SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q

x
Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2015
Commission File Number 1-7908

ADAMS RESOURCES & ENERGY, INC.
(Exact name of Registrant as specified in its charter)

Delaware
  
74-1753147
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)

17 South Briar Hollow Lane Suite 100, Houston, Texas  77027
(Address of principal executive office & Zip Code)

Registrant's telephone number, including area code (713) 881-3600

Indicate by  check mark  whether the  registrant (1)  has filed  all reports  required to be filed  by Section 13 or  15 (d) of the Securities Exchange Act of 1934 during the  preceding 12 months (or for such shorter period  that the registrant  was required to  file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES x   NO  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).  Yes  x   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of ‟large accelerated filer”, ‟accelerated filer” and ‟smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o   Accelerated filer x   Non-accelerated filer o   Smaller Reporting Company o

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

A total of 4,217,596 shares of Common Stock were outstanding at May 1, 2015.

 
 
 

PART 1 – FINANCIAL INFORMATION
Item 1.  Financial Statements

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

   
Three Months Ended
  
   
March 31,
  
   
2015
    
2014
  
REVENUES:
            
Marketing
   $ 537,748     $ 927,204  
Transportation
     16,465       17,649  
Oil and natural gas
     1,360       4,336  
      555,573       949,189  
COSTS AND EXPENSES:
                
Marketing                  
     526,133       915,565  
Transportation
     13,441       14,661  
Oil and gas operations
     1,663       2,191  
General and administrative
     3,331       2,254  
Depreciation, depletion and amortization
     6,088       6,106  
      550,656       940,777  
                 
Operating earnings
     4,917       8,412  
                 
Other income (expense):
                
Interest income
     78       42  
Interest expense
     (4 )     -  
                 
Earnings from continuing operations before income taxes
     4,991       8,454  
                 
Income tax (provision)
     (1,894 )     (3,091 )
                 
Net earnings
   $ 3,097     $ 5,363  
                 
EARNINGS (LOSS) PER SHARE:
                
Basic and diluted net earnings per common share
   $ .73     $ 1.27  
                 
                 
DIVIDENDS PER COMMON SHARE
   $ .22     $ .22  


The accompanying notes are an integral part of these financial statements.

 
2
 

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

   
March 31,
    
December 31,
  
   
2015
    
2014
  
ASSETS
            
Current assets:
            
Cash and cash equivalents
   $ 88,132     $ 80,184  
Accounts receivable, net of allowance for doubtful
                
accounts of $171 and $179, respectively
     118,941       144,434  
Inventory
     14,284       13,481  
Fair value contracts
     806       936  
Income tax receivable
     -       970  
Prepayments
     10,598       10,940  
                 
Total current assets
     232,761       250,945  
                 
Property and Equipment
                
Marketing
     65,984       65,865  
Transportation
     63,491       63,239  
Oil and gas (successful efforts method)
     89,499       88,661  
Other
     186       186  
      219,160       217,951  
                 
Less – Accumulated depreciation, depletion and amortization
     (137,525 )     (133,080 )
      81,635       84,871  
Other Assets:
                
Cash deposits and other
     5,128       4,998  
    $ 319,524     $ 340,814  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
Current Liabilities:
                
Accounts payable
   $ 135,238     $ 160,743  
Accounts payable – related party
     11       51  
Fair value contracts
     852       943  
Accrued and other liabilities
     9,306       6,208  
Current deferred income taxes
     647       658  
                 
Total current liabilities
     146,054       168,603  
                 
Other Liabilities:
                
Asset retirement obligations
     2,497       2,464  
Deferred taxes and other liabilities
     11,306       12,250  
      159,857       183,317  
Commitments and Contingencies (Note 5)
                
                 
Shareholders’ Equity:
                
Preferred stock - $1.00 par value, 960,000 shares
                
authorized, none outstanding
     -       -  
Common stock - $.10 par value, 7,500,000 shares
                
authorized, 4,217,596 shares outstanding
     422       422  
Contributed capital
     11,693       11,693  
Retained earnings
     147,552       145,382  
Total shareholders’ equity
     159,667       157,497  
    $ 319,524     $ 340,814  

The accompanying notes are an integral part of these financial statements.

 
3
 

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
   
Three Months Ended
  
   
March 31,
  
   
2015
    
2014
  
CASH PROVIDED BY OPERATIONS:
            
Net earnings
   $ 3,097     $ 5,363  
Adjustments to reconcile net earnings to net cash
                
from operating activities -
                
Depreciation, depletion and amortization
     6,088       6,106  
Property sales (gains)
     (512 )     (55 )
Dry hole costs incurred
     34       655  
Impairment of oil and gas properties
     208       93  
Deferred income taxes
     (949 )     (551 )
Net change in fair value contracts
     39       316  
Decrease (increase) in accounts receivable
     25,501       16,533  
Decrease (increase) in inventories
     (803 )     (11,921 )
Decrease (increase) in income tax receivable
     970       (1,739 )
Decrease (increase) in prepayments
     342       7,295  
Increase (decrease) in accounts payable
     (25,385 )     11,720  
Increase (decrease) in accrued liabilities
     3,509       1,758  
Other changes, net
     (8 )     (162 )
                 
Net cash provided by operating activities
     12,131       35,411  
                 
INVESTING ACTIVITIES:
                
Property and equipment additions
     (3,665 )     (7,770 )
Insurance and state collateral (deposits) refunds
     (103 )     (122 )
Proceeds from property sales
     512       55  
 
Net cash (used in) investing activities
     (3,256 )     (7,837 )
                 
FINANCING ACTIVITIES
                
Dividend payments
     (927 )     (928 )
                 
Net cash (used in) financing activities
     (927 )     (928 )
                 
Increase (decrease) in cash and cash equivalents
     7,948       26,646  
                 
Cash and cash equivalents at beginning of period
     80,184       60,733  
                 
Cash and cash equivalents at end of period
   $ 88,132     $ 87,379  


The accompanying notes are an integral part of these financial statements

 
4
 

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

Note 1 - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, in the opinion of the Company's management, include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of its financial position at March 31, 2015, its results of operations for the three months ended March 31, 2015 and 2014 and its cash flows for the three months ended March 31, 2015 and 2014. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (‟GAAP”) have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations.  The impact on the accompanying financial statements of events occurring after March 31, 2015, was evaluated through the date of issuance of these financial statements.

