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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 2001 Commission file number 1-467
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
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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 ----- 7,881,888
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WILSHIRE OIL COMPANY OF TEXAS
INDEX
Page No.
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Part I Financial Information
Financial Information:
Condensed Consolidated Balance Sheets --
September 30, 2001 (Unaudited) and December 31, 2000 ........ 1
Unaudited Condensed Consolidated Statements of Income --
Nine months ended September 30, 2001 and 2000 ............... 2
Unaudited Condensed Consolidated Statements of Income --
Three months ended September 30, 2001 and 2000 .............. 3
Unaudited Condensed Consolidated Statements of Cash Flows --
Nine months ended September 30, 2001 and 2000 ............... 4
Notes to Unaudited Condensed Consolidated
Financial Statements ........................................ 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................... 9
Part II Other Information ............................................. 12
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's Omitted, Except Share Data)
September 30,
2001 December 31,
ASSETS (Unaudited) 2000
----------- ------------
CURRENT ASSETS
Cash and cash equivalents .......................................... $ 3,931 $ 2,925
Marketable securities, available-for-sale, at fair value ........... 10,624 7,166
Accounts receivable ................................................ 1,338 2,243
Income taxes receivable ............................................ 487 332
Prepaid expenses and other current assets .......................... 1,397 2,535
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Total current assets ......................................... 17,777 15,201
MORTGAGE NOTES RECEIVABLE ............................................ 6,790 3,500
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PROPERTY AND EQUIPMENT
Oil and gas properties, using full cost method of accounting ....... 136,985 137,458
Real estate properties ............................................. 65,867 61,402
Other property and equipment ....................................... 379 312
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203,231 199,172
Less -- Accumulated depreciation, depletion and amortization ......... 121,061 119,332
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82,170 79,840
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$106,737 $ 98,541
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt .................................. $ 3,150 $ 14,842
Loan payable to shareholder ........................................ 700 400
Accounts payable ................................................... 3,296 1,986
Accrued liabilities ................................................ 1,010 1,159
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Total current liabilities .................................... 8,156 18,387
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LONG - TERM DEBT, less current portion ............................... 61,856 46,701
-------- --------
DEFERRED INCOME TAXES AND OTHER ...................................... 11,815 11,994
-------- --------
OTHER LONG-TERM LIABILITIES .......................................... -- 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, 15,00,000 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, 2,131,656 and 2,037,556 shares at .................. (10,145) (9,850)
September 30, 2001 and December 31, 2000, respectively, at cost
Retained earnings .................................................. 19,457 17,112
Accumulated other comprehensive loss ............................... (3,445) (4,877)
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24,910 21,428
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$106,737 $ 98,541
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1
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's Omitted Except Per Share Data)
FOR THE NINE MONTHS ENDED
-----------------------------
September 30, September 30,
2001 2000
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REVENUES
Oil & Gas ........................................ $ 7,416 $ 5,467
Real Estate ...................................... 10,445 9,551
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Total Revenues ............................... 17,861 15,018
COSTS AND EXPENSES
Oil and Gas Production Expenses .................. 2,283 1,769
Real Estate Operating Expenses ................... 6,311 5,605
Depreciation, depletion and amortization ......... 3,056 2,735
General and Administrative ....................... 1,072 1,300
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Total Costs and Expenses ..................... 12,722 11,409
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Income from Operations ....................... 5,139 3,609
OTHER INCOME ..................................... 2,054 579
INTEREST EXPENSE ................................. (3,702) (3,051)
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Income before provision for income taxes ......... 3,491 1,137
PROVISION FOR INCOME TAXES ....................... 1,146 387
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Net income ................................... $ 2,345 $ 750
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BASIC AND DILUTED EARNINGS PER SHARE ............. $ 0.30 $ 0.09
======= =======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
2
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's Omitted, Except Per Share Data)
FOR THE THREE MONTHS ENDED
-----------------------------
September 30, September 30,
2001 2000
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REVENUES
Oil & Gas ........................................ $ 1,601 $ 2,107
Real Estate ...................................... 3,617 3,167
