10-Q 1 0001.txt FORM 10-Q ================================================================================ 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, 2000 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 -- 8,152,511 ============================================================================== WILSHIRE OIL COMPANY OF TEXAS INDEX Page No. -------- Part I Financial Information Financial Information: Condensed Consolidated Balance Sheets-- June 30, 2000 (Unaudited) and December 31, 1999 1 Unaudited Condensed Consolidated Statements of Income-- Six months ended June 30, 2000 and 1999 2 Unaudited Condensed Consolidated Statements of Income-- Three months ended June 30, 2000 and 1999. 3 Unaudited Condensed Consolidated Statements of Cash Flows-- Six months ended June 30, 2000 and 1999 4 Notes to Unaudited Condensed Consolidated Financial Statements 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II Other Information 12 WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (000's Omitted, Except Share Data) JUNE 30, 2000 DECEMBER 31, ASSETS (UNAUDITED) 1999 ------------------------------------------------------------------- ----------- CURRENT ASSETS Cash and cash equivalents $ 3,362 $ 1,887 Accounts receivable 1,492 1,698 Marketable securities, stated at market value 8,102 5,211 Prepaid expenses and other current assets 1,688 1,550 --------- --------- Total current assets 14,644 10,346 --------- --------- MORTGAGE NOTES RECEIVABLE (Note 6) 3,500 -- PROPERTY AND EQUIPMENT Oil and gas properties, using the full cost method of accounting 136,560 136,540 Real estate properties 60,933 59,602 Other property and equipment 376 392 --------- --------- 197,869 196,534 Less- Accumulated depreciation, depletion and amortization 118,071 116,353 --------- --------- 79,798 80,181 --------- --------- $ 97,942 $ 90,527 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY -------------------------------------------------------- CURRENT LIABILITIES Current portion of long-term debt $ 3,975 $ 4,682 Short-term debt 4,700 -- Loan payable to Shareholder 1,722 -- Accounts payable 1,371 2,023 Accrued and other liabilities 1,920 985 --------- --------- Total current liabilities 13,688 7,690 --------- --------- LONG - TERM MORTGAGE DEBT, less current portion 48,911 46,935 --------- --------- DEFERRED INCOME TAXES AND OTHER NONCURRENT LIABILITIES 12,231 11,934 --------- --------- SHAREHOLDERS' EQUITY Common stock, $1 par value, 15,000,000 shares authorized; 10,013,544 shares issued 10,014 10,014 Capital in excess of par value 9,199 9,029 16,095 15,888 Retained earnings --------- --------- 35,308 34,931 Less - Treasury stock, 1,861,033 and 1,154,317 shares at June 30, 2000 and 1999, Respectively, at cost (9,090) (7,748) Accumulated other comprehensive loss (3,106) (3,215) --------- --------- 23,112 23,968 --------- --------- $ 97,942 $ 90,527 ========= ========= The accompanying notes are an integral part of these condensed consolidated financial statements. 1 WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (000's Omitted Except Per Share Data) FOR THE SIX MONTHS ENDED ------------------------ JUNE 30, JUNE 30, 2000 1999 ---------- --------- REVENUES Oil & Gas $ 3,360 $ 2,403 Real Estate 6,384 6,229 ------- ------- Total Revenues 9,744 8,632 COSTS AND EXPENSES Oil and Gas Production Expenses 1,206 1,122 Real Estate Operating Expenses 3,754 3,479 Depreciation, depletion and amortization 1,895 1,631 General and Administrative 864 707 ------- ------- Total Costs and Expenses 7,719 6,939 ------- ------- Income from Operations 2,025 1,693 ------- ------- OTHER INCOME 232 407 GAIN ON SALES OF MARKETABLE SECURITIES -- 34 INTEREST EXPENSE (2,006) (1,918) ------- ------- Income before provision for income taxes 251 216 PROVISION FOR INCOME TAXES 44 76 ------- ------- Net income $ 207 $ 140 ======= ======= BASIC AND DILUTED EARNINGS PER SHARE $ 0.03 $ 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 INCOME (000's Omitted, Except Per Share Data) FOR THE THREE MONTHS ENDED -------------------------- JUNE 30, JUNE 30, 2000 1999 ------------ ----------- REVENUES Oil & Gas $ 2,015 $ 1,194 Real Estate 3,159 3,175 ------- ------- Total Revenues 5,174 4,369 COSTS AND EXPENSES Oil and Gas Production Expenses 670 591 Real Estate Operating Expenses 1,989 1,765 Depreciation, depletion and amortization 985 830 General and Administrative 528 343 ------- ------- Total Costs and Expenses 4,172 3,529 ------- ------- Income from Operations 1,002 840 OTHER INCOME 86 225 INTEREST EXPENSE (982) (930) ------- ------- Income before provision for income taxes 106 135 PROVISION FOR INCOME TAXES 31 48 ------- ------- Net income $ 75 $ 87 ======= ======= BASIC AND DILUTED EARNINGS PER SHARE $ 0.01 $ 0.01 ======= ======= The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (000's Omitted) For The Six Months Ended ------------------------ June 30, June 30, 2000 1999 ------------ --------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 207 $ 140 Adjustments to reconcile net income (loss) to net cash used in operating activities-- Depreciation, depletion and amortization 1,895 1,631 Deferred income tax provision 297 22 Amortization (adjustment) of deferred and unearned compensation in connection with non-qualified stock option plan, net -- 9 Gain on sales of marketable securities -- (34) Changes in operating assets and liabilities-- (Increase) decrease in receivables 206 1,867 (Increase) decrease in prepaid expenses and Other current assets (138) (246) Increase (decrease) in accounts payable, accrued and other liabilities 283 (742) ------- ------- Net cash provided by operating activities 2,750 2,647 ------- ------- CASH FLOWS USED IN INVESTING ACTIVITIES Capital expenditures, net (1,335) (1,443) Purchases of marketable securities (2,891) (638) Purchase Mortgage Notes (3,500) -- Proceeds from sales and redemptions of securities -- 124 ------- ------- Net cash used in investing activities (7,726) (1,957) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of short term debt 4,700 -- Proceeds from issuance of long term debt 1,725 1,000 Proceeds from issuance of loan payable to shareholders 1,722 Principal payment of long term debt (456) (1,005) Purchase of treasury stock (1,342) (1,165) Other 178 -- ------- ------- Net cash provided by (used in) financing activities 6,527 (1,170) ------- ------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (76) 172 ------- ------- Net increase (decrease) in cash and cash equivalents 1,475 (308) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,887 4,444 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,362 $ 4,136 ======= ======= SUPPLEMENTAL DISCLOSURES TO THE STATEMENTS OF CASH FLOWS: Cash paid during the period for-- Interest $ 2,042 $ 1,898 Income taxes $ 192 $ 106 4 WILSHIRE OIL COMPANY OF TEXAS NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2000 1. FINANCIAL STATEMENTS The unaudited condensed consolidated financial statements included herein have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Registrant believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. This condensed financial information reflects, in the opinion of management, all adjustments necessary to present fairly the results for the interim periods. The results of operations for such interim periods are not necessarily indicative of the results for the full year. 2. DESCRIPTION OF BUSINESS: Wilshire Oil Company of Texas (the Company) is a diversified corporation engaged in oil and gas exploration and production and real estate operations. The Company's oil and gas operations are conducted both in its own name and through several wholly-owned subsidiaries in the United States and Canada. Crude oil and natural gas productions are sold to oil refineries and natural gas pipeline companies. The Company's real estate holdings are located in the states of Arizona, Florida, New Jersey, Texas and Georgia. The Company also maintains investments in marketable securities. 3. SEGMENT INFORMATION The Company is engaged in the exploration and development of oil and gas, both in its own name and through several wholly-owned subsidiaries, on the North American continent. The Company also conducts real estate operations throughout the United States. Oil and Gas The Company conducts its oil and gas operations in the United States and Canada. Oil and gas operations in the United States are located in Arkansas, California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas and Wyoming. In Canada, the Company conducts oil and gas operations in the Provinces of Alberta, British Columbia and Saskatchewan. Real Estate The Company's real estate operations are conducted in the states of Arizona, Texas, Florida, Georgia and New Jersey. The Company's properties consists of apartment complexes as well as commercial and retail properties. Corporate The Company holds investments in certain marketable securities. From time to time, the Company buys and sells securities in the open market. Over the years, the Company has decreased its holding in marketable securities and focused its resources in the oil and gas and real estate divisions. 