1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 1-7908
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ADAMS RESOURCES & ENERGY, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 74-1753147
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Post Oak Park, Houston, Texas 77027
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(Address of principal executive office & Zip Code)
Registrant's telephone number, including area code (713) 881-3600
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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 X No
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The number of shares of Common Stock of the Registrant, par value $.10 per
share, outstanding at May 11, 2000 was 4,217,596.
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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
-----------------------------
2000 1999
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REVENUES:
Marketing...................................................... $ 2,000,432 $ 515,266
Transportation................................................. 9,780 7,851
Oil and gas.................................................... 1,116 853
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2,011,328 523,970
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COSTS AND EXPENSES:
Marketing...................................................... 1,995,700 513,361
Transportation................................................. 8,728 7,233
Oil and gas.................................................... 473 709
General and administrative..................................... 1,539 724
Depreciation, depletion and amortization....................... 1,645 1,786
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2,008,085 523,813
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Operating earnings................................................ 3,243 157
Other income (expense):
Property sales and other....................................... 117 666
Interest....................................................... (72) (30)
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Earnings before income taxes...................................... 3,288 793
Income tax provision
Current........................................................ 785 45
Deferred....................................................... 450 129
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1,235 174
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Net earnings...................................................... $ 2,053 $ 619
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Basic and diluted net earnings $ .49 $ .15
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per common share...............................................
Dividends per common share........................................ $ - $ -
============== ===========
The accompanying notes are an integral part of these financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- Marketing
Marketing division revenues, operating earnings and significant
operating statistics were as follows:
First Quarter First Quarter
2000 1999
---------------- --------------
Revenues $ 2,000,432,000 $ 515,266,000
Operating earnings $ 4,024,000 $ 1,074,000
Volume/Price Information
Wellhead Purchases - Per day (1)
Crude Oil 286,000 bbls 192,000 bbls
Natural Gas 803,000 mcf - (2)
Average Price
Crude Oil $ 27.10/bbl $ 10.99/ bbl
Natural Gas $ 2.57/mcf $ - (2)
(1) Reflects the volume of crude oil or natural gas purchased
from third parties at the lease level and shipped to market.
(2) Natural gas marketing operations were significantly expanded
effective October 1, 1999.
Gross revenues for marketing operations increased by
$1,485,166,000 or 288% in the comparative current period as a result of an
average 147% increase in price coupled with increased volumes of crude oil
purchased at the wellhead. Further, during the fourth quarter of 1999, the
Company significantly expanded its presence in the wholesale marketplace for
natural gas. This event contributed to increased revenues and earnings for the
comparative first quarter of 2000. Marketing division operating earnings for
the first three months of 2000 increased by 275% versus the 1999 period. As
prices rose within the crude oil marketplace during the first part of 2000,
supply and demand conditions caused an improvement of per unit gross margins.
Hence, with additional volumes, operating earnings improved significantly.
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- Transportation
Transportation revenues and operating earnings increased as
follows:
First Quarter First Quarter Percentage
2000 1999 Increase
------------- -------------- ----------
Revenues $ 9,780,000 $ 7,851,000 25%
Operating earnings $ 688,000 $ 383,000 80%
Transportation revenues and operating earnings improved during
2000 as a result of improved customer demand. Because of the fixed costs
associated with a trucking operation, operating earnings on a percentage basis
improved at a faster rate than revenues in the current period.
- Oil and Gas
Oil and gas division revenues and operating earnings are
primarily a function of crude oil and natural gas prices and volumes. The
increase in this division's revenues and operating earnings is a direct result
of improved prices for both crude oil and natural gas, partially offset by
normal natural gas production declines. The current quarter also benefited from
a reduced provision for depreciation and depletion of $573,000 in 2000 versus
$720,000 in 1999. Comparative amounts are as follows:
First Quarter First Quarter
2000 1999
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Revenues $ 1,116,000 $ 853,000
Operating earnings $ 70,000 $ (576,000)
Volume/Price Information
Crude oil
Volume 11,200 bbls 10,800 bbls
Average price $ 27.78/bbl $ 9.67/bbl
Natural gas
Volume 305,000 mcf 450,000 mcf
Average price $ 2.54/mcf $ 1.68/mcf
- Other income (expense)
Property sales and other income of $117,000 and $666,000,
respectively, resulted from interest income in 2000 and from gains realized on
the sale of forty-five truck tractors in 1999.
