10-Q

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, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___  to  ___.

Commission file number: 1-07908

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	AE	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 4,233,587 shares of Common Stock were outstanding at November 1, 2019.

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

		Page No.
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	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
Signatures		38

1

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,
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	124,726	$	117,066
Restricted cash	4,903		—
Accounts receivable, net of allowance for doubtful
accounts of $117 and $153, respectively	77,665		85,197
Accounts receivable – related party	—		425
Inventory	24,900		22,779
Derivative assets	129		162
Income tax receivable	2,539		2,404
Prepayments and other current assets	1,391		1,557
Total current assets	236,253		229,590
Property and equipment, net	62,733		44,623
Operating lease right-of-use assets, net	10,137		—
Intangible assets, net	1,704		—
Cash deposits and other assets	3,018		4,657
Total assets	$	313,845	$	278,870
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	128,607	$	116,068
Accounts payable – related party	6		29
Derivative liabilities	126		139
Current portion of finance lease obligations	2,142		883
Current portion of operating lease liabilities	2,245		—
Other current liabilities	10,709		6,148
Total current liabilities	143,835		123,267
Other long-term liabilities:
Asset retirement obligations	1,549		1,525
Finance lease obligations	4,927		3,209
Operating lease liabilities	7,890		—
Deferred taxes and other liabilities	5,763		4,271
Total liabilities	163,964		132,272
Commitments and contingencies (Note 14)
Shareholders’ equity:
Preferred stock – $1.00 par value, 960,000 shares
authorized, none outstanding	—		—
Common stock – $0.10 par value, 7,500,000 shares
authorized, 4,233,587 and 4,217,596 shares outstanding, respectively	423		422
Contributed capital	12,652		11,948
Retained earnings	136,806		134,228
Total shareholders’ equity	149,881		146,598
Total liabilities and shareholders’ equity	$	313,845	$	278,870

See Notes to Unaudited Condensed Consolidated Financial Statements.

2

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenues:
Marketing	$	434,609	$	453,626	$	1,331,410	$	1,266,055
Transportation	15,698		14,265		48,498		41,509
Total revenues	450,307		467,891		1,379,908		1,307,564
Costs and expenses:
Marketing	429,507		449,367		1,313,822		1,250,233
Transportation	13,365		12,412		40,902		36,603
General and administrative	2,739		1,533		8,005		6,100
Depreciation and amortization	4,393		2,340		12,266		7,014
Total costs and expenses	450,004		465,652		1,374,995		1,299,950
Operating earnings	303		2,239		4,913		7,614
Other income (expense):
Gain on dissolution of investment	—		—		573		—
Interest income	758		601		2,145		1,486
Interest expense	(242)		(26)		(424)		(60)
Total other income (expense), net	516		575		2,294		1,426
Earnings before income taxes	819		2,814		7,207		9,040
Income tax provision	(179)		(779)		(1,653)		(2,247)
Net earnings	$	640	$	2,035	$	5,554	$	6,793
Earnings per share:
Basic net earnings per common share	$	0.15	$	0.48	$	1.31	$	1.61
Diluted net earnings per common share	$	0.15	$	0.48	$	1.31	$	1.61
Dividends per common share	$	0.24	$	0.22	$	0.70	$	0.66

See Notes to Unaudited Condensed Consolidated Financial Statements.

3

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Nine Months Ended September 30,
	2019		2018
Operating activities:
Net earnings	$	5,554	$	6,793
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization	12,266		7,014
Gains on sales of property	(1,386)		(890)
Provision for doubtful accounts	(36)		(95)
Stock-based compensation expense	352		144
Deferred income taxes	1,493		(685)
Net change in fair value contracts	20		5
Gain on dissolution of AREC	(573)		—
Changes in assets and liabilities:
Accounts receivable	8,520		12,830
Accounts receivable/payable, affiliates	(23)		1
Inventories	(2,121)		(22,568)
Income tax receivable	(135)		1,317
Prepayments and other current assets	166		(7)
Accounts payable	13,613		22,254
Accrued liabilities	4,561		3,815
Other	871		(103)
Net cash provided by operating activities	43,142		29,825
Investing activities:
Property and equipment additions	(25,425)		(7,756)
Asset acquisition	(5,624)		—
Proceeds from property sales	2,853		1,314
Proceeds from dissolution of AREC	998		—
Insurance and state collateral (deposits) refunds	750		1,070
Net cash used in investing activities	(26,448)		(5,372)
Financing activities:
Principal repayments of finance lease obligations	(1,171)		(288)
Dividends paid on common stock	(2,960)		(2,784)
Net cash used in financing activities	(4,131)		(3,072)
Increase in cash and cash equivalents, including restricted cash	12,563		21,381
Cash and cash equivalents, including restricted cash, at beginning of period	117,066		109,393
Cash and cash equivalents, including restricted cash, at end of period	$	129,629	$	130,774

See Notes to Unaudited Condensed Consolidated Financial Statements.

4

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

							Total
	Common		Contributed		Retained		Shareholders’
	Stock		Capital		Earnings		Equity
Balance, January 1, 2019	$	422	$	11,948	$	134,228	$	146,598
Net earnings	—		—		4,908		4,908
Stock-based compensation expense	—		123		—		123
Dividends declared:
Common stock, $0.22/share	—		—		(928)		(928)
Awards under LTIP, $0.22/share	—		—		(2)		(2)
Balance, March 31, 2019	422		12,071		138,206		150,699
Net earnings	—		—		6		6
Stock-based compensation expense	—		74		—		74
Issuance of common shares for acquisition	1		391		—		392
Cancellation of shares withheld to cover taxes upon vesting of restricted awards	—		(39)		—		(39)
Dividends declared:
Common stock, $0.24/share	—		—		(1,016)		(1,016)
Awards under LTIP, $0.24/share	—		—		(8)		(8)
Balance, June 30, 2019	423		12,497		137,188		150,108
Net earnings	—		—		640		640
Stock-based compensation expense	—		155		—		155
Dividends declared:
Common stock, $0.24/share	—		—		(1,016)		(1,016)
Awards under LTIP, $0.24/share	—		—		(6)		(6)
Balance, September 30, 2019	$	423	$	12,652	$	136,806	$	149,881

							Total
	Common		Contributed		Retained		Shareholders’
	Stock		Capital		Earnings		Equity
Balance, January 1, 2018	$	422	$	11,693	$	135,004	$	147,119
Net earnings	—		—		1,138		1,138
Dividends declared:
Common stock, $0.22/share	—		—		(928)		(928)
Balance, March 31, 2018	422		11,693		135,214		147,329
Net earnings	—		—		3,620		3,620
Stock-based compensation expense	—		3		—		3
Dividends declared:
Common stock, $0.22/share	—		—		(928)		(928)
Balance, June 30, 2018	422		11,696		137,906		150,024
Net losses	—		—		2,035		2,035
Stock-based compensation expense	—		141		—		141
Dividends declared:
Common stock, $0.22/share	—		—		(928)		(928)
Awards under LTIP, $0.22/share	—		—		(5)		(5)
Balance, September 30, 2018	$	422	$	11,837	$	139,008	$	151,267

See Notes to Unaudited Condensed Consolidated Financial Statements.

5

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization and Basis of Presentation

Organization

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

We operate and report in two business segments: (i) crude oil marketing, transportation and storage, and (ii) tank truck transportation of liquid chemicals and dry bulk. See Note 8 for further information.

Basis of Presentation

Our results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of results expected for the full year of 2019. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals necessary for fair presentation.  The condensed consolidated financial statements and the accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the rules of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) filed with the SEC on March 11, 2019. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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

Note 2. Summary of Significant Accounting Policies

Cash, Cash Equivalents and Restricted Cash

Restricted cash represents an amount held in a segregated bank account by Wells Fargo as collateral for amounts outstanding under our letter of credit facility. In June 2019, the amount of outstanding letters of credit under our letter of credit facility exceeded the borrowing base as defined in the letter of credit facility agreement. As a result, we were required to deposit cash with the lender as security for the outstanding letters of credit. See “Letter of Credit Facility” within this Note 2 for further information. Our borrowing base was based on our net receivable balance, and due to customer prepayments, our borrowing base as outlined in the letter of credit facility did not fully

6

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

support the outstanding letters of credit that have been issued. As a result, on July 1, 2019, we canceled the letter of credit facility, and secured the outstanding letters of credit with our restricted cash balance.

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

	September 30,
	2019
Cash and cash equivalents	$	124,726
Restricted cash	4,903
Total cash, cash equivalents and restricted cash shown in the
unaudited condensed consolidated statements of cash flows	$	129,629

Earnings Per Share

Basic earnings (losses) per share is computed by dividing our net earnings (losses) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (losses) per share is computed by giving effect to all potential shares of common stock outstanding, including our stock related to unvested restricted stock unit awards. Unvested restricted stock unit awards granted under the Adams Resources & Energy, Inc. 2018 Long-Term Incentive Plan (“2018 LTIP”) are not considered to be participating securities as the holders of these shares do not have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares (see Note 11 for further discussion).

A reconciliation of the calculation of basic and diluted earnings per share was as follows for the periods indicated (in thousands, except per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Earnings per share — numerator:
Net earnings	$	640	$	2,035	$	5,554	$	6,793
Denominator:
Basic weighted average number of shares outstanding	4,234		4,218		4,226		4,218
Basic earnings per share	$	0.15	$	0.48	$	1.31	$	1.61
Diluted earnings per share:
Diluted weighted average number of shares outstanding:
Common shares	4,234		4,218		4,226		4,218
Restricted stock unit awards	3		1		4		—
Performance share unit awards (1)	1		—		—		—
Total	4,238		4,219		4,230		4,218
Diluted earnings per share	$	0.15	$	0.48	$	1.31	$	1.61

_______________

(1) 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. The performance conditions for the performance share unit awards granted in 2018 were achieved as of December 31, 2018. For the nine months ended September 30, 2019, the effect of the performance share awards on earning per share is anti-dilutive.

7

ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements

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

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

Fair value contracts consist of derivative financial instruments and are recorded as either an asset or liability measured at its fair value. Changes in fair value are recognized immediately in earnings unless the derivatives qualify for, and we elect, cash flow hedge accounting. We had no contracts designated for hedge accounting during any current reporting periods (see Note 10 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.

Letter of Credit Facility

We maintained a Credit and Security Agreement with Wells Fargo Bank, National Association, to provide for the issuance of up to $60.0 million in stand-by letters of credit primarily used to support crude oil purchases within our crude oil marketing segment and for other purposes. Stand-by letters of credit were issued as needed and were canceled as the underlying purchase obligations were satisfied by cash payment when due. The issuance of stand-by letters of credit enabled us to avoid posting cash collateral when procuring crude oil supply. We used the letter of credit facility for letters of credit related to our insurance program. At December 31, 2018, we had $4.6 million of letters of credit outstanding under this facility. This facility was collateralized by the eligible accounts receivable within our crude oil marketing segment and expired on August 30, 2019.

Our borrowing base was based on our net receivable balance, and due to customer prepayments, our borrowing base as outlined in the letter of credit facility did not fully support the outstanding letters of credit that have been issued. As a result, on July 1, 2019, we canceled the letter of credit facility, and secured the outstanding letters of credit with our restricted cash balance.

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.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

Stock-Based Compensation

We measure all share-based payments, including the issuance of restricted stock units and performance share units to employees and board members, using a fair-value based method. The cost of services received from employees and non-employee board members in exchange for awards of equity instruments is recognized in the consolidated statements of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period. The fair value of restricted stock unit awards and performance share unit awards is based on the closing price of our common stock on the grant date. We account for forfeitures as they occur. See Note 11 for additional information regarding our 2018 LTIP.

Common Shares Outstanding

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

	Common
	shares
Balance, January 1, 2019	4,217,596
Vesting of restricted stock unit awards	375
Balance, March 31, 2019	4,217,971
Issuance of shares in acquisition (see Note 6)	11,145
Vesting of restricted stock unit awards (see Note 11)	5,354
Shares withheld to cover taxes upon vesting of restricted stock unit awards	(883)
Balance, June 30, 2019 and September 30, 2019 (1)	4,233,587

_______________

(1) There was no change in the number of common shares outstanding during the three months ended September 30, 2019.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Revenue Recognition

Revenue Disaggregation

The following table disaggregates our revenue by segment and by major source for the periods indicated (in thousands):

	Reporting Segments
	Marketing		Transportation		Total
Three Months Ended September 30, 2019
Revenues from contracts with customers	$	396,001	$	15,698	$	411,699
Other (1)	38,608		—		38,608
Total revenues	$	434,609	$	15,698	$	450,307
Timing of revenue recognition:
Goods transferred at a point in time	$	396,001	$	—	$	396,001
Services transferred over time	—		15,698		15,698
Total revenues from contracts with customers	$	396,001	$	15,698	$	411,699
Three Months Ended September 30, 2018
Revenues from contracts with customers	$	424,061	$	14,265	$	438,326
Other (1)	29,565		—		29,565
Total revenues	$	453,626	$	14,265	$	467,891
Timing of revenue recognition:
Goods transferred at a point in time	$	424,061	$	—	$	424,061
Services transferred over time	—		14,265		14,265
Total revenues from contracts with customers	$	424,061	$	14,265	$	438,326
Nine Months Ended September 30, 2019
Revenues from contracts with customers	$	1,147,139	$	48,498	$	1,195,637
Other (1)	184,271		—		184,271
Total revenues	$	1,331,410	$	48,498	$	1,379,908
Timing of revenue recognition:
Goods transferred at a point in time	$	1,147,139	$	—	$	1,147,139
Services transferred over time	—		48,498		48,498
Total revenues from contracts with customers	$	1,147,139	$	48,498	$	1,195,637
Nine Months Ended September 30, 2018
Revenues from contracts with customers	$	1,203,511	$	41,509	$	1,245,020
Other (1)	62,544		—		62,544
Total revenues	$	1,266,055	$	41,509	$	1,307,564
Timing of revenue recognition:
Goods transferred at a point in time	$	1,203,511	$	—	$	1,203,511
Services transferred over time	—		41,509		41,509
Total revenues from contracts with customers	$	1,203,511	$	41,509	$	1,245,020

_______________

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

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Other Marketing Revenue

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

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

Reporting these crude oil contracts on a gross revenue basis would increase our reported revenues as follows for the periods indicated (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue gross-up	$	193,440	$	76,373	$	658,606	$	178,399

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,
	2019		2018
Insurance premiums	$	127	$	677
Rents, licenses and other	1,264		880
Total	$	1,391	$	1,557

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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 balances were as follows at the dates indicated (in thousands):

	Estimated
	Useful Life	September 30,		December 31,
	in Years	2019		2018
Tractors and trailers (1)	5 – 6	$	109,595	$	96,523
Field equipment (2)	2 – 20	24,851		20,725
Buildings	5 – 39	16,003		15,746
Office equipment	2 – 5	1,951		1,863
Land		1,790		1,790
Construction in progress		3,427		2,794
Total		157,617		139,441
Less accumulated depreciation		(94,884)		(94,818)
Property and equipment, net		$	62,733	$	44,623

_______________

(1) Amounts include tractors held under finance leases in our marketing segment. Gross property and equipment associated with these assets held under finance leases were $5.5 million and $4.7 million at September 30, 2019 and December 31, 2018, respectively. Accumulated amortization associated with assets held under these finance leases were $1.5 million and $0.7 million at September 30, 2019 and December 31, 2018, respectively (see Note 13 for further information).

(2) At September 30, 2019, amount includes a tank storage and throughput arrangement held under a finance lease in our marketing segment. Gross property and equipment associated with these assets held under finance leases were $3.3 million. Accumulated amortization associated with these assets held under finance leases was $0.5 million (see Note 13 for further information).

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,
	2019		2018		2019		2018
Depreciation and amortization, excluding amounts
under finance leases	$	3,840	$	2,210	$	11,012	$	6,703
Amortization of property and equipment under
finance leases	553		130		1,254		311
Total depreciation and amortization	$	4,393	$	2,340	$	12,266	$	7,014

Note 6. Asset Acquisition

On April 10, 2019, we entered into a purchase and sale agreement with EH Transport, Inc. and affiliates (collectively, “EH Transport”), a Houston, Texas based bulk carrier trucking company, for the purchase of certain transportation assets. On May 6, 2019, we closed on the asset acquisition for approximately $6.4 million, which consisted of $5.6 million in cash after post-closing adjustments related to equipment qualifications, 11,145 of our common shares valued at $0.4 million and contingent consideration valued at approximately $0.4 million.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

This acquisition added approximately 39 tractors and 53 trailers to our existing transportation fleet, and these assets are included in our transportation segment. This acquisition adds new customers and new product lines to our transportation segment portfolio, which allows us to grow into new markets. In addition to general chemical products, we expect to haul liquefied petroleum gas, asphalt, bleach and crude oil for customers.

We incurred approximately $0.1 million of acquisition costs in connection with this acquisition, which has been included in the allocation of the purchase price to the assets acquired.

The following table summarizes the consideration paid for the EH Transport assets and the estimated fair value of the assets acquired at the acquisition date (in thousands):

Consideration:
Cash	$	5,624
Value of AE common shares issued	392
Contingent consideration arrangement	431
Fair value of total consideration transferred	$	6,447
Recognized amounts of identifiable assets acquired:
Property and equipment — tractors and trailers	$	4,576
Shop, office and telecommunication equipment	20
Intangible assets — customer relationships	1,851
Total purchase price	$	6,447

The fair market value of the common shares issued in this transaction was determined based upon the closing share price of AE common stock on May 6, 2019 of $35.15.

