Table of Contents

UNITED STATES

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 ~~September 30, 2021~~March 31, 2022

☐ 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)

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.10 Par Value

NYSE American LLC

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

☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company

☑

Emerging growth company

☐

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 ☐ No þ

A total of ~~4,355,001~~4,367,866 shares of Common Stock were outstanding at ~~November~~May 1, ~~2021.~~2022.

Table of Contents

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page Number
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets	2
	Unaudited Condensed Consolidated Statements of Operations	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity	5
	Notes to Unaudited Condensed Consolidated Financial Statements	76
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2823
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4032
Item 4.	Controls and Procedures	4032

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	4133
Item 1A.	Risk Factors	4133
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4233
Item 3.	Defaults Upon Senior Securities	4233
Item 4.	Mine Safety Disclosures	4233
Item 5.	Other Information	4233
Item 6.	Exhibits	4334

Signatures		4435

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)


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	95,634	$	39,293	Cash and cash equivalents	$	99,295	$	97,825
Restricted cash	Restricted cash	6,788		12,772		Restricted cash	8,850		9,492
Accounts receivable, net of allowance for doubtful	Accounts receivable, net of allowance for doubtful					Accounts receivable, net of allowance for doubtful
accounts of $111 and $114, respectively		130,169		99,799
accounts of $103 and $108, respectively						accounts of $103 and $108, respectively	212,454		137,789
Accounts receivable – related party	Accounts receivable – related party	5		—		Accounts receivable – related party	1		2
Inventory	Inventory	24,362		19,336		Inventory	42,382		18,942
Derivative assets	Derivative assets	1,005		61		Derivative assets	1,145		347
Income tax receivable	Income tax receivable	6,189		13,288		Income tax receivable	5,140		6,424
Prepayments and other current assets	Prepayments and other current assets	1,509		2,964		Prepayments and other current assets	1,705		2,389
Total current assets	Total current assets	265,661		187,513		Total current assets	370,972		273,210
Property and equipment, net	Property and equipment, net	90,739		94,134		Property and equipment, net	86,543		88,036
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	7,551		8,051		Operating lease right-of-use assets, net	6,699		7,113
Intangible assets, net	Intangible assets, net	3,509		4,106		Intangible assets, net	3,126		3,317
Other assets	Other assets	2,965		2,383		Other assets	2,777		3,027
Total assets	Total assets	$	370,425	$	296,187	Total assets	$	470,117	$	374,703

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	154,860	$	85,991	Accounts payable	$	259,451	$	168,224

Accounts payable – related party						Accounts payable – related party	47		—
Derivative liabilities	Derivative liabilities	964		52		Derivative liabilities	1,102		324
Current portion of finance lease obligations	Current portion of finance lease obligations	4,028		4,112		Current portion of finance lease obligations	3,293		3,663
Current portion of operating lease liabilities	Current portion of operating lease liabilities	2,201		2,050		Current portion of operating lease liabilities	2,258		2,178
Other current liabilities	Other current liabilities	13,084		22,343		Other current liabilities	10,828		11,622
Total current liabilities	Total current liabilities	175,137		114,548		Total current liabilities	276,979		186,011
Other long-term liabilities:	Other long-term liabilities:					Other long-term liabilities:
Long-term debt		8,000		—

Asset retirement obligations	Asset retirement obligations	2,359		2,308		Asset retirement obligations	2,391		2,376
Finance lease obligations	Finance lease obligations	10,434		11,507		Finance lease obligations	8,903		9,672
Operating lease liabilities	Operating lease liabilities	5,353		6,000		Operating lease liabilities	4,445		4,938
Deferred taxes and other liabilities	Deferred taxes and other liabilities	11,060		12,732		Deferred taxes and other liabilities	11,878		11,320
Total liabilities	Total liabilities	212,343		147,095		Total liabilities	304,596		214,317

Commitments and contingencies (Note 15)		0		0
Commitments and contingencies (Note 14)						Commitments and contingencies (Note 14)	0		0

Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Preferred stock – $1.00 par value, 960,000 shares	Preferred stock – $1.00 par value, 960,000 shares					Preferred stock – $1.00 par value, 960,000 shares
authorized, none outstanding	authorized, none outstanding	—		—		authorized, none outstanding	—		—
Common stock – $0.10 par value, 7,500,000 shares	Common stock – $0.10 par value, 7,500,000 shares					Common stock – $0.10 par value, 7,500,000 shares
authorized, 4,343,701 and 4,243,716 shares outstanding, respectively		432		423
authorized, 4,367,866 and 4,355,001 shares outstanding, respectively						authorized, 4,367,866 and 4,355,001 shares outstanding, respectively	435		433
Contributed capital	Contributed capital	16,375		13,340		Contributed capital	17,020		16,913
Retained earnings	Retained earnings	141,275		135,329		Retained earnings	148,066		143,040
Total shareholders’ equity	Total shareholders’ equity	158,082		149,092		Total shareholders’ equity	165,521		160,386
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	370,425	$	296,187	Total liabilities and shareholders’ equity	$	470,117	$	374,703

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021
Revenues:	Revenues:									Revenues:
Marketing	Marketing	$	543,228	$	245,184	$	1,310,343	$	722,546	Marketing	$	747,555	$	304,023
Transportation	Transportation	24,826		21,720		69,558		50,121		Transportation	26,690		21,235
Pipeline and storage	Pipeline and storage	127		—		515		—		Pipeline and storage	—		233
Total revenues	Total revenues	568,181		266,904		1,380,416		772,667		Total revenues	774,245		325,491

Costs and expenses:	Costs and expenses:									Costs and expenses:
Marketing	Marketing	537,362		237,479		1,285,650		721,798		Marketing	735,647		295,207
Transportation	Transportation	19,605		17,105		56,143		41,178		Transportation	20,865		17,460
Pipeline and storage	Pipeline and storage	562		—		1,594		—		Pipeline and storage	554		544
General and administrative	General and administrative	3,502		1,405		9,839		7,030		General and administrative	4,018		3,376
Depreciation and amortization	Depreciation and amortization	4,849		4,859		14,703		13,610		Depreciation and amortization	5,013		5,053
Total costs and expenses	Total costs and expenses	565,880		260,848		1,367,929		783,616		Total costs and expenses	766,097		321,640

Operating earnings (losses)		2,301		6,056		12,487		(10,949)
Operating earnings										Operating earnings	8,148		3,851

Other income (expense):	Other income (expense):									Other income (expense):
Interest and other income	Interest and other income	37		105		233		614		Interest and other income	24		134
Interest expense	Interest expense	(178)		(70)		(602)		(288)		Interest expense	(114)		(220)
Total other (expense) income, net	Total other (expense) income, net	(141)		35		(369)		326		Total other (expense) income, net	(90)		(86)

Earnings (Losses) before income taxes		2,160		6,091		12,118		(10,623)
Income tax (provision) benefit		(614)		(3,018)		(3,055)		5,772
Earnings before income taxes										Earnings before income taxes	8,058		3,765
Income tax provision										Income tax provision	(1,968)		(957)

Net earnings (losses)		$	1,546	$	3,073	$	9,063	$	(4,851)
Net earnings										Net earnings	$	6,090	$	2,808

Earnings (Losses) per share:
Basic net earnings (losses) per common share		$	0.36	$	0.72	$	2.13	$	(1.14)
Diluted net earnings (losses) per common share		$	0.36	$	0.72	$	2.12	$	(1.14)
Earnings per share:										Earnings per share:
Basic net earnings per common share										Basic net earnings per common share	$	1.40	$	0.66
Diluted net earnings per common share										Diluted net earnings per common share	$	1.39	$	0.66

Dividends per common share	Dividends per common share	$	0.24	$	0.24	$	0.72	$	0.72	Dividends per common share	$	0.24	$	0.24

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2021		2020			2022		2021
Operating activities:	Operating activities:					Operating activities:
Net earnings (losses)		$	9,063	$	(4,851)
Adjustments to reconcile net earnings (losses) to net cash
provided by (used in) operating activities:
Net earnings						Net earnings	$	6,090	$	2,808
Adjustments to reconcile net earnings to net cash						Adjustments to reconcile net earnings to net cash
provided by operating activities:						provided by operating activities:
Depreciation and amortization	Depreciation and amortization	14,703		13,610		Depreciation and amortization	5,013		5,053
Gains on sales of property	Gains on sales of property	(532)		(985)		Gains on sales of property	(491)		(83)
Provision for doubtful accounts	Provision for doubtful accounts	(3)		(27)		Provision for doubtful accounts	(5)		(1)
Stock-based compensation expense	Stock-based compensation expense	641		453		Stock-based compensation expense	195		185
Deferred income taxes	Deferred income taxes	(1,664)		(1,503)		Deferred income taxes	561		(829)
Net change in fair value contracts	Net change in fair value contracts	(32)		(3)		Net change in fair value contracts	(20)		(21)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Accounts receivable	Accounts receivable	(30,367)		(93)		Accounts receivable	(74,660)		(11,268)
Accounts receivable/payable, affiliates	Accounts receivable/payable, affiliates	(5)		153		Accounts receivable/payable, affiliates	48		(13)
Inventories	Inventories	(5,026)		10,465		Inventories	(23,440)		(9,887)
Income tax receivable	Income tax receivable	7,099		(1,782)		Income tax receivable	1,284		1,650
Prepayments and other current assets	Prepayments and other current assets	1,455		142		Prepayments and other current assets	684		(657)
Accounts payable	Accounts payable	68,766		(70,082)		Accounts payable	91,211		36,127
Accrued liabilities	Accrued liabilities	770		4,396		Accrued liabilities	(775)		51
Other	Other	(636)		17		Other	178		(114)
Net cash provided by (used in) operating activities		64,232		(50,090)
Net cash provided by operating activities						Net cash provided by operating activities	5,873		23,001

Investing activities:	Investing activities:					Investing activities:
Property and equipment additions	Property and equipment additions	(9,929)		(3,589)		Property and equipment additions	(3,694)		(170)
Asset acquisition		—		(9,163)

Proceeds from property sales	Proceeds from property sales	1,886		2,282		Proceeds from property sales	856		1,005
Insurance and state collateral (deposits) refunds		—		1,127
Net cash used in investing activities		(8,043)		(9,343)

Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(2,838)		835

Financing activities:	Financing activities:					Financing activities:
Borrowings under Credit Agreement		8,000		—

Principal repayments of finance lease obligations	Principal repayments of finance lease obligations	(3,240)		(1,677)		Principal repayments of finance lease obligations	(1,139)		(1,014)
Payment for financed portion of VEX acquisition	Payment for financed portion of VEX acquisition	(10,000)		—		Payment for financed portion of VEX acquisition	—		(2,500)
Net proceeds from sale of equity		2,504		—
Payment of contingent consideration liability		—		(111)

Dividends paid on common stock	Dividends paid on common stock	(3,096)		(3,063)		Dividends paid on common stock	(1,068)		(1,025)
Net cash used in financing activities	Net cash used in financing activities	(5,832)		(4,851)		Net cash used in financing activities	(2,207)		(4,539)

Increase (Decrease) in cash and cash equivalents, including restricted cash		50,357		(64,284)
Increase in cash and cash equivalents, including restricted cash						Increase in cash and cash equivalents, including restricted cash	828		19,297
Cash and cash equivalents, including restricted cash, at beginning of period	Cash and cash equivalents, including restricted cash, at beginning of period	52,065		122,255		Cash and cash equivalents, including restricted cash, at beginning of period	107,317		52,065
Cash and cash equivalents, including restricted cash, at end of period	Cash and cash equivalents, including restricted cash, at end of period	$	102,422	$	57,971	Cash and cash equivalents, including restricted cash, at end of period	$	108,145	$	71,362

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands, except per share data)


								Total									Total
		Common		Contributed		Retained		Shareholders’			Common		Contributed		Retained		Shareholders’
		Stock		Capital		Earnings		Equity			Stock		Capital		Earnings		Equity

Balance, January 1, 2021		$	423	$	13,340	$	135,329	$	149,092
Net earnings		—		—		2,808		2,808
Stock-based compensation expense		—		185		—		185
Cancellation of shares withheld to cover
taxes upon vesting of restricted awards		—		(31)		—		(31)
Dividends declared:
Common stock, $0.24/share		—		—		(1,019)		(1,019)
Awards under LTIP, $0.24/share		—		—		(18)		(18)
Balance, March 31, 2021		423		13,494		137,100		151,017
Balance, January 1, 2022										Balance, January 1, 2022	$	433	$	16,913	$	143,040	$	160,386
Net earnings	Net earnings	—		—		4,709		4,709		Net earnings	—		—		6,090		6,090
Stock-based compensation expense	Stock-based compensation expense	—		232		—		232		Stock-based compensation expense	—		195		—		195
Vesting of restricted awards	Vesting of restricted awards	1		(1)		—		—		Vesting of restricted awards	2		(2)		—		—
Cancellation of shares withheld to cover	Cancellation of shares withheld to cover									Cancellation of shares withheld to cover
taxes upon vesting of restricted awards	taxes upon vesting of restricted awards	—		(70)		—		(70)		taxes upon vesting of restricted awards	—		(86)		—		(86)
Dividends declared:	Dividends declared:									Dividends declared:
Common stock, $0.24/share	Common stock, $0.24/share	—		—		(1,021)		(1,021)		Common stock, $0.24/share	—		—		(1,048)		(1,048)
Awards under LTIP, $0.24/share	Awards under LTIP, $0.24/share	—		—		(16)		(16)		Awards under LTIP, $0.24/share	—		—		(16)		(16)
Balance, June 30, 2021		424		13,655		140,772		154,851
Net earnings		—		—		1,546		1,546
Stock-based compensation expense		—		224		—		224
Shares sold under at-the-market
offering program		8		2,496		—		2,504
Dividends declared:
Common stock, $0.24/share		—		—		(1,027)		(1,027)
Awards under LTIP, $0.24/share		—		—		(16)		(16)
Balance, September 30, 2021		$	432	$	16,375	$	141,275	$	158,082
Balance, March 31, 2022										Balance, March 31, 2022	$	435	$	17,020	$	148,066	$	165,521

