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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 June 30, 2002 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)
Delaware 74-1753147
- ---------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4400 Post Oak Parkway Ste 2700, 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 12, 2002 was 4,217,596.
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Six Months Ended Three Months Ended
June 30, June 30,
--------------------------- ----------------------------
2002 2001 2002 2001
------------- ------------ ------------- ----------
REVENUES:
Marketing........................................... $ 1,163,501 $2,590,446 $ 643,403 $1,259,172
Transportation...................................... 17,882 17,880 9,713 9,503
Oil and gas......................................... 1,903 4,273 1,044 1,974
------------- ------------ ------------- ----------
1,183,286 2,612,599 654,160 1,270,649
------------- ------------ ------------- ----------
COSTS AND EXPENSES:
Marketing........................................... 1,157,392 2,586,991 640,679 1,259,565
Transportation...................................... 15,845 16,088 8,529 8,262
Oil and gas......................................... 1,274 1,695 660 1,024
General and administrative.......................... 4,634 4,436 2,230 2,685
Depreciation, depletion and amortization............ 2,292 3,429 1,183 1,700
------------- ------------ ------------- ----------
1,181,437 2,612,639 653,281 1,273,236
------------- ------------ ------------- ----------
Operating earnings (loss).............................. 1,849 (40) 879 (2,587)
Other income (expense):
Interest income .................................... 46 268 33 97
Interest expense.................................... (88) (45) (37) (24)
------------- ------------ ------------- ----------
(42) 223 (4) 73
------------- ------------ ------------- ----------
Earnings (loss) before income taxes.................... 1,807 183 875 (2,514)
Income tax provision (benefit)
Current............................................. 50 5 38 (53)
Deferred............................................ 607 64 282 (832)
------------- ------------ ------------- ----------
657 69 320 (885)
------------- ------------ ------------- ----------
Earnings (loss) before cumulative effect of
accounting change................................... 1,150 114 555 (1,629)
Cumulative effect of accounting change,
net of tax.......................................... - 55 - -
------------- ------------ ------------- ----------
Net earnings (loss).................................... $ 1,150 $ 169 $ 555 $ (1,629)
============= ============ ============= ===========
EARNINGS (LOSS) PER SHARE:
Before cumulative effect of accounting change.......... $ .27 $ .03 $ .13 $ (.39)
Cumulative effect of accounting change................. - .01 - -
Basic and diluted net earnings (loss)
------------- ------------ ------------- -----------
per common share.................................... $ .27 $ .04 $ .13 $ (.39)
============= ============ ============= ===========
Dividends per common share............................. $ - $ - $ - $ -
============= ============ ============= ===========
The accompanying notes are an integral part of these financial statements.
-2-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
-- Marketing
Marketing division revenues, operating earnings and supplemental
volume and price information is presented below. Amounts shown for revenues and
operating earnings are presented as follows (IN THOUSANDS):
Six Months Ended Three Months Ended
June 30, June 30,
--------------------------------- -----------------------------
2002 2001 2002 2001
--------------- -------------- -------------- -------------
Revenues $ 1,163,501 $ 2,590,446 $ 643,403 $ 1,259,172
Operating earnings (loss) $ 5,167 $ 2,090 $ 2,298 $ (1,055)
Depreciation $ 942 $ 1,365 $ 426 $ 662
Supplemental volume and price information for the marketing
division is as follows:
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------ -------------------------------
2002 2001 2002 2001
---- ---- ---- ----
Wellhead Purchases - Per day (1)
Crude oil 110,000 bbls 135,000 bbls 106,000 bbls 134,000 bbls
Natural gas 584,000 mcf 789,000 mcf 525,000 mcf 757,000 mcf
Average Purchase Price
Crude oil - per barrel $ 22.14 $ 26.89 $ 24.67 $ 26.24
Natural gas - per mcf $ 2.82 $ 5.56 $ 3.31 $ 4.49
- ------------------------------------
(1) Reflects the volume purchased from third parties at the lease level and
pipeline pooling points.
Gross revenues for marketing operations decreased by $1,427 million and
$616 million or 55 and 49 percent, respectively, for the comparative six month
and three month periods. Such decreases resulted from reduced prices and volumes
for both crude oil and natural gas. Price decreases accounted for $384 million
and $72 million or 27 and 12 percent of the revenue decline, respectively. The
comparative price decrease between the periods presented did not have a
significant impact on reported earnings. However, a shift in the direction of
prices
-3-
(downward during 2001 and upward during 2002) did impact earnings as more fully
described later in this narrative.
Gross revenues for the marketing operation were also impacted by volume
reductions in 2002. Volume reductions at the wellhead level accounted for $328
million and $162 million or 23 and 26 percent respectively, of the revenue
decline. The remaining decline in marketing revenues resulted from curtailments
in trading activity during 2002. Following the collapse of Enron Corp in
December 2001, the marketplace for energy trading firms constricted. As
previously reported for the quarter ended December 31, 2001, just prior to
Enron's bankruptcy filing, the Company exercised its offset rights to reduce its
net exposure from Enron to $1,957,000 ($.46 per share) consisting of two
components: (i) $8.3 million ($1.97 per share) due from Enron in December 2001
and (ii) an offsetting amount of $6.4 million ($1.52 per share) originally due
to Enron during 2002, from certain fixed price purchases. Also in the fourth
quarter of 2001, the Company recorded a $1,468,000 ($.35 per share) allowance
for bad debt to reduce the carrying value of its net exposure from Enron to
$489,000 ($.12 per share). In addition, the netting process left the Company
with a short-term mismatch of cash flow requirements as described herein. As a
result this mismatch and general industry concerns, the Company's suppliers and
counterparties restricted the amount of open credit afforded the Company.
Similarly, the Company reduced the available trade credit granted to its
customers and other counterparties. Such mutual credit restrictions served to
reduce the overall volume of trading activity.