We assumed no liabilities in this acquisition. The estimated fair value of the acquired property and equipment was determined using the estimated market value of each type of asset. The estimated fair value of the acquired customer relationship intangible assets was determined using an income approach, specifically a discounted cash flow analysis. The income approach estimates the future benefits of the customer relationships and deducts the expenses incurred in servicing the relationships and the contributions from the other business assets to derive the future net benefits of these assets. The future net benefits are discounted back to present value using the appropriate discount rate, which results in the value of the customer relationships.

A customer relationship intangible asset is the relationship between EH Transport and various customers to whom we did not have a previous relationship. The customer relationships we acquired in this transaction provide us with access to those customers to whom we did not have a previous relationship and allows us to enter product markets in which we had not previously participated. Because of the highly competitive and fragmented transportation market, we believe access to these customers and product lines will provide us with an entry into new markets.

The discounted cash flow analysis used to estimate the fair value of the EH Transport customer relationships relied on Level 3 fair value inputs. Level 3 fair values are based on unobservable inputs. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date. With respect to the EH Transport customer relationships, the Level 3 inputs include the rate of retention of the current customers of EH Transport as of the valuation date, our transportation segment’s historical customer retention rate and projected future revenues associated with the customers. The EH Transport customers expected to remain with us after the transaction were included in the valuation of the customer relationships. We expect to amortize the customer relationship intangible assets over a period of seven years, using a modified straight-line approach.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the nine months ended September 30, 2019, we recorded $0.1 million of amortization expense related to these intangible assets.

The purchase and sale agreement includes a contingent consideration arrangement that requires us to pay the former owner of the assets up to a quarterly maximum amount of $146,875 (undiscounted) plus interest for the first four quarters following the closing date of the acquisition. The amount to be paid is based upon the number of qualified truck drivers that are employed by us at the end of each quarter. The potential undiscounted amount of all future payments that could be required to be paid under the contingent consideration arrangement is between $0 and $587,500. The fair value of the contingent consideration arrangement of $0.4 million was estimated by applying an income valuation approach, which is based on Level 3 inputs, including the number of qualified truck drivers we expect to be employed at each payment date. At September 30, 2019, we had a remaining accrual for $0.3 million related to this contingent consideration arrangement.

Note 7. Cash Deposits and Other Assets

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

	September 30,		December 31,
	2019		2018
Amounts associated with liability insurance program:
Insurance collateral deposits	$	1,072	$	1,453
Excess loss fund	845		1,916
Accumulated interest income	580		788
Other amounts:
State collateral deposits	108		57
Materials and supplies	413		443
Total	$	3,018	$	4,657

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

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 8. Segment Reporting

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

Information concerning our various business activities was as follows for the periods indicated (in thousands):

	Reporting Segments
	Marketing		Transportation		Other		Total
Three Months Ended September 30, 2019
Revenues	$	434,609	$	15,698	$	—	$	450,307
Segment operating earnings (1)	2,888		154		—		3,042
Depreciation and amortization	2,214		2,179		—		4,393
Property and equipment additions	3,894		8,410		—		12,304
Three Months Ended September 30, 2018
Revenues	$	453,626	$	14,265	$	—	$	467,891
Segment operating earnings (1)	2,982		790		—		3,772
Depreciation and amortization	1,277		1,063		—		2,340
Property and equipment additions (2)	612		4,416		—		5,028
Nine Months Ended September 30, 2019
Revenues	$	1,331,410	$	48,498	$	—	$	1,379,908
Segment operating earnings (1)	10,948		1,970		—		12,918
Depreciation and amortization	6,640		5,626		—		12,266
Property and equipment additions (2)	6,896		18,529		—		25,425
Nine Months Ended September 30, 2018
Revenues	$	1,266,055	$	41,509	$	—	$	1,307,564
Segment operating earnings (1)	11,712		2,002		—		13,714
Depreciation and amortization	4,110		2,904		—		7,014
Property and equipment additions (2) (3)	1,682		6,061		13		7,756

_______________

(1) Our crude oil marketing segment’s operating earnings included inventory valuation losses of $2.1 million and inventory liquidation gains of $0.1 million for the three months ended September 30, 2019 and 2018, respectively. For the nine months ended September 30, 2019 and 2018, our crude oil marketing segment’s operating earnings included inventory liquidation gains of $1.5 million and $2.5 million, respectively.

(2) Our crude oil marketing segment’s property and equipment additions do not include approximately $4.1 million of tractors and a tank storage and throughput arrangement acquired under finance leases during the nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, our crude oil marketing segment’s property and equipment additions do not include approximately $1.2 million of tractors acquired under finance leases. See Note 13 for further information.

(3) During the nine months ended September 30, 2018, we had $13 thousand of property and equipment additions for leasehold improvements at our corporate headquarters, which is not attributed or allocated to any of our reporting segments.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Segment operating earnings	$	3,042	$	3,772	$	12,918	$	13,714
General and administrative	(2,739)		(1,533)		(8,005)		(6,100)
Operating earnings	303		2,239		4,913		7,614
Gain on dissolution of investment	—		—		573		—
Interest income	758		601		2,145		1,486
Interest expense	(242)		(26)		(424)		(60)
Earnings before income taxes	$	819	$	2,814	$	7,207	$	9,040

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

	September 30,		December 31,
	2019		2018
Reporting segment:
Marketing	$	129,876	$	119,370
Transportation	51,761		34,112
Cash and other	132,208		125,388
Total assets	$	313,845	$	278,870

There were no intersegment sales during the three and nine months ended September 30, 2019 and 2018, respectively. Other identifiable assets are primarily corporate cash, corporate accounts receivable and properties not identified with any specific segment of our business. Accounting policies for transactions between reportable segments are consistent with applicable accounting policies as disclosed herein.

Note 9. Transactions with Affiliates

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

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Affiliate billings to us	$	20	$	18	$	63	$	58
Billings to affiliates	1		1		3		4
Rentals paid to affiliate	122		121		366		365

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 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, 2019, we had in place seven commodity purchase and sale contracts, of which six of these contracts had no fair value associated with them as the contractual prices of crude oil were within the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:

•387 barrels per day of crude oil during October 2019 through December 2019;

•258 barrels per day of crude oil during January 2020 through February 2020; and

•322 barrels per day of crude oil during March 2020 through April 2020.

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

	September 30, 2019
	Balance Sheet Location and Amount
	Current		Other		Current		Other
	Assets		Assets		Liabilities		Liabilities
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	$	129	$	—	$	—	$	—
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	—		—		126		—
Less counterparty offsets	—		—		—		—
As reported fair value contracts	$	129	$	—	$	126	$	—

At December 31, 2018, we had in place 10 commodity purchase and sale contracts with fair value associated with them as the contractual prices of crude oil were outside of the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:

•322 barrels per day of crude oil during January 2019 through April 2019;

•258 barrels per day of crude oil during May 2019;

•322 barrels per day of crude oil during June 2019 through August 2019; and

•258 barrels per day of crude oil during September 2019 through December 2019.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

We only enter into commodity contracts with creditworthy counterparties and evaluate our exposure to significant counterparties on an ongoing basis. At September 30, 2019 and December 31, 2018, we were not holding nor have we posted any collateral to support our forward month fair value derivative activity. We are not subject to any credit-risk related trigger events. We have no other financial investment arrangements that would serve to offset our derivative contracts.

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

	Gains (losses)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenues – marketing	$	(1)	$	(7)	$	(21)	$	(5)

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):

	September 30, 2019
	Fair Value Measurements Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs		Counterparty
	(Level 1)		(Level 2)		(Level 3)		Offsets		Total
Derivatives:
Current assets	$	—	$	129	$	—	$	—	$	129
Current liabilities	—		(126)		—		—		(126)
Net value	$	—	$	3	$	—	$	—	$	3

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	December 31, 2018
	Fair Value Measurements Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs		Counterparty
	(Level 1)		(Level 2)		(Level 3)		Offsets		Total
Derivatives:
Current assets	$	—	$	162	$	—	$	—	$	162
Current liabilities	—		(139)		—		—		(139)
Net value	$	—	$	23	$	—	$	—	$	23

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

When determining fair value measurements, we make credit valuation adjustments to reflect both our own nonperformance risk and our counterparty’s nonperformance risk. When adjusting the fair value of derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements. Credit valuation adjustments utilize Level 3 inputs, such as credit scores to evaluate the likelihood of default by us or our counterparties. At September 30, 2019 and December 31, 2018, credit valuation adjustments were not significant to the overall valuation of our fair value contracts. As a result, applicable fair value assets and liabilities are included in their entirety in the fair value hierarchy.

Note 11. Share-Based Compensation Plan

We have in place a long-term incentive plan under which any employee or non-employee director who provides services to us is eligible to participate in the plan. The 2018 LTIP, which is overseen by the Compensation Committee of our Board of Directors, provides for the grant of various types of equity awards, of which restricted stock unit awards and performance-based compensation awards 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 under the 2018 LTIP, forfeitures under the 2018 LTIP and assuming the potential achievement of the maximum amounts of the performance factors through September 30, 2019, a total of 106,573 shares were available for issuance.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Compensation expense	$	155	$	141	$	352	$	144

At September 30, 2019 and December 31, 2018, we had $21,377 and $9,533, respectively, of accrued dividend amounts for awards granted under the 2018 LTIP.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Unit Awards

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

		Weighted-
		Average Grant
	Number of	Date Fair Value
	Shares	per Share (1)
Restricted stock unit awards at January 1, 2019	13,733	$	43.00
Granted (2)	14,376	$	34.00
Vested	(5,729)	$	43.00
Forfeited	(2,139)	$	38.42
Restricted stock unit awards at September 30, 2019	20,241

_______________

(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 2019 was $0.5 million based on a grant date market price of our common shares of $34.00 per share.

Unrecognized compensation cost associated with restricted stock unit awards was approximately $0.5 million at September 30, 2019. Due to the graded vesting provisions of these awards, we expect to recognize the remaining compensation cost for these awards over a weighted-average period of 1.5 years.

Performance Share Unit Awards

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

		Weighted-
		Average Grant
	Number of	Date Fair Value
	Shares	per Share (1)
Performance share unit awards at January 1, 2019	3,966	$	43.00
Granted (2)	8,094	$	34.00
Performance factor decrease (3)	(185)	$	43.00
Vested	—	$	—
Forfeited	(1,545)	$	37.37
Performance share unit awards at September 30, 2019	10,330

_______________

(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 2019 was $0.3 million based on a grant date market price of our common shares of $34.00 per share and assuming a performance factor of 100 percent.

(3) The performance factor for awards granted during 2018 was lowered to 47.5 percent based upon a comparison of actual results for 2018 to performance goals.

Unrecognized compensation cost associated with performance share unit awards was approximately $0.3 million at September 30, 2019. We expect to recognize the remaining compensation cost for these awards over a weighted-average period of 2.4 years.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 12. Supplemental Cash Flow Information

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

	Nine Months Ended
	September 30,
	2019		2018
Cash paid for interest	$	424	$	60
Cash paid for federal and state income taxes	234		811
Non-cash transactions:
Change in accounts payable related to property and equipment additions	(1,538)		(84)
Property and equipment acquired under finance leases	4,148		1,208
Issuance of common shares in asset acquisition (see Note 6)	392		—

See Note 13 for information related to non-cash transactions related to the adoption of the new lease accounting standard.

Note 13. Leases

Adoption of ASC 842

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Codification 842, Leases (“ASC 842”), which requires lessees to recognize a right-of-use (“ROU”) asset and a corresponding lease liability for leases with terms longer than twelve months. We adopted the new standard effective January 1, 2019, using a modified retrospective transition method and applied certain optional transitional practical expedients.

We elected an optional transition method that allowed application of the new standard at the adoption date and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption with no adjustment to previously reported results. In accordance with this approach, our consolidated financial statements for periods prior to January 1, 2019 were not revised to reflect the new lease accounting guidance. We also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the carry forward of historical lease classification. We did not elect the practical expedient related to hindsight.

ASC 842 changes the way our operating leases are recorded, presented and disclosed in our consolidated financial statements. Upon adoption of ASC 842 on January 1, 2019, we recognized a ROU asset and a corresponding lease liability based on the present value of then existing operating lease obligations of approximately $11.4 million on our consolidated balance sheet. In addition, there are several key accounting policy elections that we made upon adoption of ASC 842 including:

•We did not recognize ROU assets and lease liabilities for short-term leases and instead record them in a manner similar to operating leases under ASC 840, Leases, lease accounting guidelines. A short term lease is one with a maximum lease term of 12 months or less and does not include a purchase option or renewal option the lessee is reasonably certain to exercise.

•We have also elected the non-lease component practical expedient for any asset class where lease and non-lease components are comingled and the non-lease component is determined to be insignificant when compared to the lease component.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Lease Recognition

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets, other current liabilities and operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities and other long-term liabilities in the condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. For determining the present value of lease payments, we use the discount rate implicit in the lease when readily determinable. As most of our leases do not provide an implicit rate, we use an incremental borrowing rate in determining the present value of lease payments that approximates the rate of interest we would have to pay to borrow on a collateralized basis over a similar term. At adoption, the ROU asset also includes any lease payment made and excludes lease incentives and initial direct costs. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Our lease agreements do not contain any leases with variable lease payments (i.e., payments that depend on a percentage of sales of a lessee or payments that increase based upon an index such as CPI), residual value guarantees probable of being paid or material restrictive covenants. Lease agreements with lease and non-lease components are generally accounted for separately when practical. For leases where the lease and non-lease component are comingled and the non-lease component is determined to be insignificant when compared to the lease component, the lease and the non-lease components are treated as a single lease component for all asset classes.

We are a lessee in noncancellable (1) operating leases for office space, equipment and lease and terminal access contracts for tank storage and dock access for our crude oil marketing business, and (2) finance leases for tractors and tank storage and throughput for our crude oil marketing business. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Our lease agreements have remaining lease terms ranging from one year to approximately eight years.

Some leases include one or more options to renew, with renewal terms that can extend the lease term for generally one year with exercise of lease renewal options being at our sole discretion as lessee.

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

	Three Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2019		2019
Finance lease cost:
Amortization of ROU assets	$	553	$	1,254
Interest on lease liabilities	87		214
Operating lease cost	675		2,254
Short-term lease cost	2,527		7,355
Total lease expense	$	3,842	$	11,077

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

	Nine Months
	Ended
	September 30,
	2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases (1)	$	2,254
Operating cash flows from finance leases	197
Financing cash flows from finance leases	1,171
ROU assets obtained in exchange for new lease liabilities:
Finance leases	4,148
Operating leases	12,006

______________

(1) Amount is included in Other operating activities on the unaudited condensed consolidated cash flow statement.

The following table provides the lease term and discount rate for the period indicated:

	Nine Months
	Ended
	September 30,
	2019
Weighted-average remaining lease term (years):
Finance leases	3.28
Operating leases	4.98
Weighted-average discount rate:
Finance leases	4.9	%
Operating leases	5.0	%

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

	September 30,
	2019
Assets
Finance lease ROU assets (1)	$	6,937
Operating lease ROU assets	10,137
Liabilities
Current
Finance lease liabilities	2,142
Operating lease liabilities	2,245
Noncurrent
Finance lease liabilities	4,927
Operating lease liabilities	7,890

______________

(1) Amount is included in Property and equipment, net on the unaudited condensed consolidated balance sheet.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table provides maturities of undiscounted lease liabilities at September 30, 2019 (in thousands):

	Finance		Operating
	Lease		Lease
Remainder of 2019	$	606	$	678
2020	2,426		2,660
2021	2,426		2,256
2022	1,492		1,914
2023	642		1,776
Thereafter	38		2,113
Total lease payments	7,630		11,397
Less: Interest	(561)		(1,262)
Present value of lease liabilities	7,069		10,135
Less: Current portion of lease obligation	(2,142)		(2,245)
Total long-term lease obligation	$	4,927	$	7,890

The following table provides maturities of undiscounted lease liabilities at December 31, 2018 (in thousands):

	Finance		Operating
	Lease		Lease
2019	$	1,052	$	4,242
2020	1,052		2,258
2021	1,052		2,107
2022	909		1,782
2023	451		1,495
Thereafter	—		1,488
Total lease payments	4,516		$	13,372
Less: Interest	(424)
Present value of lease liabilities	4,092
Less: Current portion of lease obligation	(883)
Total long-term lease obligation	$	3,209

Note 14. Commitments and Contingencies

Insurance Policies

We establish a liability under our automobile and workers’ compensation insurance policies for expected claims incurred but not reported on a monthly basis. As claims are paid, the liability is relieved. Our accruals for automobile and workers’ compensation claims are presented in the table below.

For periods prior to October 1, 2017, we pre-funded our estimated claims, and therefore, we could 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 was shared with a group of similarly situated entities through an insurance captive. We have appropriately recognized estimated expenses and liabilities related to these policies for losses incurred but not reported to us or our insurance carrier. The amount of pre-funded insurance premiums left to cover potential future losses are presented in the table below. If the potential insurance claims do not further develop, the pre-funded premiums will be returned to us as a premium refund.

