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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 the quarter period ended September 30, 2004 Commission file number 1-4673
------------------
WILSHIRE ENTERPRISES, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 84-0513668
- -------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
921 Bergen Avenue, Jersey City, New Jersey 07306-4204
- ------------------------------------------ ----------------------------
(Address of principal executive offices) (Zip Code)
(201) 420-2796
--------------
(Registrant's telephone number, including area code)
----------------------------------------------------
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report.)
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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes |_| No |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 10, 2004.
Common Stock $1 Par Value ----- 7,774,831
WILSHIRE ENTERPRISES, INC.
INDEX
Page No.
--------
Part I -Financial Information
- -----------------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 2004 (Unaudited) and December 31, 2003 3
Unaudited Condensed Consolidated Statements of Income -
Three months ended September 30, 2004 and 2003 4
Unaudited Condensed Consolidated Statements of Income -
Nine months ended September 30, 2004 and 2003 5
Unaudited Condensed Consolidated Statements of Cash Flows -
Nine months ended September 30, 2004 and 2003 6
Notes to Unaudited Condensed Consolidated Financial Statements 7
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
3. Quantitative and Qualitative Disclosure About Market Risk 18
4. Controls and Procedures 19
Part II - Other Information
- ---------------------------
2. Unregistered Sales of Equity Securities and Use of Proceeds 20
6. Exhibits 20
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WILSHIRE ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,
2004 DECEMBER 31,
(UNAUDITED) 2003
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 34,754,000 $ 7,763,000
Restricted cash 171,000 327,000
Marketable securities, available for sale, at fair value 2,205,000 1,996,000
Accounts receivable, net 316,000 1,802,000
Prepaid expenses and other current assets 2,107,000 1,870,000
------------- -------------
Total current assets 39,553,000 13,758,000
------------- -------------
NONCURRENT ASSETS
Mortgage notes receivable 1,064,000 2,504,000
------------- -------------
Other noncurrent assets 229,000 860,000
------------- -------------
PROPERTY AND EQUIPMENT
Oil and gas properties - Held for sale - 143,601,000
Real estate properties 53,590,000 52,700,000
Real estate properties - Held for sale 7,287,000 19,369,000
------------- -------------
60,877,000 215,670,000
Less:
Accumulated depreciation and amortization 15,781,000 14,315,000
Accumulated depreciation, depletion and amortization -
Property held for sale 657,000 119,480,000
------------- -------------
44,439,000 81,875,000
------------- -------------
TOTAL ASSETS $ 85,285,000 $ 98,997,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 691,000 $ 3,645,000
Accounts payable 2,803,000 1,894,000
Income taxes payable 2,518,000 154,000
Deferred income taxes - 10,489,000
Accrued liabilities 379,000 800,000
Deferred income 742,000 419,000
Current liabilities associated with discontinued operations 64,000 3,520,000
------------- -------------
Total current liabilities 7,197,000 20,921,000
NONCURRENT LIABILITIES
Long-term debt, less current portion 44,841,000 47,719,000
Deferred income taxes 2,973,000 1,058,000
Deferred income 576,000 725,000
Other long-term liabilities - 227,000
Noncurrent liabilities associated with discontinued operations 1,580,000 3,820,000
------------- -------------
Total liabilities 57,167,000 74,470,000
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued
and outstanding
in 2004 and 2003 - -
Common stock, $1 par value, 15,000,000 shares authorized; issued
10,013,544 shares in 2004 and 2003 10,014,000 10,014,000
Capital in excess of par value 9,024,000 9,029,000
Treasury stock, 2,232,315 and 2,210,713 shares at September 30, 2004 and
December 31, 2003, respectively, at cost (10,469,000) (10,355,000)
Retained earnings 20,368,000 17,267,000
Accumulated other comprehensive loss (819,000) (1,428,000)
------------- -------------
Total stockholders' equity 28,118,000 24,527,000
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 85,285,000 $ 98,997,000
============= =============
The accompanying notes to condensed consolidated financial statements are an
integral part of these financial statements.
3
WILSHIRE ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
REVENUES $ 2,963,000 $ 2,869,000
----------- -----------
COSTS AND EXPENSES
Operating expenses 1,745,000 1,755,000
Depreciation and amortization 475,000 494,000
General and administrative 695,000 427,000
----------- -----------
Total costs and expenses 2,915,000 2,676,000
----------- -----------
INCOME FROM OPERATIONS 48,000 193,000
OTHER INCOME
Dividend and interest income 192,000 176,000
Gain on sale of marketable securities - 2,360,000
Other income 206,000 (6,000)
INTEREST EXPENSE (716,000) (905,000)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (270,000) 1,818,000
INCOME TAX EXPENSE (BENEFIT) (124,000) 574,000
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (146,000) 1,244,000
----------- -----------
DISCONTINUED OPERATIONS - REAL ESTATE, NET OF TAXES
LOSS FROM OPERATIONS (195,000) (191,000)
GAIN FROM SALES 210,000 655,000
DISCONTINUED OPERATIONS - OIL & GAS, NET OF TAXES
INCOME (LOSS) FROM OPERATIONS (390,000) 39,000
----------- -----------
NET INCOME (LOSS) $ (521,000) $ 1,747,000
=========== ===========
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations $ (0.02) $ 0.16
Income (loss) from discontinued operations (0.05) 0.06
----------- -----------
Net income (loss) applicable to common stockholders $ (0.07) $ 0.22
=========== ===========
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations $ (0.02) $ 0.16
Income (loss) from discontinued operations (0.05) 0.06
----------- -----------
Net income (loss) applicable to common stockholders $ (0.07) $ 0.22
=========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these financial statements.