5 The following segment data is presented based on the Company's internal management reporting system- For the six months ended June 30 ----------------------------- 2000 1999 ------------ ------------- Revenues Oil and gas--United States $ 1,861,000 $ 1,525,000 Oil and gas--Canada 1,499,000 878,000 Real estate 6,384,000 6,229,000 ------------ ------------ $ 9,744,000 $ 8,632,000 ------------ ------------ Income from operations and reconciliation to Income before provision for income taxes Oil and gas--United States (a) $ (211,000) $ (627,000) Oil and gas--Canada (a) 628,000 538,000 Real estate (a) 1,688,000 1,885,000 Corporate (a) (80,000) (103,000) ------------ ------------ Income from Operations 2,025,000 1,693,000 Other Income 232,000 407,000 Gain on Sale of marketable securities -- 34,000 Interest expense (2,006,000) (1,918,000) ------------ ------------ Income before provision for income taxes $ 251,000 $ 216,000 ------------ ------------ Identifiable assets Oil and gas--United States $ 16,467.000 $ 16,712,000 Oil and gas--Canada 13,774,000 13,020,000 Real estate 41,461,000 31,993,000 Corporate 26,240,000 31,308,000 ------------ ------------ $ 97,942,000 $ 93,033,000 ------------ ------------ (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 --------------------------- 2000 1999 ----------- ------------ Revenues Oil and gas - United States $ 1,098,000 $ 739,000 Oil and gas - Canada 917,000 455,000 Real estate 3,159,000 3,175,000 ----------- ----------- $ 5,174,000 $ 4,369,000 ----------- ----------- Income from operations and reconciliation to Income before provision for income taxes Oil and gas - United States (a) $ (3,000) $ (380,000) Oil and gas - Canada (a) 360,000 289,000 Real estate (a) 703,000 980,000 Corporate (a) (58,000) (49,000) ----------- ----------- Income from Operations 1,002,000 840,000 Other Income 86,000 225,000 Interest expense (982,000) (930,000) ----------- ----------- Income before provision for income taxes $ 106,000 $ 135,000 ----------- ----------- (a) Represents revenues less all operating costs, including depreciation, depletion and amortization. 4. COMPREHENSIVE INCOME Comprehensive income, representing all changes in shareholders' equity during the period, other than changes resulting from the Company's common stock, for the six months ended June 30, 2000 and 1999 is as follows: 2000 1999 --------- --------- Net income $ 207,000 $ 140,000 --------- --------- Other comprehensive income (loss), net of taxes Foreign currency translation adjustments (233,000) 172,000 Change in unrealized gain on marketable securities 309,000 -- --------- --------- Other comprehensive income 76,000 172,000 --------- --------- Comprehensive income $ 283,000 $ 312,000 ========= ========= 7 5. EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128), which requires presentation in the Consolidated Statement of Income of both basic and diluted earnings per share. Earnings per share amounts have been presented, and where appropriate, restated to conform to the SFAS No. 128 requirements. The following table sets forth the computation of basic and diluted earnings per share-

Six Months Ended Three Months Ended June 30, June 30 ------------------ ------------------------ 2000 1999 2000 1999 --------- ---------- ---------- ------------ Numerator-- Net income $ 207,000 $ 140,000 $ 75,000 $ 87,000 ========== ========== ========== ========== Denominator-- Weighted average common shares outstanding--Basic 8,279,084 8,931,616 8,187,127 8,894,185 Incremental shares from assumed conversions of stock options -- -- -- -- ---------- ---------- ---------- ---------- Weighted average common shares outstanding--Diluted 8,279,084 8,931,616 8,187,127 8,894,185 ========== ========== ========== ========== Basic earnings per share $ 0.03 $ 0.02 $ 0.01 $ 0.01 Diluted earnings per share $ 0.03 $ 0.02 $ 0.01 $ 0.01

