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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES ACT OF 1934
For the transition period from _____________ to ______________
Commission File Number 1-4673
Wilshire Oil Company of Texas
-----------------------------
(exact name of registrant as specified in its charter)
Delaware 84-0513668
------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
921 Bergen Avenue
Jersey City, New Jersey 07306
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 420-2796______
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
(Title of each class) On which registered
- -------------------------- -----------------------
Common Stock, $1 par value American Stock Exchange
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 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the shares of the voting stock held by
non-affiliates of the Registrant was approximately $27,652,349 based upon the
closing sale price of the stock, which was $3.52 on June 30, 2002.
The number of shares of the Registrant's $1 par value common stock outstanding
as of March 14, 2003 was 7,809,834
Documents Incorporated by Reference NONE
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WILSHIRE OIL COMPANY OF TEXAS
FORM 10-K
For The Fiscal Year Ended December 31, 2002
INDEX
Part I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Executive Officers of the Registrant
Part II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
Part III
Item 10. Directors of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Item 14 Controls and Procedures
Part IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Signatures
PART I
Item 1. BUSINESS
BACKGROUND
Wilshire Oil Company of Texas (the "Company", "Registrant" or
"Wilshire") was incorporated under the laws of the State of Delaware on December
7, 1951. The Company's principal executive offices are located at 921 Bergen
Avenue, Jersey City, New Jersey 07306, (201) 420-2796.
The Company is engaged in the ownership and management of real estate
properties in Arizona, Florida, Georgia, New Jersey and Texas and in the
exploration and development of oil and gas, both in its own name in and through
wholly owned subsidiaries in the United States and Canada.
This Report on Form 10-K for the year ended December 31, 2002 contains
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected in such forward-looking statements. Certain factors which could
materially affect such results and the future performance of the Company are
described herein under Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
For financial segment information please see Note 9, "Segment
Information" of the "Notes to Consolidated Financial Statements", presented
elsewhere herein. The Company has no export sales or sales to affiliated
customers.
DESCRIPTION OF BUSINESS
REAL ESTATE OPERATIONS
The Company's real estate operations are conducted, both in its own
name and through several wholly owned subsidiaries, in the states of Arizona,
Texas, Florida, Georgia and New Jersey. They are not seasonal in nature.
The Company's Arizona properties include the following:
378 unit garden apartment complex
340 unit garden apartment complex
70 unit midrise apartment building
53,000 sq. ft. multi-tenant two story office building
65,000 sq. ft. retail/medical use complex
The Texas properties includes a 228 and 180 unit apartment complex in
San Antonio.
The Company's operations in Florida consists of two office buildings
having a combined area of 28,000 square feet and apartment properties having 62
units.
The Georgia property is a 72 unit apartment complex.
The Company's properties in New Jersey consists of apartment properties
having 473 units. In addition, the Company holds various commercial/retail
properties, including a 75,000 sq. ft. office building and other undeveloped
investment properties.
On September 11, 2002, the Company entered into a triple net 25 year
lease with an experienced operator for its 65,000 square foot banquet and
conference center in New Jersey. As an incentive to enter the lease, the Company
granted the operator a $1 million tenant improvement allowance of which $646,000
was funded to the operator through December 31, 2002. All other improvements to
this banquet facility, estimated to be approximately $3 million are to be funded
solely by the tenant.
1
The Company utilizes property management companies to assist in the
management of its properties. Expenses incurred in operating the properties
include, among other things, administrative costs, utilities, repairs and
maintenance and property taxes.
During the twelve months ended December 31, 2002, the Company did not
acquire any properties. However, the Company sold two condominium units and one
undeveloped property in New Jersey for a total profit of $263,000. The mortgages
extinguished with the sales of the properties amounted to $318,000.
The Company explores other real estate acquisitions as they arise.
The timing of any such acquisition depends on, among other things, economic
conditions and the favorable evaluation of specific opportunities presented to
the Company. The Company is currently planning acquisitions of investment
properties in addition to the deposition of certain properties. However, while
the Company anticipates that it will actively explore these and other real
estate acquisition opportunities and the disposition of certain properties, no
assurance can be given that any such acquisition or sale will occur.
The real estate industry is intensely competitive in nature. The
Company competes with many other real estate operators and is not a significant
factor in the markets it operates in.
The Company's real estate operations are subject to existing federal
and state laws regarding environmental quality and pollution control.
Environmental regulations had no materially adverse effect on the Company's real
estate operations during 2002, but no assurance can be given that environmental
regulations will not, in the future, have a materially adverse effect on the
Company's operations.
OIL AND GAS OPERATIONS
For a glossary of oil and gas terms, see "Properties - Oil and Gas
Properties - Glossary."
The Company conducts its oil and gas operations on the North American
continent. Oil and gas operations in the United States are located in Arkansas,
California, Kansas, Nebraska, New Mexico, Ohio, Oklahoma, Pennsylvania, Texas,
Utah, West Virginia and Wyoming. In Canada, the Company conducts oil and gas
operations in the Provinces of Alberta, British Columbia and Saskatchewan.
As of December 31, 2002, eight employees are directly engaged in the
oil and gas operations. In addition, the Company also has four consultants.
Prospects for lease acquisitions are developed by various co-venturers and/or
consultants.
Once a property is acquired, the Company subcontracts for surveying and
drilling operations. Many of the Company's present producing oil and gas
properties are operated by independent contractors or under operating agreements
with other companies pursuant to which the Company pays a proportionate share of
operating expenses based upon its interests. The Company also acts as operator
of various properties, charging joint venture partners for their proportionate
share of expenses.
The Company does not engage in the refining of crude oil or the
distribution of petroleum products. Crude oil and natural gas productions are
sold to oil refineries and natural gas pipeline companies.
The Company participated in the drilling of 218 wells (62.2 net) in
2002 compared to 15 (1.5 net) in 2001. The United States program in 2002
consisted of the drilling of 4 development wells (.3 net) which were all
successful. The Canadian drilling program in 2002 consisted of the drilling of
214 development wells (61.9 net), with 213 of these wells successfully completed
as gas wells. Overall, the Company's drilling program had a success ratio of
99.5%.
The Company's crude oil and condensate production is sold at posted
field prices, primarily to major crude oil and condensate purchasers. For
average posted field prices, for both oil and gas, see "Properties - Oil and Gas
Properties - Production." The Company has no one purchaser that purchased in
excess of 10% of its 2002 consolidated oil and gas revenues.
The loss of any one customer in the domestic hydrocarbon market is not
considered material. The Company is not dependent on any patent, trademark or
license.
2
The Company's oil and gas business is subject to all of the operating
risks normally associated with the exploration for and production of oil and
gas. In accordance with customary industry practices, the Company maintains
insurance coverage limiting financial loss resulting from certain of these
operating hazards.
Competition
The oil and gas industry is intensely competitive and competes with
other industries in supplying the energy and fuel requirements of industrial,
commercial and individual customers.
The principal method of competition in the production of oil and gas is
the successful location and acquisition of properties which produce commercially
profitable quantities of oil and gas.
The Company competes with many other companies in the search for and
acquisition of oil and gas properties and leases for exploration and
development. Many of these companies have substantially greater financial,
technical and other resources than the Company. Competition among petroleum
companies for favorable oil and gas prospects can be expected to continue. The
Company is not a significant factor in the oil and gas industry.
The principal raw materials and resources necessary for the exploration
for, and the acquisition, development, production and sale of, crude oil and
natural gas are leasehold or freehold prospects under which oil and gas reserves
may be discovered, drilling rigs and related equipment to explore for and
develop such reserves, casing and other capital assets required for the
development and production of the reserves and knowledgeable personnel to
conduct all phases of oil and gas operations. The Company must compete for such
raw materials and resources with both major oil companies and independent
operators and also with other industries for certain personnel and materials.
Although the Company believes its current inventories of raw materials and
resources are adequate to preclude any significant disruption of operations in
the immediate future, the continued availability of such materials and resources
to the Company cannot be assured.
Seasonality
The oil business is generally not seasonal in nature. Gas demand and
prices paid for gas have become seasonal, showing a decrease during the summer
and fall.
Environmental Matters
The petroleum industry is subject to numerous federal, state and
provincial environmental statutes, regulations and other pollution controls in
both the United States and Canada. In general, the Company is and will continue
to be subject to present and future environmental statutes and regulations.