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ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The amount of pre-funded insurance premiums left to cover potential future losses related to periods prior to October 1, 2017, and our accruals for automobile and workers’ compensation claims were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2019		2018
Pre-funded premiums for losses incurred but not reported	$	213	$	427
Accrued automobile and workers’ compensation claims	3,524		2,246

We maintain a self-insurance program for managing employee medical claims. A liability for expected claims incurred but not reported is established on a monthly basis. 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 $1.0 million of umbrella insurance coverage for annual aggregate medical claims exceeding approximately $9.6 million. Medical accrual amounts were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2019		2018
Accrued medical claims	$	1,221	$	1,181

Legal Proceedings

On August 15, 2019, we received a notice from the Internal Revenue Service (the “IRS”) regarding a proposed penalty of approximately $1.2 million for our 2017 tax year information returns. The notice alleges that certain taxpayer identification numbers supplied to the IRS for our returns in 2017 were either missing or incorrect and that certain filings were late. We believe that the IRS’ claims are without merit and plan to pursue all available administrative and judicial remedies necessary to resolve this matter. Accordingly, we responded to the IRS on September 25, 2019 disputing the proposed penalty and requesting that the amount be waived, abated or a hearing held. We have not received a response at this time and are unable to predict when this matter might be resolved. We regularly assess the likelihood of adverse outcomes resulting from examinations such as this to determine the adequacy of our tax reserves. Since we are unable to predict whether the IRS will waive or abate the proposed penalty as requested, no liabilities have been accrued to date. We intend to vigorously defend our position in this matter. We believe that the final adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows.

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 or results of operations.

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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, 2018 (the “2018 Form 10-K”), as filed on March 11, 2019 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 2018 Form 10-K and within Part II, Item 1A of this quarterly report.  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. (“AE”), a Delaware corporation organized in 1973, and its subsidiaries are primarily engaged in the business of crude oil marketing, transportation and storage in various crude oil and natural gas basins in the lower 48 states of the United States (“U.S.”). We also conduct tank truck transportation of liquid chemicals and dry bulk primarily in the lower 48 states of the U.S. with deliveries into Canada and Mexico, and with terminals in the Gulf Coast region of the U.S. Unless the context requires otherwise, references to “we,” “us,” “our,” the “Company” or “AE” are intended to mean the business and operations of Adams Resources & Energy, Inc. and its consolidated subsidiaries.  

We operate and report in two business segments: (i) crude oil marketing, transportation and storage, and (ii) tank truck transportation of liquid chemicals and dry bulk. See Note 8 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

Recent Developments

On May 6, 2019, we completed the purchase of the assets of EH Transport, Inc. and affiliates (collectively, “EH Transport”), a Houston, Texas based bulk carrier trucking company, for approximately $6.4 million. This acquisition added approximately 39 tractors and 53 trailers to our existing transportation fleet, and is included in our transportation segment. See Note 6 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information.

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Results of Operations

Marketing

Our crude oil marketing 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,
	2019		2018		Change (1)		2019		2018		Change (1)
Revenues	$	434,609	$	453,626	(4	%)	$	1,331,410	$	1,266,055	5	%
Operating earnings	2,888		2,982		(3	%)	10,948		11,712		(7	%)
Depreciation and amortization	2,214		1,277		73	%	6,640		4,110		62	%
Driver compensation	5,728		3,099		85	%	17,439		9,155		90	%
Insurance	2,104		1,435		47	%	6,336		3,849		65	%
Fuel	2,154		1,479		46	%	6,952		4,647		50	%

_______________

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

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Field level purchase volumes – per day (1)
Crude oil – barrels	105,801		70,635		106,965		68,767
Average purchase price
Crude oil – per barrel	$	55.84	$	71.69	$	56.61	$	68.11

_______________

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

Three Months Ended September 30, 2019 vs. Three Months Ended September 30, 2018. Crude oil marketing revenues decreased by $19.0 million during the three months ended September 30, 2019 as compared to the three months ended September 30, 2018, primarily as a result of a decrease in the market price of crude oil, which decreased revenues by approximately $164.5 million, partially offset by higher overall crude oil volumes, which increased revenues by approximately $145.5 million. The average crude oil price received was $71.69 for the three months ended September 30, 2018, which decreased to $55.84 for the three months ended September 30, 2019. Volumes increased approximately 31,000 barrels per day during the three months ended September 30, 2019 as compared to the same period in 2018 primarily as a result of the previously announced acquisition of a trucking company that owned approximately 113 tractors and 126 trailers operating in the Red River area in North Texas and South Central Oklahoma (the “Red River acquisition”) on October 1, 2018. The purchase price for Red River volumes is based on a contractual price for volumes in North Texas and Oklahoma, which has been slightly lower than the purchase price for legacy volumes. Revenues from legacy volumes are based upon the market price in our other market areas, primarily in the Gulf Coast.

Our crude oil marketing operating earnings for the three months ended September 30, 2019 decreased by $0.1 million as compared to the same period in 2018, primarily due to inventory valuation changes (as shown in the following table) and higher fuel, insurance and driver compensation costs, partially offset by increased crude oil volumes.

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Driver compensation increased by $2.6 million during the three months ended September 30, 2019 as compared to the same period in 2018, primarily as a result of an increase in the number of drivers in the 2019 period as compared to the 2018 period due to the Red River acquisition on October 1, 2018. In connection with the Red River acquisition, we hired over one hundred additional drivers.

Insurance costs increased by $0.7 million during the three months ended September 30, 2019 as compared to the same period in 2018, primarily due to a higher driver count and additional miles driven in the 2019 period. Fuel costs increased by $0.7 million during the three months ended September 30, 2019 as compared to the same period in 2018, consistent with a higher driver count in the current period and additional miles driven, primarily as a result of the additional drivers hired for the Red River assets.

Depreciation and amortization expense increased by $0.9 million during the three months ended September 30, 2019 as compared to the same period in 2018, primarily as a result of the acquisition of the Red River assets, consisting of approximately 113 tractors and 126 trailers on October 1, 2018, which increased depreciation expense by approximately $0.9 million per quarter. In addition, we purchased fifteen new tractors and other field equipment during the third quarter of 2019.

Nine Months Ended September 30, 2019 vs. Nine Months Ended September 30, 2018. Crude oil marketing revenues increased by $65.4 million during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018, primarily as a result of higher overall crude oil volumes, which increased revenues by approximately $487.3 million, partially offset by a decrease in the market price of crude oil, which decreased revenues by approximately $421.9 million. The average crude oil price received was $68.11 for the nine months ended September 30, 2018, which decreased to $56.61 for the nine months ended September 30, 2019. Volumes increased approximately 36,000 barrels per day primarily as a result of the Red River acquisition on October 1, 2018.

Our crude oil marketing operating earnings for the nine months ended September 30, 2019 decreased by $0.8 million as compared to the same period in 2018, primarily due to inventory valuation changes (as shown in the following table) and higher fuel, insurance and driver compensation costs, partially offset by increased crude oil volumes.

Driver compensation increased by $8.3 million during the nine months ended September 30, 2019 as compared to the same period in 2018, primarily as a result of an increase in the number of drivers in the 2019 period as compared to the 2018 period primarily due to the Red River acquisition on October 1, 2018.

Insurance costs increased by $2.5 million during the nine months ended September 30, 2019 as compared to the same period in 2018, primarily due to a higher driver count and additional miles driven in the 2019 period. Fuel costs increased by $2.3 million during the nine months ended September 30, 2019 as compared to the same period in 2018, consistent with a higher driver count in the current period and additional miles driven, primarily as a result of the additional drivers hired for the Red River assets.

Depreciation and amortization expense increased by $2.5 million during the nine months ended September 30, 2019 as compared to the same period in 2018, primarily as a result of the acquisition of the Red River assets, consisting of approximately 113 tractors and 126 trailers on October 1, 2018, which increased depreciation expense by approximately $0.9 million per quarter. In addition, we purchased approximately 28 new tractors and other field equipment during the first nine months of 2019.

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. 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.

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Crude oil marketing operating earnings can be affected by the valuations of our forward month commodity contracts (derivative instruments). 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 derivative valuations on our crude oil marketing segment operating earnings is summarized in the following reconciliation of our non-GAAP financial measure for the periods indicated (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
As reported segment operating earnings (1)	$	2,888	$	2,982	$	10,948	$	11,712
Add (subtract):
Inventory liquidation gains	—		(60)		(1,459)		(2,535)
Inventory valuation losses	2,051		—		—		—
Derivative valuation (gains) losses	1		7		21		5
Field level operating earnings (2)	$	4,940	$	2,929	$	9,510	$	9,182

_______________

(1) Segment operating earnings included inventory valuation losses of $2.1 million and inventory liquidation gains of $0.1 million for the three months ended September 30, 2019 and 2018, respectively. For the nine months ended September 30, 2019 and 2018, segment operating earnings included inventory liquidation gains of $1.5 million and $2.5 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.

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 increased during the three and nine months ended September 30, 2019 as compared to the same periods in 2018 primarily due to increased crude oil volumes, partially offset by higher fuel, insurance and driver compensation costs.

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

	September 30, 2019			December 31, 2018
		Average			Average
	Barrels	Price		Barrels	Price
Crude oil inventory	439,173	$	56.70	415,523	$	54.82

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 our 2018 Form 10-K.

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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,
	2019		2018		Change (1)		2019		2018		Change (1)
Revenues	$	15,698	$	14,265	10	%	$	48,498	$	41,509	17	%
Operating earnings	$	154	$	790	(81	%)	$	1,970	$	2,002	(2	%)
Depreciation and amortization	$	2,179	$	1,063	105	%	$	5,626	$	2,904	94	%
Driver commissions	$	2,588	$	3,163	(18	%)	$	8,352	$	8,769	(5	%)
Insurance	$	1,379	$	1,317	5	%	$	4,557	$	3,921	16	%
Fuel	$	1,454	$	1,770	(18	%)	$	4,934	$	5,368	(8	%)
Maintenance expense	$	981	$	1,221	(20	%)	$	3,072	$	4,296	(28	%)
Mileage (000s)	5,152		4,860		6	%	15,866		14,629		8	%

_______________

(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 over time. Revenues, net of fuel cost, were as follows for the periods indicated (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Total transportation revenue	$	15,698	$	14,265	$	48,498	$	41,509
Diesel fuel cost	(1,454)		(1,770)		(4,934)		(5,368)
Revenues, net of fuel cost (1)	$	14,244	$	12,495	$	43,564	$	36,141

_______________

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

Three Months Ended September 30, 2019 vs. Three Months Ended September 30, 2018. Transportation revenues increased by $1.4 million during the three months ended September 30, 2019 as compared to the three months ended September 30, 2018, primarily as a result of the EH Transport asset acquisition (see Note 6 in the Notes to Unaudited Condensed Consolidated Financial Statements), which increased revenues by approximately $1.0 million and increased miles traveled in the current period, and due to higher transportation rates in full effect in the 2019 period as a result of negotiations during 2018 with customers. Revenues, net of fuel cost, increased by $1.7 million during the three months ended September 30, 2019, primarily as a result of the higher transportation revenues and miles traveled during the 2019 period. Although the overall market has softened from 2018 levels, transportation activity has continued to increase for our transportation segment as we continue to pursue our strategy of streamlining operations and diversifying offerings in our transportation segment. We continue to work with customers to maintain our increased transportation rates as well as streamline operations in low margin areas.

Our transportation operating earnings for the three months ended September 30, 2019 decreased by $0.6 million as compared to the same period in 2018, primarily due to higher depreciation and amortization expense related to the EH Transport asset acquisition and new assets placed into service and higher insurance expense as a result of more miles traveled during the current period, partially offset by higher revenues as noted above, and lower other operating expenses.

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Fuel costs decreased by $0.3 million during the three months ended September 30, 2019 as compared to the three months ended September 30, 2018, primarily as a result of a decrease in the price of diesel during the 2019 period as compared to the 2018 period, partially offset by an increase in miles traveled. Depreciation and amortization expense increased by $1.1 million during the three months ended September 30, 2019 as compared to the same period in 2018, primarily as a result of the acquisition of the assets of EH Transport during the second quarter of 2019 and the purchase of new tractors in 2018 and 2019.

Nine Months Ended September 30, 2019 vs. Nine Months Ended September 30, 2018. Transportation revenues increased by $7.0 million during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018, primarily as a result of the EH Transport asset acquisition, which increased revenues by approximately $1.0 million and increased miles traveled in the current period, and due to higher transportation rates in full effect in the 2019 period as a result of negotiations during 2018 with customers. Revenues, net of fuel cost, increased by $7.4 million during the nine months ended September 30, 2019, primarily as a result of the higher transportation revenues and increased miles traveled during the 2019 period.

Our transportation operating earnings for the nine months ended September 30, 2019 was consistent with the same period in 2018, primarily due to higher depreciation and amortization expense related to the EH Transport asset acquisition and new assets placed into service and higher insurance expense as a result of more miles traveled during the current period, partially offset by higher revenues as noted above, and lower other operating expenses.

Fuel costs decreased by $0.4 million during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018, primarily as a result of a decrease in the price of diesel during the 2019 period as compared to the 2018 period, partially offset by an increase in miles traveled. Depreciation and amortization expense increased by $2.7 million during the nine months ended September 30, 2019 as compared to the same period in 2018, primarily as a result of the acquisition of the assets of EH Transport during the second quarter of 2019 and the purchase of new tractors in 2018 and 2019.

General and Administrative Expense

General and administrative expense increased by $1.2 million during the three months ended September 30, 2019 as compared to the same period in 2018 primarily due to the receipt in the 2018 period of approximately $0.6 million in insurance proceeds related to Hurricane Harvey insurance claims, which reduced expenses in the prior year period, and higher outside service fees, legal fees, insurance costs and salaries and wages, partially offset by lower audit fees.

General and administrative expense increased by $1.9 million during the nine months ended September 30, 2019 as compared to the same period in 2018 primarily due to the receipt in the 2018 period of approximately $0.6 million in insurance proceeds related to Hurricane Harvey insurance claims, which reduced expenses in the prior year period, and higher outside service fees, audit fees, salaries and wages, franchise taxes, insurance costs and an increase in expenses related to the amortization of equity awards as a result of new grants in the current period (see Note 11 in the Notes to Unaudited Condensed Consolidated Financial Statements), partially offset by lower legal fees.

Gain on Dissolution of Investment

During 2019, we received a cash payment from Adams Resources Exploration Corporation (“AREC”) totaling approximately $1.0 million, related to the final settlement of its bankruptcy and dissolution. AREC had been one of our wholly owned subsidiaries, until its bankruptcy filing in April 2017. Of the amount received, approximately $0.4 million was offset against a receivable that had been set up as of December 31, 2018 and $0.6 million was recorded as a gain in our unaudited condensed consolidated financial statements.

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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.

Outlook

We plan to operate our remaining business segments with internally generated cash flows during the remainder of 2019, but intend to remain flexible as the focus will be on increasing efficiencies and on business development opportunities. During the remainder of 2019, we plan to leverage our investment in our transportation segment’s Houston terminal with the continued efforts to diversify service offerings, and we plan to grow in new or existing areas with our crude oil marketing segment.

Liquidity and Capital Resources

Liquidity

Our liquidity is from our cash balance and net cash provided by operating activities and 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.

At September 30, 2019 and December 31, 2018, we had no bank debt or other forms of debenture obligations. We maintain cash balances in order to meet the timing of day-to-day cash needs. 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,
	2019		2018
Cash and cash equivalents	$	124,726	$	117,066
Working capital	92,418		106,323

We maintained a letter of credit facility with Wells Fargo Bank, National Association, to provide for the issuance of up to $60.0 million in stand-by letters of credit primarily used to support crude oil purchases within our crude oil marketing segment and for other purposes. Stand-by letters of credit were issued as needed and were canceled as the underlying purchase obligations were satisfied by cash payment when due. The issuance of stand-by letters of credit enabled us to avoid posting cash collateral when procuring crude oil supply. We used the letter of credit facility for letters of credit related to our insurance program. At December 31, 2018, we had $4.6 million of letters of credit outstanding under this facility. Our borrowing base was based on our net receivable balance, and due to customer prepayments, our borrowing base as outlined in the letter of credit facility did not fully support the outstanding letters of credit that have been issued. As a result, on July 1, 2019, we canceled the letter of credit facility, and secured the outstanding letters of credit with our restricted cash balance.

We believe 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 our short-term and long-term liquidity needs.

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

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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 2018 Form 10-K.

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
	September 30,
	2019		2018
Cash provided by (used in):
Operating activities	$	43,142	$	29,825
Investing activities	(26,448)		(5,372)
Financing activities	(4,131)		(3,072)

Operating activities. Net cash flows provided by operating activities for the nine months ended September 30, 2019 increased by $13.3 million when compared to the same period in 2018. This increase was primarily due to an increase in revenues and operating expenses and the timing of collections of accounts receivable and payments of accounts payable.

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.

Early payments were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2019		2018
Early payments received	$	49,020	$	38,539
Early payments to suppliers	—		—

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 the nine months ended September 30, 2019, we received several early payments from certain customers in our crude oil marketing operations. Our cash balance increased by approximately $7.7 million as of September 30, 2019 relative to the year ended December 31, 2018 primarily as a result of the timing of the receipt of these early payments received during each period.

Investing activities. Net cash flows used in investing activities for the nine months ended September 30, 2019 increased by $21.1 million when compared to the same period in 2018. This increase was primarily due to an increase of $17.7 million in capital spending for property and equipment (see following table), the payment of $5.6 million for the purchase of the EH Transport assets in May 2019 (see Note 6 in the Notes to Unaudited Condensed Consolidated Financial Statements for further information) and a decrease of $0.3 million in insurance and state collateral refunds, partially offset by an increase of $1.5 million in cash proceeds from the sales of assets and the receipt of $1.0 million in cash proceeds related to the final settlement of AREC’s bankruptcy.

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

	Nine Months Ended
	September 30,
	2019		2018
Crude oil marketing (1)	$	6,896	$	1,682
Transportation (2) (3)	18,529		6,061
Other	—		13
Capital spending	$	25,425	$	7,756

_______________

(1) 2019 amount primarily relates to the purchase of 28 tractors and other field equipment. 2018 amount primarily relates to construction of a pipeline connection.