~~Table of Contents~~

~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~

~~(In thousands, except per share data)~~


								Total									Total
		Common		Contributed		Retained		Shareholders’			Common		Contributed		Retained		Shareholders’
		Stock		Capital		Earnings		Equity			Stock		Capital		Earnings		Equity

Balance, January 1, 2020		$	423	$	12,778	$	138,440	$	151,641
Net losses		—		—		(11,427)		(11,427)
Stock-based compensation expense		—		134		—		134
Dividends declared:
Common stock, $0.24/share		—		—		(1,016)		(1,016)
Awards under LTIP, $0.24/share		—		—		(6)		(6)
Balance, March 31, 2020		423		12,912		125,991		139,326
Balance, January 1, 2021										Balance, January 1, 2021	$	423	$	13,340	$	135,329	$	149,092
Net earnings	Net earnings	—		—		3,503		3,503		Net earnings	—		—		2,808		2,808
Stock-based compensation expense	Stock-based compensation expense	—		170		—		170		Stock-based compensation expense	—		185		—		185
Cancellation of shares withheld to cover	Cancellation of shares withheld to cover									Cancellation of shares withheld to cover
taxes upon vesting of restricted awards	taxes upon vesting of restricted awards	—		(81)		—		(81)		taxes upon vesting of restricted awards	—		(31)		—		(31)
Dividends declared:	Dividends declared:									Dividends declared:
Common stock, $0.24/share	Common stock, $0.24/share	—		—		(1,018)		(1,018)		Common stock, $0.24/share	—		—		(1,019)		(1,019)
Awards under LTIP, $0.24/share	Awards under LTIP, $0.24/share	—		—		(10)		(10)		Awards under LTIP, $0.24/share	—		—		(18)		(18)
Balance, June 30, 2020		423		13,001		128,466		141,890
Net earnings		—		—		3,073		3,073
Stock-based compensation expense		—		149		—		149
Dividends declared:
Common stock, $0.24/share		—		—		(1,018)		(1,018)
Awards under LTIP, $0.24/share		—		—		(10)		(10)
Balance, September 30, 2020		$	423	$	13,150	$	130,511	$	144,084
Balance, March 31, 2021										Balance, March 31, 2021	$	423	$	13,494	$	137,100	$	151,017

See Notes to Unaudited Condensed Consolidated Financial Statements.

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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. 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”. Through our subsidiaries, we are primarily engaged in crude oil marketing, transportation, terminalling 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, pressurized gases, asphalt and dry bulk primarily in the lower 48 states of the U.S. with deliveries into Canada and Mexico, and with ~~eighteen~~nineteen terminals across the U.S. Unless the context requires otherwise, references to “we,” “us,” “our” or “Company” are intended to mean the business and operations of Adams Resources & Energy, Inc. and its consolidated subsidiaries.

We operate and report in 3 business segments: (i) crude oil marketing, transportation and storage; (ii) tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk; and (iii) pipeline transportation, terminalling and storage of crude oil. See Note 7 for further information regarding our business segments.

Basis of Presentation

Our results of operations for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 are not necessarily indicative of results expected for the full year of ~~2021.~~2022. 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, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”) filed with the SEC on March ~~5, 2021.~~9, 2022. 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.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Summary of Significant Accounting Policies

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash and cash equivalents and restricted cash as reported in the unaudited condensed consolidated balance sheets that totals to the amounts shown in the unaudited condensed consolidated statements of cash flows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021

Cash and cash equivalents	Cash and cash equivalents	$	95,634	$	39,293	Cash and cash equivalents	$	99,295	$	97,825
Restricted cash:	Restricted cash:					Restricted cash:
Collateral for outstanding letters of credit (1)		—		5,144

Captive insurance subsidiary ~~(2)~~(1)	Captive insurance subsidiary ~~(2)~~(1)	6,788		7,628		Captive insurance subsidiary ~~(2)~~(1)	8,850		9,492
Total cash, cash equivalents and restricted cash shown in the	Total cash, cash equivalents and restricted cash shown in the					Total cash, cash equivalents and restricted cash shown in the
unaudited condensed consolidated statements of cash flows	unaudited condensed consolidated statements of cash flows	$	102,422	$	52,065	unaudited condensed consolidated statements of cash flows	$	108,145	$	107,317

_____________

(1)Represents amounts that were previously held in a segregated bank account by Wells Fargo as collateral for outstanding letters of credit. Effective with our entry into the credit agreement (see Note 10), letters of credit are now secured under the credit agreement.

~~(2)~~$1.5 million of the restricted cash balance relates to the initial capitalization of our captive insurance company formed in late 2020, and the remainder represents amounts paid to our captive insurance company for insurance premiums.

Common Shares Outstanding

The following table reconciles our outstanding common stock for the periods indicated:


						Common
						shares

Balance, January 1, ~~2021~~2022						~~4,243,716~~4,355,001
Vesting of restricted stock unit awards (see Note 11)						~~8,544~~15,966
Shares withheld to cover taxes upon vesting of restricted stock unit awards						~~(1,245)~~(3,101)
Balance, March 31, ~~2021~~2022						~~4,251,015~~4,367,866
~~Vesting of restricted stock unit awards~~						~~5,700~~
~~Vesting of performance share unit awards~~						~~2,461~~
~~Shares withheld to cover taxes upon vesting of equity awards~~						~~(1,798)~~
~~Balance, June 30, 2021~~						~~4,257,378~~
~~Shares sold under at-the-market offering program~~						~~86,323~~
~~Balance, September 30, 2021~~						~~4,343,701~~

Credit Agreement

At March 31, 2022, we had no borrowings outstanding under our $40.0 million Credit Agreement with Wells Fargo Bank, National Association (“Credit Agreement”) and $6.1 million of letters of credit issued under the Credit Agreement at a fee of 1.75 percent per annum. At March 31, 2022, we were in compliance with all covenants under the Credit Agreement.

Earnings Per Share

Basic earnings (losses) per share is computed by dividing our net earnings (losses) by the weighted average number of common shares outstanding during the period. Diluted earnings (losses) per share is computed by giving effect to all potential common shares outstanding, including our shares 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 1211 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 ~~(losses)~~ per share was as follows for the periods indicated (in thousands, except per share data):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021
Earnings (losses) per share — numerator:
Net earnings (losses)		$	1,546	$	3,073	$	9,063	$	(4,851)
Earnings per share — numerator:										Earnings per share — numerator:
Net earnings										Net earnings	$	6,090	$	2,808

Denominator:	Denominator:									Denominator:
Basic weighted average number of shares outstanding	Basic weighted average number of shares outstanding	4,274		4,242		4,258		4,239		Basic weighted average number of shares outstanding	4,359		4,246

Basic earnings (losses) per share		$	0.36	$	0.72	$	2.13	$	(1.14)
Basic earnings per share										Basic earnings per share	$	1.40	$	0.66

Diluted earnings (losses) per share:
Diluted earnings per share:										Diluted earnings per share:
Diluted weighted average number of shares outstanding:	Diluted weighted average number of shares outstanding:									Diluted weighted average number of shares outstanding:
Common shares	Common shares	4,274		4,242		4,258		4,239		Common shares	4,359		4,246
Restricted stock unit awards ~~(1)~~	Restricted stock unit awards ~~(1)~~	17		9		16		—		Restricted stock unit awards ~~(1)~~	24		18
Performance share unit awards (1) (2)		6		2		6		—
Performance share unit awards (1)										Performance share unit awards (1)	11		7
Total diluted shares	Total diluted shares	4,297		4,253		4,280		4,239		Total diluted shares	4,394		4,271

Diluted earnings (losses) per share		$	0.36	$	0.72	$	2.12	$	(1.14)
Diluted earnings per share										Diluted earnings per share	$	1.39	$	0.66

_______________

(1)~~For the nine months ended September 30, 2020, the effect of the restricted stock unit awards and the performance share awards on losses per share is anti-dilutive.~~

~~(2)~~The dilutive effect of performance share awards are included in the calculation of diluted earnings per share when the performance share award performance conditions have been achieved.

~~Equity At the Market Offerings~~

During the three and nine months ended September 30, 2021, we received net proceeds of approximately $2.5 million (net of offering costs to B. Riley Securities, Inc. of $0.1 million) from the sale of 86,323 of our common shares at an average price per share of approximately $30.67 in at-the-market offerings under our At Market Issuance Sales Agreement with B. Riley Securities, Inc. dated December 23, 2020.

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.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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 1110 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

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted and signed into law in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating losses (“NOL”) incurred in tax years 2018, 2019 and 2020 to offset 100 percent of taxable income and be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

We have determined that the NOL carryback provision in the CARES Act would result in a cash benefit to us for the fiscal ~~years 2018 and 2019. We carried back our NOL for fiscal~~ year 2018 to 2013, and in June 2020, we received a cash refund of approximately $2.7 million. We also carried back the NOL for the fiscal year 2019 to 2014, and in April 2021, we received a cash refund of approximately $3.7 million.2020. We have an income tax receivable at ~~September 30, 2021,~~March 31, 2022, of approximately $6.8 million for the benefit of carrying back the NOL for the fiscal year 2020 to 2015 and 2016. As we are carrying the losses back to years beginning before January 1, 2018, the receivable was recorded at the previous 35 percent federal tax rate rather than the current statutory rate of 21 percent.

Inventory

Inventory consists of crude oil held in storage tanks and at third-party pipelines as part of our crude oil marketing and pipeline and storage operations. Crude oil inventory is carried at the lower of cost or net realizable value. At the end of each reporting period, we assess the carrying value of our inventory and make adjustments necessary to reduce the carrying value to the applicable net realizable value. Any resulting adjustments are a component of marketing costs and expenses or pipeline and storage expenses on our consolidated statements of operations. ~~During~~No charges were recognized during the ~~nine~~three months ended ~~September 30, 2020, we recorded a charge of $24.2 million related to the write-down of our crude oil inventory in our crude oil marketing segment due to declines in prices in 2020.~~March 31, 2022 and 2021.

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 property and equipment 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.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Stock-Based Compensation

We measure all share-based payment awards, including the issuance of restricted stock unit awards and performance share unit awards 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 statements of operations based on the estimated fair value of those awards on the grant date and is 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 1211 for additional information regarding our 2018 LTIP.

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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									Reporting Segments
		Crude Oil Marketing		Transportation		Pipeline and storage		Total			Crude Oil Marketing		Transportation		Pipeline and storage		Total

Three Months Ended September 30, 2021
Three Months Ended March 31, 2022										Three Months Ended March 31, 2022
Revenues from contracts with customers	Revenues from contracts with customers	$	535,166	$	24,826	$	127	$	560,119	Revenues from contracts with customers	$	736,034	$	26,690	$	—	$	762,724
Other (1)	Other (1)	8,062		—		—		8,062		Other (1)	11,521		—		—		11,521
Total revenues	Total revenues	$	543,228	$	24,826	$	127	$	568,181	Total revenues	$	747,555	$	26,690	$	—	$	774,245

Timing of revenue recognition:	Timing of revenue recognition:									Timing of revenue recognition:
Goods transferred at a point in time	Goods transferred at a point in time	$	535,166	$	—	$	—	$	535,166	Goods transferred at a point in time	$	736,034	$	—	$	—	$	736,034
Services transferred over time	Services transferred over time	—		24,826		127		24,953		Services transferred over time	—		26,690		—		26,690
Total revenues from contracts with customers	Total revenues from contracts with customers	$	535,166	$	24,826	$	127	$	560,119	Total revenues from contracts with customers	$	736,034	$	26,690	$	—	$	762,724

Three Months Ended September 30, 2020
Three Months Ended March 31, 2021										Three Months Ended March 31, 2021
Revenues from contracts with customers	Revenues from contracts with customers	$	242,267	$	21,720	$	—	$	263,987	Revenues from contracts with customers	$	297,475	$	21,235	$	233	$	318,943
Other (1)	Other (1)	2,917		—		—		2,917		Other (1)	6,548		—		—		6,548
Total revenues	Total revenues	$	245,184	$	21,720	$	—	$	266,904	Total revenues	$	304,023	$	21,235	$	233	$	325,491

Timing of revenue recognition:	Timing of revenue recognition:									Timing of revenue recognition:
Goods transferred at a point in time	Goods transferred at a point in time	$	242,267	$	—	$	—	$	242,267	Goods transferred at a point in time	$	297,475	$	—	$	—	$	297,475
Services transferred over time	Services transferred over time	—		21,720		—		21,720		Services transferred over time	—		21,235		233		21,468
Total revenues from contracts with customers	Total revenues from contracts with customers	$	242,267	$	21,720	$	—	$	263,987	Total revenues from contracts with customers	$	297,475	$	21,235	$	233	$	318,943

