MAYS

Business Context and Reporting Period

Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: October 31, 2003
Business Overview: The Company operates as a real estate enterprise following the discontinuance of its retail department store segment in 1989. It owns and manages properties primarily in New York, including locations in Jamaica, Brooklyn, and Fishkill.

Key Financial Metrics

Margins: The filing does not explicitly state operating or net profit margin percentages. Based on reported figures, Net Income margin was approximately 8.5% for the current period versus 9.8% for the prior period.

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by approximately 2.3% ($74,563) compared to the prior year. This increase was primarily driven by new leasing activity at the Jamaica, New York property. Note that rental income from an affiliated company present in the prior year ($69,629) was absent in the current period.
• Expense Fluctuations: Real estate operating expenses increased by $227,510 (13.9%) due to higher rental expenses, taxes, payroll, and maintenance. Conversely, administrative and general expenses decreased by $101,892 (14.6%) due to reductions in payroll, insurance, and legal costs.
• Profitability: Net income decreased by $36,288 (11.4%) despite revenue growth, largely due to the increase in operating expenses and a slight decrease in investment income.
• Cash Flow: Cash provided by operating activities more than doubled to $1.52 million from $669,469, driven by significant changes in receivables and prepaid expenses.

Outlook, Risks, and Management Commentary

Leasing and Revenue Risks

• City of New York Lease Termination: A significant tenant, the City of New York, at the Jowein building in Brooklyn, has exercised an option to terminate its lease effective May 31, 2004. This is expected to result in an approximate annual revenue loss of $2,440,000 commencing June 1, 2004.
• Replacement Strategy: Management is actively seeking tenants for the vacated space and an additional 87,000 square feet in the building. New leases have been signed for 22,192 sq. ft. (rent commencing Feb 2004) and 8,300 sq. ft. (rent commencing Dec 2003/Feb 2004).

Debt and Liquidity

• Debt Maturity: The first mortgage loan on the Fishkill, New York property matures on July 1, 2004, with a balloon payment of $1,856,852 due. The Company is currently in discussions with the bank to extend this mortgage.
• Liquidity Position: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements. Total fixed-rate debt stands at $7,614,486, exposing the company to no immediate interest rate risk.

Capital Expenditures

The Company incurred significant capital expenditures ($1.43 million) for renovations, including dividing a former department store space in Jamaica into three retail units and renovating office space in Brooklyn. Total anticipated costs for ongoing projects exceed $3.6 million.

Investor Verification Checklist

• Lease Replacement: Verify the status of leasing efforts for the 87,000+ sq. ft. space vacated by the City of New York to mitigate the projected $2.44M annual revenue loss.
• Debt Extension: Confirm the outcome of discussions regarding the extension of the Fishkill property mortgage maturing July 1, 2004, to ensure the $1.86M balloon payment is managed.
• Capital Project Costs: Monitor the completion and final costs of the Brooklyn and Jamaica renovation projects, as total costs may exceed current estimates.
• Tenant Concentration: Review the impact of the two largest tenants (18.06% and 15.18% of rental income) on future cash flow stability.