Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: April 30, 2008 (Nine months ended April 30, 2008)
Business Overview: The Company operates as a real estate enterprise, owning and leasing commercial properties in New York (Brooklyn, Jamaica, Fishkill) and Ohio (Circleville). It discontinued its retail department store segment in 1989.
Key Financial Metrics
| Metric | Nine Months Ended April 30, 2008 |
Nine Months Ended April 30, 2007 |
|---|---|---|
| Total Revenues | $10,701,425 | $10,183,549 |
| Net Income (Loss) | $(214,021) | $(168,230) |
| Income (Loss) Per Share | $(0.11) | $(0.08) |
| Operating Cash Flow | $344,481 | $792,359 |
| Cash and Equivalents (End of Period) | $2,376,235 | $2,337,654 |
| Total Assets | $57,461,704 | $60,162,219 |
| Total Liabilities | $17,997,958 | $20,465,373 |
| Long-Term Debt | $13,252,006 | $13,631,516 |
Note: Three months ended April 30, 2008 reported a Net Income of $66,797 ($0.03 per share).
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased by approximately $518,000 (5.1%) for the nine-month period. This was driven by leasing to five additional tenants in Brooklyn, Jamaica, and Levittown, offset by the vacancy of a tenant in Brooklyn and reduced rent from a replacement tenant for Levitz Home Furnishings.
- Expense Increases:
- Real Estate Operating Expenses: Increased to $6.80M from $6.41M due to higher rental expenses, utilities, payroll, and lease commissions.
- Administrative Expenses: Increased to $2.67M from $2.19M, driven by payroll, insurance, legal costs, and a bad debt expense related to a vacating tenant.
- Net Loss Widening: The net loss increased to $214,021 from $168,230, primarily due to the expense increases outpacing revenue growth.
- Cash Flow Decline: Operating cash flow decreased significantly to $344,481 from $792,359, largely due to a $1.46M decrease in income taxes payable and changes in accrued liabilities.
- Investing Activities: Capital expenditures increased to $1.60M (from $369k) due to renovations and elevator construction. The Company also purchased $1.70M in marketable securities.
Outlook, Risks, and Contingencies
- Tenant Vacancies and Leasing:
- Levitz Home Furnishings: Filed for Chapter 11 bankruptcy and vacated premises in Jan 2008. The Company re-leased the space at slightly less than half the previous rent ($800k annual loss partially mitigated).
- Brooklyn Vacancy: A tenant vacated 22,192 sq. ft. in July 2007 ($470k annual loss). 11,128 sq. ft. was re-leased in March 2008; the Company is actively seeking tenants for the remaining 11,064 sq. ft.
- New Leases: New leases commenced in March 2008 for 60,000 sq. ft. in Circleville, Ohio, and 15,900 sq. ft. at the Jowein building.
- Capital Projects: The Company is constructing two new elevators at the Bond Street building (estimated total cost $1.1M, $850k financed). Completion is anticipated in 2008.
- Legal Contingencies:
- Jowein Building Dispute: The Company is involved in litigation with landlords regarding a termination notice. A preliminary injunction was granted in May 2007 preventing eviction. Management cannot predict the outcome or potential costs to cure defaults.
- Related Party Rent: Rent expense paid to an affiliated company for the Jamaica property is based on an estimate ($784k paid to date) and may be subject to arbitration.
- Interest Rate Risk: The Company has $560,000 in variable-rate debt. A 100 basis point increase would decrease net income by approximately $5,600.
Investor Verification Checklist
- Leasing Status: Verify the status of leasing the remaining 11,064 sq. ft. of the Brooklyn vacancy and the long-term stability of the replacement tenant for Levitz.
- Legal Exposure: Monitor the outcome of the Jowein building lawsuit and the potential financial impact of the related-party rent arbitration.
- Cash Burn: Review the significant drop in operating cash flow ($344k vs $792k) and the impact of capital expenditures on liquidity.
- Debt Maturities: Note the maturity dates of various mortgages, including the $1.05M loan due April 2009 and the $1.24M loan due April 2012.
- Related Party Transactions: Confirm the final determination of the rent expense owed to the affiliated landlord for the Jamaica property.