety Disclosures	4639
Item 5.	Other Information	4639
Item 6.	Exhibits	4640

Signatures		4841

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)


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	86,510	$	97,825	Cash and cash equivalents	$	42,135	$	20,532
Restricted cash	Restricted cash	7,404		9,492		Restricted cash	8,847		10,535
Accounts receivable, net of allowance for doubtful	Accounts receivable, net of allowance for doubtful					Accounts receivable, net of allowance for doubtful
accounts of $88 and $108, respectively		198,790		137,789
Accounts receivable – related party		5		2
accounts of $85 and $88, respectively						accounts of $85 and $88, respectively	158,126		189,039

Inventory	Inventory	29,844		18,942		Inventory	22,275		26,919
Derivative assets	Derivative assets	2,036		347		Derivative assets	157		—
Income tax receivable		—		6,424

Prepayments and other current assets	Prepayments and other current assets	2,058		2,389		Prepayments and other current assets	3,028		3,118
Total current assets	Total current assets	326,647		273,210		Total current assets	234,568		250,143
Property and equipment, net	Property and equipment, net	107,991		88,036		Property and equipment, net	110,264		106,425
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	7,906		7,113		Operating lease right-of-use assets, net	7,414		7,720
Intangible assets, net	Intangible assets, net	10,379		3,317		Intangible assets, net	9,294		9,745
Goodwill	Goodwill	5,755		—		Goodwill	6,428		6,428
Other assets	Other assets	3,445		3,027		Other assets	3,595		3,698
Total assets	Total assets	$	462,123	$	374,703	Total assets	$	371,563	$	384,159

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	217,123	$	168,224	Accounts payable	$	191,704	$	204,391
Accounts payable – related party	Accounts payable – related party	20		—		Accounts payable – related party	—		31
Derivative liabilities	Derivative liabilities	129		324		Derivative liabilities	—		330
Current portion of finance lease obligations	Current portion of finance lease obligations	4,263		3,663		Current portion of finance lease obligations	5,221		4,382
Current portion of operating lease liabilities	Current portion of operating lease liabilities	2,724		2,178		Current portion of operating lease liabilities	2,821		2,712
Current portion of long-term debt						Current portion of long-term debt	2,500		—
Other current liabilities	Other current liabilities	20,972		11,622		Other current liabilities	16,627		19,214
Total current liabilities	Total current liabilities	245,231		186,011		Total current liabilities	218,873		231,060
Other long-term liabilities:	Other long-term liabilities:					Other long-term liabilities:
Long-term debt	Long-term debt	15,000		—		Long-term debt	21,250		24,375
Asset retirement obligations	Asset retirement obligations	2,474		2,376		Asset retirement obligations	2,434		2,459
Finance lease obligations	Finance lease obligations	9,934		9,672		Finance lease obligations	18,677		12,085
Operating lease liabilities	Operating lease liabilities	5,179		4,938		Operating lease liabilities	4,595		5,007
Deferred taxes and other liabilities	Deferred taxes and other liabilities	15,054		11,320		Deferred taxes and other liabilities	14,579		15,996
Total liabilities	Total liabilities	292,872		214,317		Total liabilities	280,408		290,982

Commitments and contingencies (Note 16)	Commitments and contingencies (Note 16)					Commitments and contingencies (Note 16)

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock – $1.00 par value, 960,000 shares	Preferred stock – $1.00 par value, 960,000 shares					Preferred stock – $1.00 par value, 960,000 shares
authorized, none outstanding	authorized, none outstanding	—		—		authorized, none outstanding	—		—
Common stock – $0.10 par value, 7,500,000 shares	Common stock – $0.10 par value, 7,500,000 shares					Common stock – $0.10 par value, 7,500,000 shares
authorized, 4,394,837 and 4,355,001 shares outstanding, respectively		438		433
authorized, 2,534,685 and 2,495,484 shares outstanding, respectively						authorized, 2,534,685 and 2,495,484 shares outstanding, respectively	252		248
Contributed capital	Contributed capital	18,218		16,913		Contributed capital	20,571		19,965
Retained earnings	Retained earnings	150,595		143,040		Retained earnings	70,332		72,964
Total shareholders’ equity	Total shareholders’ equity	169,251		160,386		Total shareholders’ equity	91,155		93,177
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	462,123	$	374,703	Total liabilities and shareholders’ equity	$	371,563	$	384,159

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022
Revenues:	Revenues:									Revenues:
Marketing	Marketing	$	814,394	$	543,228	$	2,524,465	$	1,310,343	Marketing	$	608,476	$	747,555
Transportation	Transportation	29,830		24,826		86,054		69,558		Transportation	26,445		26,690
Pipeline and storage	Pipeline and storage	—		127		—		515		Pipeline and storage	—		—
Logistics and repurposing	Logistics and repurposing	8,677		—		8,677		—		Logistics and repurposing	15,241		—
Total revenues	Total revenues	852,901		568,181		2,619,196		1,380,416		Total revenues	650,162		774,245

Costs and expenses:	Costs and expenses:									Costs and expenses:
Marketing	Marketing	807,316		537,362		2,498,474		1,285,650		Marketing	604,494		735,647
Transportation	Transportation	23,732		19,605		68,271		56,143		Transportation	22,413		20,865
Pipeline and storage	Pipeline and storage	640		562		1,799		1,594		Pipeline and storage	938		554
Logistics and repurposing	Logistics and repurposing	7,582		—		7,582		—		Logistics and repurposing	13,125		—
General and administrative	General and administrative	4,630		3,502		12,860		9,839		General and administrative	4,772		4,018
Depreciation and amortization	Depreciation and amortization	6,008		4,849		16,109		14,703		Depreciation and amortization	7,050		5,013
Total costs and expenses	Total costs and expenses	849,908		565,880		2,605,095		1,367,929		Total costs and expenses	652,792		766,097

Operating earnings		2,993		2,301		14,101		12,487
Operating (losses) earnings										Operating (losses) earnings	(2,630)		8,148

Other income (expense):	Other income (expense):									Other income (expense):
Interest and other income	Interest and other income	338		37		665		233		Interest and other income	204		24
Interest expense	Interest expense	(119)		(178)		(369)		(602)		Interest expense	(696)		(114)
Total other income (expense), net		219		(141)		296		(369)
Total other (expense) income, net										Total other (expense) income, net	(492)		(90)

Earnings before income taxes		3,212		2,160		14,397		12,118
Income tax provision		(1,022)		(614)		(3,641)		(3,055)
(Losses) Earnings before income taxes										(Losses) Earnings before income taxes	(3,122)		8,058
Income tax benefit (provision)										Income tax benefit (provision)	1,123		(1,968)

Net earnings		$	2,190	$	1,546	$	10,756	$	9,063
Net (losses) earnings										Net (losses) earnings	$	(1,999)	$	6,090

Earnings per share:
Basic net earnings per common share		$	0.50	$	0.36	$	2.46	$	2.13
Diluted net earnings per common share		$	0.50	$	0.36	$	2.44	$	2.12
(Losses) Earnings per share:										(Losses) Earnings per share:
Basic net (losses) earnings per common share										Basic net (losses) earnings per common share	$	(0.79)	$	1.40
Diluted net (losses) earnings per common share										Diluted net (losses) earnings per common share	$	(0.79)	$	1.39

Dividends per common share	Dividends per common share	$	0.24	$	0.24	$	0.72	$	0.72	Dividends per common share	$	0.24	$	0.24

See Notes to Unaudited Condensed Consolidated Financial Statements.

Table of Contents

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2022		2021			2023		2022
Operating activities:	Operating activities:					Operating activities:
Net earnings		$	10,756	$	9,063
Adjustments to reconcile net earnings to net cash
Net (losses) earnings						Net (losses) earnings	$	(1,999)	$	6,090
Adjustments to reconcile net (losses) earnings to net cash						Adjustments to reconcile net (losses) earnings to net cash
provided by operating activities:	provided by operating activities:					provided by operating activities:
Depreciation and amortization	Depreciation and amortization	16,109		14,703		Depreciation and amortization	7,050		5,013
Gains on sales of property	Gains on sales of property	(1,709)		(532)		Gains on sales of property	(31)		(491)
Provision for doubtful accounts	Provision for doubtful accounts	(20)		(3)		Provision for doubtful accounts	(3)		(5)
Stock-based compensation expense	Stock-based compensation expense	712		641		Stock-based compensation expense	283		195
Deferred income taxes	Deferred income taxes	(1,761)		(1,664)		Deferred income taxes	(1,424)		561
Net change in fair value contracts	Net change in fair value contracts	(1,884)		(32)		Net change in fair value contracts	(487)		(20)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(56,060)		(30,367)		Accounts receivable	30,916		(74,660)
Accounts receivable/payable, affiliates	Accounts receivable/payable, affiliates	17		(5)		Accounts receivable/payable, affiliates	(31)		48
Inventories	Inventories	(10,259)		(5,026)		Inventories	4,644		(23,440)
Income tax receivable	Income tax receivable	6,424		7,099		Income tax receivable	—		1,284
Prepayments and other current assets	Prepayments and other current assets	468		1,455		Prepayments and other current assets	90		684
Accounts payable	Accounts payable	46,925		68,766		Accounts payable	(12,653)		91,211
Accrued liabilities	Accrued liabilities	6,489		770		Accrued liabilities	(2,514)		(775)
Other	Other	(375)		(636)		Other	(134)		178
Net cash provided by operating activities	Net cash provided by operating activities	15,832		64,232		Net cash provided by operating activities	23,707		5,873

Investing activities:	Investing activities:					Investing activities:
Property and equipment additions	Property and equipment additions	(6,797)		(9,929)		Property and equipment additions	(1,900)		(3,694)
Acquisition of Firebird and Phoenix, net of cash acquired		(33,590)		—

Proceeds from property sales	Proceeds from property sales	2,209		1,886		Proceeds from property sales	441		856
Insurance and state collateral refunds		331		—

Net cash used in investing activities	Net cash used in investing activities	(37,847)		(8,043)		Net cash used in investing activities	(1,459)		(2,838)

Financing activities:	Financing activities:					Financing activities:
Borrowings under Credit Agreement	Borrowings under Credit Agreement	45,000		8,000		Borrowings under Credit Agreement	18,000		—
Repayments under Credit Agreement	Repayments under Credit Agreement	(30,000)		—		Repayments under Credit Agreement	(18,625)		—
Principal repayments of finance lease obligations	Principal repayments of finance lease obligations	(3,491)		(3,240)		Principal repayments of finance lease obligations	(1,576)		(1,139)
Payment for financed portion of VEX acquisition		—		(10,000)

Net proceeds from sale of equity	Net proceeds from sale of equity	283		2,504		Net proceeds from sale of equity	549		—
Dividends paid on common stock	Dividends paid on common stock	(3,180)		(3,096)		Dividends paid on common stock	(681)		(1,068)
Net cash provided by (used in) financing activities		8,612		(5,832)
Net cash used in financing activities						Net cash used in financing activities	(2,333)		(2,207)

(Decrease) Increase in cash and cash equivalents, including restricted cash		(13,403)		50,357
Increase in cash and cash equivalents, including restricted cash						Increase in cash and cash equivalents, including restricted cash	19,915		828
Cash and cash equivalents, including restricted cash, at beginning of period	Cash and cash equivalents, including restricted cash, at beginning of period	107,317		52,065		Cash and cash equivalents, including restricted cash, at beginning of period	31,067		107,317
Cash and cash equivalents, including restricted cash, at end of period	Cash and cash equivalents, including restricted cash, at end of period	$	93,914	$	102,422	Cash and cash equivalents, including restricted cash, at end of period	$	50,982	$	108,145

See Notes to Unaudited Condensed Consolidated Financial Statements.

Table of Contents

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except per share data)


								Total									Total
		Common		Contributed		Retained		Shareholders’			Common		Contributed		Retained		Shareholders’
		Stock		Capital		Earnings		Equity			Stock		Capital		Earnings		Equity

Balance, January 1, 2022		$	433	$	16,913	$	143,040	$	160,386
Net earnings		—		—		6,090		6,090
Balance, January 1, 2023										Balance, January 1, 2023	$	248	$	19,965	$	72,964	$	93,177
Net losses										Net losses	—		—		(1,999)		(1,999)
Stock-based compensation expense	Stock-based compensation expense	—		195		—		195		Stock-based compensation expense	—		283		—		283
Vesting of restricted awards	Vesting of restricted awards	2		(2)		—		—		Vesting of restricted awards	3		(3)		—		—
Cancellation of shares withheld to cover	Cancellation of shares withheld to cover									Cancellation of shares withheld to cover
taxes upon vesting of restricted awards	taxes upon vesting of restricted awards	—		(86)		—		(86)		taxes upon vesting of restricted awards	—		(222)		—		(222)
Shares sold under at-the-market										Shares sold under at-the-market
offering program										offering program	1		548		—		549
Dividends declared:	Dividends declared:									Dividends declared:
Common stock, $0.24/share	Common stock, $0.24/share	—		—		(1,048)		(1,048)		Common stock, $0.24/share	—		—		(608)		(608)
Awards under LTIP, $0.24/share	Awards under LTIP, $0.24/share	—		—		(16)		(16)		Awards under LTIP, $0.24/share	—		—		(25)		(25)
Balance, March 31, 2022		435		17,020		148,066		165,521
Net earnings		—		—		2,476		2,476
Stock-based compensation expense		—		263		—		263

Cancellation of shares withheld to cover
taxes upon vesting of restricted awards		—		(24)		—		(24)
Shares sold at the market		1		282		—		283
Dividends declared:
Common stock, $0.24/share		—		—		(1,049)		(1,049)
Awards under LTIP, $0.24/share		—		—		(18)		(18)
Balance, June 30, 2022		436		17,541		149,475		167,452
Net earnings		—		—		2,190		2,190
Stock-based compensation expense		—		254		—		254
Issuance of common shares for acquisition		2		423		—		425
Balance, March 31, 2023										Balance, March 31, 2023	$	252	$	20,571	$	70,332	$	91,155