4
WILSHIRE ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
REVENUES $ 8,904,000 $ 8,526,000
----------- -----------
COSTS AND EXPENSES
Operating expenses 5,063,000 4,948,000
Depreciation expense 1,475,000 1,485,000
General and administrative 1,567,000 1,408,000
----------- -----------
Total costs and expenses 8,105,000 7,841,000
----------- -----------
INCOME FROM OPERATIONS 799,000 685,000
OTHER INCOME
Dividend and interest income 432,000 545,000
Gain on sale of marketable securities - 2,621,000
Insurance proceeds - 1,000,000
Other income 444,000 247,000
INTEREST EXPENSE (2,188,000) (3,391,000)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (513,000) 1,707,000
INCOME TAX EXPENSE (BENEFIT) (261,000) 164,000
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (252,000) 1,543,000
----------- -----------
DISCONTINUED OPERATIONS - REAL ESTATE, NET OF TAXES
LOSS FROM OPERATIONS (411,000) (314,000)
GAIN FROM SALES 3,569,000 655,000
DISCONTINUED OPERATIONS - OIL & GAS, NET OF TAXES
INCOME (LOSS) FROM OPERATIONS (372,000) 1,142,000
GAIN FROM SALES 567,000 -
----------- -----------
NET INCOME $ 3,101,000 $ 3,026,000
=========== ===========
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations $ (0.03) $ 0.19
Income from discontinued operations 0.43 0.19
----------- -----------
Net income applicable to common stockholders $ 0.40 $ 0.38
=========== ===========
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations $ (0.03) $ 0.19
Income from discontinued operations 0.42 0.19
----------- -----------
Net income applicable to common stockholders $ 0.39 $ 0.38
=========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these financial statements.
5
WILSHIRE ENTERPRISES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,101,000 $ 3,026,000
Adjustments to reconcile net income to net cash provided by (used in)
operating activities -
Depreciation, depletion and amortization 1,545,000 6,221,000
Deferred income taxes (8,382,000) 2,111,000
Increase (decrease) in deferred income 174,000 (111,000)
Gain on sales of real estate assets (6,138,000) (992,000)
Gain on sale of oil and gas properties (768,000) -
Gain on sale of marketable securities - (2,621,000)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 1,486,000 (628,000)
Decrease in income taxes receivable - 208,000
Decrease (increase) in prepaid expenses and other current assets 394,000 (214,000)
Increase (decrease) in other liabilities (227,000) 62,000
Increase (decrease) in accounts payable, accrued liabilities and taxes
payable 2,404,000 (113,000)
------------ ------------
Net cash provided by (used in) operating activities (6,411,000) 6,949,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net capital expenditures - real estate (1,167,000) (2,008,000)
Net capital expenditures - oil & gas - (7,155,000)
Proceeds from sale of oil and gas properties 28,131,000 -
Proceeds from sale of real estate properties 15,833,000 1,717,000
Proceeds on mortgage notes receivable 1,440,000 414,000
Proceeds from sales and redemptions of marketable securities - 9,492,000
(Increase) decrease in restricted cash 156,000 (1,325,000)
------------ ------------
Net cash provided by investing activities 44,393,000 1,135,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt (11,349,000) (42,190,000)
Loan payable to stockholder - (500,000)
Proceeds from issuance of debt - 35,624,000
Financing costs - (550,000)
Purchase of treasury stock (154,000) -
Issuance of restricted stock 17,000 -
Proceeds from exercise of stock options 18,000 -
------------ ------------
Net cash used in financing activities (11,468,000) (7,616,000)
------------ ------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 477,000 1,605,000
------------ ------------
Net increase in cash and cash equivalents 26,991,000 2,073,000
CASH AND CASH EQUIVALENTS, beginning of period 7,763,000 4,164,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 34,754,000 $ 6,237,000
============ ============
SUPPLEMENTAL DISCLOSURES TO THE STATEMENTS OF CASH FLOWS:
Cash paid during the period for -
Interest $ 2,302,000 $ 3,590,000
============ ============
Income taxes, net $ 7,434,000 $ 160,000
============ ============
The accompanying notes to condensed consolidated financial statements are an
integral part of these financial statements.
6
WILSHIRE ENTERPRISES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
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.
Although the Registrant believes that the disclosures are adequate to
make the information presented not misleading, certain information and
footnote disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to
such rules and regulations. These unaudited condensed consolidated
financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's latest
annual report on Form 10-K. In the opinion of management, this
condensed financial information reflects all adjustments necessary to
present fairly the results for the interim periods. The results of
operations for the three and nine months ended September 30, 2004 are
not necessarily indicative of the results to be expected for the year
ended December 31, 2004 or any other subsequent period.
In July 2003, the Company committed to the sale of its oil and gas
operations. The financial statements have been adjusted to reflect the
oil and gas operations as "Discontinued Operations" in 2003 and 2004.
In April 2004, the Company sold its oil and gas operations and received
net proceeds of $28,131,000. An escrow holdback of $600,000 was
established to allow for any potential post closing adjustments
relating to its United States operations. This escrow was paid in full
to the Company on June 22, 2004 and the condensed consolidated
statements of income include a gain of $567,000 (after taxes) on the
transaction for the nine months ended September 30, 2004. Since the
sale was effective as of March 1, 2004, the financial statements as
presented reflect in discontinued operations oil and gas operations for
the first two months of 2004, compared to a full nine months of
operations in 2003.
The Company has designated certain real estate properties as held for
sale and reports the gain on the sale of such real estate properties
plus the year to date operations and related interest expense of such
real estate properties as "Discontinued Operations". During the three
and nine months ended September 30, 2004, the Company consummated the
sale of one and fourteen real estate properties in New Jersey,
respectively, for a net gain of $210,000 (after taxes) and $3,569,000
(after taxes), respectively. For the three and nine months ended
September 30, 2003, the Company consummated the sale of two real estate
properties in Florida for a net gain of $655,000 (after taxes).