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Liquidity and Capital Resources
Cash flow from operations before working capital items for the
first three months of 2000 totaled $4,103,000. The portion of cash flow
invested in transportation operations totaled $332,000, while marketing
equipment additions totaled $234,000 and $1,471,000 went toward oil and gas
drilling. The remaining $1,476,000 of cash flow before working capital items
served to bolster cash reserves. As the marketing business continues to grow,
the availability of trade credit becomes increasingly critical to the success
of the Company's operations. Thus, management places great importance on
maintaining a strong liquid balance sheet.
Refer to the "Liquidity and Capital Resources" section of the
Company's Annual Report on Form 10-K for the year ended December 31, 1999 for
additional discussion of the Company's bank relationships and other matters.
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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
March 31, December 31,
2000 1999
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(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................................... $ 48,817 $ 24,137
Accounts receivable, net.................................... 240,482 216,978
Inventories................................................. 33,693 21,475
Prepaid and other........................................... 1,589 1,635
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Total current assets.......................... 324,581 264,225
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Property and equipment........................................ 69,267 67,235
Less - accumulated depreciation,
depletion and amortization........................... (40,230) (38,590)
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29,037 28,645
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Other assets.................................................. 177 178
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$ 353,795 $ 293,048
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 294,910 $ 236,481
Accrued and other liabilities............................... 8,167 8,306
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Total current liabilities..................... 303,077 244,787
Long-term debt, less current maturities....................... 9,900 9,900
Deferred taxes and other liabilities.......................... 2,744 2,340
------------ ---------------
315,721 257,027
Shareholders' equity:
Preferred stock - $1.00 par value, 960,000 shares
authorized, none outstanding............................ - -
Common stock - $.10 par value, 7,500,000
shares authorized, 4,217,596 shares
outstanding ............................................ 422 422
Contributed capital......................................... 11,693 11,693
Retained earnings since December 31, 1992................... 25,959 23,906
------------ ---------------
Total shareholders' equity ................... 38,074 36,021
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$ 353,795 $ 293,048
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The accompanying notes are an integral part of these financial statements.
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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
Three Months Ended
March 31,
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2000 1999
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CASH PROVIDED BY OPERATIONS:
Net earnings .................................................................. $ 2,053 $ 619
Items of income not requiring (providing) cash -
Depreciation, depletion and amortization .................................... 1,645 1,786
Deferred income tax provision ............................................... 450 129
Gain on sale of properties................................................... - (611)
Other, net .................................................................. (45) (78)
Decrease (increase) in accounts receivable .................................... (23,504) (12,317)
Decrease (increase) in inventories ............................................ (12,218) 731
Decrease (increase) in prepaid and other ...................................... 46 (696)
Increase (decrease) in accounts payable ....................................... 58,429 16,433
Increase (decrease) in accrued liabilities .................................... (139) 489
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Net cash provided by operating activities ................................... 26,717 6,485
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INVESTING ACTIVITIES:
Property and equipment additions .............................................. (2,037) (866)
Proceeds from property sales .................................................. - 1,245
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Net cash provided by (used in) investing activities ......................... (2,037) 379
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FINANCING ACTIVITIES:
Repayment of debt ............................................................. - (3,900)
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Net cash provided by (used in) financing activities ......................... - (3,900)
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Increase (decrease) in cash and cash equivalents................................. 24,680 2,964
Cash at beginning of period...................................................... 24,137 10,215
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Cash at end of period............................................................ $ 48,817 $ 13,179
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Supplemental disclosure of cash flow information:
Interest paid during the period ............................................... $ 72 $ 30
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Income taxes paid during the period............................................ $ 800 $ -
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The accompanying notes are an integral part of these financial statements.
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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying condensed consolidated financial statements are
unaudited but, in the opinion of the Company's management, include all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of financial position at March 31, 2000 and December 31, 1999 and
results of operations and cash flows for the three months ended March 31, 2000
and 1999. Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to Securities and Exchange
Commission rules and regulations, although the Company believes the disclosures
made are adequate to make the information presented not misleading. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements, and the notes thereto, included in
the Company's latest annual report on Form 10-K. The interim statement of
operations is not necessarily indicative of results to be expected for a full
year.