Dividends declared:
Common stock, $0.24/share		—		—		(1,054)		(1,054)
Awards under LTIP, $0.24/share		—		—		(16)		(16)
Balance, September 30, 2022		$	438	$	18,218	$	150,595	$	169,251

~~Table of Contents~~

~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~

~~(In thousands, except per share data)~~


								Total									Total
		Common		Contributed		Retained		Shareholders’			Common		Contributed		Retained		Shareholders’
		Stock		Capital		Earnings		Equity			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
Balance, January 1, 2022										Balance, January 1, 2022	$	433	$	16,913	$	143,040	$	160,386
Net earnings	Net earnings	—		—		4,709		4,709		Net earnings	—		—		6,090		6,090
Stock-based compensation expense	Stock-based compensation expense	—		232		—		232		Stock-based compensation expense	—		195		—		195
Vesting of restricted awards	Vesting of restricted awards	1		(1)		—		—		Vesting of restricted awards	2		(2)		—		—
Cancellation of shares withheld to cover	Cancellation of shares withheld to cover									Cancellation of shares withheld to cover
taxes upon vesting of restricted awards	taxes upon vesting of restricted awards	—		(70)		—		(70)		taxes upon vesting of restricted awards	—		(86)		—		(86)
Dividends declared:	Dividends declared:									Dividends declared:
Common stock, $0.24/share	Common stock, $0.24/share	—		—		(1,021)		(1,021)		Common stock, $0.24/share	—		—		(1,048)		(1,048)
Awards under LTIP, $0.24/share	Awards under LTIP, $0.24/share	—		—		(16)		(16)		Awards under LTIP, $0.24/share	—		—		(16)		(16)
Balance, June 30, 2021		424		13,655		140,772		154,851
Net earnings		—		—		1,546		1,546
Stock-based compensation expense		—		224		—		224
Shares sold at the market		8		2,496		—		2,504
Dividends declared:
Common stock, $0.24/share		—		—		(1,027)		(1,027)
Awards under LTIP, $0.24/share		—		—		(16)		(16)
Balance, September 30, 2021		$	432	$	16,375	$	141,275	$	158,082
Balance, March 31, 2022										Balance, March 31, 2022	$	435	$	17,020	$	148,066	$	165,521

See Notes to Unaudited Condensed Consolidated Financial Statements.

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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, truck and pipeline transportation of crude oil, terminalling and storage in various crude oil and natural gas basins in the lower 48 states of the United States (“U.S.”). ~~We also~~In addition, we 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 twenty terminals across the U.S. We also recycle and repurpose off-specification fuels, lubricants, crude oil and other chemicals from producers in the U.S. Unless the context requires otherwise, references to “we,” “us,” “our,” “Adams” or the “Company” are intended to mean the business and operations of Adams Resources & Energy, Inc. and its consolidated subsidiaries.

On August 12, 2022, we completed our acquisition of all of the equity interests of Firebird Bulk Carriers, Inc. (“Firebird”) and Phoenix Oil, Inc. (“Phoenix”). The condensed consolidated financial statements prior to August 12, 2022 reflect only the historical results of Adams. The condensed consolidated financial statements since the completion of the Firebird and Phoenix acquisition have included the results of Firebird and Phoenix using the acquisition method of accounting. See Note 6 for further information regarding the acquisition.

We operate and report in four business segments: (i) crude oil marketing, transportation and storage; (ii) tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk; (iii) pipeline transportation, terminalling and storage of crude oil; and (iv) ~~beginning in the third quarter of 2022,~~ interstate bulk transportation logistics of crude oil, condensate, fuels, oils and other petroleum products and recycling and repurposing of off-specification fuels, lubricants, crude oil and other ~~chemicals, which includes the businesses we acquired in August 2022 (see Note 6 for further information regarding our business acquisition).~~chemicals. See Note 8 for further information regarding our business segments.

Basis of Presentation

Our results of operations for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 are not necessarily indicative of results expected for the full year of ~~2022.~~2023. 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~~2022 (the ~~“2021~~“2022 Form 10-K”) filed with the SEC on March ~~9, 2022.~~16, 2023. 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.

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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):


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022

Cash and cash equivalents	Cash and cash equivalents	$	86,510	$	97,825	Cash and cash equivalents	$	42,135	$	20,532
Restricted cash:	Restricted cash:					Restricted cash:

Collateral for outstanding letters of credit (1)						Collateral for outstanding letters of credit (1)	357		892
Captive insurance subsidiary ~~(1)~~(2)	Captive insurance subsidiary ~~(1)~~(2)	7,404		9,492		Captive insurance subsidiary ~~(1)~~(2)	8,490		9,643
Total cash, cash equivalents and restricted cash shown in the	Total cash, cash equivalents and restricted cash shown in the					Total cash, cash equivalents and restricted cash shown in the
unaudited condensed consolidated statements of cash flows	unaudited condensed consolidated statements of cash flows	$	93,914	$	107,317	unaudited condensed consolidated statements of cash flows	$	50,982	$	31,067

_____________

(1)Represents amounts that are held in a segregated bank account by Wells Fargo Bank as collateral for an outstanding letter of credit.

(2)$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~~2023						~~4,355,001~~2,495,484
Vesting of restricted stock unit awards (see Note 13)						~~15,966~~
~~Shares withheld to cover taxes upon vesting of restricted stock unit awards~~						~~(3,101)~~
~~Balance, March 31, 2022~~						~~4,367,866~~
~~Vesting of restricted stock unit awards (see Note 13)~~						~~2,953~~

~~Shares withheld to cover taxes upon vesting of restricted stock unit awards~~						~~(705)~~
~~Shares sold at the market~~						~~8,202~~
~~Balance, June 30, 2022~~						~~4,378,316~~
~~Issuance of shares in acquisition (see Note 6)~~						~~15,259~~
~~Vesting of restricted stock unit awards (see Note 13)~~						~~973~~20,291
Vesting of performance share unit awards (see Note 13)						~~289~~12,319
~~Balance, September 30, 2022~~ Shares withheld to cover taxes upon vesting of equity awards~~(1)~~						~~4,394,837~~ (8,089)
Shares sold under at-the-market offering program						14,680
Balance, March 31, 2023						2,534,685

~~_____________~~

~~(1)On October 31, 2022, we repurchased 1,942,433 of our common shares. See Note 17 for further information.~~

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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 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, as amended and restated (“2018 LTIP”), or granted as employment inducement awards outside of the 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 13 for further discussion).

~~A reconciliation~~

Table of ~~the~~Contents

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The calculation of basic and diluted (losses) earnings per share was as follows for the periods indicated (in thousands, except per share data):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022
Earnings per share — numerator:
Net earnings		$	2,190	$	1,546	$	10,756	$	9,063
(Losses) Earnings per share — numerator:										(Losses) Earnings per share — numerator:
Net (losses) earnings										Net (losses) earnings	$	(1,999)	$	6,090

Denominator:	Denominator:									Denominator:
Basic weighted average number of shares outstanding	Basic weighted average number of shares outstanding	4,387		4,274		4,373		4,258		Basic weighted average number of shares outstanding	2,517		4,359

Basic earnings per share		$	0.50	$	0.36	$	2.46	$	2.13
Basic (losses) earnings per share										Basic (losses) earnings per share	$	(0.79)	$	1.40

Diluted earnings per share:
Diluted (losses) earnings per share:										Diluted (losses) earnings per share:
Diluted weighted average number of shares outstanding:	Diluted weighted average number of shares outstanding:									Diluted weighted average number of shares outstanding:
Common shares	Common shares	4,387		4,274		4,373		4,258		Common shares	2,517		4,359
Restricted stock unit awards(1)	Restricted stock unit awards(1)	20		17		21		16		Restricted stock unit awards(1)	—		24
Performance share unit awards (1)		13		6		12		6
Performance share unit awards (1) (2)										Performance share unit awards (1) (2)	—		11
Total diluted shares	Total diluted shares	4,420		4,297		4,406		4,280		Total diluted shares	2,517		4,394

Diluted earnings per share		$	0.50	$	0.36	$	2.44	$	2.12
Diluted (losses) earnings per share										Diluted (losses) earnings per share	$	(0.79)	$	1.39

_______________

(1)For the three months ended March 31, 2023, the effect of the restricted stock unit awards and the performance share unit awards on losses per share was anti-dilutive.

(2)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.

Equity At-The-Market Offerings

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we received net proceeds of approximately ~~$0.3~~$0.6 million (net of offering costs to B. Riley Securities, Inc. of ~~$14~~$27 thousand) from the sale of ~~8,202~~14,680 of our common shares at an average price per share of approximately ~~$37.38~~$40.74 in at-the-market offerings under our At Market Issuance Sales Agreement with B. Riley Securities, Inc. dated December 23, 2020. ~~No shares were sold during the three months ended September 30, 2022.~~

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. The fair value of the term loan under our credit agreement (see Note 11 for further information) is representative of the carrying value based upon the variable terms and management’s opinion that the current rates available to us with the same maturity and security structure are equivalent to that of the debt.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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.

~~See Note 6 for a discussion~~

Table of ~~the Level 3 inputs used in the determination of the fair value of the intangible assets acquired and the contingent consideration issued in a business combination that occurred in August 2022.~~Contents

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 12 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.

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, permitted 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 carried back our NOL for fiscal year 2020 to fiscal years 2015 and 2016, and in June 2022, we received a cash refund of approximately $6.8 million.

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 and nine months ended September 30, 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.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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 13 for additional information regarding our 2018 LTIP.

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Note 3. Revenue Recognition

Revenue Disaggregation

The following table disaggregates our revenue by segment and by major source for the periods indicated (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022
Crude Oil Marketing:	Crude Oil Marketing:									Crude Oil Marketing:
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Goods transferred at a point in time	Goods transferred at a point in time	$	802,707	$	535,166	$	2,491,066	$	1,285,461	Goods transferred at a point in time	$	588,089	$	736,034
Services transferred over time	Services transferred over time	—		—		—		—		Services transferred over time	44		—
Total revenues from contracts with customers	Total revenues from contracts with customers	802,707		535,166		2,491,066		1,285,461		Total revenues from contracts with customers	588,133		736,034
Other (1)	Other (1)	11,687		8,062		33,399		24,882		Other (1)	20,343		11,521
Total crude oil marketing revenue	Total crude oil marketing revenue	$	814,394	$	543,228	$	2,524,465	$	1,310,343	Total crude oil marketing revenue	$	608,476	$	747,555

Transportation:	Transportation:									Transportation:
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Goods transferred at a point in time	Goods transferred at a point in time	$	—	$	—	$	—	$	—	Goods transferred at a point in time	$	—	$	—
Services transferred over time	Services transferred over time	29,830		24,826		86,054		69,558		Services transferred over time	26,445		26,690
Total revenues from contracts with customers	Total revenues from contracts with customers	29,830		24,826		86,054		69,558		Total revenues from contracts with customers	26,445		26,690
Other	Other	—		—		—		—		Other	—		—
Total transportation revenue	Total transportation revenue	$	29,830	$	24,826	$	86,054	$	69,558	Total transportation revenue	$	26,445	$	26,690

Pipeline and storage:(2)	Pipeline and storage:(2)									Pipeline and storage:(2)
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Goods transferred at a point in time	Goods transferred at a point in time	$	—	$	—	$	—	$	—	Goods transferred at a point in time	$	—	$	—
Services transferred over time	Services transferred over time	—		127		—		515		Services transferred over time	—		—
Total revenues from contracts with customers	Total revenues from contracts with customers	—		127		—		515		Total revenues from contracts with customers	—		—
Other	Other	—		—		—		—		Other	—		—
Total pipeline and storage revenue	Total pipeline and storage revenue	$	—	$	127	$	—	$	515	Total pipeline and storage revenue	$	—	$	—

Logistics and repurposing: ~~(2)~~	Logistics and repurposing: ~~(2)~~									Logistics and repurposing: ~~(2)~~
Revenue from contracts with customers:	Revenue from contracts with customers:									Revenue from contracts with customers:
Goods transferred at a point in time (3)		$	4,178	$	—	$	4,178	$	—
Services transferred over time (4)		4,499		—		4,499		—
Goods transferred at a point in time										Goods transferred at a point in time	$	8,154	$	—
Services transferred over time										Services transferred over time	7,087		—
Total revenues from contracts with customers	Total revenues from contracts with customers	8,677		—		8,677		—		Total revenues from contracts with customers	15,241		—
Other	Other	—		—		—		—		Other	—		—
Total logistics and repurposing revenue	Total logistics and repurposing revenue	$	8,677	$	—	$	8,677	$	—	Total logistics and repurposing revenue	$	15,241	$	—

Subtotal:	Subtotal:									Subtotal:
Total revenues from contracts with customers	Total revenues from contracts with customers	$	841,214	$	560,119	$	2,585,797	$	1,355,534	Total revenues from contracts with customers	$	629,819	$	762,724
Total other (1)	Total other (1)	11,687		8,062		33,399		24,882		Total other (1)	20,343		11,521
Total consolidated revenues	Total consolidated revenues	$	852,901	$	568,181	$	2,619,196	$	1,380,416	Total consolidated revenues	$	650,162	$	774,245

_______________

(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.

(2)~~On August 12,~~All pipeline and storage revenue during the three months ended March 31, 2023 and 2022 ~~we acquired a transportation logistics~~was from an affiliated shipper, GulfMark Energy, Inc., our subsidiary, and ~~recycling and repurposing business, resulting~~was eliminated in ~~a new operating segment. See Note 6 and Note 9 for further information.~~consolidation.

