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, 2002 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
- --------------------------------------------------------------------------------
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 -- 7,855,781
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, 2002 (Unaudited) and December 31, 2001
Condensed Consolidated Statements of Income - 2
Six months ended June 30, 2002 and 2001
Condensed Consolidated Statements of Income - 3
Three months ended June 30, 2002 and 2001.
Condensed Consolidated Statements of Cash Flows - 4
Six months ended June 30, 2002 and 2001.
Notes to 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
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's Omitted, Except Share Data)
June 30, December 31,
(Unaudited)
ASSETS 2002 2001
- ------ --------- ---------
CURRENT ASSETS
Cash and cash equivalents ................................... $ 2,691 $ 4,984
Marketable securities, available-for-sale, at fair value .... 9,546 10,358
Accounts receivable ......................................... 1,173 832
Income tax receivable ....................................... 445 --
Prepaid expenses and other current assets ................... 1,522 1,215
--------- ---------
Total current assets ...................................... 15,377 17,389
--------- ---------
MORTGAGE NOTES RECEIVABLE ..................................... 2,692 6,572
--------- ---------
PROPERTY AND EQUIPMENT
Oil and gas properties, using full cost method of accounting 137,796 136,355
Real estate properties ...................................... 70,043 69,161
Other property and equipment ................................ 377 394
--------- ---------
208,216 205,910
Less - Accumulated depreciation, depletion and amortization 124,344 121,968
--------- ---------
83,872 83,942
--------- ---------
$ 101,941 $ 107,903
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt ........................... $ 556 $ 7,287
Loan payable to shareholder ................................. 500 700
Accounts payable ............................................ 2,664 2,301
Income taxes payable ........................................ -- 50
Deferred income taxes ....................................... 752 896
Accrued liabilities ......................................... 89 1,028
--------- ---------
Total current liabilities ................................. 4,561 12,262
--------- ---------
LONG-TERM DEBT, less current portion .......................... 61,404 60,661
--------- ---------
DEFERRED INCOME TAXES ......................................... 11,622 11,256
--------- ---------
OTHER LONG-TERM LIABILITIES ................................... 31 31
--------- ---------
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, 2,157,763 and 2,132,656 shares at June 30,
2002 and December 31, 2001, respectively, at cost ........... (10,264) (10,179)
Retained earnings ......................................... 18,061 17,564
Accumulated other comprehensive loss ........................ (2,517) (2,735)
--------- ---------
24,323 23,693
--------- ---------
$ 101,941 $ 107,903
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's Omitted Except Per Share Data)
FOR THE SIX MONTHS ENDED
------------------------
June 30, June 30,
2002 2001
-------- --------
REVENUES
Oil & Gas ................................ $ 2,567 $ 5,815
Real Estate .............................. 7,294 6,828
-------- --------
Total Revenues ....................... 9,861 12,643
-------- --------
COSTS AND EXPENSES
Oil and Gas Production Expenses .......... 1,152 1,242
Real Estate Operating Expenses ........... 4,224 4,171
Depreciation, Depletion and Amortization . 2,107 1,830
General and Administrative ............... 948 706
Gain on Sales of Real Estate Assets ...... (168) --
-------- --------
Total Costs and Expenses ............. 8,263 7,949
-------- --------
Income from Operations ............... 1,598 4,694
OTHER INCOME ............................. 1,377 360
INTEREST EXPENSE ......................... (2,318) (2,416)
-------- --------
Income before provision for income taxes 657 2,638
PROVISION FOR INCOME TAXES ............... 160 834
-------- --------
Net income ........................... $ 497 $ 1,804
======== ========
BASIC AND DILUTED EARNINGS PER SHARE ..... $ 0.06 $ 0.23
======== ========
For purposes of comparison, certain items shown in the 2001 financial statements
have been reclassified to conform with the presentation used for 2002.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's Omitted, Except Per Share Data)