Although the Company believes the disclosures made are adequate to make the information presented not misleading, it is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements, and the notes thereto, included in the Company's latest annual report on Form 10-K. The interim statement of operations is not necessarily indicative of results to be expected for a full year.

Note 2 - Summary of Significant Accounting Policies

Nature of Operations and Principles of Consolidation

The Company is engaged in the business of crude oil marketing, tank truck transportation of liquid chemicals and oil and gas exploration and production.  Its primary area of operation is within a 1,000 mile radius of Houston, Texas.  The accompanying unaudited condensed consolidated financial statements include the accounts of Adams Resources & Energy, Inc., a Delaware corporation, and its wholly owned subsidiaries (the ‟Company”) after elimination of all intercompany accounts and transactions.

Cash and Cash Equivalents

Cash and cash equivalents include any Treasury bill, commercial paper, money market fund or federal funds with maturity of 90 days or less.  Depending on cash availability and market conditions, investments in corporate and municipal bonds, which are classified as investments in marketable securities, may also be made from time to time.  Cash and cash equivalents are maintained with major financial institutions and such deposits may exceed the amount of federally backed insurance provided.  While the Company regularly monitors the financial stability of such institutions, cash and cash equivalents ultimately remain at risk subject to the financial viability of such institutions.

Inventory

Inventory consists of crude oil held in storage tanks and at third-party pipelines as part of the Company’s crude oil marketing operations.  Crude oil inventory is carried at the lower of average cost or market.

 
5
 

Prepayments

The components of prepayments and other are as follows (in thousands):

   
March 31,
    
December 31,
  
   
2015
    
2014
  
             
Cash collateral deposits for commodity purchases
   $ 8,270     $ 7,872  
Insurance premiums
     1,547       2,316  
Rents, license and other
     781       752  
                 
    $ 10,598     $ 10,940  

Property and Equipment

Expenditures for major renewals and betterments are capitalized, and expenditures for maintenance and repairs are expensed as incurred.  Interest costs incurred in connection with major capital expenditures are capitalized and amortized over the lives of the related assets. When properties are retired or sold, the related cost and accumulated depreciation, depletion and amortization is removed from the accounts and any gain or loss is reflected in earnings.

Oil and gas exploration and development expenditures are accounted for in accordance with the successful efforts method of accounting.  Direct costs of acquiring developed or undeveloped leasehold acreage, including lease bonus, brokerage and other fees, are capitalized. Exploratory drilling costs are initially capitalized until the properties are evaluated and determined to be either productive or nonproductive.  Such evaluations are made on a quarterly basis.  If an exploratory well is determined to be nonproductive, the costs of drilling the well are charged to expense. Costs incurred to drill and complete development wells, including dry holes, are capitalized.  As of March 31, 2015, the Company had no unevaluated or suspended exploratory drilling costs.

Depreciation, depletion and amortization of the cost of proved oil and gas properties are calculated using the unit-of-production method.  The reserve base used to calculate depreciation, depletion and amortization for leasehold acquisition costs and the cost to acquire proved properties is the sum of proved developed reserves and proved undeveloped reserves.  For lease and well equipment, development costs and successful exploration drilling costs, the reserve base includes only proved developed reserves.  All other property and equipment is depreciated using the straight-line method over the estimated average useful lives of three to twenty years.

The Company reviews its long-lived assets for impairment whenever there is evidence that the carrying value of such assets may not be recoverable.  Any impairment recognized is permanent and may not be restored.  Producing oil and gas properties are reviewed on a field-by-field basis.  For properties requiring impairment, the fair value is estimated based on an internal discounted cash flow model.  Cash flows are developed based on estimated future production and prices are then discounted using a market based rate of return consistent with that used by the Company in evaluating cash flows for other assets of a similar nature.  For the three-month periods ended March 31, 2015 and 2014 there were $203,000 and zero, respectively, of impairment provisions on producing oil and gas properties.

 
6
 

On a quarterly basis, management evaluates the carrying value of non-producing oil and gas leasehold properties and may deem them impaired based on remaining lease term, area drilling activity and the Company’s plans for the property.  This fair value measure depends highly on management’s assessment of the likelihood of continued exploration efforts in a given area and, as such, data inputs are categorized as ‟unobservable” or ‟Level 3” inputs.  Importantly, this fair value measure only applies to the write-down of capitalized costs and will never result in an increase to reported earnings. Accordingly, impairment provisions on non-producing properties totaling $5,000 and $93,000 were recorded for the three-month periods ended March 31, 2015 and 2014, respectively.  Capitalized costs for non-producing oil and gas leasehold interests currently represent approximately four percent of total oil and gas property costs and are categorized as follows (in thousands):

   
March 31,
    
December 31,
  
   
2015
    
2014
  
             
South Texas Project acreage
   $ 358     $ 357  
Napoleonville, Louisiana acreage
     48       48  
North Dakota and other acreage areas
     606       554  
                 
Total Non-producing Leasehold Costs
   $ 1,012     $ 959  

The South Texas and Napoleonville acreage areas have active or scheduled drilling operations underway and holding the underlying acreage is essential to the ongoing exploration effort.  The ‟other acreage areas” category consists of smaller onshore interests dispersed over a wide geographical area.  Since the Company is generally not the operator of its oil and gas property interest, it does not maintain the underlying detail acreage data and the Company is dependent on the operator when determining which specific acreage will ultimately be drilled.  However, the capitalized cost detail on a property-by-property basis is reviewed by management, and deemed impaired if development is not anticipated prior to lease expiration.  Onshore leasehold periods are normally three years and may contain renewal options.  Capitalized cost activity on the ‟North Dakota and other acreage areas” was as follows (in thousands):

   
Leasehold Costs
  
   
March 31,
    
December 31,
  
   
2015
    
2014
  
Net book value January 1
   $ 554     $ 411  
Property additions
     54       580  
Impairments
     (2 )     (437 )
                 
Net book value end of period
   $ 606     $ 554  

Cash Deposits and Other Assets

The Company has established certain deposits to support participation in its liability insurance program and remittance of state crude oil severance taxes and other state collateral deposits.  Insurance collateral deposits are invested at the discretion of the Company’s insurance carrier and such investments primarily consist of intermediate term federal government bonds and bonds backed by federal agencies.  Components of cash deposits and other assets are as follows (in thousands):

   
March 31,
    
December 31,
  
   
2015
    
2014
  
Insurance collateral deposits
   $ 4,627     $ 4,536  
State collateral deposits
     167       155  
Materials and supplies
     334       307  
    $ 5,128     $ 4,998  

 
7
 

Revenue Recognition

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

Most crude oil purchase contracts and sale contracts qualify and are designated as non-trading activities and the Company considers such contracts as normal purchases and sales activity.  For normal purchases and sales, the Company’s customers are invoiced monthly based upon contractually agreed upon terms with revenue recognized in the month in which the physical product is delivered to the customer.  Such sales are recorded gross in the financial statements because the Company takes title, has risk of loss for the products, is the primary obligor for the purchase, establishes the sale price independently with a third party and maintains credit risk associated with the sale of the product.

