Company Quick10K Filing
Quick10K
Adams Resources & Energy
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$35.00 4 $148
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-05-27 Quarter: 2014-05-27
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-21 Exhibits
8-K 2019-05-14 Shareholder Vote
8-K 2019-05-14 Regulation FD, Exhibits
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-05-03 Enter Agreement, Exhibits
8-K 2019-03-08 Earnings, Exhibits
8-K 2019-02-22 Regulation FD, Exhibits
8-K 2018-11-07 Earnings, Exhibits
8-K 2018-08-15 Enter Agreement, Exhibits
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-06-11 Officers, Exhibits
8-K 2018-03-27 Officers, Exhibits
8-K 2018-03-16 Officers
8-K 2018-02-22 Regulation FD, Exhibits
LIN Linde 94,120
PLD Prologis 47,080
ALRM Alarm.com 3,370
SAIL Sailpoint Technologies Holdings 1,710
SYNC Synacor 60
MHDG Mullan Agritech 0
SIR Select Income REIT 0
AWIN Altegris Winton Futures Fund 0
WPS Wisconsin Public Service 0
DM Dominion Energy Midstream Partners 0
AE 2019-03-31
Part I. Financial Information
Item 1. Financial Statements
Note 1. Organization and Basis of Presentation
Note 2. Summary of Significant Accounting Policies
Note 3. Revenue Recognition
Note 4. Prepayments and Other Current Assets
Note 5. Property and Equipment
Note 6. Cash Deposits and Other Assets
Note 7. Segment Reporting
Note 8. Transactions with Affiliates
Note 9. Derivative Instruments and Fair Value Measurements
Note 10. Share-Based Compensation Plan
Note 11. Supplemental Cash Flow Information
Note 12. Leases
Note 13. Commitments and Contingencies
Note 14. Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Disclosure Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.2 a1q201910-qexhibit102.htm
EX-31.1 a1q2019exhibit311.htm
EX-31.2 a1q2019exhibit312.htm
EX-32.1 a1q2019exhibit321.htm
EX-32.2 a1q2019exhibit322.htm

Adams Resources & Energy Earnings 2019-03-31

AE 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-Q
(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019 

OR

o 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: 1-07908

ADAMS RESOURCES & ENERGY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
74-1753147
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)

17 South Briar Hollow Lane, Suite 100
Houston, Texas 77027
(Address of Principal Executive Offices, including Zip Code)
(713) 881-3600
(Registrant’s Telephone Number, including Area Code)

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 þ No o 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
Smaller reporting company þ
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockAENYSE American LLC

A total of 4,217,971 shares of Common Stock were outstanding at May 1, 2019.


Table of Contents


ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

Page No.



1

Table of Contents


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31,December 31,
20192018
ASSETS
Current assets:
Cash and cash equivalents$130,893 $117,066 
Accounts receivable, net of allowance for doubtful
accounts of $121 and $153, respectively88,095 85,197 
Accounts receivable – related party 425 
Inventory29,237 22,779 
Derivative assets274 162 
Income tax receivable1,978 2,404 
Prepayments and other current assets1,609 1,557 
Total current assets252,086 229,590 
Property and equipment, net48,917 44,623 
Operating lease right-of-use assets10,681 — 
Cash deposits and other assets2,951 4,657 
Total assets$314,635 $278,870 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable$133,325 $116,068 
Accounts payable – related party6 29 
Derivative liabilities270 139 
Current portion of finance lease obligations1,002 883 
Current portion of operating lease liabilities2,160 — 
Other current liabilities8,580 6,148 
Total current liabilities145,343 123,267 
Other long-term liabilities:
Asset retirement obligations1,538 1,525 
Finance lease obligations3,428 3,209 
Operating lease liabilities8,523 — 
Deferred taxes and other liabilities5,104 4,271 
Total liabilities163,936 132,272 
Commitments and contingencies (Note 13)
Shareholders’ equity:
Preferred stock – $1.00 par value, 960,000 shares
authorized, none outstanding  
Common stock – $0.10 par value, 7,500,000 shares
authorized, 4,217,971 and 4,217,596 shares outstanding, respectively422 422 
Contributed capital12,071 11,948 
Retained earnings138,206 134,228 
Total shareholders’ equity150,699 146,598 
Total liabilities and shareholders’ equity$314,635 $278,870 