FOR THE THREE MONTHS ENDED
--------------------------
June 30, June 30,
2002 2001
------- -------
REVENUES
Oil & Gas ................................ $ 1,319 $ 2,397
Real Estate .............................. 3,525 3,539
------- -------
Total Revenues ....................... 4,844 5,936
------- -------
COSTS AND EXPENSES
Oil and Gas Production Expenses .......... 694 641
Real Estate Operating Expenses ........... 2,117 2,130
Depreciation, depletion and amortization . 1,121 830
General and Administrative ............... 488 362
Gain on Sale of Real Estate Assets ....... (168) --
------- -------
Total Costs and Expenses ............. 4,252 3,963
------- -------
Income from Operations ............... 592 1,973
OTHER INCOME ............................. 831 265
INTEREST EXPENSE ......................... (1,183) (1,247)
------- -------
Income before provision for income taxes 240 991
PROVISION FOR INCOME TAXES ............... 33 224
------- -------
Net income ........................... $ 207 $ 767
======= =======
BASIC AND DILUTED EARNINGS PER SHARE ..... $ 0.03 $ 0.10
======= =======
For purposes of comparison, certain items shown in the 2001 financial statements
have been reclassified to conform with the presentation used for 2002.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
For The Six Months Ended
------------------------
June 30, June 30,
2002 2001
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ............................................ $ 497 $ 1,804
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation, depletion and amortization .............. 2,107 1,830
Gain on sale of marketable securities ................. (482) --
Gain on sales of real estate assets ................... (168) --
Deferred income tax provision (benefit) .............. 635 (266)
Changes in operating assets and liabilities -
Receivables ......................................... (786) (514)
Prepaid expenses and other current assets ........... (307) 22
Accounts payable, accrued and other liabilities ..... (626) 952
-------- --------
Net cash provided by operating activities ............. 870 $ 3,828
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from reduction of mortgage notes receivable .. 3,880 --
Capital expenditures, net ............................. (2,483) (7,032)
Purchases of marketable securities .................... (1,343) --
Proceeds from sales and redemptions of securities ..... 2,316 --
Proceeds from sales of real estate properties ......... 345 --
-------- --------
Net cash provided by (used in) investing activities 2,715 (7,032)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment of long term debt ................... (10,068) (2,004)
(Decrease) increase in loan payable to shareholder .... (200) 300
Proceeds from issuance of long term debt .............. 4,080 4,270
Purchase of treasury stock ............................ (85) (218)
-------- --------
Net cash (used in) provided by financing activities ... (6,273) 2,348
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ................. 395 (45)
-------- --------
Net (decrease) in cash and cash equivalents ........... (2,293) (901)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ................................... 4,984 2,925
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD ......................................... 2,691 $ 2,024
======== ========
SUPPLEMENTAL DISCLOSURES TO THE
STATEMENTS OF CASH FLOWS:
Cash paid during the period for -
Interest .............................................. $ 2,319 $ 2,416
Income taxes .......................................... $ 159 $ 156
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
WILSHIRE OIL COMPANY OF TEXAS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 oil and gas operations for the
month of June 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, which are
classified as held for sale. 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
------------------------------
2002 2001
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Revenues
Oil and gas - United States .................. $ 1,631,000 $ 3,185,000
Oil and gas - Canada ......................... 936,000 2,630,000
Real estate .................................. 7,294,000 6,828,000
------------- -------------
$ 9,861,000 $ 12,643,000
------------- -------------
Income (loss) from operations and reconciliation
to Income before provision for income taxes
