<PAGE>

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

                                     FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the Fiscal Year ended December 31, 2002
                                       OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the Transition Period from_____________to_____________

                          Commission File Number 1-7908

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

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

              4400 POST OAK PARKWAY STE. 2700
              HOUSTON, TEXAS                           77027
    (Address of Principal executive offices)        (Zip Code)

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

         Title of each class        Name of each exchange on which registered
         -------------------        -----------------------------------------
    COMMON STOCK, $.10 PAR VALUE           AMERICAN STOCK EXCHANGE

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

         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 the
filing requirements for the past 90 days. YES [X] NO [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         Indicate by check mark whether the registrant is an accelerated filer
as defined in Rule 126-2 of the Act. YES [ ] NO [X]

         The aggregate market value of the voting stock held by nonaffiliates as
of June 28, 2002 was $12,534,274. A total of 4,217,596 shares of Common Stock
were outstanding at March 17, 2003.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for Annual Meeting of Stockholders to be held
April 23, 2003 are incorporated by reference in Part III.

<PAGE>

                                     PART I

Items 1 and 2. BUSINESS AND PROPERTIES.

General

         Adams Resources & Energy, Inc. and its subsidiaries (the "Company") are
engaged in the business of marketing crude oil, natural gas and petroleum
products; tank truck transportation of liquid chemicals; and oil and gas
exploration and production. Adams Resources & Energy, Inc. is a Delaware
corporation organized in 1973. The revenues and operating earnings (loss) for
each industry segment and the identifiable assets attributable to each industry
segment for the three years ended December 31, 2002 are set forth in Note (10)
of the Notes to Consolidated Financial Statements included elsewhere herein.

Marketing

         Through its subsidiary, Gulfmark Energy, Inc., ("Gulfmark") the Company
purchases crude oil and arranges sales and deliveries to refiners and other
customers. Activity is concentrated primarily onshore in Texas and Louisiana
with additional operations in California and Michigan. Recently, in January
2003, the Company was purchasing approximately 89,000 barrels per day of crude
oil at the wellhead or lease level. Gulfmark operates 64 tractor-trailer rigs
and maintains over 50 pipeline inventory locations or injection stations. In
addition, the Company owns and operates a 7.5 mile long, six inch diameter crude
oil gathering pipeline in the Louisiana offshore, Ship Shoal area. Gulfmark also
has the ability to barge oil from nine oil storage facilities along the
intercoastal waterway of Texas and Louisiana and maintains 200,000 barrels of
storage capacity at certain of the dock facilities in order to access waterborne
markets for its products.

         To a significant extent, the profitability of Gulfmark depends upon its
ability to maximize gross margin. Such margins fluctuate with volumes purchased
and the difference between the price of crude oil at the point of purchase and
the price of crude oil at the point of sale, minus the associated costs of
aggregation and transportation. Gulfmark generally purchases crude oil at
prevailing prices from producers at the wellhead under short-term contracts. The
Company arranges transportation of the crude oil along the distribution chain
for sale to or exchange with customers. Additionally, Gulfmark enters into
exchange transactions with third parties when the cost of the exchange is less
than the alternate cost incurred in transporting or storing the crude oil.
Exchanges of one grade of crude oil for another are made to maximize margins or
meet contract delivery requirements.

         The Company's subsidiary, Adams Resources Marketing, Ltd. ("ARM"),
operates as a wholesale purchaser, distributor and marketer of natural gas.
ARM's focus is on the purchase of natural gas at the producer level. Recently,
in January 2003, ARM was purchasing approximately 316,000 mmbtus of natural gas
per day at the wellhead and pipeline pooling points. Business is concentrated
among approximately 60 independent producers with the primary production areas
being the Gulf Coast of Texas and the offshore Gulf of Mexico region. As an
additional outlet for its natural gas supply, ARM maintains a retail natural gas
sales group with offices in Providence, Rhode Island and Nashua, New Hampshire.
Operating under the trade name Adams Energy Group, ARM is currently selling
31,000 mmbtus per day of natural gas directly to commercial and industrial
end-use customers, municipalities and other retail level establishments. The
retail business serves as a natural complement to the Company's wholesale supply
and distribution business.

         Generally, as the Company purchases crude oil and natural gas, it
simultaneously establishes a

                                      I-1
<PAGE>

margin by selling the product for physical delivery to third party users, such
as independent refiners, utilities and or major oil companies and other
industrial concerns. Through these transactions, the Company seeks to maintain a
position that is substantially balanced between commodity purchases, on the one
hand, and sales or future delivery obligations, on the other hand. Crude oil and
natural gas are generally purchased at indexed prices that fluctuate with market
conditions. The product is transported and either sold outright at the field
level, or buy-sell arrangements (trades) are made in order to minimize
transportation costs or maximize the sales price. Except where back-to-back
fixed price arrangements are in place, the contracted sales price is also pegged
to an index that fluctuates with market conditions. This reduces the Company's
loss exposure from sudden changes in commodity prices. A key element of
profitability is the differential between market prices at the field level and
at the various sales points. Such price differentials vary with local supply and
demand conditions. Unforeseen fluctuations can impact financial results either
favorably or unfavorably. It is the policy of the Company not to hold crude oil,
natural gas, futures contracts or other derivative products for the purpose of
speculating on price changes. While the Company's policies are designed to
minimize market risk, some degree of exposure to unforeseen fluctuations in
market conditions remains.

         Operating results are sensitive to a number of factors. Such factors
include commodity location, grades of product, individual customer demand for
grades or location of product, localized market price structures, availability
of transportation facilities, actual delivery volumes that vary from expected
quantities and timing and costs to deliver the commodity to the customer. The
term "basis risk" is used to describe the inherent market price risk created
when a commodity of a certain location or grade is purchased, sold or exchanged
versus a purchase, sale or exchange of a like commodity of varying location or
grade. The Company attempts to reduce its exposure to basis risk by grouping its
purchase and sale activities by geographical region in order to stay balanced
within such designated region. However, there can be no assurance that all basis
risk is or will be eliminated.

         The Company's subsidiary, Ada Resources, Inc., ("Ada") markets branded
and unbranded refined petroleum products, such as motor fuels and lubricants.
Motor fuels sold are mainly automotive gasoline, distillates, aviation gasoline
and jet fuels. Lubricants consist of passenger car motor oils as well as a full
complement of industrial oils and greases. Ada is also involved in the railroad
servicing industry. In addition to fueling and lubricating locomotives, Ada also
performs routine maintenance service on the power units. This subsidiary is
certified by the United States Coast Guard as a direct to vessel approved marine
fuel and lube vendor. Purchases are made based on the supplier's established
Jobber/distributor prices, with such prices generally being lower than the
Company's sales price to its customers. Ada Resources' marketing area includes
primarily the Texas Gulf Coast and southern Louisiana. The primary product
distribution and warehousing facility is located on 5.5 Company-owned acres in
Houston, Texas. The property includes a 60,000 square foot warehouse, 11,000
square feet of office space and bulk storage for 280,000 gallons of lubricating
oil.

Tank Truck Transportation

         Service Transport Company, a subsidiary of the Company, transports
liquid chemicals on a "for hire" basis throughout the continental United States
and Canada. Transportation service is provided to over 400 customers under
contracts and on a call and demand basis. Pursuant to regulatory requirements,
the Company holds a Hazardous Materials Certificate of Registration issued by
the U.S. Department of Transportation.

         The Company's chemical hauling business presently operates 250 truck
tractors and 389 tank trailers and maintains truck terminals in Houston, Corpus
Christi, and Nederland, Texas as well as Baton Rouge (St. Gabriel), Louisiana,
Mobile (Saraland), Alabama and Atlanta (Winder), Georgia.

                                      I-2
<PAGE>

Transportation operations are headquartered at the Houston terminal facility.
This terminal is situated on 22 owned acres and includes maintenance facilities,
an office building and a six bay internal tank washrack and water treatment
system. Service Transport's St. Gabriel, Louisiana terminal is situated on 11.5
owned acres and includes an office building, maintenance bays and a tank
cleaning facility.

         Service Transport Company has maintained its registration to the
ISO-9002 Quality Management Standard. The scope of this Quality System
Certificate, registered in both the United States and Europe, covers the
carriage of bulk liquids throughout Service Transport's area of operations as
well as the tank trailer cleaning facilities and equipment maintenance. The
Company's quality management process is one of its major assets. The practice of
using statistical process control covering safety, on-time performance and
customer satisfaction aids the Company to continuously improve in all areas of
quality service to its customers. In addition to its ISO-9002 certification, the
American Chemistry Council recognizes Service Transport as a Responsible Care(C)
Partner. Responsible Care(C) Partners are those companies that serve the
chemical industry and implement and monitor the seven Codes of Management
Practices. The seven codes address compliance and continuing improvement in (1)
Community Awareness and Emergency Response, (2) Pollution Prevention, (3)
Process Safety, (4) Distribution, (5) Employee Health and Safety, (6) Product
Stewardship and (7) Security.

Oil and Gas Exploration and Production

         The Company's subsidiary, Adams Resources Exploration Corporation, is
actively engaged in the exploration and development of domestic oil and gas
properties primarily along the Gulf Coast of Texas and Louisiana. Exploration
offices are maintained at the Company's headquarters in Houston and the Company
holds an interest in 332 wells, of which 43 are Company-operated.

         Producing Wells--The following table sets forth the Company's gross and
net productive wells at December 31, 2002. Gross wells are the total number of
wells in which the Company has an interest, while net wells are the sum of the
fractional interests owned.

<TABLE>
<CAPTION>
                                Oil Wells                Gas Wells            Total Wells
                                ---------                ---------            -----------
                             Gross      Net          Gross       Net         Gross    Net
                             -----      ---          -----       ---         -----    ---
<S>                          <C>       <C>           <C>        <C>          <C>     <C>
Texas.............             69      12.12           66        7.67         135    19.79

Other.............            143       3.07           54        7.60         197    10.67
                              ---      -----          ---       -----         ---    -----

                              212      15.19          120       15.27         332    30.46
                              ===      =====          ===       =====         ===    =====
</TABLE>

         Acreage--The following table sets forth the Company's gross and net
developed and undeveloped acreage as of December 31, 2002. Gross acreage
represents the Company's direct ownership and net acreage represents the sum or
fractional interests owned.

<TABLE>
<CAPTION>
                             Developed Acreage            Undeveloped Acreage
                             -----------------            -------------------
                            Gross          Net             Gross         Net
                            -----          ---             -----         ---
<S>                         <C>          <C>               <C>          <C>
Texas.............          60,786       11,215            73,639       8,031

Other.............           7,574        1,203             6,965         872
                            ------       ------            ------       -----

                            68,360       12,418            80,604       8,903
                            ======       ======            ======       =====
</TABLE>

         Drilling Activity--The following table sets forth the Company's
drilling activity for each of the three years ended December 31, 2002. All
drilling activity was onshore in Texas and Louisiana with

                                      I-3
<PAGE>

limited drilling activity in the offshore Louisiana region.

<TABLE>
<CAPTION>
                                            2002                    2001                 2000
                                       --------------          --------------        ------------
                                       Gross      Net          Gross      Net        Gross    Net
                                       -----      ---          -----      ---        -----    ---
<S>                                    <C>       <C>           <C>       <C>         <C>     <C>
Exploratory wells drilled
  - Productive .................          1       .10            -          -           3     .24
  - Dry.........................          4      1.08            5        .65           6     .43

Development wells drilled
  - Productive .................         12       .99           17       1.41          18    1.38
  - Dry.........................          4       .22            2        .05           6     .34
</TABLE>

         In addition to the above wells drilled and completed at year-end 2002,
the Company has three wells (.38 net wells) in process and expected to be
completed in 2003.

         Production and Reserve Information--The Company's estimated net
quantities of proved oil and gas reserves, the estimated future net cash flows
and present value of future net cash flows from oil and gas reserves before
income taxes, calculated at a 10% discount rate for the three years ended
December 31, 2002, are presented in the table below.

<TABLE>
<CAPTION>
                                                                                   December 31,
                                                                    ------------------------------------------
                                                                     2002             2001              2000
                                                                     ----             ----              ----
                                                                                 (In thousands)
<S>                                                                 <C>             <C>               <C>
Crude oil (Barrels)...........................................          579              618               626
Natural gas (Mcf).............................................        7,480            7,618             8,642
Future net cash flows before income taxes.....................      $31,385         $ 16,989          $ 69,752
Present value of future net cash flows before
    income taxes..............................................      $16,728         $  9,353          $ 38,166
</TABLE>

         Estimates of the Company's oil and gas reserves and future net revenues
from oil and gas reserves were made by the Company's independent petroleum
engineers. The reserve value estimates provided at December 31, 2002, 2001 and
2000 are based on year-end market prices of $27.94, $17.55 and $25.08 per barrel
for crude oil and $4.20, $2.34 and $8.79 per Mcf for natural gas, respectively.

         Reserve estimates are based on many judgmental factors. The accuracy of
reserve estimates depends on the quantity and quality of geological data,
production performance data, the current prices being received and reservoir
engineering data, as well as the skill and judgment of petroleum engineers in
interpreting such data. The process of estimating reserves requires frequent
revision of estimates (usually on an annual basis) as additional information is
made available through drilling, testing, reservoir studies and acquiring
historical pressure and production data. In addition, the discounted present
value of estimated future net revenues should not be construed as the fair
market value of oil and gas producing properties. Such estimates do not
necessarily portray a realistic assessment of current value or future
performance of such properties. Such revenue calculations are based on estimates
by petroleum engineers as to the timing of oil and gas production, and there is
no assurance that the actual timing of production will conform to or approximate
such estimates. Also, certain assumptions have been made with respect to
pricing. The estimates assume prices will remain constant from the date of the
engineer's estimates, except for changes reflected under natural gas sales
contracts. There can be no assurance that actual future prices will not vary as
industry conditions, governmental regulation and other factors impact the market
price for oil and gas.

                                      I-4
<PAGE>

         The Company's net oil and gas production for the three years ended
December 31, 2002 has been as follows:

<TABLE>
<CAPTION>
         Years Ended                        Crude Oil                   Natural
         December 31,                       (Barrels)                  Gas (Mcf)
         ------------                       ---------                  ---------
<S>                                         <C>                        <C>
2002............................              55,000                   1,047,000
2001............................              64,000                   1,031,000
2000............................              62,000                   1,161,000
</TABLE>

         Certain financial information relating to the Company's oil and gas
activities is summarized as follows:

<TABLE>
<CAPTION>
                                                                   Years Ended December 31,
                                                             ----------------------------------
                                                              2002           2001         2000
                                                             -------       -------      -------
<S>                                                          <C>           <C>          <C>
Average oil and condensate
   sales price per Bbl.................................      $ 26.10       $ 27.08      $ 30.03
Average natural gas
   sales price per Mcf.................................      $  3.17       $  4.23      $  3.63
Average production cost,
   per equivalent Bbl, charged to expense..............      $  9.10       $  9.08      $  5.95
</TABLE>

         For comparative purposes, prices received by the Company's oil and gas
division at varying points in time during 2002 were as follows:

<TABLE>
<CAPTION>
                                                       Crude Oil                  Natural Gas
                                                   -----------------             -------------
<S>                                                <C>                           <C>
Average Annual Price for 2002.................     $26.10 per barrel             $3.17 per Mcf
Average Price for December 2002...............     $27.00 per barrel             $4.50 per Mcf
Price at December 31, 2002....................     $27.94 per barrel             $4.20 per Mcf
</TABLE>

         The Company has had no reports to Federal authorities or agencies of
estimated oil and gas reserves except for a required report on the Department of
Energy's "Annual Survey of Domestic Oil and Gas Reserves." The Company is not
obligated to provide any fixed and determinable quantities of oil or gas in the
future under existing contracts or agreements associated with its oil and gas
exploration and production segment.

         Reference is made to Note (13) of the Notes to Consolidated Financial
Statements for additional disclosures relating to oil and gas exploration and
production activities.

Employees

         At December 31, 2002 the Company employed 646 persons, 14 of whom were
employed in the exploration and production of oil and gas, 253 in the marketing
of crude oil, natural gas and petroleum products, 369 in transportation
operations and 10 in administrative capacities. None of the Company's employees
are represented by a union. Management believes its employee relations are
satisfactory.

                                      I-5
<PAGE>

Federal and State Taxation

         The Company is subject to the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"). In accordance with the Code, the Company
computes its income tax provision based on a 34% tax rate. The Company's
operations are, in large part, conducted within the State of Texas. As such, the
Company is subject to a 4.5% state tax on corporate net taxable income as
computed for federal income tax purposes. Oil and gas activities are also
subject to state and local income, severance, property and other taxes.
Management believes the Company is currently in compliance with all federal and
state tax regulations.

Forward-Looking Statements--Safe Harbor Provisions

         This annual report for the year ended December 31, 2002 contains
certain forward-looking statements which are intended to be covered by the safe
harbors provided under Federal securities law and regulation. To the extent such
statements are not recitations of historical fact, forward-looking statements
involve risks and uncertainties. In particular, statements under the captions
(a) Production and Reserve Information, (b) Competition, (c) Regulatory Status
and Potential Environmental Liability, (d) Management's Discussion and Analysis
of Financial Condition and Results of Operations, (e) Liquidity and Capital
Resources, (f) Critical Accounting Policies and Use of Estimates, (g)
Quantitative and Qualitative Disclosures about Market Risk, (h) Income Taxes,
(i) Concentration of Credit Risk, (j) Price Risk Management Activities, and (k)
Commitments and Contingencies, among others, contain forward-looking statements.
Where the Company expresses an expectation or belief to future results or
events, such expression is made in good faith and believed to have a reasonable
basis in fact. However, there can be no assurance that such expectation or
belief will actually result or be achieved.

         A number of factors could cause actual results or events to differ
materially from those anticipated. Such factors include, among others, (a)
general economic conditions, (b) fluctuations in hydrocarbon prices and margins,
(c) variations between crude oil and natural gas contract volumes and actual
delivery volumes, (d) unanticipated environmental liabilities or regulatory
changes, (e) counterparty credit default, (f) inability to obtain bank and/or
trade credit support, (g) availability and cost of insurance, (h) changes in tax
laws, and (i) the availability of capital, among others (j) changes in
regulations, (k) results of current items of litigation, (l) uninsured items of
litigation or losses, (m) uncertainty in reserve estimates and cash flows, (n)
ability to replace oil and gas reserves, (o) security issues related to drivers
and terminal facilities and (p) commodity price volatility.