6. MORTGAGE NOTES RECEIVABLE During June, 2000 the Company acquired mortgage notes receivable from the Trust Company of New Jersey for a fair value price of $3,500,000. As part of this transaction, the Company borrowed $2,100,000 from the Trust Company of New Jersey as well as $1,400,000 from another lending institution both of which are reflected in short-term debt on the accompanying balance sheet. 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 $207,000 in 2000 as compared to $140,000 in 1999. Consolidated revenues for the six months ended June 30 increased from $8,632,000 in 1999 to $9,744,000 in 2000. Oil and gas revenues increased from $2,403,000 for the six months ended June 30, 1999 to $3,360,000 for the same period in 2000, due to increases in the price of crude oil and gas from period to period. Real estate revenues increased from $6,229,000 for the six months ended June 30, 1999 to $6,384,000 the same period in 2000. This increase is due to higher rents and occupancy and more efficient operation of the properties. Total costs and expenses for the six months ended June 30 were $7,719,000 in 2000 compared with $6,939,000 in 1999. Oil and gas production expense increased by $84,000, real estate operating expenses increased by $275,000, depreciation, depletion and amortization increased by $264,000, and general and administrative expenses increased by $157,000. The Company realized gains on sales of marketable securities of $34,000 for the six months ended June 30, 1999; there were no gains in 2000. Interest expense increased from $1,918,000 for the six months ended June 30, 1999 to $2,006,000 for the same period in 2000. This increase is attributable to an increase in new mortgage financing. The provision for income taxes includes Federal, state and Canadian taxes. Differences between the effective tax rate and the statutory income tax rates are principally due to foreign resource tax credits in Canada and the dividend exclusion in the United States. 9 Liquidity and Capital Resources At June 30, 2000 the Company had approximately $8.1 million in marketable securities at market value plus $3.5 million in mortgage notes receivable. The current ratio at June 30, 2000 was 1.1 to 1, which management considers adequate for the Company's current business. The Company's working capital was approximately $1.0 million at June 30, 2000. The Company anticipates that cash provided by operating activities and investing activities will be sufficient to meet its capital requirements to acquire oil and gas properties and to drill and evaluate these and other oil and gas properties presently held by the Company. The level of oil and gas capital expenditures will vary in future periods depending on market conditions, including the price of oil and the demand for natural gas, and other related factors. As the Company has no material long-term commitments with respect to its oil and gas capital expenditure plans, the Company has a significant degree of flexibility to adjust the level of its expenditures as circumstances warrant. The Company plans to actively continue its exploration and production activities as well as search for the acquisition of oil and gas producing properties and of companies with desirable oil and gas producing properties. There can be no assurance that the Company will in fact locate any such acquisitions. The Company will also explore real estate acquisitions as they arise. The timing of any such acquisition will depend on, among other things, economic conditions and the favorable evaluation of specific opportunities presented to the Company. The Company is currently planning further acquisitions of investment properties during the next year. Accordingly, while the Company anticipates that it will actively explore these and other real estate acquisition opportunities, no assurance can be given that any such acquisition will occur. Net cash provided by operating activities was $2,647,000 for the six months ended June 30, 1999 and $2,750,000 for the same period in 2000. The increase was primarily due to changes in operating assets and liabilities. Net cash used in investing activities was ($1,957,000) for the six months ended June 30, 1999 and ($7,726,000) for the same period in 2000. The variations principally relate to transactions in securities. Proceeds from sales and redemptions of securities amounted to $124,000 in 1999 and none in 2000. Net cash provided by (used in) financing activities was ($1,170,000) for the six months ended June 30,1999 and $6,527,000 for the same period in 2000. The variation principally relates to the issuance of debt during the respective periods as well as principal payments of long-term debt. 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, 2000 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, 2000. 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 18, 2000 /s/ S. WILZIG IZAK -------------------- ---------------------------------------------- By: S. Wilzig Izak Chairman of the Board and Chief Executive Officer (Duly Authorized Officer and Chief Financial Officer)