Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Nine months ended April 30, 2011 (Unaudited)
Business Overview: The Company operates as a real estate enterprise, deriving revenue primarily from rental income. It ceased its retail department store operations in 1989.
Key Financial Metrics
| Metric | Nine Months Ended April 30, 2011 |
Nine Months Ended April 30, 2010 |
|---|---|---|
| Total Revenues | $11,109,373 | $11,141,691 |
| Net Income | $195,197 | $463,531 |
| Net Income from Continuing Ops | $382,968 | $500,791 |
| Loss from Discontinued Ops | ($187,771) | ($37,260) |
| Diluted EPS (Net Income) | $0.10 | $0.23 |
| Cash and Cash Equivalents | $2,863,881 | $1,551,630 (July 31, 2010) |
| Operating Cash Flow | $2,632,338 | $2,831,829 |
| Total Debt (Current + Long-Term) | $11,068,016 | $11,018,869 |
Note: Total Debt includes mortgages, term loans, and related party notes. Current portion of long-term debt is $3,397,031; Long-term debt is $7,670,985.
Material Changes vs. Prior Period
- Revenue: Total revenues decreased slightly by $32,318 (0.3%) compared to the prior year. This decrease is primarily attributed to the absence of a $243,423 real estate tax recovery recorded in the 2010 period.
- Net Income: Net income declined significantly by 57.9% to $195,197. This was driven by a larger loss from discontinued operations ($187,771 vs. $37,260) and lower income from continuing operations.
- Expenses: Real estate operating expenses increased by $280,250 due to higher real estate taxes and maintenance costs. Conversely, administrative and general expenses decreased by $110,744 due to lower legal and professional fees.
- Discontinued Operations: The Company reported a loss of $187,771 related to the Jowein building lease termination and property exchange settlement finalized in the prior fiscal year.
Guidance, Outlook, and Risks
- Liquidity: Management considers current working capital and borrowing capabilities adequate. Cash and cash equivalents increased by $1.31 million during the period.
- Capital Projects: The Company is undertaking a $2,000,000 renovation and brokerage commission project for a new 18,218 sq. ft. lease at Nine Bond Street, Brooklyn. Rent is anticipated to commence in late 2011 or early 2012. Costs are planned to be financed through operating funds.
- Contingencies:
- Foot Bridge Removal: The Company is required to remove a foot bridge over Bond Street by June 2012. Estimated cost is $309,415, with completion anticipated in June 2011.
- Condominium Liability: If the Company sells or demolishes 25 Elm Place, it may be liable to create a condominium unit for a loading dock; costs are currently undetermined.
- Legal: Various lawsuits are pending, though management believes resolution will not have a material adverse effect.
- Accounting Adjustment: In Q2 2011, the Company recorded an out-of-period tax adjustment expense of approximately $65,000 related to the 2010 income tax provision. Management deemed this immaterial.
Investor Verification Checklist
- Debt Maturities: Verify the repayment strategy for the $2.15 million mortgage maturing on October 1, 2011, and the $1.10 million mortgage maturing on April 1, 2012.
- Lease Execution: Confirm the timeline for the commencement of rent for the new Nine Bond Street tenant and the Massapequa drive-in restaurant (anticipated 2012).
- Capital Expenditures: Monitor cash flow impact regarding the $2.0 million commitment for the Nine Bond Street renovation and the $309k foot bridge removal.
- Tenant Concentration: Note that two tenants accounted for 18.10% and 16.49% of rental income in the nine-month period; verify lease stability for these key accounts.