-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UKDBc24t/1NbYVg/c7p3asRABAkrK+GV0mgiXKaTUavwL7/NMpz7mj9oezYHLsZB evpDbD2XgO1tcEqQDqXDhw== 0001125282-05-002549.txt : 20050513 0001125282-05-002549.hdr.sgml : 20050513 20050513162247 ACCESSION NUMBER: 0001125282-05-002549 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050513 DATE AS OF CHANGE: 20050513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WILSHIRE OIL CO OF TEXAS CENTRAL INDEX KEY: 0000107454 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 840513668 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04673 FILM NUMBER: 05829639 BUSINESS ADDRESS: STREET 1: 921 BERGEN AVE CITY: JERSEY CITY STATE: NJ ZIP: 07306-4204 BUSINESS PHONE: 2014202796 MAIL ADDRESS: STREET 1: 921 BERGEN AVENUE CITY: JERSEY CITY STATE: NJ ZIP: 07306 10-Q 1 b406716-10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter period ended March 31, 2005 Commission file number 1-4673 WILSHIRE ENTERPRISES, INC. -------------------------- (Exact name of registrant as specified in its charter) Delaware 84-0513668 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 921 Bergen Avenue, Jersey City, New Jersey 07306-4204 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (201) 420-2796 -------------- (Registrant's telephone number, including area code) ---------------------------------------------------- - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |x| No |_| Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes |_| No |x| Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 6, 2005. Common Stock $1 Par Value ----- 7,875,006 WILSHIRE ENTERPRISES, INC. INDEX
Page No. -------- Part I -- Financial Information - ------------------------------- Item 1. Financial Statements Condensed Consolidated Balance Sheets-- March 31, 2005 (Unaudited) and December 31, 2004 3 Unaudited Condensed Consolidated Statements of Income -- Three months ended March 31, 2005 and 2004 4 Unaudited Condensed Consolidated Statements of Cash Flows -- Three months ended March 31, 2005 and 2004 5 Notes to Unaudited Condensed Consolidated Financial Statements 6 2. Management's Discussion and Analysis of Financial Condition and 11 Results of Operations 3. Quantitative and Qualitative Disclosure About Market Risk 18 4. Controls and Procedures 19 Part II -- Other Information - ---------------------------- 2. Unregistered Sales of Equity Securities and Use of Proceeds 20 6. Exhibits 20
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WILSHIRE ENTERPRISES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 2005 2004 ASSETS (UNAUDITED) (NOTE 1) ----------- ------------ CURRENT ASSETS Cash and cash equivalents $28,736,000 $ 31,110,000 Restricted cash 4,047,000 4,082,000 Marketable securities, available for sale, at fair value 2,173,000 2,754,000 Accounts receivable, net 180,000 189,000 Income taxes receivable 4,289,000 4,389,000 Prepaid expenses and other current assets 1,901,000 1,827,000 ----------- ------------ Total current assets 41,326,000 44,351,000 ----------- ------------ NONCURRENT ASSETS Mortgage notes receivable --- 957,000 ----------- ------------ Other noncurrent assets --- 208,000 ----------- ------------ PROPERTY AND EQUIPMENT Real estate properties 46,975,000 46,769,000 Real estate properties - Held for sale 12,271,000 12,168,000 ----------- ------------ 59,246,000 58,937,000 Less: Accumulated depreciation and amortization 13,744,000 13,292,000 Accumulated depreciation, depletion and amortization - Property held for sale 3,608,000 3,608,000 ----------- ------------ 41,894,000 42,037,000 ----------- ------------ TOTAL ASSETS $83,220,000 $ 87,553,000 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 580,000 $ 573,000 Accounts payable 1,278,000 1,624,000 Income taxes payable 776,000 3,623,000 Deferred income taxes 2,326,000 2,465,000 Accrued liabilities 258,000 606,000 Deferred income 38,000 373,000 Current liabilities associated with discontinued operations 555,000 521,000 ----------- ------------ Total current liabilities 5,811,000 9,785,000 NONCURRENT LIABILITIES Long-term debt, less current portion 35,175,000 35,579,000 Deferred income taxes 1,850,000 1,855,000 Deferred income 195,000 621,000 Noncurrent liabilities associated with discontinued operations 10,531,000 10.602,000 ----------- ------------ Total liabilities 53,562,000 58,442,000 ----------- ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, $1 par value, 1,000,000 shares authorized; none issued and outstanding in 2005 and 2004 --- --- Common stock, $1 par value, 15,000,000 shares authorized; issued 10,013,544 shares in 2005 and 2004 10,014,000 10,014,000 Capital in excess of par value 9,524,000 9,524,000 Retained earnings 20,223,000 19,905,000 Unearned compensation (646,000) (431,000) Treasury stock, 2,122,914 and 2,234,732 shares at March 31, 2005 and December 31, 2004, respectively, at cost (9,783,000) (10,491,000) Accumulated other comprehensive income 326,000 590,000 ----------- ------------ Total stockholders' equity 29,658,000 29,111,000 ----------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $83,220,000 $ 87,553,000 =========== =============
The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements. 3 WILSHIRE ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
MARCH 31, 2005 MARCH 31, 2004 -------------- -------------- REVENUES $ 2,254,000 $2,429,000 -------------- -------------- COSTS AND EXPENSES Operating expenses 1,339,000 1,322,000 Depreciation expense 454,000 427,000 General and administrative 563,000 329,000 -------------- -------------- Total costs and expenses 2,356,000 2,078,000 -------------- -------------- INCOME (LOSS) FROM OPERATIONS (102,000) 351,000 OTHER INCOME Dividend and interest income 102,000 194,000 Gain on sale of marketable securities 134,000 --- Gain on sale of real estate and real estate related assets 887,000 --- Other income 7,000 53,000 INTEREST EXPENSE (564,000) (616,000) -------------- -------------- INCOME (LOSS) BEFORE INCOME TAXES 464,000 (18,000) INCOME TAX EXPENSE (BENEFIT) 170,000 (27,000) -------------- -------------- INCOME FROM CONTINUING OPERATIONS 294,000 9,000 DISCONTINUED OPERATIONS - REAL ESTATE, NET OF TAXES INCOME (LOSS) FROM OPERATIONS 46,000 (55,000) GAIN FROM SALES --- 2,902,000 DISCONTINUED OPERATIONS - OIL & GAS, NET OF TAXES LOSS FROM OPERATIONS (22,000) (257,000) -------------- -------------- NET INCOME $ 318,000 $ 2,599,000 ============== ============== BASIC EARNINGS (LOSS) PER SHARE: Income from continuing operations $ 0.04 $ --- Income (loss) from discontinued operations Real estate - income from operations --- --- Real estate - gain on sales --- 0.36 Oil and gas - income (loss) from operations --- (0.03) -------------- -------------- Net income applicable to common stockholders $ 0.04 $ 0.33 ============== ============== DILUTED EARNINGS (LOSS) PER SHARE: Income from continuing operations $ 0.04 $ --- Income (loss) from discontinued operations Real estate - income from operations --- --- Real estate - gain on sales --- 0.36 Oil and gas - income (loss) from operations --- (0.03) -------------- -------------- Net income applicable to common stockholders $ 0.04 $ 0.33 ============== ==============
The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements. 4 WILSHIRE ENTERPRISES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