                                      I-6
<PAGE>

                     Environmental Compliance and Regulation

         The Company is subject to an extensive variety of evolving United
States federal, state and local laws, rules and regulations governing the
storage, transportation, manufacture, use, discharge, release and disposal of
product and contaminants into the environment, or otherwise relating to the
protection of the environment. A non-exclusive listing of the environmental laws
which potentially impact the Company's Regulated Environmental Activities is set
out below:

The Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act of 1976, and subsequent amendments (collectively, "RCRA"). RCRA
established a comprehensive regulatory framework for the management of hazardous
wastes at active facilities. RCRA creates a "cradle to grave" system for
managing hazardous wastes. Those who generate, transport, treat, store or
dispose of waste regulated by RCRA are required to undertake certain
performance, testing and record keeping activities. The 1984 amendments to RCRA
known as the Hazardous and Solid Waste Amendments ("HSWA") increased the scope
of RCRA to regulate small quantity hazardous waste generators and waste oil
handlers and recyclers as well as require the identification and regulation of
underground storage tanks in which liquid petroleum or hazardous substances are
stored. HSWA and its implementing regulations require the notification to
designated state agencies of the existence and condition of regulated
underground storage tanks and impose design, construction and installation
requirements; leak detection, reporting, and cleanup requirements; tank closure
and removal requirements; and fiscal responsibility requirements. RCRA
specifically excludes from the definition of hazardous waste "drilling fluids,
produced waters, and other wastes associated with the exploration, development,
or production of crude oil, natural gas or geothermal energy."

Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA" or "Superfund"), as amended--CERCLA established the Superfund program
to clean up sites at which hazardous substances had been released. Superfund has
been interpreted to create strict, joint and several liability for the costs of
removal and remediation, other necessary response costs and damages for injury
to natural resources. Superfund liability extends to persons who arranged for
disposal or treatment of hazardous substances, as well as to (i) the current
owners and operators of a site at which hazardous substances were disposed; (ii)
any prior owner or operator of the site at the time of disposal; and (iii) waste
transporters of hazardous substances. CERCLA authorizes the United States
Environmental Protection Agency ("EPA") to investigate and remediate
contaminated sites and to recover the costs of such activities (response costs),
as well as damages to natural resources, from parties specified as liable under
the statute. CERCLA also authorizes private parties who incur response costs to
seek recovery under certain situations from statutorily liable parties. CERCLA
was amended by the Superfund Amendments and Reauthorization Act of 1986
("SARA"). SARA provides a separate funding mechanism for the clean up of
underground storage tanks. CERCLA excludes petroleum, including crude oil or any
fraction thereof, with certain limitations from the definition of "hazardous
substances" for which liability for clean up of a contaminated site will attach.
This exclusion also applies to those otherwise hazardous substances which are
inherent in petroleum, but not to those hazardous substances added to or mixed
with petroleum products.

The Clean Water Act of 1972, as amended (the "Clean Water Act")--The Clean Water
Act establishes water pollutant discharge standards applicable to many types of
manufacturing and construction facilities and imposes standards on municipal
sewage treatment plants. The Clean Water Act requires states to set water
quality standards for significant bodies of water within their boundaries and to
seek attainment and/or maintenance of those standards. Many industrial and
governmental facilities must apply for and obtain discharge permits, monitor
pollutant discharges and under certain conditions reduce certain discharges. The
Clean Water Act also requires pre-treatment of certain discharges prior to

                                      I-7
<PAGE>

release into a publicly owned treatment works.

Federal Oil Pollution Act of 1990, as amended ("OPA")--OPA amends the Clean
Water Act and expands the liability for the discharge of oil into navigable
waters. Liability is triggered by discharge or substantial threat of a discharge
of oil into navigable waters or adjoining shorelines from any vessel or any
on-shore or off-shore facility. The OPA defines three classes of parties subject
to liability: 1) owners, operators, and persons chartering vessels; 2) lessees
and permitees of areas where off-shore facilities are located; and 3) owners and
operators of on-shore facilities.

The Clean Air Act of 1970, as amended (the "Clean Air Act")--The Clean Air Act
required EPA to establish and ensure compliance with national ambient air
quality standards ("NAAQS") for certain pollutants. The NAAQS generally are to
be achieved by the individual states through state implementation plans
("SIPs"). SIPs typically attempt to meet the NAAQS by, among other things,
regulating the quantity and quality of emissions from specific industrial
sources. As required by the Clean Air Act, EPA also has established regulations
that limit emissions of specified hazardous air pollutants and other regulations
that limit emissions from new industrial sources within certain source
categories. The Clean Air Act was amended extensively in 1990 to, among other
things, add a program to require certain industries to obtain federal air
permits and impose additional emissions standards that must be implemented by
the EPA through regulations.

The Toxic Substances Control Act of 1976, as amended ("TSCA")--TSCA authorizes
the EPA to gather information on the risks of chemicals, and to monitor and
regulate the manufacture, distribution, processing, use and disposal of many
chemicals.

The Emergency Planning and Community Right-to-Know Act ("EPCRA")--EPCRA
requires emergency planning notification and release notification and reporting
with respect to the storage and release of specified chemicals. Industry must
provide information that is available to local communities regarding the
presence of extremely hazardous substances at facilities within those
communities.

The Occupational Safety and Health Act of 1970, as amended ("OSHA")--OSHA
regulates exposure to toxic substances and other forms of workplace hazards. The
Department of Labor administers OSHA. OSHA specifies maximum levels of toxic
substance exposure. OSHA also sets out a "right-to-know" rule which requires
that workers be informed of, and receive training relating to, the physical and
health hazards posed by hazardous materials in the workplace.

Texas Clean Air Act--Pursuant to the federal Clean Air Act and the Texas Clean
Air Act, the Texas Commission on Environmental Quality ("TCEQ") has established
rules that, among other things, regulate various types of emissions from
industrial sources. Among these rules is a requirement that each emission source
in Texas that emits any air pollutant receive authorization from the TCEQ or be
in existence as of August 30, 1971 and not have been modified since then (i.e.,
is "grandfathered"). Emission sources that are located in areas in which the
NAAQS have not been attained for certain pollutants ("non-attainment areas") and
that emit such pollutants, are often subject to additional and/or more stringent
rules than similar facilities located in attainment areas.

Texas Solid Waste Disposal Act ("TSWDA")--Pursuant to RCRA and the TSWDA, the
TCEQ has promulgated regulations with respect to the generation, management,
transportation, treatment, storage, and disposal of industrial solid waste,
including hazardous waste, and municipal solid waste. These regulations include
permitting requirements applicable to most facilities that treat, store and
dispose of such wastes. A state "superfund" program, which is similar to the
federal Superfund program, was also established by the TSWDA to provide
remediation of sites at which hazardous substances have been released.

                                      I-8
<PAGE>

Texas Water Code--Pursuant to the Clean Water Act, chapter 26 of the Texas Water
Code and the TCEQ regulations promulgated thereunder prohibit the unauthorized
discharge of waste into or adjacent to waters of the State. They also regulate
(including requiring permits) industrial, domestic, and municipal wastewater
discharges to ensure that the state water quality standards are satisfied. The
Texas Water Code also contains enforcement provisions that provide for civil
and/or criminal penalties and/or injunctive relief for violations of the Texas
Water Code. Another program mandated by the Texas Water Code regulates
underground storage tanks that store certain materials, including among other
materials, gasoline, oil, and other petroleum products, and established a
fee-based fund to remediate contamination from certain leaking underground
storage tanks.

Texas Oil Spill Prevention and Response Act of 1991, as amended ("OSPRA")--With
respect to oil spills in the marine environment, OSPRA provides a comprehensive
legal framework and funding system allowing Texas to establish and monitor oil
spill prevention and response requirements for vessels and facilities that
handle oil, to establish and carry out an effective program for state response
to oil spills, to provide timely and equitable settlement and compensation of
claims for those harmed by oil spills, and to provide for assessment and
restoration for environmental damage from oil spills. OSPRA supports and
compliments OPA.

Railroad Commission of Texas ("RRC")--The RRC regulates, among other things, the
drilling and operation of oil and gas wells, the operation of oil and gas
pipelines, the disposal of oil and gas production wastes and certain storage of
unrefined oil and gas. RRC regulations govern the generation, management and
disposal of waste from such oil and gas operations and provide for the clean up
of contamination from oil and gas operations. The RRC also promulgated
regulations that provide for civil and/or criminal penalties and/or injunctive
relief for violations of the RRC regulations.

State and Local Government Regulation--Many states have been authorized by the
EPA to enforce regulations promulgated under various federal statutes. In
addition, there are numerous other state as well as local authorities that
regulate the environment, some of which impose more stringent environmental
standards than Federal laws and regulations. The penalties for violations of
state law vary but typically include injunctive relief, recovery of damages for
injury to air, water or property and fines for non-compliance.

Oil and Gas Operations--The Company's oil and gas drilling and production
activities are subject to laws and regulations relating to environmental quality
and pollution control. One aspect of the Company's oil and gas operation is the
disposal of used drilling fluids, saltwater, and crude oil sediments. In
addition, at times low-level naturally occurring radiation may occur with the
production of crude oil and natural gas. The Company's policy is to comply with
environmental regulations and industry standards. Environmental compliance has
become more stringent and the Company, from time to time, may be required to
remediate past practices. Management believes that such required remediations in
the future, if any, will not have a material adverse impact on the Company's
financial position or results of operations.

All states in which the Company owns significant producing oil and gas
properties have statutory provisions regulating the production and sale of crude
oil and natural gas. Regulations typically require permits for the drilling of
wells and extend to the spacing of wells, the prevention of waste, protection of
correlative rights, the rate of production, prevention and clean-up of pollution
and other matters.

Marketing Operations--The Company's marketing facilities are subject to a number
of state and federal environmental statutes and regulations, including the
regulation of underground fuel storage tanks. The EPA's Office of Underground
Tanks and applicable state laws have established regulations requiring

                                      I-9
<PAGE>

owners or operators of underground fuel tanks to demonstrate evidence of
financial responsibility for the costs of corrective action and the compensation
of third parties for bodily injury and property damage caused by sudden and
nonsudden accidental releases arising from operating underground tanks. In
addition, the EPA requires the installation of leak detection devices and
stringent monitoring of the ongoing condition of underground tanks. Should
leakage develop in an underground tank, the Company would be obligated for clean
up costs. The Company has secured insurance covering both third party liability
and clean up costs. Currently, the Company has less than 10 active underground
storage tanks.

Transportation Operations--The Company's tank truck operations are conducted
pursuant to authority of the United States Department of Transportation (DOT)
and various State regulatory authorities. The Company's transportation
operations must also be conducted in accordance with various laws relating to
pollution and environmental control. Interstate motor carrier operations are
subject to safety requirements prescribed by the DOT. Such matters as weight and
dimension of equipment are also subject to federal and state regulations. DOT
regulations also require mandatory drug testing of drivers and require certain
tests for alcohol levels in drivers and other safety personnel. The trucking
industry is subject to possible regulatory and legislative changes such as
increasingly stringent environmental regulations or limits on vehicle weight and
size. Regulatory change may affect the economics of the industry by requiring
changes in operating practices or by changing the demand for common or contract
carrier services or the cost of providing truckload services. In addition, the
Company's tank wash facilities are subject to increasingly more stringent local,
state and federal environmental regulations.

With recent terrorist events, the Company has increased its security of drivers
and terminal facilities. Satellite tracking transponders installed in the power
units are used to communicate "all is well" messages back to the driver's home
terminal. The transponders are also equipped with a "distress button" to notify
the dispatcher that the driver is in immediate distress. Local law enforcement
agencies are notified by the dispatcher. The "Track and Trace" feature of the
Company's website is able to advise a customer of the status and location of
their loads, as well as show that customer a picture of the driver that is
delivering the load. Terminal security has been augmented by remote cameras and
better lighting coverage in the staging and parking areas.

Regulatory Status and Potential Environmental Liability--The operations and
facilities of the Company are subject to numerous federal, state and local
environmental laws and regulations including those described above, as well as
associated permitting and licensing requirements. The Company regards compliance
with applicable environmental regulations as a critical component of its overall
operation, and devotes significant attention to providing quality service and
products to its customers, protecting the health and safety of its employees,
and protecting the Company's facilities from damage. Management believes the
Company has obtained or applied for all permits and approvals required under
existing environmental laws and regulations to operate its current business.
Management has reported that the Company is not subject to any pending or
threatened environmental litigation or enforcement action(s) which could
materially and adversely affect the Company's business. While the company has,
where appropriate, implemented operating procedures at each of its facilities
designed to assure compliance with environmental laws and regulation, the
Company, given the nature of its business, is subjected to environmental risks
and the possibility remains that the Company's ownership of its facilities and
its operations and activities could result in civil or criminal enforcement and
public as well as private action(s) against the Company, which may necessitate
or generate mandatory clean up activities, revocation of required permits or
licenses, denial of application for future permits, or significant fines,
penalties or damages, any and all of which could have a material adverse effect
on the Company. At December 31, 2002, the Company is unaware of any unresolved
environmental issues for which an accounting accrual is necessary.

                                      I-10
<PAGE>

Item 3.  LEGAL PROCEEDINGS

         On August 30, 2000, CJC Leasing, Inc. ("CJC"), a wholly owned
subsidiary of the Company previously involved in the coal mining business,
received a "Notice of Taxes Due" from the State of Kentucky regarding the
results of a coal severance tax audit covering the years 1989 through 1993. The
audit initially proposed a tax assessment of $8.3 million plus penalties and
interest. This amount was adjusted downward by the State in August 2002 to $3.4
million plus penalties and interest. CJC has protested this assessment and has
set forth a number of defenses including that CJC was not a taxpayer engaged in
severing and/or mining coal at anytime during the assessment period. Further, it
is CJC's informed belief that such taxes were properly paid by the third parties
that had in fact mined the coal. Management intends to vigorously defend CJC in
this matter and believes that it will not ultimately have a significant adverse
effect on the Company's financial position or results of operations.

         In April 2002, a lawsuit was filed against the Company's wholly owned
subsidiary Gulfmark Energy, Inc. by plaintiffs Kirby Energy LLP and Kirby Black
("Kirby"). Kirby was a commission crude oil purchase representative for the
Company and as such had arranged certain crude oil purchase transactions for the
benefit of the Company that earned Kirby a percentage net profits commission.
Kirby believes the commissions paid were less than the amounts provided for in
the contract and has sued for an accounting and actual and punitive damages.
Management intends to vigorously defend this matter and believes that it will
not ultimately have a significant adverse effect on the Company's financial
position or results of operations.

         On July 31, 2002, certain individuals filed a complaint with the
Occupational Safety and Health Administration ("OSHA") pursuant to a workmen's
compensation claim filed by the family of a deceased employee. The OSHA
complaint alleges that the Company's wholly owned subsidiary, Service Transport
Company, failed to produce employee exposure and other records including air
sampling data and medical monitoring records from years 1989 through 1997. The
Company responded to the alleged violations denying that it failed to produce
such data. To date, the Company has not received a response from OSHA and
believes it is in compliance with such rules and regulations.

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

                                      I-11
<PAGE>

Item 4.  SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.

         None.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

         The persons who are currently serving as executive officers of the
Company or its subsidiaries, their ages and the positions they hold with the
Company are as follows:

<TABLE>
<CAPTION>
       Name                                     Age                      Positions with the Company
------------------                              ---           -----------------------------------------------
<S>                                             <C>           <C>
K. S. Adams, Jr.                                 80           Chairman, President and Chief Executive Officer
Vincent H. Buckley                               80           Executive Vice President and General Counsel
Claude H. Lewis                                  59           Vice President-Land Transportation
Richard B. Abshire                               50           Vice President-Finance
Juanita G. Simmons                               48           Vice President-Gulfmark Energy, Inc.
John M. Fetzer                                   49           President-Gulfmark Energy, Inc.
James Brock Moore                                62           President-Adams Resources Exploration Corp.
Lee A. Beauchamp                                 50           President-Ada Resources, Inc.
David B. Hurst                                   50           Secretary
</TABLE>

         Each officer has served in his present position for at least five years
except Mr. Buckley and Mr. Fetzer. For the five years prior to joining the
Company, Mr. Buckley was Of Counsel to the law firm of Locke Liddell & Sapp,
LLP, and Mr. Fetzer was Executive Vice President of Genesis Energy, LP. No
family relationship exists between any of the officers. Mr. Hurst is a partner
in the law firm of Chaffin & Hurst.

                                      I-12
<PAGE>

                                     PART II

Item 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
         MATTERS

         The Company's common stock is traded on the American Stock Exchange.
The following table sets forth the high and low sales prices of the common stock
as published in The Wall Street Journal for issues listed on the American Stock
Exchange for each calendar quarter since January 1, 2001.

<TABLE>
<CAPTION>
                                                                   American Stock Exchange
                                                                   -----------------------
Year                                                                  High         Low
----                                                                  ----         ---
<S>                                                                 <C>          <C>
2001
   First Quarter..............................................      $  16.49     $  13.10
   Second Quarter.............................................         16.75        13.10
   Third Quarter..............................................         13.40         6.85
   Fourth Quarter.............................................          8.20         6.10

2002
   First Quarter..............................................      $  10.55     $   7.35
   Second Quarter.............................................          8.85         6.00
   Third Quarter..............................................          6.43         3.80
   Fourth Quarter.............................................          5.40         3.96
</TABLE>

         At December 31, 2002 there were 367 holders of record of the Company's
common stock and the closing stock price was $5.25 per share. The Company has no
securities authorized for issuance under equity compensation plans.

         The terms of the Company's bank loan agreement requires the Company to
maintain consolidated net worth in excess of $32,083,000. Should the Company's
net worth fall below this threshold, the Company may be restricted from payment
of additional cash dividends on the Company's common stock.

         On each of December 17, 2002, December 17, 2001 and December 15, 2000,
the Company paid an annual cash dividend of $.13 per common share to common
stock holders of record on December 2, 2002, December 3, 2001 and December 1,
2000, respectively. Such dividends totaled $548,000 for each year presented.