Basis of Presentation
Certain amounts in the 2003 condensed consolidated financial statements
have been reclassified to conform to the 2004 presentation.
Accounting for Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board issued
Statement No. 148 to amend alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, Statement No. 148
amends the disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. The Company has
continued to account for options in accordance with the provision of
APB Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations. Accordingly, no compensation expense has been
recognized in the statements of income for stock option plans.
7
The pro forma impact of expensing stock options for the three and nine
months ended September 30, 2004 and 2003 was insignificant to both
reported net income and earnings per share.
The fair value of stock options was estimated using the Black-Scholes
option-pricing model based on the variables presented in the following
table. No stock options were granted during the three months ended
September 30, 2004 and 2003.
9 Months Ended September 30,
-----------------------------
2004 2003
---- ----
Weighted average market price $5.18 $3.60
Risk free interest rate 3.97% 3.00%
Volatility 36.4% 33.1%
Dividend yield -% -%
Expected option life 5 years 5 years
2. SEGMENT INFORMATION
The Company conducts real estate operations in the United States,
principally consisting of apartment complexes and to a much lesser
extent commercial and retail properties. Management of the Company
views its real estate operations as a single segment. For the first two
months of 2004 the Company was engaged in the exploration of oil and
gas, both in its own name and through several wholly owned
subsidiaries, on the North American continent. In July 2003 the Company
committed to the sale of its oil and gas operations and consummated the
sale in April 2004, effective March 1, 2004. The financial statements
have been adjusted to present oil and gas operations as "Discontinued
Operations" in 2003 and 2004. Accordingly, the Company only conducts
real estate operations in the United States.
3. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) for the three and nine months ended
September 30, 2004 and 2003 is as follows:
3 Months Ended September 30, 9 Months Ended September 30,
---------------------------- ----------------------------
2004 2003 2004 2003
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Net income (loss) $(521,000) $1,747,000 $3,101,000 $3,026,000
--------- ---------- ---------- ----------
Other comprehensive income net of taxes:
Foreign currency translation adjustments 88,000 1,256,000 477,000 1,694,000
Change in unrealized gain on marketable
securities 98,000 (619,000) 132,000 (423,000)
--------- ---------- ---------- ----------
Other comprehensive income 186,000 637,000 609,000 1,271,000
--------- ---------- ---------- ----------
Comprehensive income (loss) $(335,000) $2,384,000 $3,710,000 $4,297,000
========= ========== ========== ==========
8
Changes in the components of Accumulated Other Comprehensive Income
(Loss) for the year 2003 and for the nine months ended September 30, 2004
are as follows-
Unrealized Gains Cumulative Accumulated
(Losses) on Foreign Currency Other
Available-for-Sale Translation Comprehensive
Securities Adjustment Income (Loss)
------------------ ---------------- -------------
BALANCE, December 31, 2002 $ 653,000 $(3,742,000) $(3,089,000)
Change for the year 2003 (545,000) 2,206,000 1,661,000
----------- ----------- -----------
BALANCE, December 31, 2003 108,000 (1,536,000) (1,428,000)
Change for the nine months 132,000 477,000 609,000
----------- ----------- -----------
BALANCE, September 30, 2004 $ 240,000 $(1,059,000) $ (819,000)
=========== =========== ===========
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share-
3 Months Ended September 30, 9 Months Ended September 30,
---------------------------- ----------------------------
2004 2003 2004 2003
---- ---- ---- ----
Numerator-
Net Income $(521,000) $1,747,000 $3,101,000 $3,026,000
========= ========== ========== ==========
Denominator-
Weighted average common
shares outstanding - Basic 7,798,339 7,809,833 7,802,098 7,908,833
Incremental shares from assumed
conversions of stock options 199,486 125,973 186,418 86,377
---------- ---------- ---------- ----------
Weighted average common shares
outstanding - Diluted 7,997,825 7,935,806 7,988,516 7,995,210
========== ========== ========== ==========
Basic earnings (loss) per share: $ (0.07) $ 0.22 $ 0.40 $ 0.38
========= ========== ========== ==========
Diluted earnings (loss) per share: $ (0.07) $ 0.22 $ 0.39 $ 0.38
========= ========== ========== ==========
5. OTHER INCOME
Other income for 2003 includes $1,000,000 the Company received as the
beneficiary of life insurance policies on the life of the Company's
former Chairman and President who had been serving as its Senior
Consultant up to his death on January 7, 2003. This income was not
subject to income taxes.
6. COMMITMENTS AND CONTINGENCIES
In June 1996, the Company's Board of Directors adopted the Stockholder
Protection Rights Plan (the "Rights Plan"). The Rights Plan provides
for issuance of one Right for each share of common stock outstanding as
of July 6, 1996. The Rights are separable from and exercisable upon the
occurrence of certain triggering events involving the acquisition of at
least 15% (or, in the case of certain existing stockholders, 25%) of
the Company's common stock by an individual or group, as defined in the
Rights Plan (an "Acquiring" Person) and may be redeemed by the Board of
Directors at a redemption price of $0.01 per Right at any time prior to
the announcement by the Company that a person or group has become an
Acquiring Person.
9
On and after the tenth day following such triggering events, each Right
would entitle the holder (other than the Acquiring Person) to purchase
$50 in market value of the Company's Common Stock for $25. In addition,
if there is a business combination between the Company and an Acquiring
Person, or in certain other circumstances, each Right (if not
previously exercised) would entitle the holder (other than the
Acquiring Person) to purchase $50 in market value of the common stock
of the Acquiring Person for $25.
