-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QP4T0MX/59QlAC2OLXydMoJdpHmYKBlgMYoI7fPqlZvoLk1oYFfQQWbKI4XFP21F TaBqqG/X4LK2SWoKZWgCDA== 0000950129-99-002135.txt : 19990513 0000950129-99-002135.hdr.sgml : 19990513 ACCESSION NUMBER: 0000950129-99-002135 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADAMS RESOURCES & ENERGY INC CENTRAL INDEX KEY: 0000002178 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 741753147 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07908 FILM NUMBER: 99618765 BUSINESS ADDRESS: STREET 1: 6603 KIRBYVILLE STREET 2: P O BOX 844 CITY: HOUSTON STATE: TX ZIP: 77033 BUSINESS PHONE: 7136400100 MAIL ADDRESS: STREET 1: P O BOX 844 CITY: HOUSTON STATE: TX ZIP: 77001 FORMER COMPANY: FORMER CONFORMED NAME: ADA RESOURCES INC DATE OF NAME CHANGE: 19790620 10-Q 1 ADAMS RESOURCES & ENERGY, INC. - DATED 03/31/99 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 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.) 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 May 12, 1999 was 4,217,596. 2 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended March 31, -------------------------- 1999 1998 ---------- ---------- Revenues: Marketing $ 515,266 $ 406,377 Transportation 7,851 8,663 Oil and Gas 853 1,596 ---------- ---------- 523,970 416,636 Costs and expenses: Operating Marketing 513,361 404,473 Transportation 7,233 7,534 Oil and gas 709 302 Corporate general and administrative 724 543 Depreciation, depletion and amortization 1,786 2,193 ---------- ---------- 523,813 415,045 Operating earnings 157 1,591 Other income (expense) Property sales and other 666 108 Interest (30) (65) ---------- ---------- Earnings before income taxes 793 1,634 Income tax provision Current 45 494 Deferred 129 100 ---------- ---------- 174 594 ---------- ---------- Net earnings $ 619 $ 1,040 ========== ========== Basic and diluted net earnings $ .15 $ .25 ========== ========== per common share Dividends per common share $ -- $ -- ========== ==========
The accompanying notes are an integral part of these financial statements. -2- 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Marketing Marketing division revenues, operating earnings and significant operating statistics were as follows:
First Quarter First Quarter 1999 1998 -------------------- ---------------------- Revenues $ 515,266,000 $ 406,377,000 Operating earnings $ 1,074,000 $ 1,125,000 Wellhead Purchases Per day(1) 192,000 bbls. 105,000 bbls. Average Crude Oil Price $ 10.99/bbl. $ 14.52/bbl.
(1) Reflects the volume of crude oil purchased from third parties at the lease level and shipped to market. Gross revenues for this division's operations increased by $108,889,000 or 27%, in the comparative current period as a result of increased volumes of crude oil purchased at the wellhead. While volumes increased, marketing division operating earnings for the first three months of 1999 were consistent with the 1998 period. Within the crude oil marketplace during 1999, supply and demand conditions caused a narrowing of per unit gross margins. Hence, operating earnings did not increase with volumes. - Transportation Transportation revenues and operating earnings increased (decreased) as follows:
Percentage First Quarter First Quarter Increase 1999 1998 (Decrease) -------------- ------------- -------------- Revenues $ 7,851,000 $ 8,663,000 (9)% Operating earnings $ 383,000 $ 919,000 (58)%
-3- 4 This division's revenues and operating earnings suffered during 1999 as a result of slowing customer demand. In addition, the Company incurred higher fixed costs in the first quarter of 1999 because the Company had previously expanded its infrastructure in anticipation of stronger customer demand. Thus fixed costs grew faster than demand for the Company's services. Beginning in late March 1999, the Company has seen improvement in customer demand. As such demand growth continues, profitability is expected to improve. - Oil and Gas Oil and gas division revenues and operating earnings are primarily a function of crude oil and natural gas prices and volumes. The reduction in this division's revenues and operating earnings is a direct result of reduced production volumes and prices. Comparative amounts are as follows:
First Quarter First Quarter 1999 1998 ------------------- --------------------- Revenues $ 853,000 $ 1,596,000 Operating earnings $ (576,000) $ 90,000 Crude oil Volume 10,800 bbls. 17,000 bbls. Average price $ 9.67/bbl. $ 14.56/bbl. Natural gas Volume 450,000 mcf 800,000 mcf Average price $ 1.68 mcf $ 1.70 mcf
- Depreciation, depletion, and amortization The provision for depreciation, depletion and amortization is reduced in the current quarter due to lower oil and gas production volumes. - Other income (expense) Property sales and other income of $666,000 and $108,000, respectively, resulted primarily from gains realized on the sale of forty-five truck tractors in 1999 and from the sale of a former gasoline service station location during 1998. Interest expense is reduced in 1999 because the Company used its excess cash flow to reduce its level of long-term debt. -4- 5 Liquidity and Capital Resources During the first three months of 1999, the Company invested $866,000 in property and equipment additions with $522,000 expended toward expansion of the Company's transportation operations and the remainder going toward various oil and gas projects and marketing equipment items. Funding for these investments was derived from the Company generating $1,845,000 of working capital funds. The $979,000 of excess cash flow generated was applied against the Company's working capital lines of credit. Refer to the "Liquidity and Capital Resources" section of the Company's Annual Report on Form 