Certain 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.  Such buy/sell arrangements are reflected on a net revenue basis in the accompanying unaudited condensed consolidated financial statements.  Reporting such crude oil contracts on a gross revenue basis would increase the Company’s reported revenues by $130,222,000 and $434,693,000 for the three months ended March 31, 2015 and 2014, respectively.

Transportation segment customers are invoiced, and the related revenue is recognized, as the service is provided. Oil and gas revenue from the Company’s interests in producing wells is recognized as title and physical possession of the oil and gas passes to the purchaser.

Sales of long-lived assets

Gains and losses from the sale or disposal of long-lived assets that do not meet the criteria for presentation as a discontinued operation are presented in the accompanying financial statements as a component of operating earnings.

Concentration of Credit Risk

The Company’s largest customers consist of large multinational integrated oil companies and independent refiners of crude oil.  In addition, the Company transacts business with independent oil producers, major chemical concerns, crude oil trading companies and a variety of commercial energy users.  Within this group of customers the Company generally derives approximately 50 percent of its revenues from three or four large crude oil refining concerns.  While the Company has ongoing established relationships with certain domestic refiners of crude oil, alternative markets are readily available since the Company supplies less than one percent of U.S. domestic refiner demand.  As a fungible commodity delivered to major Gulf Coast supply points, the Company’s crude oil sales can be readily delivered to alternative end markets.  Management believes that a loss of any of those customers where the Company currently derives more than 10 percent of its revenues would not have a material adverse effect on the Company’s operations.

Accounts receivable associated with crude oil activities comprise approximately 95 percent of the Company’s total receivables and industry practice requires payment for such sales to occur within 20 days of the end of the month following a transaction.  The Company’s customer makeup, credit policies and the relatively short duration of receivables mitigate the uncertainty typically associated with receivables management.


 
8
 


Letter of Credit Facility

The Company maintains a Credit and Security Agreement with Wells Fargo Bank to provide a $60 million stand-by letter of credit facility that is used to support the Company’s crude oil purchases.   This facility is collateralized by the eligible accounts receivable within the segment.  Stand-by letters of credit issued totaled $7 million and $15.3 million as of March 31, 2015 and December 31, 2014, respectively.  The issued stand-by letters of credit are cancelled as the underlying purchase obligations are satisfied by cash payment when due.  The letter of credit facility places certain restrictions on the Company’s Gulfmark Energy, Inc. subsidiary.  Such restrictions include the maintenance of a combined 1.1 to 1.0 current ratio and the maintenance of positive net earnings excluding inventory valuation changes, as defined, among other restrictions.  The Company is currently in compliance with all such financial covenants.

Statement of Cash Flows

Interest paid totaled $4,000 and zero during the three-month periods ended March 31, 2015 and 2014, respectively, while taxes paid during these same periods totaled $1,081,000 and $5,007,000, respectively.  Non-cash investing activities for property and equipment were $566,000 and $1,137,000 as of March 31, 2015 and December 31, 2014, respectively and $634,000 and $1,507,000 as of March 31, 2014 and December 31, 2013, respectively.  There were no significant non-cash financing activities in any of the periods reported.

Earnings Per Share

Earnings per share are based on the weighted average number of shares of common stock and potentially dilutive common stock shares outstanding during the period presented herein. The weighted average number of shares outstanding was 4,217,596 for 2015 and 2014.  There were no potentially dilutive securities during those periods.

Share-Based Payments

During the periods presented herein, the Company had neither stock-based employee compensation plans nor any other share-based payment arrangements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates. Examples of significant estimates used in the accompanying consolidated financial statements include oil and gas reserve volumes forming the foundation for calculating depreciation, depletion and amortization and for estimating cash flows when assessing impairment triggers and when estimating values associated with oil and gas properties.  Other examples include revenue accruals, the provision for bad debts, insurance related accruals, income tax permanent and timing differences, contingencies and valuation of fair value contracts.

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 assets and liabilities and their respective tax basis.

 
9
 


Use of Derivative Instruments

The Company’s marketing segment is involved in the purchase and sale of crude oil.  The Company seeks 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, such 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, the Company accounts for such contracts at fair value, unless the normal purchase and sale exception is applicable.  Such underlying contracts are standard for the industry and are the governing document for the Company’s crude oil wholesale distribution businesses.  None of the Company’s derivative instruments have been designated as hedging instruments.  The accounting methodology utilized by the Company for its commodity contracts is further discussed below under the caption ‟Fair Value Measurements”.

The estimated fair value of forward month commodity contracts (derivatives) is reflected in the accompanying Unaudited Condensed Consolidated Balance Sheet as of March 31, 2015 as follows (in thousands):

   
Balance Sheet Location and Amount
  
   
Current
    
Other
    
Current
    
Other
  
   
Assets
    
Assets
    
Liabilities
    
Liabilities
  
Asset Derivatives
                        
- Fair Value Forward Hydrocarbon Commodity
                        
Contracts at Gross Valuation
   $ 871     $ -     $ -     $ -  
Liability Derivatives
                                
- Fair Value Forward Hydrocarbon Commodity
                                
Contracts at Gross Valuation
     -       -       917       -  
Less Counterparty Offsets
     (65 )     -       (65 )     -  
                                 
As Reported Fair Value Contracts
   $ 806     $ -     $ 852     $ -  

As of March 31, 2015, five commodity purchase and sale contracts comprise the Company’s derivative valuations.  These contracts encompass approximately 161 barrels per day of crude oil during April 2015 through September 2015 plus 129 barrels per day of crude oil from October 2015 through December 31, 2015 plus 65 barrels per day of diesel fuel from April 2015 through March 2016.
 