As of September 30, 2004 and 2003, 7,781,229 and 7,809,833,
respectively, of Rights were outstanding. Each Right entitles the
holder to purchase, for an exercise price of $25, one one-hundredth of
a share of Series A Participating Preferred Stock. Each one
one-hundredth share of Series A Participating Preferred Stock is
designed to have economic terms similar to those of one share of common
stock but will have one one-hundredth of a vote. Because the Rights are
only exercisable under certain conditions, none of which were in effect
as of September 30, 2004 and 2003, the outstanding Rights are not
considered in the computation of basic and diluted earnings per share.
On June 3, 2004, the Company announced a program to purchase up to
1,000,000 shares of its common stock on the open market, in privately
negotiated transactions or otherwise. This purchasing activity may
occur from time to time, in one or more transactions. Through September
30, 2004, the Company had purchased 30,431 shares under this program at
an approximate cost of $154,000 or $5.06 per share.
7. STOCK OPTION PLANS
In June 2004, the Company's stockholders approved the 2004 Stock Option
and Incentive Plan (the "2004 Plan"). The purpose of the 2004 Plan is
to encourage stock ownership by key employees and consultants of the
Company, to provide additional incentive for them to promote the
successful business operations of the Company, to encourage them to
continue providing services to the Company, and to attract new
employees and consultants to the Company. Awards under the 2004 Plan
may be granted in any one or all of the following forms, as those terms
are defined under the 2004 Plan: (i) incentive stock options; (ii)
non-qualified stock options; (iii) stock appreciation rights; (iv)
restricted shares of common stock; (v) performance shares; (vi)
performance units; and (vii) unrestricted shares of common stock. The
maximum aggregate number of shares of common stock available for award
under the 2004 Plan is 600,000, subject to adjustment under the terms
of the 2004 Plan. As of September 30, 2004, 3,529 shares of restricted
stock had been granted to employees under the 2004 Plan. The employee's
right to receive these restricted shares vest serially over a
three-year period. Compensation expense for the three and nine month
periods ending September 30, 2004 includes an insignificant amount
related to the issuance of these shares.
In June 2004, the Company's stockholders approved the 2004 Non-Employee
Director Stock Option Plan (the "2004 Director Plan"). The purpose of
the 2004 Director Plan is to attract qualified personnel to accept
positions of responsibility as directors of the Company, to provide
incentives for persons to remain on the Board and to induce such
persons to maximize the Company's performance during the terms of their
options. Only non-qualified stock options may be granted under the 2004
Director Plan. The maximum aggregate number of shares of common stock
available for grant under the 2004 Director Plan is 150,000, subject to
adjustment under the terms of the 2004 Director Plan. Upon adoption of
the 2004 Director Plan, each non-employee director was granted 10,000
options to purchase common shares of the Company. As of September 30,
2004, 50,000 options had been granted at market value under the 2004
Director Plan.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion addresses material changes in the Company's results of
operations for the three month period ended September 30, 2004 compared to the
three month period ended September 30, 2003, and the nine month period ended
September 30, 2004 compared to the nine month period ended September 30, 2003
and changes in its financial condition since December 31, 2003. It is presumed
that readers have read or have access to Wilshire's 2003 Annual Report on Form
10-K which includes disclosures regarding critical accounting policies as part
of Management's Discussion and Analysis of Financial Condition and Results of
Operations.
OVERVIEW
Net loss for the three months ended September 30, 2004 amounted to $521,000 or
$0.07 per diluted share, a decrease of $2,268,000 from net income totaling
$1,747,000 or $0.22 per diluted share reported for the three months ended
September 30, 2003. Net income for the nine months ended September 30, 2004,
amounted to $3,101,000 or $0.39 per diluted share, compared to $3,026,000 or
$0.38 per diluted share for the 2003 period. Operations are shown as continuing
and discontinued, with discontinued operations comprised of the results of
operations from the Company's oil and gas businesses, the gain from the sale of
the oil and gas properties, the net income from real estate properties held for
sale and the gain from real estate properties held for sale that were sold
during the period.
The Company announced in July 2003 its intention to sell its oil and gas
businesses. The Canadian oil and gas business was sold in April 2004 to Addison
Energy Inc., a wholly owned subsidiary of Exco Resources, Inc., for $15 million
in gross proceeds. The United States oil and gas business was sold in April 2004
to Crow Creek Energy LLC, a Tulsa, Oklahoma based privately held portfolio
company of Natural Gas Partners of Dallas, Texas, for $13.3 million in gross
proceeds. During the three and nine months ended September 30, 2004,
respectively, the Company recorded income (loss), net of taxes from its oil and
gas businesses of $(390,000) and $195,000, respectively. The net loss from
operating the oil and gas business during the three months ended September 30,
2004 resulted from the continuing reconciliation process between the Company and
its partners for periods prior to the effective date of the sale.
During the three months ended September 30, 2004, the Company sold one (1)
one-bedroom condominium unit at its Jefferson Gardens, New Jersey, property for
gross proceeds of $140,000 that resulted in an after-tax gain of $62,000 that
has been included in the three month net loss from continuing operations. The
Company intends to continue to operate the remaining units. In addition, the
Company sold one parcel of land in Montville, New Jersey, for gross proceeds of
$1,000,000 that resulted in an after-tax gain of $210,000. This gain has been
included in Discontinued Operations - Real Estate, net of taxes - Gain from
sales. For the nine months ended September 30, 2004, the Company sold fourteen
New Jersey real estate properties plus the condominium unit mentioned above for
gross proceeds of $15,833,000 and a net gain after taxes of $3,631,000.
The following table presents the increases (decreases) in each major statement
of income category for the three and nine months ended September 30, 2004 and
2003, respectively. The following discussion of "Results of Operations
references these increases (decreases).