See Notes to Unaudited Condensed Consolidated Financial Statements.
2

Table of Contents


ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Three Months Ended
March 31,
20192018
Revenues:
Marketing$429,761 $373,638 
Transportation15,407 13,618 
Total revenues445,168 387,256 
Costs and expenses:
Marketing420,541 369,183 
Transportation13,101 12,301 
General and administrative2,684 2,283 
Depreciation and amortization3,589 2,412 
Total costs and expenses439,915 386,179 
Operating earnings5,253 1,077 
Other income (expense):
Gain on dissolution of investment498  
Interest income656 387 
Interest expense(65)(19)
Total other income (expense), net1,089 368 
Earnings before income taxes6,342 1,445 
Income tax provision(1,434)(307)
Net earnings$4,908 $1,138 
Earnings per share:
Basic net earnings per common share$1.16 $0.27 
Diluted net earnings per common share$1.16 $0.27 
Dividends per common share$0.22 $0.22 


See Notes to Unaudited Condensed Consolidated Financial Statements.
3

Table of Contents


ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Three Months Ended
March 31,
20192018
Operating activities:
Net earnings$4,908 $1,138 
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization3,589 2,412 
Gains on sales of property(178)(26)
Provision for doubtful accounts(32) 
Stock-based compensation expense123  
Deferred income taxes834 (709)
Net change in fair value contracts19 (2)
Gain on dissolution of investment in AREC(498) 
Changes in assets and liabilities:
Accounts receivable(2,866)4,200 
Accounts receivable/payable, affiliates(23) 
Inventories(6,458)(7,075)
Income tax receivable426 880 
Prepayments and other current assets(52)153 
Accounts payable17,914 1,377 
Accrued liabilities2,432 851 
Other878 86 
Net cash provided by operating activities21,016 3,285 
Investing activities:
Property and equipment additions(8,351)(866)
Proceeds from property sales543 132 
Proceeds from dissolution of AREC923  
Insurance and state collateral (deposits) refunds842 603 
Net cash used in investing activities(6,043)(131)
Financing activities:
Principal repayments of finance lease obligations(218)(83)
Dividends paid on common stock(928)(928)
Net cash used in financing activities(1,146)(1,011)
Increase in cash and cash equivalents13,827 2,143 
Cash and cash equivalents at beginning of period117,066 109,393 
Cash and cash equivalents at end of period$130,893 $111,536 


See Notes to Unaudited Condensed Consolidated Financial Statements.

4

Table of Contents


ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)

Total
CommonContributedRetainedShareholders’
StockCapitalEarningsEquity
Balance, January 1, 2019$422 $11,948 $134,228 $146,598 
Net earnings— — 4,908 4,908 
Stock-based compensation expense— 123 — 123 
Dividends declared:
Common stock, $0.22/share— — (928)(928)
Awards under LTIP, $0.22/share— — (2)(2)
Balance, March 31, 2019$422 $12,071 $138,206 $150,699 



Total
CommonContributedRetainedShareholders’
StockCapitalEarningsEquity
Balance, January 1, 2018$422 $11,693 $135,004 $147,119 
Net earnings— — 1,138 1,138 
Dividends declared:
Common stock, $0.22/share— — (928)(928)
Balance, March 31, 2018$422 $11,693 $135,214 $147,329 



See Notes to Unaudited Condensed Consolidated Financial Statements.