                                      II-1
<PAGE>

Item 6.  SELECTED FINANCIAL DATA

                   FIVE YEAR REVIEW OF SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                        Years Ended December 31,
                                         --------------------------------------------------------------------------------------
                                              2002               2001                2000            1999             1998
                                         --------------      -------------       -------------   -------------    -------------
                                                               (In thousands, except per share data)
<S>                                      <C>                 <C>                 <C>             <C>              <C>
Revenues:
    Marketing........................    $    2,282,161      $   4,677,982       $   6,980,277   $   3,956,477    $    1,936,358
    Transportation...................            36,406             33,149              35,824          35,559            32,145
    Oil and gas......................             4,750              6,111               6,059           3,441             5,689
                                         --------------      -------------       -------------   -------------    --------------
                                         $    2,323,317      $   4,717,242       $   7,022,160   $   3,995,477    $    1,974,192
                                         ==============      =============       =============   =============    ==============

Operating earnings:
    Marketing........................    $        8,886      $      (1,230)(2)   $      15,389   $      10,424    $        4,566
    Transportation...................             2,142              1,053               2,311           3,495             3,568
    Oil and gas......................              (633)(1)            693               1,624            (520)           (1,840)(3)
    General and administrative.......            (8,173)            (7,894)             (6,463)         (4,819)           (2,738)
                                         --------------      -------------       -------------   -------------    --------------
                                                  2,222             (7,378)             12,861           8,580             3,556

Other income (expense):
    Interest income .................               115                444               1,233             565               238
    Interest expense.................              (121)              (128)               (172)            (75)             (327)
                                         --------------      -------------       -------------   -------------    --------------
Earnings before income taxes.........             2,216             (7,062)             13,922           9,070             3,467

Income tax provision (benefit).......               764             (2,438)              5,082           2,683             1,127
                                         --------------      -------------       -------------   -------------    --------------

Earnings (loss) before cumulative
    effect of accounting change......             1,452             (4,624)              8,840           6,387             2,340
Cumulative effect of accounting
    change net of tax................                 -                 55                   -               -                 -
                                         --------------      -------------       -------------   -------------    --------------
Net earnings (loss)..................    $        1,452      $      (4,569)      $       8,840   $       6,387    $        2,340
                                         ==============      =============       =============   =============    ==============

EARNINGS (LOSS) PER SHARE:
    Before cumulative effect of
       accounting change.............    $          .34      $       (1.09)      $        2.10   $        1.51    $          .55
    Cumulative effect of
       accounting change.............                 -                .01                   -               -                 -
                                         --------------      -------------       -------------   -------------    --------------
Basic earnings (loss) per
    common share.....................    $          .34      $      (1.08)       $        2.10   $        1.51    $          .55
                                         ==============      ============        =============   =============    ==============

FINANCIAL POSITION

Working capital......................    $       31,292      $      30,334       $      32,656   $      19,438    $       10,855
Total assets.........................           202,120            227,027             448,044         293,048           122,334
Long-term debt, net of
    current maturities...............            11,475             12,475              11,900           9,900             9,100
Shareholders' equity.................            40,100             39,196              44,313          36,021            30,056
Dividends on common shares...........               548                548                 548             422               422
</TABLE>

------------------

(1) The 2002 oil and gas loss includes $1.7million in dry hole costs and
    property valuation write-downs while 2001 oil and gas earnings are net of a
    $1 million asset impairment charge.

(2) The 2001 marketing loss includes $8 million in charges related to inventory
    price declines and a $1.5 million bad debt provision following the Enron
    bankruptcy, partially offset by a $5 million gain on the sale of a pipeline.

(3) The 1998 oil and gas loss includes $1.4 million in 3-D seismic expense and a
    $1 million write-down of properties due to reduced prices.

                                      II-2
<PAGE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

RESULTS OF OPERATIONS

                 -  Marketing

         Marketing segment revenues and operating earnings were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                         2002              2001               2000
                                                     -----------       -----------         -----------
<S>                                                  <C>               <C>                 <C>
Revenues....................................         $ 2,282,161       $ 4,677,982         $ 6,980,277

Operating Earnings (Loss)...................         $     8,886       $    (1,230)        $    15,389

Depreciation................................         $     1,611       $     2,600         $     2,822
</TABLE>

Marketing segment operating statistics were as follows:

<TABLE>
<CAPTION>
                                                               2002               2001              2000
                                                         ----------------   ---------------    ---------------
<S>                                                      <C>                <C>                <C>
Wellhead Purchases per day(1)
  -   Crude Oil...................................         101,000 bbls      130,000 bbls       215,000 bbls
  -   Natural Gas.................................         482,000 mmbtus    796,000 mmbtus     801,000 mmbtus

Average Price
  -   Crude Oil...................................       $   24.18/bbl      $  24.59/bbl       $  28.22/bbl
  -   Natural Gas.................................       $    3.10/mmbtu    $   4.07/mmbtu     $   3.29/mmbtu
</TABLE>

----------------

(1) Reflects the volume purchased from third parties by the Company at the lease
    level and pipeline pooling points.

         Gross revenues for the marketing division decreased by $2.4 billion for
2002 and by $2.3 billion for 2001 relative to the preceding year. This trend was
initiated in early 2000 when management concluded the Company's scope of
operations exceeded its capital base of support. As a result of rapid growth,
the Company was having difficulty maintaining credit support for its expanded
level of business. Thus, management began implementing steps to reduce the
volume of purchases, both at the wellhead level and at major trade points. The
initial effort commenced in May 2000, when the Company entered into a joint
venture arrangement with a third party for the purpose of purchasing,
distributing and marketing crude oil in the offshore Gulf of Mexico region. The
intent behind the joint venture was to combine the Company's marketing expertise
with stronger financial and credit support from the co-venture participant. The
venture operated as Williams-Gulfmark Energy Company pursuant to the terms of a
joint venture agreement. The Company held a 50 percent interest in the net
earnings of the venture and accounted for its interest under the equity method
of accounting. Formation of the joint venture and the Company's associated
withdrawal from direct purchases of crude oil in offshore waters was the cause
of the 2001 reduction in gross revenues.

         In October 2001, management undertook additional steps to reduce the
scope of operations by (i) selling its onshore Texas crude oil pipeline and
implementing a related withdrawal from a six county area and (ii) withdrawing
from the Williams-Gulfmark joint venture pursuant to the terms of a dissolution
agreement. This resulted in the Company having no further interest in the
offshore crude oil

                                      II-3
<PAGE>

marketplace. The strategy to reduce operations proved to be fortuitous because
of the December 2001 Enron bankruptcy. This event had a significant effect on
the crude oil and natural gas industries, as credit support for operations
became of paramount importance. Numerous industry participants, including the
Company's former joint venture partner, either left or are in the process of
withdrawing from the crude oil and natural gas marketplace. Spurred by the
fallout from the Enron bankruptcy, the contraction in volumes and revenues
continued during 2002. In response, the Company concentrated its crude oil
operation in its areas of strength, Central and South Texas, the onshore Gulf
Coast of Louisiana as well as Michigan and the Los Angeles Basin area of
California. Management believes the contraction of volumes has stabilized at
present levels. While volume growth is not anticipated for 2003, management
believes that profitability can be maintained within the present, more
manageable level of activity.

         Operating earnings varied from $15.4 million in 2000 to a $1.2 million
loss in 2001 and then returned to profitability of $8.9 million for 2002. Except
for the impact on inventory carrying values, operating earnings tend to be a
function of the trend in prices for prompt or current month deliveries as
opposed to average price received in a reporting period. During 2000, the crude
oil and natural gas prompt month price bias was trending up or generally
strengthening. With the high volume of activity at the time, the Company's
marketing operation produced a record profit. Market conditions reversed in 2001
and prompt month prices became exceptionally weak and normal margins narrowed.
Further, due to declining crude oil prices that were accelerated by the events
of September 11, 2001, the Company recognized approximately $7.2 million in
charges related to crude oil inventory liquidations and valuation write-downs.
Operating earnings for 2001 were also adversely impacted by a $1.5 million bad
debt provision resulting from the Enron bankruptcy. These items were partially
offset by a $5 million gain recognized in 2001 upon the sale of a crude oil
pipeline.

         For 2002, market conditions for crude oil reversed again with prices
trending upward due to Iraqi war fears and production problems in Venezuela.
This caused a significant prompt month premium and led to increased margins.
With respect to inventory values, domestic crude oil prices rose from the $19
per barrel range at year-end 2001 to the $30 range by year-end 2002. As part of
the Company's strategy to reduce its exposure to price fluctuation, during the
first quarter of 2002, the Company chose to liquidate lower priced inventory
into a relatively high value market which increased operating margins by $1.1
million. Going into 2003, prices have remained strong and as of December 31,
2002, the Company held approximately 108,000 barrels of crude oil inventory
valued at approximately $29.45 per barrel.

         Of particular significant effect on 2002 operating earnings was the
earning of fee income totaling $2,433,000 during the first six months of 2002.
This fee originated pursuant to the terms of the agreement to dissolve the
Williams-Gulfmark joint venture. Effective with November 2001 business, the
Company began to earn fees approximating $400,000 per month based on the
quantity of crude oil being purchased by the former co-venture participant in
the offshore Gulf of Mexico region. Unfortunately, effective with July 2002
business, credit constraints caused the former venture participant to
substantially curtail and ultimately cease its purchases of the crude oil in the
region. As a result, the Company recorded no fee income during the remainder of
2002 and no such fee is anticipated in future periods. The Company and the
co-venture participant continue to cooperate in the final wind-down and
settlement of open trade account items. As of December 31, 2002 the venture's
remaining trade accounts due totaled approximately $2.4 million and trade
accounts payable totaled approximately $5.2 million. As the venture either
collects or funds cash proceeds in settlement of such accounts, the Company will
receive or pay its pro-rata 50 percent share of such cash proceeds or
requirements. See also Note (11) of the Notes to Consolidated Financial
Statements.

                                      II-4
<PAGE>

                 -  Transportation

         The transportation segment continued to face a generally stagnant
marketplace in 2002, as has been the situation since the second quarter of 2000.
Revenues and operating earnings were as follows (in thousands):

<TABLE>
<CAPTION>
                                              2002                      2001                    2000
                                   -------------------------   ------------------------      ----------
                                     Amount        Change(1)     Amount       Change(1)        Amount
                                     ------        ---------     ------       ---------        ------
<S>                                <C>             <C>         <C>            <C>            <C>
Revenues......................     $   36,406         10%      $   33,149        (7%)        $   35,824

Operating Earnings............     $    2,142        103%      $    1,053       (55%)        $    2,311

Depreciation..................     $    1,838         11%      $    1,660        13%         $    1,471
</TABLE>

-----------------

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

         Results from the transportation segment are closely tied to trends for
the United States economy in general and more specifically, to the domestic
petrochemical industry. As a common carrier transporter of bulk liquid
chemicals, demand for the Company's services is closely tied to the economic
activity of domestic manufacturers of petrochemicals. A weakened U.S. economy, a
relatively strong dollar that reduces chemical exports and high natural gas
feedstock costs have all served to suppress demand in recent years.

         Based on its current infrastructures, the Company's transportation
segment is designed to maximize efficiency and earnings at a level of revenues
approaching $42 million per year. When profitable demand is short of designed
capacity, earnings are reduced and become a function of the current level of
demand and the Company's ability to control costs. Because of the fixed cost
component of operating expenses, operating earnings when expressed as a
percentage change will increase or decrease relatively faster than the rate of
increase or decrease existing for revenues.

         To counter current conditions, the Company has attempted to expand
market share and focus on cost control. There have been a limited number of
workforce reductions and expenditures on equipment were for replacement items
during 2001 and 2002. The Company's efforts to contain cost however, were offset
by a $1.1 million increase in insurance expense for the transportation segment.
In recent years, the tank truck industry has seen a large volume of
consolidation through mergers and acquisitions. Given current conditions for the
industry, the Company anticipates further industry consolidation as less
financially secure competitors fail or are acquired. This should reduce future
competition. When the U.S. economy improves and chemical demand resumes, the
Company anticipates being well-positioned to capitalize on new opportunities.

                                      II-5
<PAGE>

                 -  Oil and Gas

         Oil and gas segment revenues and operating earnings are primarily
derived from crude oil and natural gas production volumes and prices.
Comparative amounts are as follows (in thousands):

<TABLE>
<CAPTION>
                                                       2002            2001             2000
                                                     --------        --------         --------
<S>                                                  <C>             <C>              <C>
Revenues....................................         $  4,750        $  6,111         $  6,059

Operating Earnings (Loss)...................         $   (633)       $    693         $  1,624

Depreciation and Depletion..................         $  2,116        $  2,456         $  2,435
</TABLE>

Production volumes and price information is as follows:

<TABLE>
<CAPTION>
                                                            2002               2001                2000
                                                     -----------------   ----------------    ---------------
<S>                                                  <C>                 <C>                 <C>
Production Volumes
   -   Crude Oil............................             55,000 bbls          64,000 bbls        62,000 bbls
   -   Natural Gas..........................          1,047,000 mcf        1,031,000 mcf      1,161,000 mcf

Average Price
  -    Crude Oil............................         $    26.10/bbl      $     27.08 /bbl    $    30.03 /bbl
  -    Natural Gas..........................         $     3.17/mcf      $      4.23/mcf     $     3.63/mcf
</TABLE>

         Oil and gas revenues and operating earnings for 2002 were reduced
primarily because of declining natural gas prices from an average of $4.23/mcf
in 2001 to $3.17/mcf in 2002. As between 2001 and 2000, improved average natural
gas prices were offset by reduced crude oil prices and a slight reduction in
natural gas sales volumes. An additional factor contributing to reduced earnings
were dry hole and other exploration expenses totaling $1,177,000 in 2002 as
compared to $821,000 for 2001 and $481,000 for 2000.

         During 2002, the oil and gas operation participated in the drilling of
twenty-one gross wells. Thirteen wells were successfully completed with eight
dry holes. In addition, three wells in process at year-end 2002 were
subsequently completed as producers. Year-end December 31, 2002 estimated oil
and gas reserves of 579,000 barrels and 7,480,000 mcf, respectively, reflected
an average decrease of three percent from the year-end 2001 estimate. Estimated
future net cash flow before income taxes from oil and gas properties was
increased, however, from $16,989,000 at year-end 2001 to $31,385,000 at year-end
2002. This increase resulted from current price improvements, most notably
natural gas which was valued at $2.34 per unit for the year-end 2001 reserve
estimate versus $4.20 per unit for the year-end 2002 reserve valuation.

         One of the successful wells drilled in 2002 was on the Eagle Lake
Prospect in Wharton County, Texas. This well is currently producing
approximately 4,500 mcf of natural gas and 150 barrels of crude oil per day with
the Company holding a 10 percent working interest. The Company also resumed
activity in the Austin Chalk trend of Central Texas participating in the
successful re-entry of one well that is currently producing approximately 500
mcf of natural gas and 140 barrels of crude oil per day. The Company holds a
nine percent working interest in the Austin Chalk well and a second well on this
same unit was successfully drilled in 2003. A total of ten Austin Chalk wells
are budgeted for 2003.

                                      II-6
<PAGE>

         In the Elm Grove Field of Bossier Parish, Louisiana, development
efforts also continued. Three wells were successfully drilled and completed in
2002 with four wells anticipated for 2003. The wells in Elm Grove Field are low
risk development wells, designed to deplete undrained reserves. In Fort Bend
County, Texas the Company has numerous prospects identified within the Frio and
Yegua intervals. Four shallow wells were drilled in 2002 with three successful
wells yielding combined production totaling over 4,000 mcf of natural gas and
100 barrels of crude oil per day. A fifth well was spud in 2003 and is currently
being completed. A total of nine shallow Ft. Bend County wells are budgeted for
2003, and the Company holds a five percent working interest in this prospect
area.

         In Calcasieu Parish, Louisiana, the Company is participating in the
drilling of multiple prospects identified by a recent 3-D seismic survey. Two of
these prospects were drilling at year-end and both were successfully completed
in the first quarter of 2003. One of these wells sets up additional development
and establishes production in a zone that is approximately eight miles from
comparable production. Seven wells are budgeted for 2003 and the Company's
interest in this group of prospects is approximately 7.5 percent.

                 Outlook

         Through selective screening of both customers and transaction
profitability, the Company restored positive earnings to its marketing business
in 2002. Presently, the marketplace for energy continues to be closely tied to
credit availability as sellers of crude oil and natural gas seek financial
security above all other factors. With its strong balance sheet, the Company
believes its position is very stable and anticipates continued improvement. In
the long run, management believes the recent market changes will have a positive
impact on the Company's business. Leading up to the collapse of Enron, an
increase in the number of industry participants caused margins to shrink. As
substantial numbers of competitors have withdrawn, some improvements in margins
have resulted. This trend is especially noted in the wholesale distribution of
crude oil and natural gas. While generating significant marketing profits
remains a challenge, management believes the Company is one of the industry
survivors well positioned for the future.

         The economic outlook for the chemical industry, and hence the Company's
transportation operation promises little change for 2003. Some obstacles being
faced are high maintenance costs of an aging fleet, driver recruitment and
retention, insurance costs, fuel cost increases, heightened security concerns
and low competitive freight rates. Although not to the same degree but similar
to the Company's marketing business, there has recently been a "shake-out" among
chemical haulers as the industry struggles to maintain profitability. For 2003,
the Company must defend its customer base and hold down costs to remain
competitive.

         Furthering the Company's oil and gas exploration efforts in 2003, the
Company will be participating in two separate 3-D seismic surveys, among other
ongoing projects. One is a 95 square mile 3-D survey to be shot in Calcasieu
Parish Louisiana. The operator of this survey has an excellent track record of
success in this area's prolific Hackberry trend. Actual fieldwork on the survey
is expected to begin in March 2003 with the first well projected for spudding in
2004. The Company will also participate in a 90 square mile 3-D survey to be
shot in Alabama. This survey will evaluate 2-D prospect leads in the Smackover,
Eutaw, Tuscaloosa and Norphlet reservoirs. Initial drilling is planned for early
2004. Projected seismic expenditures totaling $1.5 million will be incurred and
expensed in 2003 associated with these two projects.