10-K for the year ended December 31, 1998 for additional discussion of the Company's bank relationships and other matters. Year 2000 Many currently installed computer systems and software products are coded to accept only two digit entries in the date code field. Beginning in the year 2000, these date code fields will need to accept four-digit entries to distinguish 21st century dates from 20th century dates. As a result, computer systems and software used by many companies may need to be upgraded to comply with such "Year 2000" requirements. Significant uncertainty exists concerning the potential effects associated with such compliance, but systems that do not properly recognize such information could generate erroneous data or cause a system to fail. The Company has completed a review of its key computer systems and is in the process of implementing certain new operating systems applications necessary to resolve potential year 2000 compliance issues. Many of the Company's operating and financial systems are already compliant. The Company's remaining operating and financial systems are scheduled for compliance in phases and will be compliant by the year 2000. The Company is communicating with software vendors, business partners and others with which it conducts business to provide assurances that their systems will be year 2000 compliant. Adams could be adversely affected by the failure of these unaffiliated companies to adequately address the year 2000 issue. Contingency planning will be included in this assessment to identify arrangements to mitigate the impact of disruptions from outside sources. As of year-end 1998, the Company had incurred and expensed approximately $150,000 of costs to become year 2000 compliant. An additional $50,000 is expected to be incurred and expensed in 1999 in order to complete this project. -5- 6 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (IN THOUSANDS)
March 31, December 31, 1999 1998 ---------- ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents ........................... $ 13,179 $ 10,215 Accounts receivable, net ............................ 86,181 73,864 Inventories ......................................... 7,557 8,288 Prepaid and other ................................... 1,497 801 ---------- ---------- Total current assets .................. 108,414 93,168 ---------- ---------- Property and equipment ................................ 63,947 64,019 Less - accumulated depreciation, depletion and amortization ................... (37,707) (36,226) ---------- ---------- 26,240 27,793 ---------- ---------- Other assets .......................................... 1,373 1,373 ---------- ---------- $ 136,027 $ 122,334 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable .................................... $ 94,877 $ 78,444 Accrued and other liabilities ....................... 4,358 3,869 ---------- ---------- Total current liabilities .................... 99,235 82,313 Long-term debt, less current maturities ............... 5,200 9,100 Deferred taxes and other liabilities .................. 917 865 ---------- ---------- 105,352 92,278 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 ........... 18,560 17,941 ---------- ---------- Total shareholders' equity ................... 30,675 30,056 ---------- ---------- $ 136,027 $ 122,334 ========== ==========
The accompanying notes are an integral part of these financial statements. -6- 7 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS)
Three Months Ended March 31, ------------------------------ 1999 1998 ------------ ------------ CASH PROVIDED (USED) BY OPERATIONS: Net earnings ............................................. $ 619 $ 1,040 Items of income not requiring (providing) cash- Depreciation, depletion and amortization ............... 1,786 2,193 Deferred income tax provision .......................... 129 100 Gain on sale of properties ............................. (611) (59) Other, net ............................................. (78) (132) Decrease (increase) in accounts receivable ............... (12,317) 12,550 Decrease (increase) in inventories ....................... 731 3,556 Decrease (increase) in prepaid and other ................. (696) 587 Increase (decrease) in accounts payable .................. 16,433 (16,490) Increase (decrease) in accrued liabilities ............... 489 (509) ------------ ------------ Net cash provided (required) by operating activities ... 6,485 2,836 ------------ ------------ INVESTING ACTIVITIES: Property and equipment additions ......................... (866) (2,040) Proceeds from property sales ............................. 1,245 82 ------------ ------------ Net cash provided by (used in) investing activities .... 379 (1,958) ------------ ------------ FINANCING ACTIVITIES: Repayment of debt ........................................ (3,900) (2,435) ------------ ------------ Net cash provided by (used in) financing activities .... (3,900) (2,435) ------------ ------------ Increase (decrease) in cash and cash equivalents ........... 2,964 (1,557) Cash at beginning of period ................................ 10,215 6,496 ------------ ------------ Cash at end of period ...................................... $ 13,179 $ 4,939 ============ ============ Supplemental disclosure of cash flow information: Interest paid during the period .......................... $ 30 $ 65 ============ ============ Income taxes paid during the period ...................... $ -- $ -- ============ ============