Nine Months Ended September 30, 2021
Revenues from contracts with customers		$	1,285,461	$	69,558	$	515	$	1,355,534
Other (1)		24,882		—		—		24,882
Total revenues		$	1,310,343	$	69,558	$	515	$	1,380,416

Timing of revenue recognition:
Goods transferred at a point in time		$	1,285,461	$	—	$	—	$	1,285,461
Services transferred over time		—		69,558		515		70,073
Total revenues from contracts with customers		$	1,285,461	$	69,558	$	515	$	1,355,534

Nine Months Ended September 30, 2020
Revenues from contracts with customers		$	693,513	$	50,121	$	—	$	743,634
Other (1)		29,033		—		—		29,033
Total revenues		$	722,546	$	50,121	$	—	$	772,667

Timing of revenue recognition:
Goods transferred at a point in time		$	693,513	$	—	$	—	$	693,513
Services transferred over time		—		50,121		—		50,121
Total revenues from contracts with customers		$	693,513	$	50,121	$	—	$	743,634

_______________

(1)Other crude oil marketing revenues are recognized under Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, and ASC 845, Nonmonetary Transactions – Purchases and Sales of Inventory with the Same Counterparty.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Other Crude Oil 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.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED 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 Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenue gross-up $ 201,704 $ 97,566 $ 526,082 $ 315,049


	Three Months Ended
	March 31,
	2022		2021

Revenue gross-up	$	307,386	$	134,866

Note 4. Prepayments and Other Current Assets

The components of prepayments and other current assets were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021

Insurance premiums	Insurance premiums	$	175	$	690	Insurance premiums	$	501	$	641
Vendor prepayment	Vendor prepayment	—		1,085		Vendor prepayment	—		602
Rents, licenses and other	Rents, licenses and other	1,334		1,189		Rents, licenses and other	1,204		1,146
Total prepayments and other current assets	Total prepayments and other current assets	$	1,509	$	2,964	Total prepayments and other current assets	$	1,705	$	2,389

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note 5. Property and Equipment

The historical costs of our property and equipment and related accumulated depreciation and amortization balances were as follows at the dates indicated (in thousands):


		Estimated						Estimated
		Useful Life	September 30,		December 31,			Useful Life	March 31,		December 31,
		in Years	2021		2020			in Years	2022		2021

Tractors and trailers	Tractors and trailers	5 – 6	$	103,934	$	101,813	Tractors and trailers	5 – 6	$	109,643	$	106,558
Field equipment	Field equipment	2 – 5	22,819		22,139		Field equipment	2 – 5	22,904		22,851
Finance lease ROU assets (1)	Finance lease ROU assets (1)	3 – 6	22,349		20,266		Finance lease ROU assets (1)	3 – 6	22,349		22,349
Pipeline and related facilities	Pipeline and related facilities	20 – 25	20,336		21,265		Pipeline and related facilities	20 – 25	20,363		20,336
Linefill and base gas (2)	Linefill and base gas (2)	N/A	3,922		3,333		Linefill and base gas (2)	N/A	3,922		3,922
Buildings	Buildings	5 – 39	16,108		14,977		Buildings	5 – 39	16,163		16,163
Office equipment	Office equipment	2 – 5	2,060		1,893		Office equipment	2 – 5	2,880		2,060
Land	Land	N/A	2,008		1,790		Land	N/A	2,008		2,008
Construction in progress	Construction in progress	N/A	4,361		1,626		Construction in progress	N/A	2,036		3,396
Total	Total		197,897		189,102		Total		202,268		199,643
Less accumulated depreciation and amortization	Less accumulated depreciation and amortization		(107,158)		(94,968)		Less accumulated depreciation and amortization		(115,725)		(111,607)
Property and equipment, net	Property and equipment, net		$	90,739	$	94,134	Property and equipment, net		$	86,543	$	88,036

_______________

(1)Our finance lease right-of-use (“ROU)” assets arise from leasing arrangements for the right to use various classes of underlying assets including tractors, trailers, a tank storage and throughput arrangement and office equipment (see Note 1413 for further information). Accumulated amortization of the assets presented as “Finance lease ROU assets” was ~~$8.5~~$11.0 million and ~~$5.0~~$9.8 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively.

(2)Linefill and base gas represents crude oil in the VEX pipeline and storage tanks we own, and the crude oil is recorded at historical cost.

~~Components of depreciation and amortization expense were as follows for the periods indicated (in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Depreciation and amortization, excluding amounts
under finance leases $ 3,665 $ 4,237 $ 11,169 $ 11,882
Amortization of property and equipment under
finance leases 1,184 622 3,534 1,728
Total depreciation and amortization $ 4,849 $ 4,859 $ 14,703 $ 13,610

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Components of depreciation and amortization expense were as follows for the periods indicated (in thousands):


	Three Months Ended
	March 31,
	2022		2021

Depreciation and amortization, excluding amounts under finance leases	$	3,805	$	3,913
Amortization of property and equipment under finance leases	1,208		1,140
Total depreciation and amortization	$	5,013	$	5,053

Note 6. Other Assets

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


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021

Amounts associated with liability insurance program:	Amounts associated with liability insurance program:					Amounts associated with liability insurance program:
Insurance collateral deposits	Insurance collateral deposits	$	714	$	714	Insurance collateral deposits	$	405	$	721
Excess loss fund	Excess loss fund	622		617		Excess loss fund	622		622
Accumulated interest income	Accumulated interest income	489		449		Accumulated interest income	489		489
Other amounts:	Other amounts:					Other amounts:
State collateral deposits	State collateral deposits	36		31		State collateral deposits	36		36
Materials and supplies	Materials and supplies	493		488		Materials and supplies	675		574
Debt issuance costs	Debt issuance costs	323		—		Debt issuance costs	260		292
Other	Other	288		84		Other	290		293
Total other assets	Total other assets	$	2,965	$	2,383	Total other assets	$	2,777	$	3,027

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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Segment Reporting

Financial information by reporting segment was as follows for the periods indicated (in thousands):


		Reporting Segments											Reporting Segments
		Crude Oil Marketing		Transportation		Pipeline and storage		Other		Total			Crude Oil Marketing		Transportation		Pipeline and storage		Other		Total

Three Months Ended September 30, 2021
Segment revenues (1)		$	543,228	$	24,867	$	738	$	—	$	568,833
Less: Intersegment revenues (1)		—		(41)		(611)		—		(652)
Revenues		$	543,228	$	24,826	$	127	$	—	$	568,181

Segment operating earnings (losses) (2)		4,255		2,264		(716)		—		5,803
Depreciation and amortization		1,611		2,957		281		—		4,849
Property and equipment additions (3)		443		4,904		980		—		6,327

Three Months Ended September 30, 2020
Segment revenues		$	245,184	$	21,720	$	—	$	—	$	266,904
Less: Intersegment revenues		—		—		—		—		—
Revenues		$	245,184	$	21,720	$	—	$	—	$	266,904

Segment operating earnings (losses) (2)		5,869		1,592		—		—		7,461
Depreciation and amortization		1,836		3,023		—		—		4,859
Property and equipment additions (3) (4)		684		(32)		—		57		709

Nine Months Ended September 30, 2021
Three Months Ended March 31, 2022												Three Months Ended March 31, 2022
Segment revenues (1)	Segment revenues (1)	$	1,310,343	$	69,670	$	1,808	$	—	$	1,381,821	Segment revenues (1)	$	747,555	$	26,718	$	897	$	—	$	775,170
Less: Intersegment revenues (1)	Less: Intersegment revenues (1)	—		(112)		(1,293)		—		(1,405)		Less: Intersegment revenues (1)	—		(28)		(897)		—		(925)
Revenues	Revenues	$	1,310,343	$	69,558	$	515	$	—	$	1,380,416	Revenues	$	747,555	$	26,690	$	—	$	—	$	774,245

Segment operating earnings (losses) (2)	Segment operating earnings (losses) (2)	19,643		4,520		(1,837)		—		22,326		Segment operating earnings (losses) (2)	10,120		2,868		(822)		—		12,166
Depreciation and amortization	Depreciation and amortization	5,050		8,895		758		—		14,703		Depreciation and amortization	1,788		2,957		268		—		5,013
Property and equipment additions (3) (4)	Property and equipment additions (3) (4)	1,145		7,607		1,169		8		9,929		Property and equipment additions (3) (4)	3,124		535		27		8		3,694

Nine Months Ended September 30, 2020
Segment revenues		$	722,546	$	50,121	$	—	$	—	$	772,667
Less: Intersegment revenues		—		—		—		—		—
Three Months Ended March 31, 2021												Three Months Ended March 31, 2021
Segment revenues (1)												Segment revenues (1)	$	304,023	$	21,268	$	419	$	—	$	325,710
Less: Intersegment revenues (1)												Less: Intersegment revenues (1)	—		(33)		(186)		—		(219)
Revenues	Revenues	$	722,546	$	50,121	$	—	$	—	$	772,667	Revenues	$	304,023	$	21,235	$	233	$	—	$	325,491

Segment operating earnings (losses) (2)	Segment operating earnings (losses) (2)	(4,952)		1,033		—		—		(3,919)		Segment operating earnings (losses) (2)	7,018		774		(565)		—		7,227
Depreciation and amortization	Depreciation and amortization	5,700		7,910		—		—		13,610		Depreciation and amortization	1,798		3,001		254		—		5,053
Property and equipment additions (3) (4)	Property and equipment additions (3) (4)	2,734		332		—		523		3,589		Property and equipment additions (3) (4)	210		(58)		10		8		170

_______________

(1)Segment revenues include intersegment amounts that are eliminated due to consolidation in operating costs and expenses in our unaudited condensed consolidated statements of operations. Intersegment activities are conducted at posted tariff rates where applicable, or otherwise at rates similar to those charged to third parties or rates that we believe approximate market at the time the agreement is executed.

(2)Our crude oil marketing segment’s operating ~~(losses)~~ earnings included inventory ~~valuation losses~~liquidation gains of ~~$0.3~~$8.7 million and ~~$12 thousand~~$6.9 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, respectively.

(3)Our segment property and ~~2020, respectively. For~~equipment additions do not include assets acquired under finance leases during the three months ended March 31, 2022 and 2021. See Note 13 for further information.

(4)Amounts included in property and equipment additions for Other are additions for computer equipment at our corporate headquarters, which were not attributed or allocated to any of our reporting segments.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

nine months ended September 30, 2021 and 2020, our crude oil marketing segment’s operating (losses) earnings included inventory liquidation gains of $10.3 million and inventory valuation losses of $18.2 million, respectively.

~~(3)~~Our segment property and equipment additions do not include assets acquired under finance leases during the three and nine months ended September 30, 2021 and 2020. See Note 14 for further information.

~~(4)~~Amounts included in property and equipment additions for Other are additions for computer equipment and leasehold improvements at our corporate headquarters, which were not attributed or allocated to any of our reporting segments.

Segment operating earnings ~~(losses)~~ reflect revenues net of operating costs and depreciation and amortization expense and are reconciled to earnings ~~(losses)~~ before income taxes, as follows for the periods indicated (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021

Segment operating earnings (losses)		$	5,803	$	7,461	$	22,326	$	(3,919)
Segment operating earnings										Segment operating earnings	$	12,166	$	7,227
General and administrative	General and administrative	(3,502)		(1,405)		(9,839)		(7,030)		General and administrative	(4,018)		(3,376)
Operating earnings (losses)		2,301		6,056		12,487		(10,949)
Operating earnings										Operating earnings	8,148		3,851
Interest and other income	Interest and other income	37		105		233		614		Interest and other income	24		134
Interest expense	Interest expense	(178)		(70)		(602)		(288)		Interest expense	(114)		(220)
Earnings (losses) before income taxes		$	2,160	$	6,091	$	12,118	$	(10,623)
Earnings before income taxes										Earnings before income taxes	$	8,058	$	3,765

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


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021

Reporting segment:	Reporting segment:					Reporting segment:
Crude oil marketing	Crude oil marketing	$	163,053	$	128,441	Crude oil marketing	$	260,844	$	162,770
Transportation	Transportation	67,574		72,247		Transportation	65,608		67,167
Pipeline and storage	Pipeline and storage	25,662		24,541		Pipeline and storage	25,363		25,569
Cash and other (1)	Cash and other (1)	114,136		70,958		Cash and other (1)	118,302		119,197
Total assets	Total assets	$	370,425	$	296,187	Total assets	$	470,117	$	374,703

_______________

(1)Other identifiable assets are primarily corporate cash, corporate accounts receivable, properties and operating lease right-of-use assets 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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 from KSA Industries, Inc. (“KSA”), an affiliated entity. We lease our corporate office space in a building operated by 17 South Briar Hollow Lane, LLC, an affiliate of KSA.

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021

Affiliate billings to us	Affiliate billings to us	$	1	$	(15)	$	13	$	17	Affiliate billings to us	$	6	$	12
Billings to affiliates	Billings to affiliates	4		1		10		3		Billings to affiliates	5		1
Rentals paid to affiliate	Rentals paid to affiliate	144		256		461		500		Rentals paid to affiliate	114		174

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, we ~~purchased 10 pickup trucks totaling approximately $0.5 million from~~paid West Point Buick GMC, an affiliate of ~~KSA.~~KSA, a total of approximately $0.1 million (net of trade-in values) for the purchase of 2 pickup trucks.