The Company's expenses relating to preserving the environment during
2002 were not significant in relation to operating costs and the Company expects
no material changes in 2003. Environmental regulations have had no materially
adverse effect on the Company's petroleum operations to date, but no assurance
can be given that environmental regulations will not, in the future, result in a
curtailment of production or otherwise have materially adverse effects on the
Company's operations or financial condition.
Regulation - United States Operations
The Company's operations are affected from time to time, in varying
degrees, by political developments, laws and regulations. In particular, oil and
gas production operations are affected by changes in taxes and other laws
relating to the petroleum industry and by constantly changing administrative
regulations. The long-term effects of all the federal enactments and programs,
whether beneficial or detrimental to the future operations and income of the
Company, cannot be predicted at this time.
Rates of production of oil and gas have for many years been subject to
conservation laws and regulations. State regulatory agencies set allowable rates
of production and limit the number of days a month a well can produce. The
petroleum industry has also been subject to tax laws dealing specifically with
it, such as the Crude Oil Windfall Profit Tax Act. In addition, oil and gas
operations are subject to extensive regulation or termination by government
authorities on account of ecological and other considerations. All of the
jurisdictions in which the Company operates have statutes and administrative
regulations governing the drilling and production of oil and gas.
3
Regulation - Canadian Operations
The Company's Canadian subsidiary, Wilshire Oil of Canada Co., operates
primarily in the Province of Alberta, with some activity in the Province of
British Columbia and Saskatchewan. The petroleum and natural gas industry
operates under federal and provincial legislation and regulations which govern
land tenure, royalties, production rates, environmental protection, exports and
other matters. Federal legislation monitors the price of oil and gas in export
trade and the quantities of such products exportable from Canada. Provincial
legislation has been enacted for the purpose of regulating operations in the
Provinces.
Oil and Gas Prices
Oil prices actually being paid by purchasers in the United States are
publicly announced throughout the country and vary depending on locality and
qualitative specifications of the crude oil. Gas prices are tied to spot prices,
modified by transportation costs and processing costs which vary form region to
region.
Investment in Marketable Securities
The Company holds investments in certain marketable securities. From
time to time, the Company buys and sells securities in the open market. The
Company over the years has decreased its holdings in marketable securities and
focused its resources in the oil & gas and real estate divisions.
Holdings of marketable securities, at market value, amounted to
$9,860,000 at December 31, 2002 and $10,358,000 at December 31, 2001. In 2002,
the Company realized $711,000 gains on the sale of $2,336,000 marketable
securities. There were no gains from the sale of marketable securities in 2001.
In 2001, the Company recorded a one-time charge through its statement of income
of $1,684,000 to reflect a decline in the market price of a security it owns,
which was determined to be other than temporary.
ITEM 2. PROPERTIES
Offices
The executive and administrative office of the Company consists of
approximately 2,000 square feet, located at 921 Bergen Avenue, Jersey City, New
Jersey. This office is leased at a monthly rental of $2,683.
The Company maintains its principal office for the United States oil
and gas operations in Oklahoma City, Oklahoma, leasing 3,618 square feet, at a
monthly cost of $2,345. The Company is currently under a month to month lease.
The Company also owns a storage yard of approximately five acres, situated near
Will Rogers Airport in Oklahoma City.
The Company's Canadian subsidiary maintains an exploration office in
Calgary, Alberta, Canada. The Company leases 1,583 square feet at a monthly
rental of $3,291 Canadian. This lease expires December 31, 2003.
Oil and Gas Properties
GLOSSARY
The terms defined in this section are used throughout this report.
Bbl. One stock tank barrel, or 42 U.S. gallons liquid volume, usually
used herein in reference to crude oil or other liquid hydrocarbons.
BOE. Equivalent barrels of oil in reference to natural gas. Natural gas
equivalents are determined using the ratio of six Mcf of natural gas to one Bbl
of crude oil, condensate or natural gas liquids.
4
Developed Acreage. The number of acres which are allocated or
assignable to producing wells or wells capable of production.
Development Well. A well drilled as an additional well to the same
reservoir as other producing wells on a lease, or drilled on an offset Lease not
more than one location away from a well producing from the same reservoir.
Exploratory Well. A well drilled in search of a new undiscovered pool
of oil or gas, or to extend the known limits of a field under development.
Gross Acres or Wells. The total acres or wells, as the case may be, in
which an entity has an interest, either directly or through an affiliate.
Lease. Full or partial interests in an oil and gas lease, oil and gas
mineral rights, fee rights or other rights, authorizing the owner thereof to
drill for, reduce to possession and produce oil and gas upon payment of rentals,
bonuses and/or royalties. Oil and gas leases are generally acquired from private
landowners and federal, provincial and state governments.
Mcf. One thousand cubic feet. Expressed, where gas sales contracts are
in effect, in terms of contractual temperature and pressure bases and, where
contracts are nonexistent, at 60 degrees Fahrenheit and 14.65 pounds per square
inch absolute.
MMcf. One million cubic feet. Expressed, where gas sales contracts are
in effect, in terms of contractual temperature and pressure bases and, where
contracts are nonexistent, at 60 degrees Fahrenheit and 14.65 pounds per square
inch absolute.
Net Acres or Wells. A party's interest in acres or a well calculated by
multiplying the number of gross acres or gross wells in which such party has an
interest by the fractional interest of such party in such acres or wells.
Production Costs. The expenses of producing oil or gas from a
formation, consisting of the costs incurred to operate and maintain wells and
related equipment and facilities, including labor costs, repair and maintenance,
supplies, insurance, production, severance and other production excise taxes.
Producing Property. A property (or interest therein) producing oil and
gas in commercial quantities or that is shut-in but capable of producing oil and
gas in commercial quantities, to which Producing Reserves have been assigned by
an independent petroleum engineer. Interests in a property may include working
interests, production payments, royalty interests and other nonworking
interests.
Producing Reserves. Proved Developed reserves expected to be produced
from existing completion intervals open for production in existing wells.
Prospect. An area in which a party owns or intends to acquire one or
more oil and gas interests, which is geographically defined on the basis of
geological data and which is reasonably anticipated to contain at least one
reservoir of oil, gas or other hydrocarbons.
Proved Developed Reserves. Proved Reserves which can be expected to be
recovered through existing wells with existing equipment and operating methods.
Proved Reserves. The estimated quantities of crude oil, natural gas and
other hydrocarbons which, based upon geological and engineering data, are
expected to be produced from known oil and gas reservoirs under existing
economic and operating conditions, and the estimated present value thereof based
upon the prices and costs on the date that the estimate is made and any price
changes provided for by existing conditions.
Proved Undeveloped Reserves. Proved Reserves which can be expected to
be recovered from new wells on undeveloped acreage or from existing wells where
a relatively major expenditure is required for recompletion.
Undeveloped Acres. Oil and gas acreage (including, in applicable
instances, rights in one or more horizons which may be penetrated by existing
well bores, but which have not been tested) to which proved reserves have not
been assigned by independent petroleum engineers.
5
Working Interest. The operating interest under a lease gives the owner
the rights to drill, produce and conduct operating activities on the property
and a share of production, subject to all royalty interests and other burdens
and to all costs of exploration, development and operations and all risks in
connection therewith.
* * *
Following are certain tables and other statistical data concerning the
Company's reserves, production, acreage and other information with regard to the
Company's oil and gas properties and operations.
For information regarding costs incurred in 2002, please refer to the
"Segment Information" in Note 9 of the Notes to Consolidated Financial
Statements, presented elsewhere herein. For information regarding capitalized
costs relating to oil and gas producing activities, please refer to Note 9 of
the Notes to Consolidated Financial Statements, presented elsewhere herein.
Future revenues, net of development and production expenditures (Net
Revenues), from estimated production of proved and proved developed reserves,
based on existing economic conditions for each of the next three succeeding
years, are estimated as follows:
United States Canada
(000's Omitted) (000's Omitted)
--------------- ---------------
Proved Proved Proved Proved
Reserves Developed Reserves Reserves Developed Reserves
-------- ------------------ -------- ------------------
2003 $2,921 $2,921 $3,823 $3,823
2004 $3,702 $2,760 $3,399 $3,399
2005 $2,640 $2,389 $3,202 $3,202
Remainder $22,437 $20,534 $48,966 $48,966
Reserves
The quantities of natural gas and crude oil Proved and Proved Developed
Reserves presented herein include only those amounts which the Company
reasonably expects to recover in the future from known oil and gas reservoirs
under existing economic and operating conditions. Therefore, Proved and Proved
Developed Reserves are limited to those quantities which are recoverable
commercially at current prices and costs, under existing technology.
