<PAGE> 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 June 30, 1998 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.
(Exact name of Registrant as specified in its charter)
Delaware 74-1753147
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Post Oak Park, Houston, Texas 77027
(Address of principal executive office & Zip Code)
Registrant's telephone number, including area code (713) 881-3600
------------------
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
------ ------
The number of shares of Common Stock of the Registrant, par value $.10 per
share, outstanding at July 31, 1998 was 4,217,596.
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<PAGE> 2
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUE:
Marketing $ 860,706 $ 917,467 $ 454,329 $ 432,855
Transportation 16,992 14,271 8,329 7,581
Oil & Gas 3,516 4,422 1,920 1,579
--------- --------- --------- ---------
881,214 936,160 464,578 442,015
--------- --------- --------- ---------
COSTS AND EXPENSES:
Operating
Marketing 856,572 916,434 452,099 432,887
Transportation 14,890 11,446 7,356 6,153
Oil & Gas 1,939 794 1,637 359
Corporate general and administrative 1,157 1,077 614 541
Depreciation, depletion and amortization 4,252 2,752 2,059 1,139
--------- --------- --------- ---------
878,810 932,503 463,765 441,079
--------- --------- --------- ---------
Operating earnings 2,404 3,657 813 936
OTHER INCOME (EXPENSE):
Property sales and other 108 615 -- 261
Interest (146) (128) (81) (41)
--------- --------- --------- ---------
(38) 487 (81) 220
--------- --------- --------- ---------
Earnings before income taxes 2,366 4,144 732 1,156
Income tax provision
Current 702 171 208 40
Deferred 200 1,375 100 400
--------- --------- --------- ---------
902 1,546 308 440
--------- --------- --------- ---------
NET EARNINGS $ 1,464 $ 2,598 $ 424 $ 716
========= ========= ========= =========
PER COMMON SHARE DATA:
Basic and diluted net earnings $ .35 $ .62 $ .10 $ .17
========= ========= ========= =========
Dividends $ -- $ -- $ -- $ --
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Six Months Comparison
- Marketing
Marketing division revenues and operating earnings were as
follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 860,706 $ 917,467 $ 454,329 $ 432,855
Operating earnings (loss) $ 2,577 $ 540 $ 1,452 $ (282)
</TABLE>
Gross revenues for the Company's Marketing operations were
reduced by $56,761,000 or 6%, in the comparative current period as a result
of reduced average crude oil prices partially offset by greater volumes of
crude oil purchased at the wellhead. Compared to last year's first half,
average crude oil sales prices were reduced by approximately 38% in 1998 as
crude oil fell to the $13 per barrel range. Average wellhead purchases were
105,000 barrels per day in 1998 versus 60,000 barrels per day in 1997.
Marketing division operating margins for the first six months of 1998
increased to $2,577,000 because of the reversal of the unusually
unfavorable market conditions that existed in 1997.
- Transportation
Transportation revenues and operating earnings were as follows
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------ ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $16,992 $14,271 $ 8,329 $ 7,581
Operating earnings $ 1,659 $ 2,518 $ 740 $ 1,266
</TABLE>
Transportation revenues increased in 1998 because recent
equipment additions enabled the Company to handle a larger volume of
business. Operating earnings were reduced, however, when
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<PAGE> 4
sales volumes did not grow as fast as anticipated due to an apparent
general slowing of the United States economy. As noted, in order to service
a larger volume of business, the Company expanded capacity which
necessitated increased fixed costs. When the rate of sales volume growth
slowed, the new higher level of fixed cost caused the earnings decline.
- Oil and Gas
Oil and gas division revenues and operating earnings were as
follows (in thousands):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------- -------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ 3,516 $ 4,422 $ 1,920 $ 1,579
Operating earnings (loss) $ (675) $ 1,676 $ (765) $ 493
</TABLE>
Oil and gas revenues decreased for the comparative six month
period as a result of reduced crude oil and natural gas prices. For the
comparative current quarter revenues were improved primarily as a result of
increased crude oil sales volumes. Volumes and prices compare as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------------------- -------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Crude oil
Volume 36,200 Bbls. 31,500 Bbls. 19,200 Bbls. 11,300 Bbls.