(2) 2019 amount relates to the purchase of 86 tractors, 46 trailers and other field equipment. 2018 amount primarily relates to the purchase of 40 tractors.

(3) 2019 amount does not include approximately $5.6 million of capital spending related to the EH Transport asset acquisition.

Financing activities. Cash used in financing activities for the nine months ended September 30, 2019 increased by $1.1 million when compared to the same period in 2018. The increase was primarily due to an increase of $0.9 million in principal repayments made for finance lease obligations in our crude oil marketing segment for certain of our tractors and a tank storage and throughput arrangement. During the nine months ended September 30, 2019 and 2018, we paid cash dividends of $0.70 per common share, or a total of $3.0 million, and $0.66 per common share, or a total of $2.8 million, respectively. See “Other Items” below for further information regarding our finance leases.

Other Items

Contractual Obligations

The following table summarizes our significant contractual obligations at September 30, 2019 (in thousands):

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Finance lease obligations (1)	$	7,630	$	2,425	$	4,314	$	891	$	—
Operating lease obligations (2)	11,397		2,679		4,378		3,479		861
Purchase obligations (3)	18,508		18,508		—		—		—
Total contractual obligations	$	37,535	$	23,612	$	8,692	$	4,370	$	861

_______________

(1) Amounts represent our principal contractual commitments, including interest, outstanding under finance leases for certain tractors and tank storage and throughput arrangements in our crude oil marketing segment.

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

(3) Amount represents commitments to purchase 55 new tractors and 15 new trailers in our transportation business and 10 new tractors in our crude oil marketing business.

See Note 13 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.

Related Party Transactions

For more information regarding related party transactions, see Note 9 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 2018 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 2018 Form 10-K.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to our “Quantitative and Qualitative Disclosures about Market Risk” that have occurred since the disclosures provided in our 2018 Form 10-K.

Item 4. Disclosure 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 Executive Chairman 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 Executive Chairman 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, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

35

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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 or results of operations.

See Note 14 in the Notes to Unaudited Condensed Consolidated Financial Statements for a discussion of a legal proceeding with the IRS.

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 2018 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. There have been no material changes in our Risk Factors from those disclosed in Item 1A of our 2018 Form 10-K or our other SEC filings.

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.

36

Item 6. Exhibits

Exhibit
Number	Exhibit
3.1	Certificate of Incorporation of Adams Resources & Energy, Inc., as amended (incorporated by reference to Exhibit 3(a) to Form 10-K for the fiscal year ended December 31, 1987).
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).
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 Exhibit 32.1 and 32.2) with this report.

37

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 6, 2019	By:	/s/ Townes G. Pressler
			Townes G. Pressler
			Executive Chairman
			(Principal Executive Officer)
		By:	/s/ Tracy E. Ohmart
			Tracy E. Ohmart
			Chief Financial Officer
			(Principal Financial Officer and Principal
			Accounting Officer)

38

EX-31.1

Exhibit 31.1

SARBANES-OXLEY SECTION 302 CERTIFICATION

I, Townes G. Pressler, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Adams Resources & Energy, Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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 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; and

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:	November 6, 2019	By:	/s/ Townes G. Pressler
			Townes G. Pressler
			Executive Chairman
			(Principal Executive Officer)

EX-31.2

Exhibit 31.2

SARBANES-OXLEY SECTION 302 CERTIFICATION

I, Tracy E. Ohmart, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Adams Resources & Energy, Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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 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; and

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:	November 6, 2019	By:	/s/ Tracy E. Ohmart
			Tracy E. Ohmart
			Chief Financial Officer

EX-32.1

Exhibit 32.1

SARBANES-OXLEY SECTION 906 CERTIFICATION

CERTIFICATION OF TOWNES G. PRESSLER,

EXECUTIVE CHAIRMAN OF ADAMS RESOURCES & ENERGY, INC.

In connection with the quarterly report of Adams Resources & Energy, Inc. (the “Registrant”) on Form 10-Q for the quarterly period ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Townes G. Pressler, Executive Chairman of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

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

Date:	November 6, 2019	By:	/s/ Townes G. Pressler
			Townes G. Pressler
			Executive Chairman
			(Principal Executive Officer)

EX-32.2

Exhibit 32.2

SARBANES-OXLEY SECTION 906 CERTIFICATION

CERTIFICATION OF TRACY E. OHMART,

CHIEF FINANCIAL OFFICER OF ADAMS RESOURCES & ENERGY, INC.

In connection with the quarterly report of Adams Resources & Energy, Inc. (the “Registrant”) on Form 10-Q for the quarterly period ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tracy E. Ohmart, Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

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

Date:	November 6, 2019	By:	/s/ Tracy E. Ohmart
			Tracy E. Ohmart
			Chief Financial Officer

XML

Derivative Instruments and Fair Value Measurements - Use of Derivative Instruments (Details) - Commodity Contract - Not Designated as Hedging Instrument - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current Assets
Derivatives, Fair Value [Line Items]
Asset derivatives	$ 129	$ 162
Liability derivatives	0	0
Less counterparty offsets	0	0
As reported fair value contracts	129	162
Other Assets
Derivatives, Fair Value [Line Items]
Asset derivatives	0	0
Liability derivatives	0	0
Less counterparty offsets	0	0
As reported fair value contracts	0	0
Current Liabilities
Derivatives, Fair Value [Line Items]
Asset derivatives	0	0
Liability derivatives	126	139
Less counterparty offsets	0	0
As reported fair value contracts	126	139
Other Liabilities
Derivatives, Fair Value [Line Items]
Asset derivatives	0	0
Liability derivatives	0	0
Less counterparty offsets	0	0
As reported fair value contracts	$ 0	$ 0

XML

Segment Reporting - Reconciliation of Segment Earnings to Earnings Before Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
Operating earnings	$ 303	$ 2,239	$ 4,913	$ 7,614
Gain on dissolution of investment	0	0	573	0
Interest income	758	601	2,145	1,486
Interest expense	(242)	(26)	(424)	(60)
Earnings before income taxes	819	2,814	7,207	9,040
Reporting Segments
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
Operating earnings	3,042	3,772	12,918	13,714
General and administrative
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
Operating earnings	(2,739)	(1,533)	(8,005)	(6,100)
Segment reconciling items
Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Abstract]
Gain on dissolution of investment	0	0	573	0
Interest income	758	601	2,145	1,486
Interest expense	$ (242)	$ (26)	$ (424)	$ (60)

XML

Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Supplemental Cash Flow Elements [Abstract]
Cash paid for interest	$ 424	$ 60
Cash paid for federal and state income taxes	234	811
Non-cash transactions:
Change in accounts payable related to property and equipment additions	(1,538)	(84)
Property and equipment acquired under finance leases	4,148	1,208
Issuance of common shares in asset acquisition (see Note 6)	$ 392	$ 0

XML

Transactions with Affiliates

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Transactions with Affiliates

Transactions with Affiliates

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

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Affiliate billings to us	$	20	$	18	$	63	$	58
Billings to affiliates	1		1		3		4
Rentals paid to affiliate	122		121		366		365

XML

Property and Equipment

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and Equipment

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

	Estimated
	Useful Life	September 30,		December 31,
	in Years	2019		2018
Tractors and trailers (1)	5 – 6	$	109,595	$	96,523
Field equipment (2)	2 – 20	24,851		20,725
Buildings	5 – 39	16,003		15,746
Office equipment	2 – 5	1,951		1,863
Land		1,790		1,790
Construction in progress		3,427		2,794
Total		157,617		139,441
Less accumulated depreciation		(94,884)		(94,818)
Property and equipment, net		$	62,733	$	44,623

_______________

(1) Amounts include tractors held under finance leases in our marketing segment. Gross property and equipment associated with these assets held under finance leases were $5.5 million and $4.7 million at September 30, 2019 and December 31, 2018, respectively. Accumulated amortization associated with assets held under these finance leases were $1.5 million and $0.7 million at September 30, 2019 and December 31, 2018, respectively (see Note 13 for further information).

(2) At September 30, 2019, amount includes a tank storage and throughput arrangement held under a finance lease in our marketing segment. Gross property and equipment associated with these assets held under finance leases were $3.3 million. Accumulated amortization associated with these assets held under finance leases was $0.5 million (see Note 13 for further information).

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,
	2019		2018		2019		2018
Depreciation and amortization, excluding amounts
under finance leases	$	3,840	$	2,210	$	11,012	$	6,703
Amortization of property and equipment under
finance leases	553		130		1,254		311
Total depreciation and amortization	$	4,393	$	2,340	$	12,266	$	7,014

XML

Summary of Significant Accounting Policies - Letters of Credit Facility (Details) - Wells Fargo Bank - Standby Letter of Credit - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Letter of Credit Facility [Abstract]
Line of credit facility, maximum borrowing capacity	$ 60,000,000.0
Stand-by letters of credit		$ 4,600,000

XML

Derivative Instruments and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives reflected in the consolidated balance sheet

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

	September 30, 2019
	Balance Sheet Location and Amount
	Current		Other		Current		Other
	Assets		Assets		Liabilities		Liabilities
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	$	129	$	—	$	—	$	—
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	—		—		126		—
Less counterparty offsets	—		—		—		—
As reported fair value contracts	$	129	$	—	$	126	$	—

At December 31, 2018, we had in place 10 commodity purchase and sale contracts with fair value associated with them as the contractual prices of crude oil were outside of the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:

•322 barrels per day of crude oil during January 2019 through April 2019;

•258 barrels per day of crude oil during May 2019;

•322 barrels per day of crude oil during June 2019 through August 2019; and

•258 barrels per day of crude oil during September 2019 through December 2019.

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

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

Derivatives reflected in the consolidated statement of operations

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,
	2019		2018		2019		2018
Revenues – marketing	$	(1)	$	(7)	$	(21)	$	(5)

Fair value assets and liabilities

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):

	September 30, 2019
	Fair Value Measurements Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs		Counterparty
	(Level 1)		(Level 2)		(Level 3)		Offsets		Total
Derivatives:
Current assets	$	—	$	129	$	—	$	—	$	129
Current liabilities	—		(126)		—		—		(126)
Net value	$	—	$	3	$	—	$	—	$	3

	December 31, 2018
	Fair Value Measurements Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs		Counterparty
	(Level 1)		(Level 2)		(Level 3)		Offsets		Total
Derivatives:
Current assets	$	—	$	162	$	—	$	—	$	162
Current liabilities	—		(139)		—		—		(139)
Net value	$	—	$	23	$	—	$	—	$	23

XML

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of expenses and losses incurred but not reported and accrued workers' compensation

The amount of pre-funded insurance premiums left to cover potential future losses related to periods prior to October 1, 2017, and our accruals for automobile and workers’ compensation claims were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2019		2018
Pre-funded premiums for losses incurred but not reported	$	213	$	427
Accrued automobile and workers’ compensation claims	3,524		2,246

Schedule of accrued medical claims

Medical accrual amounts were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2019		2018
Accrued medical claims	$	1,221	$	1,181

XML

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Allowance for doubtful accounts	$ 117	$ 153
Shareholders’ equity:
Preferred stock - par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock - shares authorized (in shares)	960,000	960,000
Preferred stock - shares outstanding (in shares)	0	0
Common stock - par value (in dollars per share)	$ 0.10	$ 0.10
Common stock - shares authorized (in shares)	7,500,000	7,500,000
Common stock - shares outstanding (in shares)	4,233,587	4,217,596

XML

Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

The following table disaggregates our revenue by segment and by major source for the periods indicated (in thousands):

	Reporting Segments
	Marketing		Transportation		Total
Three Months Ended September 30, 2019
Revenues from contracts with customers	$	396,001	$	15,698	$	411,699
Other (1)	38,608		—		38,608
Total revenues	$	434,609	$	15,698	$	450,307
Timing of revenue recognition:
Goods transferred at a point in time	$	396,001	$	—	$	396,001
Services transferred over time	—		15,698		15,698
Total revenues from contracts with customers	$	396,001	$	15,698	$	411,699
Three Months Ended September 30, 2018
Revenues from contracts with customers	$	424,061	$	14,265	$	438,326
Other (1)	29,565		—		29,565
Total revenues	$	453,626	$	14,265	$	467,891
Timing of revenue recognition:
Goods transferred at a point in time	$	424,061	$	—	$	424,061
Services transferred over time	—		14,265		14,265
Total revenues from contracts with customers	$	424,061	$	14,265	$	438,326
Nine Months Ended September 30, 2019
Revenues from contracts with customers	$	1,147,139	$	48,498	$	1,195,637
Other (1)	184,271		—		184,271
Total revenues	$	1,331,410	$	48,498	$	1,379,908
Timing of revenue recognition:
Goods transferred at a point in time	$	1,147,139	$	—	$	1,147,139
Services transferred over time	—		48,498		48,498
Total revenues from contracts with customers	$	1,147,139	$	48,498	$	1,195,637
Nine Months Ended September 30, 2018
Revenues from contracts with customers	$	1,203,511	$	41,509	$	1,245,020
Other (1)	62,544		—		62,544
Total revenues	$	1,266,055	$	41,509	$	1,307,564
Timing of revenue recognition:
Goods transferred at a point in time	$	1,203,511	$	—	$	1,203,511
Services transferred over time	—		41,509		41,509
Total revenues from contracts with customers	$	1,203,511	$	41,509	$	1,245,020

_______________

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

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

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,
	2019		2018		2019		2018
Revenue gross-up	$	193,440	$	76,373	$	658,606	$	178,399

XML

Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Leases

Adoption of ASC 842

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Codification 842, Leases (“ASC 842”), which requires lessees to recognize a right-of-use (“ROU”) asset and a corresponding lease liability for leases with terms longer than twelve months. We adopted the new standard effective January 1, 2019, using a modified retrospective transition method and applied certain optional transitional practical expedients.

We elected an optional transition method that allowed application of the new standard at the adoption date and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption with no adjustment to previously reported results. In accordance with this approach, our consolidated financial statements for periods prior to January 1, 2019 were not revised to reflect the new lease accounting guidance. We also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the carry forward of historical lease classification. We did not elect the practical expedient related to hindsight.

ASC 842 changes the way our operating leases are recorded, presented and disclosed in our consolidated financial statements. Upon adoption of ASC 842 on January 1, 2019, we recognized a ROU asset and a corresponding lease liability based on the present value of then existing operating lease obligations of approximately $11.4 million on our consolidated balance sheet. In addition, there are several key accounting policy elections that we made upon adoption of ASC 842 including:

•We did not recognize ROU assets and lease liabilities for short-term leases and instead record them in a manner similar to operating leases under ASC 840, Leases, lease accounting guidelines. A short term lease is one with a maximum lease term of 12 months or less and does not include a purchase option or renewal option the lessee is reasonably certain to exercise.

•We have also elected the non-lease component practical expedient for any asset class where lease and non-lease components are comingled and the non-lease component is determined to be insignificant when compared to the lease component.

Lease Recognition

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets, other current liabilities and operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities and other long-term liabilities in the condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. For determining the present value of lease payments, we use the discount rate implicit in the lease when readily determinable. As most of our leases do not provide an implicit rate, we use an incremental borrowing rate in determining the present value of lease payments that approximates the rate of interest we would have to pay to borrow on a collateralized basis over a similar term. At adoption, the ROU asset also includes any lease payment made and excludes lease incentives and initial direct costs. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Our lease agreements do not contain any leases with variable lease payments (i.e., payments that depend on a percentage of sales of a lessee or payments that increase based upon an index such as CPI), residual value guarantees probable of being paid or material restrictive covenants. Lease agreements with lease and non-lease components are generally accounted for separately when practical. For leases where the lease and non-lease component are comingled and the non-lease component is determined to be insignificant when compared to the lease component, the lease and the non-lease components are treated as a single lease component for all asset classes.

We are a lessee in noncancellable (1) operating leases for office space, equipment and lease and terminal access contracts for tank storage and dock access for our crude oil marketing business, and (2) finance leases for tractors and tank storage and throughput for our crude oil marketing business. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Our lease agreements have remaining lease terms ranging from one year to approximately eight years.

Some leases include one or more options to renew, with renewal terms that can extend the lease term for generally one year with exercise of lease renewal options being at our sole discretion as lessee.

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

	Three Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2019		2019
Finance lease cost:
Amortization of ROU assets	$	553	$	1,254
Interest on lease liabilities	87		214
Operating lease cost	675		2,254
Short-term lease cost	2,527		7,355
Total lease expense	$	3,842	$	11,077

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

	Nine Months
	Ended
	September 30,
	2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases (1)	$	2,254
Operating cash flows from finance leases	197
Financing cash flows from finance leases	1,171
ROU assets obtained in exchange for new lease liabilities:
Finance leases	4,148
Operating leases	12,006

______________

(1) Amount is included in Other operating activities on the unaudited condensed consolidated cash flow statement.

The following table provides the lease term and discount rate for the period indicated:

	Nine Months
	Ended
	September 30,
	2019
Weighted-average remaining lease term (years):
Finance leases	3.28
Operating leases	4.98
Weighted-average discount rate:
Finance leases	4.9	%
Operating leases	5.0	%

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

	September 30,
	2019
Assets
Finance lease ROU assets (1)	$	6,937
Operating lease ROU assets	10,137
Liabilities
Current
Finance lease liabilities	2,142
Operating lease liabilities	2,245
Noncurrent
Finance lease liabilities	4,927
Operating lease liabilities	7,890

______________

(1) Amount is included in Property and equipment, net on the unaudited condensed consolidated balance sheet.