 
Forward month commodity contracts (derivatives) are reflected in the accompanying Unaudited Condensed Consolidated Balance Sheet as of December 31, 2014 as follows (in thousands):

   
Balance Sheet Location and Amount
  
   
Current
    
Other
    
Current
    
Other
  
   
Assets
    
Assets
    
Liabilities
    
Liabilities
  
Asset Derivatives
                        
- Fair Value Forward Hydrocarbon Commodity
                        
Contracts at Gross Valuation
   $ 1,332     $ -     $ -     $ -  
Liability Derivatives
                                
- Fair Value Forward Hydrocarbon Commodity
                                
Contracts at Gross Valuation
     -       -       1,339       -  
Less Counterparty Offsets
     (396 )     -       (396 )     -  
                                 
As Reported Fair Value Contracts
   $ 936     $ -     $ 943     $ -  


 
10
 

As of December 31, 2014, one 100,000 barrel crude oil commodity put option and one commodity purchase and sale contract comprised the Company’s derivative valuations.  The purchase and sale contract encompasses approximately 175 barrels per day of crude oil in each of January and February 2015.

The Company only enters into commodity contracts with credit worthy counterparties or obtains collateral support for such activities.  As of March 31, 2015 and December 31, 2014, the Company was not holding nor has it posted any collateral to support its forward month fair value derivative activity. The Company is not subject to any credit-risk related trigger events.  The Company has no other financial investment arrangements that would serve to offset its derivative contracts.

Forward month commodity contracts (derivatives) are reflected in the accompanying Unaudited Condensed Consolidated Statement of Operations for the three months ended March 31, 2015 and 2014 as follows (in thousands):

   
Earnings (Loss)
  
   
Three Months Ended
  
   
March 31,
  
   
2015
    
2014
  
             
Revenues – Marketing
   $ (39 )   $ 398  
                 

Fair Value Measurements

The carrying amount reported in the consolidated balance sheet 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.

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 the Company elects, cash flow hedge accounting.  The Company had no contracts designated for hedge accounting during any current reporting periods.

Fair value estimates are based on assumptions that market participants would use when pricing an asset or liability and the Company uses a fair value hierarchy of three levels that prioritizes the information used to develop those assumptions.  Currently, for all items presented herein, the Company utilizes a market approach to valuing its contracts.  On a contract by contract, forward month by forward month basis, the Company obtains observable market data for valuing its contracts.  The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data.  The fair value hierarchy is summarized as follows:

 
Level 1 – quoted prices in active markets for identical assets or liabilities that may be accessed at the measurement date.  Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.  For Level 1 valuation of marketable securities, the Company utilizes market quotations provided by its primary financial institution and for the valuation of derivative financial instruments the Company utilizes the New York Mercantile Exchange (‟NYMEX”) for such valuations.

 
11
 


 
Level 2 – (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical assets or liabilities but in markets that are not actively traded or in which little information is released to the public, (c) observable inputs other than quoted prices and (d) inputs derived from observable market data.  Source data for Level 2 inputs include information provided by the NYMEX, published price data and indices, third party price survey data and broker provided forward price statistics.

 
Level 3 – unobservable market data inputs for assets or liabilities.

As of March 31, 2015, the Company’s fair value assets and liabilities are summarized and categorized as follows (in thousands):

   
Market Data Inputs
              
   
Gross Level 1
    
Gross Level 2
    
Gross Level 3
    
Counterparty
        
   
Quoted Prices
    
Observable
    
Unobservable
    
Offsets
    
Total
  
Derivatives
                              
- Current assets
   $ -     $ 871     $ -     $ (65 )   $ 806  
- Current liabilities
     -       (917 )     -       65       (852 )
Net Value
   $ -     $ (46 )   $ -     $ -     $ (46 )

As of December 31, 2014, the Company’s fair value assets and liabilities are summarized and categorized as follows (in thousands):

   
Market Data Inputs
              
   
Gross Level 1
    
Gross Level 2
    
Gross Level 3
    
Counterparty
        
   
Quoted Prices
    
Observable
    
Unobservable
    
Offsets
    
Total
  
Derivatives
                              
- Current assets
   $ -     $ 1,332     $ -     $ (396 )   $ 936  
- Current liabilities
     -       (1,339 )     -       396       (943 )
Net Value
   $ -     $ (7 )   $ -     $ -     $ (7 )

When determining fair value measurements, the Company makes credit valuation adjustments to reflect both its own nonperformance risk and its counterparty’s nonperformance risk.  When adjusting the fair value of derivative contracts for the effect of nonperformance risk, the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, and guarantees are considered.  Credit valuation adjustments utilize Level 3 inputs, such as credit scores to evaluate the likelihood of default by the Company or its counterparties.  As of March 31, 2015 and December 31, 2014, credit valuation adjustments were not significant to the overall valuation of the Company’s fair value contracts.  As a result, applicable fair value assets and liabilities are included in their entirety in the fair value hierarchy.

Recent Accounting Pronouncement

In May 2014, the FASB amended the existing accounting standards for revenue recognition.  The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The new guidance is effective for annual periods ending after December 15, 2016.  Early adoption is not permitted.  The amendments may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of initial application.  Management is currently evaluating the impact of these amendments on the Company’s consolidated financial statements and the transition alternatives.


 
12
 


In August 2014, the FASB issued guidance requiring management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued.  The standard also provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements.  The new guidance is effective for the annual period ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.  Management does not expect the adoption of this guidance to have an impact on the consolidated financial statements.

Management believes the impact of recently issued standards and updates, which are not yet effective, will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows upon adoption.

