Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: April 30, 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 commercial properties, primarily in New York and Ohio.
Key Financial Metrics
| Metric | Three Months Ended Apr 30, 2003 |
Nine Months Ended Apr 30, 2003 |
Nine Months Ended Apr 30, 2002 |
|---|---|---|---|
| Total Revenues | $3,209,984 | $9,931,870 | $9,630,917 |
| Net Income | $146,021 | $813,629 | $1,069,640 |
| Earnings Per Share | $0.07 | $0.40 | $0.53 |
| Operating Cash Flow | N/A | $2,004,007 | $3,554,265 |
| Cash and Equivalents | $2,919,815 | $2,919,815 | $3,591,284 |
| Total Long-Term Debt | $7,698,292 | $7,698,292 | $8,178,199 |
| Total Assets | $47,241,387 | $47,241,387 | $48,265,886 |
Margins: The filing does not explicitly state operating or net profit margin percentages. Based on reported figures, the nine-month net margin was approximately 8.2% ($813,629 / $9,931,870), down from 11.1% in the prior year.
Material Changes vs. Prior Period
- Revenue: Nine-month revenues increased by $300,953 (3.1%) compared to the prior year, driven by rental income growth. However, quarterly revenues decreased by $76,256 (2.3%) due to the termination of an affiliated company lease in August 2002.
- Expenses: Real estate operating expenses increased significantly ($714,730 or 15.9% for the nine months) primarily due to higher payroll, real estate taxes (City of New York rate increase), and insurance costs (post-9/11 impact).
- Profitability: Net income for the nine months decreased by $256,011 (24.0%) to $813,629. This decline was driven by higher operating expenses and a $100,172 loss on the disposition of an asset, partially offset by a $163,009 bad debt recovery.
- Debt: Total long-term debt decreased by approximately $480,000 due to scheduled repayments and the payoff of a mortgage on the Circleville, Ohio property.
Outlook, Risks, and Management Commentary
- Tenant Concentration Risk: Two tenants accounted for 17.93% and 15.04% of rental income during the nine-month period. No other tenant exceeded 10%.
- Lease Termination: The City of New York, a tenant in the Jowein building (Brooklyn), exercised an option to terminate its lease effective May 31, 2004. This is expected to result in an approximate annual revenue loss of $2,350,000 starting June 1, 2004. The Company is actively seeking new tenants for this space and an additional 95,000 square feet.
- Legal Contingencies: The Company obtained a judgment against the State of New York regarding a condemnation of part of its Fishkill property. After appeals, the final award was reduced to $101,925 (including interest), which has been recorded. Management does not intend to appeal further.
- Bad Debt Recovery: A $163,009 recovery was recorded from a retail tenant at the Jamaica property who had previously filed for Chapter 11 bankruptcy. The tenant vacated the premises in March 2003, and the Company is seeking replacement tenants.
- Liquidity: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements.
Investor Verification Checklist
- Revenue Replacement: Verify the Company's progress in leasing the 95,000+ square feet vacated by the City of New York and the former department store tenant to mitigate the projected $2.35M annual revenue loss.
- Expense Trajectory: Monitor if real estate taxes and insurance costs stabilize or continue to rise, as these were primary drivers of the margin compression.
- Debt Maturities: Review the schedule for the remaining mortgages, particularly the Jamaica properties (due 2006 and 2007) and the Fishkill property (due 2004), to assess refinancing risks.
- Tenant Solvency: Assess the financial health of the two major tenants representing over 32% of rental income to evaluate concentration risk.