Marketing division operating earnings improved in the current six month
and three month periods because of three primary factors; one affecting last
year's results and two originating with 2002 results. In the second quarter of
2001, the Company sustained an operating loss of $1,055,000 when results were
negatively affected by a sudden and dramatic weakening of inter-month crude oil
price spreads. Leading up to mid March 2001, the Company's trading strategy was
premised on current month crude oil prices being higher or stronger than
succeeding month prices. When this situation reversed in late March 2001 (the
current month price being lower than the next month's price), the Company chose
to liquidate certain positions, necessitating a $1,375,000 charge to first half
2001 earnings. The adverse market conditions continued to hamper earnings
recovery in the second quarter of 2001 because of the inherent time lag in
reducing crude oil acquisition costs. Crude oil is normally purchased under
30-day evergreen contracts, while the resale of crude oil varies from day to
day. Beginning in May 2001, the Company began to systematically cancel its crude
oil acquisition contracts in accordance with the allowed terms. However, it
wasn't until July of 2001 that the impact of this event began to stabilize.
One factor driving first half 2002 operating earnings was the benefit
received from increased prices for crude oil. Domestic prices rose from the $19
per barrel range at year-end 2001 to the $25 per barrel range by June 2002. This
situation enabled the Company to liquidate lower priced inventory into a
relatively high value market and boost operating margins by $1.1 million during
the first quarter of 2002. As of June 30, 2002, the Company held approximately
196,000 barrels of crude oil inventory valued at approximately $25.50 per
barrel.
-4-
The other significant factor for this year was the Company earned fee
income totaling $2,433,000 and $1,117,000 in the respective six month and three
month periods ended June 30, 2002. This fee was earned pursuant to the terms of
an agreement to dissolve its Williams-Gulfmark Energy Company joint venture
effective November 1, 2001. The Company originally entered into the joint
venture with a third party for the purpose of purchasing, distributing, and
marketing crude oil in the offshore Gulf of Mexico region. The venture allowed
the Company to combine its marketing expertise with the larger trade credit
capabilities afforded by the co-venture participant. Effective with November
2001 business, the Company began to earn fees approximating $400,000 per month
based on certain volumes of crude oil being purchased by the former co-venture
participant in the offshore Gulf of Mexico region. Unfortunately, due primarily
to credit constraints facing the participant, effective with July 2002 business,
the participant substantially curtailed its purchases of the crude oil which
will reduce the Company's fee income. Therefore, management does not believe
that such fees will be a significant contributor to future earnings. See also
Note 5 to financial statements.
-- Transportation
Transportation revenues and operating earnings were as follows (IN
THOUSANDS):
Six Months Ended Increase Three Months Ended Increase
June 30, (Decrease) June 30, (Decrease)
--------------------- ---------- ----------------------- ----------
2002 2001 2002 2001
---- ---- ---- ----
Revenues $ 17,882 $ 17,880 - % $ 9,713 $ 9,503 2.2%
Operating earnings $ 1,287 $ 961 33.9% $ 812 $ 818 -%
Depreciation $ 750 $ 831 9.7% $ 372 $ 423 12.0%
Transportation revenues as reflected above were consistent between the
respective six month and three month periods. Operating earnings were improved
for the current six month period, however, due to cost cutting measures
instituted in early 2001. The trend of improved operating earnings did not
extend into the comparative second quarter of 2002 as the effects of an
approximate 42 percent increase in insurance rates took effect consistent with
industry trends.
The Company's transportation operation is dependent upon demand for its
services from the petrochemical sector of the United States economy. For the
past 18 months, demand has generally been reduced. Late in the first quarter of
2002, however, the Company experienced a slight pick-up in demand, a trend which
appears to be holding into the third quarter of 2002.
-- Oil and Gas
Oil and gas division revenues and operating earnings are primarily a
function of crude oil and natural gas prices and volumes. Volume and price
declines for both crude oil and natural gas are the direct cause of reduced 2002
earnings from oil and gas exploration and production. In addition to the volume
and price decline, during the second quarter of 2002, the Company experienced a
$245,000 write-off of dry-hole costs.
-5-
Comparative amounts for revenues, operating earnings and depreciation
and depletion are as follows (IN THOUSANDS):
Six Months Ended Three Months Ended
June 30, June 30,
------------------------- -----------------------------
2002 2001 2002 2001
---------- --------- ---------- ----------
Revenues $ 1,903 $ 4,273 $ 1,044 $ 1,974
Operating earnings (loss) $ 29 $ 1,345 $ (1) $ 335
Depreciation and depletion $ 600 $ 1,233 $ 385 $ 615
Volume/Price Information:
Crude oil
Volume 26,400 bbls 36,700 bbls 16,600 bbls 19,800 bbls
Average price per barrel $ 24.53 $ 28.54 $ 23.67 $ 27.13
Natural gas
Volume 448,000 mcf 560,000 mcf 227,000 mcf 288,000 mcf
Average price per mcf $ 2.51 $ 5.71 $ 2.72 $ 4.92
During the first half of 2002, the Company successfully completed eight
wells with three dry holes. One of the wells completed earlier this year was in
Schleicher County Texas and the initial success looked very promising. The well
began experiencing complications with water channeling in from a deeper zone.
The Company is presently undergoing efforts to eliminate the channel. If this
operation is successful, the Company believes economic production will result. A
second test well on this prospect was drilled this year as a dry hole.
A number of other drilling prospects are planned, including the
participation in two horizontal Austin Chalk wells in the familiar Giddings
Field in Texas. Participation in the drilling of two development wells in the
Stratton Ridge prospect of Brazoria County, Texas is also expected. Seven
Stratton Ridge prospects have been identified and will be drilled contingent on
the success of the first two wells. The Company generally participates in such
ventures with its Chairman and President, K. S. Adams, Jr., and certain of his
affiliates. The terms of such participation are no better than those afforded
other non-affiliated working interest owners. See also Note 6 to financial
statements.