Note 3 – Segment Reporting

The Company is engaged in the business of crude oil marketing as well as tank truck transportation of liquid chemicals, and oil and gas exploration and production.  Information concerning the Company's various business activities is summarized as follows (in thousands):

- Three Month Comparison

         
Segment
    
Depreciation
    
Property and
  
         
Operating
    
Depletion and
    
Equipment
  
   
Revenues
    
Earnings
    
Amortization
    
Additions
  
Period Ended March 31, 2015
                        
Marketing
   $ 537,748     $ 8,848     $ 2,767     $ 1,850  
Transportation
     16,465       1,125       1,899       166  
Oil and gas
     1,360       (1,725 )     1,422       1,649  
    $ 555,573     $ 8,248     $ 6,088     $ 3,665  
Period Ended March 31, 2014
                                
Marketing
   $ 927,204     $ 9,370     $ 2,269     $ 4,076  
Transportation
     17,649       1,175       1,813       203  
Oil and gas
     4,336       121       2,024       3,491  
    $ 949,189     $ 10,666     $ 6,106     $ 7,770  

Segment operating earnings reflect revenues net of operating costs and depreciation, depletion and amortization and are reconciled to earnings from continuing operations before income taxes, as follows (in thousands):

   
Three Months Ended
  
   
March 31,
  
   
2015
    
2014
  
Segment operating earnings
   $ 8,248     $ 10,666  
- General and administrative
     (3,331 )     (2,254 )
Operating earnings
     4,917       8,412  
- Interest income
     78       42  
- Interest expense
     (4 )     -  
Earnings before income tax
   $ 4,991     $ 8,454  


 
13
 

Identifiable assets by industry segment are as follows (in thousands):

   
March 31,
    
December 31,
  
   
2015
    
2014
  
Marketing
   $ 164,431     $ 189,332  
Transportation
     36,264       37,643  
Oil and gas
     24,621       25,888  
Other
     94,208       87,951  
    $ 319,524     $ 340,814  

Intersegment sales are insignificant and all sales occurred in the United States.  Other identifiable assets are primarily corporate cash, corporate accounts receivable and properties not identified with any specific segment of the Company’s business.  Accounting policies for transactions between reportable segments are consistent with applicable accounting policies as disclosed herein.

Note 4 - Transactions with Affiliates

The late Mr. K. S. Adams, Jr., former Chairman of the Board of the Company, and certain of his family partnerships and affiliates have participated as working interest owners with the Company’s subsidiary, Adams Resources Exploration Corporation (‟AREC”)  Mr. Adams and the affiliates participated on terms similar to those afforded other non-affiliated working interest owners.  While the affiliates have generally maintained their existing property interest, they have not participated in any such transactions originating after the death of Mr. Adams in October 2013.  As of March 31, 2015 and December 31, 2014, the Company owed a combined net total of $11,000 and $51,000, respectively, to these related parties.  In connection with the operation of certain oil and gas properties, the Company also charges such related parties for administrative overhead primarily as prescribed by the Council of Petroleum Accountants Society Bulletin 5. Such overhead recoveries totaled $26,000 and $41,000 for the three-month periods ended March 31, 2015 and 2014, respectively.

The Company also enters into certain transactions in the normal course of business with other affiliated entities including direct cost reimbursement for shared phone and administrative services.  For the three-month periods ended March 31, 2015 and 2014, the affiliated entities charged the Company $17,000 and $8,000, respectively, of expense reimbursement and the Company charged the affiliates $12,000 and $11,000, respectively, for such expense reimbursements.  In addition, the Company leases office space from an affiliated entity based on a lease rental rate determined by an independent appraisal.  Rental expense paid to such related party for the three months ended March 31, 2015 and 2014 totaled $143,000 and $120,000, respectively.

Note 5 - Commitments and Contingencies

Under the Company’s automobile and workers’ compensation insurance policies, the Company can either receive a return of premium paid or be assessed for additional premiums up to pre-established limits. Additionally, in certain instances the risk of insured losses is shared with a group of similarly situated entities.  The Company has appropriately recognized estimated expenses and related liabilities for losses incurred but not reported to the Company or its insurance carrier of $2,424,000 and $2,585,000 as of March 31, 2015 and December 31, 2014, respectively.

The Company maintains a self-insurance program for managing employee medical claims.  A liability for expected claims incurred is established on a monthly basis and as claims are paid, the liability is relieved.  As of March 31, 2015 and December 31, 2014, accrued medical claims totaled $1,449,000 and $1,057,000, respectively.  The Company maintains third party insurance stop-loss coverage for annual individual medical claims exceeding $100,000.  In addition, the Company maintains $2 million of umbrella insurance coverage for aggregate medical claims exceeding approximately $4.5 million for each of the calendar years ended 2015 and 2014.

 
14
 

AREC is named as a defendant in a number of Louisiana based suits involving alleged environmental contamination from prior drilling operations.  Such suits typically allege improper disposal of oilfield wastes in earthen pits with one suit alleging subsidence contributing to the formation of a sink hole.  AREC is currently included in three such suits.  The suits are styled LePetit Chateau Deluxe v. Adams Resources Exploration Corporation dated March 2004, Gustave J. LaBarre, Jr., et. al. v. Adams Resources Exploration Corporation et. al. dated October 2012 and Henning Management, LLC v. Adams Resources Exploration Corporation dated November 2013.  Each suit involves multiple industry defendants with substantially larger proportional interests in the properties except, all the larger defendants have settled their claims in the LePetit Chateau Deluxe matter.  The plaintiffs in each of these matters are seeking unspecified compensatory and punitive damages.  While management does not believe that a material adverse effect will result from the claims, significant attorney fees will be incurred to defend these matters.  As of March 31, 2015 and December 31, 2014, the Company has accrued $500,000 of future legal/or settlement costs for these matters.

From time to time as incidental to its operations, the Company may become involved in various lawsuits and/or disputes.  Primarily as an operator of an extensive trucking fleet, the Company is a party to motor vehicle accidents, worker compensation claims and other items of general liability as would be typical for the industry. Management of the Company is presently unaware of any claims against the Company that are either outside the scope of insurance coverage or that may exceed the level of insurance coverage and could potentially represent a material adverse effect on the Company’s financial position or results of operations.

Item 2.                      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

-  
Marketing

Marketing segment revenues, operating earnings, depreciation and certain costs were as follows (in thousands):

   
Three Months Ended
        
   
March 31,
        
   
2015
    
2014
    
Change(1)
  
                   
Revenues
   $ 537,748     $ 927,204       (42 )%
                         
Operating earnings
   $ 8,848     $ 9,370       (6 )%
                         
Depreciation
   $ 2,767     $ 2,269       22 %
                         
Driver commissions
   $ 5,948     $ 4,937       20 %
                         
Insurance
   $ 1,552     $ 2,071       (25 )%
                         
Fuel
   $ 2,801     $ 3,701       (24 )%
_________________________________
(1)  
Represents the percentage increase (decrease) from the prior year.