Accordingly, any changes in the future oil and gas prices, operating and
development costs, regulations, technology and other factors could significantly
increase or decrease estimates of Proved and Proved Developed Reserves.
The Company's net Proved and Proved Developed Reserves of oil and gas
and the present values thereof at December 31, 2000 and 2001 were estimated in
the United States by Ramsey Engineering Inc. and the Company. Reserves for these
same years were estimated in Canada by Citadel Engineering, Ltd. ("Citadel").
As the Company previously announced, during 2002 it retained investment
bankers to help it explore strategic alternatives. The Company's investment
bankers advised Wilshire to retain Ryder Scott Company ("Ryder Scott") to serve
as the Company's independent professional engineering consultant to estimate, as
of December 31, 2002, its reserves in both the United States and Canada. Ryder
Scott's evaluation of the Company's reserves in one field in Canada containing
multiple wells (the "Hilda Field") was substantially lower than the evaluation
that the Company expected to receive. The Company then retained Citadel, which
was familiar with the Hilda Field from work previously performed by it, to
provide its own estimate of the Company's reserves in the Hilda Field. Based on
its analysis of the estimates received from Ryder Scott and Citadel, the Company
believes that it is reasonable to rely on
6
Citadel's estimate - rather than Ryder Scott's estimate - with respect to the
Hilda Field. Thus, the Company's reserves in Canada were estimated by Ryder
Scott with respect to all wells other than the wells in the Hilda Field and were
estimated by Citadel with respect to the wells in the Hilda field. The Company's
reserves in the United States were estimated by Ryder Scott and the Company.
The Company has disclosed for years in SEC filings that the calculation
of Proved Reserves is subjective and may differ from consultant to consultant.
In comparing the Proved Reserves for the past two years, the reader should
understand that the amounts reported were reported by different consultants.
Therefore the differences noted do not only reflect changes in facts from one
year to another but also changes in judgment.
Set forth below are estimates of the Company's Proved and Proved
Developed Reserves and the present value of estimated future net revenues from
such reserves based upon the standardized measure of discounted future net cash
flows relating to proved oil and gas reserves in accordance with the provisions
of Statement of Financial Accounting Standards No. 69, "Disclosures about Oil
and Gas Producing Activities" (SFAS No. 69). The standardized measure of
discounted future net cash flows is determined by using estimated quantities of
Proved Reserves and the periods in which they are expected to be developed and
produced based on period-end economic conditions. The estimated future
production is priced at period-end prices, except where fixed and determinable
price escalations are provided by contract.
The resulting estimated future cash inflows are reduced further by estimated
future costs to develop and produce reserves based on period-end cost levels. No
deduction has been made for depletion, depreciation or income taxes or for
indirect costs, such as general corporate overhead. Present values were computed
by discounting future net revenues by 10 percent per annum.
The following table sets forth-summary information with respect to the
estimates of the Company's Proved and Proved Developed Reserves at December 31
of the years indicated:
United States Canada
------------- ------
Proved Proved
Proved Developed Proved Developed
------ --------- ------ ---------
(000's Omitted) (000's Omitted)
2002 Oil (Bbls) 569 426 127 127
Gas (Mcf) 8,597 8,464 15,281 15,281
Net present value @ 10% $16,866 $15,250 $25,031 $25,031
2001 Oil (Bbls) 1,122 396 786 464
Gas (Mcf) 6,976 6,976 31,832 25,912
Net present value @ 10% $11,724 $6,624 $33,590 $25,493
2000 Oil (Bbls) 1,268 482 870 552
Gas (Mcf) 9,592 9,592 28,900 23,075
Net present value @ 10% $28,582 16,938 $115,744 $91,627
The determination of oil and gas reserves is a complex and interpretive
process, which is subject to continued revisions as additional information
becomes available. Reserve estimates prepared by different engineers from the
same data can vary widely. Therefore, the reserve data presented herein should
not be construed as being exact. Any reserve estimate, especially when based
upon volummetric calculations, depends in part on the quality of available data,
engineering and geologic interpretation and judgment, and thus, represents only
an informed professional judgment. Subsequent reservoir performance may justify
upward or downward revision of the estimate.
7
No Proved or Proved Developed Reserve estimates for oil and gas were
filed with or included in reports to any other federal or foreign governmental
authority or agency since the beginning of fiscal 2002 other than with the
Securities and Exchange Commission.
Production Wells
The following tabulations indicate the number of productive wells
(gross and net) as of December 31, 2002:
Gas Oil Developed Acreage
-------------- ------------- -------------------
Gross Net Gross Net Gross Net
----- --- ----- --- ----- ---
United States 554 73.9 290 59.0 48,027 18,587
Canada 539 134.4 24 3.5 168,540 26,909
Production
The following table shows the Company's net production in barrels
("Bbls") of crude oil and in thousands of cubic feet ("Mcf") of natural gas
(computed after deducting all outstanding interests, including basic royalties
and overriding royalties) for the past three years (note - all $ dollar amounts
presented are in U.S. dollars).
Oil and Condensate (Bbls) Gas (Mcf)
---------------------------- -----------------------------
United States Canada United Sates Canada
------------- ------ ------------ ------
2002 49,000 29,000 1,021,000 584,000
2001 56,000 53,000 1,437,000 750,000
2000 62,000 35,000 957,000 833,000
Average sales price per unit of oil or gas produced:
Oil Gas
-------------------- ----------------------
U.S. Canada U.S. Canada
---- ------ ---- ------
2002 $ 22.80 $ 18.85 $ 2.70 $ 2.32
2001 $ 22.82 $ 19.01 $ 2.26 $ 3.67
2000 $ 25.69 $ 24.66 $ 3.07 $ 3.00
Production as shown in the table, which is net after royalty interests
due others, is determined by multiplying the gross production volume of
properties in which the Company has an interest by the percentage of the
leasehold or other property interest owned by the Company.
The relative energy content of oil and gas (six Mcf of gas equals one
barrel of oil) was used to obtain a conversion factor to convert natural gas
production into equivalent barrels of oils.
There are no agreements with foreign governments.
8
Average Production Cost Per Equivalent Barrel of Oil in the United
States and Canada:
2002 2001 2000
---- ---- ----
United States.................... $7.78 $6.25 $7.75
Canada........................... $4.48 $3.57 $4.09
Unit cost is computed on equivalent barrels of oil equating gas to oil
based on BTU content. This method is appropriate for the Registrant since
several properties produce both oil and gas and production costs are not
segregated.
The components of production costs may vary substantially among wells
depending on the methods of recovery employed and other factors, but generally
include severance taxes, administrative overhead, maintenance and repair, labor
and utilities.
Oil and Gas Leases
The following tabulation indicates the undeveloped acreage leased by
the Registrant as of December 31 of the years indicated:
2002 2001
---- ----
Undeveloped Acres Undeveloped Acres
----------------- -----------------
Gross Net Gross Net
United States 20,072 5,977 18,115 4,913
Canada 21,768 3,784 21,768 3,784
A "gross" acre is an acre in which the Company owns a working
interest. A "net" acre is deemed to exist when the sum of the fractional working
interests owned by the Company in gross acres equals one.
Drilling
The following table sets forth the results of the Registrant's drilling
programs for the years covered:
Exploratory Wells Development
---------------------------------------------- -------------------------------------------
Net Productive Net Dry Net Productive Net Dry
---------------- ------------------- ------------------ ------------------
U.S. Canada U.S. Canada U.S. Canada U.S. Canada
---- ------ ---- ------ ---- ------ ---- ------
2002 - - - .3 .3 61.6 - -
2001 - - .7 - .2 .3 - .3
2000 - - - - 0.5 2.6 - -
1999 - - 1.5 - - 3.9 - -
1998 - - - - 0.6 6.0 1.5 -
A dry hole is an exploratory or development well which is found to be
incapable of producing oil or gas in sufficient quantities to justify
completion. A productive well is an exploratory or development well that is
capable of commercial production. The number of wells drilled refers to the
number of wells completed during the fiscal year, regardless of when drilling
was initiated.