-- Outlook
For the short term, the marketplace for energy continues to be
difficult as sellers of crude oil and natural gas are seeking financial security
above all other factors. With a relatively small capital base, in a number of
cases, the Company has lost business solely because of credit considerations.
Similarly, the Company is seeking financially secure market outlets for its
resale
-6-
of product. As a result, the most stable firms in the energy industry are
presently commanding a premium which narrows margins.
In the longer-term view, the Company believes the present energy market
turmoil will have a positive impact on its business. In recent years, an
increase in the number of participants in the industry has caused margins to
shrink. As competitors are withdrawing, the Company has recently seen some
varying improvement in margins as the true end-market users are seeking
alternative sources of supply. While it will be difficult over the next six
months to generate significant operating profits from marketing, management
believes the Company will be one of the industry survivors and will be better
positioned for long-term profit growth.
If the most recent trends hold within the transportation segment, the
Company foresees a return to more sound results with annual transportation
operating earnings in the $3-4 million range. For oil and gas, the Company has
worked to stabilize normal production declines and hold down costs. However,
with the time frame to find and develop production being longer term in nature,
the Company does not foresee much short-term change in the trend line for the
oil and gas division's 2002 results.
Liquidity and Capital Resources
During the first six months of 2002, the Company's cash flow from
operations before working capital items totaled $13,912,000. The Company
utilized such funds to make $1,499,000 in capital expenditures including $23,000
for marketing equipment, $462,000 for transportation equipment and $1,014,000
for oil and gas drilling activities. The remaining $12.4 million of cash flow
before working capital items was used to boost cash reserves and generally
improve liquidity.
A key factor in the Company's reported cash flows before working
capital items is the cash flow impact of risk management activities. As
reflected in the accompanying Statement of Cash Flows during the first quarter
of 2002, the Company converted $9,935,000 of year-end 2001 net risk management
assets to cash. As a result, reported net risk management assets of $14,523,000
as of December 31, 2001 were reduced to net risk management assets of $4,588,000
as of June 30, 2002. See also Note 4 to the accompanying Financial Statements.
For the remainder of 2002, the Company anticipates spending
approximately $1.6 million on oil and gas exploration projects and approximately
$800,000 on tractor and trailer equipment additions. Within the transportation
operation, the Company intends to replace certain older model truck-tractor
units with late model used equipment.
-- Banking Relationships
The Company's primary bank loan agreement, with Bank of America,
provides for two separate lines of credit with interest at the bank's prime rate
minus 1/4 of 1 percent. The working capital loan provides for borrowings up to
$7,500,000 based on 80 percent of eligible accounts receivable and 50 percent of
eligible inventories. Available capacity under the line is calculated
-7-
monthly and as of June 30, 2002 was established at $7,500,000. The oil and gas
production loan provides for flexible borrowings subject to a borrowing base
established semi-annually by the bank. The borrowing base was established at
$4,000,000 as of June 30, 2002. The line of credit loans are scheduled to expire
on October 29, 2003, with the then present balance outstanding converting to a
term loan payable in 12 equal quarterly installments. As of June 30, 2002, bank
debt outstanding under the Company's two revolving credit facilities totaled
$11,475,000.
The Company's Gulfmark Energy, Inc. subsidiary maintains a separate
banking relationship with BNP Paribas in order to support its crude oil
purchasing activities. In addition to providing letters of credit, the facility
also finances up to $6,000,000 of crude oil inventory and certain accounts
receivable associated with crude oil sales. Such financing is provided on a
demand note basis with interest at the bank's prime rate plus 1 percent. As of
June 30, 2002 the Company had $2.4 million of eligible borrowing capacity under
this facility. No working capital advances were outstanding as of June 30, 2002.
Letters of credit outstanding under this facility totaled approximately $24
million as of June 30, 2002.
The Company's Adams Resources Marketing subsidiary also maintains a
separate banking relationship with BNP Paribas in order to support its natural
gas purchasing activities. In addition to providing letters of credit, the
facility finances up to $4,000,000 of general working capital needs. No working
capital advances were outstanding under this facility as of June 30, 2002.
Letters of credit outstanding under this facility totaled approximately $12
million as of June 30, 2002.
Refer also to the "Liquidity and Capital Resources" section of the
Company's Annual Report on Form 10-K for the year ended December 31, 2001 for
additional discussion of the Company's banking relationships and other matters.
Critical Accounting Policies and Use of Estimates
-- Fair Value Accounting
As an integral part of its marketing operation, the Company enters into
certain forward commodity contracts that are required to be recorded at fair
value in accordance with EITF 98-10 and Statement of Financial Accounting
Standards No. 133. Management believes this required accounting, commonly called
mark-to-market accounting creates variations in reported earnings and the
reported earnings trend. Under mark-to-market accounting, significant levels of
earnings are recognized in the period of contract initiation rather than the
period when the service is provided and title passes from supplier to customer.
As it affects the Company's operation, management believes mark-to-market
accounting impacts reported earnings and the presentation of financial condition
in three important ways.
1. Gross margins, derived from certain aspects of the Company's
ongoing business, are front-ended into the period in which
contracts are executed. While there is no particular pattern to
the timing of contract execution, it does tend to occur in
clusters
-8-
during those periods of time when the Company's end-user natural
gas customers in New England perceive prices to be advantageous.
Meanwhile, personnel and other costs associated with servicing
accounts are expensed as incurred during the period of physical
product flow and title passage.
2. Mark-to-market earnings are calculated based on stated contract
volumes. One of the significant risks associated with the
Company's business is to convert stated contract or planned
volumes into actual physical commodity movement volumes without a
loss of margin. Again the planned profit from such commodity
contracts is bunched and front-ended into one period while the
risk of loss associated with the difference between actual vs
planned production or usage of oil and gas falls in a subsequent
period.