Note 9. Other Current Liabilities

The components of other current liabilities were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021

Accrued purchase price for VEX acquisition		$	—	$	10,000

Accrual for payroll, benefits and bonuses	Accrual for payroll, benefits and bonuses	4,997		6,575		Accrual for payroll, benefits and bonuses	$	4,038	$	5,210
Accrued automobile and workers’ compensation claims	Accrued automobile and workers’ compensation claims	4,835		3,171		Accrued automobile and workers’ compensation claims	4,306		4,127
Accrued medical claims	Accrued medical claims	1,654		915		Accrued medical claims	1,333		1,100
Accrued taxes	Accrued taxes	938		772		Accrued taxes	458		534
Other	Other	660		910		Other	693		651
Total other current liabilities	Total other current liabilities	$	13,084	$	22,343	Total other current liabilities	$	10,828	$	11,622

~~Note 10. Credit Agreement~~

On May 4, 2021, we entered into a Credit Agreement (“Credit Agreement”) with Wells Fargo Bank, National Association, as Agent and Issuing Lender, under which we may borrow or issue letters of credit in an aggregate of up to $40.0 million under a revolving credit facility (the “Revolving Credit Facility”), which will mature on May 4, 2024, subject to our compliance with certain financial covenants. At September 30, 2021, we had $8.0 million of borrowings outstanding under the Credit Agreement at a weighted average interest rate of 2.75 percent per annum and $5.5 million of letters of credit issued under the Credit Agreement at a fee of 1.75 percent per annum.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

For each borrowing under the Revolving Credit Facility, we can elect whether the loans bear interest at (i) the Base Rate plus Applicable Margin; or (ii) the LIBOR Rate plus Applicable Margin. Base Rate is the highest of (a) the Prime Rate, (b) the Federal Funds Rate, plus 0.50 percent and (c) LIBOR for an interest period of three months plus 1.00 percent. The Applicable Margin to be added to a Base Rate borrowing is 0.75 percent. The LIBOR Rate is (x) LIBOR (which shall not be less than 1.00 percent) divided by (y) 1.00 minus the Eurodollar Reserve Percentage. The Applicable Margin to be added to a LIBOR borrowing is 1.75 percent. A commitment fee of 0.25 percent per annum will accrue on the daily average unused amount of the commitments under the Revolving Credit Facility.

Under the Credit Agreement, we are required to maintain compliance with the following financial covenants on a pro forma basis, after giving effect to any borrowings (in each case commencing with the fiscal quarter ending June 30, 2021): (i) the Consolidated Total Leverage Ratio, which is the ratio of (a) Consolidated Funded Indebtedness on such date to (b) Consolidated EBITDA for the most recently completed Reference Period shall not be greater than 3.00 to 1.00; (ii) the Current Ratio, which is (a) consolidated current assets to (b) consolidated current liabilities, in each case with certain exclusions, shall not be less than 1.25 to 1.00; (iii) Consolidated Interest Coverage Ratio, which is the ratio of (a) Consolidated EBITDA for the most recently completed Reference Period to (b) Consolidated Interest Expense for the most recently completed Reference Period shall be not be less than 3.00 to 1.00; and (iv) the Consolidated Tangible Net Worth, which is (a) our shareholders’ equity as shown on our consolidated statement of financial position, with certain exclusions, minus (b) all goodwill and intangible assets as of such date, shall not be less than $100.0 million. The Reference Period is the most recently completed four consecutive fiscal quarters.

Consolidated EBITDA is defined under the Credit Agreement as: (a) Consolidated Net Income for such period plus (b) the sum of the following, without duplication, to the extent deducted in determining Consolidated Net Income for such period: (i) Consolidated Interest Expense; (ii) expense for taxes measured by net income, profits or capital (or any similar measures), paid or accrued, including federal and state and local income taxes, foreign income taxes and franchise taxes; and (iii) depreciation, amortization and other non-cash charges or expenses, excluding any non-cash charge or expense that represents an accrual for a cash expense to be taken in a future period; less (c) the sum of the following, without duplication, to the extent included in determining Consolidated Net Income for such period: (i) interest income, (ii) federal, state, local and foreign income tax credits us and our subsidiaries for such period (to the extent not netted from income tax expense); (iii) any unusual and non-recurring gains; (iv) non-cash gains or non-cash items; and (v) any cash expense made during such period which represents the reversal of any non-cash expense that was added in a prior period pursuant to clause (b)(iii) above subsequent to the fiscal quarter in which the relevant non-cash expenses, charges or losses were incurred.

The Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants. The affirmative covenants require us to provide the lenders with certain financial statements, business plans, compliance certificates and other documents and reports and to comply with certain laws. The negative covenants restrict each of the borrowers’ ability to incur additional indebtedness, create additional liens on its assets, make certain investments, dispose of its assets or engage in a merger or other similar transaction or engage in transactions with affiliates, subject, in each case, to the various exceptions and conditions described in the Credit Agreement. The negative covenants further restrict our ability to make certain restricted payments.

Our obligations under the Credit Agreement are secured by a pledge of substantially all of our personal property and substantially all of the personal property of certain of our other direct and indirect subsidiaries.

At September 30, 2021, we were in compliance with all covenants under the Credit Agreement. We incurred $0.3 million of debt issuance costs, which are included in other assets and are being amortized to interest expense over the term of the Credit Agreement.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note ~~11.~~10. 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 ~~September 30, 2021,~~March 31, 2022, we had in place 94 commodity purchase and sale contracts which had a 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~~encompass approximately ~~740~~324 barrels per day of crude oil during ~~October 2021 through December 2021 and approximately 194 barrels per day of crude oil during January~~April 2022 through December 2022.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At December 31, ~~2020,~~2021, we had in place 64 commodity purchase and sale contracts, of which 32 had a fair value associated with them as the contractual prices of crude oil were outside the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately ~~192~~324 barrels per day of crude oil during January ~~2021~~2022 through December ~~2021.~~2022.

The estimated fair value of forward month commodity contracts (derivatives) reflected in the accompanying unaudited condensed consolidated balance sheets were as follows at the dates indicated (in thousands):


		Balance Sheet Location and Amount									Balance Sheet Location and Amount
		Current		Other		Current		Other			Current		Other		Current		Other
		Assets		Assets		Liabilities		Liabilities			Assets		Assets		Liabilities		Liabilities
September 30, 2021
March 31, 2022										March 31, 2022
Asset derivatives:	Asset derivatives:									Asset derivatives:
Fair value forward hydrocarbon commodity	Fair value forward hydrocarbon commodity									Fair value forward hydrocarbon commodity
contracts at gross valuation	contracts at gross valuation	$	1,005	$	—	$	—	$	—	contracts at gross valuation	$	1,145	$	—	$	—	$	—
Liability derivatives:	Liability derivatives:									Liability derivatives:
Fair value forward hydrocarbon commodity	Fair value forward hydrocarbon commodity									Fair value forward hydrocarbon commodity
contracts at gross valuation	contracts at gross valuation	—		—		964		—		contracts at gross valuation	—		—		1,102		—
Less counterparty offsets	Less counterparty offsets	—		—		—		—		Less counterparty offsets	—		—		—		—
As reported fair value contracts	As reported fair value contracts	$	1,005	$	—	$	964	$	—	As reported fair value contracts	$	1,145	$	—	$	1,102	$	—

December 31, 2020
December 31, 2021										December 31, 2021
Asset derivatives:	Asset derivatives:									Asset derivatives:
Fair value forward hydrocarbon commodity	Fair value forward hydrocarbon commodity									Fair value forward hydrocarbon commodity
contracts at gross valuation	contracts at gross valuation	$	61	$	—	$	—	$	—	contracts at gross valuation	$	347	$	—	$	—	$	—
Liability derivatives:	Liability derivatives:									Liability derivatives:
Fair value forward hydrocarbon commodity	Fair value forward hydrocarbon commodity									Fair value forward hydrocarbon commodity
contracts at gross valuation	contracts at gross valuation	—		—		52		—		contracts at gross valuation	—		—		324		—
Less counterparty offsets	Less counterparty offsets	—		—		—		—		Less counterparty offsets	—		—		—		—
As reported fair value contracts	As reported fair value contracts	$	61	$	—	$	52	$	—	As reported fair value contracts	$	347	$	—	$	324	$	—

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

We only enter into commodity contracts with creditworthy counterparties and evaluate our exposure to significant counterparties on an ongoing basis. At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Revenues – marketing $ 6 $ (9) $ 31 $ 3


	Gains (losses)
	Three Months Ended
	March 31,
	2022		2021

Revenues – marketing	$	19	$	20

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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):


		Fair Value Measurements Using											Fair Value Measurements Using
		Quoted Prices											Quoted Prices
		in Active		Significant									in Active		Significant
		Markets for		Other		Significant							Markets for		Other		Significant
		Identical Assets		Observable		Unobservable							Identical Assets		Observable		Unobservable
		and Liabilities		Inputs		Inputs		Counterparty					and Liabilities		Inputs		Inputs		Counterparty
		(Level 1)		(Level 2)		(Level 3)		Offsets		Total			(Level 1)		(Level 2)		(Level 3)		Offsets		Total
September 30, 2021
March 31, 2022												March 31, 2022
Derivatives:	Derivatives:											Derivatives:
Current assets	Current assets	$	—	$	1,005	$	—	$	—	$	1,005	Current assets	$	—	$	1,145	$	—	$	—	$	1,145
Current liabilities	Current liabilities	—		(964)		—		—		(964)		Current liabilities	—		(1,102)		—		—		(1,102)
Net value	Net value	$	—	$	41	$	—	$	—	$	41	Net value	$	—	$	43	$	—	$	—	$	43

December 31, 2020
December 31, 2021												December 31, 2021
Derivatives:	Derivatives:											Derivatives:
Current assets	Current assets	$	—	$	61	$	—	$	—	$	61	Current assets	$	—	$	347	$	—	$	—	$	347
Current liabilities	Current liabilities	—		(52)		—		—		(52)		Current liabilities	—		(324)		—		—		(324)
Net value	Net value	$	—	$	9	$	—	$	—	$	9	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 ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Note ~~12.~~11. Stock-Based Compensation Plan

We have in place a long-term incentive plan in which any employee or non-employee director who provides services to us is eligible to participate. 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 have been granted. 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 and forfeitures made under the 2018 LTIP and assuming the potential achievement of the maximum amounts of the performance factors through ~~September 30, 2021,~~March 31, 2022, a total of ~~38,525~~2,261 shares were available for issuance.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Compensation expense recognized in connection with equity-based awards was as follows for the periods indicated (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Compensation expense $ 224 $ 149 $ 641 $ 453


	Three Months Ended
	March 31,
	2022		2021

Compensation expense	$	195	$	185

At ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had ~~$71,500~~$83,500 and ~~$50,800,~~$82,500, respectively, of accrued dividend amounts for awards granted under the 2018 LTIP.

Restricted Stock Unit Awards

The following table presents restricted stock unit award activity for the periods indicated:


			Weighted-				Weighted-
			Average Grant				Average Grant
		Number of	Date Fair Value			Number of	Date Fair Value
		Shares	per Share (1)			Shares	per Share (1)

Restricted stock unit awards at January 1, 2021		27,490	$	28.64
Restricted stock unit awards at January 1, 2022					Restricted stock unit awards at January 1, 2022	38,265	$	28.78
Granted (2)	Granted (2)	26,369	$	29.70	Granted (2)	26,796	$	31.83
Vested	Vested	(14,244)	$	30.20	Vested	(15,966)	$	28.20
Forfeited	Forfeited	(764)	$	28.71	Forfeited	(164)	$	29.70
Restricted stock unit awards at September 30, 2021		38,851	$	28.79
Restricted stock unit awards at March 31, 2022					Restricted stock unit awards at March 31, 2022	48,931	$	30.64

_______________

(1)Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.

(2)The aggregate grant date fair value of restricted stock unit awards issued during ~~2021~~2022 was ~~$0.8~~$0.9 million based on a grant date market price of our common shares ranging from ~~$29.70~~$31.80 to ~~$30.00~~$37.42 per share.

Unrecognized compensation cost associated with restricted stock unit awards was approximately ~~$0.6~~$1.1 million at ~~September 30, 2021.~~March 31, 2022. 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 ~~1.4~~1.7 years.

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~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Performance Share Unit Awards

The following table presents performance share unit award activity for the periods indicated:


			Weighted-				Weighted-
			Average Grant				Average Grant
		Number of	Date Fair Value			Number of	Date Fair Value
		Shares	per Share (1)			Shares	per Share (1)

Performance share unit awards at January 1, 2021		16,241	$	27.67
Performance share unit awards at January 1, 2022					Performance share unit awards at January 1, 2022	21,492	$	26.64
Granted (2)	Granted (2)	12,205	$	29.70	Granted (2)	13,458	$	31.80

Vested	Vested	(2,461)	$	43.00	Vested	—	$	—
Forfeited	Forfeited	—	$	—	Forfeited	—	$	—
Performance share unit awards at September 30, 2021		25,985	$	27.17
Performance share unit awards at March 31, 2022					Performance share unit awards at March 31, 2022	34,950	$	28.63

_______________

(1)Determined by dividing the aggregate grant date fair value of awards by the number of awards issued.

(2)The aggregate grant date fair value of performance share unit awards issued during ~~2021~~2022 was $0.4 million based on a grant date market price of our common shares of ~~$29.70~~$31.80 per share and assuming a performance factor of 100 percent.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unrecognized compensation cost associated with performance share unit awards was approximately ~~$0.5~~$0.7 million at ~~September 30, 2021.~~March 31, 2022. We expect to recognize the remaining compensation cost for these awards over a weighted-average period of ~~2.1~~2.4 years.