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~~(3)Revenues from the transportation of petroleum products are earned over time as the performance obligation is satisfied.~~

~~(4)Revenues from the sale of petroleum products are earned at a point in time when control of the product transfers to the customer and the performance obligation is satisfied.~~

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 unaudited condensed 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 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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenue gross-up $ 430,244 $ 201,704 $ 1,156,711 $ 526,082


	Three Months Ended
	March 31,
	2023		2022

Revenue gross-up	$	286,702	$	307,386

Note 4. Prepayments and Other Current Assets

The components of prepayments and other current assets were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022

Insurance premiums	Insurance premiums	$	344	$	641	Insurance premiums	$	1,060	$	1,220
Vendor prepayment		—		602

Rents, licenses and other	Rents, licenses and other	1,714		1,146		Rents, licenses and other	1,968		1,898
Total prepayments and other current assets	Total prepayments and other current assets	$	2,058	$	2,389	Total prepayments and other current assets	$	3,028	$	3,118

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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						Estimated
		Useful Life	September 30,		December 31,			Useful Life	March 31,		December 31,
		in Years	2022		2021			in Years	2023		2022

Tractors and trailers	Tractors and trailers	5 – 6	$	131,214	$	106,558	Tractors and trailers	5 – 6	$	126,789	$	128,223
Field equipment	Field equipment	2 – 5	24,489		22,851		Field equipment	2 – 5	24,725		24,676
Finance lease ROU assets (1)	Finance lease ROU assets (1)	3 – 6	21,583		22,349		Finance lease ROU assets (1)	3 – 6	34,113		25,106
Pipeline and related facilities	Pipeline and related facilities	20 – 25	20,362		20,336		Pipeline and related facilities	20 – 25	20,362		20,362
Linefill and base gas (2)	Linefill and base gas (2)	N/A	3,922		3,922		Linefill and base gas (2)	N/A	3,922		3,922
Buildings	Buildings	5 – 39	16,163		16,163		Buildings	5 – 39	16,189		16,163
Office equipment	Office equipment	2 – 5	2,928		2,060		Office equipment	2 – 5	2,964		2,937
Land	Land	N/A	2,309		2,008		Land	N/A	2,309		2,309
Construction in progress	Construction in progress	N/A	1,617		3,396		Construction in progress	N/A	4,284		3,629
Total	Total		224,587		199,643		Total		235,657		227,327
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization		(116,596)		(111,607)		Less accumulated depreciation and amortization		(125,393)		(120,902)
Property and equipment, net	Property and equipment, net		$	107,991	$	88,036	Property and equipment, net		$	110,264	$	106,425

_______________

(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 15 for further information). Accumulated amortization of the assets presented as “Finance lease ROU assets” was ~~$8.4~~$11.6 million and ~~$9.8~~$9.9 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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.

Components of depreciation and amortization expense were as follows for the periods indicated (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022

Depreciation and amortization, excluding amounts under finance leases	Depreciation and amortization, excluding amounts under finance leases	$	4,685	$	3,665	$	12,317	$	11,169	Depreciation and amortization, excluding amounts under finance leases	$	4,824	$	3,613
Amortization of property and equipment under finance leases	Amortization of property and equipment under finance leases	1,323		1,184		3,792		3,534		Amortization of property and equipment under finance leases	1,775		1,208
Amortization of intangible assets										Amortization of intangible assets	451		192
Total depreciation and amortization	Total depreciation and amortization	$	6,008	$	4,849	$	16,109	$	14,703	Total depreciation and amortization	$	7,050	$	5,013

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Note 6. Acquisition

On August 12, 2022, we entered into a purchase agreement with each of Scott Bosard, Trey Bosard and Tyler Bosard (collectively, the “Sellers”) to acquire all of the equity interests of Firebird Bulk Carriers, Inc. (“Firebird”) and Phoenix Oil, Inc. (“Phoenix”) for approximately ~~$39.7~~$39.3 million, consisting of a cash payment of ~~$35.8~~$35.4 million, 45,777 of our common shares valued at $1.4 million, of which 15,259 shares were issued immediately and 30,518 shares will be issued over a three year period, and contingent consideration valued at approximately $2.6 million. We funded the cash consideration using cash on hand at the time of acquisition. Pursuant to the purchase agreement, the purchase price is subject to customary post-closing adjustment provisions, including an earn-out payable to the Sellers to the extent the earnings before interest, taxes, depreciation and amortization (EBITDA) of Phoenix exceeds a specified threshold during the twelve full calendar months after the closing date of the acquisition.

Firebird is an interstate bulk motor carrier of crude oil, condensate, fuels, oils and other petroleum products. Firebird is headquartered in Humble, Texas, with six terminal locations throughout Texas, and ~~operated 123~~operates 130 tractors and ~~216~~209 trailers largely in the Eagle Ford ~~basin at the time of the acquisition.~~basin. Phoenix is also headquartered in Humble, Texas, and recycles and repurposes off-specification fuels, lubricants, crude oil and other chemicals from producers in the U.S. Firebird and Phoenix have formed our new logistics and repurposing segment. We expect that this acquisition will offer us the opportunity to expand our value chain and market impact, with numerous synergies benefiting the combined companies.

~~The following table summarizes the aggregate preliminary consideration paid and issued for Firebird and Phoenix (in thousands):~~


~~Cash~~	$	~~35,793~~
~~Value of AE common shares issued~~	~~1,364~~
~~Contingent consideration arrangement~~	~~2,566~~
~~Fair value of total consideration transferred~~	$	~~39,723~~

The fair market value of the common shares issued in this transaction was determined based upon the closing share price of AE common stock on August 12, 2022 of $33.75, discounted to present value using the appropriate discount rate.

We accounted for the acquisition of Firebird and Phoenix under the acquisition method in accordance with ASC 805, Business Combinations. The allocation of purchase consideration was based upon the estimated fair value of the tangible and ~~indentifiable~~identifiable intangible assets acquired and liabilities assumed in the acquisition.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The following table presents the preliminary purchase price allocation to estimated fair values of the identifiable assets acquired and liabilities assumed at the acquisition date of August 12, 2022 (in thousands):


~~Assets acquired:~~
~~Cash and cash equivalents~~	$	~~2,203~~
~~Accounts receivable~~	~~4,921~~
~~Inventory~~	~~643~~
~~Other current assets~~	~~137~~
~~Property and equipment~~	~~24,709~~
~~Intangible assets~~	~~7,734~~
~~Goodwill~~	~~5,755~~
~~Other assets~~	~~457~~
~~Total assets acquired~~	$	~~46,559~~

~~Liabilities assumed:~~
~~Accounts payable and other accrued liabilities~~	$	~~(1,945)~~
~~Deferred tax liabilities~~	~~(4,891)~~
~~Total liabilities assumed~~	$	~~(6,836)~~
~~Net assets acquired~~	$	~~39,723~~

The purchase price allocation is subject to revision as acquisition-date fair value analyses are completed and if additional information about facts and circumstances that existed at the acquisition date becomes available. The purchase price consideration, as well as the estimated fair values of the assets acquired and liabilities assumed, will be finalized as soon as practicable, but no later than one year from the closing of the acquisition.

The estimated fair value of the acquired property and equipment was determined using a combination of the cost approach and the market approach, specifically determining the replacement cost value of each type of asset.

Acquired identifiable intangible assets consists of approximately $5.2 million for customer relationships, $2.2 million for trade names, and $0.3 million for noncompete agreements entered into in connection with the acquisition. The estimated fair value of the acquired customer relationship intangible assets was determined using an income approach, specifically a discounted cash flow analysis, and are being amortized on a modified straight-line basis over a period of ten years, with the amortization more heavily weighted in the earlier years. The income approach estimates the future benefits of the customer relationships and deducts the expenses incurred in servicing the relationships and the contributions from the other business assets to derive the future net benefits of these assets. The future net benefits are discounted back to present value using the appropriate discount rate, which results in the value of the customer relationships. The estimated fair value of the trade names was determined using the relief from royalty method, a form of the income approach, and are being amortized on a straight-line basis over a period of 15 years. The estimated fair value of the noncompete agreements was determined using an income approach, specifically a discounted cash flow analysis, and are being amortized over a period of five years.

The goodwill of approximately $5.8 million arising from this acquisition is primarily attributed to our ability to generate increased revenues, earnings and cash flow by expanding our addressable market and client base and with the assembled workforce that we acquired. None of the goodwill is expected to be deductible for tax purposes. We recorded net tax liabilities of approximately $4.9 million related No changes to the ~~tax effect~~purchase price allocation occurred during the first quarter of ~~our estimated fair value allocations.~~

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The discounted cash flow analysis used to estimate the fair value of the Firebird and Phoenix intangible assets relied on Level 3 fair value inputs. Level 3 fair values are based on unobservable inputs. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date. The valuations were based on the information that was available as of the acquisition date, and the expectations and assumptions that have been deemed reasonable by our management. There are inherent uncertainties and management judgment required in these determinations. The fair value measurements of the assets acquired and liabilities assumed were based on valuations involving significant unobservable inputs, or Level 3 in the fair value hierarchy.

The contribution of this newly acquired business to our consolidated revenues and net earnings was $8.7 million and $0.2 million, respectively, for both the three and nine months ended September 30, 2022. We incurred approximately $0.3 million of acquisition costs in connection with this acquisition, which have been expensed in general and administrative expense as incurred.2023.

Unaudited Pro Forma Financial Information

The unaudited pro forma condensed consolidated results of operations in the table below are provided for illustrative purposes only and summarize the combined results of our operations and those of Firebird and Phoenix. For purposes of this pro forma presentation, the acquisition of Firebird and Phoenix is assumed to have occurred on January 1, ~~2021.~~2022. The pro forma financial information for all periods presented also includes the estimated business combination accounting effects resulting from this acquisition, notably amortization expense from the acquired intangible assets and certain other integration related impacts. This unaudited pro forma financial information should not be relied upon as being indicative of the historical results that would have been obtained if the acquisition had actually occurred on January 1, ~~2021,~~2022, nor of the results of operations that may be obtained in the future (in thousands).

Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenues $ 860,771 $ 581,334 $ 2,663,447 $ 1,417,475
Net earnings 2,295 2,056 12,867 10,430
Basic net earnings per common share $ 0.52 $ 0.48 $ 2.93 $ 2.44
Diluted net earnings per common share $ 0.52 $ 0.48 $ 2.91 $ 2.43


	Three Months Ended
	March 31,
		2022

Revenues		$	792,984
Net earnings		9,725

Basic net earnings per common share		$	2.22
Diluted net earnings per common share		$	2.21

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Other Assets

Components of other assets were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022

Amounts associated with liability insurance program:
Insurance collateral deposits	Insurance collateral deposits	$	390	$	721	Insurance collateral deposits	$	503	$	463
Excess loss fund		622		622
Accumulated interest income		523		489
Other amounts:
State collateral deposits	State collateral deposits	36		36		State collateral deposits	23		23
Materials and supplies	Materials and supplies	1,209		574		Materials and supplies	1,222		1,257
Debt issuance costs	Debt issuance costs	392		292		Debt issuance costs	1,511		1,595
Other	Other	273		293		Other	336		360
Total other assets	Total other assets	$	3,445	$	3,027	Total other assets	$	3,595	$	3,698

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~~expected losses under ~~our~~the insurance ~~policies.~~programs. 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.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8. Segment Reporting

~~Table of Contents~~

~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Financial information by reporting segment was as follows for the periods indicated (in thousands):


		Reporting Segments													Reporting Segments
		Crude oil marketing		Trans-portation		Pipeline and storage		Logistics and repur-posing (1)		Other		Total			Crude oil marketing		Trans-portation		Pipeline and storage		Logistics and repurposing (1)		Other		Total

Three Months Ended September 30, 2022
Three Months Ended March 31, 2023														Three Months Ended March 31, 2023
Segment revenues (2)	Segment revenues (2)	$	814,394	$	29,983	$	2,912	$	8,677	$	—	$	855,966	Segment revenues (2)	$	608,476	$	26,530	$	809	$	16,747	$	—	$	652,562
Less: Intersegment revenues (2)	Less: Intersegment revenues (2)	—		(153)		(2,912)		—		—		(3,065)		Less: Intersegment revenues (2)	—		(85)		(809)		(1506)		—		(2,400)
Revenues	Revenues	$	814,394	$	29,830	$	—	$	8,677	$	—	$	852,901	Revenues	$	608,476	$	26,445	$	—	$	15,241	$	—	$	650,162

Segment operating earnings (losses) (3)	Segment operating earnings (losses) (3)	5,070		3,307		(909)		155		—		7,623		Segment operating earnings (losses) (3)	1,907		901		(1,201)		535		—		2,142
Depreciation and amortization	Depreciation and amortization	2,008		2,791		269		940		—		6,008		Depreciation and amortization	2,075		3,131		263		1,581		—		7,050
Property and equipment additions (4) (5)	Property and equipment additions (4) (5)	343		722		817		132		—		2,014		Property and equipment additions (4) (5)	275		167		971		460		27		1,900

Three Months Ended September 30, 2021
Three Months Ended March 31, 2022														Three Months Ended March 31, 2022
Segment revenues (2)	Segment revenues (2)	$	543,228	$	24,867	$	738	$	—	$	—	$	568,833	Segment revenues (2)	$	747,555	$	26,718	$	897	$	—	$	—	$	775,170
Less: Intersegment revenues (2)	Less: Intersegment revenues (2)	—		(41)		(611)		—		—		(652)		Less: Intersegment revenues (2)	—		(28)		(897)		—		—		(925)
Revenues	Revenues	$	543,228	$	24,826	$	127	$	—	$	—	$	568,181	Revenues	$	747,555	$	26,690	$	—	$	—	$	—	$	774,245

Segment operating earnings (losses) (3)	Segment operating earnings (losses) (3)	4,255		2,264		(716)		—		—		5,803		Segment operating earnings (losses) (3)	10,120		2,868		(822)		—		—		12,166
Depreciation and amortization	Depreciation and amortization	1,611		2,957		281		—		—		4,849		Depreciation and amortization	1,788		2,957		268		—		—		5,013
Property and equipment additions (4) (5)	Property and equipment additions (4) (5)	443		4,904		980		—		—		6,327		Property and equipment additions (4) (5)	3,124		535		27		—		8		3,694

Nine Months Ended September 30, 2022
Segment revenues (2)		$	2,524,465	$	86,322	$	5,869	$	8,677	$	—	$	2,625,333
Less: Intersegment revenues (2)		—		(268)		(5,869)		—		—		(6,137)
Revenues		$	2,524,465	$	86,054	$	—	$	8,677	$	—	$	2,619,196

Segment operating earnings (losses) (3)		20,301		9,112		(2,607)		155		—		26,961
Depreciation and amortization		5,690		8,671		808		940		—		16,109
Property and equipment additions (4) (5)		4,351		1,416		890		132		8		6,797

Nine Months Ended September 30, 2021
Segment revenues (2)		$	1,310,343	$	69,670	$	1,808	$	—	$	—	$	1,381,821
Less: Intersegment revenues (2)		—		(112)		(1,293)		—		—		(1,405)
Revenues		$	1,310,343	$	69,558	$	515	$	—	$	—	$	1,380,416

Segment operating earnings (losses) (3)		19,643		4,520		(1,837)		—		—		22,326
Depreciation and amortization		5,050		8,895		758		—		—		14,703
Property and equipment additions (4) (5)		1,145		7,607		1,169		—		8		9,929

_______________

(1)On August 12, 2022, we acquired a transportation logistics and recycling and repurposing business, resulting in a new operating segment. ~~See Note 6 and Note 9 for further information.~~

(2)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.