The following table provides maturities of undiscounted lease liabilities at September 30, 2019 (in thousands):

	Finance		Operating
	Lease		Lease
Remainder of 2019	$	606	$	678
2020	2,426		2,660
2021	2,426		2,256
2022	1,492		1,914
2023	642		1,776
Thereafter	38		2,113
Total lease payments	7,630		11,397
Less: Interest	(561)		(1,262)
Present value of lease liabilities	7,069		10,135
Less: Current portion of lease obligation	(2,142)		(2,245)
Total long-term lease obligation	$	4,927	$	7,890

The following table provides maturities of undiscounted lease liabilities at December 31, 2018 (in thousands):

	Finance		Operating
	Lease		Lease
2019	$	1,052	$	4,242
2020	1,052		2,258
2021	1,052		2,107
2022	909		1,782
2023	451		1,495
Thereafter	—		1,488
Total lease payments	4,516		$	13,372
Less: Interest	(424)
Present value of lease liabilities	4,092
Less: Current portion of lease obligation	(883)
Total long-term lease obligation	$	3,209

Leases

Leases

Adoption of ASC 842

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Codification 842, Leases (“ASC 842”), which requires lessees to recognize a right-of-use (“ROU”) asset and a corresponding lease liability for leases with terms longer than twelve months. We adopted the new standard effective January 1, 2019, using a modified retrospective transition method and applied certain optional transitional practical expedients.

We elected an optional transition method that allowed application of the new standard at the adoption date and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption with no adjustment to previously reported results. In accordance with this approach, our consolidated financial statements for periods prior to January 1, 2019 were not revised to reflect the new lease accounting guidance. We also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the carry forward of historical lease classification. We did not elect the practical expedient related to hindsight.

ASC 842 changes the way our operating leases are recorded, presented and disclosed in our consolidated financial statements. Upon adoption of ASC 842 on January 1, 2019, we recognized a ROU asset and a corresponding lease liability based on the present value of then existing operating lease obligations of approximately $11.4 million on our consolidated balance sheet. In addition, there are several key accounting policy elections that we made upon adoption of ASC 842 including:

•We did not recognize ROU assets and lease liabilities for short-term leases and instead record them in a manner similar to operating leases under ASC 840, Leases, lease accounting guidelines. A short term lease is one with a maximum lease term of 12 months or less and does not include a purchase option or renewal option the lessee is reasonably certain to exercise.

•We have also elected the non-lease component practical expedient for any asset class where lease and non-lease components are comingled and the non-lease component is determined to be insignificant when compared to the lease component.

Lease Recognition

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets, other current liabilities and operating lease liabilities in the condensed consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities and other long-term liabilities in the condensed consolidated balance sheets.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. For determining the present value of lease payments, we use the discount rate implicit in the lease when readily determinable. As most of our leases do not provide an implicit rate, we use an incremental borrowing rate in determining the present value of lease payments that approximates the rate of interest we would have to pay to borrow on a collateralized basis over a similar term. At adoption, the ROU asset also includes any lease payment made and excludes lease incentives and initial direct costs. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Our lease agreements do not contain any leases with variable lease payments (i.e., payments that depend on a percentage of sales of a lessee or payments that increase based upon an index such as CPI), residual value guarantees probable of being paid or material restrictive covenants. Lease agreements with lease and non-lease components are generally accounted for separately when practical. For leases where the lease and non-lease component are comingled and the non-lease component is determined to be insignificant when compared to the lease component, the lease and the non-lease components are treated as a single lease component for all asset classes.

We are a lessee in noncancellable (1) operating leases for office space, equipment and lease and terminal access contracts for tank storage and dock access for our crude oil marketing business, and (2) finance leases for tractors and tank storage and throughput for our crude oil marketing business. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Our lease agreements have remaining lease terms ranging from one year to approximately eight years.

Some leases include one or more options to renew, with renewal terms that can extend the lease term for generally one year with exercise of lease renewal options being at our sole discretion as lessee.

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

	Three Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2019		2019
Finance lease cost:
Amortization of ROU assets	$	553	$	1,254
Interest on lease liabilities	87		214
Operating lease cost	675		2,254
Short-term lease cost	2,527		7,355
Total lease expense	$	3,842	$	11,077

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

	Nine Months
	Ended
	September 30,
	2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases (1)	$	2,254
Operating cash flows from finance leases	197
Financing cash flows from finance leases	1,171
ROU assets obtained in exchange for new lease liabilities:
Finance leases	4,148
Operating leases	12,006

______________

(1) Amount is included in Other operating activities on the unaudited condensed consolidated cash flow statement.

The following table provides the lease term and discount rate for the period indicated:

	Nine Months
	Ended
	September 30,
	2019
Weighted-average remaining lease term (years):
Finance leases	3.28
Operating leases	4.98
Weighted-average discount rate:
Finance leases	4.9	%
Operating leases	5.0	%

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

	September 30,
	2019
Assets
Finance lease ROU assets (1)	$	6,937
Operating lease ROU assets	10,137
Liabilities
Current
Finance lease liabilities	2,142
Operating lease liabilities	2,245
Noncurrent
Finance lease liabilities	4,927
Operating lease liabilities	7,890

______________

(1) Amount is included in Property and equipment, net on the unaudited condensed consolidated balance sheet.

The following table provides maturities of undiscounted lease liabilities at September 30, 2019 (in thousands):

	Finance		Operating
	Lease		Lease
Remainder of 2019	$	606	$	678
2020	2,426		2,660
2021	2,426		2,256
2022	1,492		1,914
2023	642		1,776
Thereafter	38		2,113
Total lease payments	7,630		11,397
Less: Interest	(561)		(1,262)
Present value of lease liabilities	7,069		10,135
Less: Current portion of lease obligation	(2,142)		(2,245)
Total long-term lease obligation	$	4,927	$	7,890

The following table provides maturities of undiscounted lease liabilities at December 31, 2018 (in thousands):

	Finance		Operating
	Lease		Lease
2019	$	1,052	$	4,242
2020	1,052		2,258
2021	1,052		2,107
2022	909		1,782
2023	451		1,495
Thereafter	—		1,488
Total lease payments	4,516		$	13,372
Less: Interest	(424)
Present value of lease liabilities	4,092
Less: Current portion of lease obligation	(883)
Total long-term lease obligation	$	3,209

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018
Statement of Stockholders' Equity [Abstract]
Dividends per common share (in dollars per share)	$ 0.24	$ 0.24	$ 0.22	$ 0.22
Awards under LTIP (in dollars per share)	$ 0.24	$ 0.24	$ 0.22	$ 0.22

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Cash Deposits and Other Assets (Tables)

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Components of cash deposits and other assets

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

	September 30,		December 31,
	2019		2018
Amounts associated with liability insurance program:
Insurance collateral deposits	$	1,072	$	1,453
Excess loss fund	845		1,916
Accumulated interest income	580		788
Other amounts:
State collateral deposits	108		57
Materials and supplies	413		443
Total	$	3,018	$	4,657

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Segment Reporting - Information Concerning Business Activities (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) segment	Sep. 30, 2018 USD ($)
Segment Reporting [Abstract]
Number of reportable segments | segment			2
Number of operating segments | segment			2
Segment Reporting Information [Line Items]
Revenues	$ 450,307,000	$ 467,891,000	$ 1,379,908,000	$ 1,307,564,000
Segment operating earnings	303,000	2,239,000	4,913,000	7,614,000
Depreciation and amortization	4,393,000	2,340,000	12,266,000	7,014,000
Inventory liquidation (losses) gains	(2,100,000)
Property and equipment acquired under finance leases		1,200,000		1,200,000
Tractors and Tank Storage and Throughput Arrangements
Segment Reporting Information [Line Items]
Property and equipment additions			4,100,000
Leasehold Improvements
Segment Reporting Information [Line Items]
Property and equipment additions				13,000
Marketing
Segment Reporting Information [Line Items]
Revenues	434,609,000	453,626,000	1,331,410,000	1,266,055,000
Inventory liquidation (losses) gains		100,000	1,500,000	2,500,000
Transportation
Segment Reporting Information [Line Items]
Revenues	15,698,000	14,265,000	48,498,000	41,509,000
Reporting Segments
Segment Reporting Information [Line Items]
Revenues	450,307,000	467,891,000	1,379,908,000	1,307,564,000
Segment operating earnings	3,042,000	3,772,000	12,918,000	13,714,000
Depreciation and amortization	4,393,000	2,340,000	12,266,000	7,014,000
Property and equipment additions	12,304,000	5,028,000	25,425,000	7,756,000
Reporting Segments | Marketing
Segment Reporting Information [Line Items]
Revenues	434,609,000	453,626,000	1,331,410,000	1,266,055,000
Segment operating earnings	2,888,000	2,982,000	10,948,000	11,712,000
Depreciation and amortization	2,214,000	1,277,000	6,640,000	4,110,000
Property and equipment additions	3,894,000	612,000	6,896,000	1,682,000
Reporting Segments | Transportation
Segment Reporting Information [Line Items]
Revenues	15,698,000	14,265,000	48,498,000	41,509,000
Segment operating earnings	154,000	790,000	1,970,000	2,002,000
Depreciation and amortization	2,179,000	1,063,000	5,626,000	2,904,000
Property and equipment additions	8,410,000	4,416,000	18,529,000	6,061,000
Reporting Segments | Other
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Segment operating earnings	0	0	0	0
Depreciation and amortization	0	0	0	0
Property and equipment additions	0	0	0	13,000
Intersegment
Segment Reporting Information [Line Items]
Revenues	$ 0	$ 0	$ 0	$ 0

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Summary of Significant Accounting Policies - Common Shares Outstanding (Details) - shares	3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance (in shares)	4,217,971
Issuance of shares in acquisition (in shares)	11,145
Vesting of restricted stock unit awards (in shares)	5,354	375
Shares withheld to cover taxes upon vesting of restricted stock unit awards (in shares)	(883)
Ending balance (in shares)	4,233,587	4,217,971

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Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 157,617		$ 157,617		$ 139,441
Less accumulated depreciation	(94,884)		(94,884)		(94,818)
Property and equipment, net	62,733		62,733		44,623
Total depreciation and amortization	4,393	$ 2,340	$ 12,266	$ 7,014
Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			2 years
Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			39 years
Assets not held under capital leases
Property, Plant and Equipment [Line Items]
Total depreciation and amortization	3,840	2,210	$ 11,012	6,703
Assets held under finance leases
Property, Plant and Equipment [Line Items]
Total depreciation and amortization	553	$ 130	1,254	$ 311
Tractors and trailers
Property, Plant and Equipment [Line Items]
Property and equipment, gross	109,595		$ 109,595		96,523
Tractors and trailers | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			5 years
Tractors and trailers | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			6 years
Tractors and trailers | Assets held under finance leases
Property, Plant and Equipment [Line Items]
Property and equipment, gross	5,500		$ 5,500		4,700
Less accumulated depreciation	(1,500)		(1,500)		(700)
Field equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	24,851		$ 24,851		20,725
Field equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			2 years
Field equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			20 years
Field equipment | Assets held under finance leases
Property, Plant and Equipment [Line Items]
Property and equipment, gross	3,300		$ 3,300
Less accumulated depreciation	(500)		(500)
Buildings
Property, Plant and Equipment [Line Items]
Property and equipment, gross	16,003		$ 16,003		15,746
Buildings | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			5 years
Buildings | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			39 years
Office equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,951		$ 1,951		1,863
Office equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			2 years
Office equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, useful life			5 years
Land
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,790		$ 1,790		1,790
Construction in progress
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 3,427		$ 3,427		$ 2,794

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Segment Reporting (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Information concerning business activities

Information concerning our various business activities was as follows for the periods indicated (in thousands):

	Reporting Segments
	Marketing		Transportation		Other		Total
Three Months Ended September 30, 2019
Revenues	$	434,609	$	15,698	$	—	$	450,307
Segment operating earnings (1)	2,888		154		—		3,042
Depreciation and amortization	2,214		2,179		—		4,393
Property and equipment additions	3,894		8,410		—		12,304
Three Months Ended September 30, 2018
Revenues	$	453,626	$	14,265	$	—	$	467,891
Segment operating earnings (1)	2,982		790		—		3,772
Depreciation and amortization	1,277		1,063		—		2,340
Property and equipment additions (2)	612		4,416		—		5,028
Nine Months Ended September 30, 2019
Revenues	$	1,331,410	$	48,498	$	—	$	1,379,908
Segment operating earnings (1)	10,948		1,970		—		12,918
Depreciation and amortization	6,640		5,626		—		12,266
Property and equipment additions (2)	6,896		18,529		—		25,425
Nine Months Ended September 30, 2018
Revenues	$	1,266,055	$	41,509	$	—	$	1,307,564
Segment operating earnings (1)	11,712		2,002		—		13,714
Depreciation and amortization	4,110		2,904		—		7,014
Property and equipment additions (2) (3)	1,682		6,061		13		7,756

_______________

(1) Our crude oil marketing segment’s operating earnings included inventory valuation losses of $2.1 million and inventory liquidation gains of $0.1 million for the three months ended September 30, 2019 and 2018, respectively. For the nine months ended September 30, 2019 and 2018, our crude oil marketing segment’s operating earnings included inventory liquidation gains of $1.5 million and $2.5 million, respectively.

(2) Our crude oil marketing segment’s property and equipment additions do not include approximately $4.1 million of tractors and a tank storage and throughput arrangement acquired under finance leases during the nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, our crude oil marketing segment’s property and equipment additions do not include approximately $1.2 million of tractors acquired under finance leases. See Note 13 for further information.

(3) During the nine months ended September 30, 2018, we had $13 thousand of property and equipment additions for leasehold improvements at our corporate headquarters, which is not attributed or allocated to any of our reporting segments.

Reconciliation of segment earnings to earnings before income taxes

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Segment operating earnings	$	3,042	$	3,772	$	12,918	$	13,714
General and administrative	(2,739)		(1,533)		(8,005)		(6,100)
Operating earnings	303		2,239		4,913		7,614
Gain on dissolution of investment	—		—		573		—
Interest income	758		601		2,145		1,486
Interest expense	(242)		(26)		(424)		(60)
Earnings before income taxes	$	819	$	2,814	$	7,207	$	9,040

Identifiable assets by industry segment

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

	September 30,		December 31,
	2019		2018
Reporting segment:
Marketing	$	129,876	$	119,370
Transportation	51,761		34,112
Cash and other	132,208		125,388
Total assets	$	313,845	$	278,870

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 124,726	$ 117,066
Restricted cash	4,903	0
Accounts receivable, net of allowance for doubtful accounts of $117 and $153, respectively	77,665	85,197
Accounts receivable – related party	0	425
Inventory	24,900	22,779
Derivative assets	129	162
Income tax receivable	2,539	2,404
Prepayments and other current assets	1,391	1,557
Total current assets	236,253	229,590
Property and equipment, net	62,733	44,623
Operating lease right-of-use assets, net	10,137
Intangible assets, net	1,704	0
Cash deposits and other assets	3,018	4,657
Total assets	313,845	278,870
Current liabilities:
Accounts payable	128,607	116,068
Accounts payable – related party	6	29
Derivative liabilities	126	139
Current portion of finance lease obligations	2,142	883
Current portion of operating lease liabilities	2,245
Other current liabilities	10,709	6,148
Total current liabilities	143,835	123,267
Other long-term liabilities:
Asset retirement obligations	1,549	1,525
Finance lease obligations	4,927	3,209
Operating lease liabilities	7,890
Deferred taxes and other liabilities	5,763	4,271
Total liabilities	163,964	132,272
Commitments and contingencies (Note 14)
Shareholders’ equity:
Preferred stock - $1.00 par value, 960,000 shares authorized, none outstanding	0	0
Common stock - $0.10 par value, 7,500,000 shares authorized, 4,233,587 and 4,217,596 shares outstanding, respectively	423	422
Contributed capital	12,652	11,948
Retained earnings	136,806	134,228
Total shareholders’ equity	149,881	146,598
Total liabilities and shareholders’ equity	$ 313,845	$ 278,870

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Prepayments and Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Components of 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,
	2019		2018
Insurance premiums	$	127	$	677
Rents, licenses and other	1,264		880
Total	$	1,391	$	1,557

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Insurance Policies

We establish a liability under our automobile and workers’ compensation insurance policies for expected claims incurred but not reported on a monthly basis. As claims are paid, the liability is relieved. Our accruals for automobile and workers’ compensation claims are presented in the table below.

For periods prior to October 1, 2017, we pre-funded our estimated claims, and therefore, we could 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 was shared with a group of similarly situated entities through an insurance captive. We have appropriately recognized estimated expenses and liabilities related to these policies for losses incurred but not reported to us or our insurance carrier. The amount of pre-funded insurance premiums left to cover potential future losses are presented in the table below. If the potential insurance claims do not further develop, the pre-funded premiums will be returned to us as a premium refund.

The amount of pre-funded insurance premiums left to cover potential future losses related to periods prior to October 1, 2017, and our accruals for automobile and workers’ compensation claims were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2019		2018
Pre-funded premiums for losses incurred but not reported	$	213	$	427
Accrued automobile and workers’ compensation claims	3,524		2,246

We maintain a self-insurance program for managing employee medical claims. A liability for expected claims incurred but not reported is established on a monthly basis. 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 $1.0 million of umbrella insurance coverage for annual aggregate medical claims exceeding approximately $9.6 million. Medical accrual amounts were as follows at the dates indicated (in thousands):

	September 30,		December 31,
	2019		2018
Accrued medical claims	$	1,221	$	1,181

Legal Proceedings

On August 15, 2019, we received a notice from the Internal Revenue Service (the “IRS”) regarding a proposed penalty of approximately $1.2 million for our 2017 tax year information returns. The notice alleges that certain taxpayer identification numbers supplied to the IRS for our returns in 2017 were either missing or incorrect and that certain filings were late. We believe that the IRS’ claims are without merit and plan to pursue all available administrative and judicial remedies necessary to resolve this matter. Accordingly, we responded to the IRS on September 25, 2019 disputing the proposed penalty and requesting that the amount be waived, abated or a hearing held. We have not received a response at this time and are unable to predict when this matter might be resolved. We regularly assess the likelihood of adverse outcomes resulting from examinations such as this to determine the adequacy of our tax reserves. Since we are unable to predict whether the IRS will waive or abate the proposed penalty as requested, no liabilities have been accrued to date. We intend to vigorously defend our position in this matter. We believe that the final adjudication of this matter will not have a material impact on our consolidated financial position, results of operations or cash flows.