3. Cash flows, by their nature, track with physical movements and
passage of title. Mark-to-market accounting, on the other hand,
creates a mismatch between reported earnings and cash flows. This
complicates and confuses the picture of stated financial
conditions and liquidity.
The Company attempts to mitigate the above described risks by only
entering into contracts where current market quotes in actively traded, liquid
markets, are available to determine the fair value of contracts. In addition,
substantially all of the Company's forward contracts are less than 18 months in
duration. However, the reader is cautioned to develop a full understanding how
fair value or mark-to-market accounting creates differing reported results
relative to those which would be presented under conventional accounting
protocol.
-- Trade Accounts
Accounts receivable and accounts payable typically represent the single
most significant assets and liabilities of the Company. Particularly within the
Company's energy marketing and oil and gas exploration and production
operations, there is a high degree of interdependence with and reliance upon
third parties, (including transaction counterparties) to provide adequate
information for the proper recording of amounts receivable or payable.
Substantially all such third parties are larger firms providing the Company with
the source documents for recording trade activity. It is commonplace for these
entities to retroactively adjust or correct such documents. This typically
requires the Company to either absorb, benefit from, or pass along such
corrections to another third party.
Due to (a) the volume of transactions, (b) the complexity of
transactions and (c) the high degree of interdependence with third parties, this
is a difficult area to control and manage. The Company manages this process by
participating in a monthly settlement process with each of its counterparties.
Ongoing account balances are monitored monthly and the Company attempts to gain
the cooperation of such counterparties to reconcile outstanding balances. The
Company also places great emphasis on collecting cash balance due and paying
only bonafide properly
-9-
supported claims. In addition, the Company maintains and monitors its bad debt
allowance and accrues for open items due. A degree of risk remains, however,
simply due to the custom and practices of the industry.
-- Oil and gas reserve estimate
The value of capitalized cost of oil and gas exploration and production
related assets are dependent on underlying oil and gas reserve estimates.
Reserve estimates are based on many judgmental factors. The accuracy of reserve
estimates depends on the quantity and quality of geological data, production
performance data and reservoir engineering data, as well as the skill and
judgment of petroleum engineers in interpreting such data. The process of
estimating reserves involves continual revision of estimates (usually on an
annual basis) as additional information is made available through drilling,
testing, reservoir studies and acquiring historical pressure and production
data. Estimated future oil and gas revenue calculations are also based on
estimates by petroleum engineers as to the timing of oil and gas production, and
there is no assurance that the actual timing of production will conform to or
approximate such estimates. Also, certain assumptions must be made with respect
to pricing. The Company's estimates assume prices will remain constant from the
date of the engineer's estimates, except for changes reflected under natural gas
sales contracts. There can be no assurance that actual future prices will not
vary as industry conditions, governmental regulation and other factors impact
the market price for oil and gas.
The Company follows the successful efforts method of accounting, so
only costs associated with production oil and gas wells are capitalized.
However, estimated oil and gas reserve quantities are the basis for the rate of
amortization under the Company units of production method for depreciating,
depleting and amortizing of oil and gas properties. Estimated oil and gas
reserve values also provide the standard for the Company's periodic review of
oil and gas properties for impairment.
-- Contingencies
From time to time as incident to its operations, the Company becomes
involved in various accidents, lawsuits and/or disputes. Primarily as an
operator of an extensive trucking fleet, the Company is a party to motor vehicle
accidents, worker compensation claims or other items of general liability as
would be typical for the industry. In addition, the Company has extensive
operations that must comply with a wide variety of tax laws, environmental laws
and labor laws among others. Should an incident occur, management will evaluate
the claim based on its nature, the facts and circumstances and the applicability
of insurance coverage. To the extent management believes that such event may
impact the financial condition of the Company, management will estimate the
monetary value of the claim and make appropriate accruals or disclosure as
provided in the guidelines of Statement of Financial Accounting Standards No. 5.
-10-
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
June 30, December 31,
2002 2001
------------ ---------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents................................... $ 15,389 $ 14,177
Accounts receivable, net.................................... 155,201 138,926
Inventories................................................. 8,850 10,004
Risk management receivables................................. 7,959 24,700
Income tax receivable....................................... 2,781 3,930
Prepaid and other........................................... 2,677 7,568
------------ ---------------
Total current assets.......................... 192,857 199,305
------------ ---------------
Property and equipment........................................ 74,542 74,188
Less - accumulated depreciation,
depletion and amortization........................... (51,698) (50,289)
------------ ---------------
22,844 23,899
------------ ---------------
Other assets
Risk management assets...................................... 1,309 3,646
Other assets................................................ 177 177
------------ ---------------
$ 217,187 $ 227,027
============ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................ $ 148,894 $ 152,153
Current portion of long-term debt........................... - 1,000
Risk management payables.................................... 3,781 12,028
Accrued and other liabilities............................... 6,798 3,790
------------ ---------------
Total current liabilities............................ 159,473 168,971
Long-term debt, less current maturities....................... 11,475 11,475
Other liabilities
Deferred taxes and other.................................... 4,994 5,590
Risk management liabilities................................ 899 1,795
------------ ---------------
176,841 187,831
------------ ---------------
Commitments and contingencies (Note 7)
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 .......................................... 28,231 27,081
------------ ---------------
Total shareholders' equity .......................... 40,346 39,196
------------ ---------------
$ 217,187 $ 227,027
============ ===============
The accompanying notes are an integral part of these financial statements.