9
Real Estate Properties
The following table sets forth the location and general character of
the principal physical properties owned by the Company as part of its real
estate operations. Most of the properties are subject to mortgages. For further
information with respect to these properties, see "Business - Real Estate
Operations."
Location General Character
- -------- -----------------
Arizona 378 Unit Apartment Complex
Arizona 340 Unit Apartment Complex
Arizona 70 Unit Apartment Building
Arizona 53,000 Sq. ft. Office Building
Arizona 65,000 Sq. ft. Retail/Medical use Complex
Texas 228 Unit Apartment Complex
Texas 180 Unit Apartment Complex
Florida 28,000 Sq. ft. Office Building
Florida Apartment Properties (62 units)
Georgia 72 Unit Apartment Complex
New Jersey Apartment Properties (473 units), including
a 132 unit apartment complex
New Jersey Commercial/Retail Properties, including a
75,000 sq. ft. office building
New Jersey Other undeveloped investment properties
The Company considers all of its properties both owned and leased,
together with the related furniture, fixtures and equipment contained therein,
to be well maintained, in good operating condition, and adequate for its present
and foreseeable future needs.
10
ITEM 3. LEGAL PROCEEDINGS
At December 31, 2002, the Company was not a party to any actions or
proceedings which management believes are reasonably likely to have a material
adverse effect upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 2002
11
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is traded on the American Stock Exchange.
The following table indicates the high and low sales prices of the Company's
common stock for the quarters indicated during the past two years:
(All in ($) Dollars)
Quarter 1 Quarter 2 Quarter 3 Quarter 4
High - Low High - Low High - Low High - Low
------------- ------------ ------------ ------------
2002 3.90 - 3.05 5.09 - 3.00 4.00 - 3.25 3.75 - 2.90
2001 4.00 - 3.00 4.22 - 2.50 4.48 - 3.05 3.60 - 2.91
As of March 14, 2003 there were 7,631 common shareholders of record.
The Company has not paid any dividends to shareholders in the past two
years as it has invested its profits in oil & gas and real estate properties.
The Board of Directors will consider the payment of dividends from time to time
in the future based on the Company's results of operations and capital
requirements.
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth our selected financial data and should be read in
conjunction with our Financial Statements and notes thereto included in Item 8,
"Financial Statements and Supplementary Data" and Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this Form 10-K.
FINANCIAL HIGHLIGHTS
(In thousands of dollars except per share amounts)
For the Year Ended December 31
-----------------------------------------------------------------
STATEMENT OF INCOME 2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Oil/Gas Revenues $ 5,729 $ 8,534 $ 7,875 $ 5,238 $ 4,759
Real Estate Revenues 14,739 14,095 12,832 12,484 11,546
-------- --------- -------- -------- --------
Total Revenues $ 20,468 $ 22,629 $ 20,707 $ 17,722 $ 16,305
-------- --------- -------- -------- --------
Gross Profit (loss) Oil/Gas (a) $ 2,015 $ 3,084 $ 4,513 $ 1,722 $ (927)
-------- --------- -------- -------- --------
Gross Profit Real Estate (b) $ 3,380 $ 3,328 $ 3,049 $ 3,684 $ 2,684
-------- --------- -------- -------- --------
Total Gross Profit $ 5,395 $ 6,412 $ 7,562 $ 5,406 $ 1,757
-------- --------- -------- -------- --------
Net Income $ 1,076 $ 452 $ 1,224 $ 614 $ 1,007
-------- --------- -------- -------- --------
Net income per share of Basic and Dilutive $ 0.14 $ 0.06 $ 0.15 $ 0.07 $ 0.11(c)
-------- --------- -------- -------- --------
Cash dividends per share $ - $ - $ - $ - $ -
-------- --------- -------- -------- --------
BALANCE SHEET
Total assets at year end $107,920 $ 107,903 $ 98,541 $ 90,527 $ 94,601
-------- --------- -------- -------- --------
Long-term obligations $ 58,392 $ 60,661 $ 46,701 $ 46,935 $ 47,764
-------- --------- -------- -------- --------
Stockholders' Equity $ 24,279 $ 26,693 $ 21,428 $ 23,968 $ 25,734
-------- --------- -------- -------- --------
a) Gross profit relating to oil and gas represents oil and gas revenues
less production costs and related depreciation, depletion and
amortization.
b) Gross profit relating to real estate represents total real estate
revenues less real estate operating costs and related depreciation.
c) Restated to give effect to stock dividends.
12
QUARTERLY FINANCIAL DATA
(Unaudited)
(In thousands $ except per share amounts)
2002
----
1st 2nd 3rd 4th Year
------- ------- ------ ------- --------
Oil/Gas Revenues $ 1,248 $ 1,319 $1,599 $ 1,563 $ 5,729
Real Estate Revenues $ 3,769 $ 3,525 $3,695 $ 3,750 $ 14,739
------- ------- ------ ------- --------
Total Revenues $ 5,017 $ 4,844 $5,294 $ 5,313 $ 20,468
------- ------- ------ ------- --------
Gross Profit (loss) Oil/Gas (a) $ 367 $ (51) $ 339 $ 1,360 $ 2,015
Gross Profit Real Estate (b) $ 1,100 $ 963 $ 834 $ 483 $ 3,380
------- ------- ------ ------- --------
Total Gross Profit $ 1,467 $ 912 $1,173 $ 1,843 $ 5,395
------- ------- ------ ------- --------
Net Income $ 450 $ 207 $ 69 $ 350 $ 1,076
------- ------- ------ ------- --------
Net Income Per Share $ 0.06 $ 0.03 $ 0.01 $ 0.04 $ 0.14
------- ------- ------ ------- --------
Cash Dividends Per Share $ .00 $ .00 $ .00 $ .00 $ .00
Net income for the first quarter as previously reported has been
adjusted to record the corrected book loss on the sale of a marketable security.
This correction resulted in an adjustment to net income for the first quarter
from $290,000 as originally reported, to $450,000, as reflected above. Such
change adjusted net income per share from $0.04 to $0.06.
(a) - Gross profit relating to oil and gas represents oil and gas revenues less
production costs and related depreciation, depletion and amortization.
(b) - Gross profit relating to real estate represents total real estate revenues
less real estate operating costs and related depreciation.
QUARTERLY FINANCIAL DATA
(Unaudited)
(In thousands $ except per share amounts)
2001
1st 2nd 3rd 4th Year
------- ------- ------- ------- --------
Oil/Gas Revenues $ 3,418 $ 2,397 $ 1,601 $ 1,118 $ 8,534
Real Estate Revenues $ 3,289 $ 3,539 $ 3,617 $ 3,650 $ 14,095
------- ------- ------- ------- --------
Total Revenues $ 6,707 $ 5,936 $ 5,218 $ 4,768 $ 22,629
------- ------- ------- ------- --------
Gross Profit (loss) Oil/Gas (a) $ 2,354 $ 1,308 $ 77 $ (655) $ 3,084
Gross Profit Real Estate (b) $ 711 $ 846 $ 915 $ 856 $ 3,328
------- ------- ------- ------- --------
Total Gross Profit $ 3,065 $ 2,154 $ 992 $ 201 $ 6,412
------- ------- ------- ------- --------
Net Income (loss) $ 1,037 $ 767 $ 541 $(1,893) $ 452
------- ------- ------- ------- --------
Net Income (loss) Per Share $ 0.13 $ 0.10 $ 0.07 $ (0.24) $ 0.06
------- ------- ------- ------- --------
Cash Dividends Per Share $ .00 $ .00 $ .00 $ .00 $ .00
------- ------- ------- ------- --------
(a) - Gross profit relating to oil and gas represents oil and gas revenues less
production costs and related depreciation, depletion and amortization.
(b) - Gross profit relating to real estate represents total real estate revenues
less real estate operating costs and related depreciation.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company owns and manages residential and commercial real estate in
several states across the United States. The Company is also 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.
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
consist of apartment complexes as well as commercial and retail properties.
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,
Wyoming, Utah, and West Virginia. In Canada, the Company conducts oil and gas
operations in the Provinces of Alberta, British Columbia and Saskatchewan.