MARCH 31, 2005 MARCH 31, 2004 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 318,000 $ 2,599,000 Adjustments to reconcile net income to net cash provided by (used in) operating activities - Depreciation, depletion and amortization 454,000 1,342,000 Amortization of compensation expense 316,000 --- Deferred income tax (benefit) provision (5,000) 344,000 Increase (decrease) in deferred income (761,000) 43,000 Gain on sales of real estate assets (212,000) (4,897,000) Gain on sale of marketable securities (133,000) --- Changes in operating assets and liabilities: Decrease in accounts receivable 9,000 445,000 Decrease (increase) in income taxes receivable 100,000 (312,000) Decrease in prepaid expenses and other current assets 134,000 125,000 Increase (decrease) in accounts payable, accrued liabilities and other liabilities (694,000) 796,000 Increase (decrease) in taxes payable (2,847,000) 980,000 -------------- -------------- Net cash provided by (used in) operating activities (3,321,000) 1,465,000 -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures - real estate (357,000) (340,000) Deposits on sale of oil & gas --- 146,000 Proceeds from sale of real estate properties 258,000 10,909,000 Proceeds on mortgage notes receivable 957,000 654,000 Proceeds from sales of marketable securities 374,000 --- Decrease in restricted cash 35,000 143,000 -------------- -------------- Net cash provided by investing activities 1,267,000 11,512,000 -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (434,000) (8,767,000) Purchase of treasury stock (20,000) --- Proceeds from exercise of stock options 3,000 --- -------------- -------------- Net cash used in financing activities (451,000) (8,767,000) -------------- -------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH 131,000 (484,000) -------------- -------------- Net increase (decrease) in cash and cash equivalents (2,374,000) 3,726,000 CASH AND CASH EQUIVALENTS, beginning of period 31,110,000 7,763,000 -------------- -------------- CASH AND CASH EQUIVALENTS, end of period $ 28,736,000 $11,489,000 ============== ============== SUPPLEMENTAL DISCLOSURES TO THE STATEMENTS OF CASH FLOWS: Cash paid during the period for - Interest $ 713,000 $ 756,000 ============== ============== Income taxes, net $ 2,825,000 $ 76,000 ============== ==============
The accompanying notes to condensed consolidated financial statements are an integral part of these financial statements. 5 WILSHIRE ENTERPRISES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2005 1. FINANCIAL STATEMENTS -------------------- The unaudited condensed consolidated financial statements included herein have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Registrant believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of management, this condensed financial information reflects all adjustments necessary to present fairly the results for the interim periods. The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results to be expected for the year ending December 31, 2005 or any other subsequent period. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. In July 2003, the Company committed to the sale of its oil and gas operations. The financial statements have been adjusted to reflect the oil and gas operations as "Discontinued Operations" in 2004 and 2005. In April 2004, the Company sold its oil and gas operations and received net proceeds of $28,131,000. An escrow holdback of $600,000 was established to allow for any potential post closing adjustments relating to its United States operations. This escrow was paid in full to the Company on June 22, 2004 and the condensed consolidated statements of income for the three months ended June 30, 2004 include a gain of $567,000 (after taxes) on the transaction. Since the sale was effective as of March 1, 2004, the financial statements as presented reflect in discontinued operations oil and gas operations for the first two months of 2004. The 2005 period includes residual costs related to the oil and gas properties. The Company has designated certain real estate properties as held for sale and reports the gain on the sale of such real estate properties plus the year to date operations and related interest expense of such real estate properties as "Discontinued Operations". During the three months ended March 31, 2005, the Company did not sell any of its properties designated as discontinued operations. For the three months ended March 31, 2004, the Company sold eleven real estate properties located in Jersey City, New Jersey for gross proceeds of $11 million and recorded an after tax gain on the sale of $2.9 million. Basis of Presentation --------------------- Certain amounts in the 2004 condensed consolidated financial statements have been reclassified to conform to the 2005 presentation. Accounting for Stock-Based Compensation --------------------------------------- In December 2002, the Financial Accounting Standards Board issued Statement No. 148 to amend alternative methods of transition for a voluntary change to the fair value based method of accounting for stock- based employee compensation. In addition, Statement No. 148 amends the disclosures in both 6 annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company has continued to account for options in accordance with the provision of APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations. Accordingly, no compensation expense has been recognized in the statements of income for stock option plans. The pro forma impact of expensing stock options for the three months ended March 31, 2005 and 2004 was insignificant to both reported net income and earnings per share. No stock options were granted during the three months ended March 31, 2005 and 2004. In December 2004, the FASB issued SFAS No. 123R, "Accounting for Stock- Based Compensation." SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This Statement focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires that the fair value of such equity instruments be recognized as an expense in the historical financial statements as services are performed. Prior to SFAS 123R, only certain pro forma disclosures of fair value were required. SFAS 123R shall be effective for Wilshire as of the beginning of the first interim or annual reporting period that begins after December 15, 2005. The adoption of this new accounting pronouncement is not expected to have a material impact on Wilshire's consolidated financial statements. At the time of his retirement on June 30, 2004, the former President of the Company had 300,000 stock options outstanding with a weighted average exercise price of $3.35 per share. As part of the three year consulting arrangement between the former President and the Company, the term of his stock options were extended for the length of his consulting arrangement. This arrangement has resulted in the Company valuing his stock options at $495,000, which is the difference between the intrinsic value of the stock options at their date of grant and the market value of the Company's common stock at June 30, 2004. This value has been recorded as an increase to capital in excess of par value and an increase to unearned compensation, both separate components of stockholders' equity. The unearned compensation amount was being amortized into general and administrative expense over the term of the three year consulting arrangement. At March 31, 2005, $371,000 was remaining to be amortized into general and administrative expense over the balance of the term of the consulting agreement and $41,000 was recognized in expense during the three months ended March 31, 2005. On April 19, 2005, the Company reached a mutual agreement with the former President to terminate his consulting agreement with the Company. The Company agreed to provide him with a final lump sum payment in the amount of $50,625 and the former President agreed to forego an additional $75,000 of consulting fees due to him under the terms of his consulting arrangement. Also, at the Company's request, the former President agreed to exercise his 300,000 stock options at the applicable exercise prices for a total sum of $1,005,500 and then sell to the Company all of the exercised shares at a purchase price per share of $7.00 for an aggregate payment of $2,100,000, or a net cash payment of $1,094,500. The transaction was completed on April 20, 2005 and will result in the Company recording an after-tax charge of approximately $600,000 in the second quarter of 2005. 