(3)Our crude oil marketing segment’s operating earnings included inventory valuation losses of ~~$5.1~~$1.0 million and ~~$0.3~~inventory liquidation gains of $8.7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, and 2021, respectively. For the nine months ended September 30, 2022 and 2021, our crude oil marketing segment’s operating earnings included inventory liquidation gains of $2.1 million and $10.3 million, respectively.

(4)Our segment property and equipment additions do not include assets acquired under finance leases during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. See Note 15 for further information.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

(5)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.

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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 (losses) earnings before income taxes, as follows for the periods indicated (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022

Segment operating earnings	Segment operating earnings	$	7,623	$	5,803	$	26,961	$	22,326	Segment operating earnings	$	2,142	$	12,166
General and administrative	General and administrative	(4,630)		(3,502)		(12,860)		(9,839)		General and administrative	(4,772)		(4,018)
Operating earnings		2,993		2,301		14,101		12,487
Operating (losses) earnings										Operating (losses) earnings	(2,630)		8,148
Interest and other income	Interest and other income	338		37		665		233		Interest and other income	204		24
Interest expense	Interest expense	(119)		(178)		(369)		(602)		Interest expense	(696)		(114)
Earnings before income taxes		$	3,212	$	2,160	$	14,397	$	12,118
(Losses) Earnings before income taxes										(Losses) Earnings before income taxes	$	(3,122)	$	8,058

Identifiable assets by business segment were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022

Reporting segment:	Reporting segment:					Reporting segment:
Crude oil marketing	Crude oil marketing	$	231,014	$	162,770	Crude oil marketing	$	183,972	$	215,813
Transportation	Transportation	61,429		67,167		Transportation	61,115		60,405
Pipeline and storage	Pipeline and storage	25,742		25,569		Pipeline and storage	26,480		25,815
Logistics and repurposing ~~(1)~~	Logistics and repurposing ~~(1)~~	45,404		—		Logistics and repurposing ~~(1)~~	43,544		45,307
Cash and other ~~(2)~~(1)	Cash and other ~~(2)~~(1)	98,534		119,197		Cash and other ~~(2)~~(1)	56,452		36,819
Total assets	Total assets	$	462,123	$	374,703	Total assets	$	371,563	$	384,159

_______________

(1)~~On August 12, 2022, we acquired a transportation logistics and recycling and repurposing business, resulting in a new operating segment. See Note 6 and Note 9 for further information.~~

~~(2)~~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.

2016

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Transactions with Affiliates

We enter into certain transactions in the normal course of business with affiliated ~~entities including~~entities. Activities with affiliates were as follows for the periods indicated (in thousands):


	Three Months Ended
	March 31,
	2023		2022

KSA and affiliate billings to us	$	—	$	6
Billings to KSA and affiliates	5		5
Rentals paid to an affiliate of KSA	137		114
Payments to KSA and affiliates for purchase of vehicles (1)	157		78
Rentals paid to affiliates of Scott Bosard	140		—

_______________

(1)Amounts paid to West Point Buick GMC are for the purchase of three and two pickup trucks during the three months ended March 31, 2023 and 2022, respectively.

Affiliate transactions include direct cost reimbursement for shared phone and administrative services from KSA Industries, Inc. (“KSA”), an affiliated entity. KSA was our largest shareholder until October 31, 2022 when we repurchased the common stock owned by it. An affiliate of KSA served on our Board of Directors through the date of our 2023 annual meeting. 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 Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Affiliate billings to us $ 1 $ 1 $ 7 $ 13
Billings to affiliates 5 4 15 10
Rentals paid to affiliate 136 144 388 461

~~During the nine months ended September 30, 2022,~~ In addition, we ~~paid~~purchase pickup trucks from 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. During the nine months ended September 30, 2021, we paid West Point Buick GMC, an affiliate of KSA, a total of approximately $0.5 million (net of trade-in values) for the purchase of ten pickup trucks.KSA.

In connection with the acquisition of Firebird and Phoenix on August 12, 2022, we entered into ~~three~~four operating lease agreements for office and terminal locations with entities owned by Scott Bosard, one of the ~~Sellers,~~sellers, for periods ranging from two to five years. ~~For the period from acquisition through September 30, 2022, we paid approximately $0.1 million in rental fees to Scott Bosard.~~

~~See Note 17 for further information regarding our relationship with KSA.~~

Note 10. Other Current Liabilities

The components of other current liabilities were as follows at the dates indicated (in thousands):


		September 30,		December 31,
		2022		2021			March 31,		December 31,
							2023		2022

Accrual for payroll, benefits and bonuses	Accrual for payroll, benefits and bonuses	$	6,579	$	5,210	Accrual for payroll, benefits and bonuses	$	4,134	$	6,435
Accrued automobile and workers’ compensation claims	Accrued automobile and workers’ compensation claims	4,174		4,127		Accrued automobile and workers’ compensation claims	5,269		5,579
Contingent consideration for acquisition						Contingent consideration for acquisition	2,566		2,566
Accrued medical claims	Accrued medical claims	1,718		1,100		Accrued medical claims	936		1,007
Accrued taxes	Accrued taxes	4,627		534		Accrued taxes	2,185		2,208
Other	Other	3,874		651		Other	1,537		1,419
Total other current liabilities	Total other current liabilities	$	20,972	$	11,622	Total other current liabilities	$	16,627	$	19,214

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 11. ~~Credit Agreement~~Long-Term Debt

~~Credit Agreement~~

On ~~May 4, 2021,~~October 27, 2022, we entered into a ~~$40.0 million credit agreement (“~~Credit Agreement (the “Credit Agreement”) with ~~Wells Fargo~~Cadence Bank, ~~National Association,~~ as ~~Agent~~administrative agent, swingline lender and ~~Issuing Lender, under which we could borrow or issue letters of credit in an aggregate of up to $40.0 million under~~issuing lender, and the other lenders party thereto (collectively, the “Lenders”). The Credit Agreement provides for (a) a revolving credit facility (“Revolving Credit Facility”), which was to mature on May 4, 2024, subject to our compliance with certain financial covenants. On August 11, 2022, we entered into an amendment to our Credit Agreement (the “Credit Agreement Amendment”), which increased our borrowing capacitythat allows for borrowings up to $60.0 ~~million.~~ million in aggregate principal amount from time to time (the “Revolving Credit Facility”) and (b) a Term Loan in aggregate principal amount of $25.0 million (the “Term Loan”). The Revolving Credit ~~Agreement Amendment also extended the maturity of the facility to August 11, 2025.~~Facility matures on October 27, 2027 unless earlier terminated.

~~The Credit Agreement Amendment also provided for~~At March 31, 2023, we had $23.8 million outstanding under the ~~replacement~~Term Loan at a weighted average interest rate of ~~LIBOR with the Secured Overnight Financing Rate, as administered by the Federal Reserve Bank~~6.81 percent, and $20.4 million letters of ~~New York (“SOFR”). Borrowings~~credit outstanding at a fee of 2.00 percent. No amounts were outstanding under the Revolving Credit ~~Facility, which remained~~Facility. The following table presents the scheduled maturities of principal amounts of our debt obligations at March 31, 2023 for the next five years, and in place at September 30, 2022, bore interest, at our election, at (i) the Base Rate plus Applicable Margin; or (ii) the Adjusted Term SOFR plus Applicable Margin. Base Rate is the highest of (a) the Prime Rate, (b) the Federal Funds Rate, plus 0.50 percent and (c) Adjusted TERM SOFR for an interest period of one month plus 1.00 percent. The Applicable Margin to be added to a Base Rate borrowing was 0.75 percent. The Applicable Margin to be added to an Adjusted Term SOFR borrowing was 1.75 percent. A commitment fee of 0.25 percent per annum accrued on the daily average unused amount of the commitments under the Revolving Credit Facility.total thereafter (in thousands):


Remainder of 2023	$	1,875
2024	2,500
2025	2,500
2026	2,500
2027	14,375
Total debt maturities	$	23,750

At September 30, 2022, we had $15.0 million of borrowings outstanding under our Credit Agreement Amendment and $8.2 million of letters of credit issued under the Credit Agreement Amendment at a fee of 1.75 percent per annum. At September 30, 2022,March 31, 2023, we were in compliance with all ~~financial~~ covenants under the ~~Credit Agreement Amendment.~~

~~See Note 17 for further information regarding our~~ Credit Agreement.

Note 12. 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 ~~September 30,~~March 31, 2023, we had in place one commodity purchase and sale contract, entered into in March 2023 for a total of 100,000 barrels of crude oil to be purchased and sold in April 2023, and one commodity purchase contract, entered into in 2022, for the purchase of 126,000 gallons of diesel fuel per month during January 2023 through December 2023.

At December 31, 2022, we had in place ~~ten~~three commodity purchase and sale contracts, all of 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 encompassed approximately 324 barrels per day of crude oil during October 2022 through December 2022, and also include purchase and sale contracts, entered into in ~~August~~ 2022 for ~~an additional~~a total of 300,000 barrels of crude oil to be purchased and sold in ~~October 2022.~~January 2023, and one commodity purchase contract, also entered into in 2022, for the purchase of 126,000 gallons of diesel fuel per month during January 2023 through December 2023.

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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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
September 30, 2022
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation $ 2,036 $ — $ — $ —
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation — — 129 —
Less counterparty offsets — — — —
As reported fair value contracts $ 2,036 $ — $ 129 $ —
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 $ —


	Balance Sheet Location and Amount
	Current		Other		Current		Other
	Assets		Assets		Liabilities		Liabilities
March 31, 2023
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	$	157	$	—	$	—	$	—
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	—		—		—		—
Less counterparty offsets	—		—		—		—
As reported fair value contracts	$	157	$	—	$	—	$	—

December 31, 2022
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	$	—	$	—	$	—	$	—
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	—		—		330		—
Less counterparty offsets	—		—		—		—
As reported fair value contracts	$	—	$	—	$	330	$	—

We only enter into commodity contracts with creditworthy counterparties and evaluate our exposure to significant counterparties on an ongoing basis. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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)									Gains (losses)
		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022

Revenues – marketing	Revenues – marketing	$	(14)	$	6	$	(9)	$	31	Revenues – marketing	$	—	$	19
Cost and expenses – marketing	Cost and expenses – marketing	1,878		—		1,253		—		Cost and expenses – marketing	(486)		—

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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											Fair Value Measurements Using
		Quoted Prices											Quoted Prices
		in Active		Significant									in Active		Significant
		Markets for		Other		Significant							Markets for		Other		Significant
		Identical Assets		Observable		Unobservable							Identical Assets		Observable		Unobservable
		and Liabilities		Inputs		Inputs		Counterparty					and Liabilities		Inputs		Inputs		Counterparty
		(Level 1)		(Level 2)		(Level 3)		Offsets		Total			(Level 1)		(Level 2)		(Level 3)		Offsets		Total
September 30, 2022
March 31, 2023												March 31, 2023
Derivatives:	Derivatives:											Derivatives:
Current assets	Current assets	$	—	$	2,036	$	—	$	—	$	2,036	Current assets	$	—	$	157	$	—	$	—	$	157
Current liabilities	Current liabilities	—		(129)		—		—		(129)		Current liabilities	—		—		—		—		—
Net value	Net value	$	—	$	1,907	$	—	$	—	$	1,907	Net value	$	—	$	157	$	—	$	—	$	157

December 31, 2021
December 31, 2022												December 31, 2022
Derivatives:	Derivatives:											Derivatives:
Current assets	Current assets	$	—	$	347	$	—	$	—	$	347	Current assets	$	—	$	—	$	—	$	—	$	—
Current liabilities	Current liabilities	—		(324)		—		—		(324)		Current liabilities	—		(330)		—		—		(330)
Net value	Net value	$	—	$	23	$	—	$	—	$	23	Net value	$	—	$	(330)	$	—	$	—	$	(330)

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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, 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 13. 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. In May 2022, our shareholders approved an amendment and restatement of the 2018 LTIP, in which the maximum number of shares authorized for issuance under the 2018 LTIP was increased by 150,000 shares to a total of 300,000 shares, and the term of the 2018 LTIP was extended through February 23, 2032. 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 ~~September 30, 2022,~~March 31, 2023, a total of ~~157,697~~122,829 shares were available for issuance.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In August 2022, we also granted 30,518 restricted stock units to two employees of an acquired company, outside of the 2018 LTIP, as equity inducement awards under applicable stock exchange listing rules.