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Total Revenues ............................... 5,218 5,274
COSTS AND EXPENSES
Oil and Gas Production Expenses .................. 860 563
Real Estate Operating Expenses ................... 2,140 1,851
Depreciation, depletion and amortization ......... 1,226 840
General and Administrative ....................... 547 436
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Total Costs and Expenses ..................... 4,773 3,690
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Income from Operations ....................... 445 1,584
OTHER INCOME ..................................... 1,694 347
INTEREST EXPENSE ................................. (1,286) (1,045)
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Income before provision for income taxes ......... 853 886
PROVISION FOR INCOME TAXES ....................... 312 343
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Net income ................................... $ 541 $ 543
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BASIC AND DILUTED EARNINGS PER SHARE ............. $ 0.07 $ 0.06
======= =======
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 Nine Months Ended
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September 30, September 30,
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ................................................... $ 2,345 $ 750
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation, depletion and amortization ..................... 3,056 2,735
Gain on sale of Assets ....................................... (1,420) --
Deferred income tax benefit .................................. (1,766) (172)
Changes in operating assets and liabilities --
(Increase) decrease in receivables ........................... 751 (1,106)
(Increase) decrease in prepaid expenses and
other current assets ....................................... 1,138 272
Increase (decrease) in accounts payable,
accrued and other liabilities .............................. 1,161 968
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Net cash provided by operating activities .................... 5,265 3,447
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase Mortgage Notes ...................................... (3,290) (3,500)
Capital expenditures ......................................... (7,616) (1,615)
Purchases of marketable securities ........................... -- (4,481)
Proceeds from sales of assets ................................ 3,650 --
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Net cash used in investing activities ........................ (7,256) (9,596)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment of long term debt .......................... (4,007) (708)
Proceeds from issuance of loan payable to shareholder ........ 300 2,622
Proceeds from issuance of short term debt .................... -- 4,700
Proceeds from issuance of long term debt ..................... 7,470 1,793
Purchase of treasury stock ................................... (295) (1,871)
Other ........................................................ (318) (125)
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Net cash provided by (used in) financing activities .......... 3,150 6,411
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EFFECT OF EXCHANGE RATE CHANGES ON CASH ........................ (153) (277)
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Net increase (decrease) in cash and cash equivalents ......... 1,006 (15)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............... 2,925 1,887
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CASH AND CASH EQUIVALENTS AT END OF PERIOD...................... $ 3,931 $ 1,872
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SUPPLEMENTAL DISCLOSURES TO THE STATEMENTS OF CASH FLOWS:
Cash paid during the period for --
Interest ................................................... $ 3,686 $ 3,051
Income taxes ............................................... $ 254 $ 183
4
WILSHIRE OIL COMPANY OF TEXAS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 Nine months
ended September 30
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2001 2000
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Revenues
Oil and gas -- United States .................. $ 4,073,000 $ 3,074,000
Oil and gas -- Canada ......................... 3,343,000 2,393,000
Real estate ................................... 10,445,000 9,551,000
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$ 17,861,000 $15,018,000
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Income (loss) from operations and reconciliation
to Income before provision for income taxes
Oil and gas -- United States (a) .............. $ 243,000 $ (716,000)
Oil and gas -- Canada (a) ..................... 2,331,000 1,504,000
Real estate (a) ............................... 2,472,000 2,483,000
Corporate (a) ................................. 93,000 338,000
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Income from Operations ...................... 5,139,000 3,609,000
Other Income .................................... 2,054,000 579,000
Interest expense .............................. (3,702,000) (3,051,000)
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Income before provision for income taxes .... $ 3,491,000 $ 1,137,000
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Identifiable assets
Oil and gas -- United States .................. $ 15,236,000 $17,520,000
Oil and gas -- Canada ......................... 14,230,000 14,012,000
Real estate ................................... 38,784,000 48,176,000
Corporate ..................................... 38,387,000 17,916,000
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$106,637,000 $97,624,000
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(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 September 30
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2001 2000