Note ~~13.~~12. Supplemental Cash Flow Information

Supplemental cash flows and non-cash transactions were as follows for the periods indicated (in thousands):


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2021		2020			2022		2021

Cash paid for interest	Cash paid for interest	$	602	$	288	Cash paid for interest	$	114	$	220
Cash paid for federal and state income taxes	Cash paid for federal and state income taxes	1,297		419		Cash paid for federal and state income taxes	—		2
Cash refund for NOL carryback under CARES Act		3,712		2,703

Non-cash transactions:	Non-cash transactions:					Non-cash transactions:
Change in accounts payable related to property and equipment additions	Change in accounts payable related to property and equipment additions	(72)		(1,232)		Change in accounts payable related to property and equipment additions	—		(44)
Property and equipment acquired under finance leases	Property and equipment acquired under finance leases	2,083		1,655		Property and equipment acquired under finance leases	—		2,091

See Note 1413 for information related to other non-cash transactions related to leases.

Note 13. Leases

The following table provides the components of lease expense for the periods indicated (in thousands):


	Three Months Ended
	March 31,
	2022		2021
Finance lease cost:
Amortization of ROU assets	$	1,207	$	1,140
Interest on lease liabilities	80		110
Operating lease cost	673		623
Short-term lease cost	3,781		3,212
Variable lease cost	6		1
Total lease expense	$	5,747	$	5,086

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Note 14. Leases~~

~~The following table provides the components of lease expense for the periods indicated (in thousands):~~

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Finance lease cost:
Amortization of ROU assets $ 1,184 $ 622 $ 3,534 $ 1,728
Interest on lease liabilities 101 70 321 212
Operating lease cost 643 681 1,890 2,038
Short-term lease cost 3,701 3,085 10,399 7,756
Variable lease cost 2 — 4 —
Total lease expense $ 5,631 $ 4,458 $ 16,148 $ 11,734

The following table provides supplemental cash flow and other information related to leases for the periods indicated (in thousands):


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2021		2020			2022		2021
Cash paid for amounts included in measurement of lease liabilities:	Cash paid for amounts included in measurement of lease liabilities:					Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases (1)	Operating cash flows from operating leases (1)	$	1,886	$	2,037	Operating cash flows from operating leases (1)	$	673	$	622
Operating cash flows from finance leases	Operating cash flows from finance leases	260		295		Operating cash flows from finance leases	80		109
Financing cash flows from finance leases	Financing cash flows from finance leases	3,240		1,677		Financing cash flows from finance leases	1,139		1,014

ROU assets obtained in exchange for new lease liabilities:	ROU assets obtained in exchange for new lease liabilities:					ROU assets obtained in exchange for new lease liabilities:
Finance leases	Finance leases	2,083		1,655		Finance leases	—		2,091
Operating leases	Operating leases	1,157		630		Operating leases	196		264

______________

(1)Amounts are included in Other operating activities on the unaudited condensed consolidated statements of cash flows.

The following table provides the lease terms and discount rates for the periods indicated:


		Nine Months Ended			Three Months Ended
		September 30,			March 31,
		2021	2020		2022	2021
Weighted-average remaining lease term (years):	Weighted-average remaining lease term (years):			Weighted-average remaining lease term (years):
Finance leases	Finance leases	3.75	3.18	Finance leases	3.39	4.10
Operating leases	Operating leases	4.06	4.46	Operating leases	3.63	4.32

Weighted-average discount rate:	Weighted-average discount rate:			Weighted-average discount rate:
Finance leases	Finance leases	2.7%	4.3%	Finance leases	2.6%	2.8%
Operating leases	Operating leases	3.8%	4.4%	Operating leases	3.7%	4.2%

~~Table of Contents~~

~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The following table provides supplemental balance sheet information related to leases at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021
Assets	Assets					Assets
Finance lease ROU assets (1)	Finance lease ROU assets (1)	$	13,800	$	15,251	Finance lease ROU assets (1)	$	11,382	$	12,590
Operating lease ROU assets	Operating lease ROU assets	7,551		8,051		Operating lease ROU assets	6,699		7,113

Liabilities	Liabilities					Liabilities
Current	Current					Current
Finance lease liabilities	Finance lease liabilities	4,028		4,112		Finance lease liabilities	3,293		3,663
Operating lease liabilities	Operating lease liabilities	2,201		2,050		Operating lease liabilities	2,258		2,178
Noncurrent	Noncurrent					Noncurrent
Finance lease liabilities	Finance lease liabilities	10,434		11,507		Finance lease liabilities	8,903		9,672
Operating lease liabilities	Operating lease liabilities	5,353		6,000		Operating lease liabilities	4,445		4,938

______________

(1)Amounts are included in Property and equipment, net on the unaudited condensed consolidated balance sheets.

~~The following table provides maturities of undiscounted lease liabilities at September 30, 2021 (in thousands):~~

Finance Operating
Lease Lease
Remainder of 2021 $ 1,219 $ 657
2022 3,941 2,343
2023 3,143 2,022
2024 2,348 1,874
2025 3,771 394
Thereafter 801 788
Total lease payments 15,223 8,078
Less: Interest (761) (524)
Present value of lease liabilities 14,462 7,554
Less: Current portion of lease obligation (4,028) (2,201)
Total long-term lease obligation $ 10,434 $ 5,353

2520

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table provides maturities of undiscounted lease liabilities at ~~December~~March 31, ~~2020~~2022 (in thousands):

Finance Operating
Lease Lease
2021 $ 4,496 $ 2,343
2022 3,562 2,002
2023 2,764 1,821
2024 1,969 1,700
2025 2,992 222
Thereafter 802 675
Total lease payments 16,585 8,763
Less: Interest (966) (713)
Present value of lease liabilities 15,619 8,050
Less: Current portion of lease obligation (4,112) (2,050)
Total long-term lease obligation $ 11,507 $ 6,000


	Finance		Operating
	Lease		Lease

Remainder of 2022	$	2,722	$	1,923
2023	3,143		2,080
2024	2,348		1,911
2025	3,771		394
2026	801		333
Thereafter	—		455
Total lease payments	12,785		7,096
Less: Interest	(589)		(393)
Present value of lease liabilities	12,196		6,703
Less: Current portion of lease obligation	(3,293)		(2,258)
Total long-term lease obligation	$	8,903	$	4,445

The following table provides maturities of undiscounted lease liabilities at December 31, 2021 (in thousands):


	Finance		Operating
	Lease		Lease

2022	$	3,941	$	2,399
2023	3,143		2,080
2024	2,348		1,911
2025	3,771		394
2026	801		333
Thereafter	—		455
Total lease payments	14,004		7,572
Less: Interest	(669)		(456)
Present value of lease liabilities	13,335		7,116
Less: Current portion of lease obligation	(3,663)		(2,178)
Total long-term lease obligation	$	9,672	$	4,938

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note ~~15.~~14. Commitments and Contingencies

Insurance

We have accrued liabilities for estimated workers’ compensation and other casualty claims incurred based upon claim reserves plus an estimate for loss development and incurred but not reported claims. We self-insure a significant portion of expected losses relating to workers’ compensation, general liability and automobile liability, with a self-insured retention of $1.0 million. Insurance is purchased over our retention to reduce our exposure to catastrophic events. ~~We also share 20 percent of the risk of loss, capped at $1.0 million for any claims in excess of $5.0 million.~~ Estimates are recorded for potential and incurred outstanding liabilities for workers’ compensation, auto and general liability claims and claims that are incurred but not reported. Estimates are based on adjusters’ estimates, historical experience and statistical methods commonly used within the insurance industry that we believe are reliable. We have also engaged a third-party actuary to perform a review of our accrued liability for these claims as well as potential funded losses in our captive insurance company. Insurance estimates include certain assumptions and management judgments regarding the frequency and severity of claims, claim development and settlement practices and the selection of estimated loss among estimates derived using different methods. Unanticipated changes in these factors may produce materially different amounts of expense that would be reported under these programs.

On October 1, 2020, we elected to utilize a wholly owned insurance captive to insure the self-insured retention for our workers’ compensation, general liability and automobile liability insurance programs. All accrued liabilities associated with periods from October 1, 2017 through current were transferred to the captive.

We maintain excess property and casualty ~~reinsurance~~ programs with third-party insurers in an effort to limit the financial impact of significant events covered under these programs. Our operating subsidiaries pay premiums to both the excess and reinsurance carriers and our captive for the estimated losses based on an external actuarial analysis. These premiums held by our wholly owned captive are currently held in a restricted account, resulting in a transfer of risk from our operating subsidiaries to the captive.

We also maintain a self-insurance program for managing employee medical claims in excess of employee deductibles. As claims are paid, the liability is relieved. We also maintain third party insurance stop-loss coverage for individual medical claims exceeding a certain minimum threshold. In addition, we maintain ~~$1.4~~$1.2 million of umbrella insurance coverage for annual aggregate medical claims exceeding approximately ~~$7.5~~$11.5 million.

~~Table of Contents~~

~~ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Our accruals for automobile, workers’ compensation and medical claims were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021

Pre-funded premiums for losses incurred but not reported	Pre-funded premiums for losses incurred but not reported	$	51	$	55	Pre-funded premiums for losses incurred but not reported	$	33	$	50
Accrued automobile and workers’ compensation claims	Accrued automobile and workers’ compensation claims	4,835		3,171		Accrued automobile and workers’ compensation claims	4,306		4,127
Accrued medical claims	Accrued medical claims	1,654		915		Accrued medical claims	1,333		1,100

Litigation

From time to time as incidental to our operations, we may become involved in various lawsuits and/or disputes. Primarily as an operator of an extensive trucking fleet, we are a party to motor vehicle accidents, worker compensation claims and other items of general liability as would be typical for the industry. We are presently unaware of any claims against us 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 our financial position, results of operations or cash flows.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with our Unaudited Condensed Consolidated Financial Statements and accompanying Notes included in this quarterly report on Form 10-Q and the Audited Consolidated Financial Statements and related Notes, together with our discussion and analysis of financial position and results of operations, included in our annual report on Form 10-K for the year ended December 31, ~~2020~~2021 (the ~~“2020~~“2021 Form 10-K”), as filed on March ~~5, 2021~~9, 2022 with the U.S. Securities and Exchange Commission (“SEC”). Our financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”).

Cautionary Statement Regarding Forward-Looking Information

This quarterly report on Form 10-Q contains various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and information that are based on our beliefs, as well as assumptions made by us and information currently available to us. When used in this document, words such as “anticipate,” “project,” “expect,” “plan,” “seek,” “goal,” “estimate,” “forecast,” “intend,” “could,” “should,” “would,” “will,” “believe,” “may,” “potential” and similar expressions and statements regarding our plans and objectives for future operations are intended to identify forward-looking statements. Although we believe that our expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that such expectations will prove to be correct. Forward-looking statements are subject to a variety of risks, uncertainties and assumptions as described in more detail under Part I, Item 1A of our ~~2020~~2021 Form ~~10-K and within Part II, Item 1A of this quarterly report.~~10-K. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those anticipated, estimated, projected or expected. You should not put undue reliance on any forward-looking statements. The forward-looking statements in this quarterly report speak only as of the date hereof. Except as required by federal and state securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or any other reason.

Overview of Business

Adams Resources & Energy, Inc., a Delaware corporation organized in 1973, and its subsidiaries are primarily engaged in crude oil marketing, transportation, terminalling 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, pressurized gases, asphalt and dry bulk primarily in the lower 48 states of the U.S. with deliveries into Canada and Mexico, and with ~~eighteen~~nineteen terminals across the U.S. Unless the context requires otherwise, references to “we,” “us,” “our” or the “Company” are intended to mean the business and operations of Adams Resources & Energy, Inc. and its consolidated subsidiaries.

We operate and report in three business segments: (i) crude oil marketing, transportation and storage; (ii) tank truck transportation of liquid chemicals, pressurized gases, asphalt and dry bulk; and (iii) pipeline transportation, terminalling and storage of crude oil. See Note 7 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding our business segments.

~~Table of Contents~~

~~Recent Developments and Outlook~~

~~COVID-19 Update~~

The global COVID-19 outbreak, associated countermeasures implemented by governments around the world, as well as increased business uncertainty, changes in consumer behavior related to the slowdown of the economy and the disruption of historical supply and demand patterns during 2020 resulted in a decline in our crude oil marketing operations and significantly decreased demand for our transportation services through global shutdowns and supply chain and operational disruptions at times during 2020. We took a variety of actions in 2020 to help mitigate the financial impact, including executing temporary cost saving measures and reducing our capital spending. As economic conditions improve, we have begun to resume normal capital spending activities, but may implement additional cost saving measures in the future, if needed.

Our primary focus continues to be the safety of our employees and operations while providing uninterrupted service to our customers. We will continue to maintain the safety protocols we established, including encouraging our employees to seek vaccination when eligible. We are actively monitoring the global situation and its effect on our financial condition, liquidity, operations, customers, industry and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we cannot estimate the length or gravity of the impacts of these events at this time. While we consider the overall effects of the pandemic to be temporary, if the pandemic and its economic effects continue, particularly in light of new and variant strains of the virus and the plateau of vaccination rates, it may have a material adverse effect on our results of future operations, financial position and liquidity in 2021.

We plan to continue to operate our remaining business segments with internally generated cash flows and borrowings under the Credit Agreement (discussed further below) during the remainder of 2021, but intend to remain flexible as the focus will be on increasing efficiencies and on business development opportunities. During the remainder of 2021, we plan to integrate our newly acquired terminals and leverage back haul opportunities with the continued efforts to diversify service offerings, and we plan to grow in new or existing areas with our crude oil marketing segment.

