SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 2001 Commission file number 1-467
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WILSHIRE OIL COMPANY OF TEXAS
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(Exact name of registrants as specified in its charter)
Delaware 84-0513668
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
921 Bergen Avenue, Jersey City, New Jersey 07306-4204
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number - including area code (201) 420-2796
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NO CHANGE
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Former name, former address and former fiscal year, if changed since last
reports.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period by this report.
Common Stock $1 Par Value---7,895,288
WILSHIRE OIL COMPANY OF TEXAS
INDEX
Page No.
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Part I Financial Information
Financial Information: 1
Condensed Consolidated Balance Sheets-
June 30, 2001 (Unaudited) and December 31, 2000
Unaudited Condensed Consolidated Statements of Income- 2
Six months ended June 30, 2001 and 2000
Unaudited Condensed Consolidated Statements of Income - 3
Three months ended June 30, 2001 and 2000.
Unaudited Condensed Consolidated Statements of Cash Flows - 4
Six months ended June 30, 2001 and 2000
Notes to Unaudited Condensed Consolidated Financial Statements 5
Management's Discussion and Analysis 9
of Financial Condition and Results of Operations
Part II Other Information 12
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(000's Omitted, Except Share Data)
June 30,
(Unaudited) December 31,
ASSETS 2001 2000
--------- ---------
CURRENT ASSETS
Cash and cash equivalents .................................. $ 2,024 $ 2,925
Marketable securities, available-for-sale, at fair value ... 10,711 7,166
Accounts receivable ........................................ 2,621 2,243
Income taxes receivable .................................... 468 332
Prepaid expenses and other current assets .................. 1,218 2,535
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Total current assets ...................................... 17,042 15,201
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MORTGAGE NOTES RECEIVABLE ................................... 3,500 3,500
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PROPERTY AND EQUIPMENT
Oil and gas properties, using full cost method of accounting 137,597 137,458
Real estate properties ..................................... 67,619 61,402
Other property and equipment ............................... 370 312
--------- ---------
205,586 199,172
Less- Accumulated depreciation, depletion and amortization 120,544 119,332
--------- ---------
85,042 79,840
--------- ---------
$ 105,584 $ 98,541
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt .......................... $ 572 $ 14,842
Loan payable to shareholder ................................ 700 400
Accounts payable ........................................... 3,322 1,986
Accrued liabilities ........................................ 775 1,159
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Total current liabilities ............................... 5,369 18,387
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LONG- TERM DEBT, less current portion ....................... 63,237 46,701
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DEFERRED INCOME TAXES ....................................... 12,028 11,994
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OTHER LONG-TERM LIABILITIES ................................. 31 31
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized;
None issued and outstanding in 2001 and 2000
Common stock, $1 par value, 15,000,000 shares authorized;
Issued 10,013,544 shares in 2001 and 2000 ................. 10,014 10,014
Capital in excess of par value .............................. 9,029 9,029
Treasury stock, 2,118,256 and 2,037,556 shares at June 30, (10,068) (9,850)
2001 and December 31, 2000, respectively, at cost
Retained earnings ........................................... 18,916 17,112
Accumulated other comprehensive loss ........................ (2,972) (4,877)
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24,919 21,428
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$ 105,584 $ 98,541
========= =========
1
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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(000's Omitted Except Per Share Data)
FOR THE SIX MONTHS ENDED
------------------------
June 30, June 30,
2001 2000
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REVENUES
Oil & Gas ........................................ $ 5,815 $ 3,360
Real Estate ...................................... 6,828 6,384
-------- --------
Total Revenues ................................ 12,643 9,744
COSTS AND EXPENSES
Oil and Gas Production Expenses .................. 1,423 1,206
Real Estate Operating Expenses ................... 4,171 3,754
Depreciation, depletion and amortization ......... 1,830 1,895
General and Administrative ....................... 525 864
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Total Costs and Expenses ..................... 7,949 7,719
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Income from Operations ....................... 4,694 2,025
OTHER INCOME ..................................... 360 232
INTEREST EXPENSE ................................. (2,416) (2,006)
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Income before provision for income taxes ........ 2,638 251
PROVISION FOR INCOME TAXES ....................... 834 44
-------- --------
Net income .................................. $ 1,804 $ 207
======== ========
BASIC AND DILUTED EARNINGS PER SHARE ............. $ 0.23 $ 0.03
======== ========
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
2
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-----------------------------------------------------
(000's Omitted, Except Per Share Data)
FOR THE THREE MONTHS ENDED
--------------------------
June 30, June 30,
2001 2000
--------- --------
REVENUES
Oil & Gas ........................................ $ 2,397 $ 2,015
Real Estate ...................................... 3,539 3,159
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Total Revenues ................................ 5,936 5,174