Compensation expense recognized in connection with equity-based awards was as follows for the periods indicated (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Compensation expense $ 254 $ 224 $ 712 $ 641


	Three Months Ended
	March 31,
	2023		2022

Compensation expense	$	283	$	195

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, we had ~~$107,200~~$92,400 and ~~$82,500,~~$140,300, respectively, of accrued dividend amounts for awards granted under the 2018 LTIP or ~~under the~~as inducement ~~awards described above.~~awards.

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 under 2018 LTIP (2)
26,796 $ 31.83
Granted as inducement awards (3)
30,518 $ 33.75
Vested (19,892) $ 29.15
Forfeited (3,521) $ 30.33
Restricted stock unit awards at September 30, 2022 72,166 $ 31.84


		Weighted-
		Average Grant
	Number of	Date Fair Value
	Shares	per Share (1)

Restricted stock unit awards at January 1, 2023	70,244	$	31.89
Granted (2)	23,409	$	57.18
Vested	(20,291)	$	29.76
Forfeited	(312)	$	44.59
Restricted stock unit awards at March 31, 2023	73,050	$	40.53

_______________

(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 the first ~~nine~~three months of ~~2022~~2023 was ~~$0.9~~$1.3 million based on a grant date market ~~price~~prices of our common shares ranging from ~~$31.80~~$37.56 to ~~$37.42 per share.~~

~~(3)~~These awards were granted in connection with the acquisition of Phoenix and Firebird (see Note 6 for further information). The aggregate grant date fair value of these restricted stock unit awards issued on August 12, 2022 was $1.0 million based on a grant date market price of our common shares of $33.75$58.05 per share.

Unrecognized compensation cost associated with restricted stock unit awards was approximately ~~$0.6~~$1.5 million at ~~September 30, 2022.~~March 31, 2023. 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 ~~1.4~~1.8 years.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Performance Share Unit Awards

The following table presents performance share unit award activity for the periods indicated:


			Weighted-				Weighted-
			Average Grant				Average Grant
		Number of	Date Fair Value			Number of	Date Fair Value
		Shares	per Share (1)			Shares	per Share (1)

Performance share unit awards at January 1, 2022		21,492	$	26.64
Performance share unit awards at January 1, 2023					Performance share unit awards at January 1, 2023	30,687	$	28.59
Granted (2)	Granted (2)	13,458	$	31.80	Granted (2)	12,061	$	56.84

Vested	Vested	(289)	$	28.25	Vested	(12,319)	$	24.96
Forfeited	Forfeited	(1,297)	$	30.87	Forfeited	—	$	—
Performance share unit awards at September 30, 2022		33,364	$	28.54
Performance share unit awards at March 31, 2023					Performance share unit awards at March 31, 2023	30,429	$	41.26

_______________

(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 the first ~~nine~~three months of ~~2022~~2023 was ~~$0.4~~$0.7 million based on a grant date market ~~price~~prices of our common shares ~~of $31.80~~ranging from $38.42 to $58.05 per share and assuming a performance factor of 100 percent.

Unrecognized compensation cost associated with performance share unit awards was approximately ~~$0.5~~$1.0 million at ~~September 30, 2022.~~March 31, 2023. We expect to recognize the remaining compensation cost for these awards over a weighted-average period of ~~2.0~~2.5 years.

Note 14. Supplemental Cash Flow Information

Supplemental cash flows and non-cash transactions were as follows for the periods indicated (in thousands):


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2022		2021			2023		2022

Cash paid for interest	Cash paid for interest	$	369	$	602	Cash paid for interest	$	636	$	114
Cash paid for federal and state income taxes	Cash paid for federal and state income taxes	1,827		1,297		Cash paid for federal and state income taxes	2		—
Cash refund for NOL carryback under CARES Act		6,907		3,712

Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Change in accounts payable related to property and equipment additions	Change in accounts payable related to property and equipment additions	—		(72)		Change in accounts payable related to property and equipment additions	52		—
Property and equipment acquired under finance leases	Property and equipment acquired under finance leases	4,353		2,083		Property and equipment acquired under finance leases	9,007		—
Issuance of shares for acquisition (see Note 6)		1,364		—

See Note 15 for information related to other non-cash transactions related to leases.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 15. Leases

The following table provides the components of lease expense for the periods indicated (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022
Finance lease cost:	Finance lease cost:									Finance lease cost:
Amortization of ROU assets	Amortization of ROU assets	$	1,306	$	1,184	$	3,775	$	3,534	Amortization of ROU assets	$	1,774	$	1,207
Interest on lease liabilities	Interest on lease liabilities	84		101		242		321		Interest on lease liabilities	238		80
Operating lease cost	Operating lease cost	781		643		2,130		1,890		Operating lease cost	878		673
Short-term lease cost	Short-term lease cost	3,752		3,701		11,335		10,399		Short-term lease cost	3,698		3,781
Variable lease cost	Variable lease cost	6		2		16		4		Variable lease cost	5		6
Total lease expense	Total lease expense	$	5,929	$	5,631	$	17,498	$	16,148	Total lease expense	$	6,593	$	5,747

The following table provides supplemental cash flow and other information related to leases for the periods indicated (in thousands):


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2022		2021			2023		2022
Cash paid for amounts included in measurement of lease liabilities:	Cash paid for amounts included in measurement of lease liabilities:					Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases (1)	Operating cash flows from operating leases (1)	$	2,112	$	1,886	Operating cash flows from operating leases (1)	$	777	$	673
Operating cash flows from finance leases (1)	Operating cash flows from finance leases (1)	238		260		Operating cash flows from finance leases (1)	224		80
Financing cash flows from finance leases	Financing cash flows from finance leases	3,491		3,240		Financing cash flows from finance leases	1,576		1,139

ROU assets obtained in exchange for new lease liabilities:	ROU assets obtained in exchange for new lease liabilities:					ROU assets obtained in exchange for new lease liabilities:
Finance leases	Finance leases	4,353		2,083		Finance leases	9,007		—
Operating leases	Operating leases	2,715		1,157		Operating leases	401		196

______________

(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:


		Nine Months Ended			Three Months Ended
		September 30,			March 31,
		2022	2021		2023	2022
Weighted-average remaining lease term (years):	Weighted-average remaining lease term (years):			Weighted-average remaining lease term (years):
Finance leases	Finance leases	3.33	3.75	Finance leases	3.89	3.39
Operating leases	Operating leases	3.57	4.06	Operating leases	3.32	3.63

Weighted-average discount rate:	Weighted-average discount rate:			Weighted-average discount rate:
Finance leases	Finance leases	2.9%	2.7%	Finance leases	4.6%	2.6%
Operating leases	Operating leases	3.9%	3.8%	Operating leases	4.1%	3.7%

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table provides supplemental balance sheet information related to leases at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022
Assets	Assets					Assets
Finance lease ROU assets (1)	Finance lease ROU assets (1)	$	13,149	$	12,590	Finance lease ROU assets (1)	$	22,496	$	15,264
Operating lease ROU assets	Operating lease ROU assets	7,906		7,113		Operating lease ROU assets	7,414		7,720

Liabilities	Liabilities					Liabilities
Current	Current					Current
Finance lease liabilities	Finance lease liabilities	4,263		3,663		Finance lease liabilities	5,221		4,382
Operating lease liabilities	Operating lease liabilities	2,724		2,178		Operating lease liabilities	2,821		2,712
Noncurrent	Noncurrent					Noncurrent
Finance lease liabilities	Finance lease liabilities	9,934		9,672		Finance lease liabilities	18,677		12,085
Operating lease liabilities	Operating lease liabilities	5,179		4,938		Operating lease liabilities	4,595		5,007

______________

(1)Amounts are included in Property and equipment, net on the unaudited condensed consolidated balance sheets.

The following table provides maturities of undiscounted lease liabilities at ~~September 30, 2022~~March 31, 2023 (in thousands):


		Finance		Operating			Finance		Operating
		Lease		Lease			Lease		Lease

Remainder of 2022		$	1,300	$	809
2023		4,161		2,830
Remainder of 2023						Remainder of 2023	$	4,779	$	2,330
2024	2024	2,920		2,487		2024	5,492		2,789
2025	2025	4,343		832		2025	6,625		1,061
2026	2026	1,373		762		2026	4,211		891
2027						2027	4,643		570
Thereafter	Thereafter	958		681		Thereafter	948		237
Total lease payments	Total lease payments	15,055		8,401		Total lease payments	26,698		7,878
Less: Interest	Less: Interest	(858)		(498)		Less: Interest	(2,800)		(462)
Present value of lease liabilities	Present value of lease liabilities	14,197		7,903		Present value of lease liabilities	23,898		7,416
Less: Current portion of lease obligation	Less: Current portion of lease obligation	(4,263)		(2,724)		Less: Current portion of lease obligation	(5,221)		(2,821)
Total long-term lease obligation	Total long-term lease obligation	$	9,934	$	5,179	Total long-term lease obligation	$	18,677	$	4,595

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table provides maturities of undiscounted lease liabilities at December 31, ~~2021~~2022 (in thousands):


		Finance		Operating			Finance		Operating
		Lease		Lease			Lease		Lease

2022		$	3,941	$	2,399
2023	2023	3,143		2,080		2023	$	4,870	$	2,958
2024	2024	2,348		1,911		2024	3,629		2,617
2025	2025	3,771		394		2025	4,652		962
2026	2026	801		333		2026	2,482		879
2027						2027	2,179		570
Thereafter	Thereafter	—		455		Thereafter	—		237
Total lease payments	Total lease payments	14,004		7,572		Total lease payments	17,812		8,223
Less: Interest	Less: Interest	(669)		(456)		Less: Interest	(1,345)		(504)
Present value of lease liabilities	Present value of lease liabilities	13,335		7,116		Present value of lease liabilities	16,467		7,719
Less: Current portion of lease obligation	Less: Current portion of lease obligation	(3,663)		(2,178)		Less: Current portion of lease obligation	(4,382)		(2,712)
Total long-term lease obligation	Total long-term lease obligation	$	9,672	$	4,938	Total long-term lease obligation	$	12,085	$	5,007

Note 16. 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~~$1.3 million of umbrella insurance coverage for annual aggregate medical claims exceeding approximately ~~$11.5~~$11.3 million.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our accruals for automobile, workers’ compensation and medical claims were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022

Pre-funded premiums for losses incurred but not reported		$	96	$	50

Accrued automobile and workers’ compensation claims	Accrued automobile and workers’ compensation claims	4,174		4,127		Accrued automobile and workers’ compensation claims	$	5,269	$	5,579
Accrued medical claims	Accrued medical claims	1,718		1,100		Accrued medical claims	936		1,007

Litigation

From time to time as incidental to our operations, we may become involved in various lawsuits and/or disputes. 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.

~~Note 17. Subsequent Events~~

~~New Credit Facility~~

On October 27, 2022, we entered into a new Credit Agreement (the “New Credit Agreement”) with Cadence Bank, as administrative agent, swingline lender and issuing lender, and the other lenders party thereto (collectively, the “Lenders”). The New Credit Agreement provides for (a) a revolving credit facility that allows for borrowings up to $60.0 million in aggregate principal amount from time to time (the “New Revolving Credit Facility”) and (b) a Term Loan in aggregate principal amount of $25.0 million (the “Term Loan”).

The New Credit Agreement replaces our prior $60.0 million credit facility with Wells Fargo entered into May 4, 2021. In connection with our termination of the Credit Agreement Amendment with Wells Fargo, we deposited cash equaling 103.0 percent of the face value of three letters of credit previously issued by Wells Fargo in May 2021. The three letters of credit are fully collateralized, have no associated debt, and no draws against any of the letters of credit are pending.

For each borrowing under the New Revolving Credit Facility, we may elect whether such loans bear interest at (i) the Base Rate plus Applicable Margin for Base Rate Loans; or (ii) Term SOFR plus the Applicable Margin for SOFR Loans. The Base Rate is the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.5 percent and (c) Adjusted Term SOFR for a one month tenor in effect on the date of determination plus 1.0 percent. The Applicable Margin to be added to a Base Rate borrowing under either (a), (b) or (c) in the preceding sentence is an amount determined quarterly between 1.0 percent and 2.0 percent depending on our consolidated total leverage ratio. The Applicable Margin to be added to a Term SOFR borrowing under the New Revolving Credit Facility is an amount determined quarterly between 2.0 percent and 3.0 percent depending on our consolidated total leverage ratio.A commitment fee of 0.25 percent per annum accrues on the daily average unused amount of the commitments of the Lenders under the New Revolving Credit Facility. We may obtain letters of credit under the New Revolving Credit Facility up to a maximum amount of $30.0 million. The amount of our outstanding letters of credit reduces availability under the New Revolving Credit Facility. The New Revolving Credit Facility matures on October 27, 2027 unless earlier terminated.

~~Table of Contents~~

~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The Term Loan amortizes on a 10 year schedule with quarterly payments beginning December 31, 2022, and matures on October 27, 2027 unless earlier accelerated. The Term Loan may be prepaid in whole or in part without premium or penalty, and must be prepaid with proceeds of any future debt issuance, the proceeds of any equity issuance to the extent proceeds exceed $2.0 million in any quarter with limited exceptions, and the proceeds of certain asset dispositions. The Term Loan bears interest at the SOFR Rate plus the Applicable Margin for SOFR Rate Loans as described above.

Pursuant to the terms of the New Credit Agreement, we are required to maintain compliance with the following financial covenants on a pro forma basis, after giving effect to any borrowings (in each case commencing with the fiscal quarter ending December 31, 2022): (i) the Consolidated Total Leverage Ratio shall not be greater than 2.50 to 1.00; (ii) the Asset Coverage Ratio shall not be less than 2.00 to 1.00; and (iii) the Consolidated Fixed Charge Coverage Ratio shall not be less than 1.25 to 1.00. Each of such ratios is calculated as outlined in the New Credit Agreement and subject to certain exclusions and qualifications described therein.

