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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1999
Commission file number 1-467
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WILSHIRE OIL COMPANY OF TEXAS
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(Exact name of registrants as specified in its charter)
DELAWARE 84-0513668
- ------------------------------- -------------------
(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
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Former name, former address and former fiscal year,
if changed since last reports.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-- --
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period by this report.
Common Stock $1 Par Value -- 8,899,738
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<PAGE>
WILSHIRE OIL COMPANY OF TEXAS
INDEX
Page No.
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PART I FINANCIAL INFORMATION
Financial Information:
Condensed Consolidated Balance Sheets -
March 31, 1999 (Unaudited) and December 31, 1998 .......... 1
Consolidated Statement of Income - (Unaudited)
Three months ended March 31, 1999 and 1998 ................ 2
Consolidated Statement of Cash Flows - (Unaudited)
Three months ended March 31, 1999 and 1998 ................ 3
Notes to (Unaudited) Consolidated Financial Statements ...... 4 & 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................... 6,7,8,&9
PART II OTHER INFORMATION ........................................... 10
<PAGE>
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's Omitted, Except Share Data)
March 31, December 31,
1999 1998
ASSETS ----------- ------------
- --------- (Unaudited)
CURRENT ASSETS
Cash and cash equivalents ..................... $ 4,161 $ 4,444
Accounts receivable ........................... 2,414 3,261
Marketable securities, stated at
market value ................................ 5,246 5,162
Prepaid expenses and other current assets ..... 1,575 1,359
-------- --------
Total current assets ................. 13,396 14,226
-------- --------
PROPERTY AND EQUIPMENT
Oil and gas properties, using the
full cost method of accounting .............. 134,209 133,804
Real estate properties ........................ 59,211 58,773
Other property and equipment .................. 416 446
-------- --------
193,836 193,023
Less - Accumulated depreciation,
depletion and amortization .................. 113,449 112,648
-------- --------
80,387 80,375
-------- --------
$ 93,783 $ 94,601
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt ............. $ 6,314 $ 6,502
Accounts payable .............................. 1,447 1,782
Accrued and other liabilities ................. 911 928
-------- --------
Total current liabilities ............ 8,672 9,212
-------- --------
LONG - TERM DEBT, less current portion .......... 47,890 47,764
-------- --------
DEFERRED INCOME TAXES AND OTHER
NONCURRENT LIABILITIES ........................ 12,455 11,891
-------- --------
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 ................ 9,264 9,146
Retained earnings ........................... 15,327 15,274
-------- --------
34,605 34,434
Less -
Treasury stock, 1,113,806 and 878,348
shares in 1999 and 1998, at cost ........ (6,305) (5,303)
Accumulated other comprehensive loss ...... (3,534) (3,397)
-------- --------
24,766 25,734
-------- --------
$ 93,783 $ 94,601
======== ========
1
<PAGE>
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's Omitted, Except Share Data)
FOR THE THREE MONTHS ENDED
--------------------------
March 31, March 31,
1999 1998
----------- -----------
(Unaudited)
REVENUES
Oil & Gas ........................................ $ 1,209 $ 1,326
Real Estate ...................................... 3,054 2,727
------- -------
Total Revenues ........................ 4,263 4,053
COSTS AND EXPENSES
Oil and Gas Production Expenses .................. 531 593
Real Estate Operating Expenses ................... 1,714 1,608
Depreciation, depletion and amortization ......... 801 851
General and Administrative ....................... 364 398
------- -------
Total Costs and Expenses .............. 3,410 3,450
------- -------
Income from Operations ................ 853 603
OTHER INCOME (EXPENSE) ........................... 182 123
GAIN ON SALES OF MARKETABLE
SECURITIES (Note 3) ............................ 34 1,495
INTEREST EXPENSE ................................. (988) (1,036)
------- -------
Income before provision
for income taxes ............................. 81 1,185
PROVISION FOR INCOME TAXES ....................... 28 405
------- -------
Net income ............................ $ 53 $ 780
======= =======
BASIC EARNINGS PER
COMMON SHARE ................................... $ .01 $ .08
======= =======
DILUTED EARNINGS PER
COMMON SHARE ................................... $ .01 $ .08
======= =======
2
<PAGE>
<TABLE>
<CAPTION>
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's Omitted)
For The Three Months Ended
--------------------------
March 31, March 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ......................................... $ 53 $ 780
Adjustments to reconcile net income to net
cash used in operating activities -
Depreciation, depletion and amortization ........... 801 851
Deferred income tax provision ...................... 571 (194)
Amortization (adjustment) of deferred and
unearned compensation in connection
with non-qualified stock option plan, net ........ 236 163
Gain on sales of marketable securities ............. (34) (1,495)
Foreign currency transactions ...................... -- --
Changes in operating assets and liabilities -
(Increase) decrease in receivables ............... 772 121
(Increase) in prepaid expenses and other
current assets ................................. (216) (149)
Increase (decrease) in accounts payable,
accrued and other liabilities .................. (187) (1,649)
------- -------
Net cash provided by (used in)
operating activities ............................. $ 1,996 $(1,572)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, net .......................... (813) (2,358)
Purchases of marketable securities ................. (436) (35)
Proceeds from sales and redemptions of securities .. 124 4,070
------- -------
Net cash provided by (used in)
investing activities ............................. $(1,125) 1,677
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long term debt ........... -0- 1,105
Principal payment of long term debt ................ (62) 1,698)
Purchase of treasury stock ......................... (1,002) (7)
Exercise of stock options .......................... -- --
Other .............................................. 47 --
------- -------
Net cash provided by (used in)
financing activities ............................. $(1,017) $ (600)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .............. (137) 77
------- -------
Net increase (decrease) in cash and
cash equivalents ................................. (283) (418)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD ................................ 4,444 5,534
------- -------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD ...................................... $ 4,161 $ 5,116
------- -------
SUPPLEMENTAL DISCLOSURES TO THE
STATEMENTS OF CASH FLOWS:
Cash paid during the period for -
Interest ......................................... $ 964 $ 1,013
Income taxes ..................................... $ 60 $ 1,042
</TABLE>
3
<PAGE>
WILSHIRE OIL COMPANY OF TEXAS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 (Unaudited)
1. FINANCIAL STATEMENTS
The 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 generally accepted accounting principles 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 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 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. GAIN ON SALES OF MARKETABLE SECURITIES
The Company realized gains from the sales of marketable securities of
$34,000 for the three months ended March 31, 1999 and $1,495,000 for the
three months ended March 31, 1998.
4. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", which modifies the financial statement presentation of
comprehensive income and its components. Reclassification of financial
statements for earlier periods is required.
4
<PAGE>
Comprehensive income, representing all changes in shareholders' equity
during the period, other than changes resulting from the Company's common
stock, for the three months ended March 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Net income ............................................ $ 53,000 $ 780,000
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustments .............. (137,000) 76,000
Unrealized gain on available-for-sale securities ...... -- 1,421,000
Less: Reclassification adjustment for gains
included in net income, net of income tax
effect of $-0- and $508,000 in
1999 and 1998, respectively ................... -- (987,000)
---------- ----------
Other comprehensive income (loss) ..................... (137,000) 510,000
---------- ----------
Comprehensive income (loss)............................ $ (84,000) $1,290,000
---------- ----------
</TABLE>
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--
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1999 1998
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<S> <C> <C>
Numerator--
Net income .......................................... $ 53,000 $ 780,000
========== ==========
Denominator--
Weighted average common shares
outstanding -- Basic .............................. 8,969,464 9,414,864
Incremental shares from assumed
conversions of stock options ...................... -- 74,745
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Weighted average common shares
outstanding -- Diluted ............................ 8,969,464 9,489,609
========== ==========
Basic earnings per share .............................. 0.01 $0.08
Diluted earnings per share ............................ 0.01 $0.08
</TABLE>
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the quarter ended March 31 was $53,000 in 1999 as compared
to $780,000 in 1998.
Consolidated revenues for the quarter ended March 31 increased from
$4,053,000 in 1998 to $4,263,000 in 1999. Oil and gas revenues decreased by
$117,000 due to declines in the price of crude oil. Real estate revenues
increased from $2,727,000 in 1998 to $3,054,000 in 1999. This increase is due to
higher rents and the operations of the properties acquired in 1998.
Total costs and expenses for the quarter ended March 31 were comparable,
amounting to 3,410,000 in 1999 compared with $3,450,000 in 1998. Oil and gas
production expense decreased by $62,000, real estate operating expenses
increased by $106,000, depreciation, depletion and amortization decreased by
$50,000, and general and administrative expenses decreased by $34,000. The
increase in real estate operating expenses is attributable to the properties
acquired in 1998.
The Company realized approximately 1.5 million less in securities gains in
1999 than in 1998. The Company realized gains on sales of marketable securities
of $34,000 in 1999 as compared with $1,495,000 in 1998.
Interest expense decreased from $1,036,000 in 1998 to $988,000 in 1999.
This decrease is attributable to a lower cost of funds on the Company's
first-mortgage indebtness as a result of the Company's refinancing with Criimi
Mae/Citicorp Real Estate.
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.
6
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998 the Company had approximately $5.2 million in marketable
securities at market value. The current ratio at March 31, 1999 was 1.54 to 1,
which management considers adequate for the Company's current business. The
Company's working capital was approximately $4.7 million at March 31, 1999.
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 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 (used in) operating activities was $1,996,000 in 1999
and ($1,572,000) in 1998. The increase in 1999 was primarily due to changes in
operating assets and liabilities.
Net cash provided by (used in) investing activities was $1,125,000 in 1999
and $1,677,000 in 1998. The variations principally relate to purchases of real
estate properties and transactions in securities. Purchases of real estate
properties amounted to $1,300,000 in 1998. There were no such purchases in 1999.
Proceeds from sales and redemptions of securities amounted to $124,000 in 1999
and $4,070,000 in 1998.