5

Table of Contents

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Basis of Presentation

Organization

Adams Resources & Energy, Inc. (“AE”) is a publicly traded Delaware corporation organized in 1973, the common shares of which are listed on the NYSE American LLC under the ticker symbol “AE”. We, through our subsidiaries, are primarily engaged in the business of crude oil marketing, transportation and storage in various crude oil and natural gas basins in the lower 48 states of the United States (“U.S.”). We also conduct tank truck transportation of liquid chemicals and dry bulk primarily in the lower 48 states of the U.S. with deliveries into Canada and Mexico, and with terminals in the Gulf Coast region of the U.S. Unless the context requires otherwise, references to “we,” “us,” “our,” the “Company” or “AE” are intended to mean the business and operations of Adams Resources & Energy, Inc. and its consolidated subsidiaries.  

We operate and report in two business segments: (i) crude oil marketing, transportation and storage, and (ii) tank truck transportation of liquid chemicals and dry bulk.   

Basis of Presentation

Our results of operations for the three months ended March 31, 2019 are not necessarily indicative of results expected for the full year of 2019. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals necessary for fair presentation.  The condensed consolidated financial statements and the accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the rules of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) filed with the SEC on March 8, 2019. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of our financial statements in conformity with GAAP requires management to use estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience and on various other assumptions and information we believe to be reasonable under the circumstances. Estimates and assumptions about future events and their effects cannot be perceived with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. While we believe the estimates and assumptions used in the preparation of these condensed consolidated financial statements are appropriate, actual results could differ from those estimates.


Note 2. Summary of Significant Accounting Policies

Earnings Per Share

Basic earnings (losses) per share is computed by dividing our net earnings (losses) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (losses) per share is computed by giving effect to all potential shares of common stock outstanding, including our stock related to unvested restricted stock unit awards. Unvested restricted stock unit awards granted under the Adams Resources & Energy, Inc. 2018 Long-Term Incentive Plan (“2018 LTIP”) are not considered to be participating securities as the holders of these shares do not have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares (see Note 10 for further discussion).
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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the calculation of basic and diluted earnings per share is as follows (in thousands, except per share data):
Three Months Ended
March 31,
20192018
Earnings per share — numerator:
Net earnings $4,908 $1,138 
Denominator:
Basic weighted average number of shares outstanding4,218 4,218 
Basic earnings per share$1.16 $0.27 
Diluted earnings per share:
Diluted weighted average number of shares outstanding:
Common shares4,218 4,218 
Restricted stock unit awards6  
Performance share unit awards (1)
  
Total4,224 4,218 
Diluted earnings per share$1.16 $0.27 
_______________
(1) The performance conditions for the performance share unit awards were achieved as of December 31, 2018. For the three months ended March 31, 2019, the effect of the performance share awards on earning per share is anti-dilutive.

Fair Value Measurements

The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of the immediate or short-term maturity of these financial instruments. Marketable securities are recorded at fair value based on market quotations from actively traded liquid markets.

A three-tier hierarchy has been established that classifies fair value amounts recognized in the financial statements based on the observability of inputs used to estimate these fair values.  The hierarchy considers fair value amounts based on observable inputs (Levels 1 and 2) to be more reliable and predictable than those based primarily on unobservable inputs (Level 3).  At each balance sheet reporting date, we categorize our financial assets and liabilities using this hierarchy.

Fair value contracts consist of derivative financial instruments and are recorded as either an asset or liability measured at its fair value. Changes in fair value are recognized immediately in earnings unless the derivatives qualify for, and we elect, cash flow hedge accounting. We had no contracts designated for hedge accounting during any current reporting periods (see Note 9 for further information).  

Income Taxes

Income taxes are accounted for using the asset and liability method. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of these items and their respective tax basis.


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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Letter of Credit Facility

We maintain a Credit and Security Agreement with Wells Fargo Bank, National Association to provide for the issuance of up to $60.0 million in stand-by letters of credit primarily used to support crude oil purchases within our crude oil marketing segment and for other purposes. We are currently using the letter of credit facility for letters of credit related to our insurance program. This facility is collateralized by the eligible accounts receivable within our crude oil marketing segment and expires on August 30, 2019.