 
15
 

Supplemental volume and price information is as follows:
 
   
Three Months Ended
  
   
March 31,
  
   
2015
    
2014
  
Field Level Purchase Volumes – Per day(1)
            
Crude oil – barrels
     124,380       109,871  
                 
Average Purchase Price
                
Crude oil – per barrel
   $ 43.51     $ 96.34  
_____________________________
(1) Reflects the volume purchased from third parties at the oil and natural gas field level and pipeline pooling points.

Crude oil revenues declined in 2015 consistent with reduced market prices for crude oil partially offset by increased volumes as shown in the table above.  Increased volumes resulted from increased purchase activity in the Eagle Ford shale trend of South Texas.

-  
Crude Oil – Field Level Operating Earnings (Non GAAP-Measure)

Two significant factors affecting comparative crude oil segment operating earnings are inventory valuations and forward commodity contract (derivatives or mark-to-market) valuations.  As a purchaser and shipper of crude oil, the Company holds inventory in storage tanks and third-party pipelines.  Inventory sales turnover occurs approximately every three days, but the quantity held in stock at the end of a given period is reasonably consistent.  As a result, during periods of increasing crude oil prices, the Company recognizes inventory liquidation gains while during periods of falling prices, the Company recognizes inventory valuation losses.  Over time, these gains and losses tend to offset and have limited impact on cash flow.  While crude oil prices fluctuated during the first three months of 2015, the net impact on earnings was negligible producing inventory liquidation gains totaling $104,000 for the period.  In contrast crude oil prices were generally increasing during the first quarter of 2014 producing inventory liquidation gains totaling $2,629,000.  As of March 31, 2015 and December 31, 2014, the Company held 314,939 barrels and 292,355 barrels of crude oil inventory at a composite average price of $45.35 per barrel and of $46.11 per barrel, respectively.

Crude oil marketing operating earnings are also affected by the valuations of the Company’s forward month commodity contracts (derivative instruments) as of the various report dates.  Such non-cash valuations are calculated and recorded at each period end based on the underlying data existing as of such date.  The Company generally enters into these derivative contracts as part of a pricing strategy based on crude oil purchases at the wellhead (field level).  Only those contracts qualifying as derivative instruments are accorded fair value treatment while the companion contracts to purchase crude oil at the wellhead (field level) are not accorded fair value treatment.  The value of derivative instruments at period end requires the recognition of ‟mark-to-market” gains and losses.  The impact on crude oil segment operating earnings of inventory liquidations and derivative valuations is summarized as follows in reconciliation from the GAAP to non-GAAP financial measure (in thousands):

   
Three Months Ended
  
   
March 31,
  
   
2015
    
2014
  
As reported segment operating earnings
   $ 8,848     $ 9,370  
Add (less) -
                
Inventory valuation (gains) losses
     (104 )     (2,629 )
Derivative valuation (gains) losses
     39       (398 )
                 
Field level operating earnings(1)
   $ 8,783     $ 6,343  
____________________________________
(1)  
Such designation is unique to the Company and is not comparable to any similar measures developed by industry participants.  The Company utilizes such data to evaluate the profitability of its operations.

 
16
 

Field level operating earnings and field level purchase volumes (see earlier table) depict the Company’s day-to-day operation of acquiring crude oil at the wellhead, transporting the material, and delivery to market at the sales point.  Comparative field level operating earnings increased during 2015 relative to the three month 2014 period due to increased purchase volumes and reduced fuel and insurance costs as shown in the table above.  Fuel declined consistent with falling crude oil prices and insurance costs saw an improved claims experience.
 
 
Historically, prices received for crude oil have been volatile and unpredictable with price volatility expected to continue.  See Part I, Item 1A, Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

-           Transportation

Transportation segment revenues, earnings and depreciation are as follows (in thousands):

   
Three Months Ended
        
   
March 31,
        
   
2015
    
2014
    
Change(1)
  
                   
Revenues
   $ 16,465     $ 17,649       (7 )%
                         
Operating earnings
   $ 1,125     $ 1,175       (4 )%
                         
Depreciation
   $ 1,899     $ 1,813       5 %
                         
Driver commissions
   $ 3,370     $ 3,469       (3 )%
                         
Insurance
   $ 1,472     $ 1,471       -  
                         
Diesel fuel
   $ 2,233     $ 3,985       (44 )%
                         
Maintenance expense
   $ 1,522     $ 1,634       (7 )%
__________________________
(1)  Represents the percentage increase (decrease) from the prior year.

The Company’s transportation segment serves the petrochemical industry and customer demand and revenues were consistent and strong during the comparative periods.  Revenues appear reduced in 2015 due to $1,091,000 in reduced fuel surcharges included in trucking rates.  The reduced surcharge is more than offset by reduced fuel costs as shown in the table above.  This segment benefits from the present low price environment for natural gas because this commodity is a basic petrochemical industry feedstock.  As the petrochemical industry continues to expand capacity, the long-term prospect for chemical hauling demand remains positive.

 
17
 

-           Oil and Gas

Oil and gas segment revenues and operating earnings are primarily a function of crude oil and natural gas prices and volumes.  Comparative amounts for revenues, operating earnings and depreciation and depletion are as follows (in thousands):
 
   
Three Months Ended
        
   
March 31,
        
   
2015
    
2014
    
Change(1)
  
                   
Revenues
   $ 1,360     $ 4,336       (69 )%
                         
Operating earnings (loss)
   $ (1,725 )   $ 121       (1,526 )%
                         
Depreciation and depletion
   $ 1,422     $ 2,024       (30 )%
________________________________
(1)  
Represents the percentage increase (decrease) from the prior year.

 Oil and gas revenues and operating earnings declined in the comparative first quarter of 2015 following reduced commodity prices and volume reductions as shown in the table below.  Volumes have declined consistent with reduced drilling activity.  Depreciation and depletion expense is also reduced in 2015 consistent with reduced volumes and reduced net capitalized costs.