The accompanying notes are an integral part of these financial statements. -7- 8 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Basis of Presentation The accompanying condensed consolidated financial statements are unaudited but, in the opinion of the Company's management, include all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of financial position at March 31, 1999 and December 31, 1998 and results of operations and cash flows for the three months ended March 31, 1999 and 1998. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations, although the Company believes the disclosures made are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements, and the notes thereto, included in the Company's latest annual report on Form 10-K. The interim statement of operations is not necessarily indicative of results to be expected for a full year. Note 2 - Segment Reporting The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" effective January 1, 1998. Under this new standard, companies are required to report certain information about operating segments in consolidated statements. Operating segments are determined based on the method by which management organizes its business for making operating decisions and assessing performance. -8- 9 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS The Company is primarily engaged in the business of crude oil and petroleum products marketing, transportation, and oil and gas exploration and production. Information concerning the Company's various business activities is summarized as follows (in thousands):
Depreci- ation, Earnings Depletion Property (Loss) and and from Amorti- Equipment Revenues Operations zation Additions ------------ ------------ ------------ ------------ For the three months ended March 31, 1999 Marketing ..................... $ 515,266 $ 1,074 $ 831 $ 212 Transportation ................ 7,851 383 235 522 Oil and gas ................... 853 (576)(1) 720 132 ------------ ------------ ------------ ------------ $ 523,970 $ 881 $ 1,786 $ 866 ============ ============ ============ ============ For the three months ended March 31, 1998 Marketing ..................... $ 406,377 $ 1,125 $ 779 $ 828 Transportation ................ 8,663 919 210 414 Oil and gas ................... 1,596 90 1,204 798 ------------ ------------ ------------ ------------ ....................... $ 416,636 $ 2,134 $ 2,193 $ 2,040 ============ ============ ============ ============
(1) Includes a $666,000 comparative earnings decrease caused by dry hole expense and decreased crude oil and natural gas prices. Identifiable assets by industry segment are as follows:
March 31, December 31, 1999 1998 ------------ ------------ Marketing ................................... $ 98,140 $ 86,510 Transportation .............................. 13,603 13,947 Oil and gas ................................. 9,608 10,227 Other ....................................... 14,676 11,650 ------------ ------------ $ 136,027 $ 122,334 ============ ============
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. -9- 10 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Earnings from operations by segment represent revenues less operating costs and expenses and depreciation, depletion and amortization and are reconciled to earnings from operations before income taxes, as follows (in thousands):
For the three months ended March 31, 1999 ------------------------------ 1998 1997 ------------ ------------ Earnings from operations .................... $ 881 $ 2,134 General and administrative expenses ......... (724) (543) Property sales and other .................... 666 108 Interest expense ............................ (30) (65) ------------ ------------ Earnings before income taxes ................ $ 793 $ 1,634 ============ ============
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. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. The standard cannot be applied retroactively but early adoption is permitted. The Company has not yet determined the impacts of adopting SFAS No. 133; however, this standard could increase volatility in earnings and shareholder's 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 a net charge of $242,000 to reflect a loss in marketing revenues for the current period relating to such activities. The accompanying balance sheet reflects the fair value of the trading asset or $621,000 in other current assets and the fair value of the trading liability or $863,000 in accrued liabilities. -10- 11 PART II. OTHER INFORMATION Item 1. - None Item 2. - None Item 3. - None Item 4. - Submission of Matters to a Vote of Security Holders The 1999 Annual Meeting of Stockholders (the "Meeting") of the Company was held on April 28, 1999. At the Meeting, holders of common stock, $.10 par value, of the Company elected nine members of the Company's Board of Directors. Out of the 4,217,596 shares of common stock entitled to vote at the Meeting, there were 3,922,364 shares of common stock voted for the election of the nominees for Directors listed in the proxy statement. Item 6. Exhibits and Reports on Form 8K a. Exhibits - None. b. Reports on Form 8-K - None. -11- 12 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADAMS RESOURCES & ENERGY, INC. (Registrant) Date: May 13, 1999 By /s/ K. S. Adams, Jr. ---------------- ------------------------------------- K. S. Adams, Jr. Chief Executive Officer By /s/ Richard B. Abshire ------------------------------------- Richard B. Abshire Chief Financial Officer -12- 13 EXHIBIT INDEX
Exhibit Number Description - ------- ----------- 27* - Financial Data Schedule
- ------------------------------ * - Filed herewith -13- EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 MAR-31-1999 13,179 0 86,420 (239) 7,557 108,414 63,947 (37,707) 136,027 99,235 5,200 422 0 0 30,253 136,027 523,970 523,970 521,303 523,813 0 0 30 793 174 619 0 0 0 619 .15 .15
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