Corporate -
The Company holds passive 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 holdings in marketable securities
and focused its resources in its oil & gas and real estate divisions.
General - Oil and Gas
The Company's oil and gas operating performance is influenced by
several factors. The most significant are the prices received for the sale of
oil and gas and the sales volume. For 2002, the average price of oil that the
Company received was $21.35 compared to $20.97 for 2001. The average price of
gas for 2002 was $2.56 compared to $2.89 for 2001.
The following table reflects the average prices received by the Company
for oil and gas, the average production cost per BOE, and the amount of the
Company's oil and gas production for the fiscal years presented:
Fiscal Year Ended December 31
------------------------------------
Crude Oil and Natural Gas Production: 2002 2001 2000
---- ---- ----
Oil (Bbls).......................... 78,000 109,000 97,000
Gas (Mcf)............................ 1,605,000 2,187,000 1,790.000
Average sales prices:
Oil (per Bbl)....................... $21.35 $20.97 $25.32
Gas (per Mfc)........................ $2.56 $2.89 $3.01
Average production costs per BOE: $6.58 $5.24 $6.14
Sales prices received by the Company for oil and gas have fluctuated
significantly from period to period. The fluctuations in oil prices during these
periods primarily reflected market uncertainty regarding the inability of the
Organization of Petroleum Exporting Countries ("OPEC") to control the production
of its member countries, as well as concerns related to global supply and demand
for crude oil. Gas prices received by the Company fluctuate generally with
changes in the spot market price for gas. It is impossible to predict future
price movements with certainty.
14
Critical Accounting Policies
Wilshire's discussion and analysis of its financial condition and
results of operations are based upon Wilshire's consolidated financial
statements which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires Wilshire to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses. Wilshire 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.
Oil and Gas Properties
The Company follows the accounting policy, generally known in the oil
and gas industry as "full cost accounting". Under full cost accounting, the
Company capitalizes all costs, including interest costs, relating to the
exploration for and development of its mineral resources. Under this method, all
costs incurred in the United States and Canada are accumulated in separate cost
centers and are amortized using the gross revenue method based on total future
estimated recoverable oil and gas reserves.
The determination of oil and gas reserves is a complex and interpretive
process, which is subject to continued revisions as additional information
becomes available. Reserve estimates prepared by different engineers from the
same data can vary widely. Therefore, the reserve data presented herein should
not be construed as being exact. Any reserve estimate, especially when based
upon volumemetric calculations, depends in part on the quality of available
data, engineering and geologic interpretation and judgment, and thus, represents
only an informed professional judgment. Subsequent reservoir performance may
justify upward or downward revision of the estimate.
Capitalized costs are subject to a "ceiling" test that limits such
costs to the aggregate of the estimated present value, using a discount rate of
10% of the future net revenues of proved reserves and the lower of cost or fair
value of unproved properties. Management is of the opinion that, based on
reserve reports of petroleum engineers and geologists, the fair value of the
estimated recoverable oil and gas reserves exceeds the unamortized cost of oil
and gas properties at December 31, 2002 and 2001.
Impairment of Property and Equipment
In October 2001, the FASB issued Statement of Financial Accounting Standard No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets", 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. SFAS 144, among other things, will require 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 had no impact on the Company's results of operations or financial
position.
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 December 31, 2002 and 2001 that the value of any
of its rental properties is impaired.
Revenue Recognition
Revenue from oil and gas properties is recognized at the time these
products are delivered to third party purchasers. Revenue from real estate
properties is recognized during the period in which the premises are occupied
and rent is due from 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. An allowance for uncollectible accounts is maintained based on the
Company's estimate of the inability of its joint interest partners in the oil
and gas division and its tenants in the real estate division to make required
payments.
15
Foreign Operations
The assets and liabilities of the Company's Canadian subsidiary have
been translated at year-end exchange rates. The related revenues and expenses
have been translated at average annual exchange rates. The aggregate effect of
translation losses are reflected as a component of accumulated other
comprehensive income (loss) until the sale or liquidation of the underlying
foreign investment.
Unremitted earnings of the Canadian subsidiary are intended to be
permanently invested in Canada and are subject to foreign taxes substantially
equivalent to United States Federal income taxes. The unremitted earnings on
which the Company has not been required to provide Federal income taxes amounted
to approximately $8,187,000 and $9,225,000 at December 31, 2002, and 2001,
respectively.
Accounting for Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123).
Recently Issued Pronouncements
In May 2002, the FASB issued SFAS No. 145, "Reporting Gains and Losses
from Extinguishment of Debt", which rescinded SFAS No. 4, No. 44 and No. 64 and
amended SFAS No. 13. The new standard addresses the income statement
classification of gains or losses from the extinguishments of debt and criteria
for classification as extraordinary items. The adoption of this pronouncement
did not have a material impact on the Company's results of operations or
financial position.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (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. We do not
anticipate that the adoption of this statement will have any impact on our
results of operations or financial position.
In November of 2002, the FASB issued Interpretation No. 45,
"Guarantors' Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." The Interpretation elaborates on
the disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This Interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term of the
related guarantee. The disclosure provisions of this Interpretation are
effective for the Company's December 31, 2002 financial statements. The initial
recognition and initial measurement provisions of this Interpretation are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002. The Company is currently in the process of evaluating the
impact that this Interpretation will have on its financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation Transition and Disclosure," which provides guidance on
how to transition from the intrinsic method of accounting for stock-based
employee compensation under APB No. 25 to SFAS No. 123 for the fair value method
of accounting, if a company so elects. The adoption of this standard is not
expected to have a material impact on the Company's results of operations,
financial position or liquidity.
16
In January of 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities. This Interpretation clarifies the
application of existing accounting pronouncements to certain entities in which
equity investors do not have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties.
The provisions of the Interpretation will be immediately effective for all
variable interests in variable interest entities created after January 31, 2003,
and we will need to apply its provisions to any existing variable interests in
variable interest entities by no later than September 30, 2003. We do not
believe that this Interpretation will have a significant impact on our financial
statements.
Results of Operations
Year ended December 31, 2002 ("2002") Compared with Year Ended December 31, 2001
("2001")
Net income for the year ended December 31 was $1,076,000 in 2002 or
$0.14 per share - basic and dilutive, compared to $452,000 in 2001 or $0.06 per
share - basic and dilutive.
Operating income in 2002 was $3,324,000 compared to $4,722,000 in 2001,
a decrease of $1,398,000. This decrease was due to lower operating income from
oil & gas operations, real estate operations and corporate operation.
Oil and gas revenues decreased from $8,534,000 in 2001 to $5,729,000 in
2002. This decrease was primarily attributable to lower production of oil and
gas in 2002. Oil production decreased form 109,000 BBL in 2001 to 78,000 BBL in
2002. Gas production decreased from 2,187,000 MCF in 2001 to 1,605,000 MCF in
2002.
Real estate revenues increased from $14,095,000 in 2001 to $14,739,000
in 2002. This increase was principally due to additional rental income from the
acquisition of our 180 unit apartment complex in San Antonio in 2001.
Oil and gas production expense was lower in 2002 than 2001. Oil and gas
production expense amounted to $2,298,000 in 2002 and $2,555,000 in 2001. The
decreased 2002 expense was the result of lower production in 2002 offset in part
by an increase in the average production costs per BOE increased from $5.24 in
2001 to $6.58 in 2002.
Depreciation, depletion and amortization of oil and gas assets
amounted to $1,416,000 in 2002 compared to $2,894,000 in 2001. This decrease
resulted from a lower depletion expense due to an increase in value of the
Company's United States reserves as a result of higher oil and gas prices at
December 31, 2002 versus December 31, 2001. In Canada, while the dollar value
of reserves decreased , its effect on depletion was not significant Real estate
depreciation was $2,468,000 in 2002 compared to $2,263,000 in 2001.
General and administrative expense increased form $1,690,000 in 2001
to $2,071,000 in 2002 due to increased legal, salary and insurance expenses.
Gain on sales of real estate assets decreased form $1,559,000 in 2001
to $263,000 in 2002 as a result of less property dispositions in 2002
Interest expense decreased from $4,805,000 in 2001 to $4,518,000 in
2002. This decrease is attributable to a reduction in debt during most of 2002.
In August 2002 the Company entered into a financing arrangement to support an
oil and gas development project in Canada resulting in an overall increase in
debt from 2001 to 2002.