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Revenues
Oil and gas -- United States ................. $ 888,000 $ 1,213,000
Oil and gas -- Canada ........................ 713,000 894,000
Real estate .................................. 3,617,000 3,167,000
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$ 5,218,000 $ 5,274,000
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Income from operations and reconciliation
to Income before provision for income taxes
Oil and gas -- United States (a) ............. $ (962,000) $ (272,000)
Oil and gas -- Canada (a) .................... 229,000 876,000
Real estate (a) .............................. 915,000 795,000
Corporate (a) ................................ 263,000 185,000
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Income from Operations ..................... 445,000 1,584,000
Other Income ................................... 1,694,000 347,000
Interest expense ............................. (1,286,000) (1,045,000)
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Income before provision for income taxes ... $ 853,000 $ 886,000
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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 nine months ended September 30, 2001 and 2000 is as follows:
2001 2000
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Net income $2,379,000 $750,000
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Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments ...... (471,000) (488,000)
Change in unrealized (loss) gain on
marketable securities ....................... 1,903,000 396,000
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Other comprehensive income (loss) ............... 1,432,000 (92,000)
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Comprehensive income ............................ $3,811,000 $658,000
========== ========
7
Changes in the components of Accumulated Other Comprehensive Income (Loss)
for the year 2000 and for the nine months ended September 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 nine months ......... 1,903,000 (471,000) 1,432,000
----------- ----------- -----------
BALANCE, September 30, 2001 .......... $ 318,000 $(3,763,000) $(3,445,000)
=========== =========== ===========
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share--
Nine Months Ended September 30, Three Months Ended September 30,
------------------------------ -------------------------------
2001 2000 2001 2000
---------- ---------- ---------- ----------
Numerator --
Net income ................................. $2,345,000 $ 750,000 $ 541,000 $ 543,000
========== ========== ========== ==========
Denominator--
Weighted average common shares
outstanding -- Basic ..................... 7,925,886 8,212,190 7,892,731 8,079,858
Incremental shares from assumed
conversions of stock options ............... -- -- -- --
---------- ---------- ---------- ----------
Weighted average common shares
outstanding -- Diluted ..................... 7,925,886 8,212,190 7,892,731 8,079,858
========== ========== ========== ==========
Basic earnings per share ..................... $ 0.30 $ 0.09 $ 0.07 $ 0.06
Diluted earnings per share ................... $ 0.30 $ 0.09 $ 0.07 $ 0.06
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the nine months ended September 30 was $2,345,000 in 2001 as
compared to $750,000 in 2000.
Consolidated revenues for the nine months ended September 30 increased from
$15,018,000 in 2000 to $17,861,000 in 2001. Oil and gas revenues increased by
$1,949,000 due to increases in the price of crude oil and gas. Real estate
revenues increased from $9,551,000 in 2000 to $10,4445,000 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.
During the third quarter of 2001, the Company sold real estate properties
in the amount of $3,650,000 which resulted in a pre-tax gain of $1,420,000.
Total costs and expenses increased for the nine months ended September 30,
amounting to $12,722,000 in 2001 compared with $11,409,000 in 2000. Oil and gas
production expense increased by $514,000 and real estate operating expenses
increased by $706,000. Depreciation, depletion and amortization was increased
slightly by $321,000 and general and administrative expenses decreased by
$228,000.
Interest expense increased from $3,051,000 for the nine months ended
September 30, 2000 to $,3,702,000 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 September 30, 2001 the Company had approximately $10,624,000 in
marketable securities at market value. The current ratio at September 30, 2001
was approximately 2.2 to 1, which management considers adequate. The Company
completed its refinancing of short-term debt, as noted in the first quarter
10-Q, at favorable interest rates. The result of this refinancing is evident in
the current quarter ratio. The Company's working capital was approximately $9.6
million at September 30, 2001.
The Company anticipates that cash provided by operating activities 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 $5,265,000 in 2001 and
$3,447,000 in 2000. The increase in 2001 was primarily due to higher income.
Net cash used in investing activities was $7,256,000 in 2001 and $9,596,000
in 2000. The variations principally relate to the acquisition of a 180 unit
apartment complex in San Antonio, Texas for $5,250,000 and the sale of assets
for $3,650,000 in 2001 versus the purchase of marketable securities in the
amount of $4,481,000 in 2000.
Net cash provided by financing activities was $3,150,000 in 2001 and
$6,411,000 in 2000. The variation principally relates to the issuance and
payment 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 $295,000 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 September 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 September 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: November 14, 2001 By: /s/ S. WILZIG IZAK
--------------------------------------
S. Wilzig Izak
Chairman of the Board and Chief
Executive Officer
(Duly Authorized Officer and Chief
Financial Officer)
13