11
INCREASE (DECREASE) IN CONDENSED CONSOLIDATED STATEMENTS OF INCOME
CATEGORIES FOR THE PERIODS:
3 Months Ended September 30, 9 Months Ended September 30,
2004 v. September 30, 2003 2004 v. September 30, 2003
-------------------------- --------------------------
Amount (S) % Amount ($) %
---------- --- ---------- ---
REVENUES $ 94,000 3.3% $ 378,000 4.4%
----------- -----------
COSTS AND EXPENSES
Operating expenses (10,000) (0.6) 115,000 2.3
Depreciation expense (19,000) (3.8) (10,000) (0.7)
General and administrative 268,000 62.8 159,000 11.3
----------- -----------
Total costs and expenses 239,000 8.9 264,000 3.4
----------- -----------
INCOME FROM OPERATIONS (145,000) (75.1) 114,000 16.6
OTHER INCOME
Dividend and interest income 16,000 9.1 (113,000) (20.7)
Gain on sale of marketable securities (2,360,000) (100.0) (2,621,000) (100.0)
Insurance proceeds - (A) (1,000,000) (100.0)
Other income 212,000 NM 197,000 79.8
INTEREST EXPENSE (189,000) (20.9) (1,203,000) (35.5)
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (2,088,000) NM (2,220,000) NM
INCOME TAX EXPENSE (BENEFIT) (698,000) NM (425,000) NM
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (1,390,000) NM (1,795,000) NM
----------- -----------
DISCONTINUED OPERATIONS - REAL ESTATE, NET OF TAXES
LOSS FROM OPERATIONS (4,000) (2.1) (97,000) (30.9)
GAIN FROM SALES (445,000) (67.9) 2,914,000 NM
DISCONTINUED OPERATIONS - OIL & GAS, NET OF TAXES
INCOME (LOSS) FROM OPERATIONS (429,000) NM (1,514,000) NM
GAIN FROM SALES - (B) 567,000 100.0
----------- -----------
NET INCOME $(2,268,000) NM $ 75,000 2.5
=========== ===========
BASIC EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations $ (0.18) NM $ (0.22) NM
Income from discontinued operations (0.11) NM 0.24 NM
----------- -----------
Net income applicable to common stockholders $ (0.29) NM $ 0.02 5.3
=========== ===========
DILUTED EARNINGS (LOSS) PER SHARE:
Income (loss) from continuing operations $ (0.18) NM $ (0.22) NM
Income from discontinued operations (0.11) NM 0.21 NM
----------- -----------
Net income applicable to common stockholders $ (0.29) NM $ (0.01) 2.6
=========== ===========
(A) No insurance proceeds were received in either period.
(B) There was no gain from the sale of the oil and gas business in either
period.
NM Percentage change was not meaningful.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2004 ("2004") COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 2003 ("2003")
CONTINUING OPERATIONS:
Loss from continuing operations was $146,000 in 2004 compared with income of
$1,244,000 in 2003. Results per diluted share from continuing operations
amounted to $(0.02) in 2004 and $0.16 in 2003. The 2003 period included a
$1,396,000 after tax gain ($2,360,000 before taxes) from the sale of marketable
securities. Without this gain from the sale of securities, 2003 would have
reported a loss from continuing operations of $152,000.
12
Reported income from continuing operations in 2004 compared with 2003 reflects a
lower level of income from operations (defined as revenues reduced by operating
expenses, depreciation and general and administrative expenses) and lower other
income, that was partly offset by reduced interest expense and an income tax
benefit. These factors are discussed below.
Revenues amounted to $2,963,000 in 2004, an increase of $94,000 or 3.3%, from
$2,869,000 in 2003. The increase for the 2004 period is primarily attributable
to higher rent and reimbursement of real estate tax expenses applicable to the
Company's triple net leased hotel and conference facility.
Operating expenses were $1,745,000 in 2004, a $10,000 improvement from
$1,755,000 in 2003. Operating expenses in 2004 included adjustments to property
tax and property insurance expense to reflect the actual amounts paid and
projected to be paid for these items. In addition, 2004 included increased
expenditures for capital and maintenance items to reposition and strengthen the
properties within their targeted markets.
Depreciation expense in 2004 was comparable with the 2003 levels.
General and administrative expense increased $268,000 to $695,000 in 2004 from
$427,000 in 2003. The increase was related largely to expenses totaling $40,000
for a stock repurchase program that enabled stockholders owning less than 100
shares to sell their stock to the Company and severance expense of $57,000
related to the streamlining of personnel in real estate and corporate
operations. The stock repurchase program expense in nonrecurring, while
additional severance expense of $51,000 will be recognized in the fourth quarter
2004.
Also, there was an increased accrual of the pro-rata amount of the estimated
annual incentive bonus expense of $137,000 primarily for the newly hired
management team. The incentive bonus expense represents management's estimate of
the amount of performance-based bonus expense earned during the current period
and does not represent a contractual obligation to pay bonuses. The amount of
the bonus expense is reviewed periodically by management and the Compensation
Committee of the Board of Directors and may be adjusted in future periods. If
and when bonuses are awarded, at the direction of the Compensation Committee,
such bonuses may be paid in shares of restricted stock.
Other income decreased $2,132,000 to $398,000 in 2004 from $2,530,000 in 2003,
principally related to $2,360,000 of gains on the sale of marketable securities
in 2003. No securities were sold in the 2004 period. Other income in 2004
included $64,000 of fee income received under a contract to sell a parcel of
land and a $104,000 gain recorded on the sale of one condominium unit at the
Company's Jefferson Gardens, New Jersey, property.
Interest expense decreased to $716,000 from $905,000 in 2003, mainly related to
the payoff of approximately $6.2 million of mortgage debt ($5.8 million during
the three months ended March 31, 2004, $0.3 million during the three months
ended June 30, 2004 and $0.1 million during the three months ended September 30,
2004) related to real estate properties sold.
The provision for income taxes amounted to a tax benefit of $124,000 in 2004
compared to tax expense of $574,000 in 2003. The change in the provision for
income taxes is related to the level of income from continuing operations in
2004 compared to 2003.
