<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, 2000 or
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ___________ to __________
Commission File Number 1-7908
ADAMS RESOURCES & ENERGY, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 74-1753147
---------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
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 August 7, 2000 was 4,217,596.
<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,
---------------------- ----------------------
2000 1999 2000 1999
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenues:
Marketing........................................... $ 3,962,038 $ 1,271,829 $ 1,961,606 $756,563
Transportation...................................... 19,335 16,925 9,555 9,074
Oil and Gas......................................... 2,333 1,716 1,217 863
------------- ------------ ------------- -----------
3,983,706 1,290,470 1,972,378 766,500
------------- ------------ ------------- -----------
Costs and expenses:
Operating
Marketing........................................... 3,951,996 1,265,914 1,956,296 752,553
Transportation...................................... 17,131 15,229 8,403 7,996
Oil and gas......................................... 865 1,052 392 343
Corporate general and administrative................ 3,117 1,427 1,578 703
Depreciation, depletion and amortization............ 3,342 3,295 1,697 1,509
------------- ------------ ------------- -----------
3,976,451 1,286,917 1,968,366 763,104
------------- ------------ ------------- -----------
Operating earnings..................................... 7,255 3,553 4,012 3,396
Other income (expense)
Property sales and other............................ 454 705 337 39
Interest............................................ (117) (43) (45) (13)
------------- ------------ ------------- -----------
337 662 292 26
------------- ------------ ------------- -----------
Earnings before income taxes........................... 7,592 4,215 4,304 3,422
Income tax provision
Current............................................. 2,103 234 1,318 189
Deferred............................................ 650 900 200 771
------------- ------------ ------------- -----------
2,753 1,134 1,518 960
------------- ------------ ------------- -----------
Net earnings........................................... $ 4,839 $ 3,081 $ 2,786 $ 2,462
============= ============ =========== ===========
Basic and diluted net earnings
per common share.................................... $ 1.15 $ .73 $ .66 $ .58
============= =========== =========== ===========
Dividends per common share............................. $ - $ - $ - $ -
============= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- Marketing
Marketing division revenues and operating earnings were as follows
(in thousands):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------------------- --------------------------------
2000 1999 2000 1999
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $3,962,038 $ 1,271,829 $ 1,961,606 $ 756,563
Operating earnings $ 8,627 $ 4,269 $ 4,603 $ 3,195
</TABLE>
Marketing division gross revenues increased by $2,690,209,000 or 212%
and by $1,205,043,000 or 159% for the respective six month and three month
periods. Such increases resulted because crude oil prices doubled and volumes
grew by approximately 50% during the comparative periods. Further, during the
fourth quarter of 1999, the Company significantly expanded its presence in the
wholesale marketplace for natural gas. This event also contributed to increased
revenues and earnings during 2000.
Marketing division operating earnings increased by 102% to $8,627,000
for the current six month period and by 44% to $4,603,000 for the current three
month period. Beginning in the second quarter of 1999, the price for crude oil
began to rise in the marketplace. Such supply and demand conditions caused an
improvement in per unit gross margins beginning midway through the second
quarter of 1999. Hence, coupled with additional volumes, operating earnings
improved significantly for the comparative current periods.
-3-
<PAGE> 4
Supplemental volume and price information for the marketing division is
as follows:
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
--------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Wellhead Purchases - Per day (1)
Crude oil 302,000 bbls 195,000 bbls 318,000 bbls 220,000 bbls
Natural gas 829,000 mcf - (2) 855,000 mcf - (2)
Average Price
Crude oil - per barrel $ 27.01 $ 15.51 $ 26.91 $ 13.41
Natural gas - per mcf $ 3.20 $ - $ 3.42 $ -
</TABLE>
--------------
(1) Reflects the volume of crude oil purchased from third parties at the
lease level and shipped to market.
(2) Natural gas marketing operations were significantly expanded effective
October 1, 1999.
- Transportation
Transportation revenues and operating earnings were as follows (IN
THOUSANDS):
<TABLE>
<CAPTION>
Six Months Ended Increase Three Months Ended Increase
June 30, (Decrease) June 30, (Decrease)
------------------------ ---------- ------------------- -----------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 19,335 $ 16,925 14% $ 9,555 $ 9,074 5%
Operating earnings $ 1,470 $ 1,198 23% $ 782 $ 815 (4)%
</TABLE>
During 2000, the Company experienced some improvement in demand for
trucking services. Improved revenues caused an overall increase in operating
earnings for the comparative first half of the year. For the comparative three
month period however, the 5% revenue increase was not sufficient to cover
increased fuel and other operating expenses. Thus, although revenues for the
comparative three months ended June 30, 2000 increased slightly, operating
earnings experienced a slight decline.