COSTS AND EXPENSES
Oil and Gas Production Expenses .................. 822 670
Real Estate Operating Expenses ................... 2,130 1,989
Depreciation, depletion and amortization ......... 830 985
General and Administrative ....................... 181 528
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Total Costs and Expenses ..................... 3,963 4,172
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Income from Operations ....................... 1,973 1,002
OTHER INCOME ..................................... 265 86
INTEREST EXPENSE ................................. (1,247) (982)
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Income before provision for income taxes ........ 991 106
PROVISION FOR INCOME TAXES ....................... 224 31
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Net income .................................. $ 767 $ 75
======= =======
BASIC AND DILUTED EARNINGS PER SHARE ............. $ 0.10 $ 0.01
======= =======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
3
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
---------------------------------------------------------
(000's Omitted)
FOR THE SIX MONTHS ENDED
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June 30, June 30,
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ........................................... $ 1,804 $ 207
Adjustments to reconcile net income to net
cash used in operating activities-
Depreciation, depletion and amortization ............. 1,830 1,895
Deferred income tax (benefit) provision .............. (266) 297
Changes in operating assets and liabilities-
(Increase) decrease in receivables ................... (514) 206
(Increase) decrease in prepaid expenses and
Other current assets ................................ 22 (138)
(Increase) decrease in accounts payable,
Accrued and other liabilities ........................ 952 283
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Net cash provided by operating activities ............ $ 3,828 $ 2,750
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase Mortgage Notes .............................. -- (3,500)
Capital expenditures, net ............................ (7,032) (1,335)
Purchases of marketable securities ................... -- (2,891)
Proceeds from sales and redemptions of securities .... -- --
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Net cash used in investing activities ............... (7,032) (7,726)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment of long term debt .................. (2,004) (456)
Proceeds from issuance of loan payable to shareholder 300 1,722
Proceeds from issuance of short term debt ............ -- 4,700
Proceeds from issuance of long term debt ............. 4,270 1,725
Purchase of treasury stock ........................... (218) (1,342)
Other ................................................ -- 178
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Net cash provided by financing activities ............ 2,348 6,527
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EFFECT OF EXCHANGE RATE CHANGES ON CASH ............... (45) (76)
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Net (decrease) increase in cash and cash equivalents . (901) 1,475
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD .................................. 2,925 1,887
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD ........................................ $ 2,024 $ 3,362
======= =======
SUPPLEMENTAL DISCLOSURES TO THE
STATEMENTS OF CASH FLOWS:
Cash paid during the period for-
Interest ............................................. $ 2,416 $ 2,042
Income taxes ......................................... $ 156 $ 192
4
WILSHIRE OIL COMPANY OF TEXAS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
1 FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements included herein
have been prepared by the Registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted pursuant to
such rules and regulations, although the Registrant believes that the
disclosures are adequate to make the information presented not misleading.
It is suggested that these unaudited condensed consolidated financial
statements be read in conjunction with the financial statements and the
notes thereto included in the Company's latest annual report on Form 10-K.
This condensed financial information reflects, in the opinion of
management, all adjustments necessary to present fairly the results for the
interim periods. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
2 DESCRIPTION OF BUSINESS:
Wilshire Oil Company of Texas (the Company) is a diversified corporation
engaged in oil and gas exploration and production and real estate
operations. The Company's oil and gas operations are conducted both in its
own name and through several wholly-owned subsidiaries in the United States
and Canada. Crude oil and natural gas productions are sold to oil
refineries and natural gas pipeline companies. The Company's real estate
holdings are located in the states of Arizona, Florida, New Jersey, Texas
and Georgia. The Company also maintains investments in marketable
securities.
3 SEGMENT INFORMATION
The Company is engaged in the exploration and development of oil and gas,
both in its own name and through several wholly-owned subsidiaries, on the
North American continent. The Company also conducts real estate operations
throughout the United States.
Oil and Gas
The Company conducts its oil and gas operations in the United States and
Canada. Oil and gas operations in the United States are located in
Arkansas, California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma,
Pennsylvania, Texas and Wyoming. In Canada, the Company conducts oil and
gas operations in the Provinces of Alberta, British Columbia and
Saskatchewan.
Real Estate
The Company's real estate operations are conducted in the states of
Arizona, Texas, Florida, Georgia and New Jersey. The Company's properties
consists of apartment complexes as well as commercial and retail
properties.
Corporate
The Company holds investments in certain marketable securities. From time
to time, the Company buys and sells securities in the open market. Over the
years, the Company has decreased its holding in marketable securities and
focused its resources in the oil and gas and real estate divisions.