The provision for income taxes includes Federal, State and Canadian
taxes. Differences between the effective tax rate and the statutory income tax
rates are primarily due to foreign resource tax credits in Canada, and the
dividend exclusion in the United States.
17
Year ended December 31, 2001 ("2001") Compared with Year Ended December 31, 2000
("2000")
Net income for the year ended December 31, was $452,000 in 2001or $0.06
per share - basic and dilutive, compared to $1,224,000 in 2000 or $0.15 per
share - basic and dilutive. Net income in 2001 includes a one-time charge of
$1,684,000 ($1,111,000 net of tax impact) for write down of a marketable
security due to a decline in market price below cost levels which was deemed to
be other than temporary. Excluding the impact of the one time charge, net income
for 2001 would have been $1,563,000 or $0.20 per share - basic and dilutive,
compared with net income of $1,224,000 in 2000 or $0.15 per share - basic and
dilutive. The market price of the specific security has risen from $2.10 per
share at December 31, 2001 (the determination date of the writedown) to $2.50
per share as of March 28, 2002.
Operating income in 2001 was $4,722,000 compared to $5,873,000 in 2000,
an decrease of $1,151,000. This decrease was due to an increase in depletion
expense in 2001, as well as increased costs of operating the oil and gas and
real estate operations.
Oil and gas revenues increased from $7,875,000 in 2000 to $8,534,000 in
2001. This increase was attributable to an increase in the production of crude
oil and gas. Average oil prices decreased from $25.32 per BBL in 2000 to $20.97
in 2001. Average gas prices decreased from $3.01 per MCF in 2000 to $2.89 in
2001.
Real estate revenues increased from $12,832,000 in 2000 to $14,095,000
in 2001. This increase was principally due to additional rental income resulting
from the purchase of additional properties in 2001.
Oil and gas production expense was higher in 2001 than 2000. Oil and
gas production expense amounted to $2,555,000 in 2001 and $2,224,000 in 2000.
The increased 2001 expense was primarily a result of cost increases and
engineering operations to increase production.
Depreciation, depletion and amortization of oil and gas assets
amounted to $2,894,000 in 2001 compared to $1,138,000 in 2000. This increase in
depletion, expense resulted from a decrease in value of the Company's reserves
due to lower oil and gas prices at December 31, 2001 versus December 31, 2000.
Real estate depreciation was $2,263,000 in 2001 compared to $2,126,000 in 2000.
General and administrative expense was comparable in 2001 and 2000.
General and administrative expense amounted to $1,690,000 in 2001 compared to
$1,689,000 in 2000.
Interest expense increased from $4,419,000 in 2000 to $4,805,000 in
2001. This increase is attributable to an increase in mortgage debt in 2001.
The provision for income taxes includes Federal, State and Canadian
taxes. Differences between the effective tax rate and the statutory income tax
rates are primarily due to foreign resource tax credits in Canada, and the
dividend exclusion in the United States.
Effects of Inflation
The effects of inflation on the Company's financial condition are not
considered to be material by management.
Liquidity and Capital Resources
At December 31, 2002 the Company had approximately $8.7 million in
marketable securities at cost, with a market value of approximately $9.9
million. The current ratio at December 31, 2002 was 1.5 to 1 on a market basis
and the Company's working capital was $5.9 million at December 31, 2002.
Management considers these amounts adequate for the Company's current business.
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.
18
The Company continues to 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.
During 2002, the Company did not acquire any additional real estate
properties. The Company will continue to 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
acquisitions of investment properties in addition to the desposition of certain
existing properties. However, 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.
As of year ended December 31, 2002, the Company had entered into
arrangements to refinance all of its long-term debt. On March 1, 2003 the
Company finalized these arrangements. The proceeds of these loans were used to
pay off existing debt. See Notes to Consolidated Financial Statements -
Long-term Debt (Note 3) for information regarding the refinancing.
Net cash provided by operating activities was $4,933,000, $7,016,000
and $3,620,000 in 2002, 2001 and 2000, respectively. The variations in the three
years principally relate to changes in depletion in oil and gas reserves as well
as changes in accounts receivable, accounts payable and accrued liabilities.
Net cash used in investing activities was $3,223,000, $11,200,000, and
$10,767,000 in 2002, 2001 and 2000, respectively. The variations principally
relate to purchases of real estate properties and transactions in securities.
Purchases of real estate properties amounted to $10,140,000 in 2001. Purchases
of marketable securities amounted to $1,930,000 in 2002, $5,000 in 2001 and
$4,355,000 in 2000. Proceeds from sales of real estate properties amounted to
$737,000 in 2002, $3,774,000 in 2001 and $691,000 in 2000. The Company purchased
$3,500,000 in mortgages notes in 2000. These mortgage notes were redeemed in
2001 and replaced by a new mortgage note in the amount of $6,790,000 secured by
196 units in two contiguous apartment complexes in Jersey City, New Jersey. At
year end 2002, this note was reduced to $3,035,000.
Net cash provided by (used in) financing activities was ($2,618,000),
$6,376,000 and $8,224,000 in 2002, 2001 and 2000, respectively. The variations
principally relate to the issuance, refinance, and repayments of long-term debt.
The Company has mortgage notes payable, notes payable and revolving lines of
credit with maturity dates ranging from 2002 to 2010. See Notes to Consolidated
Financial Statements - Long-term Debt (Note 3) for a schedule of long-term debt.
The Company believes it has adequate capital resources to fund
operations for the foreseeable future.
Forward-Looking Statements
This Report on Form 10-K for 2002 contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements included herein other than statements of historical fact are
forward-looking statements. Although the Company believes that the underlying
assumptions and expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to be
correct. The Company's business and prospects are subject to a number of risks
which could cause actual results to differ materially from those reflected in
such forward-looking statements, including the potential sale of its oil & gas
operations, 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.
19
ITEM 7a. 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 loss. See Notes to the Consolidated
Financial Statements. - Summary of Significant Accounting Policies - Marketable
Securities, Available-for-Sale (Note 2)
The Company is exposed to changes in interest rates from its floating
rate debt arrangements. At December 31, 2002, the Company had $65,700,000 of
debt outstanding of which $58,700,000 bears interest at fixed rates. The
interest rate on the Company's revolving credit lines, under which $7,000,000
was outstanding at December 31, 2002, is variable at a rate of prime for US
borrowings and prime plus .25% for its Canadian revolving demand loan. A
hypothetical 100 basis point adverse move (increase) on short-term interest
rates on the floating rate debt outstanding at December 31, 2002 would adversely
affect the Company's annual interest cost by approximately $70,000 assuming
borrowed amounts under the revolving credit lines remained at $7,000,000.
SUMMARY OF INDEBTEDNESS
Long-term debt as of December 31 consists of the following --
2002 2001
----------- -----------
Mortgage notes payable $24,800,000 $26,464,000
Mortgage notes payable 16,670,000 16,868,000
Mortgage notes payable 5,476,000 5,552,000
Mortgage notes payable 4,025,000 4,244,000
Mortgage note payable 4,085,000 4,145,000
Note payable 5,475,000 4,575,000
Revolving line of credit 2,000,000 3,500,000
Revolving line of credit 2,100,000 2,600,000
Revolving demand loan 895,000 --
----------- -----------
Total 65,706,000 67,948,000
Less--Current portion 7,314,000 7,287,000
----------- -----------
Long term portion $58,392,000 $60,661,000
=========== ===========
As of March 1, 2003, the Company consummated the refinancing of most of
its long-term debt at reduced interest rates. The following five year projection
reflects the payout of the outstanding debt which increased from the total noted
above of $65,706,000 as of December 31, 2002 to $67,433,000 as of March 1,
2003. The aggregate maturities of the long-term debt in each of the five years
subsequent to 2002 and thereafter are --
2003 $ 7,314,000
2004 5,841,000
2005 849,000
2006 903,000
2007 961,000
Thereafter 51,565,000
-----------
$67,433,000
===========
See Note 3 to the consolidated financial statements for a discussion of
interest rates.