~~Credit Agreement~~

On May 4, 2021, we entered into a Credit Agreement (“Credit Agreement”) with Wells Fargo Bank, National Association, as Agent and Issuing Lender, under which we may borrow or issue letters of credit in an aggregate of up to $40.0 million under a revolving credit facility, which will mature on May 4, 2024, subject to our compliance with certain financial covenants. See Note 10 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

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Results of Operations

Crude Oil Marketing

Our crude oil marketing segment revenues, operating earnings ~~(losses)~~ and selected costs were as follows for the periods indicated (in thousands):


		Three Months Ended						Nine Months Ended							Three Months Ended
		September 30,						September 30,							March 31,
		2021		2020		Change (1)		2021		2020		Change (1)			2022		2021		Change (1)

Revenues	Revenues	$	543,228	$	245,184	122	%	$	1,310,343	$	722,546	81	%	Revenues	$	747,555	$	304,023	146	%
Operating earnings (losses) (2)		4,255		5,869		(28	%)	19,643		(4,952)		(497	%)
Operating earnings (2)														Operating earnings (2)	10,120		7,018		44	%
Depreciation and amortization	Depreciation and amortization	1,611		1,836		(12	%)	5,050		5,700		(11	%)	Depreciation and amortization	1,788		1,798		(1	%)
Driver compensation	Driver compensation	4,507		4,579		(2	%)	13,193		13,961		(6	%)	Driver compensation	4,626		4,390		5	%
Insurance	Insurance	1,813		553		228	%	5,659		5,193		9	%	Insurance	1,734		1,977		(12	%)
Fuel	Fuel	2,086		1,372		52	%	5,798		4,538		28	%	Fuel	2,546		1,741		46	%

_______________

(1)Represents the percentage increase (decrease) from the prior year period.

(2)Operating earnings ~~(losses)~~ included inventory ~~valuation losses~~liquidation gains of ~~$0.3~~$8.7 million and ~~$12 thousand~~$6.9 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, and 2020, respectively. For the nine months ended September 30, 2021 and 2020, our crude oil marketing segment’s operating (losses) earnings included inventory liquidation gains of $10.3 million and inventory valuation losses of $18.2 million, respectively, as discussed further below.

Volume and price information were as follows for the periods indicated:


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021
Field level purchase volumes – per day (1)	Field level purchase volumes – per day (1)									Field level purchase volumes – per day (1)
Crude oil – barrels	Crude oil – barrels	91,941		90,896		88,186		93,762		Crude oil – barrels	90,385		82,889

Average purchase price	Average purchase price									Average purchase price
Crude oil – per barrel	Crude oil – per barrel	$	67.81	$	37.12	$	62.28	$	36.38	Crude oil – per barrel	$	92.70	$	54.91

_______________

(1)Reflects the volume purchased from third parties at the field level of operations.

~~Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020~~. Crude oil marketing revenues increased by ~~$298.0~~$443.5 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020,~~March 31, 2021, primarily as a result of an increase in the market price of crude oil, which increased revenues by approximately ~~$291.8~~$389.1 million and higher overall crude oil volumes, which increased revenues by approximately ~~$6.2~~$54.4 million. The average crude oil price received was ~~$37.12~~$54.91 during the three months ended ~~September 30, 2020,~~March 31, 2021, which increased to ~~$67.81~~$92.70 during the three months ended ~~September 30, 2021.~~March 31, 2022. Revenues from legacy volumes are based upon the market price primarily in our Gulf Coast market area. The ~~2020 period was impacted by a lower~~ market price of crude oil ~~due~~has continued to increase in 2022, as it did throughout 2021, and is now in excess of $100 per barrel. U.S. producers are exercising capital discipline, maintaining oil production plans in spite of the crude oil price, and are focusing capital on share buy-backs and renewables. Contributing to the ~~effects of~~volatility in price has been the war in Europe, as well as COVID-19 ~~outbreak~~outbreaks in China, supply chain issues and ~~the delay of OPEC to agree on crude oil~~labor shortages, creating uncertainty for demand growth. OPEC+ has also maintained a disciplined approach, allowing only modest production levels, both of which resulted in market disruptions that decreased the demand for and price of crude oil during the three months ended September 30, 2020. The 2021 period was affected by increased demand for crude oil, but with less supply as production has not yet increased to previous levels, thus increasing the market price of crude oil.increases.

~~Table of Contents~~

Our crude oil marketing operating earnings ~~decreased~~increased by ~~$1.6~~$3.1 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, primarily due to higher crude oil prices and volumes and inventory valuation changes (as shown in the table below) ~~and higher fuel and insurance costs,~~, partially offset by higher ~~crude oil prices~~fuel costs and ~~volumes.~~driver compensation.

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Driver compensation ~~decreased~~increased by ~~$0.1~~$0.2 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, primarily as a result of ~~an overall decrease~~higher volumes transported in the ~~number of drivers in the current period.~~

~~Insurance costs increased by $1.3 million during the three months ended September 30, 2021~~2022 period as compared to the same period in ~~2020,~~2021.

Insurance costs decreased by $0.2 million during the three months ended March 31, 2022 as compared to the same period in 2021, primarily due in part to ~~favorable adjustments to reserves~~our safety performance in the ~~2020 period for insurance claims resulting from our favorable safety record over the policy period, partially offset by~~prior year, and to a lower overall driver count in the ~~2021~~2022 period. Fuel costs increased by ~~$0.7~~$0.8 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, consistent with an increase in crude oil volumes in the current period and higher fuel prices.

Depreciation and amortization expense ~~decreased by $0.2 million~~ during the three months ended ~~September 30, 2021 as compared to~~March 31, 2022 was consistent with the same period in ~~2020,~~2021, primarily due to the timing of purchases and retirements of tractors and other field equipment during ~~2020~~2021 and ~~2021.~~2022.

~~Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020~~. Crude oil marketing revenues increased by $587.8 million during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020, primarily as a result of an increase in the market price of crude oil, which increased revenues by approximately $678.4 million, partially offset by lower overall crude oil volumes, which decreased revenues by approximately $90.6 million. The average crude oil price received was $36.38 during the nine months ended September 30, 2020, which increased to $62.28 during the nine months ended September 30, 2021. Volumes decreased and the market price of crude oil increased during the 2021 period as compared to the prior year period as a result of increased competition for supply from shippers and marketers to fill obligations to pipelines with the lower crude oil production available.

Our crude oil marketing operating (losses) earnings for the nine months ended September 30, 2021 increased by $24.6 million, from a loss of $5.0 million during the 2020 period to earnings of $19.6 million in the 2021 period, primarily due to inventory valuation changes (as shown in the table below) and higher revenues due to higher crude oil prices and lower driver compensation costs, partially offset by higher fuel costs and lower crude oil volumes.

Driver compensation decreased by $0.8 million during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily as a result of an overall decrease in the number of drivers required for volumes transported in the 2021 period as compared to the 2020 period.

Insurance costs increased by $0.5 million during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily due to favorable adjustments to reserves in the 2020 period for insurance claims resulting from our favorable safety record over the policy period, partially offset by a lower driver count and lower miles driven in the 2021 period. Fuel costs increased by $1.3 million during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily due to higher fuel prices in the current period.

Depreciation and amortization expense decreased by $0.7 million during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily due to the timing of purchases and retirements of tractors and other field equipment during 2020 and 2021.

~~Table of Contents~~

Field Level Operating Earnings (Non-GAAP Financial Measure). Inventory valuations and forward commodity contract (derivatives or mark-to-market) valuations are two ~~significant~~ factors affecting comparative crude oil marketing segment operating earnings (losses)., of which inventory valuations is the most significant. As a purchaser and shipper of crude oil, we hold inventory in storage tanks and third-party pipelines. During periods of increasing crude oil prices, we recognize inventory liquidation gains while during periods of falling prices, we recognize inventory liquidation and valuation losses.

Crude oil marketing operating earnings (losses) can be affected by the valuations of our forward month commodity contracts (derivative instruments)., if material. These non-cash valuations are calculated and recorded at each period end based on the underlying data existing as of such date. We generally enter into these derivative contracts as part of a pricing strategy based on crude oil purchases at the wellhead (field level). The valuation of derivative instruments at period end requires the recognition of non-cash “mark-to-market” gains and losses.

The impact of inventory liquidations and valuations and derivative valuations on our crude oil marketing segment operating earnings ~~(losses)~~ is summarized in the following reconciliation of our non-GAAP financial measure and provides management a measure of the business unit’s performance without the impact of inventory valuation and liquidation adjustments for the periods indicated (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021

As reported segment operating earnings (losses) (1)		$	4,255	$	5,869	$	19,643	$	(4,952)
As reported segment operating earnings (1)										As reported segment operating earnings (1)	$	10,120	$	7,018
Add (subtract):	Add (subtract):									Add (subtract):
Inventory liquidation gains	Inventory liquidation gains	—		—		(10,282)		—		Inventory liquidation gains	(8,717)		(6,943)
Inventory valuation losses	Inventory valuation losses	311		12		—		18,196		Inventory valuation losses	—		—
Derivative valuation (gains) losses	Derivative valuation (gains) losses	(8)		9		(32)		(3)		Derivative valuation (gains) losses	(19)		(20)
Field level operating earnings (2)	Field level operating earnings (2)	$	4,558	$	5,890	$	9,329	$	13,241	Field level operating earnings (2)	$	1,384	$	55

_______________

(1)Our crude oil marketing segment’s operating earnings ~~(losses)~~ included inventory ~~valuation losses~~liquidation gains of ~~$0.3~~$8.7 million and ~~$12 thousand~~$6.9 million for the three months ended ~~September 30,~~March 31, 2022 and 2021, and 2020, respectively. For the nine months ended September 30, 2021 and 2020, our crude oil marketing segment’s operating (losses) earnings included inventory liquidation gains of $10.3 million and inventory valuation losses of $18.2 million, respectively.

(2)The use of field level operating earnings is unique to us, not a substitute for a GAAP measure and may not be comparable to any similar measures developed by industry participants. We utilize this data to evaluate the profitability of our operations.

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Field level operating earnings and field level purchase volumes depict our day-to-day operation of acquiring crude oil at the wellhead, transporting the product and delivering the product to market sales point. Field level operating earnings ~~decreased~~increased during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020~~2021 primarily due to higher fuel and insurance costs, partially offset by higher crude oil prices and volumes. During the nine months ended September 30, 2021, field level operating earnings decreased as compared to the same period in 2020 due to higher fuel and insurance costs and lower crude oil volumes, partially offset by higher revenues due to higher crude oil prices and volumes and lower insurance costs, partially offset by higher fuel costs and driver ~~compensation costs.~~compensation.

We held crude oil inventory at a weighted average composite price as follows at the dates indicated (in barrels):

September 30, 2021 December 31, 2020
Average Average
Barrels Price Barrels Price
Crude oil inventory 340,276 $ 71.48 421,759 $ 45.83


	March 31, 2022			December 31, 2021
		Average			Average
	Barrels	Price		Barrels	Price

Crude oil inventory	404,636	$	104.02	259,489	$	71.86

~~Table of Contents~~

Prices received for crude oil have been volatile and unpredictable with price volatility expected to continue. See “Part I, Item 1A. Risk Factors” in our ~~2020~~2021 Form 10-K.

Transportation

Our transportation segment revenues, operating earnings and selected costs were as follows for the periods indicated (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020
Change (1)
2021 2020
Change (1)
Revenues $ 24,826 $ 21,720 14 % $ 69,558 $ 50,121 39 %
Operating earnings $ 2,264 $ 1,592 42 % $ 4,520 $ 1,033 338 %
Depreciation and amortization $ 2,957 $ 3,023 (2 %) $ 8,895 $ 7,910 12 %
Driver commissions $ 3,710 $ 4,069 (9 %) $ 11,181 $ 8,627 30 %
Insurance $ 2,143 $ 1,711 25 % $ 6,455 $ 4,797 35 %
Fuel $ 1,973 $ 1,599 23 % $ 5,953 $ 3,486 71 %
Maintenance expense $ 1,027 $ 1,295 (21 %) $ 3,001 $ 2,746 9 %
Mileage (000s) 6,931 7,625 (9 %) 21,109 16,755 26 %


	Three Months Ended
	March 31,
	2022		2021		Change (1)

Revenues	$	26,690	$	21,235	26	%
Operating earnings	$	2,868	$	774	271	%
Depreciation and amortization	$	2,957	$	3,001	(1	%)
Driver commissions	$	3,765	$	3,596	5	%
Insurance	$	2,149	$	2,148	—	%
Fuel	$	2,802	$	1,875	49	%
Maintenance expense	$	1,248	$	913	37	%
Mileage (000s)	6,798		6,932		(2	%)

_______________

(1)Represents the percentage increase (decrease) from the prior year period.

Our revenue rate structure includes a component for fuel costs in which fuel cost fluctuations are largely passed through to the customer. Revenues, net of fuel costs, were as follows for the periods indicated (in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2021		2020		2021		2020			2022		2021

Total transportation revenue	Total transportation revenue	$	24,826	$	21,720	$	69,558	$	50,121	Total transportation revenue	$	26,690	$	21,235
Diesel fuel cost	Diesel fuel cost	(1,973)		(1,599)		(5,953)		(3,486)		Diesel fuel cost	(2,802)		(1,875)
Revenues, net of fuel costs (1)	Revenues, net of fuel costs (1)	$	22,853	$	20,121	$	63,605	$	46,635	Revenues, net of fuel costs (1)	$	23,888	$	19,360

_______________

(1) Revenues, net of fuel costs, is a non-GAAP financial measure and is utilized for internal analysis of the results of our transportation segment.