The New Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants. The affirmative covenants require us to provide the Lenders with certain financial statements, business plans, compliance certificates and other documents and reports and to comply with certain laws. The negative covenants restrict our ability to incur additional indebtedness, create additional liens on our assets, make certain investments, dispose of our assets or engage in a merger or other similar transaction or engage in transactions with affiliates, subject, in each case, to the various exceptions and conditions described in the New Credit Agreement. The negative covenants further restrict our ability to make certain restricted payments.

Our obligations under the New Credit Agreement are secured by a pledge of substantially all of our personal property and substantially all of the personal property of certain other our direct and indirect subsidiaries.

~~KSA Stock Repurchase~~

On October 31, 2022, we entered into a Stock Repurchase Agreement (the “Repurchase Agreement”) with KSA and certain members of the family of the late Kenneth Stanley Adams, Jr., our founder (collectively, the “KSA Sellers”). Prior to the transaction, KSA was our largest stockholder. Under the terms of the Repurchase Agreement, we purchased an aggregate of 1,942,433 shares of our common stock from the KSA Sellers for an aggregate purchase price of $69.9 million, at a price of $36.00 per share. Immediately following the transaction, we had 2,452,404 shares of common stock outstanding. The purchase price was funded with the proceeds of the $25.0 million term loan under our New Credit Agreement with Cadence Bank, described in more detail above, with the balance funded with cash on hand at the time of the transaction.

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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~~2022 (the ~~“2021~~“2022 Form 10-K”), as filed on March ~~9, 2022~~16, 2023 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~~2022 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, truck and pipeline transportation of crude oil, terminalling and storage in various crude oil and natural gas basins in the lower 48 states of the United States (“U.S.”). ~~We also~~In addition, we 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 twenty terminals across the U.S. We also recycle and repurpose off-specification fuels, lubricants, crude oil and other chemicals from producers in 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 four business segments: (i) crude oil marketing, transportation and storage; (ii) tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk; (iii) pipeline transportation, terminalling and storage of crude oil; and (iv) ~~beginning in the third quarter of 2022,~~ interstate bulk transportation logistics of crude oil, condensate, fuels, oils and other petroleum products and recycling and repurposing of off-spec fuels, lubricants, crude oil and other ~~chemicals, which includes the businesses we acquired in August 2022.~~chemicals. See Note 68 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding ~~the businesses we acquired in August 2022, and Note 8 for further information regarding~~ our business segments.

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Recent Developments

~~Phoenix and Firebird Acquisition~~

On ~~August 12, 2022,~~May 4, 2023, we ~~entered into a purchase agreement with each~~acquired approximately 10.6 acres of ~~Scott Bosard, Trey Bosard and Tyler Bosard (collectively,~~land in the ~~“Sellers”) to acquire all of the equity interests of Firebird Bulk Carriers, Inc. (“Firebird”) and Phoenix Oil, Inc. (“Phoenix”)~~Gulf Inland Industrial Park, located in Dayton, Texas, for approximately ~~$39.7~~$1.8 million ~~consisting of~~to build a ~~cash payment of $35.8 million~~new processing facility for Phoenix with rail spur and ~~45,777 of our common shares valued at $1.4 million~~siding, product storage, and ~~contingent consideration valued at approximately $2.6 million. Firebird is an interstate bulk motor carrier of crude oil, condensate, fuels, oils~~truck rack. Phoenix will build new infrastructure to service its existing customers and ~~other petroleum products. Firebird is headquartered in~~to create opportunities for growing the business. Phoenix will also relocate its headquarters from Humble, Texas with six terminal locations throughout Texas, and operated 123 tractors and 216 trailers largely in the Eagle Ford basin at the time of the acquisition. Phoenix is also headquartered in Humble, Texas, and recycles and repurposes off-specification fuels, lubricants, crude oil and other chemicals from producers in the U.S. Firebird and Phoenix have formed ourto this new logistics and repurposing segment. We expect that this acquisition will offer us the opportunity to expand our value chain and market impact, with numerous synergies benefiting the combined companies. See Note 6 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the acquisition.

~~New Credit Agreement and Repurchase of KSA Shares~~

On October 27, 2022, subsequent to the end of the third fiscal quarter, we entered into a new credit agreement (the “New Credit Agreement”) with Cadence Bank and other lenders. The New Credit Agreement provides for a revolving credit facility that allows for borrowings up to $60.0 million principal amount from time to time and a term loan in principal amount of $25.0 million. The New Credit Agreement also provides for up to $30.0 million in letters of credit, which would reduce amounts available under the revolving credit facility by the amounts issued thereunder. The New Credit Agreement replaces our prior $60.0 million credit facility with Wells Fargo Bank, National Association. See Note 17 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the New Credit Agreement.

On October 31, 2022, we repurchased an aggregate of 1,942,433 shares of our common stock from KSA Industries, Inc., our largest stockholder at the time, and certain members of the family of the late Kenneth Stanley Adams, Jr., our founder, for an aggregate purchase price of $69.9 million. Immediately following the transaction, we had 2,452,404 shares of common stock outstanding. The purchase price was paid with the proceeds of the term loan under the New Credit Agreement, together with cash on hand at the time of the transaction. See Note 17 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the transaction.location.

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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						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2022		2021		Change (1)		2022		2021		Change (1)			2023		2022		Change (1)

Revenues	Revenues	$	814,394	$	543,228	50	%	$	2,524,465	$	1,310,343	93	%	Revenues	$	608,476	$	747,555	(19	%)
Operating earnings (2)	Operating earnings (2)	5,070		4,255		19	%	20,301		19,643		3	%	Operating earnings (2)	1,907		10,120		(81	%)
Depreciation and amortization	Depreciation and amortization	2,008		1,611		25	%	5,690		5,050		13	%	Depreciation and amortization	2,075		1,788		16	%
Driver compensation	Driver compensation	4,962		4,507		10	%	14,204		13,193		8	%	Driver compensation	5,008		4,626		8	%
Insurance	Insurance	1,679		1,813		(7	%)	5,087		5,659		(10	%)	Insurance	1,786		1,734		3	%
Fuel	Fuel	3,425		2,086		64	%	9,429		5,798		63	%	Fuel	2,859		2,546		12	%

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(1)Represents the percentage increase (decrease) from the prior year period.

(2)Operating earnings included inventory valuation losses of ~~$5.1~~$1.0 million and ~~$0.3~~inventory liquidation gains of $8.7 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. For the nine months ended September 30, 2022 and 2021, operating earnings included inventory liquidation gains of $2.1 million and $10.3 million,~~ respectively, as discussed further below.

Volume and price information were as follows for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022
Field level purchase volumes – per day (1)	Field level purchase volumes – per day (1)									Field level purchase volumes – per day (1)
Crude oil – barrels	Crude oil – barrels	91,878		91,941		93,334		88,186		Crude oil – barrels	94,030		90,385

Average purchase price	Average purchase price									Average purchase price
Crude oil – per barrel	Crude oil – per barrel	$	89.55	$	67.81	$	96.84	$	62.28	Crude oil – per barrel	$	73.27	$	92.70

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(1)Reflects the volume purchased from third parties at the field level of operations.

~~Three Months Ended September 30, 2022 vs. Three Months Ended September 30, 2021~~
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Crude oil marketing revenues ~~increased~~decreased by ~~$271.2~~$139.1 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the three months ended ~~September 30, 2021,~~March 31, 2022, primarily as a result of a decrease in the market price of crude oil, which decreased revenues by approximately $162.7 million. This was partially offset by higher overall crude oil volumes, which increased revenues by approximately $23.6 million. The average crude oil price received was $92.70 during the three months ended March 31, 2022, which decreased to $73.27 during the three months ended March 31, 2023. Revenues from our volumes are mostly based upon the market price in our market areas, primarily in the Gulf Coast. The market price of crude oil decreased during the 2023 period as compared to the 2022 period primarily as a result of a return of global crude oil demand in 2022 following the pandemic. In addition, the invasion of Ukraine by Russia also contributed to an increase in the market price of crude oil which increased revenues by approximately $271.8 million, partially offset by lower overall crude oil volumes, which decreased revenues by approximately $0.6 million. The average crude oil price received was $67.81 duringin the three months ended September 30, 2021, which increased to $89.55 during the three months ended September 30, 2022. Revenues from legacy volumes are based upon the market price primarily in our Gulf Coast market area. The market price of crude oil increased through May 2022, as it did throughout 2021, before dropping through the third quarterfirst half of 2022. ~~Many U.S. producers have been exercising capital discipline, maintaining oil production plans~~In the second half of 2022 and continuing into 2023, weakness in ~~spite of~~ the ~~crude oil price,~~Chinese economy and have been focusing capital on share buy-backs and renewables. Rig count has risen steadily through the year. 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, and fears of a globalconcern over economic ~~slowdown, creating uncertainty for demand growth. OPEC+ has also mandated production decreases in hopes of keeping~~recession caused crude oil prices ~~strong but only with moderate success.~~to fall, while still remaining historically high.

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~~Our crude oil marketing operating earnings~~Driver compensation increased by ~~$0.8~~$0.4 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021, primarily due to higher crude oil prices and margin, partially offset by higher operating expenses, lower crude oil volumes and inventory valuation changes (as shown in the table below).~~

~~Driver compensation increased by $0.5 million during the three months ended September 30,~~ 2022, ~~as compared to the same period in 2021,~~ primarily due to an increase in driver pay, ~~partially offset by lower~~higher volumes transported and a ~~lower~~higher overall driver count in the ~~2022~~2023 period as compared to the same period in ~~2021.~~2022.

Insurance costs ~~decreased~~during the three months ended March 31, 2023 were consistent with the same period in 2022. The higher overall driver count in the 2023 period was offset in part by ~~$0.1~~our safety performance during the current period. Fuel costs increased by $0.3 million during the three months ended ~~September 30, 2022~~March 31, 2023 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 $1.3 million during the three months ended September 30, 2022 as compared to the same period in 2021,~~ primarily due to higher fuel prices.

Depreciation and amortization increased by ~~$0.4~~$0.3 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021,~~2022, primarily due to the timing of purchases and retirements of tractors and other field equipment during ~~2021~~2022 and ~~2022.~~

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~. Crude oil marketing revenues increased by $1,214.1 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, primarily as a result of an increase in the market price of crude oil, which increased revenues by approximately $1,074.9 million, and higher overall crude oil volumes, which increased revenues by approximately $139.2 million. The average crude oil price received was $62.28 during the nine months ended September 30, 2021, which increased to $96.84 during the nine months ended September 30, 2022.2023.

Our crude oil marketing operating earnings ~~increased~~decreased by ~~$0.7~~$8.2 million during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023 as compared to the same period in ~~2021,~~2022, primarily ~~due to higher crude oil prices and volumes, partially offset by~~as a result of inventory valuation changes (as shown in the table below), ~~higher fuel costs~~a decrease in the average market price of crude oil and higher ~~driver compensation.~~

~~Driver compensation increased by $1.0 million during the nine months ended September 30, 2022 as compared to the same period in 2021, primarily as a result of higher volumes transported~~operating expenses in the ~~2022~~2023 period, ~~and an increase in driver pay as compared to the same period in 2021,~~ partially offset by ~~a lower overall driver count~~higher crude oil volumes in the ~~2022~~2023 period.

Insurance costs decreased by $0.6 million during the nine months ended September 30, 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 $3.6 million during the nine months ended September 30, 2022 as compared to the same period in 2021, consistent with higher fuel prices.

Depreciation and amortization expense increased by $0.6 million during the nine months ended September 30, 2022 as compared to 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 significant factors affecting comparative crude oil marketing segment operating ~~earnings (losses), of which inventory valuations is the most significant.~~earnings. As a purchaser and shipper of crude oil, we hold inventory in storage tanks and third-party pipelines. ~~During~~Generally, 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.

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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.

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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				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022

As reported segment operating earnings ~~(1)~~	As reported segment operating earnings ~~(1)~~	$	5,070	$	4,255	$	20,301	$	19,643	As reported segment operating earnings ~~(1)~~	$	1,907	$	10,120
Add (subtract):	Add (subtract):									Add (subtract):
Inventory liquidation gains	Inventory liquidation gains	—		—		(2,062)		(10,282)		Inventory liquidation gains	—		(8,717)
Inventory valuation losses	Inventory valuation losses	5,122		311		—		—		Inventory valuation losses	1,017		—
Derivative valuation (gains) losses (2)		(627)		(8)		(1,257)		(32)
Derivative valuation gains										Derivative valuation gains	(486)		(19)
Field level operating earnings ~~(3)~~(1)	Field level operating earnings ~~(3)~~(1)	$	9,565	$	4,558	$	16,982	$	9,329	Field level operating earnings ~~(3)~~(1)	$	2,438	$	1,384

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(1)Our crude oil marketing segment’s operating earnings included inventory valuation losses of $5.1 million and $0.3 million for the three months ended September 30, 2022 and 2021, respectively. For the nine months ended September 30, 2022 and 2021, operating earnings included inventory liquidation gains of $2.1 million and $10.3 million, respectively.

~~(2)~~During each of the second and third quarters of 2022, we entered into commodity purchase and sale contracts for 300,000 barrels of crude oil, which were adjusted to fair value at June 30, 2022 and September 30, 2022, respectively.

~~(3)~~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 ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021~~2022 primarily due to higher crude oil ~~prices~~volumes in the ~~2022~~2023 period, partially offset by lower volumes and higher fuel costs and higher driver compensation. Field level operating earnings increased during the nine months ended September 30, 2022 as compared to the same period in 2021 primarily due to higher crude oil prices and ~~volumes in the 2022 period, partially offset by~~ higher fuel costs and higher driver compensation.

We held crude oil inventory at a weighted average composite price as follows at the dates indicated (in barrels):

September 30, 2022 December 31, 2021
Average Average
Barrels Price Barrels Price
Crude oil inventory 304,554 $ 85.80 259,489 $ 71.86


	March 31, 2023			December 31, 2022
		Average			Average
	Barrels	Price		Barrels	Price

Crude oil inventory	285,440	$	74.46	328,562	$	78.39

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~~2022 Form 10-K.

