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 March 31, 2002 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
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 -- 7,875,888
WILSHIRE OIL COMPANY OF TEXAS
INDEX
Page No.
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Part I Financial Information
Financial Information: 1
Condensed Consolidated Balance Sheets -
March 31, 2002 (Unaudited) and December 31, 2001
Unaudited Condensed Consolidated Statements of Income - 2
Three months ended March 31, 2002 and 2001
Unaudited Condensed Consolidated Statement of Cash Flows - 3
Three months ended March 31, 2002 and 2001
Notes to Unaudited Condensed Consolidated
Financial Statements 4, 5 & 6
Management's Discussion and Analysis 7, 8, & 9
of Financial Condition and Results of
Operations
Part II Other Information 10
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(000's Omitted, Except Share Data)
March 31, December 31,
2002 2001
--------- ------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................................. $ 3,215 $ 4,984
Marketable securities, available-for-sale, at fair value ................... 10,120 10,358
Accounts receivable ........................................................ 1,739 832
Prepaid income taxes ....................................................... 796 --
Prepaid expenses and other current assets .................................. 281 1,215
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Total current assets ............................................. 16,151 17,389
MORTGAGE NOTES RECEIVABLE ................................................... 5,176 6,572
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PROPERTY AND EQUIPMENT
Oil and gas properties, using full cost method of accounting .............. 136,521 136,355
Real estate properties .................................................... 69,689 69,161
Other property and equipment .............................................. 375 394
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206,585 205,910
Less-Accumulated depreciation, depletion and amortization ............... 122,918 121,968
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83,667 83,942
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$ 104,994 107,903
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt .......................................... $ 3,187 $ 7,287
Loan payable to shareholder ................................................ 500 700
Accounts payable ........................................................... 3,094 3,247
Accrued liabilities ........................................................ 176 1,028
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Total current liabilities ................................... 6,957 12,262
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LONG - TERM DEBT, less current portion ....................................... 61,145 60,661
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DEFERRED INCOME TAXES ........................................................ 12,794 11,256
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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 2002 and 2001
Common stock, $1 par value, 15,000,000 shares authorized;
Issued 10,013,544 shares in 2002 and 2001 ............................... 10,014 10,014
Capital in excess of par value ............................................ 9,029 9,029
Treasury stock, 2,137,656 and 2,132,656 shares at March 31,
2002 and December 31, 2001, respectively, at cost ....................... (10,198) (10,179)
Retained earnings ......................................................... 17,854 17,564
Accumulated other comprehensive loss ...................................... (2,601) (2,735)
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24,098 23,693
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$ 104,994 $ 107,903
========= =========
1
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
UNAUDITED CONDENSED CONDOLIDATED STATEMENTS OF INCOME
(000's Omitted, Except Per Share Data)
FOR THE THREE MONTHS ENDED
-------------------------
March 31, March 31,
2002 2001
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REVENUES
Oil & Gas .......................................... $ 1,248 $ 3,418
Real Estate ........................................ 3,769 3,289
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Total Revenues .................................. 5,017 6,707
COSTS AND EXPENSES
Oil and Gas Production Expenses .................... 457 601
Real Estate Operating Expenses ..................... 2,107 2,041
Depreciation, depletion and amortization ........... 986 1,000
General and Administrative ......................... 461 344
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Total Costs and Expenses ........................ 4,011 3,986
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Income from Operations .......................... 1,006 2,721
OTHER INCOME ....................................... 546 95
INTEREST EXPENSE ................................... (1,135) (1,169)
Income before provision for income
taxes .......................................... 417 1,647
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PROVISION FOR INCOME TAXES ......................... 127 610