5
The following segment data is presented based on the Company's internal
management reporting system-
For the six months
ended June 30
-------------------------------
2001 2000
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Revenues
Oil and gas- United States .................. $ 3,185,000 $ 1,861,000
Oil and gas- Canada ......................... 2,630,000 1,499,000
Real estate ................................. 6,828,000 6,384,000
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$ 12,643,000 $ 9,744,000
============= =============
Income from operations and reconciliation
to Income before provision for income taxes
Oil and gas- United States (a) .............. $ 1,205,000 $ (211,000)
Oil and gas- Canada (a) ..................... 2,102,000 628,000
Real estate (a) ............................. 1,557,000 1,688,000
Corporate (a) ............................... (170,000) (80,000)
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Income from Operations ...................... 4,694,000 2,025,000
Other Income ................................. 360,000 232,000
Interest expense ............................ (2,416,000) (2,006,000)
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Income before provision for income taxes .... $ 2,638,000 $ 251,000
============= =============
Identifiable assets .......................... $ 17,143,000 $ 16,467,000
Oil and gas - United States ................. 21,400,000 13,774,000
Oil and gas - Canada ........................ 43,998,000 41,461,000
Real estate ................................. 23,043,000 26,240,000
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Corporate ................................... $ 105,584,000 $ 97,942,000
============= =============
(a) Represents revenues less all operating costs, including depreciation,
depletion and amortization.
6
The following segment data is presented based on the Company's internal
management reporting system-
For the three months
ended June 30
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2001 2000
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Revenues
Oil and gas- United States .................... $ 1,549,000 $ 1,098,000
Oil and gas - Canada .......................... 848,000 917,000
Real estate ................................... 3,539,000 3,159,000
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$ 5,936,000 $ 5,174,000
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Income from operations and reconciliation
to Income before provision for income taxes
Oil and gas- United States (a) ................ $ 684,000 $ (3,000)
Oil and gas- Canada (a) ....................... 623,000 360,000
Real estate (a) ............................... 846,000 703,000
Corporate (a) ................................. (180,000) (58,000)
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Income from Operations ........................ 1,973,000 1,002,000
Other Income ................................... 265,000 86,000
Interest expense .............................. (1,247,000) (982,000)
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Income before provision for income taxes ...... $ 991,000 $ 106,000
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(a) Represents revenues less all operating costs, including depreciation,
depletion and amortization.
4 COMPREHENSIVE INCOME
Comprehensive income, representing all changes in shareholders' equity
during the period, other than changes resulting from the Company's common
stock, for the six months ended June 30, 2001 and 2000 is as follows:
2001 2000
----------- ----------
Net income ........................................ $ 1,804,000 $ 207,000
----------- ----------
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments ......... (45,000) (233,000)
Change in unrealized gain on marketable securities 1,950,000 309,000
----------- ----------
Other comprehensive income ........................ 1,905,000 76,000
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Comprehensive income .............................. $ 3,709,000 $ 283,000
=========== ==========
7
Changes in the components of Accumulated Other Comprehensive
Income (Loss) for the year 2000 and for the six months ended June
30, 2001 are as follows-
Unrealized Gains Cumulative Accumulated
(Losses) on Foreign Currency Other
Available-for Sale Translation Comprehensive
Securities Adjustment Income (Loss)
------------------ ----------- -------------
BALANCE, December 31, 1999 ... $ (274,000) $(2,941,000) $(3,215,000)
Change for the year 2000 .... (1,311,000) (351,000) (1,662,000)
----------- ----------- -----------
BALANCE, December 31, 2000 ... (1,585,000) (3,292,000) (4,877,000)
Change for the six months .. 1,950,000 (45,000) 1,905,000
----------- ----------- -----------
$ 365,000 $(3,337,000) $(2,972,000)
=========== =========== ===========
5 EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share-
Six Months Ended June 30, Three Months Ended June 30
------------------------ --------------------------
2001 2000 2001 2000
----------- --------- ----------- ---------
Numerator-
Net income ................... $1,804,000 $ 207,000 $ 767,000 $ 75,000
========== ========== ========== ==========
Denominator-
Weighted average common shares
outstanding - Basic ......... 7,942,738 8,279,084 7,915,953 8,187,127
Incremental shares from assumed
conversions of stock options -- -- -- --
--------- --------- --------- ---------
Weighted average common shares
outstanding - Diluted ....... 7,942,738 8,279,084 7,915,953 8,187,127
========== ========== ========== ==========
Basic earnings per share ...... $ 0.23 $ 0.03 $ 0.10 $ 0.01
Diluted earnings per share .... $ 0.23 $ 0.03 $ 0.10 $ 0.01
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net income for the six months ended June 30 was $1,804,000 in 2001 as
compared to $207,000 in 2000.