         One area to address is future general and administrative expense.
Because of the turmoil caused by Enron and others, and the related expansion of
securities rules and regulations, the Company

                                      II-7
<PAGE>

expended $1.6 million or 70 percent of pre-tax earnings on legal, consulting and
accounting fees during 2002 in response to these issues. While the Company
anticipates increased 2003 accounting costs in order to comply with the
Sarbanes-Oxley Act, overall, the amount of administrative fees should diminish
from the prior year level. Such projected savings may be offset however, should
insurance costs continue to rise. During 2002, the Company experienced an
average 49 percent increase in the cost of all forms of insurance. This brought
the total cost of insurance for 2002 to $7.5 million. Since the insurance
marketplace remains in turmoil, the Company cannot predict its overall future
level of costs.

         The Company has the following major objectives for 2003:

                  -    Increase marketing operating earnings by 10 percent to
                       $10 million.

                  -    Maintain transportation operating earnings of at least $2
                       million.

                  -    Continue exploration efforts to grow the oil and gas
                       reserve base by 15 percent; however, 2003 earnings will
                       be impacted by the expensing of $1.5 million in planned
                       seismic expenditures.

                  -    Reduce general and administrative expenses by 12 percent,
                       or $1 million.

LIQUIDITY AND CAPITAL RESOURCES

         During 2002, the Company's cash flow from operations totaled
$18,694,000. Such funds were utilized to make $4,622,000 in capital expenditures
with the remaining $14.1 million of cash flow from operations used to boost cash
reserves and generally improve liquidity.

                  Banking Relationships

         The Company's primary bank loan agreement, with Bank of America,
provides for two separate lines of credit with interest at the bank's prime rate
minus 1/4 of 1 percent. The working capital loan provides for borrowings up to
$7,500,000 based on 80 percent of eligible accounts receivable and 50 percent of
eligible inventories. Available capacity under the line is calculated monthly
and as of December 31, 2002 was established at $7,500,000. The oil and gas
production loan provides for flexible borrowings subject to a borrowing base
established semi-annually by the bank. The borrowing base was established at
$4,000,000 as of December 31, 2002. The line of credit loans are scheduled to
expire on October 29, 2004, with the then present balance outstanding converting
to a term loan payable in 8 equal quarterly installments. As of December 31,
2002, bank debt outstanding under the Company's two revolving credit facilities
totaled $11,475,000.

         The Company's Gulfmark Energy, Inc. subsidiary maintains a separate
banking relationship with BNP Paribas in order to support its crude oil
purchasing activities. In addition to providing up to $40 million in letters of
credit, the facility also finances up to $6 million of crude oil inventory and
certain accounts receivable associated with crude oil sales. Such financing is
provided on a demand note basis with interest at the bank's prime rate plus 1
percent. As of December 31, 2002, the Company had $1.5 million of eligible
borrowing capacity under this facility. No working capital advances were
outstanding as of December 31, 2002. Letters of credit outstanding under this
facility totaled approximately $13.7 million as of December 31, 2002. BNP
Paribas has the right to discontinue the issuance of letters of credit under
this facility without prior notification to the Company.

                                      II-8
<PAGE>

         The Company's Adams Resources Marketing subsidiary also maintains a
separate banking relationship with BNP Paribas in order to support its natural
gas purchasing activities. In addition to providing up to $25 million in letters
of credit, the facility finances up to $4 million of general working capital
needs on a demand note basis. No working capital advances were outstanding under
this facility as of December 31, 2002. Letters of credit outstanding under this
facility totaled approximately $4.3 million as of December 31, 2002. Under this
facility, BNP Paribas has the right to discontinue the issuance of letters of
credit without prior notification to the Company.

         Management maintains that the greatest uncertainty facing a marketing
company is the banking community's continued willingness to support commodity
credit facilities. The events leading to Enron's bankruptcy support this belief.
The Company remains positioned to operate the commodity portions of its business
without bank support should such a need develop.

                  Off-balance Sheet Arrangements

         The Company maintains no off-balance sheet arrangements other than
certain operating lease arrangements to provide tractor and trailer equipment
for the Company's truck fleet. All such operating lease commitments qualify for
off-balance sheet treatment as provided by Statement of Financial Accounting
Standards No. 13, "Accounting for Leases". See Note (7) of the Notes to
Consolidated Financial Statements.

                  Contractual Cash Obligations

         In addition to its banking relationships and obligations, the Company
enters into certain operating leasing arrangements for tractors, trailers,
office space and other equipment and facilities. A summary of contractual debt
and lease obligations is as follows (in thousands):

<TABLE>
<CAPTION>
                                                              Payment Period
                          ------------------------------------------------------------------------------
                              2003         2004          2005         2006        2007       Thereafter        Total
                          -----------    ---------     --------     ---------   --------    ------------    ------------
<S>                       <C>            <C>           <C>          <C>         <C>         <C>             <C>
Long-term debt........    $         -    $   1,434     $  5,738     $   4,303   $      -    $          -    $     11,475
Operating leases......          3,965        2,674        1,133           420        206             250           8,648
                          -----------    ---------     --------     ---------   --------    ------------    ------------
    Total                 $     3,965    $   4,108     $  6,871     $   4,723   $    206    $        250    $     20,123
                          ===========    =========     ========     =========   ========    ============    ============
</TABLE>

         In addition to its bank debt and lease financing obligations, the
Company is also committed to purchase certain quantities of crude oil and
natural gas in connection with its marketing activities. Such commodity purchase
obligations are the basis for commodity sales, which generate the cash flow
necessary to meet such purchase obligations. See also Note (7) of the Notes to
Consolidated Financial Statements. Approximate commodity purchase obligations as
of December 31, 2002 are as follows: (In thousands)

<TABLE>
<CAPTION>
                                 January       Remaining
                                  2003           2003              2004         2005     Thereafter     Total
                              ------------    -----------       ---------    ---------   -----------   --------
<S>                           <C>             <C>               <C>          <C>         <C>           <C>
Crude Oil..................   $    134,769    $    39,875       $   2,780    $   1,143   $         -   $178,567
Natural Gas................         39,935          6,812               -            -             -     46,747
Refined Products...........            144              -               -            -             -        144
                              ------------    -----------       ---------    ---------   -----------   --------
                              $    174,848    $    46,687       $   2,780    $   1,143   $         -   $225,458
                              ============    ===========       =========    =========   ===========   ========
</TABLE>

                                      II-9
<PAGE>

                  Investment Activities

         During 2002, the Company invested approximately $2,561,000 in oil and
gas projects, $1,911,000 for replacement equipment for its petrochemical
trucking fleet and $150,000 was invested in equipment for the Company's
marketing operations. Oil and gas exploration and development efforts continue,
and the Company plans to invest approximately $4.3 million toward such projects
in 2003 including $1.5 million of seismic costs to be expensed during the year.
An additional approximate $1.7 million is currently projected to be expended
toward purchasing transportation equipment as present lease financing
arrangements mature.

                  Insurance

         The marketplace for all forms of insurance has entered a period of
severe cost increases. In the past, during such cyclical periods, the Company
has seen severe cost increases to the point where desired levels of insurance
were either unavailable or unaffordable. The Company's primary insurance needs
are in the area of automobile and umbrella coverage for its trucking fleet and
medical insurance for employees. During 2002, the Company's insurance expense
totaled $7,498,000, a 49 percent increase over 2001. Based on insurance renewals
in 2002, the Company is anticipating further insurance increases for 2003. The
Company has no effective way to pass on such cost increases and any increase
will thus need to be absorbed by existing operations.

                  Competition

         In all phases of its operations, the Company encounters strong
competition from a number of entities. Many of these competitors possess and
employ financial and personnel resources substantially in excess of those which
are available to the Company. The Company faces competition principally in
establishing trade credit, pricing of available materials and quality of
service. In its oil and gas operation, the Company also competes for the
acquisition of mineral properties. The Company's marketing division competes
with major oil companies and other large industrial concerns that own or control
significant refining and marketing facilities. These major oil companies may
offer their products to others on more favorable terms than those available to
the Company. From time to time in recent years, there have been supply
imbalances for crude oil and natural gas in the marketplace. This in turn has
led to significant fluctuations in prices for crude oil and natural gas. As a
result, there is a high degree of uncertainty regarding both the future market
price for crude oil and natural gas and the available margin spread between
wholesale acquisition costs and sales realization.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

                  Fair Value Accounting

         As an integral part of its marketing operation, the Company enters into
certain forward commodity contracts that are required to be recorded at fair
value in accordance with Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" and related
accounting pronouncements. Management believes this required accounting,
commonly called mark-to-market accounting creates variations in reported
earnings and the reported earnings trend. Under mark-to-market accounting,
significant levels of earnings are recognized in the period of contract
initiation rather than the period when the service is provided and title passes
from supplier to customer. As it affects the Company's operation, management
believes mark-to-market accounting impacts reported earnings and the
presentation of financial condition in three important ways.

                                     II-10
<PAGE>

         1.       Gross margins, derived from certain aspects of the Company's
                  ongoing business, are front-ended into the period in which
                  contracts are executed. While there is no particular pattern
                  to the timing of contract execution, it does tend to occur in
                  clusters during those periods of time when the Company's
                  end-user natural gas customers in New England perceive prices
                  to be advantageous. Meanwhile, personnel and other costs
                  associated with servicing accounts are expensed as incurred
                  during the period of physical product flow and title passage.

         2.       Mark-to-market earnings are calculated based on stated
                  contract volumes. One of the significant risks associated with
                  the Company's business is to convert stated contract or
                  planned volumes into actual physical commodity movement
                  volumes without a loss of margin. Again the planned profit
                  from such commodity contracts is bunched and front-ended into
                  one period while the risk of loss associated with the
                  difference between actual vs planned production or usage of
                  oil and gas falls in a subsequent period.

         3.       Cash flows, by their nature, match physical movements and
                  passage of title. Mark-to-market accounting, on the other
                  hand, creates a mismatch between reported earnings and cash
                  flows. This complicates and confuses the picture of stated
                  financial conditions and liquidity.

         The Company attempts to mitigate the above described risks by only
entering into contracts where current market quotes in actively traded, liquid
markets are available to determine the fair value of contracts. In addition,
substantially all of the Company's forward contracts are less than 18 months in
duration. However, the reader is cautioned to develop a full understanding of
how fair value or mark-to-market accounting creates differing reported results
relative to those which would be presented under conventional accrual
accounting.

                  Trade Accounts

         Accounts receivable and accounts payable typically represent the single
most significant assets and liabilities of the Company. Particularly within the
Company's energy marketing and oil and gas exploration and production
operations, there is a high degree of interdependence with and reliance upon
third parties, (including transaction counterparties) to provide adequate
information for the proper recording of amounts receivable or payable.
Substantially all such third parties are larger firms providing the Company with
the source documents for recording trade activity. It is commonplace for these
entities to retroactively adjust or correct such documents. This typically
requires the Company to either absorb, benefit from, or pass along such
corrections to another third party.

         Due to (a) the volume of transactions, (b) the complexity of
transactions and (c) the high degree of interdependence with third parties, this
is a difficult area to control and manage. The Company manages this process by
participating in a monthly settlement process with each of its counterparties.
Ongoing account balances are monitored monthly and the Company attempts to gain
the cooperation of such counterparties to reconcile outstanding balances. The
Company also places great emphasis on collecting cash balance due and paying
only bonafide properly supported claims. In addition, the Company maintains and
monitors its bad debt allowance. A degree of risk remains, however, simply due
to the custom and practices of the industry.

                                     II-11
<PAGE>

         Oil and Gas Reserve Estimate

         The value of capitalized cost of oil and gas exploration and production
related assets are dependent on underlying oil and gas reserve estimates.
Reserve estimates are based on many judgmental factors. The accuracy of reserve
estimates depends on the quantity and quality of geological data, production
performance data and reservoir engineering data, changed prices, as well as the
skill and judgment of petroleum engineers in interpreting such data. The process
of estimating reserves requires frequent revision of estimates (usually on an
annual basis) as additional information becomes available. Estimated future oil
and gas revenue calculations are also based on estimates by petroleum engineers
as to the timing of oil and gas production, and there is no assurance that the
actual timing of production will conform to or approximate such estimates. Also,
certain assumptions must be made with respect to pricing. The Company's
estimates assume prices will remain constant from the date of the engineer's
estimates, except for changes reflected under natural gas sales contracts. There
can be no assurance that actual future prices will not vary as industry
conditions, governmental regulation and other factors impact the market price
for oil and gas.

         The Company follows the successful efforts method of accounting, so
only costs (including development dry hole costs) associated with producing oil
and gas wells are capitalized. However, estimated oil and gas reserve quantities
are the basis for the rate of amortization under the Company units of production
method for depreciating, depleting and amortizing of oil and gas properties.
Estimated oil and gas reserve values also provide the standard for the Company's
periodic review of oil and gas properties for impairment.

                  Contingencies

         From time to time as incident to its operations, the Company becomes
involved in various accidents, lawsuits and/or disputes. Primarily as an
operator of an extensive trucking fleet, the Company is a party to motor vehicle
accidents, worker compensation claims or other items of general liability as
would be typical for the industry. In addition, the Company has extensive
operations that must comply with a wide variety of tax laws, environmental laws
and labor laws, among others. Should an incident occur, management will evaluate
the claim based on its nature, the facts and circumstances and the applicability
of insurance coverage. To the extent management believes that such event may
impact the financial condition of the Company, management will estimate the
monetary value of the claim and make appropriate accruals or disclosure as
provided in the guidelines of Statement of Financial Accounting Standards No. 5.

                  Revenue Recognition

         The Company's natural gas and crude oil marketing customers are
invoiced based on contractually agreed upon terms on a monthly basis. Revenue is
recognized in the month in which the physical product is delivered to the
customer. Where required, the Company also recognizes fair value or
mark-to-market gains and losses related to its natural gas and crude oil trading
activities. A detailed discussion of the Company's risk management activities is
included in Note (1) of the Notes to Consolidated Financial Statements.

         Customers of the Company's petroleum products marketing subsidiary are
invoiced and revenue is recognized in the period when the customer physically
takes possession and title to the product upon delivery at their facility.
Transportation customers are invoiced, and the related revenue is recognized as
the service is provided. Oil and gas revenue from the Company's interests in
producing wells is recognized as title and physical possession of the oil and
gas passes to the purchaser.

                                     II-12

<PAGE>

                  New Accounting Pronouncements

         In August 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses the
accounting and reporting for the impairment of disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" and Accounting Principals Board ("APB")
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." The objective of SFAS No. 144 is to
establish one accounting model for long-lived assets to be disposed of by sale
as well as resolve implementation issues related to SFAS No. 121. The Company
adopted SFAS No. 144 effective January 1, 2002 with no material impact on its
financial position or results of operations.

         In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations." The objective of SFAS No. 143 is to establish an
accounting model for accounting and reporting obligations associated with
retirement of tangible long-lived assets and associated retirement costs. This
Statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The Company intends to adopt SFAS No. 143
effective January 1, 2003. SFAS No. 143 requires that the fair value of a
liability for an asset's retirement obligation be recorded in the period in
which it is incurred and the corresponding cost capitalized by increasing the
carrying amount of the related long-lived asset. The liability is accreted to
its then present value each period, and the capitalized cost is depreciated over
the useful life of the related asset. If the liability is settled for an amount
other than the recorded amount, a gain or loss is recognized. The Company has
completed its assessment of SFAS No. 143. At December 31, 2002, the Company
estimates that the present value of its future Asset Retirement Obligations
("ARO") is approximately $663,000. The estimated cumulative effect of adoption
of SFAS No. 143 and the change in accounting principal will be a charge to net
income during the first quarter of 2003 of approximately $110,000 or $73,000 net
of taxes.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from
Extinguishment of Debt" and an amendment of that statement, SFAS No. 64,
"Extinguishment of Debt Made to Satisfy Sinking-Fund Requirements." SFAS No. 145
also rescinds SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers."
SFAS No. 145 also amends SFAS No. 13, "Accounting for Leases," to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. SFAS No. 145 also
amends other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. The provisions were effective for various times throughout 2002 and
did not have a material effect on the Company's results of operations.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally EITF Issue No. 94-3. The Company will adopt the provisions
of SFAS No. 146 for restructuring activities initiated after December 31, 2002.
SFAS No. 146 requires that the liability for costs associated with an exit or
disposal activity be recognized when the liability is incurred. Under Issue No.
94-3, a liability for an exit cost was recognized at the date of commitment to
an exit plan. SFAS No. 146 also establishes that the liability should initially
be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the
timing of recognizing

                                      II-13
<PAGE>

future restructuring costs as well as the amounts recognized. At this time, the
Company does not expect the adoption of SFAS No. 146 will have a material impact
on its financial position, results of operation or cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is exposed to market risk, including adverse changes in
interest rates and commodity prices.

                  Interest Rate Risk

         Total long-term debt at December 31, 2002 included $11,475,000 of
floating rate debt. As a result, the Company's annual interest costs fluctuate
based on interest rate changes. Because the interest rate on the Company's
long-term debt is a floating rate, the fair value approximates carrying value as
of December 31, 2002. A hypothetical 10 percent adverse change in the floating
rate would not have had a material effect on the Company's results of operations
for the fiscal year ended December 31, 2002.

                  Commodity Price Risk

         The Company's major market risk exposure is in the pricing applicable
to its marketing and production of crude oil and natural gas. Realized pricing
is primarily driven by the prevailing spot prices applicable to oil and gas.
Commodity price risk in the Company's marketing operations represents the
potential loss that may result from a change in the market value of an asset or
a commitment. From time to time, the Company enters into forward contracts to
minimize or hedge the impact of market fluctuations on its purchases of crude
oil and natural gas. The Company may also enter into price support contracts
with certain customers to secure a floor price on the purchase of certain
supply. In each instance, the Company locks in a separate matching price support
contract with a third party in order to minimize the risk of these financial
instruments. Substantially all forward contracts fall within a 6-month to 1-year
term with no contracts extending longer than three years in duration. The
Company monitors all commitments and positions and endeavors to maintain a
balanced portfolio.

         Certain forward contracts are recorded at fair value, depending on
management's assessments of numerous accounting standards and positions that
comply with generally accepted accounting principles. The undiscounted fair
value of such contracts is reflected on the Company's balance sheet as risk
management assets and liabilities. The revaluation of such contracts is
recognized on a net basis in the Company's results of operations. Current market
price quotes from actively traded liquid markets are used in all cases to
determine the contracts' undiscounted fair value. Regarding net risk management
assets, 100 percent of presented values as of December 31, 2002 and 2001 were
based on readily available market quotations. Risk management assets and
liabilities are classified as short-term or long-term depending on contract
terms. The estimated future net cash inflow based on year-end market prices is
$1,768,000 for 2003 and $24,000 for 2004. The estimated future cash inflow
approximates the net fair value recorded in the Company's risk management assets
and liabilities.