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~~Three Months Ended September 30, 2021 vs. Three Months Ended September 30, 2020~~. Transportation revenues increased by ~~$3.1~~$5.5 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020.~~March 31, 2021. Transportation revenues, net of fuel costs, increased by ~~$2.7~~$4.5 million during the three months ended ~~September 30, 2021,~~March 31, 2022, as compared to the prior year period. ~~Revenues increased~~These increases were primarily due to increased transportation rates during the ~~2021~~2022 period, as we have ~~been~~continued working with our customers to increase our transportation rates. In addition, as a result of customer demand, we opened ~~three~~four new terminals during the ~~third quarter~~second half of 2021. These terminals, located in West Memphis, Arkansas, Charleston, West Virginia, Augusta, Georgia, and Joliet, Illinois, increased revenues by approximately ~~$0.6~~$2.1 million during the ~~third~~first quarter of 2021 as the startup efforts began. Revenues also increased as a result of increased activity with the customers related to the acquisition of substantially all of the transportation assets of CTL Transportation, LLC, a subsidiary of Comcar Industries, Inc. (the “CTL acquisition”) in June 2020. On June 26, 2020, we completed the CTL acquisition, which added new customers, new market areas and new product lines to our portfolio. As a result of the CTL acquisition, we added services to new and existing customers in six new market areas, including new terminals in Louisiana, Missouri, Ohio, Georgia and Florida. We also hired approximately 140 additional drivers in connection with this acquisition.

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The adverse economic effects of the COVID-19 outbreak, including the continued restrictions in place by governments, changes in consumer behavior related to the slowdown of the economy and the disruption of historical supply and demand patterns, decreased demand for our transportation services during early to mid-2020. However, during the second half of 2020, demand for transportation of chemicals and personal care products, along with automotive plants coming back online and strong home building product lines, resulted in an increase in our transportation operations, which has continued into 2021.2022. In February 2021, a severe winter storm and resulting power outages affected Texas, which resulted in a significant decline in transportation services for over a week and a temporary loss of ~~revenues. When production and customer facilities resumed normal operating conditions, demand for truck transportation increased to even higher levels as a result of~~revenues in the ~~disruption of the supply chain normally serviced by rail capacity shifting to truck transportation in an effort to get products to the end users in a more timely manner.~~2021 period.

Our transportation operating earnings increased by ~~$0.7~~$2.1 million for the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, primarily due to increased transportation rates, ~~and~~ higher revenues as a result of increased transportation rates, new terminals and lower revenues in the ~~CTL acquisition,~~2021 period as a result of a winter storm and lower depreciation and amortization expense related to the timing of new assets placed into service, ~~and lower maintenance expense,~~ partially offset by higher ~~insurance~~maintenance expense, driver commissions and fuel costs.

Driver commissions ~~decreased~~increased by ~~$0.4~~$0.2 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the three months ended ~~September 30, 2020,~~March 31, 2021, primarily due to an increase in driver pay, partially offset by lower mileage during the impact of Hurricane Ida in August 2021, which affected our Louisiana operations, resulting in a loss of days worked by drivers in the area, thus decreasing driver commissions. The impact of the storm affected our Louisiana locations through mid-September.2022 period.

Fuel costs increased by ~~$0.4~~$0.9 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, primarily as a result of an increase in the price of fuel during the ~~2021~~2022 period. Insurance costs ~~increased by $0.4 million~~remained constant during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, primarily due to ~~higher~~consistent insurance premiums during the 2021 ~~period.~~and 2022 periods.

Depreciation and amortization expense ~~decreased by $0.1 million~~was relatively consistent during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, primarily as a result of the timing of purchases of new tractors and trailers in ~~2021.~~

~~Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020~~. Transportation revenues increased by $19.4 million during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020, primarily as a result of the CTL acquisition in June 2020, an increase in business activities as a result of continued market recovery after COVID-19 lockdowns, higher transportation rates2022 and the additional revenues associated with our new terminals. The 2020 period was impacted by decreases in certain business activities of our customers as a result of the COVID-19 outbreak resulting in lower miles traveled. Revenues, net of fuel cost, increased by $17.0 million during the nine months ended September 30, 2021, primarily as a result of the higher transportation revenues and increased miles traveled during the 2021 period.

Our transportation operating earnings for the nine months ended September 30, 2021 increased by $3.5 million as compared to the same period in 2020, primarily due to higher revenues and increased miles traveled during the 2021 period, partially offset by higher depreciation and amortization expense related to the CTL acquisition and new assets placed into service, and higher insurance and fuel costs, maintenance expense and other operating expenses.

Driver commissions increased by $2.6 million during the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020, primarily due to a higher driver count, increased miles driven in the 2021 period and an increase in driver pay in mid-2021, partially offset by the impact of Hurricane Ida at our Louisiana locations.

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Fuel costs increased by $2.5 million during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily as a result of the CTL acquisition, which increased the number of miles traveled during the 2021 period, and an increase in the price of fuel. Insurance costs increased by $1.7 million during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily due to the CTL acquisition which resulted in a higher driver count, increased miles driven in the 2021 period and higher insurance premiums.

Depreciation and amortization expense increased by $1.0 million during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily as a result of the CTL asset acquisition in June 2020 and the purchase and lease of new tractors and trailers in late 2020 and in 2021.

Pipeline and Storage

Our pipeline and storage segment revenues, operating losses and selected costs were as follows for the period indicated (in thousands):


		Three Months		Nine Months			Three Months Ended
		Ended		Ended			March 31,
		September 30,		September 30,			2022		2021		Change (1)
		2021		2021

Segment revenues (1)		$	738	$	1,808
Less: Intersegment revenues (1)		(611)		(1,293)
Segment revenues (2)						Segment revenues (2)	$	897	$	419	114	%
Less: Intersegment revenues (2)						Less: Intersegment revenues (2)	(897)		(186)		382	%
Revenues	Revenues	$	127	$	515	Revenues	$	—	$	233	(100	%)

Operating losses	Operating losses	(716)		(1,837)		Operating losses	(822)		(565)		45	%
Depreciation and amortization	Depreciation and amortization	281		758		Depreciation and amortization	268		254		6	%
Insurance	Insurance	169		527		Insurance	200		210		(5	%)

_______________

(1)Represents the percentage increase (decrease) from the prior year period.

(2)Segment revenues ~~represent~~include intersegment revenues from ~~the~~our crude oil marketing segment, which are eliminated due to consolidation in our unaudited condensed consolidated statements of operations.

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Volume information was as follows for the periods indicated (in barrels per day):


		Three Months	Nine Months
		Ended	Ended		Three Months Ended
		September 30,	September 30,		March 31,
		2021	2021		2022	2021

Pipeline throughput	Pipeline throughput	9,759	6,889	Pipeline throughput	10,486	2,956
Terminalling	Terminalling	9,159	7,408	Terminalling	10,948	4,912

During the three months ended March 31, 2022, all pipeline and storage segment revenues were earned from an affiliated shipper, while during the three months ended March 31, 2021, pipeline and storage revenues included revenues from third party shippers. Revenues earned from an affiliated shipper are eliminated due to consolidation, with the offset to marketing costs and expenses in our unaudited condensed consolidated statements of operations.

We are continuing to focus on opportunities to increase our pipeline and storage capacity utilization, by identifying opportunities with our existing and new customers to increase volumes. In addition, we are exploring new connections for the pipeline system both upstream and downstream of the pipeline, to increase the crude oil supply and take-away capability of the system.

General and Administrative Expense

General and administrative expense increased by ~~$2.1~~$0.6 million during the three months ended ~~September 30, 2021~~March 31, 2022 as compared to the same period in ~~2020,~~2021, primarily due to higher salaries and wages and related personnel costs ~~insurance costs~~ and ~~outside service costs,~~legal fees, partially offset by lower ~~legal fees and office rental costs. The 2020 period included a higher office rental costs due to a true-up of common area maintenance fees.~~

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General and administrative expense increased by $2.8 million during the nine months ended September 30, 2021 as compared to the same period in 2020, primarily due to higher salaries and wages and related personnel costs, insurance costs and outside service ~~costs, partially offset by lower legal fees.~~costs.

Income Taxes

Provision for (benefit from) income taxes is based upon federal and state tax rates, and variations in amounts are consistent with taxable income (loss) in the respective accounting periods.

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Liquidity and Capital Resources

Liquidity

Our primary sources of liquidity ~~is from~~are (i) our cash balance, ~~and net~~(ii) cash ~~provided by~~flow from operating activities, (iii) borrowings under our $40.0 million credit agreement (“Credit Agreement”) and (iv) funds received from the sale of equity securities. Our primary cash requirements include, but are not limited to, (i) ordinary course of business uses, such as the payment of amounts related to the purchase of crude oil, and other expenses, (ii) discretionary capital spending for investments in our business and (iii) dividends to our shareholders. We believe we will have sufficient liquidity through our current cash balances, availability under our Credit Agreement, expected cash generated from future operations, and the ease of financing tractor and trailer additions through leasing arrangements (should the need arise) to meet our short-term and long-term liquidity needs for the reasonably foreseeable future. Our cash balance and cash flow from operating activities is ~~therefore~~ dependent on the success of future operations. If our cash inflow subsides or turns negative, we will evaluate our investment plan accordingly and remain flexible.

On May 4, 2021, we entered into the Credit Agreement with Wells Fargo Bank, National Association, as Agent and Issuing Lender, under which we may borrow or issue letters of credit in an aggregate of up to $40.0 million under a revolving credit facility, which will mature on May 4, 2024, subject to our compliance with certain financial covenants. At September 30, 2021, we had $8.0 million of borrowings outstanding under the Credit Agreement at a weighted average interest rate of 2.75 percent per annum. At September 30, 2021, we had $5.5 million of letters of credit issued under the Credit Agreement at a fee of 1.75 percent per annum. See Note 10 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

We maintain cash balances in order to meet the timing of day-to-day cash needs. Cash and cash equivalents (excluding restricted cash) and working capital, the excess of current assets over current liabilities, were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021

Cash and cash equivalents	Cash and cash equivalents	$	95,634	$	39,293	Cash and cash equivalents	$	99,295	$	97,825
Working capital	Working capital	90,524		72,965		Working capital	93,993		87,199

Our cash balance at ~~September 30, 2021~~March 31, 2022 increased by ~~143~~2 percent from December 31, ~~2020,~~2021, as discussed further below. ~~We believe current cash balances,~~

At March 31, 2022, we had $6.1 million of letters of credit issued under the ~~availability under our~~ Credit Agreement ~~expected cash generated from future operations and~~at a fee of 1.75 percent per annum. See Note 2 in the ~~ease of financing truck and trailer additions through leasing arrangements (should the need arise) will be sufficient~~Notes to ~~meet our short-term and long-term liquidity needs.~~Unaudited Condensed Consolidated Financial Statements for further information.

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~~On December 23, 2020, we entered into~~We have in place an At Market Issuance Sales Agreement (“ATM Agreement”) with B. Riley Securities, Inc., as agent (the “Agent”)~~. Pursuant to the ATM Agreement,~~, in which we may offer to sell shares of our common stock through or to the Agent for cash from time to time. We ~~filed a registration statement initially registering an aggregate of $20.0 million of~~did not sell any shares of common stock ~~for sale~~ under the ATM ~~Agreement. The total number~~Agreement during the first quarter of shares of common stock to be sold, if any, and the price the shares will be sold at will be determined by us periodically in connection with any such sales, though the total amount sold may not exceed the limitations stated in the registration statement. During the three and nine months ended September 30, 2021, we received net proceeds of approximately $2.5 million (net of offering costs to B. Riley Securities, Inc. of $0.1 million) from the sale of 86,323 of our common shares at an average price per share of approximately $30.67 under this agreement.2022.

We utilize cash from operations to make discretionary investments in our crude oil marketing, transportation and pipeline and storage businesses. With the exception of operating and finance lease commitments primarily associated with storage tank terminal arrangements, leased office space, tractors, trailers and other equipment, and borrowings outstanding under the Credit Agreement, our future commitments and planned investments can be readily curtailed if operating cash flows decrease. See ~~“Other Items”~~“Material Cash Requirements” below for information regarding our operating and finance lease obligations.

The most significant item affecting future increases or decreases in liquidity is earnings from operations, and these earnings are dependent on the success of future operations. See “Part I, Item 1A. Risk Factors” in our ~~2020~~2021 Form 10-K.

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Cash Flows from Operating, Investing and Financing Activities

Our consolidated cash flows from operating, investing and financing activities were as follows for the periods indicated (in thousands):


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2021		2020			2022		2021

Cash provided by (used in):	Cash provided by (used in):					Cash provided by (used in):
Operating activities	Operating activities	$	64,232	$	(50,090)	Operating activities	$	5,873	$	23,001
Investing activities	Investing activities	(8,043)		(9,343)		Investing activities	(2,838)		835
Financing activities	Financing activities	(5,832)		(4,851)		Financing activities	(2,207)		(4,539)

Operating activities. Net cash flows provided by operating activities ~~was $64.2 million~~ for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 decreased by $17.1 million as compared to ~~net cash flows used~~the same period in ~~operating activities of $50.1 million for the nine months ended September 30, 2020.~~2021. The ~~increase~~decrease in net cash flows from operating activities ~~of $114.3 million~~ was primarily due to changes in our working capital accounts, partially offset by higher earnings in the current ~~period and changes in our working capital accounts.~~period.