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 or results of operations.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Contributed Capital	Retained Earnings
Beginning balance at Dec. 31, 2017	$ 147,119	$ 422	$ 11,693	$ 135,004
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings/ losses	1,138			1,138
Dividends declared:
Common stock, $0.22/share	(928)			(928)
Ending balance at Mar. 31, 2018	147,329	422	11,693	135,214
Beginning balance at Dec. 31, 2017	147,119	422	11,693	135,004
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings/ losses	6,793
Ending balance at Sep. 30, 2018	151,267	422	11,837	139,008
Beginning balance at Mar. 31, 2018	147,329	422	11,693	135,214
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings/ losses	3,620			3,620
Stock-based compensation expense	3		3
Dividends declared:
Common stock, $0.22/share	(928)			(928)
Ending balance at Jun. 30, 2018	150,024	422	11,696	137,906
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings/ losses	2,035			2,035
Stock-based compensation expense	141		141
Dividends declared:
Common stock, $0.22/share	(928)			(928)
Awards under LTIP, $0.22/share	(5)			(5)
Ending balance at Sep. 30, 2018	151,267	422	11,837	139,008
Beginning balance at Dec. 31, 2018	146,598	422	11,948	134,228
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings/ losses	4,908			4,908
Stock-based compensation expense	123		123
Dividends declared:
Common stock, $0.22/share	(928)			(928)
Awards under LTIP, $0.22/share	(2)			(2)
Ending balance at Mar. 31, 2019	150,699	422	12,071	138,206
Beginning balance at Dec. 31, 2018	146,598	422	11,948	134,228
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings/ losses	5,554
Ending balance at Sep. 30, 2019	149,881		12,652	136,806
Beginning balance at Mar. 31, 2019	150,699	422	12,071	138,206
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings/ losses	6			6
Stock-based compensation expense	74		74
Issuance of common shares for acquisition	392	1	391
Cancellation of shares withheld to cover taxes upon vesting of restricted awards	(39)		(39)
Dividends declared:
Common stock, $0.22/share	(1,016)			(1,016)
Awards under LTIP, $0.22/share	(8)			(8)
Ending balance at Jun. 30, 2019	150,108	$ 423	12,497	137,188
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net earnings/ losses	640			640
Stock-based compensation expense	155		155
Dividends declared:
Common stock, $0.22/share	(1,016)			(1,016)
Awards under LTIP, $0.22/share	(6)			(6)
Ending balance at Sep. 30, 2019	$ 149,881		$ 12,652	$ 136,806

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Summary of Significant Accounting Policies - Property and Equipment (Details)	9 Months Ended
	Sep. 30, 2019
Minimum
Property, Plant and Equipment [Abstract]
Property and equipment, useful life	2 years
Maximum
Property, Plant and Equipment [Abstract]
Property and equipment, useful life	39 years

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Prepayments and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Insurance premiums	$ 127	$ 677
Rents, licenses and other	1,264	880
Total	$ 1,391	$ 1,557

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Cash Deposits and Other Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Insurance collateral deposits	$ 1,072	$ 1,453
Excess loss fund	845	1,916
Accumulated interest income	580	788
State collateral deposits	108	57
Materials and supplies	413	443
Total	$ 3,018	$ 4,657

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Leases [Abstract]
Operating lease right-of-use assets, net	$ 10,137	$ 10,137	$ 11,400
Finance lease liability	7,069	7,069	11,400
Lease, Cost [Abstract]
Amortization of ROU assets	553	1,254
Interest on lease liabilities	87	214
Operating lease cost	675	2,254
Short-term lease cost	2,527	7,355
Total lease expense	$ 3,842	11,077
Operating cash flows from operating leases		2,254
Operating cash flows from finance leases		197
Financing cash flows from finance leases		1,171
ROU assets obtained in exchange for new lease liabilities, Finance leases		4,148
ROU assets obtained in exchange for new lease liabilities, Operating leases		$ 12,006
Weighted-average remaining lease term (years), Finance leases	3 years 3 months 10 days	3 years 3 months 10 days
Weighted-average remaining lease term (years), Operating leases	4 years 11 months 23 days	4 years 11 months 23 days
Weighted-average discount rate, Finance leases	4.90%	4.90%
Weighted-average discount rate, Operating leases	5.00%	5.00%
Assets and Liabilities, Lessee [Abstract]
Finance lease ROU assets	$ 6,937	$ 6,937
Operating lease ROU assets	10,137	10,137	11,400
Finance lease liabilities, Current	2,142	2,142		$ 883
Operating lease liabilities, Current	2,245	2,245
Finance lease liabilities, Noncurrent	4,927	4,927		3,209
Operating lease liabilities, Noncurrent	7,890	7,890
Finance Lease Liabilities, Payments
Remainder of 2019	606	606
2020	2,426	2,426
2021	2,426	2,426
2022	1,492	1,492
2023	642	642
Thereafter	38	38
Total lease payments	7,630	7,630
Less: Interest	(561)	(561)
Present value of lease liabilities	7,069	7,069	$ 11,400
Less: Current portion of lease obligation	(2,142)	(2,142)		(883)
Finance lease obligations	4,927	4,927		3,209
Operating Lease Liabilities, Payments Due
Remainder of 2019	678	678
2020	2,660	2,660
2021	2,256	2,256
2022	1,914	1,914
2023	1,776	1,776
Thereafter	2,113	2,113
Total lease payments	11,397	11,397
Less: Interest	(1,262)	(1,262)
Present value of lease liabilities	10,135	10,135
Less: Current portion of lease obligation	(2,245)	(2,245)
Total long-term lease obligation	$ 7,890	$ 7,890
Capital Lease Maturities
2019				1,052
2020				1,052
2021				1,052
2022				909
2023				451
Thereafter				0
Total lease payments				4,516
Less: Interest				(424)
Present value of lease liabilities				4,092
Less: Current portion of lease obligation				(883)
Total long-term lease obligation				3,209
Operating Lease Maturities
2019				4,242
2020				2,258
2021				2,107
2022				1,782
2023				1,495
Thereafter				1,488
Total lease payments				$ 13,372
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease term		1 year
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease term		8 years

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Derivative Instruments and Fair Value Measurements - Gain (Loss) on Derivatives (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues – marketing | Not Designated as Hedging Instrument | Commodity Contract
Derivative [Line Items]
Gain (loss) on derivative	$ (1)	$ (7)	$ (21)	$ (5)

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Segment Reporting - Identifiable Assets by Industry Segment (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Segment Reconciliation [Abstract]
Total assets	$ 313,845	$ 278,870
Reporting Segments
Segment Reconciliation [Abstract]
Total assets	313,845	278,870
Reporting Segments | Marketing
Segment Reconciliation [Abstract]
Total assets	129,876	119,370
Reporting Segments | Transportation
Segment Reconciliation [Abstract]
Total assets	51,761	34,112
Cash and other
Segment Reconciliation [Abstract]
Total assets	$ 132,208	$ 125,388

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Derivative Instruments and Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Fair Value Measurements

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, 2019, we had in place seven commodity purchase and sale contracts, of which six of these contracts had no fair value associated with them as the contractual prices of crude oil were within the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:

•387 barrels per day of crude oil during October 2019 through December 2019;

•258 barrels per day of crude oil during January 2020 through February 2020; and

•322 barrels per day of crude oil during March 2020 through April 2020.

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

	September 30, 2019
	Balance Sheet Location and Amount
	Current		Other		Current		Other
	Assets		Assets		Liabilities		Liabilities
Asset derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	$	129	$	—	$	—	$	—
Liability derivatives:
Fair value forward hydrocarbon commodity
contracts at gross valuation	—		—		126		—
Less counterparty offsets	—		—		—		—
As reported fair value contracts	$	129	$	—	$	126	$	—

At December 31, 2018, we had in place 10 commodity purchase and sale contracts with fair value associated with them as the contractual prices of crude oil were outside of the range of prices specified in the agreements. These commodity purchase and sale contracts encompassed approximately:

•322 barrels per day of crude oil during January 2019 through April 2019;

•258 barrels per day of crude oil during May 2019;

•322 barrels per day of crude oil during June 2019 through August 2019; and

•258 barrels per day of crude oil during September 2019 through December 2019.

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

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

We only enter into commodity contracts with creditworthy counterparties and evaluate our exposure to significant counterparties on an ongoing basis. At September 30, 2019 and December 31, 2018, we were not holding nor have we posted any collateral to support our forward month fair value derivative activity. We are not subject to any credit-risk related trigger events. We have no other financial investment arrangements that would serve to offset our derivative contracts.

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

	Gains (losses)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenues – marketing	$	(1)	$	(7)	$	(21)	$	(5)

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):

	September 30, 2019
	Fair Value Measurements Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs		Counterparty
	(Level 1)		(Level 2)		(Level 3)		Offsets		Total
Derivatives:
Current assets	$	—	$	129	$	—	$	—	$	129
Current liabilities	—		(126)		—		—		(126)
Net value	$	—	$	3	$	—	$	—	$	3

	December 31, 2018
	Fair Value Measurements Using
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	and Liabilities		Inputs		Inputs		Counterparty
	(Level 1)		(Level 2)		(Level 3)		Offsets		Total
Derivatives:
Current assets	$	—	$	162	$	—	$	—	$	162
Current liabilities	—		(139)		—		—		(139)
Net value	$	—	$	23	$	—	$	—	$	23

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

When determining fair value measurements, we make credit valuation adjustments to reflect both our own nonperformance risk and our counterparty’s nonperformance risk. When adjusting the fair value of derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements. Credit valuation adjustments utilize Level 3 inputs, such as credit scores to evaluate the likelihood of default by us or our counterparties. At September 30, 2019 and December 31, 2018, credit valuation adjustments were not significant to the overall valuation of our fair value contracts. As a result, applicable fair value assets and liabilities are included in their entirety in the fair value hierarchy.

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Assets Acquisition

9 Months Ended

Sep. 30, 2019

Asset Acquisition [Abstract]

Asset Acquisition

Asset AcquisitionOn April 10, 2019, we entered into a purchase and sale agreement with EH Transport, Inc. and affiliates (collectively, “EH Transport”), a Houston, Texas based bulk carrier trucking company, for the purchase of certain transportation assets. On May 6, 2019, we closed on the asset acquisition for approximately $6.4 million, which consisted of $5.6 million in cash after post-closing adjustments related to equipment qualifications, 11,145 of our common shares valued at $0.4 million and contingent consideration valued at approximately $0.4 million.

This acquisition added approximately 39 tractors and 53 trailers to our existing transportation fleet, and these assets are included in our transportation segment. This acquisition adds new customers and new product lines to our transportation segment portfolio, which allows us to grow into new markets. In addition to general chemical products, we expect to haul liquefied petroleum gas, asphalt, bleach and crude oil for customers.

We incurred approximately $0.1 million of acquisition costs in connection with this acquisition, which has been included in the allocation of the purchase price to the assets acquired.

The following table summarizes the consideration paid for the EH Transport assets and the estimated fair value of the assets acquired at the acquisition date (in thousands):

Consideration:
Cash	$	5,624
Value of AE common shares issued	392
Contingent consideration arrangement	431
Fair value of total consideration transferred	$	6,447
Recognized amounts of identifiable assets acquired:
Property and equipment — tractors and trailers	$	4,576
Shop, office and telecommunication equipment	20
Intangible assets — customer relationships	1,851
Total purchase price	$	6,447

The fair market value of the common shares issued in this transaction was determined based upon the closing share price of AE common stock on May 6, 2019 of $35.15.

We assumed no liabilities in this acquisition. The estimated fair value of the acquired property and equipment was determined using the estimated market value of each type of asset. The estimated fair value of the acquired customer relationship intangible assets was determined using an income approach, specifically a discounted cash flow analysis. The income approach estimates the future benefits of the customer relationships and deducts the expenses incurred in servicing the relationships and the contributions from the other business assets to derive the future net benefits of these assets. The future net benefits are discounted back to present value using the appropriate discount rate, which results in the value of the customer relationships.

A customer relationship intangible asset is the relationship between EH Transport and various customers to whom we did not have a previous relationship. The customer relationships we acquired in this transaction provide us with access to those customers to whom we did not have a previous relationship and allows us to enter product markets in which we had not previously participated. Because of the highly competitive and fragmented transportation market, we believe access to these customers and product lines will provide us with an entry into new markets.

The discounted cash flow analysis used to estimate the fair value of the EH Transport customer relationships relied on Level 3 fair value inputs. Level 3 fair values are based on unobservable inputs. Unobservable inputs are used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date. With respect to the EH Transport customer relationships, the Level 3 inputs include the rate of retention of the current customers of EH Transport as of the valuation date, our transportation segment’s historical customer retention rate and projected future revenues associated with the customers. The EH Transport customers expected to remain with us after the transaction were included in the valuation of the customer relationships. We expect to amortize the customer relationship intangible assets over a period of seven years, using a modified straight-line approach.

During the nine months ended September 30, 2019, we recorded $0.1 million of amortization expense related to these intangible assets. The purchase and sale agreement includes a contingent consideration arrangement that requires us to pay the former owner of the assets up to a quarterly maximum amount of $146,875 (undiscounted) plus interest for the first four quarters following the closing date of the acquisition. The amount to be paid is based upon the number of qualified truck drivers that are employed by us at the end of each quarter. The potential undiscounted amount of all future payments that could be required to be paid under the contingent consideration arrangement is between $0 and $587,500. The fair value of the contingent consideration arrangement of $0.4 million was estimated by applying an income valuation approach, which is based on Level 3 inputs, including the number of qualified truck drivers we expect to be employed at each payment date. At September 30, 2019, we had a remaining accrual for $0.3 million related to this contingent consideration arrangement.

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Transactions with Affiliates (Tables)

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Activities with affiliates

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Affiliate billings to us	$	20	$	18	$	63	$	58
Billings to affiliates	1		1		3		4
Rentals paid to affiliate	122		121		366		365

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Lease, Cost

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

	Three Months		Nine Months
	Ended		Ended
	September 30,		September 30,
	2019		2019
Finance lease cost:
Amortization of ROU assets	$	553	$	1,254
Interest on lease liabilities	87		214
Operating lease cost	675		2,254
Short-term lease cost	2,527		7,355
Total lease expense	$	3,842	$	11,077

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

	Nine Months
	Ended
	September 30,
	2019
Cash paid for amounts included in measurement of lease liabilities:
Operating cash flows from operating leases (1)	$	2,254
Operating cash flows from finance leases	197
Financing cash flows from finance leases	1,171
ROU assets obtained in exchange for new lease liabilities:
Finance leases	4,148
Operating leases	12,006

______________

(1) Amount is included in Other operating activities on the unaudited condensed consolidated cash flow statement.

The following table provides the lease term and discount rate for the period indicated:

	Nine Months
	Ended
	September 30,
	2019
Weighted-average remaining lease term (years):
Finance leases	3.28
Operating leases	4.98
Weighted-average discount rate:
Finance leases	4.9	%
Operating leases	5.0	%

Assets And Liabilities, Lessee

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

	September 30,
	2019
Assets
Finance lease ROU assets (1)	$	6,937
Operating lease ROU assets	10,137
Liabilities
Current
Finance lease liabilities	2,142
Operating lease liabilities	2,245
Noncurrent
Finance lease liabilities	4,927
Operating lease liabilities	7,890

______________

(1) Amount is included in Property and equipment, net on the unaudited condensed consolidated balance sheet.