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Net income ...................................... $ 290 $ 1,037
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BASIC AND DILUTED EARNINGS PER SHARE .............. $ 0.04 $ 0.13
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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 CASH FLOWS
(000's Omitted)
For The Three
Months Ended
-------------------
March 31, March 31,
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ............................................ $ 290 $ 1,037
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation, depletion and amortization ............. 986 1,000
Gain on sales of Marketable Securities ............... (380) --
Deferred income tax provision (benefit) .............. 1,429 (397)
Changes in operating assets and liabilities -
(Increase) decrease in receivables ............... (1,703) (334)
(Increase) decrease in prepaid expenses and
Other current assets ........................... 933 (175)
Increase (Decrease) in accounts payable,
Accrued and other liabilities .................. (1,005) 1,973
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Net cash provided by operating activities .......... 550 3,104
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CASH FLOWS FROM INVESTING ACTIVITIES
Mortgage Notes Receivable ............................. 1,396 --
Capital expenditures, net ............................. (675) (4,961)
Purchases of marketable securities .................... (537) --
Proceeds from sales of marketable securities .......... 1,453 --
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Net cash provided by (used in) investing activities ... 1,637 (4,961)
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment of debt ............................. (7,896) (2,000)
Proceeds from issuance of long term debt .............. 4,080 4,270
Purchase of treasury stock ............................ (19) (198)
Other ................................................. (50) (195)
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Net cash provided by (used in) financing activities ... (3,885) 1,877
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................. (71) (1,004)
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Net decrease in cash and cash equivalents ............. (1,769) (984)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......... 4,984 2,925
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CASH AND CASH EQUIVALENTS AT END OF PERIOD ............... $ 3,215 $ 1,941
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SUPPLEMENTAL DISCLOSURES TO THE
STATEMENTS OF CASH FLOWS:
Cash paid during the period for -
Interest ............................................. $ 1,135 $ 1,175
Income taxes ......................................... $ 62 $ 59
3
WILSHIRE OIL COMPANY OF TEXAS
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
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/A. This condensed financial information reflects, in the opinion of
management, all adjustments necessary to present fairly the results for the
interim periods. In connection with the preparation of the interim
financial statements, the Company estimates the oil and gas operations for
the month of March based on prior months actual results and specific
significant transactions which may have occurred during the month. In the
opinion of management these estimated results approximate actual. 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.
4
The following segment data is presented based on the Company's internal
management reporting system-
For the three months
Ended March 31
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2002 2001
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Revenues
Oil and gas- United States ................. $ 728,000 $ 1,636,000
Oil and gas - Canada ....................... 520,000 1,782,000
Real estate ................................ 3,769,000 3,289,000
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$ 5,017,000 $ 6,707,000
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Income from operations and reconciliation
to Income before provision for income taxes
Oil and gas - United States (a) ........... $ (413,000) $ 521,000
Oil and gas - Canada (a) .................. 317,000 1,479,000
Real estate (a) ........................... 1,100,000 711,000
Corporate (a) ............................. 2,000 10,000
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Income from Operations ................ 1,006,000 2,721,000
Other Income .................................. 546,000 95,000
Interest expenses .......................... (1,135,000) (1,169,000)
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Income before provision for income taxes $ 417,000 $ 1,647,000
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Identifiable assets
Oil and gas - United States ................. $ 14,110,000 $ 16,459.000
Oil and gas - Canada ........................ 13,529,000 14,748,000
Real estate ................................ 58,671,000 36,467,000
Corporate .................................. 20,721,000 35,381,000
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$107,031,000 $103,055,000
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(a) Represents revenues less all operating costs, including depreciation,
depletion and amortization.