Oil and gas - United States (a) .............. $ (382,000) $ 1,205,000
Oil and gas - Canada (a) ..................... 448,000 2,102,000
Real estate (a) .............................. 2,063,000 1,557,000
Corporate .................................... (531,000) (170,000)
------------- -------------
Income from Operations ................... 1,598,000 4,694,000
Other Income ................................... 1,377,000 360,000
Interest expense ............................. (2,318,000) (2,416,000)
------------- -------------
Income before provision for income taxes . $ 657,000 $ 2,638,000
------------- -------------
Identifiable assets
Oil and gas - United States .................. $ 14,622,000 $ 17,143,000
Oil and gas - Canada ......................... 13,998,000 21,400,000
Real estate .................................. 58,534,000 43,998,000
Corporate .................................... 14,787,000 23,043,000
------------- -------------
$ 101,941,000 $ 105,584,000
------------- -------------
(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
--------------------------
2002 2001
----------- -----------
Revenues
Oil and gas - United States ................ $ 903,000 $ 1,549,000
Oil and gas - Canada ....................... 416,000 848,000
Real estate ................................ 3,525,000 3,539,000
----------- -----------
$ 4,844,000 $ 5,936,000
----------- -----------
Income from operations and reconciliation
to Income before provision for income taxes
Oil and gas - United States (a) ............ $ 31,000 $ 684,000
Oil and gas - Canada (a) ................... 131,000 623,000
Real estate (a) ............................ 963,000 846,000
Corporate .................................. (533,000) (180,000)
----------- -----------
Income from Operations ................. 592,000 1,973,000
Other Income ................................. 831,000 265,000
Interest expense ........................... (1,183,000) (1,247,000)
----------- -----------
Income before provision for income taxes $ 240,000 $ 991,000
----------- -----------
(a) Represents revenues less all operating costs, including depreciation,
depletion and amortization.
7
4. COMPREHENSIVE INCOME
Comprehensive income for the six months ended June 30, 2002 and 2001 is as
follows:
2002 2001
----------- -----------
Net income ......................................... $ 497,000 $ 1,804,000
----------- -----------
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments ......... 395,000 (45,000)
Change in unrealized gain on marketable securities (177,000) 1,950,000
----------- -----------
Other comprehensive income ......................... 218,000 1,905,000
----------- -----------
Comprehensive income ............................... $ 715,000 $ 3,709,000
=========== ===========
Changes in the components of Accumulated Other Comprehensive Income (Loss)
for the year 2001 and for the six months ended June 30, 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 six months (177,000) 395,000 218,000
----------- ----------- -----------
BALANCE, June 30, 2002 ........ $ 918,000 $(3,435,000) $(2,517,000)
=========== =========== ===========
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
------------------------- -------------------------
2002 2001 2002 2001
--------- ---------- --------- ---------
Numerator-
Net income $ 497,000 $1,804,000 $ 207,000 $ 767,000
========= ========== ========= =========
Denominator-
Weighted average common shares
outstanding - Basic ........ 7,870,228 7,942,738 7,859,905 7,915,953
Incremental shares from assumed
conversions of stock options -- -- -- --
--------- ---------- --------- ---------
Weighted average common shares
outstanding - Diluted ...... 7,870,228 7,942,738 7,859,905 7,915,953
========= ========== ========= =========
Basic earnings per share ....... $ 0.06 $ 0.23 $ 0.03 $ 0.10
Diluted earnings per share ..... $ 0.06 $ 0.23 $ 0.03 $ 0.10
6. COMMITMENTS AND CONTINGENCIES
The Canadian subsidiary of the Company was advised of a pollution problem
by an operator of a well where the Company has a joint interest. The amount
of potential liability that the initial claim listed was covered by the
Company's pollution policy. Recently, the Company has become aware of a
larger liability from this event. The Company has denied any liability for
the incident, as it was not the operator of the well, and has received
advice from legal counsel that it should not bear any liability from the
incident.
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 $497,000 in 2002 as
compared to $1,804,000 in 2001.