2. SEGMENT INFORMATION ------------------- The Company conducts real estate operations in the United States, principally consisting of residential apartment and condominium complexes and commercial and retail properties. For the first two months of 2004 the Company was engaged in the exploration of oil and gas, both in its own name and through several wholly owned subsidiaries, on the North American continent. In July 2003 the Company committed to the sale of its oil and gas operations and consummated the sale in April 2004, effective March 1, 2004. The financial statements have been adjusted to present oil and gas operations as "Discontinued Operations" in 2004 and 2005. Accordingly, the Company only conducts real estate operations in the United States. Continuing real estate revenue, operating expenses, net operating income ("NOI") and recurring capital improvements for the reportable segments are summarized below and reconciled to consolidated net income (loss) from continuing operations for each of the three month periods ended March 31, 2005 and 2004. Asset information is not reported since Wilshire does not use this measure to assess performance. 7
March 31, 2005 March 31, 2004 -------------- -------------- Real estate revenue: Residential $1,838,000 $1,882,000 Commercial 416,000 547,000 -------------- -------------- Total $2,254,000 $2,429,000 -------------- -------------- Real estate operating expenses: Residential $1,046,000 $1,027,000 Commercial 293,000 295,000 -------------- -------------- Total $1,339,000 $1,322,000 -------------- -------------- Net operating income: Residential $ 792,000 $ 855,000 Commercial 123,000 252,000 -------------- -------------- Total $ 915,000 $1,107,000 -------------- -------------- Capital improvements: Residential $ 268,000 $ 249,000 Commercial 89,000 91,000 -------------- -------------- Total $ 357,000 $ 340,000 -------------- -------------- Reconciliation of NOI to consolidated net income from continuing operations: Segment NOI $ 915,000 $ 1,107,000 Total other income, including net investment income 1,130,000 247,000 Depreciation expense (454,000) (427,000) General and administrative expense (563,000) (329,000) Interest expense (564,000) (616,000) Income tax provision (benefit) (170,000) 27,000 -------------- -------------- Income from continuing operations $ 294,000 $ 9,000 ============== ==============
3. COMPREHENSIVE INCOME -------------------- Comprehensive income for the three months ended March 31, 2005 and 2004 is as follows:
3 Months Ended March 31, ------------------------ 2005 2004 (Unaudited) (Unaudited) ----------- ----------- Net income $318,000 $2,599,000 ----------- ----------- Other comprehensive income (loss) net of taxes: Foreign currency translation adjustments (63,000) (484,000) Change in unrealized gain on marketable securities - Reclassification adjustment for gains on marketable securities sold, net of tax of $(53,000) in 2005 (76,000) --- Change in unrealized gain on marketable securities (125,000) 41,000 ----------- ----------- Other comprehensive income (loss) (264,000) (443,000) ----------- ----------- Comprehensive income $ 54,000 $2,156,000 =========== ===========
8 Changes in the components of Accumulated Other Comprehensive Income (Loss) for the three months ended March 31, 2005 and the year ended December 31, 2004 are as follows-
Cumulative Unrealized Gains Foreign Accumulated (Losses) on Currency Other Available-for-Sale Translation Comprehensive Securities Adjustment Income (Loss) ------------------ ---------------- ------------- BALANCE, December 31, 2003 $ 108,000 $ (1,536,000) $ (1,428,000) Change for the year 2004 456,000 1,562,000 2,018,000 ------------------ ---------------- ------------- BALANCE, December 31, 2004 564,000 26,000 590,000 Change for the three months (201,000) (63,000) (264,000) ------------------ ---------------- ------------- BALANCE, March 31, 2005 $ 363,000 $ (37,000) $ 326,000 ================== ================ =============
4. EARNINGS PER SHARE ------------------ The following table sets forth the computation of basic and diluted earnings per share-
3 Months Ended March 31, --------------------- 2005 2004 --------- ---------- Numerator- Net Income $ 318,000 $2,599,000 ========= ========== Denominator- Weighted average common shares outstanding - Basic 7,876,358 7,802,831 Incremental shares from assumed conversions of stock options 231,169 184,396 --------- ---------- Weighted average common shares outstanding - Diluted 8,107,527 7,987,227 ========= ========== Basic earnings per share: $ 0.04 $ 0.33 ========= ========== Diluted earnings per share: $ 0.04 $ 0.33 ========= ==========
5. COMMITMENTS AND CONTINGENCIES ----------------------------- On June 3, 2004, the Company announced a program to purchase up to 1,000,000 shares of its common stock on the open market, in privately negotiated transactions or otherwise. This purchasing activity may occur from time to time, in one or more transactions. From the inception of the authorization through March 31, 2005, the Company had purchased 41,403 shares under this program at an approximate cost of $218,000 or $5.27 per share, with 2,900 shares being purchased during the three months ended March 31, 2005. In June 1996, the Company's Board of Directors adopted the Stockholder Protection Rights Plan (the "Rights Plan"). The Rights Plan provides for issuance of one Right for each share of common stock outstanding as of July 6, 1996. The Rights are separable from and exercisable upon the occurrence of certain triggering events involving the acquisition of at least 15% (or, in the case of certain existing 9 stockholders, 25%) of the Company's common stock by an individual or group, as defined in the Rights Plan (an "Acquiring Person") and may be redeemed by the Board of Directors at a redemption price of $0.01 per Right at any time prior to the announcement by the Company that a person or group has become an Acquiring Person. On and after the tenth day following such triggering events, each Right would entitle the holder (other than the Acquiring Person) to purchase $50 in market value of the Company's Common Stock for $25. In addition, if there is a business combination between the Company and an Acquiring Person, or in certain other circumstances, each Right (if not previously exercised) would entitle the holder (other than the Acquiring Person) to purchase $50 in market value of the common stock of the Acquiring Person for $25. As of March 31, 2005 and 2004, 7,890,630 and 7,802,831, respectively, of Rights were outstanding. Each Right entitles the holder to purchase, for an exercise price of $25, one one-hundredth of a share of Series A Participating Preferred Stock. Each one one-hundredth share of Series A Participating Preferred Stock is designed to have economic terms similar to those of one share of common stock but will have one one-hundredth of a vote. Because the Rights are only exercisable under certain conditions, none of which were in effect as of March 31, 2005 and 2004, the outstanding Rights are not considered in the computation of basic and diluted earnings per share. 