The issued stand-by letters of credit are canceled as the underlying purchase obligations are satisfied by cash payment when due. The letter of credit facility places certain restrictions on GulfMark Energy, Inc., one of our wholly owned subsidiaries. These restrictions include the maintenance of positive net earnings excluding inventory valuation changes, as defined, among other restrictions. We are currently in compliance with all such financial covenants. However, per the terms of our letter of credit agreement, we were in default of certain nonfinancial covenants at March 31, 2019, and we obtained a waiver whereby the creditor will not exercise any of their rights or remedies. At March 31, 2019 and December 31, 2018, we had $4.6 million and $4.6 million, respectively, of letters of credit outstanding under this facility.  

Property and Equipment

Property and equipment is recorded at cost. Expenditures for additions, improvements and other enhancements to property and equipment are capitalized, and minor replacements, maintenance and repairs that do not extend asset life or add value are charged to expense as incurred. When property and equipment assets are retired or otherwise disposed of, the related cost and accumulated depreciation is removed from the accounts and any resulting gain or loss is included in results of operations in operating costs and expenses for the respective period. Property and equipment, except for land, is depreciated using the straight-line method over the estimated average useful lives ranging from two to thirty-nine years.

We review our long-lived assets for impairment whenever there is evidence that the carrying value of these assets may not be recoverable. Any impairment recognized is permanent and may not be restored. Property and equipment is reviewed at the lowest level of identifiable cash flows. For properties requiring impairment, the fair value is estimated based on an internal discounted cash flow model of future cash flows.

See Note 5 for additional information regarding our property and equipment.

Stock-Based Compensation

We measure all share-based payments, including the issuance of restricted stock units and performance share units to employees and board members, using a fair-value based method. The cost of services received from employees and non-employee board members in exchange for awards of equity instruments is recognized in the consolidated statement of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period. The fair value of restricted stock unit awards and performance share unit awards is based on the closing price of our common stock on the grant date. We account for forfeitures as they occur. See Note 10 for additional information regarding our 2018 LTIP.  


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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3. Revenue Recognition

Revenue Disaggregation

The following table disaggregates our revenue by segment and by major source for the periods indicated (in thousands):
Reporting Segments
MarketingTransportationTotal
Three Months Ended March 31, 2019
Revenues from contracts with customers$360,731 $15,407 $376,138 
Other (1)
69,030  69,030 
Total revenues$429,761 $15,407 $445,168 
Timing of revenue recognition:
Goods transferred at a point in time$360,731 $ $360,731 
Services transferred over time 15,407 15,407 
Total revenues from contracts with customers$360,731 $15,407 $376,138 
Three Months Ended March 31, 2018
Revenues from contracts with customers$360,085 $13,618 $373,703 
Other (1)
13,553  13,553 
Total revenues$373,638 $13,618 $387,256 
Timing of revenue recognition:
Goods transferred at a point in time$360,085 $ $360,085 
Services transferred over time 13,618 13,618 
Total revenues from contracts with customers$360,085 $13,618 $373,703 
_______________
(1) Other marketing revenues are recognized under ASC 815, Derivatives and Hedging, and ASC 845, Nonmonetary Transactions – Purchases and Sales of Inventory with the Same Counterparty. 

Other Marketing Revenue

Certain of the commodity purchase and sale contracts utilized by our crude oil marketing business qualify as derivative instruments with certain specifically identified contracts also designated as trading activity. From the time of contract origination, these contracts are marked-to-market and recorded on a net revenue basis in the accompanying consolidated financial statements.

Certain of our crude oil contracts may be with a single counterparty to provide for similar quantities of crude oil to be bought and sold at different locations. These contracts are entered into for a variety of reasons, including effecting the transportation of the commodity, to minimize credit exposure, and/or to meet the competitive demands of the customer. These buy/sell arrangements are reflected on a net revenue basis in the accompanying consolidated financial statements.