-11-
ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
Six Months Ended
June 30,
---------------------------
2002 2001
---------- ---------
CASH PROVIDED (USED) BY OPERATIONS:
Net earnings ................................................................. $ 1,150 $ 169
Items of income not requiring (providing) cash -
Depreciation, depletion and amortization .................................... 2,292 3,429
Risk management activities ................................................. 9,935 (3,026)
Gains on property sales .................................................... (269) -
Deferred income tax provision ............................................... 607 64
Write-off of dry hole costs.................................................. 245 -
Other, net .................................................................. (48) 2
Decrease (increase) in accounts receivable ................................... (16,275) 92,313
Decrease (increase) in inventories ........................................... 1,154 14,334
Decrease (increase) in prepaid and other ..................................... 4,891 1,039
Increase (decrease) in accounts payable ...................................... (3,259) (113,266)
Increase (decrease) in accrued liabilities ................................... 3,008 (3,203)
---------- ----------
Net cash provided by (used in) operating activities ......................... 3,431 (8,145)
---------- ----------
INVESTING ACTIVITIES:
Property and equipment additions ............................................. (1,499) (1,601)
Investment in joint venture................................................... - (4,981)
Proceeds from property sales.................................................. 280 -
---------- ----------
Net cash (used in) investing activities..................................... (1,219) (6,582)
---------- ----------
FINANCING ACTIVITIES:
Repayment of debt............................................................. (1,000) -
---------- ----------
Net cash (used in) financing activities...................................... (1,000) -
---------- ----------
Increase (decrease) in cash and cash equivalents................................. 1,212 (14,727)
Cash at beginning of period...................................................... 14,177 36,140
---------- ----------
Cash at end of period............................................................ $ 15,389 $ 21,413
========== ==========
Supplemental disclosure of cash flow information:
Interest paid during the period .............................................. $ 88 $ 45
========== ==========
Income taxes paid during the period........................................... $ 61 $ 164
========== ==========
The accompanying notes are an integral part of these financial statements.
-12-
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, 2002 and December 31, 2001 and its results of
operations for the six months and three months ended June 30, 2002 and 2001 and
its cash flows for the six months ended June 30, 2002 and 2001. 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 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 - Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Adams Resources & Energy, Inc., a Delaware corporation, and its wholly owned
subsidiaries (the "Company") after elimination of all significant intercompany
accounts and transactions. In addition, these statements include the Company's
share of oil and gas joint interests using pro-rata consolidation and its
interest in a 50% owned crude oil marketing joint venture using the equity
method of accounting. See Note 5 to Consolidated Financial Statements.
Nature of Operations
The Company is 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. Its primary area of
operation is within a 1,000 mile radius of Houston, Texas and the New England
region of the United States with respect to certain natural gas retail sales
activities.
Cash and Cash Equivalents
Cash and cash equivalents include any treasury bill, commercial paper,
money market fund or federal fund with a maturity of 30 days or less. Included
in the cash balance at December
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31, 2001 is a deposit of $2 million to collateralize the Company's
month-to-month crude oil letter of credit facility.
Inventories
Crude oil and petroleum product inventories are carried at the lower of
cost or market. Petroleum products inventory includes gasoline, lubricating oils
and other petroleum products purchased for resale and are valued at cost
determined on the first-in, first-out basis, while crude oil inventory is valued
at average cost. Materials and supplies are included in inventory at specific
cost, with a valuation allowance provided if needed. Natural gas inventories
purchased to cover forward sales contracts are carried at market. Components of
inventory are as follows (IN THOUSANDS):
June 30, December 31,
2002 2001
---------- ---------------
Crude oil............................................ $ 4,883 $ 6,806
Petroleum products .................................. 1,806 1,690
Materials and supplies............................... 633 683
Natural gas.......................................... 1,528 825
--------- ---------------
$ 8,850 $ 10,004
========= ===============
Property and Equipment
Expenditures for major renewals and betterments are capitalized, and
expenditures for maintenance and repairs are expensed as incurred. Interest
costs incurred in connection with major capital expenditures are capitalized and
amortized over the lives of the related assets. When properties are retired or
sold, the related cost and accumulated depreciation, depletion and amortization
("DD&A") is removed from the accounts and any gain or loss is reflected in
earnings.
Oil and gas exploration and development expenditures are accounted for
in accordance with the successful efforts method of accounting. Direct costs of
acquiring developed or undeveloped leasehold acreage, including lease bonus,
brokerage and other fees, are capitalized. Exploratory drilling costs are
initially capitalized until the properties are evaluated and determined to be
either productive or nonproductive. If an exploratory well is determined to be
nonproductive, the capitalized costs of drilling the well are charged to
expense. Costs incurred to drill and complete development wells, including dry
holes, are capitalized.
Producing oil and gas leases, equipment and intangible drilling costs
are depleted or amortized over the estimated recoverable reserves using the
units-of-production method. Other property and equipment is depreciated using
the straight-line method over the estimated average useful lives of three to
twenty years for marketing, three to fifteen years for transportation and ten to
twenty years for all others.
-14-
The Company is required to periodically review long-lived assets for
impairment whenever there is evidence that the carrying value of such assets may
not be recoverable. This consists of comparing the carrying value of the asset
with the asset's expected future undiscounted cash flows without interest costs.
Estimates of expected future cash flows represent management's best estimate
based on reasonable and supportable assumptions. Proved oil and gas properties
are reviewed for impairment on a field-by-field basis. Any impairment recognized
is permanent and may not be restored.
Revenue Recognition
The Company's natural gas and crude oil marketing customers are
invoiced based on contractually agreed upon terms on a monthly basis. Revenue is
recognized in the month where the physical product is delivered to the customer.
Where required, the Company also recognizes mark-to-market gains and losses
related to its natural gas and crude oil trading activities. A detailed
discussion of the Company's risk management activities are included later in
this footnote.
Customers of the Company's petroleum products marketing subsidiary are
invoiced and revenue is recognized in the period in which the customer
physically takes possession and title of the product at their facility.
