10-Q 1 e85080_000.txt ================================================================================ 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, 2001 Commission file number 1-467 WILSHIRE OIL COMPANY OF TEXAS ------------------------------------------------------- (Exact name of registrants 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) Registrant's telephone number -- including area code ---------------------------------------------------- (201) 420-2796 NO CHANGE --------------------------------------------------- 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 -- 7,946,688 ================================================================================ WILSHIRE OIL COMPANY OF TEXAS INDEX Page No. -------- Part I Financial Information Financial Information: Condensed Consolidated Balance Sheets -- March 31, 2001 (Unaudited) and December 31, 2000 ............. 1 Unaudited Condensed Consolidated Statements of Income -- (Unaudited) Three months ended March 31, 2001 and 2000 ....... 2 Unaudited Condensed Consolidated Statement of Cash Flows -- (Unaudited) Three months ended March 31, 2001 and 2000 ....... 3 Notes to Unaudited Condensed Consolidated Financial Statements ................................................... 4, 5 & 6 Management's Discussion and Analysis of Financial Condition and Results of Operations ............. 7, 8 & 9 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, 2001 2000 ----------- ------------- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents .......................... $ 1,941 $ 2,925 Marketable securities, available-for-sale, at fair value ....................................... 8,388 7,166 Accounts receivable ................................ 2,441 2,243 Income taxes receivable ............................ 468 332 Prepaid expenses and other current assets .......... 2,161 2,535 -------- -------- Total current assets ........................ 15,399 15,201 -------- -------- MORTGAGE NOTES RECEIVABLE ............................ 3,500 3,500 -------- -------- PROPERTY AND EQUIPMENT Oil and gas properties, using full cost method of accounting ............................. 136,802 137,458 Real estate properties ............................. 67,041 61,402 Other property and equipment ....................... 290 312 -------- -------- 204,133 199,172 Less -- Accumulated depreciation, depletion and amortization ................................. 119,977 119,332 -------- -------- 84,156 79,840 -------- -------- $103,055 98,541 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt .................. $ 12,269 $ 14,842 Loan payable to shareholder ........................ 400 400 Accounts payable ................................... 3,944 1,986 Accrued liabilities ................................ 1,174 1,159 -------- -------- Total current liabilities ................... 17,787 18,387 -------- -------- LONG -- TERM DEBT, less current portion .............. 51,704 46,701 -------- -------- DEFERRED INCOME TAXES ................................ 11,597 11,994 -------- -------- 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 2001 and 2000 Common stock, $1 par value, 15,000,000 shares authorized; Issued 10,013,544 shares in 2001 and 2000 .................................... 10,014 10,014 Capital in excess of par value ..................... 9,029 9,029 Treasury stock, 2,057,556 and 1,742,021 shares at March 31, 2001 and December 31, 2000, respectively, at cost ............................ (10,048) (9,850) Retained earnings .................................. 18,149 17,112 Accumulated other comprehensive loss ............... (5,208) (4,877) -------- --------- 21,936 21,428 -------- --------- $103,055 $ 98,541 ======== ========= 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, 2001 2000 --------- --------- REVENUES Oil & Gas .......................................... $ 3,418 $ 1,345 Real Estate ........................................ 3,289 3,225 ------- ------- Total Revenues ............................ 6,707 4,570 COSTS AND EXPENSES Oil and Gas Production Expenses .................... 601 536 Real Estate Operating Expenses ..................... 2,041 1,765 Depreciation, depletion and amortization ........... 1,000 910 General and Administrative ......................... 344 336 ------- ------- Total Costs and Expenses .................. 3,986 3,547 ------- ------- Income from Operations .................... 2,721 1,023 OTHER INCOME ....................................... 95 146 INTEREST EXPENSE ................................... (1,169) (1,024) ------- ------- Income before provision for income taxes ........ 1,647 145 PROVISION FOR INCOME TAXES ......................... 610 13 ------- ------- Net income ................................ $ 1,037 $ 132 ------- ------- BASIC AND DILUTED EARNINGS PER SHARE .............. $ 0.13 $ 0.02 ------- ------- 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, 2001 2000 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income ......................................... $ 1,037 $ 132 Adjustments to reconcile net income to net cash used in operating activities -- Depreciation, depletion and amortization ........... 1,000 910 Deferred income tax (benefit) provision ............ (397) 159 Gain on sales of marketable securities ............. -- -- Changes in operating assets and liabilities -- (Increase) decrease in receivables ............... (334) (191) (Increase) decrease in prepaid expenses and Other current assets ........................... (175) 410 (Increase) Decrease in accounts payable, Accrued and other liabilities .................. 1,973 (793) ------- ------- Net cash provided by operating activities .......... 3,104 627 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures, net .......................... (4,961) (494) Purchases of marketable securities ................. -- (146) Proceeds from sales and redemptions of securities .. -- -- ------- ------- Net cash used in investing activities .............. (4,961) $ (640) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long term debt ........... 