13
DISCONTINUED OPERATIONS, NET OF TAXES:
REAL ESTATE
Income from discontinued operations amounted to after tax losses of $195,000 in
2004 and $191,000 in 2003. The increased loss reflects the lower level of
revenue from these properties due to sales subsequent to the 2003 period.
Gains from sales amounted to $210,000 in 2004 and $655,000 in 2003. In 2004, one
parcel of land in New Jersey was sold for gross proceeds of $1,000,000. In 2003,
two properties in Florida were sold for gross proceeds of $1,686,000.
OIL AND GAS
Discontinued operations for 2004 had a net after tax loss of $390,000 in 2004
and a profit of $39,000 in 2003. The 2004 period includes residual revenue and
expense adjustments between the Company and its partners relating to the
operations of the oil and gas business during the pre-sale period. The 2003
period reflects a full three months of oil and gas production.
NINE MONTHS ENDED SEPTEMBER 30, 2004 ("2004") COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 2003 ("2003")
CONTINUING OPERATIONS:
Loss from continuing operations was $252,000 in 2004 compared with income of
$1,543,000 in 2003. Per diluted share amounts from continuing operations was
$(0.03) in 2004 and $0.19 in 2003. The 2003 period included $1,550,000 of after
tax ($2,621,000 before taxes) gains on the sale of marketable securities and
$1,000,000 after tax income from death benefits received from an insurance
policy on the life of the Company's former senior consultant. Without these two
special transactions, the Company would have incurred a loss from continuing
operations of $1,007,000 in 2003.
Reported income from continuing operations in 2004 compared with 2003 reflects a
higher level of income from operations (defined as revenues reduced by operating
expenses, depreciation and general and administrative expenses) and lower other
income, that was partly offset by reduced interest expense and an income tax
benefit. These factors are discussed below.
Revenues amounted to $8,904,000 in 2004, an increase of $378,000 or 4.4%, from
$8,526,000 in 2003. The increase for the 2004 period is primarily attributable
to higher rent due to improved occupancy and reduced rental concessions and
higher reimbursement of real estate tax expenses applicable to the Company's
triple net leased hotel and conference facility.
Operating expenses increased to $5,063,000 in 2004 from $4,948,000 in 2003, an
increase of 2.3%. The majority of the increase was due to higher real estate tax
expense applicable to the Company's triple net leased hotel and conference
facility.
Depreciation expense was comparable with the 2003 period.
General and administrative expenses increased to $1,567,000 from $1,408,000 in
2003. The increase was largely related to a stock repurchase program that
enabled stockholders owning less than 100 shares to sell their stock to the
Company and severance expense related to the streamlining of personnel in real
estate and corporate operations. Additionally, there was an increased accrual of
incentive bonus expense primarily for the newly hired management team. (See
quarterly results above for additional discussion of bonus expense.)
14
Other income decreased $3,537,000 to $876,000 in 2004 from $4,413,000 in 2003.
In 2003, the Company sold marketable securities and recognized gains of
$2,621,000, whereas no marketable securities were sold in 2004. In addition,
2003 other income included $1,000,000 received by the Company as beneficiary of
life insurance policies on the life of the Company's former Chairman and
President Siggi B. Wilzig, who had been serving as its Senior Consultant up to
his death on January 7, 2003. These 2003 items were partly offset by $193,000 of
fee income received in 2004 under a contract to sell a parcel of land and the
$104,000 gain recorded on the sale of the condominium unit mentioned in the
discussion of three month results.
Interest expense decreased to $2,188,000 from $3,391,000 in 2003. Interest
expense in 2003 includes a one-time prepayment penalty of $469,000 to secure the
refinancing of the Company's real estate properties. The refinancing of the
mortgage notes payable in the first quarter of 2003 reduced the effective rate
paid by the Company from 7.36% to 6.10% and extended its maturity and terms. In
addition, the Company paid down approximately $6.2 million of mortgage debt
during 2004 related to real estate properties sold.
The provision for income taxes amounted to a benefit of $261,000 in 2004 and an
expense of $164,000 in 2003. The calculation of the 2003 income tax expense was
impacted by the tax-exempt status of the $1,000,000 of previously mentioned life
insurance proceeds.
DISCONTINUED OPERATIONS, NET OF TAXES:
REAL ESTATE
Discontinued operations amounted to losses of $411,000 in 2004 and $314,000 in
2003. The loss for each period reflects the results of operating the properties.
The increase in the loss in 2004 is related to a reduction in operating income
attributable to the large number of properties sold subsequent to the 2003
period.
Gains from the sale of real estate properties held for sale were $3,569,000
after taxes in 2004. During 2004, the Company sold fourteen real estate
properties in New Jersey for gross proceeds of $15,833,000. The gains of
$655,000 reported in 2003 reflect the sale of two properties in Florida noted in
the discussion of quarterly results.
OIL AND GAS
Discontinued operations includes a loss of $372,000 in 2004 and income of
$1,142,000 in 2003. The 2003 profit includes nine months of oil and gas sales
while the 2004 figures only include sales from January and February and the
results of residual income and expense related to periods prior to the sale but
reported to the Company subsequent to the effective date of the sale. The 2004
results also include the net after tax gain of $567,000 from the sale of the oil
and gas divisions.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2004, the Company had working capital of $32.4 million,
compared to a working capital deficiency of $7.2 million at December 31, 2003.
The change reflects the receipt of approximately $28.1 million from the sale of
the oil and gas business and approximately $15.8 million from the sale of real
estate properties, partly offset by the payment of a portion of the income taxes
related to those sales and the repayment of $11.3 million of debt related to the
real estate properties sold.