Transportation customers are invoiced, and the related revenue is recognized as
the service is provided. Oil and gas revenue from the Company's interest in
producing wells is recognized as title and physical possession of the oil and
gas passes to the purchaser.
Earnings Per Share
The Company computes and presents earnings per share in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", which requires the presentation of basic earnings per share and diluted
earnings per share for potentially dilutive securities. Earnings per share are
based on the weighted average number of shares of common stock outstanding
during the period. Such shares outstanding on both a basic and diluted basis
averaged 4,217,596 for both the six month and three month periods ended June 30,
2002 and 2001. There are no potential dilutive securities outstanding during the
periods presented.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Examples of significant estimates used in the accompanying
consolidated financial statements include the accounting for depreciation,
depletion and amortization, income taxes, contingencies and price risk
management activities.
-15-
Price Risk Management Activities
The Company's trading and non-trading transactions give rise to market
risk, which represents the potential loss that may result from a change in the
market value of a particular commitment. The Company closely monitors and
manages its exposure to market risk to ensure compliance with the Company's risk
management policies. Such policies are regularly assessed to ensure their
appropriateness given management's objectives, strategies and current market
conditions.
The Company's forward crude oil contracts are considered normal
purchases and sales. Natural gas forward contracts and energy trading contracts
for crude oil and natural gas are recorded at fair value, depending on
management's assessments of numerous accounting standards and positions that
comply with generally accepted accounting principles. The revaluation of such
contracts is recognized in the Company's results of operations in accordance
with EITF 98-10 "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities". Current market quotes from actively traded, liquid
markets are used to determine the fair value of the contracts, which is
reflected on the Company's balance sheet as risk management assets and
liabilities. With regard to net risk management assets, 100% of presented values
at June 30, 2002 and December 31, 2001 were based on either market quotations or
industry posted prices. Risk management assets and liabilities are classified as
short- or long-term depending on contract terms. The net unrealized gains and
losses related to the valuation of these contracts are reflected net in
marketing revenues on the accompanying statement of earnings. The estimated
future net cash inflow based on June 30, 2002 market prices is $2,665,000 for
the remainder of 2002, $1,847,000 for 2003, and $76,000 for 2004. The estimated
future cash flow approximates the net fair value recorded in the Company's risk
management assets and liabilities.
In June 2002 the Emerging Issues Task Force reached certain consensus
related to the Accounting for Contracts Involved in Energy Trading and Risk
Management Activities. The Task Force consensus requires: (i) all mark-to-market
gains and losses on energy trading contracts should be shown net in the income
statement whether or not settled physically, (ii) requires an entity to disclose
the gross transaction volumes for those energy trading contracts that are
physically settled, and (iii) the disclosure of the following:
o The applicability of Issue 98-10
o The types of contracts that are accounted for as energy trading
contracts
o The fair values of its energy trading contracts, aggregated by
source or method of estimating fair value and by maturity dates
of the contracts
o A description of the methods and significant assumptions used to
estimate the fair value of its various classes of energy trading
contracts
o A reconciliation of the beginning and ending carrying values of
its energy trading contracts, aggregated by source or method of
estimating fair value, showing separately the changes
attributable to (1) unrealized gains and losses recognized at
inception of a contract, (2) unrealized gains and losses
recognized as a result of changes in valuation techniques and
assumptions,
-16-
(3) other unrealized gains and losses recognized during the
period, and (4) realized gains and losses recognized during the
period.
o The sensitivity of its estimates to changes in the near term.
The consensus on net presentation and the disclosure of transaction
volumes is effective for financial statements issued for periods ending after
July 15, 2002. Upon application of the consensus, comparative financial
statements for prior periods should be reclassified to conform to the consensus.
The consensus on the remaining disclosures is effective for financial statements
issued for fiscal years ending after July 15, 2002. The disclosures required by
the consensus should be provided for all periods presented. Early application of
the consensuses is permitted. The Company is currently evaluating these
consensus; however, management does not believe they will have a material impact
on results of operation.
On January 1, 2001 the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133 and No. 138. The statement establishes
accounting and reporting standards that require every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded on the balance sheet as either an asset or liability measured at its
fair value, unless the derivative qualifies as a normal purchase or sale.
Changes in fair value are recognized immediately in earnings, unless the
derivatives qualify for cash flow hedge accounting, then the effective portion
of the change in fair value will be deferred in other comprehensive income until
the related hedge item impacts earnings. Based on the Company's assessment of
its contracts that qualify as a derivative instrument under SFAS No. 133 and
that were not already recorded at fair value on the balance sheet, the Company
recorded a net risk management income of $55,000 (net of $29,000 of income
taxes), as a cumulative affect of change in accounting principle effective
January 1, 2001. For the six months ended June 30, 2002 and 2001, the Company
had no contracts that qualified for hedge accounting under SFAS 133.