-4-
<PAGE> 5
- Oil and Gas
Oil and gas division revenues and operating earnings are primarily a
function of crude oil and natural gas prices and volumes. Comparative amounts
are as follows (IN THOUSANDS):
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
--------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C>
Revenues $ 2,333 $ 1,716 $ 1,217 $ 863
Operating earnings (loss) $ 275 $ (487) $ 205 $ 89
</TABLE>
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. See supplemental information
below.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
----------------- ------------------
2000 1999 2000 1999
---- ----- ---- ----
<S> <C> <C> <C> <C>
Volume/Price Information:
------------------------
Crude oil
Volume 26,000 bbls 21,000 bbls 15,000 bbls 11,000 bbls
Average price per barrel $ 27.76 $ 12.42 $ 27.74 $ 14.23
Natural gas
Volume 585,000 mcf 860,000 mcf 280,000 mcf 410,000 mcf
Average price per mcf $ 2.63 $ 1.71 $ 2.72 $ 1.75
</TABLE>
- General and administrative
Corporate general and administrative expenses are increased for the
comparative current periods because of additional personnel and support costs
necessitated by the increased volume of business, most notably the expansion
into the natural gas marketing arena.
- Other income (expense)
Property sales and other income of $454,000 and $705,000, respectively,
resulted from interest income in 2000 and from gains realized on the sale of
forty-five truck tractors in the first quarter of 1999.
-5-
<PAGE> 6
Liquidity and Capital Resources
During the first six months of 2000, the Company's cash flow from
operations before working capital items totaled $8,221,000. The Company invested
$2,518,000 in capital expenditures including $458,000 in transportation
operations, $584,000 in marketing equipment and $1,476,000 in oil and gas
drilling activities. The remaining $5.7 million of cash flow before working
capital items served to meet working capital needs. 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.
-6-
<PAGE> 7
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 18,574 $ 24,137
Accounts receivable, net.................................... 292,161 216,978
Inventories................................................. 35,824 21,475
Prepaid and other........................................... 4,215 1,635
------------ ---------------
Total current assets.......................... 350,774 264,225
------------ ---------------
Property and equipment........................................ 69,641 67,235
Less - accumulated depreciation,
depletion and amortization........................... (41,820) (38,590)
------------- ---------------
27,821 28,645
------------ ---------------
Other assets.................................................. 723 178
------------ ---------------
$ 379,318 $ 293,048
============ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 313,639 $ 236,481
Accrued and other liabilities............................... 11,994 8,306
------------ --------------
Total current liabilities............................ 325,633 244,787
Long-term debt, less current maturities....................... 9,900 9,900
Deferred taxes and other liabilities.......................... 2,925 2,340
------------ ---------------
338,458 257,027
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................... 28,745 23,906
------------ ---------------
Total shareholders' equity .......................... 40,860 36,021
------------ ---------------
$ 379,318 $ 293,048
============ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE> 8
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
2000 1999
---------- -------
<S> <C> <C>
Net earnings ................................................................. $ 4,839 $ 3,081
Items of income not requiring (providing) cash -
Depreciation, depletion and amortization .................................... 3,342 3,295
Deferred income tax provision ............................................... 650 900
Gain on sale of properties................................................... - (590)
Equity in earnings of joint venture.......................................... (495) -
Other, net .................................................................. (115) (26)
Decrease (increase) in accounts receivable ................................... (75,183) (38,595)
Decrease (increase) in inventories ........................................... (14,349) (2,257)
Decrease (increase) in prepaid and other ..................................... (2,580) (677)
Increase (decrease) in accounts payable ...................................... 77,158 38,604
Increase (decrease) in accrued liabilities ................................... 3,688 1,639
---------- ----------
Net cash provided (required) by operating activities ........................ (3,045) 5,374
----------- ----------
INVESTING ACTIVITIES:
Property and equipment additions ............................................. (2,518) (2,231)
Proceeds from property sales ................................................. - 1,245
----------- ----------
Net cash provided by (used in) investing activities ......................... (2,518) (986)
---------- ----------
FINANCING ACTIVITIES:
Repayment of debt ............................................................ - (600)
---------- -----------
Net cash provided by (used in) financing activities ......................... - (600)
---------- ----------
Increase (decrease) in cash and cash equivalents................................. (5,563) 3,788
Cash at beginning of period...................................................... 24,137 10,215
---------- ----------
Cash at end of period............................................................ $ 18,574 $ 14,003
========== ==========
Supplemental disclosure of cash flow information:
Interest paid during the period .............................................. $ 117 $ 43
========== ==========
Income taxes paid during the period........................................... $ 800 $ 141
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE> 9
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying consolidated financial statements are unaudited but,
in the opinion of the Company's management, include all adjustments (consisting
of normal recurring accruals) necessary for the fair presentation of its
financial position at June 30, 2000 and December 31, 1999 and its results of
operations and cash flows for the six months ended and three months ended June
30, 2000 and 1999. Certain information and note disclosures normally included in
annual financial statements prepared in accordance with accounting principles
generally accepted in the United States 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 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 - Joint Venture
Commencing in May 2000, the Company entered into a joint venture
agreement with Williams Energy Marketing & Trading Co. for the purpose of
purchasing, distributing and marketing crude oil in the Offshore Gulf of Mexico
region. The new business operates as Williams-Gulfmark Energy Co. pursuant to
the terms of a joint venture agreement. The Company holds a 50% interest in the
net earnings of the venture and accounts for its interest under the equity
method of accounting. The Company's net investment in the venture is reported in
other assets in the consolidated balance sheet and its equity in the venture's
pretax earnings is included in marketing segment revenues in the consolidated
statement of operations. As of June 30, 2000 and for the three and six month
periods then ended, the Company's net investment included in other assets and
the amount of pretax earnings included in marketing revenues relating to the
venture was $495,000. Included in such amount was $368,000 which represents the
impact of mark-to-market accounting for certain energy contracts.