Note 2 - Segment Reporting
The Company is primarily engaged in the business of crude oil, natural
gas and petroleum products marketing, as well as tank truck transportation of
liquid chemicals and oil and gas exploration and production. Information
concerning the Company's various business segments is summarized as follows (in
thousands):
Depreciation
Earnings Depletion Property
(Loss) and and
from Amorti- Equipment
Revenues Operations zation Additions
------------- ------------- ------------ -----------
For the three months ended
March 31, 2000
Marketing........................ $ 2,000,432 $ 4,024 $ 708 $ 234
Transportation................... 9,780 688 364 332
Oil and gas...................... 1,116 70 573 1,471
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$ 2,011,328 $ 4,782 $ 1,645 $ 2,037
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For the three months ended
March 31, 1999
Marketing........................ $ 515,266 $ 1,074 $ 831 $ 212
Transportation................... 7,851 383 235 522
Oil and gas...................... 853 (576)(1) 720 132
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$ 523,970 $ 881 $ 1,786 $ 866
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(1) Includes a $646,000 comparative earnings decrease caused by reduced crude
oil and natural gas prices and a greater provision for depreciation and
depletion.
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Identifiable assets by industry segment are as follows (in thousands):
March 31, December 31,
2000 1999
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Marketing.................................. $ 277,714 $ 242,786
Transportation............................. 15,308 15,412
Oil and gas................................ 11,577 10,449
Other...................................... 49,196 24,401
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$ 353,795 $ 293,048
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Intersegment sales are insignificant. Other identifiable assets are
primarily corporate cash, accounts receivable, and properties not identified
with any specific segment of the Company's business. All sales by the Company
occurred in the United States.
Earnings from operations by segment represent revenues less operating
costs and expenses and depreciation, depletion and amortization and are
reconciled to earnings from operations before income taxes, as follows (in
thousands):
For the three months ended
March 31,
----------------------------
2000 1999
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Segment operating earnings........................... $ 4,782 $ 881
General and administrative expenses.................. (1,539) (724)
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Operating earnings................................... 3,243 157
Property sales and other............................. 117 666
Interest expense .................................... (72) (30)
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Earnings before income taxes......................... $ 3,288 $ 793
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Note 3 - Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The statement establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement requires that changes in the derivative's fair value
be recognized currently in earnings unless specific hedge accounting criteria
are met. Qualifying hedges allow a derivative's gains and losses to offset
related results on the hedged item in the income statement, and requires that a
company must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
In June 1999, the FASB issued SFAS No. 137 which deferred the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. A
company may implement SFAS No. 133 as of the beginning of any fiscal quarter
after issuance, however, the statement cannot be applied retroactively. The
Company does not plan to early adopt SFAS No. 133. The Company is currently
assessing the potential impact of adopting SFAS No. 133. Applications of this
standard could increase volatility in earnings and shareholders' equity through
other comprehensive income.
On January 1, 1999 the Company adopted the Emerging Issues Task
Force's Issue 98-10, "Accounting for Contracts Involved in Energy Trading and
Risk Management Activities." Issue 98-10 is effective for fiscal years
beginning after December 15, 1998, and requires energy trading contracts (as
defined) to be recorded at fair value on the balance sheet, with the change in
fair value included in earnings. The effect of initial adoption on January 1,
1999 was not significant. The accompanying statement of operations includes
pretax income of $385,000 to reflect the future income from marketing
operations based upon the year-end prices of the underlying commodities being
traded. The accompanying balance sheet reflects the fair value of the trading
asset of $2,524,000 in current assets and the fair value of the trading
liability of $2,139,000 in current liabilities.
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PART II. OTHER INFORMATION
Item 1. - None
Item 2. - None
Item 3. - None
Item 4. - Submission of Matters to a Vote of Security Holders
The 2000 Annual Meeting of Stockholders (the "Meeting") of the Company
was held on April 26, 2000. At the Meeting, holders of common stock, $.10 par
value, of the Company elected nine members of the Company's Board of Directors.
Out of the 4,217,596 shares of common stock entitled to vote at the
Meeting, there were 3,922,364 shares of common stock voted for the election of
the nominees for Directors listed in the proxy statement.
Item 6. Exhibits and Reports on Form 8K
a. Exhibits - None.
b. Reports on Form 8-K - None.
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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: May 11, 2000 By /s/ K. S. Adams, Jr.
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K. S. Adams, Jr.
Chief Executive Officer
By /s/ Richard B. Abshire
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Richard B. Abshire
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
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27* - Financial Data Schedule
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* - Filed herewith