Consolidated revenues for the six months ended June 30 increased from
$9,744,000 in 2000 to $12,643,000 in 2001. Oil and gas revenues increased by
$2,455,000 due to increases in the price of crude oil and gas. Real estate
revenues increased from $6,384,000 in 2000 to $6,828,000 in 2001. This increase
is due to higher rents and the purchase of a 180 unit apartment complex in San
Antonio, Texas on March 29, 2001.
Total costs and expenses for the six month ended June 30 increased
slightly, amounting to $7,949,000 in 2001 compared with $7,719,000 in 2000. Oil
and gas production expense increased by $217,000 and real estate operating
expenses increased by $417,000. Depreciation, depletion and amortization was
lower due to the increased value of company reserves and general and
administrative expenses decreased by $339,000.
Interest expense increased from $2,006,000 in 2000 to $2,416,000 in 2001.
This increase is attributable to an increase in debt.
The provision for income taxes includes Federal, state and Canadian taxes.
Differences between the effective tax rate and the statutory income tax rates
are principally due to foreign resource tax credits in Canada and the dividend
exclusion in the United States.
9
Liquidity and Capital Resources
At June 30, 2001 the Company had approximately $10,711,000 in marketable
securities at market value. The current ratio at June 30, 2001 was 3.2 to 1,
which management considers adequate. The Company completed its refinancing of
short-term debt, as noted in the first quarter 10Q, at favorable interest rates.
The result of this refinancing is evident in the current quarter current ratio.
The Company's working capital was approximately $11,673,000 at June 30, 2001.
The Company anticipates that cash provided by operating and investing
activities will be sufficient to meet its capital requirements to acquire oil
and gas properties and to drill and evaluate these and other oil and gas
properties presently held by the Company. The level of oil and gas capital
expenditures will vary in future periods depending on market conditions,
including the price of oil and the demand for natural gas, and other related
factors. As the Company has no material long-term commitments with respect to
its oil and gas capital expenditure plans, the Company has a significant degree
of flexibility to adjust the level of its expenditures as circumstances warrant.
The Company plans to actively continue its exploration and production
activities as well as search for the acquisition of oil and gas producing
properties and of companies with desirable oil and gas producing properties.
There can be no assurance that the Company will in fact locate any such
acquisitions.
The Company will also explore real estate acquisitions as they arise. The
timing of any such acquisition will depend on, among other things, economic
conditions and the favorable evaluation of specific opportunities presented to
the Company. The Company is currently planning further acquisitions of
investment properties during the next year. Accordingly, while the Company
anticipates that it will actively explore these and other real estate
acquisition opportunities, no assurance can be given that any such acquisition
will occur.
Net cash provided by operating activities was $3,828,000 in 2001 and
$2,750,000 in 2000. The increase in 2001 was primarily due to higher income.
Net cash used in investing activities was $7,032,000 in 2001 and $7,726,000
in 2000. The variations principally relate to the acquisition of a 180 unit
apartment complex in San Antonio, Texas for $5,250,000 in 2001 versus the
purchase of mortgage notes and marketable securities in the amount of $6,391,000
in 2000.
Net cash provided by (used in) financing activities was $2,348,000 in 2001
and $6,527,000 in 2000. The variation principally relates to the issuance of
long-term debt in connection with real estate properties during the respective
quarters as well as principal payments of long-term debt. In addition, the
Company acquired approximately $218,000 of treasury stock in 2001.
The Company believes it has adequate capital resources to fund operations
for the foreseeable future.
10
Forward-Looking Statements
This Report on Form 10-Q for the quarter ended June 30, 2001 contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements included herein other than
statements of historical fact are forward-looking statements. Although the
Company believes that the underlying assumptions and expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to be correct. The Company's business and prospects
are subject to a number of risks which could cause actual results to differ
materially from those reflected in such forward-looking statements, including
volatility of oil & gas prices, the need to develop and replace reserves, risks
involved in exploration and drilling, uncertainties about estimates of reserves,
environmental risks relating to the Company's oil & gas and real estate
properties, competition, the substantial capital expenditures required to fund
the Company's oil & gas and real estate operations, market and economic changes
in areas where the Company holds real estate properties, interest rate
fluctuations, government regulation, and the ability of the Company to implement
its business strategy.
11
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
No Form 8-K was filed during the quarter ended June 30, 2001.
12
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILSHIRE OIL COMPANY OF TEXAS
-----------------------------
(Registrant)
Date: August 14, 2001 /s/ S. WILZIG IZAK
-------------------
By: S. Wilzig Izak
Chairman of the Board and Chief Executive
Officer (Duly Authorized Officer and Chief
Financial Officer)