Consolidated revenues for Wilshire's six months ended June 30 decreased
from $12,643,000 in 2001 to $9,861,000 in 2002. Oil and gas revenues decreased
by $3,248,000 due to a reduction in oil and gas prices in 2002, compared to 2001
and a decrease of 37% in oil production in 2002. The average price of gas
received by the Company in 2001 was $4.76 per MCF vs $2.20 in 2002, a 54%
decrease, while the average price of oil in 2001 was $28.64 per BBL, compared to
$19.09 in 2002 a 33% decrease. Real estate revenue increased from $6,828,000 in
2001 to $7,294,000 in 2002. This increase is primarily due to the purchase of a
180 unit apartment complex in San Antonio, Texas on March 29, 2001.
Total Costs and Expenses, excluding Gain on Sales of Real Estate Assets,
increased by $482,000 for the six month period ended June 30, 2002, a 6%
increase over 2001. Oil and Gas Production expense decreased by $90,000 between
2001 and 2002 due to lower overall production. Depreciation, Depletion and
Amortization expense for 2002 increased $277,000, or 15% over 2001 mainly as a
result of increased depletion charges for 2002 due to the low oil and gas prices
at December 31, 2001. Those low prices resulted in a decrease in the value of
our reserves, which in turn caused our depletion expense for 2002 to increase.
General and Administrative expenses for 2002 increased $242,000 over 2001 due to
higher legal, accounting and insurance expenses.
Interest expense decreased in 2002, due to a reduction in long and short
term debt in 2002.
The Canadian subsidiary of the Company was advised of a pollution problem
by an operator of a well where the Company has a joint interest. The amount of
potential liability that the initial claim listed was covered by the Company's
pollution policy. Recently, the Company has become aware of a larger liability
from this event. The Company has denied any liability for the incident, as it
was not the operator of the well, and has received advice from legal counsel
that it should not bear any liability from the incident.
9
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2002 the Company had approximately $9,546,000 in marketable
securities at market value. The current ratio at June 30, 2002 was 3.4 to 1,
which management considers adequate. On December 31, 2001 the Company had
$7,287,000 in short term debt, compared to $556,000 on June 30, 2002. This
reduction in short term debt has resulted in an increase in the current ratio at
June 30, 2002.
The Company anticipates that cash provided by operating and investing
activities will be sufficient to meet its normal capital requirements to acquire
oil and gas properties and to drill and evaluate these and other oil and gas
properties held by the Company. The major gas drilling program announced by the
Company for its Canadian subsidiary will be financed by a borrowing the Company
has arranged with a Canadian bank. The Company anticipates that this funding
requirement will be approximately $7,200,000 Canadian (approximately $4,700,000
U.S.).
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. 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 $870,000 in 2002 and
$3,828,000 in 2001. The decrease in 2002 was primarily due to lower income and
an increase in accounts receivable and a decrease in accounts payable and
accrued and other liabilities.
Net cash provided by (used in) investing activities was $2,715,000 in 2002
and $(7,032,000) in 2001. The variations were due to lower capital expenditures
in the first six months of 2002 compared to the same period in 2001. In 2001,
the Company acquired a 180 unit apartment complex in San Antonio, Texas. In
2002, the Company collected $3,880,000 of its mortgage notes receivable and also
received $2,316,000 from the sale of marketable securities, while purchasing
$1,343,000 in marketable securities.
Net cash provided by (used in) financing activities was $(6,273,000) in
2002 and $2,348,000 in 2001. The variation principally relates to the issuance
of long-term debt in connection with real estate properties during the
respective six month periods as well as principal payments of long-term debt. In
addition, the Company acquired approximately $85,000 of treasury stock in 2002.
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, 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.
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, 2002.
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, 2002 /s/ S. Wilzig Izak
-------------------------------------
By: S. Wilzig Izak
Chairman of the Board and Chief
Executive Officer
/s/ Philip G. Kupperman
-------------------------------------
By: Philip G. Kupperman
President and Chief Financial Officer
The following two (2) Certifications should be filed as "Correspondence" with
the 10-Q and not as Exhibit to the 10-Q.