Production volumes and price information is as follows:

   
Three Months Ended
  
   
March 31,
  
   
2015
    
2014
  
Crude Oil
            
Volume – barrels
     14,004       24,237  
Average price per barrel
   $ 44.18     $ 100.43  
                 
Natural gas
                
Volume – mcf
     217,261       309,808  
Average price per mcf
   $ 2.86     $ 5.13  
                 
Natural gas liquids
                
Volume – barrels
     10,251       8,044  
Average price per barrel
   $ 11.77     $ 38.84  

Comparative exploration costs are summarized in the table below.  Exploration cost components were as follows (in thousands):

   
Three Months Ended
  
   
March 31,
  
   
2015
    
2014
  
Dry hole expense
   $ 34     $ 655  
Prospect and property impairments
     208       93  
Seismic and geological
     1       6  
Total
   $ 243     $ 754  

During the first three months of 2015, the Company successfully completed nine wells with no dry holes originating from current period activities.  Additionally, the Company has an interest in 14 wells that were in process on March 31, 2015.  Completion is currently delayed on at least eight of these 14 wells pending improved crude oil and natural gas prices.  Participation in the drilling of approximately three wells is planned for the remainder of 2015 on the Company’s prospect acreage in Texas and North Dakota.

 
18
 

-  
General and administrative

General and administrative expenses were elevated from $2,254,000 during the first quarter of 2014 to $3,331,000 during the first quarter of 2015 due to a $1.1 million lump sum payment made to the Company’s former President upon retirement and the related termination of his previous employment agreement.

-           Outlook

Looking forward in 2015, the impact of recent crude oil price declines is causing marketing segment field level volumes to drop off as the Company’s suppliers curtail production.  Anticipation suggests continued volume declines within the marketing operation as well as narrowed margins as competition intensifies.  Conversely, transportation results for the remainder of 2015 should remain consistent with the first quarter, if not improved.  However, the oil and gas division continues to see declining volumes as drilling is curtailed and prices remain suppressed.


Liquidity and Capital Resources

The Company’s liquidity primarily derives from net cash provided by operating activities and such amount was $12,131,000 and $35,411,000 for the three-month periods ended March 31, 2015 and 2014, respectively.  As of March 31, 2015 and December 31, 2014, the Company had no bank debt or other forms of debenture obligations.  Cash and cash equivalents totaled $88,132,000 as of March 31, 2015, and such balances are maintained in order to meet the timing of day-to-day cash needs.  Working capital, the excess of current assets over current liabilities, totaled $86,707,000 and $82,342,000 as of March 31, 2015 and December 31, 2014, respectively.  The Company heavily relies on its ability to obtain open-line trade credit from its suppliers especially with respect to its crude oil marketing operation.  In this regard, the Company generally maintains substantial cash balances and avoids debt obligations.  Cash balances were increased during the current period from $80,184,000 as of year-end 2014 as a result of operating cash earnings generated during the current period.

At various times during each month, the Company makes cash prepayments and/or early payments in advance of the normal due date to certain suppliers of crude oil within the marketing operations.  Crude oil supply prepayments totaled $8,270,000 as of March 31, 2015 and such amounts will be recouped and advanced from month to month as the suppliers deliver product to the Company.  In addition, in order to secure crude oil supply, the Company may also ‟early pay” its suppliers in advance of the normal payment due date of the twentieth of the month following the month of production.  Such ‟early payments” reduce cash and accounts payable as of the balance sheet date and totaled $25,363,000 as of March 31, 2015.  The Company also requires certain customers to make similar early payments or to post cash collateral with the Company in order to support their purchases from the Company.  Early payments and cash collateral received from customers increases cash and reduces accounts receivable as of the balance sheet date.  Early payments received totaled $46,921,000 and cash collateral held by the Company totaled $5,588,000 as of March 31, 2015, respectively.  As of December 31, 2014, crude oil supply prepayments totaled $7,872,000, early payments to suppliers totaled $35,500,000, early payments received from customers totaled $57,404,000 and cash collateral received from customers totaled $8,594,000.

The Company maintains a stand-by letter of credit facility with Wells Fargo Bank to provide for the issuance of up to $60 million in stand-by letters of credit to suppliers of crude oil.  The issuance of stand-by letters of credit enables the Company to avoid posting cash collateral when procuring crude oil supply.  As of March 31, 2015 and December 31, 2014, letters of credit outstanding totaled $7 million and $15.3 million, respectively.  The issued stand-by letters of credit are cancelled as the underlying purchase obligations are satisfied by cash payment when due.  Management believes current cash balances, together with expected cash generated from future operations, and the ease of financing truck and trailer additions through leasing arrangements (should the need arise) will be sufficient to meet short-term and long-term liquidity needs.

 
19
 

The Company utilizes cash from operations to make discretionary investments in its marketing, transportation and exploration businesses, which comprise substantially all of the Company’s investing cash outflows for each of the periods in this filing.  The Company does not look to proceeds from property sales to fund its cash flow needs.  Except for commitments totaling $18,273,000 associated with barge affreightment contracts, storage tank terminal arrangements and office lease space, the Company’s future commitments and planned investments can be readily curtailed if operating cash flows contract.

Capital expenditures during the first three months of 2015 included $2,016,000 for marketing and transportation equipment additions and $1,649,000 in property additions associated with oil and gas exploration and production activities.  Currently for the remainder of 2015, the Company’s only planned expenditure is the investment of $4.5 million to expand and improve the terminal facilities within the chemical hauling division.  Future capital projects within the crude oil marketing and oil and gas exploration segments will be evaluated as they arise.

Historically, the Company paid an annual dividend in the fourth quarter of each year until June 17, 2013 when the Company initiated payment of a quarterly dividend.  A quarterly dividend of $0.22 per common share or $928,000 (rounded to $927,000 for 2015 disclosures) was paid during each of the first quarters of 2015 and 2014.  The most significant item affecting future increases or decreases in liquidity is earnings from operations and such earnings are dependent on the success of future operations.  See Part I, Item 1A Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Critical Accounting Policies and Use of Estimates

There have been no material changes to the Company’s ‟Critical Accounting Policies and Use of Estimates” disclosures that have occurred since the disclosures provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the Company’s ‟Quantitative and Qualitative Disclosures about Market Risk” that have occurred since the disclosures provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

Forward-Looking Statements – Safe Harbor Provisions

This quarterly report for the period ended March 31, 2015 contains certain forward-looking statements covered by the safe harbors provided under federal securities law and regulations.  To the extent such statements are not recitations of historical fact, forward-looking statements involve risks and uncertainties.  In particular, statements included herein and/or in the Company’s latest annual report on Form 10-K under the captions (a) Production and Reserve Information, (b) Regulatory Status and Potential Environmental Liability, (c) Management’s Discussion and Analysis of Financial Condition and Results of Operations, (d) Critical Accounting Policies and Use of Estimates, (e) Quantitative and Qualitative Disclosures about Market Risk, (f) Income Taxes, (g) Concentration of Credit Risk, (h) Fair Value Contract Activities, and (i) Commitments and Contingencies, among others, contain forward-looking statements.  Where the Company expresses an expectation or belief regarding future results of events, such expression is made in good faith and believed to have a reasonable basis in fact.  However, there can be no assurance that such expectation or belief will actually result or be achieved.