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Transportation

Our transportation segment revenues, operating earnings, selected costs and operating data were as follows for the periods indicated (in thousands):


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2022		2021		Change (1)		2022		2021		Change (1)			2023		2022		Change (1)

Revenues	Revenues	$	29,830	$	24,826	20	%	$	86,054	$	69,558	24	%	Revenues	$	26,445	$	26,690	(1	%)
Operating earnings	Operating earnings	$	3,307	$	2,264	46	%	$	9,112	$	4,520	102	%	Operating earnings	$	901	$	2,868	(69	%)
Depreciation and amortization	Depreciation and amortization	$	2,791	$	2,957	(6	%)	$	8,671	$	8,895	(3	%)	Depreciation and amortization	$	3,131	$	2,957	6	%
Driver commissions		$	4,020	$	3,710	8	%	$	11,509	$	11,181	3	%
Driver commissions and wages														Driver commissions and wages	$	3,727	$	3,765	(1	%)
Insurance	Insurance	$	2,186	$	2,143	2	%	$	6,499	$	6,455	1	%	Insurance	$	2,180	$	2,149	1	%
Fuel	Fuel	$	3,136	$	1,973	59	%	$	9,647	$	5,953	62	%	Fuel	$	2,678	$	2,802	(4	%)
Maintenance expense	Maintenance expense	$	1,539	$	1,027	50	%	$	4,057	$	3,001	35	%	Maintenance expense	$	1,387	$	1,248	11	%
Mileage (000s)	Mileage (000s)	6,775		6,931		(2	%)	20,437		21,109		(3	%)	Mileage (000s)	6,552		6,798		(4	%)

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(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				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022

Total transportation revenue	Total transportation revenue	$	29,830	$	24,826	$	86,054	$	69,558	Total transportation revenue	$	26,445	$	26,690
Diesel fuel cost	Diesel fuel cost	(3,136)		(1,973)		(9,647)		(5,953)		Diesel fuel cost	(2,678)		(2,802)
Revenues, net of fuel costs (1)	Revenues, net of fuel costs (1)	$	26,694	$	22,853	$	76,407	$	63,605	Revenues, net of fuel costs (1)	$	23,767	$	23,888

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(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.

~~Three Months Ended September 30, 2022 vs. Three Months Ended September 30, 2021~~. Transportation revenues ~~increased~~decreased by ~~$5.0~~$0.2 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the three months ended ~~September 30, 2021.~~March 31, 2022. Transportation revenues, net of fuel costs, ~~increased~~decreased by ~~$3.8~~$0.1 million during the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the prior year period. These ~~increases~~decreases in transportation revenues were primarily due to ~~increased~~decreased transportation rates during the ~~2022~~2023 period ~~through continued negotiations with customers to increase rates. In addition,~~ as a result of ~~customer demand, we opened four new terminals during~~a slight softening in the second half of 2021. These terminals, located in West Memphis, Arkansas, Charleston, West Virginia, Augusta, Georgia, and Joliet, Illinois, increased revenues by approximately $2.4 million during the third quarter of 2022.

~~Our~~ transportation ~~operating earnings increased by $1.0 million for the three months ended September 30, 2022 as compared to the same period in 2021, primarily~~market due to ~~higher revenues as a result of increased transportation rates~~changes in demand, supply chain issues and ~~revenues from new terminals, partially offset by higher fuel costs and higher maintenance expense.~~inflation.

Driver commissions ~~increased by $0.3 million~~ during the three months ended ~~September 30, 2022 as compared to~~March 31, 2023 were consistent with the three months ended ~~September 30, 2021,~~March 31, 2022, primarily due to an increase in driver pay in July 2022 and an increase in the number of drivers, partially offset by lower mileage during the ~~2022~~2023 period.

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Fuel costs ~~increased~~decreased by ~~$1.2~~$0.1 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021,~~2022, primarily as a result of ~~an increase in the price of fuel~~lower miles traveled during the ~~2022~~2023 period. Insurance costs remained relatively constant during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021,~~2022, primarily due to consistent insurance premiums during the ~~2021~~2022 and ~~2022~~2023 periods. Maintenance expense increased by ~~$0.5~~$0.1 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021,~~2022, primarily due to repairs and maintenance to older tractors and trailers in our fleet and escalating prices in parts, repairs and maintenance.

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Depreciation and amortization expense ~~decreased~~increased by $0.2 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021,~~2022, primarily as a result of the timing of purchases of new tractors and trailers in ~~2021~~2022 and ~~2022.~~

~~Nine Months Ended September 30, 2022 vs. Nine Months Ended September 30, 2021~~. Transportation revenues increased by $16.5 million during the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. Transportation revenues, net of fuel costs, increased by $12.8 million during the nine months ended September 30, 2022, as compared to the prior year period. These increases in transportation revenues were primarily due to increased transportation rates during the 2022 period through continued negotiations with customers to increase 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 $6.9 million during the first nine months 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.2023.

Our transportation operating earnings ~~increased~~decreased by ~~$4.6~~$2.0 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021,~~2022, primarily due to ~~higher~~lower revenues as a result of ~~increased~~decreased transportation rates and ~~revenues from new terminals, partially offset by~~ higher ~~fuel costs and higher maintenance expense.~~

Driver commissions increased by $0.3 million for the nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to an increase in driver pay and an increase in the number of drivers, partially offset by lower mileage during the 2022 period.

Fuel costs increased by $3.7 million during the nine months ended September 30, 2022 as compared to the same period in 2021, primarily as a result of an increase in price of fuel during the 2022 period. Insurance costs remained relatively constant during the nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to consistent premiums during the 2021 and 2022 periods. Maintenance expense increased by $1.1 million during the nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to repairs and maintenance to older tractors and trailers in our fleet and escalating prices in parts, repairs and maintenance.

~~Depreciation~~depreciation and amortization expense, ~~decreased by $0.2 million during the nine months ended September 30, 2022 as compared to the same period in 2021, primarily as a result of the timing of purchases of new tractors~~maintenance expense and ~~trailers in 2021 and 2022.~~other operating costs.

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Pipeline and Storage

Our pipeline and storage segment revenues, operating losses and selected costs were as follows for the periods indicated (in thousands):


		Three Months Ended						Nine Months Ended						Three Months Ended
		September 30,						September 30,						March 31,
		2022		2021		Change (1)		2022		2021		Change (1)		2023		2022		Change (1)

Segment revenues (2)	Segment revenues (2)	$	2,912	$	738	295	%	$	5,869	$	1,808	225%	Segment revenues (2)	$	809	$	897	(10	%)
Less: Intersegment revenues (2)	Less: Intersegment revenues (2)	(2,912)		(611)		377	%	(5,869)		(1,293)		354%	Less: Intersegment revenues (2)	(809)		(897)		(10	%)
Revenues	Revenues	$	—	$	127	(100	%)	$	—	$	515	(100%)	Revenues	$	—	$	—	—	%

Operating losses	Operating losses	(909)		(716)		27	%	(2,607)		(1,837)		42%	Operating losses	(1,201)		(822)		46	%
Depreciation and amortization	Depreciation and amortization	269		281		(4	%)	808		758		7%	Depreciation and amortization	263		268		(2	%)
Insurance	Insurance	200		169		18	%	600		527		14%	Insurance	217		200		9	%

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(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		Nine Months Ended			Three Months Ended
		September 30,		September 30,			March 31,
		2022	2021	2022	2021		2023	2022

Pipeline throughput	Pipeline throughput	9,963	9,759	11,242	6,889	Pipeline throughput	10,088	10,486
Terminalling	Terminalling	9,716	9,159	11,451	7,408	Terminalling	10,395	10,948

During each of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, all pipeline and storage segment revenues were earned from GulfMark, an affiliated ~~shipper, while during the three and nine months ended September 30, 2021,~~shipper. All pipeline and storage revenues ~~included revenues from a third-party shipper under a contract that had been in place at the time of the acquisition of the pipeline and related terminal assets, and has subsequently ended. Revenues~~ earned from ~~an affiliated shipper~~GulfMark are eliminated ~~due to~~in consolidation, with the offset to marketing costs and expenses in our unaudited condensed consolidated statements of operations. Segment revenues from GulfMark decreased by $0.1 million for the three months ended March 31, 2023 as compared to the same period in 2022, primarily due to lower volumes transported by GulfMark during the current period.

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. We are breaking ground on thecurrently constructing a new pipeline connection between ~~our Victoria Express~~the VEX Pipeline System and the Max Midstream pipeline system, and we expect to complete construction and place the assets into commercial service during the second or third quarter of 2023. In addition, we are exploring new connections with ~~several~~ other pipeline systems, for new crude oil supply opportunities both upstream and downstream of the pipeline, to enhance the crude oil supply and take-away capability of the system.

Our pipeline and storage operating losses increased by $0.4 million during the three months ended March 31, 2023 as compared to the 2022 period, primarily due to increases in operating salaries and wages and related personnel costs, materials and supplies, outside service costs and insurance costs in the 2023 period.

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Logistics and Repurposing

Our logistics and repurposing segment revenues, operating earnings and selected costs were as follows for the ~~periods~~period indicated (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2022 (1)
2022 (1)
Revenues $ 8,677 $ 8,677
Operating earnings 155 155
Depreciation and amortization 940 940
Driver commissions 1,554 1,554
Insurance 128 128
Fuel 676 676
Maintenance expense 260 260

~~_______________~~

~~(1)Represents the period from acquisition, August 12, 2022 through September 30, 2022.~~


	Three Months Ended
	March 31,
	2023

Revenues	$	15,241
Operating earnings	535
Depreciation and amortization	1,581
Driver commissions	2,045
Insurance	568
Fuel	994
Maintenance expense	509

On August 12, 2022, we acquired all of the equity interests of Firebird and Phoenix. Firebird is an interstate bulk motor carrier of crude oil, condensate, fuels, oils and ~~other~~͏other petroleum products. Firebird has six terminal locations throughout Texas and ~~owned~~owns 123 tractors and 216 trailers largely in the Eagle Ford ~~basin at the time of the acquisition.~~basin. Phoenix ~~recycles~~͏recycles and repurposes off-specification fuels, lubricants, crude oil and other chemicals from ~~producers~~͏producers in the U.S. ~~We expect that this acquisition will offer us the opportunity to expand our value chain and market impact, with numerous synergies benefiting the combined companies.~~

General and Administrative Expense

General and administrative expense increased by ~~$1.1~~$0.8 million during the three months ended ~~September 30, 2022~~March 31, 2023 as compared to the same period in ~~2021,~~2022, primarily due to higher salaries and wages and related personnel costs, outside service costs and audit ~~fees and legal fees, partially offset~~fees.

Interest Expense

Interest expense increased by ~~lower franchise and other taxes. The~~$0.6 million during the three months ended March 31, 2023 as compared to the same period in 2022, ~~period also includes approximately $0.3~~primarily due to higher interest expense related to the outstanding Term Loan of $23.8 million ~~of acquisition related costs for the purchase of Phoenix and Firebird~~under our credit agreement with Cadence Bank (see Note 611 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information) and approximately $0.2 million of costs related to the repurchase of our common shares from an affiliate (see Note 17 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information).

General and administrative expense increased by $3.0 million during the nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to higher salaries and wages and related personnel costs, outside service costs, audit fees and legal fees, partially offset by lower franchise and other taxes. The 2022 period also includes approximately $0.3 million of acquisition related costs for the purchase of Phoenix and Firebird and approximately $0.2 million of costs related to the repurchase of our common shares from an affiliate.

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.

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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 carried back our NOL for fiscal year 2020 to fiscal years 2015 and 2016, and in June 2022, we received a cash refund of approximately $6.8 million.

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 ~~bank~~ credit ~~facility~~agreement and (iv) funds received from the sale of equity securities. Our primary cash requirements include, but are not limited to, (a) ordinary course of business uses, such as the payment of amounts related to the purchase of crude oil, and other expenses, (b) discretionary capital spending for investments in our business and (c) dividends to our shareholders. We believe we will have sufficient liquidity through our current cash balances, availability under our ~~bank~~ credit ~~facility,~~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):


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022

Cash and cash equivalents	Cash and cash equivalents	$	86,510	$	97,825	Cash and cash equivalents	$	42,135	$	20,532
Working capital	Working capital	81,416		87,199		Working capital	15,695		19,083

Our cash balance at ~~September 30, 2022 decreased~~March 31, 2023 increased by 12105 percent from December 31, ~~2021,~~2022, as discussed further below.

We have in place a credit agreement (the “Credit Agreement”) with Cadence Bank. The Credit Agreement provides for (a) a revolving credit facility that allows for borrowings up to $60.0 million in aggregate principal amount from time to time, and (b) a term loan in aggregate principal amount of $25.0 million (the “Term Loan”). We may also obtain letters of credit under the revolving credit facility up to a maximum amount of $30.0 million, which reduces availability under the revolving credit facility by a like amount. Borrowings under the revolving credit facility may be, at our option, base rate loans (defined by reference to the higher of the prime rate, the federal funds rate or an adjusted term SOFR for a one month tenor plus one percent) or SOFR loans, in each case plus an applicable margin, the amount of which is determined by reference to our consolidated total leverage ratio, and is between 1 percent and 2 percent for base rate loans and between 2 percent and 3 percent for SOFR loans.

The term loan amortizes on a 10-year schedule with quarterly payments beginning December 31, 2022, and matures October 27, 2027. Proceeds of the term loan were used, together with additional cash on hand, to fund the repurchase of shares from the KSA and certain of its affiliates. The term loan bears interest at the SOFR loan rate plus the applicable margin for SOFR loans.