20
Financial Accounting Standards Board Statement No. 69 Disclosures
The following disclosures are those required to be made by publicly
traded enterprises under Financial Accounting Standards Board Statement No. 69,
Disclosures About Oil and Gas Producing Activities.
The SEC defines proved oil and gas reserves as those estimated
quantities of crude oil, natural gas and natural gas liquids which geological
and engineering data demonstrate with reasonable certainty to be recoverable in
future years from known reservoirs under existing economic and operating
conditions. Proved developed oil and gas reserves are those that can be
recovered through existing wells with existing equipment and operating methods.
Estimated quantities of proved oil and gas reserves are as follows:
Disclosures of Oil and Gas Producing Activities as
Required by Financial Accounting Standards
Board Statement No. 69
(000's Omitted)
Crude Oil, Condensate and Natural Gas Liquids
(Barrels)
United States Canada
- -----------------------------------------------------------------------------------------------------------------------
2002 2001 2000 2002 2001 2000
---- ---- ---- ---- ---- ----
Proved Reserves-Beginning of Year 1,122 1,268 1,428 786 870 939
Revisions of previous estimates (505) (90) (98) (630) (32) (34)
Sales of minerals in place - -
- -
Extensions and discoveries 1 - - -
- 1
Production (49) (56) (62) (29) (53) (35)
------ ------ ----- ------- ------ ------
Proved Reserves-End of Year 569 1,122 1,268 127 786 870
------ ------ ----- ------- ------ ------
Proved Developed Reserves-
Beginning of Year 396 482 447 464 552 615
------ ------ ----- ------- ------ ------
End of Year 426 396 482 127 464 552
====== ====== ===== ======= ====== ======
Natural Gas
(MFC)
United States Canada
------------- ------
2002 2001 2000 2002 2001 2000
---- ---- ---- ---- ---- ----
Proved Reserves-Beginning of Year 6,976 9,592 8,791 31,832 28,900 36,578
Revisions of previous estimates 2,516 (1,325) 1,728 (18,633) 3,437 (6,948)
Sales of minerals in place - - - -
-
Extensions and discoveries 126 146 30 2,666 245 103
Production (1,021) (1,437) (957) (584) (750) (833)
------ ------ ----- ------- ------ ------
Proved Reserves-End of Year 8,597 6,976 9,592 15,281 31,832 28,900
------ ------ ----- ------- ------ ------
Proved Developed Reserves-
Beginning of Year 6,976 9,592 8,791 25,912 23,075 30,419
------ ------ ----- ------- ------ ------
End of Year 8,464 6,976 9,592 15,281 25,912 23,075
====== ====== ===== ======= ====== ======
21
Standardized Measure of Discounted Future Net Cash Flows
Related to Proved Oil and Gas Reserves
For The Years Ended December 31
(000's Omitted)
United States Canada
----------------------- ---------------------
2002 2001 2002 2001
---- ---- ---- ----
Future cash flows $52,088 $35,631 67,278 $102,926
------- ------- ------ --------
Future costs:
Production 19,478 14,710 7,825 14,675
Development, dismantlement & abandonment 910 1,972 63 1,696
------- ------- ------ --------
Total Future Costs 20,388 16,682 7,888 16,371
------- ------- ------ --------
Future net inflows- Before income tax 31,700 18,949 59,390 86,555
Future income taxes 7,849 4,625 19,243 29,309
------- ------- ------ --------
Future net cash flows 23,851 14,324 40,147 57,246
10% Discount factor 11,162 6,166 23,229 35,030
------- ------- ------ --------
Standardized measure of discounted future net cash flows 12,689 $8,158 16,918 $22,216
======= ====== ====== ========
Estimated future cash inflows are computed by applying year-end prices
of oil and gas to year-end quantities of proved reserves. Future price changes
are considered only to the extent provided by contractual arrangements.
Estimated future development and production costs are determined by estimating
the expenditures to be incurred in developing and producing the proved oil and
gas reserves at the end of the year, based on year-end costs and assuming
continuation of existing economic conditions. Estimated future income tax
expenses are calculated by applying year-end statutory tax rates (adjusted for
permanent differences and tax credits) to estimated future pretax net cash flows
related to proved oil and gas reserves, less the tax basis of the properties
involved.
These estimates are furnished and calculated in accordance with
requirements of the Financial Accounting Standards Board and the SEC. Due to
unpredictable variances in expenses and capital forecasts, crude oil and natural
gas price changes and the fact that the basis for such estimates vary
significantly, management believes the usefulness of these projections is
limited. Estimates of future net cash flows do not represent management's
assessment of future profitability or future cash flow to the Company.
Management's investment and operating decisions are based upon reserve estimates
that include proved reserves prescribed by the SEC as well as probable reserves,
and upon different price and cost assumptions from those used here. It should be
recognized that applying current costs and prices at a 10 percent standard
discount rate allows for comparability but does not convey absolute value. The
discounted amounts arrived at are only one measure of financial quantification
of proved reserves.
There were no oil and gas estimates filed with or included in reports
to any other federal or foreign governmental authority or agency within the last
twelve months.
Reserves in the United States were estimated by Ryder Scott Company and
the Company. Reserves in Canada represent combined estimates performed by both
Ryder Scott Company and Citadel Engineering, Ltd.
"Total Costs Both Capitalized and Expensed, Incurred in Oil and Gas
Producing Activities" (including capitalized interest), "Cost Incurred in
Property Acquisition, Exploration and Development Activities" and "Results of
Operations from Oil and Gas Producing Activities" during the three years ended
December 31, 2002, 2001 and 2000 are included in the Notes to Consolidated
Financial Statements Segment information ( Note 9), presented elsewhere herein.
22
The standardized measure of discounted estimated future net cash flows
and changes therein related to proved oil and gas reserves is as follows:
Changes in Standardized Measure of
Discounted Future Net Cash Flow from Proved Reserve Quantities
(000's Omitted)
2002 2001 2000
---- ---- ----
Standardized Measure - Beginning of Year $30,374 $95,255 $33,509
Sales and transfers - Net of Production Costs (3,431) (6,055) (7,848)
Extensions and discoveries 10,781 700 512
Net change in sales price 39,074 (26,255) 118,760
Revision of quantity estimates (66,302) 1,510 (23,308)
Proceeds from sales of Minerals in Place -0- -0- -0-
Accretion of discount 3,610 11,716 5,516
Net change in income taxes (2,527) 31,894 (26,929)
Change in production rates- Other 18,028 (78,391) (4,957)
------- ------- -------
Standardized measure - End of year $29,607 $30,374 $95,255
------- ------- -------
23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMTAL DATA
Report of Independent Auditors
The Board of Directors and Shareholders of Wilshire Oil Company of Texas
We have audited the accompanying consolidated balance sheet of Wilshire
Oil Company of Texas and subsidiaries as of December 31, 2002, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. Our audit also included the financial statement schedule listed
in the Index at Item 15. These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audit. The
financial statements of Wilshire Oil Company of Texas as of December 31, 2001,
and for each of two years in the period then ended were audited by other
auditors who have ceased operations. Those auditors expressed an unqualified
opinion on those financial statements in their report dated March 22, 2002.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 2002 financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Wilshire Oil Company of Texas and subsidiaries at December 31, 2002, and the
consolidated results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
New York, New York
March 25, 2003
/s/ Ernst & Young LLP
24
THIS REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP. THE
REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP NOR HAS ARTHUR ANDERSEN LLP
PROVIDED A CONSENT TO THE INCLUSION OF ITS REPORT IN THIS FORM 10-K.