                                      II-14
<PAGE>

         The following table illustrates the factors impacting the change in the
net value of the Company's risk management assets and liabilities for the year
ended December 31, 2002. (In thousands)

<TABLE>
<CAPTION>
                                                                      2002
                                                                    --------
<S>                                                                 <C>
Net fair value on January 1,                                        $ 14,523
Activity during 2002
  -  Cash received from settled contracts                            (14,192)
  -  Net realized gain from prior years' contracts                       518
  -  Net unrealized gain from prior years' contracts                     183
  -  Net unrealized gain from current year contracts                     760
                                                                    --------
Net fair value on December 31,                                      $  1,792
                                                                    ========
</TABLE>

         Historically, prices received for oil and gas production have been
volatile and unpredictable. Price volatility is expected to continue. From
January 1, 2001 through December 31, 2002 natural gas price realizations ranged
from a monthly low of $1.96 per Mcf to a monthly high of $9.10 per Mcf. Oil
prices ranged from a low of $17.55 per barrel to a high of $31.71 per barrel
during the same period. A hypothetical 10 percent adverse change in average
natural gas and crude oil prices, assuming no changes in volume levels, would
have reduced earnings by approximately $475,000 and $611,000, respectively, for
the comparative years ended December 31, 2002 and 2001.

                                      II-15
<PAGE>

ITEM 8. FINANCIAL STATEMENTS

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                     Page
                                                                                     -----
<S>                                                                                  <C>
REPORT OF INDEPENDENT AUDITORS..................................................     II-17

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS........................................     II-18

FINANCIAL STATEMENTS:

            Consolidated Balance Sheet as of
               December 31, 2002 and 2001.......................................     II-19

            Consolidated Statement of Operations for
               the Years Ended December 31, 2002,
               2001 and 2000....................................................     II-20

            Consolidated Statement of Shareholders'
               Equity for the Years Ended
               December 31, 2002, 2001 and 2000.................................     II-21

            Consolidated Statement of Cash Flows
               for the Years Ended December 31,
               2002, 2001 and 2000..............................................     II-22

            Notes to Consolidated Financial Statements..........................     II-23
</TABLE>

                                      II-16
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Shareholders of Adams Resources & Energy, Inc.:

         We have audited the accompanying consolidated balance sheet of Adams
Resources and Energy, Inc. and subsidiaries (the "Company") as of December 31,
2002 and the related consolidated statements of operations, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements based on our audit. The consolidated
financial statements of the Company for the year ended December 31, 2001 and
2000 were audited by other auditors who have ceased operations. Those auditors
expressed an unqualified opinion on those financial statements in their report
dated March 21, 2002. These auditors reported on such financial statements prior
to the restatement discussed in Note 9.

         We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidences supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

         In our opinion, consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
2002 and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.

         As discussed above, the financial statements of Adams Resources and
Energy, Inc. and subsidiaries as of December 31, 2001, and for the year then
ended were audited by other auditors who have ceased operations. As described in
Note 9, the Company changed its classification of the gain related to the sale
of an operating asset in 2001, and the amounts in the 2001 financial statements
relating to the change have been restated. We audited the adjustment that was
applied to restate the consolidated statement of operations presentation
reflected in the 2001 financial statements. Our procedures included (a) agreeing
the original cost of the asset purchase to the asset purchase agreement (b)
recalculating the net book value of the assets on the date of sale, (c) agreeing
the cash received from the sale to third party documents and (d) recalculating
the resulting gain. In our opinion, the adjustment is appropriate and has been
properly applied. However, we were not engaged to audit, review, or apply any
procedures to the 2001 financial statements of the Company other than with
respect to the adjustment and, accordingly, we do not express an opinion or any
other form of assurance on the 2001 financial statements taken as a whole.

         As discussed in Note 1 to the consolidated financial statements,
effective January 1, 2001, the Company changed its method of accounting for
derivative instruments.

DELOITTE & TOUCHE LLP
Houston, Texas
March 21, 2003

                                      II-17
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Shareholders of Adams Resources & Energy, Inc.:

We have audited the accompanying consolidated balance sheet of Adams Resources &
Energy, Inc. (a Delaware corporation) and subsidiaries as of December 31, 2001
and 2000, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Adams Resources &
Energy, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States.

                                                ARTHUR ANDERSEN LLP

Houston, Texas
March 21, 2002

This is a copy of the audit report previously issued by Arthur Andersen LLP in
connection with our filing on Form 10-K for the year ended December 31, 2001.
This audit report has not been reissued by Arthur Andersen LLP in connection
with this filing on Form 10-K.

                                      II-18
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                             -----------------------
                                                                                2002         2001
                                                                             ----------    ---------
<S>                                                                          <C>           <C>
                                   ASSETS
CURRENT ASSETS:
   Cash and cash equivalents..........................................       $   27,262    $  14,177
   Accounts receivable, net of allowance for doubtful
      accounts of $2,291 and $2,193, respectively.....................          133,250      138,926
   Inventories........................................................            6,591       10,004
   Risk management receivables........................................            8,220       24,700
   Income tax receivable..............................................              382        3,930
   Prepayments........................................................            3,349        7,568
                                                                             ----------    ---------
           Total current assets.......................................          179,054      199,305
                                                                             ----------    ---------

PROPERTY AND EQUIPMENT:
   Marketing..........................................................           19,042       20,784
   Transportation.....................................................           18,799       17,849
   Oil and gas (successful efforts method)............................           37,479       35,456
   Other..............................................................               99           99
                                                                             ----------    ---------
                                                                                 75,419       74,188
   Less -Accumulated depreciation, depletion
              and amortization........................................          (53,115)     (50,289)
                                                                             ----------    ---------
                                                                                 22,304       23,899
                                                                             ----------    ---------

OTHER ASSETS:
   Risk management assets.............................................              346        3,646
   Other assets.......................................................              416          177
                                                                             ----------    ---------
                                                                             $  202,120    $ 227,027
                                                                             ==========    =========

                 LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Accounts payable...................................................       $  137,244    $ 152,153
   Current portion of long-term debt..................................                -        1,000
   Risk management payables...........................................            6,452       12,028
   Accrued and other liabilities......................................            4,066        3,790
                                                                             ----------    ---------
           Total current liabilities..................................          147,762      168,971

LONG-TERM DEBT                                                                   11,475       11,475

OTHER LIABILITIES:
   Deferred taxes and other...........................................            2,461        5,590
   Risk management liabilities........................................              322        1,795
                                                                             ----------    ---------
                                                                                162,020      187,831
                                                                             ----------    ---------

COMMITMENTS AND CONTINGENCIES (NOTE 7)

SHAREHOLDERS' EQUITY:
   Preferred stock, $1.00 par value, 960,000
      shares authorized, none outstanding.............................                -            -
   Common stock, $.10 par value, 7,500,000 shares
      authorized, 4,217,596 issued and outstanding....................              422          422
   Contributed capital................................................           11,693       11,693
   Retained earnings..................................................           27,985       27,081
                                                                             ----------    ---------
           Total shareholders' equity.................................           40,100       39,196
                                                                             ----------    ---------
                                                                             $  202,120    $ 227,027
                                                                             ==========    =========
</TABLE>

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

                                      II-19
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                     Years Ended December 31,
                                                                             -------------------------------------
                                                                                2002          2001         2000
                                                                             ----------    ----------   ----------
<S>                                                                          <C>           <C>          <C>
REVENUES:
     Marketing........................................................       $2,282,161    $4,677,982   $6,980,277
     Transportation...................................................           36,406        33,149       35,824
     Oil and gas......................................................            4,750         6,111        6,059
                                                                             ----------    ----------   ----------
                                                                              2,323,317     4,717,242    7,022,160
                                                                             ----------    ----------   ----------
COSTS AND EXPENSES:
     Marketing........................................................        2,271,664     4,676,612    6,962,066
     Transportation...................................................           32,426        30,436       32,042
     Oil and gas......................................................            3,267         2,952        1,983
     General and administrative.......................................            8,173         7,894        6,463
     Depreciation, depletion and amortization.........................            5,565         6,726        6,745
                                                                             ----------    ----------   ----------
                                                                              2,321,095     4,724,620    7,009,299
                                                                             ----------    ----------   ----------

OPERATING EARNINGS (LOSS).............................................            2,222        (7,378)      12,861

OTHER INCOME (EXPENSE):
     Interest income..................................................              115           444        1,233
     Interest expense.................................................             (121)         (128)        (172)
                                                                             ----------    ----------   ----------

EARNINGS (LOSS) BEFORE INCOME TAXES...................................            2,216        (7,062)      13,922

INCOME TAX PROVISION (BENEFIT):
     Current..........................................................            3,839        (3,930)       3,925
     Deferred.........................................................           (3,075)        1,492        1,157
                                                                             ----------    ----------   ----------
                                                                                    764        (2,438)       5,082
                                                                             ----------    ----------   ----------
Earnings (loss) before cumulative effect of
     accounting change................................................            1,452        (4,624)       8,840
Cumulative effect of accounting change,
     net of taxes.....................................................                -            55            -
                                                                             ----------    ----------   ----------

NET EARNINGS (LOSS)...................................................       $    1,452    $   (4,569)  $    8,840
                                                                             ==========    ==========   ==========

EARNINGS (LOSS) PER SHARE:

     Before cumulative effect of accounting change....................              .34         (1.09)        2.10
     Cumulative effect of accounting change...........................                -           .01            -
                                                                             ----------    ----------   ----------
Basic earnings (loss) per share.......................................       $      .34    $    (1.08)  $     2.10
                                                                             ==========    ==========   ==========
DIVIDENDS PER COMMON SHARE............................................       $      .13    $      .13   $      .13
                                                                             ==========    ==========   ==========
</TABLE>

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

                                      II-20
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                             TOTAL
                                                                      COMMON    CONTRIBUTED   RETAINED   SHAREHOLDERS'
                                                                      STOCK       CAPITAL     EARNINGS      EQUITY
                                                                     --------   -----------   --------   -------------
<S>                                                                  <C>        <C>           <C>        <C>
BALANCE, January 1, 2000..........................................   $    422   $    11,693   $ 23,906   $      36,021
   Net earnings...................................................          -             -      8,840           8,840
   Dividends paid on common stock.................................          -             -       (548)           (548)
                                                                     --------   -----------   --------   -------------
BALANCE, December 31, 2000........................................        422        11,693     32,198          44,313
   Net earnings (loss)............................................          -             -     (4,569)         (4,569)
   Dividends paid on common stock.................................          -             -       (548)           (548)
                                                                     --------   -----------   --------   -------------
BALANCE, December 31, 2001........................................        422        11,693     27,081          39,196
   Net earnings...................................................          -             -      1,452           1,452
   Dividends paid on common stock.................................          -             -       (548)           (548)
                                                                     --------   -----------   --------   -------------
BALANCE, December 31, 2002.......................................    $    422   $    11,693   $ 27,985   $      40,100
                                                                     ========   ===========   ========   =============
</TABLE>

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

                                      II-21
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                           -----------------------------------
                                                                              2002        2001         2000
                                                                           ---------    ---------    ---------
<S>                                                                        <C>          <C>          <C>
CASH PROVIDED BY OPERATIONS:
  Net earnings (loss).................................................     $   1,452    $  (4,569)   $   8,840
  Items of income not requiring (providing) cash -
    Depreciation, depletion and amortization..........................         5,565        6,726        6,745
    Gains on property sales...........................................          (447)      (5,132)         (27)
    Impairment of non-producing oil and gas properties................           537            -            -
    Other, net........................................................          (292)         470          592
  Decrease (increase) in accounts receivable..........................         5,676      168,311      (94,649)
  Decrease (increase) in inventories..................................         3,413       25,449      (13,978)
  Decrease (increase) in risk management assets.......................        12,731      (11,722)        (296)
  Decrease (increase) in tax receivable...............................         3,548       (3,930)           -
  Decrease (increase) in prepayments..................................         4,219       (4,964)        (969)
  Increase (decrease) in accounts payable.............................       (14,909)    (193,350)     109,022
  Increase (decrease) in accrued liabilities..........................           276       (2,336)        (295)
  Increase (decrease) in deferred taxes...............................        (3,075)       1,492        1,157
                                                                           ---------    ---------    ---------
    Net cash provided by (used in) operating activities...............        18,694      (23,555)      16,142
                                                                           ---------    ---------    ---------

INVESTING ACTIVITIES:
  Property and equipment additions....................................        (4,622)      (3,591)      (5,684)
  Proceeds from property sales........................................           561        5,156           93
                                                                           ---------    ---------    ---------
         Net cash (used in) provided by investing activities..........        (4,061)       1,565       (5,591)
                                                                           ---------    ---------    ---------

FINANCING ACTIVITIES:
  Borrowings..........................................................             -          575        2,000
  Repayment of debt...................................................        (1,000)           -            -
  Dividend payments...................................................          (548)        (548)        (548)
                                                                           ---------    ---------    ---------
      Net cash (used in) provided by financing activities.............        (1,548)          27        1,452
                                                                           ---------    ---------    ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................        13,085      (21,963)      12,003

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR........................        14,177       36,140       24,137
                                                                           ---------    ---------    ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR..............................     $  27,262    $  14,177    $  36,140
                                                                           =========    =========    =========
</TABLE>

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

                                      II-22
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Principles of Consolidation

         The accompanying consolidated financial statements include the accounts
of Adams Resources & Energy, Inc., a Delaware corporation, and its wholly owned
subsidiaries (the "Company") after elimination of all significant intercompany
accounts and transactions. In addition, these statements include the Company's
share of oil and gas joint interests using pro-rata consolidation and its
interest in a 50% owned crude oil marketing joint venture using the equity
method of accounting. See Note (11) of Notes to Consolidated Financial
Statements.

 Nature of Operations

         The Company is engaged in the business of crude oil, natural gas and
petroleum products marketing, as well as tank truck transportation of liquid
chemicals and oil and gas exploration and production. Its primary area of
operation is within a 500 mile radius of Houston, Texas.

 Cash and Cash Equivalents

         Cash and cash equivalents include any treasury bill, commercial paper,
money market fund or federal fund with a maturity of 30 days or less. Included
in the cash balance at December 31, 2002 and 2001 is a deposit of $2 million to
collateralize the Company's month-to-month crude oil letter of credit facility.
See Note (2) of Notes to Consolidated Financial Statements.

 Inventories

         Crude oil and petroleum product inventories are carried at the lower of
cost or market. Due to declining prices for crude oil during 2001, the Company
recognized a combined $7.2 million in charges related to crude oil inventory
liquidations and valuation write-downs during 2001. Petroleum products inventory
includes gasoline, lubricating oils and other petroleum products purchased for
resale and are valued at cost determined on the first-in, first-out basis, while
crude oil inventory is valued at average cost. Materials and supplies are
included in inventory at specific cost, with a valuation allowance provided if
needed. At December 31, 2002 natural gas inventories are carried at average
cost. As of December 31, 2001, natural gas inventories were recorded at market
which was less than cost. Components of inventory are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                                           ----------------------
                                                                              2002         2001
                                                                           ---------    ---------
<S>                                                                        <C>          <C>
Crude oil.............................................................     $   3,062    $   6,806
Petroleum products....................................................         1,919        1,690
Materials and supplies................................................           664          683
Natural gas...........................................................           946          825
                                                                           ---------    ---------
                                                                           $   6,591    $  10,004
                                                                           =========    =========
</TABLE>

 Property and Equipment

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

                                      II-23
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Oil and gas exploration and development expenditures are accounted for
in accordance with the successful efforts method of accounting. Direct costs of
acquiring developed or undeveloped leasehold acreage, including lease bonus,
brokerage and other fees, are capitalized. Exploratory drilling costs are
initially capitalized until the properties are evaluated and determined to be
either productive or nonproductive. If an exploratory well is determined to be
nonproductive, the capitalized costs of drilling the well are charged to
expense. Costs incurred to drill and complete development wells, including dry
holes, are capitalized.

         Producing oil and gas leases, equipment and intangible drilling costs
are depleted or amortized over the estimated recoverable reserves using the
units-of-production method. Other property and equipment is depreciated using
the straight-line method over the estimated average useful lives of three to
twenty years for marketing, three to fifteen years for transportation and ten to
twenty years for all others.

         The Company is required to periodically review long-lived assets for
impairment whenever there is evidence that the carrying value of such assets may
not be recoverable. This consists of comparing the carrying value of the asset
with the asset's expected future undiscounted cash flows without interest costs.
Estimates of expected future cash flows represent management's best estimate
based on reasonable and supportable assumptions. Proved oil and gas properties
are reviewed for impairment on a field-by-field basis. Any impairment recognized
is permanent and may not be restored. Due to relatively high costs incurred in
relation to oil and gas reserve additions, a $492,000 impairment provision on
producing oil and gas properties was recognized and included in DD&A for 2002.
In addition, management also evaluated the carrying value of certain
non-producing properties and deemed them impaired for lack of drilling activity.
Accordingly, a $537,000 impairment provision on non-producing properties was
recorded in 2002. In 2001, declining oil and natural gas prices during the
fourth quarter resulted in a $1,062,000 asset impairment charge being recorded
and included in DD&A for the year.

 Revenue Recognition

         The Company's natural gas and crude oil marketing customers are
invoiced based on contractually agreed upon terms on a monthly basis. Revenue is
recognized in the month in which the physical product is delivered to the
customer. Where required, the Company also recognizes fair value or
mark-to-market gains and losses related to its natural gas and crude oil trading
activities. A detailed discussion of the Company's risk management activities
are included later in this footnote.

         Customers of the Company's petroleum products marketing subsidiary are
invoiced and revenue is recognized in the period when the customer physically
takes possession and title to the product upon delivery at their facility.
Transportation customers are invoiced, and the related revenue is recognized as
the service is provided. Oil and gas revenue from the Company's interests in
producing wells is recognized as title and physical possession of the oil and
gas passes to the purchaser.