-17-
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 exploration and production. Information concerning
the Company's various business activities is summarized as follows (IN
THOUSANDS):
Depreci-
ation,
Segment Depletion Property
Operating and and
Earnings Amorti- Equipment
Revenues (Loss) zation Additions
------------- ---------- ---------- -----------
For the six months ended
June 30, 2002
Marketing........................ $ 1,163,501 $ 5,167 $ 942 $ 23
Transportation................... 17,882 1,287 750 462
Oil and gas...................... 1,903 29 600 1,014
------------- ---------- --------- -----------
$ 1,183,286 $ 6,483 $ 2,292 $ 1,499
============= ========== ========= ===========
For the six months ended
June 30, 2001
Marketing........................ $ 2,590,446 $ 2,090 $ 1,365 $ 476
Transportation................... 17,880 961 831 324
Oil and gas...................... 4,273 1,345 1,233 801
------------- ---------- --------- -----------
$ 2,612,599 $ 4,396 $ 3,429 $ 1,601
============ ========== ========= ===========
For the three months ended
June 30, 2002
Marketing........................ $ 643,403 $ 2,298 $ 426 $ 3
Transportation................... 9,713 812 372 444
Oil and gas...................... 1,044 (1) 385 -
------------- ---------- --------- -----------
$ 654,160 $ 3,109 $ 1,183 $ 447
============= ========== ========= ===========
For the three months ended
June 30, 2001
Marketing........................ $ 1,259,172 $ (1,055) $ 662 $ 55
Transportation................... 9,503 818 423 15
Oil and gas...................... 1,974 335 615 175
------------- ---------- --------- -----------
$ 1,270,649 $ 98 $ 1,700 $ 245
============= ========== ========= ===========
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Identifiable assets by industry segment are as follows (IN THOUSANDS):
June 30, December 31,
2002 2001
------------ -------------
Marketing................................................. $ 169,888 $ 182,914
Transportation............................................ 16,052 14,268
Oil and gas............................................... 11,798 11,265
Other..................................................... 19,449 18,580
------------ -----------
$ 217,187 $ 227,027
============ ===========
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):
Six months ended Three months ended
June 30, June 30,
------------------------ ------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Segment operating earnings .................... $ 6,483 $ 4,396 $ 3,109 $ 98
General and administrative expenses............ (4,634) (4,436) (2,230) (2,685)
--------- --------- -------- ----------
Operating earnings......................... 1,849 (40) 879 (2,587)
Interest income and other...................... 46 268 33 97
Interest expense .............................. (88) (45) (37) (24)
--------- --------- -------- ----------
Earnings (loss) before income taxes
and cumulative effect of accounting
change................................... $ 1,807 $ 183 $ 875 $ (2,514)
========= ======== ======== ==========
Note 4 - Price Risk Management Activities
Certain forward contracts are recorded in the accompanying financial
statements at fair value, depending on management's assessments of numerous
accounting standards and positions that comply with generally accepted
accounting principles. The revaluation of such contracts is recognized in the
Company's results of operations. Current market quotes from actively traded,
liquid markets are used to determine the undiscounted fair value of the
contracts, which are reflected on the Company's balance sheet as risk management
assets and liabilities. Risk management assets and liabilities are classified as
short- or long-term depending on contract terms. The net unrealized gains and
losses related to the valuation of these contracts are reflected in marketing
revenues on the accompanying statement of earnings.
-19-
Note 5 - Marketing Joint Venture
Commencing in May 2000, the Company had entered into a joint venture
arrangement with a third party for the purpose of purchasing, distributing and
marketing crude oil in the offshore Gulf of Mexico region. The intent behind the
joint venture was to combine the Company's marketing expertise with stronger
financial and credit support from the co-venture participant. The venture
operated as Williams-Gulfmark Energy Company pursuant to the terms of a joint
venture agreement. The Company held a 50 percent interest in the net earnings of
the venture and accounted for its interest under the equity method of
accounting. The Company included its net investment in the venture in the
consolidated balance sheet and its equity in the venture's pretax earnings was
included in marketing segment revenues in the consolidated statement of
earnings.
Effective November 1, 2001, the joint venture participants agreed to
dissolve the venture pursuant to the terms of a joint venture dissolution
agreement. As part of the consideration for terminating the joint venture, the
Company receives a monthly per barrel fee to be paid by the former joint venture
co-participant for a period of sixty months on certain barrels purchased by the
participant in the offshore Gulf of Mexico region. Included in 2002 marketing
segment revenues is $2,433,000 of pre-tax earnings derived from this fee. While
the co-venture participant willingly paid this fee through January 31, 2002
activity, effective with February 2002 business, the participant notified the
Company of its intent to withhold the fee until they audited the previous joint
venture activity.
Such audit was conducted in June of 2002 and to the best of
management's knowledge, the audit detected no adverse findings. The joint
venture dissolution agreement does not permit the withholding of fees due, and
the Company intends to pursue its full legal remedies under the agreement. As a
precautionary measure, during the second quarter of 2002, the Company recorded a
$140,000 bad debt provision which represents the full amount of the currently
uncollected portion of such fees due.
Note 6 - Transactions with Related Parties
Sakco, Ltd. ("Sakco"), Kenada Oil & Gas, Ltd. ("Kenada") and Kasco,
Ltd. ("Kasco"), family limited partnerships of which Mr. K. S. Adams, Jr.,
Chairman and President, is a limited partner, Sakdril, Inc. ("Sakdril"), a
wholly owned subsidiary of KSA Industries, Inc., which is a major stockholder of
the Company, and Mr. Adams individually participate as working interest owners
in certain oil and gas wells administered by the Company. Sakco, Kenada, Kasco,
Sakdril and Mr. Adams participated in each of the wells under terms no better
than those afforded other non-affiliated working interest owners. In recent
years, such related party transactions tend to result after management of the
Company has first identified oil and gas prospects of interest. Due to the
Company's capital budgeting constraints, typically the required dollar
committment to participate in such transactions is greater than the amount that
management is comfortable putting at risk. In such event, the Company first
determines the
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percentage of the transaction it wants to retain with one of the related party
entities participating in the transaction to the extent of the excess available.
Such related party transactions are individually reviewed by and are subject to
approval by the independent directors on the Company's Board. As of June 30,
2002, the Company was owed $585,000 from these related parties, and the Company
owed $252,000 to these related parties. As of December 31, 2001, the Company was
owed $251,000 from these related parties and the Company owed $233,000 to these
related parties.
David B. Hurst, Secretary of the Company, is a partner in the law firm
of Chaffin & Hurst. The Company has been represented by Chaffin & Hurst since
1974 and plans to use the services of that firm in the future. Chaffin & Hurst
currently leases office space from the Company. Transactions with Chaffin &
Hurst are on the same terms as those prevailing at the time for comparable
transactions with unrelated entities.