Report of Independent Public Accountants
To the Shareholders and Board of
Directors of Wilshire Oil Company of Texas:
We have audited the accompanying consolidated balance sheets of Wilshire Oil
Company of Texas (a Delaware corporation) and subsidiaries as of December 31,
2001 and 2000, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wilshire Oil Company of Texas
and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 22, 2002
25
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATE BALANCE SHEETS
As of December 31, 2002 and 2001
ASSETS 2002 2001
---------------- ------------------
CURRENT ASSETS:
Cash and cash equivalents (Note 3) $ 4,164,000 $ 4,984,000
Marketable securities, available-for-sale, at fair value (Notes 2 and 3) 9,860,000 10,358,000
Accounts receivable net of allowance of $77,000 and $112,000 in 2002
and 2001, respectively 1,094,000 832,000
Income taxes receivable (Note 7) 626,000 -
Prepaid expenses and other current assets 1,677,000 1,215,000
------------ ------------
Total current assets 17,421,000 17,389,000
------------ ------------
NONCURRENT ASSETS
Mortgage notes receivable (Note 4) 3,035,000 6,072,000
Other noncurrent 375,000 500,000
PROPERTY AND EQUIPMENT (Notes 3, 9 and 10):
Oil and gas properties, using the full cost method of accounting 141,243,000 136,355,000
Real estate properties 71,355,000 69,161,000
Other property and equipment 366,000 394,000
---------------- ------------------
212,964,000 205,910,000
Less-Accumulated depreciation, depletion and amortization 125,875,000 121,968,000
------------ ------------
87,089,000 83,942,000
------------ ------------
TOTAL ASSETS $107,920,000 $107,903,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 3) $7,314,000 $ 7,287,000
Loan payable to shareholder (Note 5) 500,000 700,000
Accounts payable 3,033,000 2,301,000
Income taxes payable 35,000 50,000
Deferred income taxes (Note 7) 535,000 896,000
Accrued liabilities (Note 8) 119,000 1,028,000
------------ ------------
Total current liabilities 11,536,000 12,262,000
NONCURRENT LIABILITIES
Long-term debt, less current portion (Note 3) 58,392,000 60,661,000
Deferred income taxes (Note 7) 12,051,000 11,256,000
Deferred income 1,627,000 -
Other Long-term liabilities 75,000 31,000
------------ ------------
Total liabilities 83,681,000 84,210,000
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY (Note 8)
Preferred stock, $1 par value, 1,000,000 shares authorized; none issued and
outstanding in 2002 and 2001 - -
Common stock, $1 par value, 15,000,000 shares authorized; issued
10,013,544 shares in 2002 and 2001 10,014,000 10,014,000
Capital in excess of par value 9,029,000 9,029,000
Treasury stock, 2,203,710 and 2,132,656 shares in 2002 and 2001,
respectively, at cost (10,355,000) (10,179,000)
Retained earnings 18,640,000 17,564,000
Accumulated other comprehensive loss (3,089,000) (2,735,000)
------------ ------------
Total shareholders' equity 24,239,000 23,693,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $107,920,000 $107,903,000
============ ============
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
26
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31, 2002, 2001 and 2000
2002 2001 2000
---------- ---------- ----------
REVENUES (Notes 9 and 10):
Oil and gas $5,729,000 $8,534,000 $7,875,000
Real estate 14,739,000 14,095,000 12,832,000
---------- ---------- ----------
Total revenues 20,468,000 22,629,000 20,707,000
---------- ---------- ----------
COST AND EXPENSES (Notes 9 and 10):
Oil and gas production expenses 2,298,000 2,555,000 2,224,000
Real estate operating expenses 8,891,000 8,505,000 7,657,000
Depreciation and amortization 2,468,000 2,263,000 2,126,000
Depreciation, depletion and amortization of oil and gas properties 1,416,000 2,894,000 1,138,000
General and administrative 2,071,000 1,690,000 1,689,000
---------- ---------- ----------
Total costs and expenses 17,144,000 17,907,000 14,834,000
---------- ---------- ----------
INCOME FROM OPERATIONS 3,324,000 4,722,000 5,873,000
OTHER INCOME (loss)
Dividend and interest income 1,127,000 861,000 118,000
Gain on sale of real estate assets 263,000 1,559,000 305,000
Write down of marketable securities (Note 2) - (1,684,000) -
Gain on sale of securities 711,000 - -
Other Income 499,000 6,000 -
INTEREST EXPENSE (Note 3) (4,518,000) (4,805,000) (4,419,000)
---------- ---------- ----------
Income before provision for income taxes 1,406,000 659,000 1,877,000
PROVISION FOR INCOME TAXES (Note 7) 330,000 207,000 653,000
---------- ---------- ----------
NET INCOME $1,076,000 $ 452,000 $1,224,000
========== ========== ==========
Basic earnings per share $ 0.14 $ 0.06 $ 0.15
========== ========== ==========
Diluted earnings per share $ 0.14 $ 0.06 $ 0.15
========== ========== ==========
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
27
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
December 31, 2002, 2001 and 2000
Preferred Stock Common Stock
--------------- ------------
Accumulated
Other Other
Shares Shares Excess of Treasury Comprehensive Retained Comprehensive
Issued Amount Issued Amount Par Value Stock Income (Loss) Earning Income(Loss)
------ ----- ---------- ----------- ---------- ----------- ----------- ----------- ----------
BALANCE, December 31, 1999 - $ - 10,013,544 $10,014,000 $9,029,000 $(7,748,000) $(3,215,000) $15,888,000
Comprehensive income,
year ended
December 31, 2000 -
Net income - - - - - - - 1,224,000 $1,224,000
Other comprehensive income -
Net translation adjustment - - - - - - (351,000) - (351,000)
Change in unrealized loss
on marketable securities,
net of income tax benefit
of $1,295,000 - (1,311,000) - (1,311,000)
----------
Comprehensive loss - - - - - - $(438,000)
Purchase of treasury stock - - - - - (2,102,000) - -
---- ----- ---------- ----------- ---------- ----------- ----------- ----------- ----------
BALANCE, December 31, 2000 - - 10,013,544 10,014,000 9,029,000 (9,850,000) (4,877,000) 17,112,000
Comprehensive income, year
ended December 31, 2001 -
Net income - - - - - - - 452,000 $452,000
Other comprehensive income -
Net translation adjustment - - - - - - (538,000) - (538,000)
Change in unrealized gain
on marketable securities,
net of income tax expense
of $896,000 - 2,680,000 - 2,680,000
Comprehensive income - - - - - - - $2,594,000
Purchase of treasury stock - - - - - (329,000) - - -
---- ----- ---------- ----------- ---------- ----------- ----------- ----------- ----------
BALANCE, December 31, 2001 - - 10,013,544 10,014,000 9,029,000 (10,179,000) (2,735,000) 17,564,000
Comprehensive income, year
ended December 31, 2002 -
Net income - - - - - - - 1,076,000 $1,076,000
Other comprehensive income -
Net translation adjustment - - - - - - 88,000 88,000
Change in unrealized loss
on marketable securities,
net of income tax benefit
of $361,000 - (442,000) (442,000)
----------
Comprehensive income - - - - - - $722,000
Purchase of treasury stock - - - - - (176,000)
---- ----- ---------- ----------- ---------- ----------- ----------- ----------- ==========
BALANCE, December 31, 2002 - $ - 10,013,544 $10,014,000 $9,029,000 $(10,355,000) $(3,089,000) $18,640,000
==== ===== ========== =========== ========== ============ =========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
28
WILSHIRE OIL COMPANY OF TEXAS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 2002, 2001 and 2000
2002 2001 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,076,000 $ 452,000 $ 1,224,000
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation, depletion and amortization 3,884,000 5,157,000 3,264,000
Write down of marketable securities - 1,684,000 -
Deferred income tax (benefits) provision 762,000 (738,000) 60,000
Deferred income 1,627,000 - -
Gain on sales of marketable securities (711,000) - -
Gain on sales of real estate assets (263,000) (1,559,000) (305,000)
Changes in operating assets and liabilities -
Decrease (increase) in accounts receivable (262,000) 1,411,000 (1,055,000)
Decrease (increase) in income taxes receivable (626,000) - 178,000
Decrease (increase) in prepaid expenses and other
current assets (462,000) 382,000 86,000
Increase in other liabilities 100,000 43,000 31,000
Increase (decrease) in accounts payable, accrued
liabilities and taxes payable (192,000) 184,000 137,000
----------- ----------- -----------
Net cash provided by operating activities 4,933,000 7,016,000 3,620,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (7,528,000) (11,897,000) (3,622,000)
Purchases of marketable securities (1,930,000) (5,000) (4,355,000)
Proceeds from sales and redemptions of marketable securities 2,336,000 - 19,000
Purchase of mortgage notes receivable - (3,290,000) (3,500,000)
Proceeds on mortgage notes receivable 3,162,000 218,000 -
Proceeds from sales of real estate properties 737,000 3,774,000 691,000
----------- ----------- -----------
Net cash used in investing activities