Reporting these crude oil contracts on a gross revenue basis would increase our reported revenues as follows for the periods indicated (in thousands):
Three Months Ended
March 31,
20192018
Revenue gross-up$242,123 $45,691 

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4. Prepayments and Other Current Assets

The components of prepayments and other current assets were as follows at the dates indicated (in thousands):
March 31,December 31,
20192018
Insurance premiums$598 $677 
Rents, licenses and other1,011 880 
Total$1,609 $1,557 


Note 5. Property and Equipment

The historical costs of our property and equipment and related accumulated depreciation balances were as follows at the dates indicated (in thousands):
Estimated
Useful LifeMarch 31,December 31,
in Years20192018
Tractors and trailers (1)
5 – 6$101,470 $96,523 
Field equipment2 – 2021,378 20,725 
Buildings5 – 3915,821 15,746 
Office equipment2 – 51,886 1,863 
Land1,790 1,790 
Construction in progress1,918 2,794 
Total144,263 139,441 
Less accumulated depreciation(95,346)(94,818)
Property and equipment, net$48,917 $44,623 
_______________
(1) Amounts include assets held under finance leases for certain tractors in our marketing segment. Gross property and equipment associated with assets held under finance leases were $5.3 million and $4.7 million at March 31, 2019 and December 31, 2018, respectively. Accumulated amortization associated with assets held under finance leases were $0.9 million and $0.7 million at March 31, 2019 and December 31, 2018, respectively (see Note 12 for further information).

Components of depreciation and amortization expense were as follows for the periods indicated (in thousands):
Three Months Ended
March 31,
20192018
Depreciation and amortization, excluding amounts
under finance leases$3,344 $2,322 
Amortization of property and equipment under finance leases245 90 
Total depreciation and amortization$3,589 $2,412 


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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 6. Cash Deposits and Other Assets

Components of cash deposits and other assets were as follows at the dates indicated (in thousands):

March 31,December 31,
20192018
Amounts associated with liability insurance program:
Insurance collateral deposits$1,027 $1,453 
Excess loss fund794 1,916 
Accumulated interest income520 788 
Other amounts:
State collateral deposits54 57 
Materials and supplies556 443 
Total$2,951 $4,657 

We have established certain deposits to support participation in our liability insurance program and remittance of state crude oil severance taxes and other state collateral deposits. Insurance collateral deposits are held by the insurance company to cover past or potential open claims based upon a percentage of the maximum assessment under our insurance policies. Insurance collateral deposits are invested at the discretion of our insurance carrier. Excess amounts in our loss fund represent premium payments in excess of claims incurred to date that we may be entitled to recover through settlement or commutation as claim periods are closed. Interest income is earned on the majority of amounts held by the insurance companies and will be paid to us upon settlement of policy years.


Note 7. Segment Reporting

We operate and report in two business segments: (i) crude oil marketing, transportation and storage, and (ii) tank truck transportation of liquid chemicals and dry bulk.

Information concerning our various business activities was as follows for the periods indicated (in thousands):
Reporting Segments
MarketingTransportationOtherTotal
Three Months Ended March 31, 2019
Revenues$429,761 $15,407 $ $445,168 
Segment operating earnings (1)
7,098 839  7,937 
Depreciation and amortization2,122 1,467  3,589 
Property and equipment additions1,654 6,697  8,351 
Three Months Ended March 31, 2018
Revenues$373,638 $13,618 $ $387,256 
Segment operating earnings (1)
2,958 402  3,360 
Depreciation and amortization1,497 915  2,412 
Property and equipment additions793 73  866 
_______________
(1)  Our marketing segment’s operating earnings included inventory liquidation gains of $4.5 million and $0.6 million for the three months ended March 31, 2019 and 2018, respectively.