6. STOCK OPTION PLANS ------------------ In June 2004, the Company's stockholders approved the 2004 Stock Option and Incentive Plan (the "2004 Plan"). The purpose of the 2004 Plan is to encourage stock ownership by key employees and consultants of the Company, to provide additional incentive for them to promote the successful business operations of the Company, to encourage them to continue providing services to the Company, and to attract new employees and consultants to the Company. Awards under the 2004 Plan may be granted in any one or all of the following forms, as those terms are defined under the 2004 Plan: (i) incentive stock options; (ii) non-qualified stock options; (iii) stock appreciation rights; (iv) restricted shares of common stock; (v) performance shares; (vi) performance units; and (vii) unrestricted shares of common stock. The maximum aggregate number of shares of common stock available for award under the 2004 Plan is 600,000, subject to adjustment under the terms of the 2004 Plan. As of March 31, 2005, 115,529 shares of stock had been granted to employees and significant vendors under the 2004 Plan, of which 48,929 shares had restrictions under which the employee's right to receive these restricted shares vest serially over a three-year period. During the three months ended March 31, 2005, the Company issued 44,400 shares under the Plan and recognized compensation expense of approximately $23,000 related to shares issued under the Plan. In June 2004, the Company's stockholders approved the 2004 Non-Employee Director Stock Option Plan (the "2004 Director Plan"). The purpose of the 2004 Director Plan is to attract qualified personnel to accept positions of responsibility as directors of the Company, to provide incentives for persons to remain on the Board and to induce such persons to maximize the Company's performance during the terms of their options. Only non- qualified stock options may be granted under the 2004 Director Plan. The maximum aggregate number of shares of common stock available for grant under the 2004 Director Plan is 150,000, subject to adjustment under the terms of the 2004 Director Plan. Upon adoption of the 2004 Director Plan, each non-employee director was granted 10,000 options to purchase common shares of the Company. As of March 31, 2005, 50,000 options had been granted at market value under the 2004 Director Plan. No options were granted during the three months ended March 31, 2005. 7. MORTGAGE RECEIVABLE ------------------- In February 2005, the Company and the borrower negotiated a settlement of the outstanding mortgage notes receivable for $1.1 million, which was paid during the first quarter of 2005. The Company 10 recognized a gain in the first quarter of 2005 of approximately $675,000 before taxes ($400,000 after taxes) on this transaction. 8. SUBSEQUENT EVENTS ----------------- On May 5, 2005, the Company sold a one-bedroom condominium unit at Galsworthy Arms for gross proceeds of $240,000, resulting in an approximate $80,000 after-tax gain that will be recorded in the second quarter 2005 statement of income. After the sale, the Company continues to operate 43 condominium units at Galsworthy. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion addresses material changes in the Company's results of operations for the three month period ended March 31, 2005 compared to the three month period ended March 31, 2004 and changes in its financial condition since December 31, 2004. It is presumed that readers have read or have access to Wilshire's 2004 Annual Report on Form 10-K which includes disclosures regarding critical accounting policies as part of Management's Discussion and Analysis of Financial Condition and Results of Operations. FORWARD-LOOKING STATEMENTS - -------------------------- This Report on Form 10-Q for the quarter ended March 31, 2005 contains forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements included herein other than statements of historical fact are forward-looking statements. Although the Company believes that the underlying assumptions and expectations reflected in such forward- looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The Company's business and prospects are subject to a number of risks which could cause actual results to differ materially from those reflected in such forward-looking statements, including uncertainties inherent in any attempt to sell a portion or all of the business at an acceptable price, environmental risks relating to the Company's real estate properties, competition, the substantial capital expenditures required to fund the Company's real estate operations, market and economic changes in areas where the Company holds real estate properties, interest rate fluctuations, government regulation, and the ability of the Company to implement its business strategy. OVERVIEW - -------- Net income for the three months ended March 31, 2005 amounted to $318,000 or $0.04 per diluted share, a decrease of $2,281,000 from net income totaling $2,599,000 or $0.33 per diluted share reported for the three months ended March 31, 2004. Operations are shown as continuing and discontinued, with discontinued operations comprised of the results of operations from the Company's oil and gas businesses, the net income (loss) from real estate properties held for sale and the gain from real estate properties held for sale that were sold during the period. During the three months ended March 31, 2004, the Company sold eleven real estate properties in Jersey City, New Jersey for gross proceeds of $11 million, realizing an after-tax gain of $2.9 million. This gain was included in the statement of income in discontinued operations real estate gain from sales. During the three months ended March 31, 2005, the Company sold one (1) two- bedroom condominium unit at its Galsworthy Arms, New Jersey, property for gross proceeds of $270,000 that resulted in an after-tax gain of approximately $125,000 that has been included in the three month net income from continuing operations. Also during the three months ended March 31, 2005, the Company settled a mortgage receivable that had a gross carrying value of $1,165,000 and $727,000 of unearned income as of December 31, 2004 for $1,100,000 in cash. Security for the mortgage was a first lien on in excess of 100 condominium units in two contiguous buildings 11 located in Jersey City, New Jersey As a result of this transaction, the Company recognized an after tax gain of approximately $400,000 in the first quarter of 2005 that was included in net income from continuing operations. The Company