                                      II-24
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Statement of Cash Flows

         Interest paid totaled $121,000, $128,000 and $172,000 during the years
ended December 31, 2002, 2001 and 2000, respectively. Net income taxes paid
during these same periods totaled $465,000, $322,000 and $2,814,000,
respectively. Federal tax refunds received during 2002 totaled $2,779,000. There
were no significant non-cash investing or financing activities in any of the
periods reported.

 Earnings Per Share

         The Company computes and presents earnings per share in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", which requires the presentation of basic earnings per share and diluted
earnings per share for potentially dilutive securities. Earnings per share are
based on the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. The weighted average number of shares
outstanding averaged 4,217,596 for 2002, 2001 and 2000. There were no
potentially dilutive securities during 2002, 2001 and 2000.

 Use of Estimates

         The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Examples of significant estimates used in the accompanying
consolidated financial statements include the accounting for depreciation,
depletion and amortization, income taxes, contingencies and price risk
management activities.

 Price Risk Management Activities

         On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities", as amended by SFAS No. 137 and No. 138. The statement
establishes accounting and reporting standards that require every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded on the balance sheet as either an asset or liability
measured at its fair value, unless the derivative qualifies and has been
designated as a normal purchase or sale. Changes in fair value are recognized
immediately in earnings, unless the derivatives qualify for and the Company
elects cash flow hedge accounting, then the effective portion of the change in
fair value will be deferred in other comprehensive income until the related
hedge item impacts earnings. As of January 1, 2001, based on assessment of
Company contracts as required under SFAS No. 133, the Company recorded a net
risk management income of $55,000 (net of $29,000 of income taxes), as a
cumulative affect of change in accounting principle. As of January 1, 2001 and
for the years ended December 31, 2002 and 2001, the Company had no contracts
designated for hedge accounting under SFAS 133.

                                      II-25
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         In October 2002, the Financial Accounting Standards Board's Emerging
Issues Task Force ("EITF") amended and rescinded certain prior consensus related
to the Accounting for Contracts Involved in Energy Trading and Risk Management
Activities and issued a new consensus EITF 02-03. The new EITF consensus
requires: (i) all mark-to-market gains and losses on trading contracts be shown
net in the income statement whether or not settled physically and (ii) precludes
mark-to-market accounting for non-SFAS No. 133 derivatives. The October EITF
consensus is effective October 26, 2002 for new contracts, and for existing
contracts, the consensus becomes effective with physical periods beginning after
December 15, 2002. The Company adopted EITF 02-03 effective October 26, 2002 for
any new contracts and effective January 1, 2003 for any existing contracts. Upon
adoption, the latest consensus requires restatement to historical cost for any
contracts that no longer qualify for mark-to-market treatment. Such restatement
is recorded as a cumulative effect of an accounting change and comparative
financial statements for prior periods must be reclassified to conform to the
new consensus. In the Company's case, however, management does not believe it
has any contracts requiring restatement to historical cost. Effective January 1,
2003, the Company's natural gas marketing activities will be prospectively
presented and prior periods will be retroactively restated to reflect all
physical activity associated with the trading of natural gas on a net basis.
This change in accounting will not impact net income; however, natural gas
marketing revenues will be presented net of associated costs, significantly
reducing revenues reflected in the statement of operations.

         The Company's trading and non-trading transactions give rise to market
risk, which represents the potential loss that may result from a change in the
market value of a particular commitment. The Company closely monitors and
manages its exposure to market risk to ensure compliance with the Company's risk
management policies. Such policies are regularly assessed to ensure their
appropriateness given management's objectives, strategies and current market
conditions.

         The Company's forward crude oil contracts are designated as normal
purchases and sales. Natural gas forward contracts and energy trading contracts
on crude oil and natural gas are recorded at fair value, depending on
management's assessments of the numerous accounting standards and positions that
comply with generally accepted accounting principles. The undiscounted fair
value of such contracts is reflected on the Company's balance sheet as risk
management assets and liabilities. The revaluation of such contracts is
recognized in the Company's results of operations. Current market price quotes
from actively traded liquid markets are used in all cases to determine the
contracts undiscounted fair value. Regarding net risk management assets, 100
percent of presented values as of December 31, 2002 and 2001 were based on
readily available market quotations. Risk management assets and liabilities are
classified as short-term or long-term depending on contract terms. The estimated
future net cash inflow based on year-end market prices is $1,768,000 for 2003
and $24,000 for 2004. The estimated future cash inflow approximates the net fair
value recorded in the Company's risk management assets and liabilities.

                                      II-26
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The following table illustrates the factors impacting the change in the
net value of the Company's risk management assets and liabilities for the year
ended December 31, 2002. (In thousands)

<TABLE>
<CAPTION>
                                                                             2002
                                                                           ---------
<S>                                                                        <C>
Net fair value on January 1,..........................................     $  14,523
Activity during 2002
  -  Cash received from settled contracts.............................       (14,192)
  -  Net realized gain from prior years' contracts....................           518
  -  Net unrealized gain from prior years' contracts..................           183
  -  Net unrealized gain from current year contracts..................           760
                                                                           ---------
  Net fair value on December 31,......................................     $   1,792
                                                                           =========
</TABLE>

 New Accounting Pronouncements

         In August 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses the
accounting and reporting for the impairment of disposal of long-lived assets and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" and Accounting Principals Board ("APB")
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." The objective of SFAS No. 144 is to
establish one accounting model for long-lived assets to be disposed of by sale
as well as resolve implementation issues related to SFAS No. 121. The Company
adopted SFAS No. 144 effective January 1, 2002 with no material impact on its
financial position or results of operations.

         In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations." The objective of SFAS No. 143 is to establish an
accounting model for accounting and reporting obligations associated with
retirement of tangible long-lived assets and associated retirement costs. This
Statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The Company intends to adopt SFAS No. 143
effective January 1, 2003. SFAS No. 143 requires that the fair value of a
liability for an asset's retirement obligation be recorded in the period in
which it is incurred and the corresponding cost capitalized by increasing the
carrying amount of the related long-lived asset. The liability is accreted to
its then present value each period, and the capitalized cost is depreciated over
the useful life of the related asset. If the liability is settled for an amount
other than the recorded amount, a gain or loss is recognized. The Company has
completed its assessment of SFAS No. 143. At December 31, 2002, the Company
estimates that the present value of its future Asset Retirement Obligations
("ARO") is approximately $663,000. The estimated cumulative effect of adoption
of SFAS No. 143 and the change in accounting principal will be a charge to net
income during the first quarter of 2003 of approximately $110,000 or $73,000 net
of taxes.

         In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and

                                      II-27
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145
rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt"
and an amendment of that statement, SFAS No. 64, "Extinguishment of Debt Made to
Satisfy Sinking-Fund Requirements." SFAS No. 145 also rescinds SFAS No. 44,
"Accounting for Intangible Assets of Motor Carriers." SFAS No. 145 also amends
SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The
provisions were effective for various times throughout 2002 and did not have a
material effect on the Company's results of operations.

         In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally EITF Issue No. 94-3. The Company will adopt the provisions
of SFAS No. 146 for restructuring activities initiated after December 31, 2002.
SFAS No. 146 requires that the liability for costs associated with an exit or
disposal activity be recognized when the liability is incurred. Under Issue No.
94-3, a liability for an exit cost was recognized at the date of commitment to
an exit plan. SFAS No. 146 also establishes that the liability should initially
be measured and recorded at fair value. Accordingly, SFAS No. 146 may affect the
timing of recognizing future restructuring costs as well as the amounts
recognized. At this time, the Company does not expect the adoption of SFAS No.
146 will have a material impact on its financial position, results of operation
or cash flows.

(2) LONG-TERM DEBT

         Long-term debt is comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                December 31,
                                                                           ----------------------
                                                                              2002        2001
                                                                           ---------    ---------
<S>                                                                        <C>          <C>
Bank lines of credit, secured by substantially all of the Company's
   and its subsidiaries' (excluding Gulfmark and ARM) assets, due in
   eight quarterly installments commencing on October 29, 2004........     $  11,475    $  12,475
   Less - current maturities..........................................             -        1,000
                                                                           ---------    ---------

Long-term debt........................................................     $  11,475    $  11,475
                                                                           =========    =========
</TABLE>

         The Company's revolving bank loan agreement, with Bank of America,
provides for two separate lines of credit with interest at the bank's prime rate
minus 1/4 of 1 percent. The agreement also provides for an interest rate option
at the lender's quoted Eurodollar rate (LIBOR) plus 2 and 3/4 percent. The first
line of credit or working capital loan provides for borrowings up to $7,500,000
based on the total of 80% of eligible accounts receivable and 50% of eligible
inventories. Available borrowing capacity under the working capital line is
calculated monthly and as of December 31, 2002 was established at $7,500,000
with the full amount outstanding at December 31, 2002. The second line of credit
or oil and gas production loan provides for flexible borrowings, subject to a
borrowing base established semi-annually by the bank. The borrowing base was
established at $4,000,000 as of December 31, 2002 with the next scheduled
borrowing base re-determination date of September 1, 2003. As of December 31,
2002, $3,975,000 was outstanding under the oil and gas production loan facility.
The working capital loans also provide for the issuance of letters of credit.
The amount of each letter of credit obligation is

                                      II-28
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

deducted from the borrowing capacity. As of December 31, 2002, letters of credit
under this facility totaled $25,000. The revolving line of credit loans are
scheduled to expire on October 29, 2004, with the then present balance
outstanding converting to a term loan payable in 8 equal quarterly installments.

         The revolving loan agreement, among other things, places certain
restrictions with respect to additional borrowings and the purchase or sale of
assets, as well as requiring the Company to comply with certain financial
covenants, including maintaining a 1.0 to 1.0 ratio of consolidated current
assets to consolidated current liabilities, maintaining a 3.0 to 1.0 ratio of
pre-tax net income to interest expense, and consolidated net worth in excess of
$32,083,000.

         A subsidiary of the Company, Gulfmark Energy, Inc. ("Gulfmark"),
maintains a separate banking relationship with BNP Paribas in order to provide
up to $40 million in letters of credit and to provide financing for up to $6
million of crude oil inventories and certain accounts receivable associated with
sales of crude oil. Such financing is provided on a demand note basis with
interest at the bank's prime rate plus 1%. The letter of credit and demand note
facilities are secured by substantially all of Gulfmark's and ARM's assets. At
year-end 2002 and 2001, Gulfmark had no amounts outstanding under the inventory
based line of credit. Gulfmark had approximately $13.7 million and $18.1 million
in letters of credit outstanding as of December 31, 2002 and 2001, respectively,
in support of its crude oil purchasing activities. As of December 31, 2002, the
Company had $1.5 million of eligible borrowing capacity under the Gulfmark
facility.

         The Company's Adams Resources Marketing, Ltd. subsidiary ("ARM")
maintains a separate banking relationship with BNP Paribas in order to support
its natural gas purchasing business. In addition to providing up to $25 million
in letters of credit, the facility finances up to $4 million of general working
capital needs. Such financing is provided on a demand note basis with interest
at the bank's prime rate plus 1 percent. The letter of credit and demand note
facilities are secured by substantially all of ARM's and Gulfmark's assets. At
year-end 2002 and 2001, ARM had no working capital advances outstanding. ARM had
approximately $4.3 million and $13.9 million in letters of credit outstanding at
December 31, 2002 and 2001, respectively.

         The Company's weighted average effective interest rate for 2002, 2001
and 2000 was 3.7%, 5.7%, and 8.5%, respectively. No interest was capitalized
during 2002, 2001 or 2000. At December 31, 2002, the scheduled aggregate
principal maturities of the Company's long-term debt are: 2004 - $1,434,375;
2005 - $5,737,500; and 2006 - $4,303,125.

                                      II-29
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(3) INCOME TAXES

         The following table shows the components of the Company's income tax
provision (benefit) (in thousands):

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                           -----------------------------------
                                                                              2002         2001         2000
                                                                           ---------    ---------    ---------
<S>                                                                        <C>          <C>          <C>
Current:
      Federal.........................................................     $   3,784    $  (3,930)   $   3,299
      State...........................................................            55            -          626
                                                                           ---------    ---------    ---------
                                                                               3,839       (3,930)       3,925
Deferred:
      Federal.........................................................        (3,075)       1,492        1,157
                                                                           ---------    ---------    ---------
                                                                           $     764    $  (2,438)   $   5,082
                                                                           =========    =========    =========
</TABLE>

         As of December 31, 2002 and 2001, the Company's deferred tax liability
totaled $2,320,000 and $5,395,000, respectively, and consisted principally of
financial statement carrying amounts in excess of the underlying tax basis of
fixed assets and mark-to-market gains on energy contracts not included in
taxable income. At December 31, 2002 the fixed asset component of the deferred
tax liability totaled $1,101,000 and the mark-to-market gain component totaled
$1,197,000. At December 31, 2001, the fixed asset component of the deferred tax
liability totaled $2,506,000 and the mark-to-market gain component totaled
$2,901,000.

         Taxes computed at the corporate federal income tax rate reconcile to
the reported income tax provision as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                           -----------------------------------
                                                                             2002         2001         2000
                                                                           ---------    ---------    ---------
<S>                                                                        <C>          <C>          <C>
Statutory federal income tax provision (benefit) at 34%...............     $     735    $  (2,382)   $   4,520
State income tax provision............................................            55            -          626
Federal statutory depletion...........................................          (100)         (51)         (51)
Other.................................................................            74           (5)         (13)
                                                                           ---------    ---------    ---------
            Income tax provision (benefit)............................     $     764    $  (2,438)   $   5,082
                                                                           =========    =========    =========
</TABLE>

(4) FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

 Fair Value of Financial Instruments

         The carrying amount of cash equivalents are believed to approximate
their fair values because of the short maturities of these instruments.
Substantially all of the Company's long and short-term debt obligations bear
interest at floating rates. As such, carrying amounts approximate fair values.
For a discussion of the fair value of commodity financial instruments see "Price
Risk Management Activities" in Note (1) of Notes to Consolidated Financial
Statements.

 Concentration of Credit Risk

         Credit risk represents the amount of loss which the Company would
absorb if its customers failed to perform pursuant to contractual terms.
Management of credit risk involves a number of

                                      II-30
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

considerations, such as the financial profile of the customer, the value of
collateral held, if any, specific terms and duration of the contractual
agreement, and the customer's sensitivity to economic developments. The Company
has established various procedures to manage credit exposure, including initial
credit approval, credit limits, and rights of offset. Letters of credit and
guarantees are also utilized to limit credit risk.

         The Company's largest customers consist of large multinational
integrated oil companies and utilities. In addition, the Company transacts
business with independent oil producers, major chemical concerns, crude oil and
natural gas trading companies and a variety of commercial energy users. Accounts
receivable associated with crude oil and natural gas marketing activities
comprise approximately 90% of the Company's total receivables as of December 31,
2002, and industry practice requires payment for purchases of crude oil to take
place on the 20th of the month following a transaction, while natural gas
transactions are settled on the 25th of the following month. The Company's
credit policy and the relatively short duration of receivables mitigates the
uncertainty typically associated with longer term receivables management.
Accordingly, the amount of the allowance for doubtful accounts required is
minimal. The Company had accounts receivable from one customer that comprised
10.5 percent of total receivables at December 31, 2002. No customer represented
10 percent of total accounts receivable or greater as of December 31, 2001.

         There were no large significant bad debt write-offs in 2002. In 2001
primarily as a result of the bankruptcy of Enron Corp., the Company incurred
$2.1 million of bad debt expense. In 2000, the Company incurred bad debts
totaling $4.1 million following the bankruptcy proceedings by a natural gas
customer. An allowance for doubtful accounts is provided where appropriate and
accounts receivable presented herein are net of allowances for doubtful accounts
of $2,291,000 and $2,193,000 at December 31, 2002 and 2001, respectively. An
analysis of the changes in the allowance for doubtful accounts is presented as
follows: (In thousands)

<TABLE>
<CAPTION>
                                                                              2002         2001        2000
                                                                           ---------    ---------    ---------
<S>                                                                        <C>          <C>          <C>
Balance, Beginning of year........................................         $   2,193    $     559    $     223
  Provisions for bad debts........................................               758        1,935        2,781
  Less: Writeoffs and reductions..................................              (660)        (301)      (2,445)
                                                                           ---------    ---------    ---------

Balance, End of Year..............................................         $   2,291    $   2,193    $     559
                                                                           =========    =========    =========
</TABLE>

(5) EMPLOYEE BENEFITS

         The Company maintains a 401(k) savings plan for the benefit of its
employees. Company contributions to the plan were $388,000 in 2002, $433,000 in
2001, $374,000 in 2000. There are no pension or retirement plans maintained by
the Company.

(6) TRANSACTIONS WITH RELATED PARTIES

         Mr. K. S. Adams, Jr., Chairman and President of the Company, is a
limited partner in certain family limited partnerships known as Sakco, Ltd.
("Sakco"), Kenada Oil & Gas, Ltd. ("Kenada") and Kasco, Ltd. ("Kasco"). From
time to time, these partnerships as well as Sakdril, Inc. ("Sakdril"), a wholly
owned subsidiary of KSA Industries, Inc., a major stockholder of the Company,
and Mr. Adams

                                      II-31
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

individually participate as working interest owners in certain oil and gas wells
operated by the Company. In addition, these entities may participate in
non-Company operated wells where the Company also holds an interest. Sakco,
Kenada, Kasco, Sakdril and Mr. Adams participated in each of the wells under
terms no better than those afforded other non-affiliated working interest
owners. In recent years, such related party transactions tend to result after
the Company has first identified oil and gas prospects of interest. Due to
capital budgeting constraints, typically the available dollar commitment to
participate in such transactions is greater than the amount management is
comfortable putting at risk. In such event, the Company first determines the
percentage of the transaction it wants to obtain, which allows a related party
to participate in the investment to the extent there is excess available. Such
related party transactions are individually reviewed and approved by a committee
of independent directors on the Company's Board of Directors. As of December 31,
2002, the Company owed a net total of $308,000 to these related parties. The
amount due was comprised of $297,000 of oil and gas revenues to be disbursed to
such working interest owners, plus $11,000 of current joint interest credits due
to such joint interest owners. As of December 31, 2002, these related parties
owed no monies to the Company. As of December 31, 2001, the Company owed
$233,000 to these related parties and the related parties owed $251,000 to the
Company under these arrangements. In connection with the operation of certain
oil and gas properties, the Company also charges such related parties for
administrative overhead primarily as prescribed by the Council of Petroleum
Accountants Society ("COPAS") Bulletin 5. Such overhead recoveries totaled
$146,000 in 2002 and $145,000 in 2001.