7
<PAGE>
Net cash provided by (used in) financing activities was $1,017,000 in 1999
and ($600,000) in 1998. The variation principally relates to the issuance of
long-term debt in connection with the purchases of real estate properties during
the respective quarters as well as principal payments of long-term debt. In
addition, the Company acquired approximately $1 million of treasury stock in
1999.
The Company believes it has adequate capital resources to fund operations
for the foreseeable future.
YEAR 2000 COMPLIANCE
Many businesses and government organizations use computers and other
electronic equipment that read and process dates. This equipment falls into two
categories-information technology ("IT"), such as ordinary computers and
"non-IT" equipment, such as process controllers and devices with embedded
microprocessors. Some IT and non-IT equipment currently in use cannot accurately
read and process certain dates, including several dates in the year 1999 and/or
all dates in the Year 2000 and afterwards (collectively, "Year 2000 Problem").
The Company has implemented a formal Year 2000 program (the "Year 2000
Program") to address its Year 2000 Problem and to investigate the Year 2000
Problem of third parties significant to the Company's business. The Company's
Year 2000 Program has three general components: (i) addressing Year 2000
Problems in the Company's IT and non-IT equipment; (ii) investigating the Year
2000 Problems of such significant third parties; and (iii) contingency planning.
The Company has evaluated its current systems with respect to oil and gas
operations and management feels that it is Year 2000 compliant. With respect to
real estate, management is in the process of evaluating its systems and also
believes the current systems are Year 2000 compliant. With respect to its non-IT
equipment, the Company and its consultants are presently inventorying,
evaluating, remediating and testing this equipment. The Company expects to
complete its Year 2000 Program for IT and non-IT equipment by mid-1999.
The Company is also requesting information on the Year 2000 Problems of
third parties significant to the Company's business, including banks, major
suppliers and customers. The Company has received and is evaluating the
responses from many of these entities and is in the process of requesting more
information as appropriate. Based on these responses, the Company's obligations
to its customers, and the information gathered from its Year 2000 Program, the
Company is developing contingency plans to minimize the impact of Year 2000
Problems on its business should any such problems occur. The Company expects to
substantially complete its investigation of the Year 2000 Problems of its major
suppliers, third party service providers and customers and form contingency
plans by mid-1999, but also expects that these activities will continue through
1999 as more information becomes available to the Company. The Company has
incurred costs of approximately $27,000 in connection with evaluating Year 2000
compliance of its IT Systems.
8
<PAGE>
The Company does not believe that the costs of its Year 2000 Program will
be material to its financial condition or results of operations. Costs incurred
in connection with evaluating Year 2000 compliance of its non-IT systems have
not been material to date. The Company does not believe that future costs, if
any, of addressing the Year 2000 Problems of its non-IT systems will have a
material effect on its financial condition or results of operations. The Company
also intends to continue to use its personnel in evaluating the Year 2000
Problems of those third parties who the Company believes are significant to the
Company's business, including its suppliers, third party service providers and
customers, and to formulate contingency plans. The Company expects that the
source of any funds that may be necessary to pay the costs of addressing its
Year 2000 Problems will be provided from cash balances or cash generated from
operations. The Company intends to charge such costs against earnings as the
costs are incurred.
Management believes that it has taken reasonable steps to address its Year
2000 Problems and to evaluate the Year 2000 compliance status of key third
parties with whom the Company does business. Notwithstanding these actions,
however, the Company cannot ensure that all of its Year 2000 Problems or those
of its key suppliers, service providers or customers will be resolved or
addressed satisfactorily before the Year 2000 commences. Management believes
that the "most reasonably likely worst case scenario" could involve the failure
of such third parties to address their Year 2000 Problems. If the Company's key
suppliers, service providers, customers and other third parties fail to address
their Year 2000 Problems, and there are no alternates available to the Company,
then the Company's usual channels of supply and distribution would be disrupted,
in which event the Company could experience a material adverse impact on its
business, results of operations or financial condition.
FOWARD-LOOKING STATEMENTS
This Report on Form 10-Q for the quarter ended March 31, 1999 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
<PAGE>
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, 1999.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILSHIRE OIL COMPANY OF TEXAS
-----------------------------
(Registrant)
Date: May 14, 1999 By: /s/ S. WILZIG IZAK
------------ -----------------------------------------------------
S. Wilzig Izak
Chairman of the Board and Chief Executive Officer
(Duly Authorized Officer and Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,161,000
<SECURITIES> 5,246,000
<RECEIVABLES> 2,414,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,396,000
<PP&E> 193,836,000
<DEPRECIATION> 113,449,000
<TOTAL-ASSETS> 93,783,000
<CURRENT-LIABILITIES> 8,672,000
<BONDS> 0
<COMMON> 10,014,000
0
0
<OTHER-SE> 14,752,000
<TOTAL-LIABILITY-AND-EQUITY> 93,783,000
<SALES> 1,209,000
<TOTAL-REVENUES> 4,263,000
<CGS> 531,000
<TOTAL-COSTS> 3,410,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 988,000
<INCOME-PRETAX> 81,000
<INCOME-TAX> 28,000
<INCOME-CONTINUING> 53,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,000
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