Lessee, Operating Lease, Liability, Maturity

The following table provides maturities of undiscounted lease liabilities at September 30, 2019 (in thousands):

	Finance		Operating
	Lease		Lease
Remainder of 2019	$	606	$	678
2020	2,426		2,660
2021	2,426		2,256
2022	1,492		1,914
2023	642		1,776
Thereafter	38		2,113
Total lease payments	7,630		11,397
Less: Interest	(561)		(1,262)
Present value of lease liabilities	7,069		10,135
Less: Current portion of lease obligation	(2,142)		(2,245)
Total long-term lease obligation	$	4,927	$	7,890

Finance Lease, Liability, Maturity

The following table provides maturities of undiscounted lease liabilities at September 30, 2019 (in thousands):

	Finance		Operating
	Lease		Lease
Remainder of 2019	$	606	$	678
2020	2,426		2,660
2021	2,426		2,256
2022	1,492		1,914
2023	642		1,776
Thereafter	38		2,113
Total lease payments	7,630		11,397
Less: Interest	(561)		(1,262)
Present value of lease liabilities	7,069		10,135
Less: Current portion of lease obligation	(2,142)		(2,245)
Total long-term lease obligation	$	4,927	$	7,890

Schedule of Principal Contractual Commitments Outstanding Under Capital Leases

The following table provides maturities of undiscounted lease liabilities at December 31, 2018 (in thousands):

	Finance		Operating
	Lease		Lease
2019	$	1,052	$	4,242
2020	1,052		2,258
2021	1,052		2,107
2022	909		1,782
2023	451		1,495
Thereafter	—		1,488
Total lease payments	4,516		$	13,372
Less: Interest	(424)
Present value of lease liabilities	4,092
Less: Current portion of lease obligation	(883)
Total long-term lease obligation	$	3,209

Schedule of Principal Contractual Commitments Outstanding Under Operating Leases

The following table provides maturities of undiscounted lease liabilities at December 31, 2018 (in thousands):

	Finance		Operating
	Lease		Lease
2019	$	1,052	$	4,242
2020	1,052		2,258
2021	1,052		2,107
2022	909		1,782
2023	451		1,495
Thereafter	—		1,488
Total lease payments	4,516		$	13,372
Less: Interest	(424)
Present value of lease liabilities	4,092
Less: Current portion of lease obligation	(883)
Total long-term lease obligation	$	3,209

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Summary of Significant Accounting Policies - Reconciliation of Basic and Diluted Earnings (Losses) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic earnings per share:
Net earnings	$ 640	$ 6	$ 4,908	$ 2,035	$ 3,620	$ 1,138	$ 5,554	$ 6,793
Basic weighted average number of shares outstanding (in shares)	4,234			4,218			4,226	4,218
Basic earnings per share (in dollars per share)	$ 0.15			$ 0.48			$ 1.31	$ 1.61
Diluted weighted average number of shares outstanding:
Basic weighted average number of shares outstanding (in shares)	4,234			4,218			4,226	4,218
Total (in shares)	4,238			4,219			4,230	4,218
Diluted earnings per share (in dollars per share)	$ 0.15			$ 0.48			$ 1.31	$ 1.61
Restricted stock unit awards
Diluted weighted average number of shares outstanding:
Unit awards	3			1			4	0
Performance Unit Awards
Diluted weighted average number of shares outstanding:
Unit awards	1			0			0	0

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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

Organization and Basis of Presentation

Organization

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

We operate and report in two business segments: (i) crude oil marketing, transportation and storage, and (ii) tank truck transportation of liquid chemicals and dry bulk. See Note 8 for further information.

Basis of Presentation

Our results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of results expected for the full year of 2019. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals necessary for fair presentation.  The condensed consolidated financial statements and the accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the rules of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) filed with the SEC on March 11, 2019. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

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

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Assets Acquisition (Tables)

9 Months Ended

Sep. 30, 2019

Asset Acquisition [Abstract]

Schedule Of Asset Acquisition

The following table summarizes the consideration paid for the EH Transport assets and the estimated fair value of the assets acquired at the acquisition date (in thousands):

Consideration:
Cash	$	5,624
Value of AE common shares issued	392
Contingent consideration arrangement	431
Fair value of total consideration transferred	$	6,447
Recognized amounts of identifiable assets acquired:
Property and equipment — tractors and trailers	$	4,576
Shop, office and telecommunication equipment	20
Intangible assets — customer relationships	1,851
Total purchase price	$	6,447

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Cash and Cash Equivalents and Restricted Cash

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

	September 30,
	2019
Cash and cash equivalents	$	124,726
Restricted cash	4,903
Total cash, cash equivalents and restricted cash shown in the
unaudited condensed consolidated statements of cash flows	$	129,629

Schedule of Earnings Per Share, Basic and Diluted

A reconciliation of the calculation of basic and diluted earnings per share was as follows for the periods indicated (in thousands, except per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Earnings per share — numerator:
Net earnings	$	640	$	2,035	$	5,554	$	6,793
Denominator:
Basic weighted average number of shares outstanding	4,234		4,218		4,226		4,218
Basic earnings per share	$	0.15	$	0.48	$	1.31	$	1.61
Diluted earnings per share:
Diluted weighted average number of shares outstanding:
Common shares	4,234		4,218		4,226		4,218
Restricted stock unit awards	3		1		4		—
Performance share unit awards (1)	1		—		—		—
Total	4,238		4,219		4,230		4,218
Diluted earnings per share	$	0.15	$	0.48	$	1.31	$	1.61

_______________

(1) 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. The performance conditions for the performance share unit awards granted in 2018 were achieved as of December 31, 2018. For the nine months ended September 30, 2019, the effect of the performance share awards on earning per share is anti-dilutive.

Schedule of Common Stock Outstanding

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

	Common
	shares
Balance, January 1, 2019	4,217,596
Vesting of restricted stock unit awards	375
Balance, March 31, 2019	4,217,971
Issuance of shares in acquisition (see Note 6)	11,145
Vesting of restricted stock unit awards (see Note 11)	5,354
Shares withheld to cover taxes upon vesting of restricted stock unit awards	(883)
Balance, June 30, 2019 and September 30, 2019 (1)	4,233,587

_______________

(1) There was no change in the number of common shares outstanding during the three months ended September 30, 2019.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues:
Total revenues	$ 450,307	$ 467,891	$ 1,379,908	$ 1,307,564
Costs and expenses:
General and administrative	2,739	1,533	8,005	6,100
Depreciation and amortization	4,393	2,340	12,266	7,014
Total costs and expenses	450,004	465,652	1,374,995	1,299,950
Operating earnings	303	2,239	4,913	7,614
Other income (expense):
Gain on dissolution of investment	0	0	573	0
Interest income	758	601	2,145	1,486
Interest expense	(242)	(26)	(424)	(60)
Total other income (expense), net	516	575	2,294	1,426
Earnings before income taxes	819	2,814	7,207	9,040
Income tax provision	(179)	(779)	(1,653)	(2,247)
Net earnings	$ 640	$ 2,035	$ 5,554	$ 6,793
Earnings per share:
Basic net earnings per common share (in dollars per share)	$ 0.15	$ 0.48	$ 1.31	$ 1.61
Diluted net earnings per common share (in dollars per share)	0.15	0.48	1.31	1.61
Dividends per common share (in dollars per share)	$ 0.24	$ 0.22	$ 0.70	$ 0.66
Marketing
Revenues:
Total revenues	$ 434,609	$ 453,626	$ 1,331,410	$ 1,266,055
Costs and expenses:
Cost of goods and services sold	429,507	449,367	1,313,822	1,250,233
Transportation
Revenues:
Total revenues	15,698	14,265	48,498	41,509
Costs and expenses:
Cost of goods and services sold	$ 13,365	$ 12,412	$ 40,902	$ 36,603

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Commitments and Contingencies - Schedule of Accrued Medical Claims (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Aug. 15, 2019	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Umbrellas insurance coverage	$ 1,000
Aggregate medical claims for umbrella insurance coverage per calendar year	9,600
Accrued medical claims	$ 1,221		$ 1,181
Income tax examination, proposed penalty		$ 1,200

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Revenue Recognition - Revenue Disaggregation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	$ 411,699	$ 438,326	$ 1,195,637	$ 1,245,020
Total revenues	450,307	467,891	1,379,908	1,307,564
Goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	396,001	424,061	1,147,139	1,203,511
Services transferred over time
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	15,698	14,265	48,498	41,509
Revenues from contracts with customers
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	411,699	438,326	1,195,637	1,245,020
Other
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	38,608	29,565	184,271	62,544
Marketing
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	396,001	424,061	1,147,139	1,203,511
Total revenues	434,609	453,626	1,331,410	1,266,055
Marketing | Goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	396,001	424,061	1,147,139	1,203,511
Marketing | Services transferred over time
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	0	0	0	0
Marketing | Revenues from contracts with customers
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	396,001	424,061	1,147,139	1,203,511
Marketing | Other
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	38,608	29,565	184,271	62,544
Transportation
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	15,698	14,265	48,498	41,509
Total revenues	15,698	14,265	48,498	41,509
Transportation | Goods transferred at a point in time
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	0	0	0	0
Transportation | Services transferred over time
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	15,698	14,265	48,498	41,509
Transportation | Revenues from contracts with customers
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	15,698	14,265	48,498	41,509
Transportation | Other
Disaggregation of Revenue [Line Items]
Total revenues from contracts with customers	$ 0	$ 0	$ 0	$ 0

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Assets Acquisition - Additional Information (Details) - EH Trucking		9 Months Ended
	May 06, 2019 USD ($) trailer truck $ / shares shares	Sep. 30, 2019 USD ($)
Schedule of Asset Acquisition [Line Items]
Consideration transferred	$ 6,447,000
Payments for asset acquisitions, cash	$ 5,624,000
Number of shares (in shares) | shares	11,145
Value assigned to shares	$ 400,000
Contingent consideration, liability	$ 400,000
Number of tractor trailer trucks | truck	39
Number of trailers | trailer	53
Transaction sosts	$ 100,000
Share price | $ / shares	$ 35.15
Liabilities assumed	$ 0
Maximum quarterly payment	146,875
Range of outcomes, value, low	0
Range of outcomes, value, high	$ 587,500
Contingent consideration, accrual		$ 300,000
Customer Relationships
Schedule of Asset Acquisition [Line Items]
Useful life	7 years
Amortization expense		$ 100,000

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Share-Based Compensation Plan (Details) - The 2018 LTIP - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	May 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized (in shares)	106,573		106,573			150,000
Compensation expense	$ 155,000	$ 141,000	$ 352,000	$ 144,000
Accrued dividends	$ 21,377		$ 21,377		$ 9,533
Restricted stock unit awards
Number of Shares
Unit awards, beginning balance (in shares)			13,733
Granted (in shares)			14,376
Vested (in shares)			(5,729)
Forfeited (in shares)			(2,139)
Unit awards, ending balance (in shares)	20,241		20,241
Weighted Average Grant Date Fair Value per Share
Unit awards, beginning balance (in dollars per share)			$ 43.00
Granted (in dollars per share)			34.00
Vested (in dollars per share)			43.00
Forfeited (in dollars per share)			$ 38.42
Aggregate grant date fair value awards issues			$ 500,000
Unrecognized compensation cost	$ 500,000		$ 500,000
Period for recognition for remaining compensation cost			1 year 6 months
Performance Unit Awards
Number of Shares
Unit awards, beginning balance (in shares)			3,966
Granted (in shares)			8,094
Performance factor decrease (in shares)			(185)
Vested (in shares)			0
Forfeited (in shares)			(1,545)
Unit awards, ending balance (in shares)	10,330		10,330
Weighted Average Grant Date Fair Value per Share
Unit awards, beginning balance (in dollars per share)			$ 43.00
Granted (in dollars per share)			34.00
Performance factor decrease (in dollars per share)			43.00
Vested (in dollars per share)			0
Forfeited (in dollars per share)			$ 37.37
Aggregate grant date fair value awards issues			$ 300,000
Performance factor			47.50%
Unrecognized compensation cost	$ 300,000		$ 300,000
Period for recognition for remaining compensation cost			2 years 4 months 24 days
Performance Unit Awards | Awards Issued During 2019
Weighted Average Grant Date Fair Value per Share
Performance factor			100000.00%

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Derivative Instruments and Fair Value Measurements - Narrative (Details) - Commodity Contract	3 Months Ended	9 Months Ended
	Mar. 31, 2019 barrel_of_oil_per_day	Sep. 30, 2019 barrel_of_oil_per_day contract	Dec. 31, 2018 contract
Derivative Instruments, Gain (Loss) [Line Items]
Number of contracts held | contract		7	10
October 2019 through December 2019
Derivative Instruments, Gain (Loss) [Line Items]
Production		387
January 2020 through February 2020
Derivative Instruments, Gain (Loss) [Line Items]
Production		258
March 2020 through April 2020
Derivative Instruments, Gain (Loss) [Line Items]
Production		322
January through April 2019
Derivative Instruments, Gain (Loss) [Line Items]
Production	322
May 2019
Derivative Instruments, Gain (Loss) [Line Items]
Production	258
June 2019 through August 2019
Derivative Instruments, Gain (Loss) [Line Items]
Production	322
September 2019 through December 2019
Derivative Instruments, Gain (Loss) [Line Items]
Production	258
Reported Value Measurement
Derivative Instruments, Gain (Loss) [Line Items]
Number of contracts held | contract		6

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Share-Based Compensation Plan (Tables)

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Schedule of Share-based Payment Arrangement

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Compensation expense	$	155	$	141	$	352	$	144

Share-based Compensation, Activity

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

		Weighted-
		Average Grant
	Number of	Date Fair Value
	Shares	per Share (1)
Restricted stock unit awards at January 1, 2019	13,733	$	43.00
Granted (2)	14,376	$	34.00
Vested	(5,729)	$	43.00
Forfeited	(2,139)	$	38.42
Restricted stock unit awards at September 30, 2019	20,241

_______________

(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 2019 was $0.5 million based on a grant date market price of our common shares of $34.00 per share.

Unrecognized compensation cost associated with restricted stock unit awards was approximately $0.5 million at September 30, 2019. Due to the graded vesting provisions of these awards, we expect to recognize the remaining compensation cost for these awards over a weighted-average period of 1.5 years.

Performance Share Unit Awards

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

		Weighted-
		Average Grant
	Number of	Date Fair Value
	Shares	per Share (1)
Performance share unit awards at January 1, 2019	3,966	$	43.00
Granted (2)	8,094	$	34.00
Performance factor decrease (3)	(185)	$	43.00
Vested	—	$	—
Forfeited	(1,545)	$	37.37
Performance share unit awards at September 30, 2019	10,330

_______________

(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 2019 was $0.3 million based on a grant date market price of our common shares of $34.00 per share and assuming a performance factor of 100 percent.

(3) The performance factor for awards granted during 2018 was lowered to 47.5 percent based upon a comparison of actual results for 2018 to performance goals.

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Organization and Basis of Presentation (Details)	9 Months Ended
	Sep. 30, 2019 segment state
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of states in which entity operates | state	48
Number of operating segments	2
Number of reportable segments	2

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Segment Reporting

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

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

Information concerning our various business activities was as follows for the periods indicated (in thousands):

	Reporting Segments
	Marketing		Transportation		Other		Total
Three Months Ended September 30, 2019
Revenues	$	434,609	$	15,698	$	—	$	450,307
Segment operating earnings (1)	2,888		154		—		3,042
Depreciation and amortization	2,214		2,179		—		4,393
Property and equipment additions	3,894		8,410		—		12,304
Three Months Ended September 30, 2018
Revenues	$	453,626	$	14,265	$	—	$	467,891
Segment operating earnings (1)	2,982		790		—		3,772
Depreciation and amortization	1,277		1,063		—		2,340
Property and equipment additions (2)	612		4,416		—		5,028
Nine Months Ended September 30, 2019
Revenues	$	1,331,410	$	48,498	$	—	$	1,379,908
Segment operating earnings (1)	10,948		1,970		—		12,918
Depreciation and amortization	6,640		5,626		—		12,266
Property and equipment additions (2)	6,896		18,529		—		25,425
Nine Months Ended September 30, 2018
Revenues	$	1,266,055	$	41,509	$	—	$	1,307,564
Segment operating earnings (1)	11,712		2,002		—		13,714
Depreciation and amortization	4,110		2,904		—		7,014
Property and equipment additions (2) (3)	1,682		6,061		13		7,756

_______________

(1) Our crude oil marketing segment’s operating earnings included inventory valuation losses of $2.1 million and inventory liquidation gains of $0.1 million for the three months ended September 30, 2019 and 2018, respectively. For the nine months ended September 30, 2019 and 2018, our crude oil marketing segment’s operating earnings included inventory liquidation gains of $1.5 million and $2.5 million, respectively.

(2) Our crude oil marketing segment’s property and equipment additions do not include approximately $4.1 million of tractors and a tank storage and throughput arrangement acquired under finance leases during the nine months ended September 30, 2019. For the three and nine months ended September 30, 2018, our crude oil marketing segment’s property and equipment additions do not include approximately $1.2 million of tractors acquired under finance leases. See Note 13 for further information.

(3) During the nine months ended September 30, 2018, we had $13 thousand of property and equipment additions for leasehold improvements at our corporate headquarters, which is not attributed or allocated to any of our reporting segments.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Segment operating earnings	$	3,042	$	3,772	$	12,918	$	13,714
General and administrative	(2,739)		(1,533)		(8,005)		(6,100)
Operating earnings	303		2,239		4,913		7,614
Gain on dissolution of investment	—		—		573		—
Interest income	758		601		2,145		1,486
Interest expense	(242)		(26)		(424)		(60)
Earnings before income taxes	$	819	$	2,814	$	7,207	$	9,040

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

	September 30,		December 31,
	2019		2018
Reporting segment:
Marketing	$	129,876	$	119,370
Transportation	51,761		34,112
Cash and other	132,208		125,388
Total assets	$	313,845	$	278,870

There were no intersegment sales during the three and nine months ended September 30, 2019 and 2018, respectively. Other identifiable assets are primarily corporate cash, corporate accounts receivable and properties not identified with any specific segment of our business. Accounting policies for transactions between reportable segments are consistent with applicable accounting policies as disclosed herein.

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Prepayments and Other Current Assets

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepayments and Other Current Assets

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,
	2019		2018
Insurance premiums	$	127	$	677
Rents, licenses and other	1,264		880
Total	$	1,391	$	1,557

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Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2019

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

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

	Nine Months Ended
	September 30,
	2019		2018
Cash paid for interest	$	424	$	60
Cash paid for federal and state income taxes	234		811
Non-cash transactions:
Change in accounts payable related to property and equipment additions	(1,538)		(84)
Property and equipment acquired under finance leases	4,148		1,208
Issuance of common shares in asset acquisition (see Note 6)	392		—

See Note 13 for information related to non-cash transactions related to the adoption of the new lease accounting standard.