The Company also enters into certain transactions in the normal course
of business with other affiliated entities. These transactions with affiliated
companies are on the same terms as those prevailing at the time for comparable
transactions with unrelated entities.
Note 7 - Commitments and Contingencies
On August 30, 2000 CJC Leasing, Inc. ("CJC"), a wholly owned subsidiary
of the Company previously involved in the coal mining business, received a
"Notice of Taxes Due" from the State of Kentucky regarding the results of a coal
severance tax audit covering the years 1989 through 1993. The audit proposed a
tax assessment of $8.3 million plus penalties and interest. CJC has protested
this assessment and has set forth a number of defenses including that CJC was
not a taxpayer engaged in severing and/or mining coal at anytime during the
assessment period. Further, it is CJC's informed belief that such taxes were
properly paid by the third parties that had in fact mined the coal. Management
intends to vigorously defend CJC in this matter and believes that it will not
ultimately have a significant adverse effect on the Company's financial position
or results of operations.
In April 2002, a lawsuit was filed against the Company's wholly owned
subsidiary Gulfmark Energy, Inc. by plaintiffs Kirby Energy LLP and Kirby Black
("Kirby"). Kirby was a commission crude oil purchase representative for the
Company and as such had arranged certain crude oil purchase transactions for the
benefit of the Company that earned Kirby a percentage net profits commission.
Kirby believes the commissions paid to him were less than the amounts provided
for in his contract and has sued for an accounting and actual and punitive
damages. Management intends to vigorously defend this matter and believes that
it will not ultimately have a significant adverse effect on the Company's
financial position or results of operations.
On July 31, 2002, pursuant to a workmen's compensation claim filed by
the family of a deceased employee, the plaintiffs filed a complaint with the
Occupational Safety and Health Administration ("OSHA") alleging the Company's
wholly owned subsidiary, Service Transport Company failed to produce employee
exposure and other records including air sampling data and medical monitoring
records from years 1989 through 1997. The Company has responded to the
-21-
alleged violations denying that it failed to produce such data. To date, the
Company has not received a response from OSHA and believes it is in compliance
with such rules and regulations.
From time to time as incident to its operations, the Company becomes
involved in various lawsuits and/or disputes. Primarily as an operator of an
extensive trucking fleet, the Company is a party to motor vehicle accidents,
worker compensation claims or other items of general liability as would be
typical for the industry. Except as disclosed herein, management of the Company
is presently unaware of any claims against the Company 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 the
Company's financial position or results of operations.
Note 8 - Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses the
accounting and reporting for the impairment of disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" and APB Opinion No. 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The objective of SFAS No. 144 is to establish one accounting
model for long-lived assets to be disposed of by sale as well as resolve
implementation issues related to SFAS No. 121. The Company adopted SFAS No. 144
effective January 1, 2002 with no material impact on its financial position or
results of operations.
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations." The objective of SFAS No. 143 is to establish an
accounting model for accounting and reporting obligations associated with
retirement of tangible long-lived assets and associated retirement costs. This
Statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The Company intends to adopt SFAS No. 143
effective January 1, 2003. The Company is presently evaluating the effect of
implementing SFAS No. 143 and does not expect the adoption of this standard to
have a material impact on its financial position or results of operations.
In April 2002 the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt" and an amendment of that statement, SFAS No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." SFAS No.
145 also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor
Carriers." SFAS No. 145 also amends SFAS No. 13, "Accounting for Leases," to
eliminate an inconsistency between the required accounting for sale-leaseback
transactions and the required accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions. SFAS No.
145 also amends other existing authoritative pronouncements to make various
technical corrections, clarify meanings, or describe their applicability under
changed conditions. The provisions related to the rescission of SFAS No. 4 shall
be applied in fiscal years beginning after May 15, 2002. The provisions related
to SFAS No. 13 shall be effective for transactions occurring after May 15, 2002.
All other provisions shall be effective for financial statements issued on or
after May 15, 2002, with early application encouraged. The Company does not
believe that SFAS No. 145 will have a material effect on its results of
operations.
In June 2002 the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally EITF Issue No. 94-3. The Company will adopt the provisions
of SFAS No. 146 for restructuring activities initiated after December 31, 2002.
SFAS No. 146 requires that the liability for costs associated with an exit or
disposal activity be recognized when the liability is incurred. Under Issue No.
94-3, a liability for an exit cost was recognized at the date of commitment to
an exit plan. SFAS No. 146 also establishes that the liability should initially
be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the
timing of recognizing future restructuring costs as well as the amounts
recognized. The Company has not completed its analysis of the impact that SFAS
No. 146 will have on its consolidated financial statements.
-22-
PART II. OTHER INFORMATION
Item 1. - See Note 7 to the Consolidated Financial Statements
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
A report on Form 8-K was filed on July 18, 2002 to announce a change in
the Company's Certifying Accountants from Arthur Andersen LLP to
Deloitte & Touche LLP.
-23-
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 13, 2002 By /s/ K. S. Adams, Jr.
---------------------- --------------------------------------
K. S. Adams, Jr.
Chief Executive Officer
By /s/ Richard B. Abshire
--------------------------------------
Richard B. Abshire
Chief Financial Officer
CERTIFICATION
In connection with the Quarterly Report of Adams Resources & Energy, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2002 (the "Report"), I,
K. S. Adams, Jr., Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ K. S. Adams, Jr.
- ------------------------------------
K. S. Adams, Jr.
Chief Executive Officer
August 13, 2002
-24-
In connection with the Quarterly Report of Adams Resources & Energy, Inc. (the
"Company") on Form 10-Q for the period ending June 30, 2002 (the "Report"), I,
Richard B. Abshire, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a)
of 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of
operations of the Company.
/s/ Richard B. Abshire
- ------------------------------------
Richard B. Abshire
Chief Financial Officer
August 13, 2002
These certifications accompany this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934.
-25-