4,270 750 Principal payment of short term debt ............... (2,000) (271) Purchase of treasury stock ......................... (198) (733) Other .............................................. (195) 7 ------- ------- Net cash provided by (used) in financing activities ............................. 1,877 (247) EFFECT OF EXCHANGE RATE CHANGES ON CASH .............. (1,004) 50 ------- ------- Net decrease in cash and cash equivalents .......... (984) (210) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................... 2,925 1,887 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................... $ 1,941 $ 1,677 ------- ------- SUPPLEMENTAL DISCLOSURES TO THE STATEMENTS OF CASH FLOWS: Cash paid during the period for -- Interest ....................................... $ 1,175 $ 1,116 Income taxes ................................... $ 59 $ 131 3 WILSHIRE OIL COMPANY OF TEXAS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 1. FINANCIAL STATEMENTS The unaudited condensed consolidated financial statements included herein have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. This condensed financial information reflects, in the opinion of management, all adjustments necessary to present fairly the results for the interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the full year. 2. DESCRIPTION OF BUSINESS Wilshire Oil Company of Texas (the Company) is a diversified corporation engaged in oil and gas exploration and production and real estate operations. The Company's oil and gas operations are conducted both in its own name and through several wholly-owned subsidiaries in the United States and Canada. Crude oil and natural gas productions are sold to oil refineries and natural gas pipeline companies. The Company's real estate holdings are located in the states of Arizona, Florida, New Jersey, Texas and Georgia. The Company also maintains investments in marketable securities. 3. SEGMENT INFORMATION The Company is engaged in the exploration and development of oil and gas, both in its own name and through several wholly-owned subsidiaries, on the North American continent. The Company also conducts real estate operations throughout the United States. Oil and Gas ----------- The Company conducts its oil and gas operations in the United States and Canada. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas and Wyoming. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan. Real Estate ----------- The Company's real estate operations are conducted in the states of Arizona, Texas, Florida, Georgia and New Jersey. The Company's properties consists of apartment complexes as well as commercial and retail properties. Corporate --------- The Company holds investments in certain marketable securities. From time to time, the Company buys and sells securities in the open market. Over the years, the Company has decreased its holding in marketable securities and focused its resources in the oil and gas and real estate divisions. 4 The following segment data is presented based on the Company's internal management reporting system- For the three months ended March 31 --------------------------- 2001 2000 ------------ ----------- Revenues Oil and gas -- United States ................. $ 1,636,000 $ 763,000 Oil and gas -- Canada ........................ 1,782,000 582,000 Real estate .................................. 3,289,000 3,225,000 ------------ ----------- $ 6,707,000 $ 4,570,000 ------------ ----------- Income from operations and reconciliation to Income before provision for income taxes Oil and gas -- United States (a) ............. $ 521,000 $ (208,000) Oil and gas - Canada (a) ..................... 1,479,000 268,000 Real estate (a) .............................. 711,000 985,000 Corporate (a) ................................ 10,000 (22,000) ------------ ----------- Income from Operations .................... 2,721,000 1,023,000 Other Income ..................................... 95,000 146,000 Interest expenses .............................. (1,169,000) (1,024,000 ------------ ----------- Income before provision for income taxes... $ 1,647,000 $ 145,000 ------------ ----------- Identifiable assets Oil and gas - United States .................. $ 16,459.000 $15,274,000 Oil and gas - Canada ......................... 14,748,000 13,960,000 Real estate .................................. 36,467,000 40,685,000 Corporate .................................... 35,381,000 19,401,000 ------------ ----------- $103,055,000 $89,320,000 ------------ ----------- ---------- (a) Represents revenues less all operating costs, including depreciation, depletion and amortization. 4. COMPREHENSIVE INCOME Comprehensive income for the three months ended March 31, 2001 and 2000 is as follows: 2001 2000 ---------- --------- Net income $1,037,000 $ 132,000 ---------- --------- Other comprehensive income (loss), net of taxes Foreign currency translation adjustments ...... (1,243,000) (260,000) Change in unrealized (loss) gain on marketable securities ....................... 912,000 (163,000) ---------- --------- Other comprehensive income (loss) ............... (331,000) (423,000) ---------- --------- Comprehensive income (loss) ..................... $ 706,000 $(291,000) ========== ========= 5 Changes in the components of Accumulated Other Comprehensive Income (Loss) for the year 2000 and for the three months ended March 31, 2001 are as follows-

Unrealized Gains Cumulative Accumulated (Losses) on Foreign Currency Other Available-for Sale Translation Comprehensive Securities Adjustment Income (Loss) ------------------ ---------------- ------------- BALANCE, December 31, 1999 ..... $ (274,000) $(2,941,000) $(3,215,000) Change for the year 2000 ..... (1,311,000) (351,000) (1,662,000) ----------- ----------- ----------- BALANCE, December 31, 2000 ..... (1,585,000) (3,292,000) (4,877,000) Change for the quarter ....... 912,000 (1,243,000) (331,000) ----------- ----------- ----------- $ (673,000) $(4,535,000) $(5,208,000) =========== =========== ===========

5. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share- Three Months Ended March 31, ---------------------------- 2001 2000 ---------- ---------- Numerator -- Net income ................................ $1,037,000 $ 132,000 ========== ========== Denominator -- Weighted average common shares outstanding -- Basic .................... 7,969,820 8,371,041 Incremental shares from assumed conversions of stock options ............ -- -- ---------- ---------- Weighted average common shares outstanding -- Diluted .............. 7,969,820 8,371,041 ========== ========== Basic earnings per share .................... $ 0.13 $ 0.02 Diluted earnings per share .................. $ 0.13 $ 0.02 6 FINANCIAL CONDITION AND RESULTS OF MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS Results of Operations --------------------- Net income for the quarter ended March 31 increased from $132,000 in 2000 to $1,037,000 in 2001. Consolidated revenues for the quarter ended March 31 increased from $4,570,000 in 2000 to $6,707,000 in 2001. Oil and gas revenues increased by $2,073,000 primarily due to increases in the price of crude oil and gas. Real estate revenues increased from $3,225,000 in 2000 to $3,289,000 in 2001. This increase is due to higher rents. Total costs and expenses for the quarter ended March 31 increased slightly, amounting to $3,986,000 in 2001 compared with $3,547,000 in 2000. Oil and gas production expenses increased $65,000 real estate operating expenses increased by $276,000, depreciation, depletion and amortization increased by $90,000, and general and administrative expenses increased by $8,000. Interest expense increased from $1,024,000 in 2000 to $1,169,000 in 2001. This increase is primarily attributable to additional real estate financings. 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, 2001 the Company had approximately $8.4 million in marketable securities at market value. The current ratio at March 31, 2001 was .87 to 1, which management considers adequate at this time. During the first quarter of 2001, the Company chose to postpone the refinancing of its short-term debt into long-term mortgages to take advantage of anticipated interest rate reductions by the Federal Reserve. While the Company's working capital was ($2,388,000) at March 31, 2001, the Company intends to refinance $5.7 million of its current portion of long-term debt into long-term mortgages at lower, more favorable interest rates during the second and third quarters of 2001. The Company anticipates that cash provided by operating activities and investing activities will be sufficient to meet its capital requirements to acquire oil and gas properties and to drill and evaluate these and other oil and gas properties presently held by the Company. The level of oil and gas capital expenditures will vary in future periods depending on market conditions, including the price of oil and the demand for natural gas, and other related factors. As the Company has no material long-term commitments with respect to its oil and gas capital expenditure plans, the Company has a significant degree of flexibility to adjust the level of its expenditures as circumstances warrant. The Company plans to actively continue its exploration and production activities as well as search for the acquisition of oil and gas producing properties and of companies with desirable oil and gas producing properties. There can be no assurance that the Company will in fact locate any such acquisitions. The Company also will 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 planning further acquisitions of investment properties during the year. Accordingly, while the Company anticipates that it will actively explore these and other real estate acquisition opportunities, no assurance can be given that any such acquisition will occur. Net cash provided by operating activities was $3,104,000 in 2001 and $627,000 in 2000. The increase in 2001 was primarily due to changes in operating assets and liabilities and higher income. Net cash used in investing activities was $(4,961,000) in 2001 and $(640,000) in 2000. The variations principally relate to property, equipment additions and the purchase of an apartment complex in San Antonio, Texas for $5,250,000 offset by decreases in oil and gas properties held in Canada due to exchange rate fluctuations. Net cash provided by (used in) financing activities was $1,877,000 in 2001 and $(247,000) in 2000. The variation principally relates to the issuance of long-term debt in connection with real estate properties during the respective quarters as well as principal payments of long-term debt. In addition, the Company acquired approximately $198,000 of treasury stock in 2001. The Company believes it has adequate capital resources to fund operations for the foreseeable future. 8 Foward-Looking Statements ------------------------- This Report on Form 10-Q for the quarter ended March 31, 2001 contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included herein other than statements of historical fact are forward-looking statements. Although the Company believes that the underlying assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's business and prospects are subject to a number of risks which could cause actual results to differ materially from those reflected in such forward-looking statements, including volatility of oil & gas prices, the need to develop and replace reserves, risks involved in exploration and drilling, uncertainties about estimates of reserves, environmental risks relating to the Company's oil & gas and real estate properties, competition, the substantial capital expenditures required to fund the Company's oil & gas and real estate operations, market and economic changes in areas where the Company holds real estate properties, interest rate fluctuations, government regulation, and the ability of the Company to implement its business strategy. 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, 2001. 10 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: May 12, 2001 By: /s/ S. WILZIG IZAK ---------------------------------- S. Wilzig Izak Chairman of the Board and Chief Executive Officer (Duly Authorized Officer and Chief Financial Officer)