5
4. COMPREHENSIVE INCOME
Comprehensive income for the three months ended March 31, 2002 and 2001 is
as follows:
2002 2001
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Net income ..................................................... $ 290,000 $ 1,037,000
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Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments ..................... (242,000) (1,243,000)
Change in unrealized (loss) gain on marketable securities .... 376,000 912,000
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Other comprehensive income (loss) .............................. 134,000 (331,000)
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Comprehensive income (loss) .................................... $ 424,000 $ 706,000
========= ===========
Changes in the components of Accumulated Other Comprehensive Income (Loss)
for the year 2001 and for the three months ended March 31, 2002 are as follows-
Unrealized Gains Cumulative Accumulated
(Losses) on Foreign Currency Other
Available-for Sale Translation Comprehensive
Securities Adjustment Income (Loss)
------------------ ---------------- -------------
BALANCE, December 31, 2000 ......................... $(1,585,000) $(3,292,000) $(4,877,000)
Change for the year 2001 ..................... 2,680,000 (538,000) 2,142,000
----------- ----------- -----------
BALANCE, December 31, 2001 ......................... 1,095,000 (3,830,000) (2,735,000)
Change for the quarter ....................... 376,000 (242,000) 134,000
----------- ----------- -----------
$ 1,471,000 $(4,072,000) $(2,601,000)
=========== =========== ===========
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share-
Three Months Ended
March 31,
-------------------------
2002 2001
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Numerator-
Net income .................................... $ 290,000 $1,037,000
========== ==========
Denominator-
Weighted average common shares
outstanding - Basic ......................... 7,875,888 7,969,820
Incremental shares from assumed
conversions of stock options ................ -- --
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Weighted average common shares
outstanding - Diluted ....................... 7,875,888 7,969,820
========== ==========
Basic earnings per share ......................... $ 0.04 $ 0.13
Diluted earnings per share ....................... $ 0.04 $ 0.13
6
FINANCIAL CONDITION AND RESULTS OF MANAGEMENT'S DISCUSSION AND
ANALYSIS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the quarter ended March 31 was $290,000 in 2002 as compared
to $1,037,000 in 2001.
Consolidated revenues for the quarter ended March 31 decreased from
$6,707,000 in 2001 to $5,017,000 in 2002. Oil and gas revenues decreased in the
first quarter of 2002 due to lower oil and gas prices in 2002, compared to 2001.
Real estate revenues increased from $3,289,000 in 2001 to $3,769,000 in 2002.
This increase is due to higher rents and the addition of our 180 unit apartment
complex in San Antonio, Texas.
Total costs and expenses for the quarter ended March 31 increased slightly,
amounting to $4,011,000 in 2002 compared with $3,986,000 in 2001. Oil and gas
production expenses decreased $144,000, real estate operating expenses increased
by $66,000, depreciation, depletion and amortization decreased by $14,000, and
general and administrative expenses increased by $117,000.
Interest expense decreased from $1,169,000 in 2001 to $1,135,000 in 2002.
This decrease is primarily attributable to the reduction of outstanding debts.
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.
7
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002 the Company had approximately $10,120,000 in marketable
securities at market value. The current ratio at March 31, 2002 was 2.3 to 1,
which management considers adequate at this time. The Company's working capital
was approximately $9,194,000 at March 31, 2002.
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 $550,000 in 2002 and
$3,104,000 in 2001. The decrease in 2002 was primarily due to changes in
operating assets and liabilities. An increase in accounts receivable of
$1,703,000 and a decrease in accounts payable and accrued liabilities of
$1,005,000 were primarily responsible for the reduction in cash provided by
operations.
Net cash provided by (used in) investing activities was $1,637,000 in 2002
and $(4,961,000) in 2001. The variations principally relate to property,
equipment additions and the purchase of an apartment complex in San Antonio,
Texas in 2001, the redemption of mortgage notes receivable and the sale of
marketable securities in 2002.
Net cash (used in) provided by financing activities was $(3,885,000) in 2002
and $1,877,000 in 2001. The variation principally relates to the issuance of
long-term debt in connection with refinancing and acquisition of real estate
properties during the respective quarters as well as the significant increase in
the principal payments of long-term debt during 2002.
The Company believes it has adequate capital resources to fund operations
for the foreseeable future.
8
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q for the quarter ended March 31, 2002 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.
9
PART II - OTHER INFORMATION
Item 1, 2, 3, 4, 5 -- Not applicable
Item 6 -- Exhibits and Reports on Form 8-K
No Form 8-K was filed during the quarter ended March 31, 2002.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILSHIRE OIL COMPANY OF TEXAS
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(Registrant)
Date: May 15, 2002 /s/ S. Wilzig Izak
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By: S. Wilzig Izak
Chairman of the Board and Chief Executive Officer
(Duly Authorized Officer and Chief Financial Officer)