         David B. Hurst, Secretary of the Company, is a partner in the law firm
of Chaffin & Hurst. The Company has been represented by Chaffin & Hurst since
1974 and plans to use the services of that firm in the future. Chaffin & Hurst
currently leases office space from the Company. Transactions with Chaffin &
Hurst are on the same terms as those prevailing at the time for comparable
transactions with unrelated entities.

         The Company also enters into certain transactions in the normal course
of business with other affiliated entities. These transactions with affiliated
companies are on the same terms as those prevailing at the time for comparable
transactions with unrelated entities.

(7) COMMITMENTS AND CONTINGENCIES

         The Company has operating lease arrangements for tractors, trailers,
office space, and other equipment and facilities. Rental expense for the years
ended December 31, 2002, 2001, and 2000 was $5,944,000, $7,035,000 and
$6,981,000, respectively. At December 31, 2002, commitments under long-term
noncancelable operating leases for the next five years and thereafter are
payable as follows: 2003 - $3,965,000; 2004 - $2,674,000; 2005 - $1,133,000;
2006 - $420,000; 2007 - $206,000; 2008 and thereafter - $250,000.

         On August 30, 2000, CJC Leasing, Inc. ("CJC"), a wholly owned
subsidiary of the Company previously involved in the coal mining business,
received a "Notice of Taxes Due" from the State of Kentucky regarding the
results of a coal severance tax audit covering the years 1989 through 1993. The
audit initially proposed a tax assessment of $8.3 million plus penalties and
interest. This amount was adjusted downward by the State in August 2002 to $3.4
million plus penalties and interest. CJC has protested this assessment and has
set forth a number of defenses including that CJC was not a taxpayer engaged in
severing and/or mining coal at anytime during the assessment period. Further, it
is CJC's informed belief that such taxes were properly paid by the third parties
that had in fact mined the coal.

                                      II-32
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Management intends to vigorously defend CJC in this matter and believes that it
will not ultimately have a significant adverse effect on the Company's financial
position or results of operations.

         In April 2002, a lawsuit was filed against the Company's wholly owned
subsidiary Gulfmark Energy, Inc. by plaintiffs Kirby Energy LLP and Kirby Black
("Kirby"). Kirby was a commission crude oil purchase representative for the
Company and as such had arranged certain crude oil purchase transactions for the
benefit of the Company that earned Kirby a percentage net profits commission.
Kirby believes the commissions paid were less than the amounts provided for in
the contract and has sued for an accounting and actual and punitive damages.
Management intends to vigorously defend this matter and believes that it will
not ultimately have a significant adverse effect on the Company's financial
position or results of operations.

         On July 31, 2002, certain individuals filed a complaint with the
Occupational Safety and Health Administration ("OSHA") pursuant to a workmen's
compensation claim filed by the family of a deceased employee. The OSHA
complaint alleges that the Company's wholly owned subsidiary, Service Transport
Company, failed to produce employee exposure and other records including air
sampling data and medical monitoring records from years 1989 through 1997. The
Company responded to the alleged violations denying that it failed to produce
such data. To date, the Company has not received a response from OSHA and
believes it is in compliance with such rules and regulations.

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

(8) GUARANTEES

         In November 2002 the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees Including Indirect
Guarantees of Indebtedness of Others". In certain instances, this interpretation
requires a guarantor to recognize, at the inception of a guarantee, a liability
for the fair value of the obligation undertaken in issuing the guarantee. The
liability recognition aspect of this interpretation is effective on a
prospective basis commencing on January 1, 2003. Pursuant to arranging operating
lease financing for truck tractors and tank trailers, individual subsidiaries of
the Company, may guarantee the lessor a minimum residual sales value upon the
expiration of a lease and sale of the underlying equipment. Aggregate guaranteed
residual values for tractors and trailers under operating leases as of December
2002 are as follows: (In thousands)

<TABLE>
<CAPTION>
                                                                  2003         2004        2005         2006      Total
                                                               ---------    ---------    ---------    --------   -------
<S>                                                            <C>          <C>          <C>          <C>        <C>
Lease residual values....................................      $   1,027    $     551    $     763    $    150   $ 2,491
</TABLE>

         Presently, neither the Company nor any of its subsidiaries have any
other types of guarantees outstanding that in the future would require liability
recognition under the provisions of Interpretation No. 45.

                                      II-33
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         This interpretation also sets forth disclosure requirements for
guarantees including the guarantees by a parent company on behalf of its
subsidiaries. Adams Resources & Energy, Inc. frequently issues parent guarantees
of commitments resulting from the ongoing activities of its subsidiary
companies. The guarantees generally result as incident to subsidiary commodity
purchase obligation, subsidiary lease commitments and subsidiary bank debt. The
nature of such guarantees is to guarantee the performance of the subsidiary
companies in meeting their respective underlying obligations. Except for
operating lease commitments, all such underlying obligations are recorded on the
books of the subsidiary companies and are included in the consolidated financial
statements included herein. Therefore, none of such obligation are recorded
again on the books of the parent. The parent would only be called upon to
perform under the guarantee in the event of a payment default by the applicable
subsidiary company. In satisfying such obligations, the parent would first look
to the assets of the defaulting subsidiary company. As of December 31, 2002, the
amount of parental guaranteed obligations are approximately as follows: (In
thousands)

<TABLE>
<CAPTION>
                                                  2003       2004        2005       2006     Thereafter    Total
                                                ---------   -------   ---------   --------   ----------   --------
<S>                                             <C>         <C>       <C>         <C>        <C>          <C>
Bank Debt.................................      $       -   $ 1,434   $   5,738   $  4,303    $      -    $ 11,475
Operating leases..........................          3,965     2,674       1,133        420         456       8,648
Lease residual values.....................          1,027       551         763        150           -       2,491
Commodity purchases.......................         33,289         -           -          -           -      33,289
Letters of credit.........................         18,000         -           -          -           -      18,000
                                                ---------   -------   ---------   --------    --------    --------
                                                $  56,281   $ 4,659   $   7,634   $  4,873    $    456    $ 73,903
                                                =========   =======   =========   ========    ========    ========
</TABLE>

(9) RESTATEMENT OF INTEREST AND OTHER INCOME

         For 2002 reporting, the Company has changed the presentation in the
Statement of Operations for gains related to the sale of operating assets. For
consistency of presentation, the Company has restated such affected reported
amounts for 2001. No such restatement was necessary for 2000. The table below
summarizes the effect on 2001. (In thousands)

<TABLE>
<CAPTION>
                                                                               2001
                                                                      -----------------------
                                                                      Currently    Previously
                                                                       Reported     Reported
                                                                      ----------   ----------
<S>                                                                   <C>          <C>
Revenues.........................................................     $4,717,242   $4,717,242
Costs and Expenses...............................................     $4,724,620   $4,729,752
Operating Loss...................................................     $   (7,378)  $  (12,510)
Interest and Other Income........................................     $      444   $    5,576
Earnings (Loss) Before Income Taxes..............................     $   (7,062)  $   (7,062)
Net Earnings (Loss)..............................................     $   (4,569)  $   (4,569)
</TABLE>

                                     II-34
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) SEGMENT REPORTING

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

<TABLE>
<CAPTION>
                                                                                       Depreci-
                                                                                        ation,
                                                                       Segment        Depletion   Property
                                                                      Operating          and        and         Identi-
                                                                      Earnings         Amorti-    Equipment     fiable
                                                        Revenues        (Loss)         zation     Additions     Assets
                                                      -----------    -----------      ---------   ---------   -----------
<S>                                                   <C>            <C>              <C>         <C>         <C>
Year ended
 December 31, 2002-
   Marketing....................................      $ 2,282,161    $     8,886       $  1,611    $   150    $   145,330
   Transportation...............................           36,406          2,142          1,838      1,911         15,931
   Oil and gas..................................            4,750           (633)(1)      2,116      2,561         11,504
   Other........................................                -              -              -          -         29,355
                                                      -----------    -----------       --------    -------    -----------
                                                      $ 2,323,317    $    10,395       $  5,565    $ 4,622    $   202,120
                                                      ===========    ===========       ========    =======    ===========

Year ended
 December 31, 2001 -
   Marketing....................................      $ 4,677,982    $    (1,230)(2)   $  2,600    $   847    $   182,914
   Transportation...............................           33,149          1,053          1,660        635         14,268
   Oil and gas..................................            6,111            693          2,456      2,109         11,265
   Other........................................                -              -             10          -         18,580
                                                      -----------    -----------       --------    -------    -----------
                                                      $ 4,717,242    $       516       $  6,726    $ 3,591    $   227,027
                                                      ===========    ===========       ========    =======    ===========

Year ended
 December 31, 2000 -
   Marketing....................................      $ 6,980,277    $    15,389       $  2,822    $ 1,170    $   383,247
   Transportation...............................           35,824          2,311          1,471      1,430         16,329
   Oil and gas..................................            6,059          1,624          2,435      3,084         11,971
   Other........................................                -              -             17          -         36,497
                                                      -----------    -----------       --------    -------    -----------
                                                      $ 7,022,160    $    19,324       $  6,745    $ 5,684    $   448,044
                                                      ===========    ===========       ========    =======    ===========
</TABLE>

--------------------

(1) The 2002 oil and gas loss includes $1.7 million in dry hole costs and oil
    and gas property valuation write-downs while 2001 oil and gas earnings are
    net of a $1 million asset impairment charge.

(2) The 2001 marketing loss includes $8 million in charges related to inventory
    price declines and a $1.5 million bad debt provision following the Enron
    bankruptcy, partially offset by a $5 million gain on the sale of a pipeline.

                                      II-35
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         Intersegment sales are insignificant. Other identifiable assets are
primarily corporate cash, accounts receivable, and properties not identified
with any specific segment of the Company's business. All sales by the Company
occurred in the United States. In each of 2002 and 2000, the Company had sales
to one customer that totaled $247,000,000 and $1,036,000,000, respectively. No
other customers accounted for greater than 10% of sales in any of the three
years presented herein. The loss of any of the Company's 10 percent customers
would not have a material adverse effect on the Company's future operating
results and all such customers could be readily replaced.

         Earnings from operations by segment represent revenues less operating
costs and expenses and depreciation, depletion and amortization and are
reconciled to operating earnings and earnings from operations before income
taxes, as follows (in thousands):

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                                 ----------------------------------
                                                                    2002        2001         2000
                                                                 ---------    ---------    --------
<S>                                                              <C>          <C>          <C>
Segment operating earnings (loss).....................           $  10,395    $     516    $ 19,324
General and administrative expenses...................              (8,173)      (7,894)     (6,463)
                                                                 ---------    ---------    --------
Operating earnings....................................               2,222       (7,378)     12,861
Interest income.......................................                 115          444       1,233
Interest expense......................................                (121)        (128)       (172)
                                                                 ---------    ---------    --------
Earnings before income taxes..........................           $   2,216    $  (7,062)   $ 13,922
                                                                 =========    =========    ========
</TABLE>

(11) MARKETING JOINT VENTURE

         Commencing in May 2000, the Company had entered into a joint venture
arrangement with a third party for the purpose of purchasing, distributing and
marketing crude oil in the offshore Gulf of Mexico region. The intent behind the
joint venture was to combine the Company's marketing expertise with stronger
financial and credit support from the co-venture participant. The venture
operated as Williams-Gulfmark Energy Company pursuant to the terms of a joint
venture agreement. The Company held a 50 percent interest in the net earnings of
the venture and accounted for its interest under the equity method of
accounting. The Company included its net investment in the venture in the
consolidated balance sheet and its equity in the venture's pretax earnings was
included in marketing segment revenues in the consolidated statement of
earnings. Other than ordinary trade credit under standard industry terms, the
joint venture had no third party debt or other obligations. Management of cash
flow and all cash flow requirements were maintained by the participants.

         Effective November 1, 2001, the joint venture participants agreed to
dissolve the venture pursuant to the terms of a joint venture dissolution
agreement. As part of the consideration for terminating the joint venture, the
Company was to receive a monthly per barrel fee to be paid by the former joint
venture co-participant for a period of sixty months on certain barrels purchased
by the participant in the offshore Gulf of Mexico region. Due primarily to
credit constraints, effective with July 2002 business, the co-participant
substantially curtailed and ultimately ceased its purchase of crude oil in the
affected region. Prior to the co-venture's decision to withdraw from the region,
during the first half of 2002, the Company earned $2,433,000 of marketing
segment pre-tax earnings derived from this fee. While the co-venture participant
willingly paid this fee through January 31, 2002 activity, effective with
February 2002 business, the participant notified the Company of its intent to
withhold the fee until they audited the previous joint venture activity. Such
audit was conducted in June of 2002 and to date, to the

                                      II-36
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

best of management's knowledge, the audit detected no adverse findings. The
joint venture dissolution agreement does not permit the withholding of fees due,
and as a precautionary measure, during the second quarter of 2002, the Company
recorded a $140,000 bad debt provision, which represents the full amount of the
currently uncollected portion of such fees due. The Company recorded no fee
income during the second half of 2002 and no such fee is contemplated in future
periods.

         The Company and the co-venture participant continue to cooperate in the
final wind-down and settlement of open trade account items. As of December 31,
2002 the venture's remaining trade accounts due totaled approximately $2.4
million and trade accounts payable totaled approximately $5.2 million. As the
venture either collects or funds cash proceeds in settlement of such accounts,
the Company will receive or pay its pro-rata 50 percent share of such cash
proceeds or requirements.

(12) QUARTERLY FINANCIAL DATA (UNAUDITED) -

         Selected quarterly financial data and earnings per share of the Company
are presented below for the years ended December 31, 2002 and 2001 (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                                         Net Earnings                Dividends
                                                    Segment         -----------------------   ------------------------
                                                   Operating                         Per                        Per
                                      Revenues      Earnings          Amount        Share       Amount         Share
                                    -----------    ----------       ---------     ---------   ----------     ---------
<S>                                 <C>            <C>              <C>           <C>         <C>            <C>
2002 -
March 31..................          $   529,051    $    3,299       $     595     $     .14   $        -     $       -
June 30...................              654,160         3,109             555           .13            -             -
September 30..............              624,968         1,960             189           .05            -             -
December 31...............              515,138         2,027             113           .02          548           .13
                                    -----------    ----------       ---------     ---------   ----------     ---------
                                    $ 2,323,317    $   10,395(1)    $   1,452     $     .34   $      548     $     .13
                                    ===========    ==========       =========     =========   ==========     =========

2001 -
March 31..................          $ 1,341,950    $    4,298       $   1,798     $     .43   $        -     $       -
June 30...................            1,270,649            98          (1,629)         (.39)           -             -
September 30..............            1,238,211           442          (1,049)         (.25)           -             -
December 31...............              866,432        (4,322)(2)      (3,689)         (.87)         548           .13
                                    -----------    ----------       ---------    ----------   ----------     ---------
                                    $ 4,717,242    $      516       $  (4,569)    $   (1.08)  $      548     $     .13
                                    ===========    ==========       =========    ==========   ==========     =========
</TABLE>

-----------------

(1) Operating earnings for 2002 are net of $1.7 million of dry hole costs and
    property valuation write-downs.

(2) The 2001 fourth quarter loss includes $8 million in charges related to
    inventory price declines and a $1.5 million bad debt provision following the
    Enron bankruptcy, partially offset by a $5 million gain on the sale of a
    pipeline.

         The above unaudited interim financial data reflect all adjustments that
are in the opinion of management necessary to a fair statement of the results
for the period presented. All such adjustments are of a normal recurring nature.

                                      II-37

<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(13) OIL AND GAS PRODUCING ACTIVITIES

         The following information concerning the Company's oil and gas segment
has been provided pursuant to Statement of Financial Accounting Standards No.
69, "Disclosures about Oil and Gas Producing Activities." The Company's oil and
gas exploration and production activities are conducted in the United States,
primarily along the Gulf Coast of Texas and Louisiana.

Oil and Gas Producing Activities (Unaudited) -

         Total costs incurred in oil and gas exploration and development
activities, all incurred within the United States, were as follows (in
thousands, except per barrel information):

<TABLE>
<CAPTION>
                                                                  Years Ended December 31,
                                                          ---------------------------------------
                                                             2002            2001         2000
                                                          ----------      ----------   ----------
<S>                                                       <C>             <C>          <C>
Property acquisition costs
     Unproved......................................       $    1,126      $       43   $       30
     Proved........................................                -               -          190
Exploration costs
     Expensed......................................            1,177             821          421
     Capitalized...................................               75               -        1,311
Development costs..................................            1,248           2,067        1,613
                                                          ----------      ----------   ----------
Total costs incurred...............................       $    3,626      $    2,931   $    3,565
                                                          ==========      ==========   ==========
</TABLE>

         The aggregate capitalized costs relative to oil and gas producing
activities are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                       December 31,
                                                             ------------------------------
                                                                2002                2001
                                                             ----------          ----------
<S>                                                          <C>                 <C>
Unproved oil and gas properties......................        $    2,190          $    3,556
Proved oil and gas properties........................            35,289              31,900
                                                             ----------          ----------
                                                                 37,479              35,456
Accumulated depreciation, depletion
  and amortization...................................           (27,501)            (25,386)
                                                             ----------          ----------

         Net capitalized cost........................        $    9,978          $   10,070
                                                             ==========          ==========
</TABLE>

                                     II-38
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Estimated Oil and Natural Gas Reserves (Unaudited) -

         The following information regarding estimates of the Company's proved
oil and gas reserves, all located in the United States, is based on reports
prepared on behalf of the Company by its independent petroleum engineers.
Because oil and gas reserve estimates are inherently imprecise and require
extensive judgments of reservoir engineering data, they are generally less
precise than estimates made in conjunction with financial disclosures. The
revisions of previous estimates as reflected in the table below result from more
precise engineering calculations based upon additional production histories and
price changes.