Average price $13.75/ Bbl $21.14/ Bbl. $ 13.03/ Bbl. $ 19.28/ Bbl.
Natural gas
Volume 1,625,000 Mcf 1,700,000 Mcf 825,000 Mcf 810,000 Mcf
Average price $1.95/ Mcf $2.24/ Mcf $1.99/ Mcf $ 1.78/ Mcf
</TABLE>
Oil and gas operating earnings decreased in 1998 in part because
of the reduced pricing scenario. In addition, during the second quarter of
1998, the Company incurred and expensed $1,044,000 of 3D seismic
geophysical costs. The Company continues to participate in the seismic
study and expects to incur and expense approximately $320,000 of additional
3D seismic costs during the third quarter of 1998. The Company currently
anticipates participating in the drilling of the first test well on the
prospective acreage during the fourth quarter of 1998.
- Other
The provision for depreciation, depletion and amortization is
increased in 1998 because of a larger capitalized cost base. Recently
included in the depreciable cost base is the Company's offshore Louisiana
crude oil pipeline completed at a cost of $4.2 million and placed in
service in
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<PAGE> 5
January 1998. Property sales and other income for 1998 resulted
primarily from the sale of a former gasoline service station location while
1997 included a $401,000 recovery from an insurance carrier for prior year
overcharges and a $215,000 gain realized on the sale of twenty-one truck
tractors.
- Three Months Comparisons
Comparisons for the three month period ended June 30, 1998 are
consistent with the discussions provided above.
Liquidity and Capital Resources
During the first six months of 1998, the Company invested
$4,462,000 in property additions with $1,256,000 going towards oil and gas
drilling efforts and the remainder for various marketing and transportation
equipment items. Funding for these investments was derived from the Company
generating $5,479,000 of working capital funds. The $1,193,000 of excess
cash flow was applied to general working capital needs.
During the second quarter of 1998, the Company's primary lending
bank increased the Company's borrowing availability under its oil and gas
working capital line to $5 million. As of June 30, 1998, total available
working capital borrowing capacity was $9.2 million with $6.7 million
outstanding. Refer to the "Liquidity and Capital Resources" section of the
Company's Annual Report on Form 10-K for the year ended December 31, 1997
for additional discussion of the Company's bank relationships, tax
carryforwards and other matters.
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<PAGE> 6
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................. $ 3,250 $ 6,496
Accounts receivable, net .................................. 51,606 73,806
Inventories ............................................... 6,047 5,092
Prepaid and other ......................................... 1,188 1,675
--------- ---------
Total current assets ........................ 62,091 87,069
--------- ---------
Property and equipment ...................................... 60,588 56,298
Less - accumulated depreciation,
depletion and amortization ......................... (34,475) (30,361)
--------- ---------
26,113 25,937
--------- ---------
Other assets ................................................ 1,342 1,277
--------- ---------
$ 89,546 $ 114,283
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................................... $ 49,486 $ 74,829
Accrued and other liabilities ............................. 2,963 3,475
Current maturities of long-term debt ...................... 36 71
--------- ---------
Total current liabilities .......................... 52,485 78,375
Long-term debt, less current maturities ..................... 6,700 6,900
Other liabilities ........................................... 759 870
--------- ---------
59,944 86,145
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, respectively ............................. 422 422
Contributed capital ....................................... 11,693 11,693
Retained earnings since December 31, 1992 ................. 17,487 16,023
--------- ---------
Total shareholders' equity ......................... 29,602 28,138
--------- ---------
$ 89,546 $ 114,283
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 7
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1998 1997
-------- --------
<S> <C> <C>
CASH PROVIDED (USED) BY OPERATIONS:
Net earnings .................................................. $ 1,464 $ 2,598
Items of income not requiring (providing) cash -
Depreciation, depletion and amortization .................... 4,252 2,752
Deferred income tax provision ............................... -- 725
Gain on sale of properties .................................. (61) (215)
Other, net .................................................. (176) (218)
Decrease (increase) in accounts receivable .................... 22,200 16,716
Decrease (increase) in inventories ............................ (955) 761
Decrease (increase) in prepaid and other ...................... 487 198
Increase (decrease) in accounts payable ....................... (25,343) (15,574)
Increase (decrease) in accrued liabilities .................... (512) (709)
-------- --------
Net cash provided (required) by operating activities ........ 1,356 7,034
-------- --------
INVESTING ACTIVITIES:
Property and equipment additions .............................. (4,462) (4,156)
Proceeds from property sales .................................. 95 425
-------- --------
Net cash provided by (used in) investing activities ......... (4,367) (3,731)
-------- --------
FINANCING ACTIVITIES:
Repayment of debt ............................................. (235) (3,331)
Sales of stock ................................................ -- 43
-------- --------
Net cash provided by (used in) financing activities ......... (235) (3,288)
-------- --------
Increase (decrease) in cash and cash equivalents ................ (3,246) 15
Cash at beginning of period ..................................... 6,496 3,782
-------- --------
Cash at end of period ........................................... $ 3,250 $ 3,797
======== ========
Supplemental disclosure of cash flow information:
Interest paid during the period ............................... $ 146 $ 87
======== --------
Income taxes paid during the period ........................... $ 513 $ 867
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE> 8
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying condensed 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 June 30, 1998 and December 31, 1997 and results of operations and
cash flows for the six months ended June 30, 1998 and 1997. 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 these condensed 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.