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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Segment operating earnings reflect revenues net of operating costs and depreciation and amortization expense and are reconciled to earnings before income taxes, as follows for the periods indicated (in thousands):
Three Months Ended
March 31,
20192018
Segment operating earnings$7,937 $3,360 
General and administrative(2,684)(2,283)
Operating earnings5,253 1,077 
Gain on dissolution of investment498  
Interest income656 387 
Interest expense(65)(19)
Earnings before income taxes$6,342 $1,445 

Identifiable assets by business segment were as follows at the dates indicated (in thousands):

March 31,December 31,
20192018
Reporting segment:
Marketing$135,755 $119,370 
Transportation40,796 34,112 
Cash and other138,084 125,388 
Total assets$314,635 $278,870 

There were no intersegment sales during the three months ended March 31, 2019 and 2018, respectively. Other identifiable assets are primarily corporate cash, corporate accounts receivable and properties not identified with any specific segment of our business. Accounting policies for transactions between reportable segments are consistent with applicable accounting policies as disclosed herein.


Note 8. Transactions with Affiliates

We enter into certain transactions in the normal course of business with affiliated entities including direct cost reimbursement for shared phone and administrative services. In addition, we lease our corporate office space from an affiliated entity.

Activities with affiliates were as follows for the periods indicated (in thousands):

Three Months Ended
March 31,
20192018
Affiliate billings to us$17 $15 
Billings to affiliates1 2 
Rentals paid to affiliate122 122 


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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 9. Derivative Instruments and Fair Value Measurements

Derivative Instruments

In the normal course of our operations, our crude oil marketing segment purchases and sells crude oil. We seek to profit by procuring the commodity as it is produced and then delivering the material to the end users or the intermediate use marketplace. As typical for the industry, these transactions are made pursuant to the terms of forward month commodity purchase and/or sale contracts. Some of these contracts meet the definition of a derivative instrument, and therefore, we account for these contracts at fair value, unless the normal purchase and sale exception is applicable. These types of underlying contracts are standard for the industry and are the governing document for our crude oil marketing segment. None of our derivative instruments have been designated as hedging instruments.

At March 31, 2019, we had in place 12 commodity purchase and sale contracts, of which ten of these contracts had no fair value associated with them as the contractual prices of crude oil were within the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:
322 barrels per day of crude oil during April 2019;
258 barrels per day of crude oil during May 2019;
322 barrels per day of crude oil during June 2019 through August 2019;
516 barrels per day of crude oil during September 2019 through December 2019; and
258 barrels per day of crude oil during January 2020 through February 2020.
The estimated fair value of forward month commodity contracts (derivatives) reflected in the accompanying unaudited condensed consolidated balance sheet were as follows at the date indicated (in thousands):
March 31, 2019
Balance Sheet Location and Amount
CurrentOtherCurrentOther
AssetsAssetsLiabilitiesLiabilities
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation$274 $ $ $ 
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation  270  
Less counterparty offsets    
As reported fair value contracts$274 $ $270 $ 

At December 31, 2018, we had in place ten commodity purchase and sale contracts with fair value associated with them as the contractual prices of crude oil were outside of the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:
322 barrels per day of crude oil during January 2019 through April 2019;
258 barrels per day of crude oil during May 2019;
322 barrels per day of crude oil during June 2019 through August 2019; and  
258 barrels per day of crude oil during September 2019 through December 2019.
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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The estimated fair value of forward month commodity contracts (derivatives) reflected in the accompanying unaudited condensed consolidated balance sheet were as follows at the date indicated (in thousands):

December 31, 2018
Balance Sheet Location and Amount
CurrentOtherCurrentOther
AssetsAssetsLiabilitiesLiabilities
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation$162 $ $ $ 
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation  139  
Less counterparty offsets    
As reported fair value contracts$162 $ $139 $ 

We only enter into commodity contracts with creditworthy counterparties and evaluate our exposure to significant counterparties on an ongoing basis. At March 31, 2019 and December 31, 2018, we were not holding nor have we posted any collateral to support our forward month fair value derivative activity. We are not subject to any credit-risk related trigger events. We have no other financial investment arrangements that would serve to offset our derivative contracts.