announced in July 2003 its intention to sell its oil and gas businesses. The Canadian oil and gas business was sold in April 2004 to Addison Energy Inc., a wholly owned subsidiary of Exco Resources, Inc., for $15 million in gross proceeds. The United States oil and gas business was sold in April 2004 to Crow Creek Energy LLC, a Tulsa, Oklahoma based privately held portfolio company of Natural Gas Partners of Dallas, Texas, for $13.3 million in gross proceeds. During the three months ended March 31, 2005 and 2004, respectively, the Company recorded losses, net of taxes from its oil and gas businesses of $(22,000) and $(257,000), respectively. The net loss from operating the oil and gas business during the three months ended March 31, 2005 resulted from the continuing reconciliation process between the Company and its partners for periods prior to the effective date of the sale and the allocation of senior management bonus expense to this activity. The following table presents the increases (decreases) in each major statement of income category for the three months ended March 31, 2005 and 2004, respectively. The following discussion of "Results of Operations references these increases (decreases). 12
INCREASE (DECREASE) IN CONSOLIDATED STATEMENTS OF INCOME CATEGORIES FOR THE PERIOD: 3 Months Ended March 31, 2005 v. March 30, 2004 ------------------- Amount (S) % ----------- ------ REVENUES $ (175,000) (7.2) ----------- COSTS AND EXPENSES Operating expenses 17,000 1.3 Depreciation expense 27,000 6.3 General and administrative 234,000 71.1 ----------- Total costs and expenses 278,000 13.4 ----------- LOSS FROM OPERATIONS (453,000) (129.1) OTHER INCOME Dividend and interest income (92,000) (47.4) Gain on sale of marketable securities 134,000 100.0 Gain on sale of real estate and real estate related assets 887,000 100.0 Other income (46,000) (86.8) INTEREST EXPENSE (52,000) (8.4) ----------- INCOME BEFORE INCOME TAXES 482,000 --- INCOME TAX EXPENSE 197,000 729.6 ----------- INCOME FROM CONTINUING OPERATIONS 285,000 --- ----------- DISCONTINUED OPERATIONS - REAL ESTATE, NET OF TAXES LOSS FROM OPERATIONS 101,000 183.6 GAIN FROM SALES (2,902,000) (100.0) DISCONTINUED OPERATIONS - OIL & GAS, NET OF TAXES LOSS FROM OPERATIONS 235,000 91.4 ----------- NET INCOME $(2,281,000) (87.8) =========== BASIC EARNINGS (LOSS) PER SHARE: Income from continuing operations $ 0.04 100.0 Loss from discontinued operations (0.33) (100.0) ----------- Net loss applicable to common stockholders $(0.29) (87.9) =========== DILUTED EARNINGS (LOSS) PER SHARE: Income from continuing operations $ 0.04 100.0 Loss from discontinued operations (0.33) (100.0) ----------- Net loss applicable to common stockholders $(0.29) (87.9) ===========
RESULTS OF OPERATIONS - --------------------- THREE MONTHS ENDED MARCH 31, 2005 ("Q1 2005") COMPARED WITH THREE MONTHS ENDED MARCH 31, 2004 ("Q1 2004") OVERVIEW Net income for Q1 2005 amounted to $318,000 or $0.04 per diluted share, a decline of $2,281,000 from the net income of $2,599,000 or $0.33 per diluted share reported for Q1 2004. Results of operations are shown as continuing and discontinued, with discontinued operations comprised of the results of operations from the Company's oil and gas businesses, the operating results from real estate properties held for sale and the gain from real estate properties held for sale that were sold during the period. 13 CONTINUING OPERATIONS: Income from continuing operations was $294,000 in Q1 2005 compared with $9,000 in Q1 2004. Results per diluted share from continuing operations amounted to $0.04 in Q1 2005 and $0.00 in Q1 2004. The 2005 period included approximately $625,000 of after tax ($1,021,000 before taxes) gains on the sale of marketable securities and real estate and real estate related assets. SEGMENT INFORMATION Wilshire presently conducts business in the residential (including condominiums that it owns and rents) and commercial real estate segments. The following table sets forth comparative data for Wilshire's real estate segments in continuing operations.
Residential Real Estate Commercial Real Estate Total -------------------------- ------------------------ ---------------------------- 3 months 3 months ended Increase ended Increase 3 months ended Increase March 31 (Decrease) March 31 (Decrease) March 31 (Decrease) 2005 2004 $ % 2005 2004 $ % 2005 2004 $ % ------ ------ ---- ---- ---- ---- ----- ----- ------ ------ ----- ----- (In 000s of $) (In 000s of $) (In 000s of $) Total revenues $1,838 $1,882 $(44) (4.5) $416 $547 $(131) (23.9) $2,254 $2,429 $(175) (7.2) Operating expenses 1,046 1,027 19 2.8 293 295 (2) (0.7) 1,339 1,322 17 1.3 ------ ------ ---- ---- ---- ---- ----- ----- ------ ------ ----- ----- Net operating income $ 792 $ 855 $(63) (7.4) $123 $252 $(129) (51.2) $ 915 $1,107 $(192) (17.3) ====== ====== ==== ==== ==== ==== ===== ===== ====== ====== ===== =====
Reconciliation to consolidated income from continuing operations: Net operating income $ 915 $1,107 Depreciation expense (454) (427) General and administrative expenses (563) (329) Other income 1,130 247 Interest expense (564) (616) Income tax (expense) benefit (170) 27 ----- ------ Income from continuing operations $ 294 $ 9 ===== ======
The above table details the comparative revenue, expenses and net operating income ("NOI") for Wilshire's residential and commercial real estate segments, and reconciles the combined NOI to consolidated income (loss) from continuing operations. NOI is based on operating revenue and expenses directly associated with the operations of the real estate properties, but excludes depreciation and interest expense. Wilshire assesses and measures segment operating results based on NOI, which is a direct measure of each property's contribution to the results of the Company before considering revenues from treasury activities, overhead expenses and other costs that are not directly related to the performance of a property. The Company believes NOI is a more descriptive measure of the Company's performance than income (loss) from continuing operations. NOI is not a measure of operating results or cash flow as measured by accounting principles generally accepted in the United States of America and is not necessarily indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. RESIDENTIAL SEGMENT Q1 2005 revenues, as compared to Q1 2004 revenues, decreased $44,000 or 4.5% to $1,838,000 and operating expenses increased $19,000 or 2.8% to $1,046,000. The decrease in revenues was largely attributable to the Company's two condominium complexes in New Jersey (Galsworthy Arms and Jefferson Gardens) and its Wellington Estates apartment complex in Texas. The New Jersey condominium complexes combined had a decline of $29,000 or 65.9% of the total revenue decline. Several units at these two condominium complexes were left vacant in the second half of 2004 while the Company evaluated the sale of these units due to attractive selling prices. Some of these units remain vacant and are available for rent. Revenues for Wellington Estates, 14 located in San Antonio, Texas decreased by $16,000, primarily due to the Company imposing stricter qualifying criteria regarding the credit profile of potential tenants resulting in a lower occupancy percentage. The increase in operating expense in Q1 2005 over Q1 2004 was principally related to Wellington Estates. This complex