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Derivative Instruments and Fair Value Measurements - Fair Value Measurements (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Derivatives:
Current assets	$ 129	$ 162
Current assets, counterparty offsets	0	0
Current liabilities	(126)	(139)
Current liabilities, counterparty offsets	0	0
Net value	3	23
Net value, counterparty offsets	0	0
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)
Derivatives:
Current assets	0	0
Current liabilities	0	0
Net value	0	0
Significant Other Observable Inputs (Level 2)
Derivatives:
Current assets	129	162
Current liabilities	(126)	(139)
Net value	3	23
Significant Unobservable Inputs (Level 3)
Derivatives:
Current assets	0	0
Current liabilities	0	0
Net value	$ 0	$ 0

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Transactions with Affiliates (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Transactions with Affiliates [Abstract]
Billings to affiliates	$ 411,699	$ 438,326	$ 1,195,637	$ 1,245,020
Affiliated entities
Transactions with Affiliates [Abstract]
Affiliate billings to us	20	18	63	58
Billings to affiliates	1	1	3	4
Rentals paid to affiliate	$ 122	$ 121	$ 366	$ 365

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2019

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

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

	Nine Months Ended
	September 30,
	2019		2018
Cash paid for interest	$	424	$	60
Cash paid for federal and state income taxes	234		811
Non-cash transactions:
Change in accounts payable related to property and equipment additions	(1,538)		(84)
Property and equipment acquired under finance leases	4,148		1,208
Issuance of common shares in asset acquisition (see Note 6)	392		—

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Summary of Significant Accounting Policies - Reconciliation of Cash and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Cash and cash equivalents	$ 124,726	$ 117,066
Restricted cash	4,903	0
Total cash, cash equivalents and restricted cash shown in the unaudited condensed consolidated statements of cash flows	$ 129,629	$ 117,066	$ 130,774	$ 109,393

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Share-Based Compensation Plan

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Share-Based Compensation Plan

Share-Based Compensation Plan

We have in place a long-term incentive plan under which any employee or non-employee director who provides services to us is eligible to participate in the plan. The 2018 LTIP, which is overseen by the Compensation Committee of our Board of Directors, provides for the grant of various types of equity awards, of which restricted stock unit awards and performance-based compensation awards 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 under the 2018 LTIP, forfeitures under the 2018 LTIP and assuming the potential achievement of the maximum amounts of the performance factors through September 30, 2019, a total of 106,573 shares were available for issuance.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Compensation expense	$	155	$	141	$	352	$	144

At September 30, 2019 and December 31, 2018, we had $21,377 and $9,533, 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-
		Average Grant
	Number of	Date Fair Value
	Shares	per Share (1)
Restricted stock unit awards at January 1, 2019	13,733	$	43.00
Granted (2)	14,376	$	34.00
Vested	(5,729)	$	43.00
Forfeited	(2,139)	$	38.42
Restricted stock unit awards at September 30, 2019	20,241

_______________

(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 2019 was $0.5 million based on a grant date market price of our common shares of $34.00 per share.

Unrecognized compensation cost associated with restricted stock unit awards was approximately $0.5 million at September 30, 2019. Due to the graded vesting provisions of these awards, we expect to recognize the remaining compensation cost for these awards over a weighted-average period of 1.5 years.

Performance Share Unit Awards

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

		Weighted-
		Average Grant
	Number of	Date Fair Value
	Shares	per Share (1)
Performance share unit awards at January 1, 2019	3,966	$	43.00
Granted (2)	8,094	$	34.00
Performance factor decrease (3)	(185)	$	43.00
Vested	—	$	—
Forfeited	(1,545)	$	37.37
Performance share unit awards at September 30, 2019	10,330

_______________

(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 2019 was $0.3 million based on a grant date market price of our common shares of $34.00 per share and assuming a performance factor of 100 percent.

(3) The performance factor for awards granted during 2018 was lowered to 47.5 percent based upon a comparison of actual results for 2018 to performance goals.

Unrecognized compensation cost associated with performance share unit awards was approximately $0.3 million at September 30, 2019. We expect to recognize the remaining compensation cost for these awards over a weighted-average period of 2.4 years.

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Cash Deposits and Other Assets

9 Months Ended

Sep. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Cash Deposits and Other Assets

Cash Deposits and Other Assets

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

	September 30,		December 31,
	2019		2018
Amounts associated with liability insurance program:
Insurance collateral deposits	$	1,072	$	1,453
Excess loss fund	845		1,916
Accumulated interest income	580		788
Other amounts:
State collateral deposits	108		57
Materials and supplies	413		443
Total	$	3,018	$	4,657

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

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Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

Revenue Disaggregation

The following table disaggregates our revenue by segment and by major source for the periods indicated (in thousands):

	Reporting Segments
	Marketing		Transportation		Total
Three Months Ended September 30, 2019
Revenues from contracts with customers	$	396,001	$	15,698	$	411,699
Other (1)	38,608		—		38,608
Total revenues	$	434,609	$	15,698	$	450,307
Timing of revenue recognition:
Goods transferred at a point in time	$	396,001	$	—	$	396,001
Services transferred over time	—		15,698		15,698
Total revenues from contracts with customers	$	396,001	$	15,698	$	411,699
Three Months Ended September 30, 2018
Revenues from contracts with customers	$	424,061	$	14,265	$	438,326
Other (1)	29,565		—		29,565
Total revenues	$	453,626	$	14,265	$	467,891
Timing of revenue recognition:
Goods transferred at a point in time	$	424,061	$	—	$	424,061
Services transferred over time	—		14,265		14,265
Total revenues from contracts with customers	$	424,061	$	14,265	$	438,326
Nine Months Ended September 30, 2019
Revenues from contracts with customers	$	1,147,139	$	48,498	$	1,195,637
Other (1)	184,271		—		184,271
Total revenues	$	1,331,410	$	48,498	$	1,379,908
Timing of revenue recognition:
Goods transferred at a point in time	$	1,147,139	$	—	$	1,147,139
Services transferred over time	—		48,498		48,498
Total revenues from contracts with customers	$	1,147,139	$	48,498	$	1,195,637
Nine Months Ended September 30, 2018
Revenues from contracts with customers	$	1,203,511	$	41,509	$	1,245,020
Other (1)	62,544		—		62,544
Total revenues	$	1,266,055	$	41,509	$	1,307,564
Timing of revenue recognition:
Goods transferred at a point in time	$	1,203,511	$	—	$	1,203,511
Services transferred over time	—		41,509		41,509
Total revenues from contracts with customers	$	1,203,511	$	41,509	$	1,245,020

_______________

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

Other Marketing Revenue

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

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

Reporting these crude oil contracts on a gross revenue basis would increase our reported revenues as follows for the periods indicated (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue gross-up	$	193,440	$	76,373	$	658,606	$	178,399

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Cover Page - shares	9 Months Ended
	Sep. 30, 2019	Nov. 01, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2019
Document Transition Report	false
Entity File Number	1-07908
Entity Registrant Name	ADAMS RESOURCES & ENERGY, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	74-1753147
Entity Address, Address Line One	17 South Briar Hollow Lane
Entity Address, Address Line Two	Suite 100
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77027
City Area Code	713
Local Phone Number	881-3600
Title of 12(b) Security	Common Stock, $0.10 Par Value
Trading Symbol	AE
Security Exchange Name	NYSEAMER
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,233,587
Document Fiscal Year Focus	2019
Entity Central Index Key	0000002178
Current Fiscal Year End Date	--12-31
Document Fiscal Period Focus	Q3
Amendment Flag	false

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Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property and equipment

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

	Estimated
	Useful Life	September 30,		December 31,
	in Years	2019		2018
Tractors and trailers (1)	5 – 6	$	109,595	$	96,523
Field equipment (2)	2 – 20	24,851		20,725
Buildings	5 – 39	16,003		15,746
Office equipment	2 – 5	1,951		1,863
Land		1,790		1,790
Construction in progress		3,427		2,794
Total		157,617		139,441
Less accumulated depreciation		(94,884)		(94,818)
Property and equipment, net		$	62,733	$	44,623

_______________

(1) Amounts include tractors held under finance leases in our marketing segment. Gross property and equipment associated with these assets held under finance leases were $5.5 million and $4.7 million at September 30, 2019 and December 31, 2018, respectively. Accumulated amortization associated with assets held under these finance leases were $1.5 million and $0.7 million at September 30, 2019 and December 31, 2018, respectively (see Note 13 for further information).

(2) At September 30, 2019, amount includes a tank storage and throughput arrangement held under a finance lease in our marketing segment. Gross property and equipment associated with these assets held under finance leases were $3.3 million. Accumulated amortization associated with these assets held under finance leases was $0.5 million (see Note 13 for further information).

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,
	2019		2018		2019		2018
Depreciation and amortization, excluding amounts
under finance leases	$	3,840	$	2,210	$	11,012	$	6,703
Amortization of property and equipment under
finance leases	553		130		1,254		311
Total depreciation and amortization	$	4,393	$	2,340	$	12,266	$	7,014

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Organization

Organization

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

We operate and report in two business segments: (i) crude oil marketing, transportation and storage, and (ii) tank truck transportation of liquid chemicals and dry bulk. See Note 8 for further information.

Basis of Presentation

Basis of Presentation

Our results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of results expected for the full year of 2019. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals necessary for fair presentation.  The condensed consolidated financial statements and the accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and the rules of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures required by GAAP for complete annual financial statements have been omitted and, therefore, these interim financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) filed with the SEC on March 11, 2019. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

Use of EstimatesThe 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.

Cash, Cash Equivalents and Restricted Cash

Cash, Cash Equivalents and Restricted Cash

Restricted cash represents an amount held in a segregated bank account by Wells Fargo as collateral for amounts outstanding under our letter of credit facility. In June 2019, the amount of outstanding letters of credit under our letter of credit facility exceeded the borrowing base as defined in the letter of credit facility agreement. As a result, we were required to deposit cash with the lender as security for the outstanding letters of credit. See “Letter of Credit Facility” within this Note 2 for further information. Our borrowing base was based on our net receivable balance, and due to customer prepayments, our borrowing base as outlined in the letter of credit facility did not fully

support the outstanding letters of credit that have been issued. As a result, on July 1, 2019, we canceled the letter of credit facility, and secured the outstanding letters of credit with our restricted cash balance.

Earnings Per Share

Earnings Per ShareBasic earnings (losses) per share is computed by dividing our net earnings (losses) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (losses) per share is computed by giving effect to all potential shares of common stock outstanding, including our stock related to unvested restricted stock unit awards. Unvested restricted stock unit awards granted under the Adams Resources & Energy, Inc. 2018 Long-Term Incentive Plan (“2018 LTIP”) are not considered to be participating securities as the holders of these shares do not have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares (see Note 11 for further discussion).

Fair Value Measurements

Fair Value Measurements

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

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

Fair value contracts consist of derivative financial instruments and are recorded as either an asset or liability measured at its fair value. Changes in fair value are recognized immediately in earnings unless the derivatives qualify for, and we elect, cash flow hedge accounting. We had no contracts designated for hedge accounting during any current reporting periods (see Note 10 for further information).

Income Taxes

Income TaxesIncome 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.

Letter of Credit Facility

Letter of Credit FacilityWe maintained a Credit and Security Agreement with Wells Fargo Bank, National Association, to provide for the issuance of up to $60.0 million in stand-by letters of credit primarily used to support crude oil purchases within our crude oil marketing segment and for other purposes. Stand-by letters of credit were issued as needed and were canceled as the underlying purchase obligations were satisfied by cash payment when due. The issuance of stand-by letters of credit enabled us to avoid posting cash collateral when procuring crude oil supply. We used the letter of credit facility for letters of credit related to our insurance program.

Property and Equipment

Property and Equipment

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

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

Stock-Based Compensation

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

Other Marketing Revenue

Other Marketing Revenue

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

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

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Operating activities:
Net earnings	$ 5,554	$ 6,793
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	12,266	7,014
Gains on sales of property	(1,386)	(890)
Provision for doubtful accounts	(36)	(95)
Stock-based compensation expense	352	144
Deferred income taxes	1,493	(685)
Net change in fair value contracts	20	5
Gain on dissolution of AREC	(573)	0
Changes in assets and liabilities:
Accounts receivable	8,520	12,830
Accounts receivable/payable, affiliates	(23)	1
Inventories	(2,121)	(22,568)
Income tax receivable	(135)	1,317
Prepayments and other current assets	166	(7)
Accounts payable	13,613	22,254
Accrued liabilities	4,561	3,815
Other	871	(103)
Net cash provided by operating activities	43,142	29,825
Investing activities:
Property and equipment additions	(25,425)	(7,756)
Asset acquisition	(5,624)	0
Proceeds from property sales	2,853	1,314
Proceeds from dissolution of AREC	998	0
Insurance and state collateral (deposits) refunds	750	1,070
Net cash used in investing activities	(26,448)	(5,372)
Financing activities:
Principal repayments of finance lease obligations	(1,171)	(288)
Dividends paid on common stock	(2,960)	(2,784)
Net cash used in financing activities	(4,131)	(3,072)
Increase in cash and cash equivalents, including restricted cash	12,563	21,381
Cash and cash equivalents, including restricted cash, at beginning of period	117,066	109,393
Cash and cash equivalents, including restricted cash, at end of period	$ 129,629	$ 130,774

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Cash, Cash Equivalents and Restricted Cash

Restricted cash represents an amount held in a segregated bank account by Wells Fargo as collateral for amounts outstanding under our letter of credit facility. In June 2019, the amount of outstanding letters of credit under our letter of credit facility exceeded the borrowing base as defined in the letter of credit facility agreement. As a result, we were required to deposit cash with the lender as security for the outstanding letters of credit. See “Letter of Credit Facility” within this Note 2 for further information. Our borrowing base was based on our net receivable balance, and due to customer prepayments, our borrowing base as outlined in the letter of credit facility did not fully

support the outstanding letters of credit that have been issued. As a result, on July 1, 2019, we canceled the letter of credit facility, and secured the outstanding letters of credit with our restricted cash balance.

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

	September 30,
	2019
Cash and cash equivalents	$	124,726
Restricted cash	4,903
Total cash, cash equivalents and restricted cash shown in the
unaudited condensed consolidated statements of cash flows	$	129,629

Earnings Per Share

Basic earnings (losses) per share is computed by dividing our net earnings (losses) by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (losses) per share is computed by giving effect to all potential shares of common stock outstanding, including our stock related to unvested restricted stock unit awards. Unvested restricted stock unit awards granted under the Adams Resources & Energy, Inc. 2018 Long-Term Incentive Plan (“2018 LTIP”) are not considered to be participating securities as the holders of these shares do not have non-forfeitable dividend rights in the event of our declaration of a dividend for common shares (see Note 11 for further discussion).

A reconciliation of the calculation of basic and diluted earnings per share was as follows for the periods indicated (in thousands, except per share data):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Earnings per share — numerator:
Net earnings	$	640	$	2,035	$	5,554	$	6,793
Denominator:
Basic weighted average number of shares outstanding	4,234		4,218		4,226		4,218
Basic earnings per share	$	0.15	$	0.48	$	1.31	$	1.61
Diluted earnings per share:
Diluted weighted average number of shares outstanding:
Common shares	4,234		4,218		4,226		4,218
Restricted stock unit awards	3		1		4		—
Performance share unit awards (1)	1		—		—		—
Total	4,238		4,219		4,230		4,218
Diluted earnings per share	$	0.15	$	0.48	$	1.31	$	1.61

_______________

(1) 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. The performance conditions for the performance share unit awards granted in 2018 were achieved as of December 31, 2018. For the nine months ended September 30, 2019, the effect of the performance share awards on earning per share is anti-dilutive.

Fair Value Measurements

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

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

Fair value contracts consist of derivative financial instruments and are recorded as either an asset or liability measured at its fair value. Changes in fair value are recognized immediately in earnings unless the derivatives qualify for, and we elect, cash flow hedge accounting. We had no contracts designated for hedge accounting during any current reporting periods (see Note 10 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.

Letter of Credit Facility

We maintained a Credit and Security Agreement with Wells Fargo Bank, National Association, to provide for the issuance of up to $60.0 million in stand-by letters of credit primarily used to support crude oil purchases within our crude oil marketing segment and for other purposes. Stand-by letters of credit were issued as needed and were canceled as the underlying purchase obligations were satisfied by cash payment when due. The issuance of stand-by letters of credit enabled us to avoid posting cash collateral when procuring crude oil supply. We used the letter of credit facility for letters of credit related to our insurance program. At December 31, 2018, we had $4.6 million of letters of credit outstanding under this facility. This facility was collateralized by the eligible accounts receivable within our crude oil marketing segment and expired on August 30, 2019.

Our borrowing base was based on our net receivable balance, and due to customer prepayments, our borrowing base as outlined in the letter of credit facility did not fully support the outstanding letters of credit that have been issued. As a result, on July 1, 2019, we canceled the letter of credit facility, and secured the outstanding letters of credit with our restricted cash balance.

Property and Equipment

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

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

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

Stock-Based Compensation

We measure all share-based payments, including the issuance of restricted stock units and performance share units to employees and board members, using a fair-value based method. The cost of services received from employees and non-employee board members in exchange for awards of equity instruments is recognized in the consolidated statements of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period. The fair value of restricted stock unit awards and performance share unit awards is based on the closing price of our common stock on the grant date. We account for forfeitures as they occur. See Note 11 for additional information regarding our 2018 LTIP.

Common Shares Outstanding

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

	Common
	shares
Balance, January 1, 2019	4,217,596
Vesting of restricted stock unit awards	375
Balance, March 31, 2019	4,217,971
Issuance of shares in acquisition (see Note 6)	11,145
Vesting of restricted stock unit awards (see Note 11)	5,354
Shares withheld to cover taxes upon vesting of restricted stock unit awards	(883)
Balance, June 30, 2019 and September 30, 2019 (1)	4,233,587

_______________

(1) There was no change in the number of common shares outstanding during the three months ended September 30, 2019.