At various times each month, we may make cash prepayments and/or early payments in advance of the normal due date to certain suppliers of crude oil within our crude oil marketing operations. Crude oil supply prepayments are recouped and advanced from month to month as the suppliers deliver product to us. In addition, in order to secure crude oil supply, we may also “early pay” our suppliers in advance of the normal payment due date of the twentieth of the month following the month of production. These “early payments” reduce cash and accounts payable as of the balance sheet date.

We also require certain customers to make similar early payments or to post cash collateral with us in order to support their purchases from us. Early payments and cash collateral received from customers increases cash and reduces accounts receivable as of the balance sheet date.

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Early payments received from customers and prepayments to suppliers were as follows at the dates indicated (in thousands):


		September 30,		December 31,			March 31,		December 31,
		2021		2020			2022		2021

Early payments received	Early payments received	$	41,030	$	939	Early payments received	$	72,761	$	52,841
Prepayments to suppliers	Prepayments to suppliers	8,445		1,085		Prepayments to suppliers	31,365		5,732

We rely heavily on our ability to obtain open-line trade credit from our suppliers especially with respect to our crude oil marketing operations. During December ~~2020,~~2021 and March 2022, we received ~~a small amount of~~ early payments from certain customers in our crude oil marketing operations ~~while during September 2021, early payments from customers increased significantly.~~as noted in the table above. Our cash balance increased by approximately ~~$56.3~~$1.5 million as of ~~September 30, 2021~~March 31, 2022 relative to the year ended December 31, ~~2020~~2021 primarily as a result of the timing of the receipt of these early payments received and prepayments made to suppliers during each period resulting from an increase in crude oil marketing activities.

Investing activities. Net cash flows used in investing activities was $2.8 million for the ~~nine~~three months ended ~~September 30, 2021 decreased by $1.3 million~~March 31, 2022 as compared to net cash flows provided by investing activities of $0.8 million for the ~~same period in 2020. This decrease~~three months ended March 31, 2021. The increase in net cash flows used in investing activities of $3.7 million was primarily due to ~~a payment of $9.2 million in June 2020 for the acquisition of CTL transportation assets. This decrease in net cash flows used in investing activities was partially offset by~~ an increase of ~~$6.3~~$3.5 million in capital spending for property and equipment (see following table)~~, a decrease of $1.1 million in insurance and state collateral refunds~~ and a decrease of ~~$0.4~~$0.1 million in cash proceeds from the sales of assets.

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Capital spending was as follows for the periods indicated (in thousands):


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2021		2020			2022		2021
Crude oil marketing (1)	Crude oil marketing (1)	$	1,145	$	2,734	Crude oil marketing (1)	$	3,124	$	210
Transportation (2)	Transportation (2)	7,607		332		Transportation (2)	535		(58)
Pipeline and storage (3)	Pipeline and storage (3)	1,169		—		Pipeline and storage (3)	27		10
Other ~~(4)~~	Other ~~(4)~~	8		523		Other ~~(4)~~	8		8
Capital spending	Capital spending	$	9,929	$	3,589	Capital spending	$	3,694	$	170

_______________

(1)2022 amount relates to the purchase of 13 tractors and other field equipment, and the 2021 amount primarily relates to the purchase of field equipment.

(2)2022 amount relates to the purchase of three tractors and other field equipment. During the three months ended March 31, 2021, we received a refund of approximately $0.3 million for amounts previously spent in our transportation segment, which has been reflected as a reduction in property and equipment additions. The remaining 2021 amount relates to the purchase of ~~field equipment, and the 2020 amount primarily relates to the purchase of 16 tractors and other field equipment.~~

~~(2)2021 amount relates to the purchase of 52~~two trailers of which 11 are expected to be placed into service during the fourth quarter of 2021, 26 tractors, of which 16 are expected to be placed into service during the fourth quarter of 2021, and computer software and equipment. 2020 amount primarily relates to the purchase of other field equipment and computer software and equipment.

(3)~~2021~~2022 amount relates to the purchase of field equipment.

~~(4)~~2021 amount relates to the purchase of computer software and equipment, and the 2020 amount relates to leasehold improvements, both at our corporate headquarters and both of which are not attributed to any of our reporting segments.

~~Table of Contents~~

Financing activities. Net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2021 increased~~March 31, 2022 decreased by ~~$1.0~~$2.3 million as compared to the same period in ~~2020.~~2021. The ~~increase~~decrease was primarily due to the payment in the 2021 period of the ~~$10.0~~first $2.5 million ~~outstanding payable~~installment related to the purchase of the VEX pipeline in October 2020, the full amount of which was repaid in May 2021, and an increase of ~~$1.6~~$0.1 million in principal repayments made for finance lease obligations. See ~~“Other Items”~~“Material Cash Requirements” below for further information regarding our finance leases. During ~~both~~each of the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we paid cash dividends of ~~$0.72~~$0.24 per common share, or a total of ~~$3.1~~$1.1 million. These increases were partially offset by the borrowing of $8.0 million under the Credit Agreement, which was primarily used to repay the amount due for the remaining purchase price of the VEX pipeline. During the nine months ended September 30, 2021, we received net proceeds of approximately $2.5 million from the sale of 86,323 of our common shares under the ATM Agreement.

~~Other Items~~

~~Contractual Obligations~~Material Cash Requirements

The following table summarizes our ~~significant~~ contractual obligations with material cash requirements at ~~September 30, 2021~~March 31, 2022 (in thousands):


				Payments due by period											Payments due by period
Contractual Obligations	Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Credit Agreement (1)		$	8,036	$	8,036	$	—	$	—	$	—

Finance lease obligations ~~(2)~~(1)	Finance lease obligations ~~(2)~~(1)	15,223		4,333		5,739		5,151		—		Finance lease obligations ~~(2)~~(1)	$	12,785	$	3,545	$	5,246	$	3,994	$	—
Operating lease obligations ~~(3)~~(2)	Operating lease obligations ~~(3)~~(2)	8,078		2,444		3,985		1,139		510		Operating lease obligations ~~(3)~~(2)	7,096		2,458		3,556		681		401
Purchase obligations ~~(4)~~(3)	Purchase obligations ~~(4)~~(3)	7,682		7,682		—		—		—		Purchase obligations ~~(4)~~(3)	16,069		16,069		—		—		—
Total contractual obligations	Total contractual obligations	$	39,019	$	22,495	$	9,724	$	6,290	$	510	Total contractual obligations	$	35,950	$	22,072	$	8,802	$	4,675	$	401

_______________

(1)Amount represents amounts due under our Credit Agreement, including interest. See Note 10 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information about our Credit Agreement.

~~(2)~~Amounts represent our principal contractual commitments, including interest, outstanding under finance leases for certain tractors, trailers, tank storage and throughput arrangements and other equipment.

~~(3)~~(2)Amounts represent rental obligations under non-cancelable operating leases and terminal arrangements with terms in excess of one year.

~~(4)~~(3)Amount represents commitments to purchase 535 new tractors and 40 new trailers in our transportation business and 4839 new tractors and two new trailers in our crude oil marketing business.

See Note 1413 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information regarding our finance and operating leases.

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Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably expected to have a material current or future effect on our financial position, results of operations or cash flows.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2 in the Notes to Unaudited Condensed Consolidated Financial Statements.

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Related Party Transactions

For more information regarding related party transactions, see Note 8 in the Notes to Unaudited Condensed Consolidated Financial Statements.

Critical Accounting Policies and Use of Estimates

A discussion of our critical accounting policies and estimates is included in our ~~2020~~2021 Form 10-K. Certain of these accounting policies require the use of estimates. There have been no material changes to our accounting policies since the disclosures provided in our ~~2020~~2021 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a result of our entry in the Credit Agreement, we are exposed to the risk of changes in interest rates. At September 30, 2021, we had $8.0 million of borrowings outstanding under the Credit Agreement at a weighted average interest rate of 2.75 percent per annum. A 10 percent increase or decrease in the interest rate as of September 30, 2021 would not have a material impact on our consolidated financial position, results of operations or cash flows.

There have been no other material changes to our “Quantitative and Qualitative Disclosures about Market Risk” that have occurred since the disclosures provided in our ~~2020~~2021 Form 10-K.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report, our management carried out an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 and 15d-15(e) of the Exchange Act. Based on this evaluation, as of the end of the period covered by this quarterly report, our Chief Executive Officer and our Chief Financial Officer concluded:

(i)that our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow for timely decisions regarding required disclosures; and

(ii)that our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(e) under the Exchange Act) during the fiscal quarter ended ~~September 30, 2021,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our ~~2020~~2021 Form 10-K and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. ~~Except as set forth below, there~~There have been no material changes in our Risk Factors from those disclosed in Item 1A of our ~~2020~~2021 Form 10-K or our other SEC filings.

Restrictions in our Credit Agreement reduce operating flexibility and the Credit Agreement contains covenants and restrictions that create the potential for defaults, which could adversely affect our business, financial condition and results of operations.

Under our Credit Agreement, we may borrow or issue letters of credit in an aggregate of up to $40.0 million under a revolving credit facility, subject to our compliance with certain covenants. At September 30, 2021, we had $8.0 million of borrowings outstanding and $5.5 million of letters of credit issued under the Credit Agreement.

~~The terms of our Credit Agreement restrict our ability to, among other things (and subject in each case, to various exceptions and conditions):~~

•~~incur additional indebtedness,~~

•~~create additional liens on our assets,~~

•~~make certain investments,~~

•~~dispose of our assets or engage in a merger or other similar transaction, or~~

•~~engage in transactions with affiliates.~~

We are also required to maintain compliance with the following financial covenants on a pro forma basis, after giving effect to any borrowings (in each case commencing with the fiscal quarter ending June 30, 2021): (i) the Consolidated Total Leverage Ratio, which is the ratio of (a) Consolidated Funded Indebtedness on such date to (b) Consolidated EBITDA for the most recently completed Reference Period shall not be greater than 3.00 to 1.00; (ii) the Current Ratio, which is (a) consolidated current assets to (b) consolidated current liabilities, in each case with certain exclusions, shall not be less than 1.25 to 1.00; (iii) Consolidated Interest Coverage Ratio, which is the ratio of (a) Consolidated EBITDA for the most recently completed Reference Period to (b) Consolidated Interest Expense for the most recently completed Reference Period shall be not be less than 3.00 to 1.00; and (iv) the Consolidated Tangible Net Worth, which is (a) our shareholders’ equity as shown on our consolidated statement of financial position, with certain exclusions, minus (b) all goodwill and intangible assets as of such date, shall not be less than $100.0 million. The Reference Period is the most recently completed four consecutive fiscal quarters.

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Our ability to comply with the financial covenants in the Credit Agreement depends on our operating performance, which in turn depends significantly on prevailing economic, financial and business conditions and other factors that are beyond our control. Therefore, despite our best efforts and execution of our strategic plan, we may be unable to comply with these financial covenants in the future.

At September 30, 2021, we were in compliance with all financial covenants. However, if in the future there are economic declines, we can make no assurance that these declines will not negatively impact our financial results and, in turn, our ability to meet these financial covenant requirements. If we fail to comply with certain covenants, including our financial covenants, we could be in default under our Credit Agreement. In the event of such a default, the lenders under the Credit Agreement are entitled to take various actions, including the acceleration of the maturity of all loans and to take all actions permitted to be taken by a secured creditor against the collateral under the related security documents and applicable law. Any of these events could adversely affect our business, financial condition and results of operations.

~~In addition, these restrictions reduce our operating flexibility and could prevent us from exploiting certain investment, acquisition, or other time-sensitive business opportunities~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit
Number						Exhibit

3.1						Certificate of Incorporation of Adams Resources & Energy, Inc., as amended (incorporated by reference to Exhibit 3.1 to Form 10-K for the fiscal year ended December 31, 2019).
3.2						Bylaws of Adams Resources & Energy, Inc., as amended (incorporated by reference to Exhibit 3(b) to Form 10-K for the year ended December 31, 2012).
10.1+*						Form of Employee Performance Share Unit Award Agreement for 2022 Awards under the Adams Resources & Energy, Inc. 2018 Long-Term Incentive Plan.
31.1*						Sarbanes-Oxley Section 302 certification of Executive Chairman pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Sarbanes-Oxley Section 302 certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*						Sarbanes-Oxley Section 906 certification of Executive Chairman pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*						Sarbanes-Oxley Section 906 certification of Chief Financial Officer pursuant to 18. U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.CAL*						Inline XBRL Calculation Linkbase Document
101.DEF*						Inline XBRL Definition Linkbase Document
101.INS*						Inline XBRL Instance Document — the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.LAB*						Inline XBRL Labels Linkbase Document
101.PRE*						Inline XBRL Presentation Linkbase Document
101.SCH*						Inline XBRL Schema Document
104*						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

____________

* Filed or furnished (in the case of Exhibits 32.1 and 32.2) with this report.

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Table of Contents

SIGNATURES

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:	~~November 4, 2021~~May 16, 2022	By:	/s/ Kevin J. Roycraft
			Kevin J. Roycraft
			Chief Executive Officer
			(Principal Executive Officer)

		By:	/s/ Tracy E. Ohmart
			Tracy E. Ohmart
			Chief Financial Officer
			(Principal Financial Officer and Principal
			Accounting Officer)

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