With the uncertainties of forward looking statements in mind, the reader should consider the risks discussed elsewhere in this report and other documents filed with the Securities and Exchange Commission from time to time and the important factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, under ‟Item 1A Risk Factors” that could cause actual results to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company.


 
20
 


Item 4.  Disclosure Controls and Procedures

The Company maintains ‟disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ‟Exchange Act”)), that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.  Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s disclosure control objectives.

As of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting during the fiscal quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


 
21
 


PART II.  OTHER INFORMATION


Item 1.  Legal Proceedings

AREC is named as a defendant in a number of Louisiana based suits involving alleged environmental contamination from prior drilling operations.  Such suits typically allege improper disposal of oilfield wastes in earthen pits with one suit alleging subsidence contributing to the formation of a sink hole.  AREC is currently included in three such suits.  The suits are styled LePetit Chateau Deluxe v. Adams Resources Exploration Corporation dated March 2004, Gustave J. LaBarre, Jr., et. al. v. Adams Resources Exploration Corporation et. al. dated October 2012 and Henning Management, LLC v. Adams Resources Exploration Corporation dated November 2013.  Each suit involves multiple industry defendants with substantially larger proportional interests in the properties, except all the larger defendants have settled their claims in the LePetit Chateau Deluxe matter.  The plaintiffs in each of these matters are seeking unspecified compensatory and punitive damages.  While management does not believe that a material adverse effect will result from the claims, significant attorney fees will be incurred to defend these matters.  As of March 31, 2015, the Company has accrued $500,000 of future legal/or settlement costs for these matters.

From time to time as incident to its operations, the Company becomes involved in various lawsuits and/or disputes.  Primarily as an operator of an extensive trucking fleet, the Company may be a party to motor vehicle accidents, worker compensation claims or other items of general liability as would be typical for the industry.  Management of the Company is presently unaware of any claims against the Company that are either outside the scope of insurance coverage or that may exceed the level of insurance coverage and could potentially represent a material adverse effect on the Company’s financial position or results of operations.

Item 1A.
Risk Factors – There are no material changes in the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
   
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
   
Item 6.
Exhibits

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q.


 
22
 


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
ADAMS RESOURCES & ENERGY, INC
 
(Registrant)
   
   
   
Date:  May 8, 2015
By /s/Thomas S. Smith
 
Thomas S. Smith
 
President, Chief Executive Officer
 
(Principal Executive Officer)
   
   
 
By /s/Richard B. Abshire
 
Richard B. Abshire
 
Chief Financial Officer
 
(Principal Financial Officer and Principal
 
Accounting Officer)
   
   
   


 
23
 

EXHIBIT INDEX


Exhibit
  
Number
Description
   
*31.1
Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
*31.2
Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
*32.1
Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
*32.2
Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*    **101.INS-
XBRL Instance Document
   
*    **101.SCH -
XBRL Schema Document
   
*    **101.CAL -
XBRL Calculation Linkbase Document
   
*    **101.DEF
XBRL Definition Linkbase Document
   
*    **101.LAB -
XBLR Label Linkbase Document
 
*    **101.PRE -
XBRL Presentation Linkbase Document
 

*
Exhibits filed herewith

**
Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income – Three Months Ended March 31, 2015 and 2014, (ii) the Consolidated Balance Sheets – March 31, 2015 and December 31, 2014, (iii) the Consolidated Statements of Cash Flows – Three Months Ended March 31, 2015 and 2014 and (iv) Notes to Consolidated Financial Statements.

 
24
 




                              Exhibit 31.1

ADAMS RESOURCES & ENERGY, INC.
CERTIFICATION PURSUANT TO
17 CFR 240.13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas S. Smith certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Adams Resources & Energy, Inc. (‟the registrant”);

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

 
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
(c)  evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
(d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 
(a)  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
(b)  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 8, 2015
/s/ Thomas S. Smith
Thomas S. Smith
Chief Executive Officer




                                Exhibit 31.2

ADAMS RESOURCES & ENERGY, INC.
CERTIFICATION PURSUANT TO
17 CFR 240.13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard B. Abshire, certify that:

1.
I have reviewed this quarterly report on Form 10-Q of Adams Resources & Energy, Inc. (‟the registrant”);

2.
Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

 
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

 
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 
(c)  evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 
(d)  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 
(b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  May 8, 2015
/s/ Richard B. Abshire
Richard B. Abshire
Chief Financial Officer




                                  Exhibit 32.1


ADAMS RESOURCES & ENERGY, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Adams Resources & Energy, Inc. (the ‟Company”) on Form 10-Q for the period ending March 31, 2015, as filed with the Securities and Exchange Commission (the “Report”), I, Thomas S. Smith, Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350) that to the best of my knowledge:

 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Thomas S. Smith
Thomas S. Smith
Chief Executive Officer

Date:  May 8, 2015










This Certification is being furnished solely to accompany the Report pursuant to 18 U.S.C.§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906, or other documents authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.




                                     Exhibit 32.2


ADAMS RESOURCES & ENERGY, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Quarterly Report of Adams Resources & Energy, Inc. (the ‟Company”) on Form 10-Q for the period ending March 31, 2015, as filed with the Securities and Exchange Commission (the “Report”), I, Richard B. Abshire, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that to the best of my knowledge:

 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended ; and

 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Richard B. Abshire
Richard B. Abshire
Chief Financial Officer

Date:  May 8, 2015










This Certification is being furnished solely to accompany the Report pursuant to 18 U.S.C.§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing.

A signed original of this written statement required by Section 906, or other documents authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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