When used in this document, the words "anticipate", "believe",
"expect", "estimate", "project", and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, believed, expected or
projected.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share", which established new standards for computing and presenting
earnings per share. The provisions of the statement are effective for fiscal
years ending after December 15, 1997, and accordingly, have been adopted in the
accompanying financial statements. Under the provisions of SFAS No. 128, the
presentation of primary earnings per share has been replaced with basic earnings
per share, and fully diluted earnings per share presentations have been replaced
with diluted earnings per share for potentially dilutive securities. Prior
period earnings per share data have been restated. Earnings per share are based
on the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. Such shares outstanding averaged
4,217,596 shares for 1998 and 4,213,596 shares for 1997.
Note 2 - New Accounting Standards
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
The statement requires (a)
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<PAGE> 9
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
classification of items of other comprehensive income by their nature in a
financial statement and (b) display of the accumulated balance of other
comprehensive income separate from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. SFAS No. 130
is effective for interim periods beginning after December 15, 1997. For the six
month period and for the quarters ended June 30, 1998, and 1997, there are no
differences between the Company's "traditional" and "comprehensive" net income.
In June 1997, the FASB also issued SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information", which establishes standards
for reporting information about operating segments in annual financial
statements and requires that selected information be reported about the
operating segments in interim financial reports issued to the shareholders. It
also establishes standards for related disclosure about products and services,
geographic areas, and major customers. The Company has concluded that its
segment information as currently reported is in compliance with SFAS No. 131 and
as such, adoption has no effect on current or prior period presentations.
In June 1998, the FASB issued 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 derivatives fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows 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. SFAS 133 is required to be
effective for fiscal years beginning after June 15, 1999 and may be adopted
early. The Company has not yet quantified the impact (if any) of adopting SFAS
133.
PART II. OTHER INFORMATION
Item 1. - None
Item 2. - None
Item 3. - None
Item 4. - None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - None.
b. Reports on Form 8-K - None.
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<PAGE> 10
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: August 12, 1998
By /s/ K. S. Adams, Jr.
------------------------------------
K. S. Adams, Jr.
Chief Executive Officer
By /s/ Richard B. Abshire
------------------------------------
Richard B. Abshire
Chief Financial Officer
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<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C> <C>
27* - Financial Data Schedule
</TABLE>
- ----------
* - Filed herewith
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,250
<SECURITIES> 0
<RECEIVABLES> 51,757
<ALLOWANCES> (151)
<INVENTORY> 6,047
<CURRENT-ASSETS> 62,091
<PP&E> 60,588
<DEPRECIATION> (34,475)
<TOTAL-ASSETS> 89,546
<CURRENT-LIABILITIES> 52,485
<BONDS> 6,700
0
0
<COMMON> 422
<OTHER-SE> 29,180
<TOTAL-LIABILITY-AND-EQUITY> 89,546
<SALES> 881,214
<TOTAL-REVENUES> 881,214
<CGS> 877,653
<TOTAL-COSTS> 878,702
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146
<INCOME-PRETAX> 2,366
<INCOME-TAX> 902
<INCOME-CONTINUING> 1,464
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,464
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