The Company has $34.8 million of cash and cash equivalents at September 30,
2004. This balance is comprised of working capital accounts for its real estate
properties and corporate needs and short-term investments in highly liquid, high
quality government and corporate securities and money market funds. The Company
estimates that it has approximately $5.5 million of taxes remaining to be paid
relating to the sale of the oil and gas business and the sales of real estate
properties. These obligations will be satisfied by the end of the first quarter
2005.
15
The remaining cash and cash equivalents will be utilized in a manner designed to
maximize stockholder value. The Company continues to explore corporate and real
estate property acquisitions as they arise. The timing of such acquisitions, if
any, will depend upon, among other criteria, economic conditions and the
favorable evaluation of specific opportunities presented to the Company. In the
short-term, the Company will continue to invest these funds in high quality
investments that are consistent with its investment policy. Management considers
its liquidity position adequate to fulfill the Company's current business plans.
Net cash used in operating activities amounted to $6.4 million in 2004, while in
2003 operating activities provided net cash of $6.9 million. The 2004 use of
cash resulted from net income of $3.1 million and the sale of the oil and gas
business and the sale of real estate properties with their related changes in
receivables, payables and current and deferred tax accounts. The 2003 provision
of cash was mainly related to net income of $3.1 million and depreciation and
amortization expense (a non-cash expense), partly offset by changes in other
current asset and liability and income tax accounts related to normal business
activity.
Net cash provided by investing activities amounted to $44.4 million in 2004 and
$1.1 million in 2003. This increase is due mainly to the sale of real estate
assets and oil and gas assets in 2004 compared with $9.2 million of capital
expenditures on real estate properties and oil and gas activities in 2003.
Net cash used in financing activities increased to $11.5 million from $7.6
million in 2003. This increased use of funds principally relates to the
repayment of long-term debt associated with the fourteen real estate properties
sold and the repayment of a note payable of $2.7 million.
In addition to the generation of funds from its operations, the Company has a
$2.0 million line of credit with a major financial institution. The Company
believes it has adequate capital resources to fund its operations for the
foreseeable future.
On June 3, 2004, the Company announced a program to purchase up to 1,000,000
shares of its common stock on the open market, in privately negotiated
transactions or otherwise. This purchasing activity may occur from time to time,
in one or more transactions. At September 30, 2004, the Company had purchased
30,431 shares at an aggregate cost of $154,000 under this program. The majority
of the shares acquired were from stockholders who at the time owned less than
100 shares of the Company's common stock.
CRITICAL ACCOUNTING POLICIES
The Company's discussion and analysis of its financial condition and results of
operations are based upon unaudited consolidated financial statements prepared
in conformity with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires the Company
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses. The Company bases its estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146") (effective January 1, 2003). SFAS
No. 146 replaces current accounting literature and requires the recognition of
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. The adoption of
this pronouncement in 2003 had an immaterial impact on the Company's financial
statements.
16
Impairment of Property and Equipment
In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This standard harmonizes the accounting for impaired assets and resolves some of
the implementation issues as originally described in SFAS 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS 144, among other things, requires the Company to classify the
operations and cash flow of properties to be disposed of as discontinued
operations. The Company adopted this pronouncement on January 1, 2002. This
adoption impacted how the Company reported its results of operations and
financial position as of September 30, 2004 and 2003.
On a periodic basis, management assesses whether there are any indicators that
the value of the real estate properties may be impaired. A property's value is
considered impaired if management's estimate of the aggregate future cash flows
(undiscounted and without interest charges) to be generated by the property are
less than the carrying value of the property. To the extent impairment has
occurred, the loss shall be measured as the excess of the carrying amount of the
property over the fair value of the property. Management does not believe at
September 30, 2004, that the value of any of its rental properties is impaired.
Revenue Recognition
Revenue from real estate properties is recognized during the period in which the
premises are occupied and rent is due from the tenant. Rental revenue is
recognized on a straight-line basis over the term of the lease. The excess of
rents recognized over amounts contractually due pursuant to the underlying
leases are included in accounts receivable. The Company follows a policy of
aggressively pursuing its rental tenants to ensure timely payment of amounts
due. When a tenant becomes 30 days in arrears on paying rent, the amount is
written-off and turned over to a collection agency for action. Accordingly, no
allowance for uncollectible accounts is maintained for the Company's real estate
tenants.
An allowance for uncollectible accounts was maintained based on the Company's
estimate of the inability of its joint interest partners in the oil and gas
division to make required payments. With the sale of the oil and gas division,
the Company no longer maintains an allowance for uncollectible accounts.
Foreign Operations
The assets and liabilities of the Company's Canadian subsidiary have been
translated at exchange rates in effect at the reporting date. The related
revenues and expenses have been translated at average exchange rates for the
applicable reported period. The aggregate effect of translation gains and losses
are reflected as a component of "Accumulated other comprehensive income (loss)"
until the sale or liquidation of the underlying foreign investment.
As a result of the sale of its Canadian oil and gas assets in April 2004, the
Company intends to dissolve its Canadian subsidiary and remit all prior years'
earning to the U. S. The Company has provided for approximately $1.2 million of
Federal income taxes that will result from the receipt of such funds.
Accounting for Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board issued Statement No.
148 to amend alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation. In
addition, Statement No. 148 amends the disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. However, the
Company has continued to account for options in accordance with the provision of
APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related
interpretations. Accordingly, no compensation expense has been recognized in the
statements of income for stock option plans and the Company has adopted the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation."
17
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity
In May 2003, the Financial Accounting Standards Board issued Statement No. 150
that establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. As of
September 30, 2004, the Company did not have any financial instruments
outstanding that were within the scope of Statement No. 150.