Forward month commodity contracts (derivatives) reflected in the accompanying unaudited condensed consolidated statements of operations were as follows for the periods indicated (in thousands):

Gains (losses)
Three Months Ended
March 31,
20192018
Revenues – marketing$(20)$1 

Fair Value Measurements

The following tables set forth, by level with the Level 1, 2 and 3 fair value hierarchy, the carrying values of our financial assets and liabilities at the dates indicated (in thousands):

March 31, 2019
Fair Value Measurements Using
Quoted Prices
in ActiveSignificant
Markets forOtherSignificant
Identical AssetsObservableUnobservable
and LiabilitiesInputsInputsCounterparty
(Level 1)(Level 2)(Level 3)OffsetsTotal
Derivatives:
Current assets$ $274 $ $ $274 
Current liabilities (270)  (270)
Net value$ $4 $ $ $4 

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2018
Fair Value Measurements Using
Quoted Prices
in ActiveSignificant
Markets forOtherSignificant
Identical AssetsObservableUnobservable
and LiabilitiesInputsInputsCounterparty
(Level 1)(Level 2)(Level 3)OffsetsTotal
Derivatives:
Current assets$ $162 $ $ $162 
Current liabilities (139)  (139)
Net value$ $23 $ $ $23 

These assets and liabilities are measured on a recurring basis and are classified based on the lowest level of input used to estimate their fair value. Our assessment of the relative significance of these inputs requires judgments.

When determining fair value measurements, we make credit valuation adjustments to reflect both our own nonperformance risk and our counterparty’s nonperformance risk. When adjusting the fair value of derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements. Credit valuation adjustments utilize Level 3 inputs, such as credit scores to evaluate the likelihood of default by us or our counterparties. At March 31, 2019 and December 31, 2018, credit valuation adjustments were not significant to the overall valuation of our fair value contracts. As a result, applicable fair value assets and liabilities are included in their entirety in the fair value hierarchy.


Note 10.  Share-Based Compensation Plan

In May 2018, our shareholders approved the 2018 LTIP, a long-term incentive plan under which any employee or non-employee director who provides services to us is eligible to participate in the plan. The 2018 LTIP, which is overseen by the Compensation Committee of our Board of Directors, provides for the grant of various types of equity awards, of which restricted stock unit awards and performance-based compensation awards were granted during the second quarter of 2018. The maximum number of shares authorized for issuance under the 2018 LTIP is 150,000 shares, and the 2018 LTIP is effective until May 8, 2028. After giving effect to awards granted under the 2018 LTIP and assuming the potential achievement of the maximum amounts of the performance factors through March 31, 2019, a total of 132,486 shares were available for issuance. During the three months ended March 31, 2019, we recognized $0.1 million of compensation expense in connection with equity-based awards. We had no compensation expense in connection with equity-based awards during the three months ended March 31, 2018 as we began awarding share-based compensation to eligible employees and directors in June 2018.  

At March 31, 2019 and December 31, 2018, we had $11,600 and $10,000, respectively, of accrued dividend amounts for awards granted under the 2018 LTIP.


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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Unit Awards

The following table presents restricted stock unit award activity for the periods indicated:
Weighted-
Average Grant
Number ofDate Fair Value
Shares
per Share (1)
Restricted stock unit awards at January 1, 201913,733 $43.00 
Granted $ 
Vested(375)$43.00 
Forfeited $ 
Restricted stock unit awards at March 31, 201913,358 
_______________
(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.

Unrecognized compensation cost associated with restricted stock unit awards was approximately $0.3 million at March 31, 2019. Due to the graded vesting provisions of these awards, we expect to recognize the remaining compensation cost for these awards over a weighted-average period of 1.5 years.

Performance Share Unit Awards

The following table presents performance share unit award activity for the periods indicated:
Weighted-
Average Grant
Number ofDate Fair Value
Shares
per Share (1)
Performance share unit awards at January 1, 20193,966 $43.00 
Granted $ 
Performance factor decrease (2)
(185)$43.00 
Vested $ 
Forfeited $ 
Performance share unit awards at March 31, 20193,781 
_______________
(1) Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.
(2) The performance factor was lowered to 47.5 percent based upon a comparison of actual results for 2018 to performance goals.

Unrecognized compensation cost associated with performance share unit awards was approximately $