is undergoing a concentrated improvements program to enhance the appearance of this property that has resulted in higher operating costs. COMMERCIAL SEGMENT Q1 2005 revenues, as compared to Q1 2004 revenues, decreased $131,000 or 23.9% to $416,000 and operating expenses decreased $2,000 or 2.0% to $293,000. The bulk of the revenue decrease, $104,000 or 79.4% of the total decrease is attributable to the Wilshire Grand Hotel, which ceased making rental payments beginning in January 2005. As a result of the hotel operator's delinquency, Wilshire is evaluating alternatives for its investment including participating in a settlement agreement in which Wilshire would assume control of the Wilshire Grand Hotel. Depreciation expense amounted to $454,000 in Q1 2005, an increase of 6.3% from the $427,000 in Q1 2004, reflecting increased capital expenditures throughout the Company's network of residential and commercial properties. These expenditures were undertaken as part of a program to reposition and strengthen the Company's properties within their targeted markets. Depreciation expense is not included in the operating expenses included in the preceding table and discussion. General and administrative expense increased $234,000, or 71.1%, to $563,000 in Q1 2005 from $329,000 in Q1 2004. This increase in general and administrative expense is related to the method of allocating corporate expenses among the Company's lines of business and the accounting for incentive and stock compensation expense. In Q1 2004, a high percentage of corporate salaries and related expenses were allocated to the Company's oil and gas businesses. In Q1 2005, this allocation was significantly lowered as only accrual adjustments related to prior periods were allocated to the oil and gas business. Additionally, prior to the third quarter of 2004, incentive compensation awards were not recorded as an expense until they were paid and Q1 2004 did not include incentive compensation expense. Thus, a large portion of the increase was related to recording incentive compensation expense for bonuses to be paid in the future that are being earned by individual and Company performance during the current period and for past awards of restricted stock and other stock compensation whose expense is allocated over the vesting period of the award. Included in stock compensation expense for Q1 2005 (but not Q1 2004) is $41,000 related to stock options granted to the former President of Wilshire who retired on June 30, 2004. On April 19, 2005, the Company reached a mutual agreement with the former President to terminate his consulting agreement with the Company. The Company agreed to provide him with a final lump sum payment in the amount of $50,625 and the former President agreed to forego an additional $75,000 of consulting fees due to him under the terms of his consulting arrangement. Also, at the Company's request, the former President agreed to exercise his 300,000 stock options at the applicable exercise prices for a total sum of $1,005,500 and then sell to the Company all of the exercised shares at a purchase price per share of $7.00 for an aggregate payment of $2,100,000, or a net cash payment of $1,094,500 before withholding taxes. The transaction was completed on April 20, 2005 and will result in the Company recording an after-tax charge of approximately $600,000 in the second quarter of 2005. Other income increased $883,000 to $1,130,000 in the 2005 quarter from $247,000 in the 2004 quarter, principally related to $675,000 of gain from the settlement of a mortgage receivable, $212,000 gain from the sale of one two- bedroom condominium at Galsworthy Arms and $134,000 gain from the sale of marketable securities. No marketable securities or real estate properties from the Company's portfolio of continuing operations were sold in 2004. 15 Interest expense decreased to $564,000 from $616,000 in the 2004 quarter, mainly related to the payoff of approximately $200,000 of mortgage debt related to the sale of condominiums at Jefferson Gardens in the second half of 2004 and $250,000 of mortgage debt related to the sale of one condominium in January 2005 at Galsworthy Arms and normal principal amortization payments. The provision for income taxes amounted to a tax expense of $170,000 in the 2005 quarter and a benefit of $(27,000) in the 2004 quarter. The change in the provision for income taxes is related to the level of income from continuing operations in the 2005 quarter compared to the 2004 quarter and the change in the mix between taxable and tax-exempt income. DISCONTINUED OPERATIONS, NET OF TAXES: REAL ESTATE Income from discontinued operations amounted to after tax income of $46,000 in Q1 2005 and $2,847,000 in Q1 2004. The decreased income reflects the high level of sales of properties in Q1 2004 compared to none sold in Q1 2005. During Q1 2004, the Company sold eleven properties in Jersey City, New Jersey for gross proceeds of $11 million that resulted in after-tax gains of $2,902,000. Included in Q1 2005 income from discontinued operations is a nonrefundable fee of $100,000 that the Company received in February 2005 when it signed an agreement to sell its Biltmore Club apartment complex (Phoenix, Arizona) to GDG Partners L.L.C., an independent third party, for $20,956,000. The agreement is expected to close no later than December 23, 2005. In addition to the $100,000 fee already paid, GDG Partners L.L.C. paid to escrow an additional nonrefundable deposit of $150,000 on April 3, 2005 and owes $250,000 as a nonrefundable deposit to be paid by July 2, 2005, respectively. We expect to report, when the sale is completed, a gain on the sale after taxes of approximately $8.5 million and have net proceeds after transaction costs and paying off the mortgage of approximately $10.0 million. OIL AND GAS The Company announced in July 2003 its intention to sell its oil and gas businesses. The Canadian oil and gas business was sold in April 2004 to Addison Energy Inc., a wholly owned subsidiary of Exco Resources, Inc., for $15 million in gross proceeds. The United States oil and gas business was sold in April 2004 to Crow Creek Energy LLC, a Tulsa, Oklahoma based privately held portfolio company of Natural Gas Partners of Dallas, Texas, for $13.3 million in gross proceeds. During Q1 2005 and Q1 2004, respectively, the Company recorded losses from operating it oil and gas business, net of taxes, of $22,000 and $257,000, respectively. The net loss from operating the oil and gas business in Q1 2004 includes the operating results of the oil and gas business for January and February and both periods include the continuing reconciliation process between the Company and its partners for periods prior to the effective dates of the sales and the allocation of certain incentive compensation amounts from awards made in January 2005 that relate to efforts that these individuals put forth in consummating the sale of the oil and gas business. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2005, the Company had working capital of $35.5 million, compared to working capital of $34.6 million at December 31, 2004. The Company has $28.7 million of cash and cash equivalents at March 31, 2005 and $4.0 million of restricted cash that becomes available to Wilshire with the expiration of its Section 1031 election in June 2005, for a total of $32.7 million of cash and cash equivalents. This balance is comprised of working capital accounts for its real estate properties and corporate needs and short-term investments in government and corporate securities and money market funds. The Company estimates that it has approximately $2.5 million of taxes remaining to be paid relating to the sale of the oil and gas business, including U.S. and 16 Canadian taxes on the repatriation of earnings from its Canadian subsidiary. These obligations will be satisfied in 2005, partly through the application of an approximate $2.9 million estimated overpayment of 2004 U.S. Federal taxes. After considering these tax payments, Wilshire expects to have $33.0 million of cash and cash equivalents for working capital and other purposes. The Company continues to explore corporate and real estate property acquisitions as they arise. The timing of such acquisitions, if any, will depend upon, among other criteria, economic conditions and the favorable evaluation of specific opportunities presented to the Company. In the short- term, the Company will continue to invest these funds in high quality investments that are consistent with its investment policy. Management considers its liquidity position adequate to fulfill the Company's current business plans. Net cash used in operating activities amounted to $3.3 million in Q1 2005, while Q1 operating activities provided net cash of $1.5 million. The Q1 2005 use of cash resulted from net income of $0.3 million, the sale of real estate properties and marketable securities with their related changes in receivables, payables and current and deferred tax accounts. The Q1 2004 provision of cash was mainly related to a net income of $2.6 million and non-cash charges for depreciation and amortization expense ($1.3 million) and changes in other current asset and liability and income tax accounts related to normal business activity, partly offset by gains on the sales of real estate properties in Jersey City, New Jersey. Net cash provided by investing activities amounted to $1.3 million in Q1 2005 and $11.5 million in Q1 2004. The cash provided by investing activities in Q1 2005 is due mainly to the sale of real estate assets and marketable securities, partly offset by capital expenditures on real estate properties. The Q1 2004 provision of cash from investing activities is related to proceeds from the sale of real estate properties partly offset by capital expenditures on real estate properties. Net cash used in financing activities amounted to $0.5 million in Q1 2005 and $8.8 million in Q1 2004. The Q1 2005 and Q1 2004 uses of cash reflects the repayment of long term debt due to the sales of real estate properties and normal annual amortization of long term debt from monthly debt service payments. On June 3, 2004, the Board of Directors approved the repurchase of up to 1,000,000 shares of the Company's common stock on the open market, in privately negotiated transactions or otherwise. This purchasing activity may occur from time to time, in one or more transactions. At March 31, 2005, the Company had purchased 41,403 shares at an aggregate cost of $218,000 under this program. The majority of the shares acquired were from stockholders who at the time owned less than 100 shares of the Company's common stock. During March 2005, Wilshire negotiated a long-term lease for new offices in Newark, New Jersey, effective April 1, 2005. The lease is for a sixty-five month term with two renewal options each for a five-year term and covers 4,502 rentable square feet at a base rate of $29.00 per square foot. The Company has an option to early terminate the lease after two years, subject to a termination fee. The Company expects to move into its new space by the end of May 2005. The Company has concluded negotiations with the city of Perth Amboy, New Jersey concerning the redevelopment zone status of its office building (Amboy Towers). The City has agreed to exclude Amboy Towers from the redevelopment zone and the Company has agreed to invest $750,000 in capital improvements in the building over the next 18 months. In March 2005, the Company signed an agreement to sell its Twelve Oaks apartment complex (Atlanta, Georgia) to Interstate East Management, Inc., an independent third party, for $1,725,000. The agreement contains a "time is of the essence clause" and is expected to close as soon as practicable. The property is highly leveraged with an outstanding mortgage balance of approximately $1,602,000. We expect to report a gain on the sale after taxes of approximately $440,000 and we estimate taxes related to this gain to be approximately $285,000. The transaction, if completed, will generate net proceeds of approximately $1,379,000 after taxes and transaction costs 17 and before debt retirement. The shortfall in the net proceeds to retire the debt will be made up from general corporate sources of funds. Also in March 2005 the Company was evaluating alternatives for optimizing its investment in the Wilshire Grand Hotel and Banquet Facility (the "Wilshire Hotel"). The Company leases the Wilshire Hotel under two 25-year operating leases, one for the hotel and one for the banquet facility, to an experienced hotel operator (the "Hotel Operator"). The Hotel Operator has encountered financial adversity and in 2004 ceased payment on its mortgage obligations, which are held by a third party (the "Mortgagor"). As of March 2005, the Hotel Operator was also delinquent on lease payments to Wilshire for the months of January, February and March 2005. The Mortgagor is required to cure any defaults of the Hotel Operator (i.e., pay any amounts due Wilshire under the lease) in order to protect its mortgage and cannot impair Wilshire's ownership interest in the property. As a result of the Hotel Operator's delinquency, Wilshire is evaluating alternatives for its investment including assisting in the consummation of a settlement agreement by which Wilshire would assume operational control of the Wilshire Hotel and in the event of a subsequent sale of the hotel, would receive an agreed upon value prior to any proceeds being distributed to the Mortgagor or Hotel Operator. At this time, Wilshire does not expect to incur a loss on this property. On May 5, 2005, the Company sold a one-bedroom condominium unit at Galsworthy Arms for gross proceeds of $240,000, resulting in an approximate $80,000 after- tax gain that will be recorded in the second quarter 2005 statement of income. After the sale, the Company continues to operate 43 condominium units at Galsworthy and expects to sell an additional two units (a one-bedroom and a two-bedroom) in 2005. ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK The Company has an investment in the common stock of one publicly traded real estate company in the United States in which the Company has exposure to the risk of market value fluctuation. The Company accounts for this investment as securities that are available for sale and marks them to market at each period- end. The change in value in the investment, net of tax impact, is reported in Accumulated Other Comprehensive Income, a separate component of stockholders' equity. The Company also evaluates its investment to determine if it has suffered a decline in market value that is permanent, which would require a charge to the Statement of Income. At March 31, 2005, in the opinion of management, there has been no permanent decline in value in the Company's holdings of equity securities. After the sale of its Canadian oil and gas assets in April 2004, the Company has cash and cash equivalents at its Canadian subsidiary whose value is exposed to fluctuations in the value of the Canadian dollar / U.S. dollar exchange rate. The change in value in the Canadian dollar denominated accounts is reported in Accumulated Other Comprehensive Income, a separate component of stockholders' equity. The Company will be repatriating all assets, net of liabilities, of its Canadian subsidiary during 2005. At that time, the foreign exchange component previously reported in Accumulated Other Comprehensive Income will be recognized as a component of net income. At March 31, 2005, the unrealized foreign exchange component of Accumulated Other Comprehensive Income was a loss of $37,000. Long-term debt as of March 31, 2005 and December 31, 2004 consists of the following --