We are required to maintain compliance with certain financial covenants under the Credit Agreement, including a consolidated leverage ratio, an asset coverage ratio and a consolidated fixed charge coverage ratio. We were in compliance with these covenants as of March 31, 2023. At ~~September 30, 2022,~~March 31, 2023, we had ~~$15.0~~$23.8 million of borrowings outstanding under the ~~amended credit agreement~~Credit Agreement, representing the remaining principal balance of the Term Loan, with ~~Wells Fargo and $8.2~~a weighted average interest rate of 6.81 percent. We also had $20.4 million of letters of credit issued under the ~~amended credit agreement with Wells Fargo~~Credit Agreement at a fee of ~~1.75~~2.00 percent per annum. No amounts were outstanding under the revolving credit facility. See Note 11 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information. During the 2022 period, as a result of the significant increase in crude oil prices, we borrowed $45.0 million under the amended credit agreement with Well Fargo for working capital purposes and repaid $30.0 million. At September 30, 2022, we were in compliance with all financial covenants under this credit agreement. See Note 17 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding the termination of the credit agreement with Wells Fargo and our entry into a new credit agreement subsequent to the end of our third fiscal quarter.

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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 filed a registration statement initially registering an aggregate of $20.0 million of shares of common stock for sale under the ATM Agreement. The total number of shares of common stock to be sold, if any, and the price at which the shares will be sold will be determined by us periodically in connection with any such sales, though the total amount sold may not exceed the limitations stated in the registration statement. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, we received net proceeds of approximately ~~$0.3~~$0.6 million (net of offering costs to ~~B. Riley Securities, Inc.~~the Agent of ~~$14~~$27 thousand) from the sale of ~~8,202~~14,680 of our common shares at an average price per share of approximately ~~$37.38~~$40.74 under this agreement. ~~We did not sell any shares during the three months ended September 30, 2022.~~

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We utilize cash from operations to make discretionary investments in our crude oil marketing, transportation, pipeline and storage and logistics and repurposing 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 our bank credit facility, 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~~2022 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):


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2022		2021			2023		2022

Cash provided by (used in):	Cash provided by (used in):					Cash provided by (used in):
Operating activities	Operating activities	$	15,832	$	64,232	Operating activities	$	23,707	$	5,873
Investing activities	Investing activities	(37,847)		(8,043)		Investing activities	(1,459)		(2,838)
Financing activities	Financing activities	8,612		(5,832)		Financing activities	(2,333)		(2,207)

Operating activities. Net cash flows provided by operating activities for the ~~nine~~three months ended ~~September 30, 2022 decreased~~March 31, 2023 increased by ~~$48.4~~$17.8 million as compared to the same period in ~~2021.~~2022. The ~~decrease~~increase in net cash flows from operating activities was primarily due to changes in our working capital ~~accounts, including an increase of $10.9~~accounts. Early payments received from customers increased by approximately $5.4 million in ~~crude~~the 2023 period, and early payments made to suppliers decreased by approximately $4.9 million in the 2023 period. Crude oil inventory decreased by $4.6 million at ~~September 30, 2022. The increase in inventory was~~March 31, 2023, primarily due to ~~an increase~~a decrease in the price of our crude oil inventory, which ~~increased~~decreased from ~~$71.86~~$78.39 per barrel at December 31, ~~2021~~2022 to ~~$85.80~~$74.46 per barrel at ~~September 30, 2022,~~March 31, 2023, and ~~an increase~~a decrease of ~~17.4~~13.1 percent in the number of barrels held in inventory.

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 increase cash and reduce accounts receivable as of the balance sheet date.

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Early payments received from customers and prepayments to suppliers were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2022		2021			2023		2022

Early payments received	Early payments received	$	43,133	$	52,841	Early payments received	$	50,672	$	45,265
Prepayments to suppliers	Prepayments to suppliers	12,242		5,732		Prepayments to suppliers	9,112		14,055

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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 September 2022, we received early payments from certain customers in our crude oil marketing operations as noted in the table above. Our cash balance decreased by approximately $11.3 million as of September 30, 2022 relative to the year ended December 31, 2021 primarily as a result of theThe timing of ~~the receipt~~payments and receipts of these early ~~payments~~pays received and ~~prepayments made to suppliers during each period resulting from an increase in crude oil price and marketing activities.~~paid can have a significant impact on our cash balance.

Investing activities. Net cash flows used in investing activities for the ~~nine~~three months ended ~~September 30, 2022 increased~~March 31, 2023 decreased by ~~$29.8~~$1.4 million as compared to the same period in ~~2021.~~2022. This ~~increase~~decrease was due to a payment of $33.6 million for the acquisition of Firebird and Phoenix in August 2022 (see Note 6 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information), partially offset by a decrease of ~~$3.1~~$1.8 million in capital spending for property and equipment (see following table) ~~and an increase~~, partially offset by a decrease of ~~$0.3~~$0.4 million in cash proceeds from the sales of assets.

Capital spending was as follows for the periods indicated (in thousands):


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2022		2021			2023		2022
Crude oil marketing (1)	Crude oil marketing (1)	$	4,351	$	1,145	Crude oil marketing (1)	$	275	$	3,124
Transportation (2)	Transportation (2)	1,416		7,607		Transportation (2)	167		535
Pipeline and storage (3)	Pipeline and storage (3)	890		1,169		Pipeline and storage (3)	971		27
Logistics and repurposing (4)	Logistics and repurposing (4)	132		—		Logistics and repurposing (4)	460		—
Other (5)	Other (5)	8		8		Other (5)	27		8
Capital spending	Capital spending	$	6,797	$	9,929	Capital spending	$	1,900	$	3,694

_______________

(1)2023 amount relates to the purchase of various field equipment, and the 2022 amount relates to the purchase of 2013 tractors ~~10 trailers~~ and other field ~~equipment, and the 2021~~equipment.

(2)2023 amount relates to the purchase of various field ~~equipment.~~

~~(2)~~equipment, and the 2022 amount relates to the purchase of three tractors ~~two trailers~~ and other field ~~equipment, and the 2021 amount relates to the purchase of 52 trailers, 26 tractors, and computer software and~~ equipment.

(3)~~2022~~2023 amount relates to spending for the ~~purchase~~continued construction of ~~land and easements in connection with~~ a planned pipeline connection, which is expected to be placed in commercial service during the second or third quarter of 2023, and the ~~2021~~2022 amount relates to the purchase of field equipment.

(4)~~2022~~2023 amount relates to the purchase of two tractors and various field equipment.

(5)Other capital spending relates to the purchase of office and computer equipment.

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Financing activities. Net cash ~~flows provided by~~used in financing activities was ~~$8.6~~$2.3 million for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 as compared to $2.2 million for the three months ended March 31, 2022. The increase in net cash flows used in financing activities of ~~$5.8 million for the nine months ended September 30, 2021. The increase in net cash flows from financing activities of $14.4~~$0.1 million was primarily due to ~~borrowings~~the following cash outflows and repayments under our bank credit facility during each period. During the 2022 period, as a result of the significant increase in crude oil prices and other cash flow needs, we borrowed $45.0 million under the bank credit facility for working capital purposes and repaid $30.0 million, while during the 2021 period, we borrowed $8.0 million under the bank credit facility primarily to repay the $10.0 million outstanding payable related to the purchase of the VEX pipeline system in October 2020.inflows:

~~This~~•an increase in ~~cash flows was partially offset by~~ the 2023 period in net repayments under our credit agreement. During the three months ended March 31, 2023, we made a principal payment of $0.6 million on the Term Loan. During the three months ended March 31, 2023, we also borrowed and repaid $18.0 million under the revolving credit facility under our credit agreement, primarily for working capital purposes;

•an increase in the 2023 period of ~~$0.3~~$0.4 million infor principal repayments made for finance lease obligations (see ~~below).~~“Material Cash Requirements” below for information regarding our finance lease obligations);

•an increase in the 2023 period in net proceeds from the sale of common shares under the ATM program. During the three months ended March 31, 2023, we received net proceeds of approximately $0.6 million from the sale of 14,680 of our common shares; and

•a decrease in the 2023 period in cash dividends paid on our common shares. During each of the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we paid cash dividends of ~~$0.72~~$0.24 per common share, or totals of ~~$3.2~~$0.7 million and ~~$3.1~~$1.1 million, respectively. ~~During~~On October 31, 2022, the ~~nine months ended September 30, 2022, we received net proceeds~~number of ~~approximately $0.3 million from the sale of 8,202 of our~~ common shares ~~under~~outstanding decreased by 1.9 million as a result of the ~~ATM Agreement as compared to net proceeds~~repurchase of ~~approximately $2.5 million~~shares from ~~the sale~~KSA and certain of ~~86,323 of our comments shares under the ATM Agreement during the nine months ended September 30, 2021.~~its affiliates.

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Material Cash Requirements

The following table summarizes our contractual obligations with material cash requirements at ~~September 30, 2022~~March 31, 2023 (in thousands):


				Payments due by period											Payments due by period
Contractual Obligations	Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Credit Agreement (1)	Credit Agreement (1)	$	15,000	$	—	$	15,000	$	—	$	—	Credit Agreement (1)	$	29,470	$	4,053	$	7,596	$	17,821	$	—
Finance lease obligations (2)	Finance lease obligations (2)	15,055		4,598		5,944		4,513		—		Finance lease obligations (2)	26,698		6,181		11,942		8,575		—
Operating lease obligations (3)	Operating lease obligations (3)	8,401		2,969		3,782		1,357		293		Operating lease obligations (3)	7,878		3,058		3,369		1,270		181
Purchase obligations (4)	Purchase obligations (4)	13,358		13,358		—		—		—		Purchase obligations (4)	15,981		15,981		—		—		—
Total contractual obligations	Total contractual obligations	$	51,814	$	20,925	$	24,726	$	5,870	$	293	Total contractual obligations	$	80,027	$	29,273	$	22,907	$	27,666	$	181

_______________

(1)Represents scheduled future maturities for amounts due under the Term Loan under our ~~credit agreement with Wells Fargo.~~Credit Agreement plus estimated cash payments for interest. Interest payments are based upon the principal amount of the amount outstanding and the applicable interest rate at March 31, 2023. See Note 11 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information about our ~~credit agreement.~~Credit Agreement.

(2)Amounts represent our principal contractual commitments, including interest, outstanding under finance leases for certain tractors, trailers, tank storage and throughput arrangements and other equipment.

(3)Amounts represent rental obligations under non-cancelable operating leases and terminal arrangements with terms in excess of one year.

(4)Amount represents commitments to purchase 35 new tractors and 3834 new trailers in our transportation business, 20 new tractors in our crude oil marketing business and 2818 new tractors and two new trailers in our logistics and repurposing segment.

We maintain certain lease arrangements with independent truck owner-operators for use of their equipment and driver services on a month-to-month basis. In addition, we enter into office space and certain lease and terminal access contracts in order to provide tank storage and dock access for our crude oil marketing business. These storage and access contracts require certain minimum monthly payments for the term of the contracts.

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See Note 15 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.

Transactions with Affiliates

For more information regarding transactions with our affiliates during the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, and subsequent to September 30,~~ 2022, see Note 9 ~~and Note 17~~ 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~~2022 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~~2022 Form 10-K.

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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~~2022 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 ~~September 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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~~2022 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~~2022 Form 10-K ~~as updated by our Form 8-K filed on June 9, 2022~~ or our other SEC filings.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 12, 2022, we issued 45,777 shares of common stock (the “Acquisition Shares”) as partial consideration for the acquisition of Firebird and Phoenix. Total consideration for the acquisition was approximately $39.7 million, consisting of a cash payment of $35.8 million, the Acquisition Shares valued at $1.4 million and contingent consideration valued at approximately $2.6 million. These Acquisition Shares were issued in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. For additional information, see Note 6 to the Unaudited Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

On August 12, 2022, we also granted a total of 30,518 restricted stock units (the “Inducement Awards”) to Trey Bosard and Tyler Bosard as an inducement to employment in accordance with Section 711(a) of the NYSE American Company Guide. The Inducement Awards vest in three separate tranches on each of the first three anniversaries of the grant date. The Inducement Awards were issued in reliance on an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit
Number						Exhibit

3.1						Certificate of Incorporation of Adams Resources & Energy, Inc., as amended (incorporated by reference to Exhibit 3.1 to Form 10-K for the fiscal year ended December 31, 2019).
3.2						Bylaws of Adams Resources & Energy, Inc., as amended (incorporated by reference to Exhibit 3.2 to ~~Current Report on Form 8-~~K f ~~iled on November~~ ~~1, 2022~~).
~~10.1~~						Limited Waiver Agreement and Amendment No. 1, dated August 11, 2022, to Credit Agreement, dated May 4, 2021, by and among Adams Resources & Energy, Inc., GulfMark Asset Holdings, LLC, and Service Transport Company, as Borrowers, the Lenders referred to t ~~herein, as Lenders, and Wells Fargo Bank, National Association, as Administrative Agent and Issuing Lender (incorporated by reference to Exhibit 10.1~~ to Current Report on Form 8-K filed on ~~August 17,~~November 1, 2022).
~~10.2~~10.1+*						~~Purchase~~Form of Employee Performance Share Unit Award Agreement dated August 12, 2022 by and among GulfMark Asset Holdings, LLC, Scott Bosard, Trey Bosard and Tyler Bosard (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K filed on August 17, 2022).for 2023 Awards under the Adams Resources & Energy, Inc. 2018 Long-Term Incentive Plan, as amended.
~~10.3+~~						~~Employment Agreement dated August 12, 2022 by and between Trey Bosard and Phoenix Oil, Inc. (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed on August 17, 2022).~~
~~10.4+~~						~~Change of Control Plan (incorporated by reference to Exhibit 10.3 to Current Report on Form 8-K filed on August 17, 2022).~~

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~~Exhibit~~
~~Number~~						~~Exhibit~~
31.1*						Sarbanes-Oxley Section 302 certification of Executive Chairman pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Sarbanes-Oxley Section 302 certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Sarbanes-Oxley Section 906 certification of Executive Chairman pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Sarbanes-Oxley Section 906 certification of Chief Financial Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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.

+ Management compensatory plan or arrangement.

4740

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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.


			ADAMS RESOURCES & ENERGY, INC.
			(Registrant)



Date:	~~November 10, 2022~~May 9, 2023	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)

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