Consolidation of Variable Interest Entities
FIN 46(R), "Consolidation of Variable Interest Entities," applies at different
dates to different types of enterprises and entities, and special provisions
apply to enterprises that have fully or partially applied Interpretation 46
prior to issuance of Interpretation 46(R). Application of Interpretation 46 or
Interpretation 46(R) is required in financial statements of public entities that
have interests in variable interest entities or potential variable interest
entities commonly referred to as special-purpose entities for periods ending
after December 15, 2003. Application by public entities (other than small
business issuers) for all other types of entities is required in financial
statements for periods ending after March 15, 2004. Application by small
business issuers to entities other than special-purpose entities and by
nonpublic entities to all types of entities is required at various dates in 2004
and 2005. In some instances, enterprises have the option of applying or
continuing to apply Interpretation 46 for a short period of time before applying
Interpretation 46(R). As of September 30, 2004, the Company does not have any
variable interest entities that fall within the provisions of FIN 46(R).
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q for the quarter and nine months ended September 30,
2004 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
uncertainties inherent in any attempt to sell a portion or all of the business
at an acceptable price, environmental risks relating to the Company's real
estate properties, competition, the substantial capital expenditures required to
fund the Company's 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.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has investments in domestic equity securities for which the Company
has exposure to the risk of market value fluctuation. The Company accounts for
these investments as securities that are available for sale and marks them to
market at each period-end. The change in value in the investments, net of tax
impact, is reported in Accumulated Other Comprehensive Income, a separate
component of shareholders' equity. The Company also evaluates its investments to
determine if they have suffered a decline in market value that is permanent,
which would require a charge to the Statement of Income. At September 30, 2004,
in the opinion of management, there has been no permanent decline in value in
the Company's holdings of equity securities.
The Company is not exposed to changes in interest rates. At September 30, 2004,
the Company had no floating rate debt outstanding under its $2.0 million U.S.
credit line. At September 30, 2004, the Company had $47,148,000 of mortgage debt
outstanding which all bears interest at fixed rates.
18
SUMMARY OF INDEBTEDNESS
Long-term debt as of September 30, 2004 and December 31, 2003 consists of the
following -
2004 2003
(Unaudited)
----------- -----------
Mortgage notes payable $47,148,000 $53,824,000
Note payable - 2,700,000
Revolving demand loan - 1,970,000
----------- -----------
Total 47,148,000 58,494,000
Less-Current portion 727,000 6,989,000
----------- -----------
Long term portion (1) $46,421,000 $51,505,000
=========== ===========
(1) Includes mortgage debt associated with discontinued operations
of $1,616,000 in 2004 and $7,130,000 in 2003.
The aggregate maturities of the long-term debt in each of the five years
subsequent to September 30, 2004 and thereafter are -
October 1, 2004 through September 30, 2005 $ 727,000
October 1, 2005 through September 30, 2006 800,000
October 1, 2006 through September 30, 2007 880,000
October 1, 2007 through September 30, 2008 967,000
October 1, 2008 through September 30, 2009 4,894,000
After September 30, 2009 38,880,000
-----------
$47,148,000
===========
ITEM 4. CONTROLS AND PROCEDURES
(a) Disclosure controls and procedures. As of the end of the Company's most
recently completed fiscal quarter covered by this report, the Company
carried out an evaluation, with the participation of the Company's
management, including the Company's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the Company's disclosure
controls and procedures pursuant to Securities Exchange Act Rule
13a-15. Based upon that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in ensuring that
information required to be disclosed by the Company in the reports that
it files or submits under the Securities Exchange Act is recorded,
processed, summarized and reported, within the time periods specified
in the SEC's rules and forms.
(b) Changes in internal controls over financial reporting. There have been
no changes in the company's internal control over financial reporting
that occurred during the Company's last fiscal quarter to which this
report relates that have materially affected, or are reasonably likely
to materially affect, the Company's internal control over financial
reporting.
19
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table presents the activity in the Company's previously announced
common stock repurchase program for the three months ended September 30, 2004.
The program, for the repurchase of up to 1,000,000 shares of the Company's
common stock, was announced on June 3, 2004. No repurchase activity took place
from the date of the program's announcement through June 30, 2004. The Company
has continued the program into the fourth quarter of 2004 and has not yet
determined when the program will be discontinued.
(c) Total number (d) Maximum number (or
of shares (or approximate dollar value)
(b) Average units) purchased of shares (or units) that
(a) Total number price paid as part of publicly may yet be purchased
of shares (or per share announced plans under the plans
Period units) purchased (or unit) or programs or programs
- ------ ---------------- ---------- -------------------- --------------------------
July 1 - 31, 2004 2,080 $5.03 2,080 997,920 common shares
August 1 - 31, 2004 18,029 $5.08 18,029 979,891 common shares
September 1 - 30, 2004 10,322 $5.08 10,322 969,569 common shares
ITEM 6. EXHIBITS
Exhibit 10.1 2004 Stock Option and Incentive Plan (incorporated by reference
to Appendix C to the Registrant's definitive proxy statement
for its 2004 annual meeting of stockholders.
Exhibit 10.2 2004 Non-Employee Director Stock Option Plan (incorporated by
reference to Appendix D to the Registrant's definitive proxy
statement for its 2004 annual meeting of stockholders.
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section
302 of Sarbanes-Oxley Act
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section
302 of Sarbanes-Oxley Act
Exhibit 32.1 Certification of Chief Executive Officer Pursuant to Section
906 of Sarbanes-Oxley Act
Exhibit 32.2 Certification of Chief Financial Officer Pursuant to Section
906 of Sarbanes-Oxley Act
20
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 ENTERPRISES, INC.
--------------------------
(Registrant)
Date: November 12, 2004 /s/ S. Wilzig Izak
----------------- -----------------------------------
By: S. Wilzig Izak
Chairman of the Board and Chief
Executive Officer
/s/ Seth H. Ugelow
------------------------------------
By: Seth H. Ugelow
Chief Financial Officer
21