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                 ------------------------------------------------------------------
                                                       2002                      2001                    2000
                                                 ----------------       ------------------       ------------------
                                                 Natural                Natural                  Natural
                                                   Gas       Oil          Gas         Oil          Gas        Oil
                                                 (Mcf's)   (Bbls.)      (Mcf's)     (Bbls.)      (Mcf's)     (Bbls.)
                                                  -----     -----        -----       -----        -----       -----
                                                                           (In thousands)
<S>                                              <C>       <C>          <C>         <C>          <C>         <C>
Proved developed and
  undeveloped reserves -
   Beginning of year                               7,618     618         8,642        626         7,387        597
   Revisions of previous
     estimates                                       206      (1)         (820)         7           861        (65)
   Purchase of oil and gas
     reserves                                          -       -            11         25           995        147
   Extensions, discoveries
     and other additions                             703      17           816         24           560          9
   Production                                     (1,047)    (55)       (1,031)       (64)       (1,161)       (62)
                                                 -------   -----        ------        ---        ------        ---
   End of year                                     7,480     579         7,618        618         8,642        626
                                                 =======   =====        ======        ===        ======        ===

Proved developed reserves -
   End of year                                     7,480     579         7,617        609         8,640        626
                                                 =======   =====        ======        ===        ======        ===
</TABLE>

Standardized Measure of Discounted Future Net Cash Flows from Oil and Gas
Operations and Changes Therein (Unaudited) -

         The standardized measure of discounted future net cash flows was
determined based on the economic conditions in effect at the end of the years
presented, except in those instances where fixed and determinable gas price
escalations are included in contracts. The disclosures below do not purport to
present the fair market value of the Company's oil and gas reserves. An estimate
of the fair market value would also take into account, among other things, the
recovery of reserves in excess of proved reserves, anticipated future changes in
prices and costs, a discount factor more representative of the time value of
money and risks inherent in reserve estimates.

                                      II-39
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                                     ----------------------------------------
                                                                        2002           2001          2000
                                                                     -----------     ----------    ----------
                                                                                  (In thousands)
<S>                                                                  <C>             <C>           <C>
Future gross revenues.............................................   $    47,887     $   28,465    $   90,473
Future costs -
    Lease operating expenses......................................       (16,142)       (11,008)      (20,444)
    Development costs.............................................          (360)          (468)         (277)
                                                                     -----------     ----------    ----------
Future net cash flows before income taxes.........................        31,385         16,989        69,752
Discount at 10% per annum.........................................       (14,657)        (7,636)      (31,586)
                                                                     -----------     ----------    ----------
Discounted future net cash flows
    before income taxes...........................................        16,728          9,353        38,166
Future income taxes, net of discount at 10%
    per annum.....................................................        (5,687)        (3,180)      (12,976)
                                                                     -----------     ----------    ----------
Standardized measure of
    discounted future net cash flows..............................   $    11,041     $    6,173    $   25,190
                                                                     ===========     ==========    ==========
</TABLE>

         The reserve estimates provided at December 31, 2002, 2001 and 2000 are
based on year-end market prices of $27.94, $17.55 and $25.08 per barrel for
crude oil and $4.20, $2.34 and $8.79 per Mcf for natural gas, respectively. The
year-end December 31, 2002 price used in the 2002 reserve estimate is comparable
to average actual December 2002 price received for sales of crude oil ($27.00
per barrel) and sales of natural gas ($4.50 per mcf).

         The following are the principal sources of changes in the standardized
measure of discounted future net cash flows:

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                     ----------------------------------------
                                                                        2002            2001          2000
                                                                     -----------     ----------    ----------
                                                                                  (In thousands)
<S>                                                                  <C>             <C>           <C>
Beginning of year.................................................   $     6,173     $   25,190    $    8,587
    Revisions to reserves proved in prior years -
      Net change in prices and production costs...................         9,016        (32,056)       21,930
      Net change due to revisions in quantity estimates...........           353           (772)        3,606
      Accretion of discount.......................................           763          3,158           883
      Production rate changes and other ..........................        (2,375)         3,195        (3,416)
                                                                     ------------    ----------    ----------
         Total revisions..........................................         7,757        (26,475)       23,003
    Purchase of oil and gas reserves, net of future
      production costs............................................             -            263         2,795
    New field discoveries and extensions,
      net of future production costs..............................         2,278          1,369         3,897
    Sales of oil and gas produced, net of
      production costs ...........................................        (2,660)        (3,970)       (4,540)
    Net change in income taxes....................................        (2,507)         9,796        (8,552)
                                                                     ------------    ----------    ----------
    Net change in standardized measure of
      discounted future net cash flows ...........................         4,868        (19,017)       16,603
                                                                     -----------     ----------    ----------
End of year.......................................................   $    11,041     $    6,173    $   25,190
                                                                     ===========     ==========    ==========
</TABLE>

                                     II-40
<PAGE>

                 ADAMS RESOURCES & ENERGY, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Results of Operations for Oil and Gas Producing Activities (Unaudited) -

         The results of oil and gas producing activities, excluding corporate
overhead and interest costs, are as follows:

<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                     ----------------------------------------
                                                                        2002            2001          2000
                                                                     -----------     ----------    ----------
                                                                                  (In thousands)
<S>                                                                  <C>             <C>           <C>
Revenues..........................................................   $     4,750     $    6,111    $    6,059
Costs and expenses -
    Production....................................................         2,090          2,141         1,519
    Exploration...................................................         1,177            821           481
    Depreciation, depletion and amortization......................         2,116          2,456         2,435
                                                                     -----------     ----------    ----------
Operating income (loss) before income taxes.......................          (633)           693         1,624
Income tax (expense) benefit......................................           215           (236)         (552)
                                                                     -----------     ----------    ----------
Operating income (loss)...........................................   $      (418)    $      457    $    1,072
                                                                     ===========     ==========    ==========
</TABLE>

                                      II-41
<PAGE>

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         On July 18, 2002, the Company dismissed its former accountants and
appointed Deloitte & Touche LLP to serve as its independent public accountants
for the fiscal year 2002. These actions followed the Company's decision to seek
proposals from independent accountants to audit the financial statements of the
Company, and were approved by the Company's Board of Directors upon the
recommendation of its Audit Committee. Prior to the selection of Deloitte &
Touche, Arthur Andersen LLP served as the Company's independent accountants.

         During the two fiscal years ended December 31, 2001, and the subsequent
interim period through July 18, 2002, there were no disagreements between the
Company and Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to Arthur Andersen LLP's satisfaction, would have
caused Arthur Andersen LLP to make reference to the subject matter of the
disagreement in connection with its reports.

         None of the reportable events described under Item 304(a)(1)(v) of
Regulation S-K occurred within the two fiscal years ended December 31, 2001 or
within the interim period through July 18, 2002.

         The audit reports of Arthur Andersen LLP on the consolidated financial
statements of the Company as of and for the fiscal years ended December 31, 2000
and 2001 did not contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles.

         The Company provided Arthur Andersen LLP with a copy of the foregoing
disclosures. The Company was advised by Arthur Andersen LLP that it was unable
to provide a letter stating whether it agreed with such statements.

         During the two fiscal years ended December 31, 2001, and the subsequent
interim period through July 18, 2002, the Company did not consult with Deloitte
& Touche LLP regarding any of the matters or events set forth in Item
304(a)(2)(i) and (ii) of Regulation S-K.

                                     II-42
<PAGE>

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The information concerning executive officers of the Company is
included in Part I. The information concerning directors of the Company is
incorporated by reference from the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held April 23, 2003, to be filed with the
Commission not later than 120 days after the end of the fiscal year covered by
this Form 10-K.

Item 11. EXECUTIVE COMPENSATION

         The information required by Item 11 is incorporated by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held April 23, 2003, to be filed with the Commission not later than 120
days after the end of the fiscal year covered by this Form 10-K.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by Item 12 is incorporated by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held April 23, 2003, to be filed with the Commission not later than 120
days after the end of the fiscal year covered by this Form 10-K.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 13 is incorporated by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held April 23, 2003, to be filed with the Commission not later than 120
days after the end of the fiscal year covered by this Form 10-K.

Item 14. CONTROLS AND PROCEDURES

         The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the reports
under the Securities Exchange Act of 1934, as amended ("Exchange Act") are
communicated, processed, summarized and reported within the time periods
specified in the SEC's rules and forms. Within the 90-day period prior to the
filing of this report, an evaluation was carried out under the supervision and
with the participation of the Company's management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rule 13a-14(c)) under the Securities Exchange Act of 1934). Based upon that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the design and operation of these disclosure controls and
procedures were effective. No significant changes were made in our internal
controls or procedures or in other factors that could significantly affect these
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                      III-1
<PAGE>

                                     PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      The following documents are filed as a part of this Form 10-K:

                  1. Financial Statements

                        Report of Independent Public Accountants

                        Consolidated Balance Sheet as of December 31, 2002 and
                             2001

                        Consolidated Statement of Operations for the Years Ended
                             December 31, 2002, 2001 and 2000

                        Consolidated Statement of Shareholders' Equity for the
                             Years Ended December 31, 2002, 2001 and 2000

                        Consolidated Statement of Cash Flows for the Years Ended
                             December 31, 2002, 2001 and 2000

                        Notes to Consolidated Financial Statements

                  2. All financial schedules have been omitted
                     because they are not applicable or the required information
                     is shown in the financial statements or notes thereto.

                  3. Exhibits required to be filed

3(a)     -        Certificate of Incorporation of the Company, as amended.
                  (Incorporated by reference to Exhibit 3(a) filed with the
                  Annual Report on Form 10-K (-File No. 1-7908) of the Company
                  for the fiscal year ended December 31, 1987)

3(b)     -        Bylaws of the Company, as amended (Incorporated by reference
                  to Exhibits 3.2 and 3.2.1 of Amendment No. 1 to the
                  Registration Statement on Form S-1 filed with the Securities
                  and Exchange Commission on October 29, 1973 - File No.
                  2-48144)

3(c)     -        Amendment to the Bylaws of the Company to add an Article VII,
                  Section 8. Indemnification of Directors, Officers, Employees
                  and Agents (Incorporated by reference to Exhibit 3(c) of the
                  Annual Report on Form 10-K (-File No. 1-7908) of the Company
                  for the fiscal year ended December 31, 1986)

3(d)*    -        Adams Resources & Energy, Inc. and Subsidiaries' Code of
                  Ethics

4(a)     -        Specimen common stock Certificate (Incorporated by reference
                  to Exhibit 4(a) of the Annual Report on Form 10-K of the
                  Company (-File No. 1-7908) for the fiscal year ended December
                  31, 1991)

                                      IV-1
<PAGE>

4(c)*    -        Tenth Amendment to Loan Agreement between Service Transport
                  Company et al and Bank of America, N.A. dated March 17, 2003.

12.1     -        Computation of Ratio of Earnings to Fixed Charges

21*      -        Subsidiaries of the Registrant

------------------------------
*  - Filed herewith

         Copies of all agreements defining the rights of holders of long-term
debt of the Company and its subsidiaries, which agreements authorize amounts not
in excess of 10% of the total consolidated assets of the Company, are not filed
herewith but will be furnished to the Commission upon request.

                                      IV-2
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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)

By /s/ RICHARD B. ABSHIRE                   By /s/ K. S. ADAMS, JR.
   ---------------------------------           -----------------------------
   (Richard B. Abshire,                        (K. S. Adams, Jr.,
   Vice President-Finance, Director            President,Chairman of the Board,
   Chief Financial Officer)                    and and Chief Executive Officer)

Date: March 21, 2003

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

By /s/CLAUDE H. LEWIS                       By /s/ E. C. REINAUER, JR.
   ---------------------------------           --------------------------------
   (Claude H. Lewis, Director)                 (E. C. Reinauer, Jr., Director)

By /s/ VINCENT H. BUCKLEY                   By /s/ E. JACK WEBSTER, JR.
   ---------------------------------           --------------------------------
   (Vincent H. Buckley, Director)              (E. Jack Webster, Jr., Director)

By /s/ JUANITA G. SIMMONS                   By /s/ EDWARD WIECK
   ---------------------------------           --------------------------------
   (Juanita G. Simmons, Director)              (Edward Wieck, Director)

By /s/ JOHN A. BARRETT
   ---------------------------------
   (John A. Barrett, Director)

Date: March 21, 2003

                                      IV-3
<PAGE>

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

In connection with the Annual Report of Adams Resources & Energy, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2002 (the "Report"), I,
K. S. Adams, Jr., Chief Executive Officer of the Company, certify, pursuant to
18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge:

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

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

/s/ K. S. Adams, Jr.
------------------------------------
K. S. Adams, Jr.
Chief Executive Officer
March 21, 2003

In connection with the Annual Report of Adams Resources & Energy, Inc. (the
"Company") on Form 10-K for the year ended December 31, 2002 (the "Report"), I,
Richard B. Abshire, Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002,
that to the best of my knowledge:

         (1)   The Report fully complies with the requirements of Section 13(a)
               of 15(d) 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 Company.

/s/ Richard B. Abshire
------------------------------------
Richard B. Abshire
Chief Financial Officer
March 21, 2003

These certifications accompany this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934.

                                      IV-4
<PAGE>

                         ADAMS RESOURCES & ENERGY, INC.
                            CERTIFICATION PURSUANT TO
                                17 CFR 240.13a-14
                              [17 CFR 240.15d-14],
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, K. S. Adams, Jr. certify that:

1. I have reviewed this annual report on Form 10-K of Adams Resources & Energy,
   Inc. (the "registrant");

2. Based on my knowledge, this annual 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 annual report;

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

4. The registrant's other certifying officer and I are responsible for
   establishing and maintaining disclosure controls and procedures (as defined
   in Rules 13a-14 and 15d-14 as promulgated under the Securities Exchange Act
   of 1934, as amended) for the registrant and we have:

   (a) designed such disclosure controls and procedures 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 annual report is
       being prepared;

   (b) evaluated the effectiveness of the registrant's disclosure controls
       and procedures as of a date within 90 days prior to the filing date of
       this annual report (the "Evaluation Date"); and

   (c) presented in this annual report our conclusions about the
       effectiveness of the disclosure controls and procedures based on our
       evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
   most recent evaluation, to the registrant's auditors and the audit committee
   of registrant's board of directors:

   (a) all significant deficiencies in the design or operation of internal
       controls which could adversely affect the registrant's ability to record,
       process, summarize and report financial data and have identified for the
       registrant's auditors any material weaknesses in internal controls; and

   (b) any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       controls; and

                                      IV-5
<PAGE>

6. The registrant's other certifying officer and I have indicated in this annual
   report whether or not there were significant changes in internal controls or
   in other factors that could significantly affect internal controls subsequent
   to the date of our most recent evaluation, including any corrective actions
   with regard to significant deficiencies and material weaknesses.

Date: March 21, 2003

/s/ K. S. Adams, Jr.
------------------------------------
K. S. Adams, Jr.
Chief Executive Officer

                                      IV-6
<PAGE>

                         ADAMS RESOURCES & ENERGY, INC.
                            CERTIFICATION PURSUANT TO
                                17 CFR 240.13a-14
                              [17 CFR 240.15d-14],
                             AS ADOPTED PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard B. Abshire, certify that:

1. I have reviewed this annual report on Form 10-K of Adams Resources & Energy,
   Inc. (the "registrant");

2. Based on my knowledge, this annual 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 annual report;

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

4. The registrant's other certifying officer and I are responsible for
   establishing and maintaining disclosure controls and procedures (as defined
   in Rules 13a-14 and 15d-14 as promulgated under the Securities Exchange Act
   of 1934, as amended) for the registrant and we have:

   (a) designed such disclosure controls and procedures 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 annual report is
       being prepared;

   (b) evaluated the effectiveness of the registrant's disclosure controls
       and procedures as of a date within 90 days prior to the filing date of
       this annual report (the "Evaluation Date"); and

   (c) presented in this annual report our conclusions about the
       effectiveness of the disclosure controls and procedures based on our
       evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
   most recent evaluation, to the registrant's auditors and the audit committee
   of registrant's board of directors:

   (c) all significant deficiencies in the design or operation of internal
       controls which could adversely affect the registrant's ability to record,
       process, summarize and report financial data and have identified for the
       registrant's auditors any material weaknesses in internal controls; and

   (d) any fraud, whether or not material, that involves management or other
       employees who have a significant role in the registrant's internal
       controls; and

                                      IV-7
<PAGE>

6. The registrant's other certifying officer and I have indicated in this annual
   report whether or not there were significant changes in internal controls or
   in other factors that could significantly affect internal controls subsequent
   to the date of our most recent evaluation, including any corrective actions
   with regard to significant deficiencies and material weaknesses.

Date: March 21, 2003

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

                                      IV-8
<PAGE>

                                 EXHIBIT INDEX

Exhibit
Number                 Description

3(a)     -        Certificate of Incorporation of the Company, as amended.
                  (Incorporated by reference to Exhibit 3(a) filed with the
                  Annual Report on Form 10-K of the Company for the fiscal year
                  ended December 31, 1987)

3(b)     -        Bylaws of the Company, as amended (Incorporated by reference
                  to Exhibits 3.2 and 3.2.1 of Amendment No. 1 to the
                  Registration Statement on Form S-1 filed with the Securities
                  and Exchange Commission on October 29, 1973 - File No.
                  2-48144)

3(c)     -        Amendment to the Bylaws of the Company to add an Article
                  VII, Section 8. Indemnification of Directors, Officers,
                  Employees and Agents (Incorporated by reference to Exhibit
                  3(c) of the Annual Report on Form 10-K of the Company for the
                  fiscal year ended December 31, 1986)

3(d)*    -        Adams Resources & Energy, Inc. and Subsidiaries' Code of
                  Ethics

4(a)     -        Specimen common stock Certificate (Incorporated by reference
                  to Exhibit 4(a) of the Annual Report on Form 10-K of the
                  Company for the fiscal year ended December 31, 1991)

4(b)     -        Loan Agreement between Adams Resources & Energy, Inc. and
                  NationsBank Texas N.A. dated October 27, 1993 ( Incorporated
                  by reference to Exhibit 4(b) of the Annual Report on Form
                  10-K of the Company for the fiscal year ended December 31,
                  1993)

4(c)*    -        Tenth Amendment to Loan Agreement between Service Transport
                  Company et al and Bank of America, N.A. dated March 17, 2003.

12.1     -        Computation of Ratio of Earnings to Fixed Charges

21*      -        Subsidiaries of the Registrant

------------------------------
*  - Filed herewith

                                      IV-9