2005 2004 ----------- ----------- Mortgage notes payable $46,421,000 $46,855,000 Less-current portion (1) 739,000 729,000 ----------- ----------- Long term portion (2) $45,682,000 $46,126,000 =========== ===========
(1) Includes mortgage debt associated with discontinued operations of $159,000 in 2005 and $156,000 in 2004. (2) Includes mortgage debt associated with discontinued operations of $10,507,000 in 2005 and $10,547,000 in 2004. The aggregate maturities of the long-term debt in each of the five years subsequent to March 31, 2005 and thereafter are -- 18
Year Ended Amount - -------------- ----------- March 31, 2006 $ 739,000 March 31, 2007 795,000 March 31, 2008 852,000 March 31, 2009 923,000 March 31, 2010 4,778,000 Thereafter 38,334,000 ----------- $46,421,000 ===========
The Company is not exposed to changes in interest rates. At March 31, 2005, the Company had $46,421,000 of mortgage debt outstanding which all bears interest at an average fixed rate of 6.098% and an average remaining life of approximately 7.7 years. The fixed rate mortgages are subject to repayment (amortization) schedules that are longer than the term of the mortgages. As such, the approximate amount of balloon payments for all mortgage debt that will be required is as follows:
Year Amount - ---- ----------- 2009 $ 3,861,000 2013 36,289,000 ----------- $40,150,000 -----------
Wilshire expects to re-finance the individual mortgages with new mortgages when their terms expire. To this extent, we have exposure to interest rate risk on our fixed rate mortgage debt obligations. If interest rates, at the time any individual mortgage note is due, are higher than the current fixed interest rate, higher debt service may be required, and/or re-financing proceeds may be less than the amount of mortgage debt being retired. We believe that the values of our properties will be adequate to command re- financing proceeds equal to, or higher than the mortgage debt to be re- financed. ITEM 4. CONTROLS AND PROCEDURES (a) Disclosure controls and procedures. As of the end of the Company's most recently completed fiscal quarter covered by this report, the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. (b) Changes in internal controls over financial reporting. There have been no changes in the company's internal control over financial reporting that occurred during the Company's last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting, except for the correction of a material weakness noted in the Company's Annual Report on Form 10-K for the year ended December 31, 2004 concerning the recording of a transaction involving equity compensation for one former employee. 19 PART II -- OTHER INFORMATION ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The following table presents the total share repurchase activity for the period January 1 through March 31, 2005 under the Board's authorization. The program, for the repurchase of up to 1,000,000 shares of the Company's common stock, was announced on June 3, 2004. No repurchase activity took place from the date of the announcement of the Board's authorization through June 30, 2004. For the period July 1 through December 31, 2004, the Company purchased 38,478 shares under this authorization. The authorization to repurchase common shares has no expiration date and the Company has not determined when, or if, the program will be discontinued.
(c) Total number of (d) Maximum number (or shares (or units) approximate dollar value) (a) Total number of purchased as part of of shares (or units) that shares (or units) (b)Average price paid publicly announced may yet be purchased under Period purchased per share (or unit) plans or programs the plans or programs - ------------- ------------------------ ------------------------ ------------------------ ------------------------- January 1 -- 31, 2005 2,900 $6.91 2,900 958,622 common shares February 1 -- 28, 2005 None March 1 -- 31, 2005 None
ITEM 6. EXHIBITS Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act Exhibit 32.1 Certification of Chief Executive Officer Pursuant to Section 906 of Sarbanes-Oxley Act Exhibit 32.2 Certification of Chief Financial Officer Pursuant to Section 906 of Sarbanes-Oxley Act
20 S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WILSHIRE ENTERPRISES, INC. -------------------------- (Registrant)
Date: May 13, 2005 /s/ S. Wilzig Izak ------------ ------------------ By: S. Wilzig Izak Chairman of the Board and Chief Executive Officer
/s/ Seth H. Ugelow ------------------ By: Seth H. Ugelow Chief Financial Officer
21 EX-31.1 2 b406716_ex31-1.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATION I, S. Wilzig Izak, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Wilshire Enterprises, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13, 2005 /s/ S. Wilzig Izak - ------------------ S. Wilzig Izak Chief Executive Officer EX-31.2 3 b406716_ex31-2.txt EXHIBIT 31.2 EXHIBIT 31.2 CERTIFICATION I, Seth H. Ugelow, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Wilshire Enterprises, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13, 2005 /s/ Seth H. Ugelow - ------------------ Seth H. Ugelow Chief Financial Officer EX-32.1 4 b406716_ex32-1.txt EXHIBIT 32.1 EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Wilshire Enterprises, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2005 filed with the Securities and Exchange Commission (the "Report"), I, S. Wilzig Izak, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and consolidated results of operations of the Company for the periods presented. Dated: May 13, 2005 By: /s/ S. Wilzig Izak ------------------ S. Wilzig Izak Chief Executive Officer
This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. EX-32.2 5 b406716_ex32-2.txt EXHIBIT 32.2 EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Wilshire Enterprises, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2005 filed with the Securities and Exchange Commission (the "Report"), I, Seth H. Ugelow, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the consolidated financial condition of the Company as of the dates presented and consolidated results of operations of the Company for the periods presented. Dated: May 13, 2005 By: /s/ Seth H. Ugelow ------------------ Seth H. Ugelow Chief Financial Officer
This certification has been furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. -----END PRIVACY-ENHANCED MESSAGE-----