-9-
<PAGE> 10
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Segment Reporting
The Company is primarily engaged in the business of marketing crude
oil, natural gas and petroleum products; tank truck transportation of liquid
chemicals; and oil and gas exloration and production. Information concerning the
Company's various business activities is summarized as follows (in thousands):
<TABLE>
<CAPTION>
Depreci-
ation,
Depletion Property
Segment and and
Operating Amorti- Equipment
Revenues Earnings zation Additions
------------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
For the six months ended
June 30, 2000
Marketing........................ $ 3,962,038 $ 8,627 $ 1,415 $ 584
Transportation................... 19,335 1,470 734 458
Oil and gas...................... 2,333 275 1,193 1,476
------------- ----------- ----------- -----------
$ 3,983,706 $ 10,372 $ 3,342 $ 2,518
============= =========== =========== ===========
For the six months ended
June 30, 1999
Marketing........................ $ 1,271,829 $ 4,269 $ 1,646 $ 1,020
Transportation................... 16,925 1,198 498 945
Oil and gas...................... 1,716 (487) 1,151 266
------------- ----------- ----------- -----------
$ 1,290,470 $ 4,980 $ 3,295 $ 2,231
============ =========== =========== ===========
For the three months ended
June 30, 2000
Marketing........................ $ 1,961,606 $ 4,603 $ 707 $ 350
Transportation................... 9,555 782 370 126
Oil and gas...................... 1,217 205 620 5
------------- ----------- ----------- -----------
$ 1,972,378 $ 5,590 $ 1,697 $ 481
============= =========== =========== ===========
For the three months ended
June 30, 1999
Marketing........................ $ 756,563 $ 3,195 $ 815 $ 808
Transportation................... 9,074 815 263 423
Oil and gas...................... 863 89 431 134
------------- ----------- ----------- -----------
$ 766,500 $ 4,099 $ 1,509 $ 1,365
============= =========== =========== ===========
</TABLE>
-10-
<PAGE> 11
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS
Identifiable assets by industry segment are as follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- -------------
<S> <C> <C>
Marketing................................................. $ 333,485 $ 242,786
Transportation............................................ 15,815 15,412
Oil and gas............................................... 11,039 10,449
Other..................................................... 18,979 24,401
---------- --------------
$ 379,318 $ 293,048
========== ==============
</TABLE>
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):
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
----------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Segment operating earnings .................... $ 10,372 $ 4,980 $ 5,590 $ 4,099
General and administrative expenses............ (3,117) (1,427) (1,578) (703)
--------- -------- --------- ----------
Operating earnings......................... 7,255 3,553 4,012 3,396
Property sales and other....................... 454 705 337 39
Interest expense .............................. (117) (43) (45) (13)
--------- -------- --------- ----------
Earnings before income taxes............... $ 7,592 $ 4,215 $ 4,304 $ 3,422
========= ======== ========= ==========
</TABLE>
Note 3 - Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board 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.
-11-
<PAGE> 12
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. 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
(EITF) 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
$2,820,000 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 or $6,127,000 in
other current assets and the fair value of the trading liability or $3,307,000
in current liabilities.
-12-
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. - None
Item 2. - None
Item 3. - None
Item 4. - None
Item 6. Exhibits and Reports on Form 8K
a. Exhibits - None.
b. Reports on Form 8-K - None.
-13-
<PAGE> 14
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 10, 2000 By /s/ K. S. Adams, Jr.
--------------------
K. S. Adams, Jr.
Chief Executive Officer
By /s/ Richard B. Abshire
------------------------
Richard B. Abshire
Chief Financial Officer
-14-
<PAGE> 15
EXHIBIT INDEX
Exhibit
Number Description
--------- -----------
27* - Financial Data Schedule
------------------------------
* - Filed herewith
-15-
