Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: April 30, 1995 (Unaudited)
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, including the Jowein Building in Brooklyn, NY, and properties in Fishkill, NY, and Circleville, OH.
Key Financial Metrics
| Metric | Three Months Ended Apr 30, 1995 |
Nine Months Ended Apr 30, 1995 |
Nine Months Ended Apr 30, 1994 |
|---|---|---|---|
| Rental Income | $2,096,545 | $6,276,449 | $7,247,949 |
| Total Expenses | $2,171,884 | $6,369,284 | $7,091,038 |
| Net Loss | $(110,756) | $(199,539) | $(284,454) |
| Loss Per Share | $(0.05) | $(0.09) | $(0.13) |
| Cash and Equivalents | $527,722 | $527,722 | $1,035,699 |
| Working Capital | $2,179,009 | $2,179,009 | N/A |
| Total Debt (Long-Term + Current) | $7,125,086 | $7,125,086 | $7,614,324 |
Note: Net Loss for the nine months ended April 30, 1995, excludes the cumulative effect of accounting changes which resulted in a net loss of $(221,308) before that adjustment.
Material Changes vs. Prior Period
- Revenue Decline: Rental income decreased by approximately 3% for the quarter and 13% for the nine-month period compared to the prior year. This is primarily attributed to the loss of two tenants and rent concessions granted to another tenant (Jamesway Corporation), partially offset by new leasing activity.
- Expense Reduction: Administrative and general expenses decreased significantly in the nine-month period ($1.54M vs $2.20M) largely due to a one-time bad debt write-off of $622,023 recorded in the prior year related to the McCrory Stores lease rejection.
- Debt Structure: Total debt decreased by approximately $489,000 year-over-year. However, working capital decreased by approximately $1.1 million during the quarter due to the reclassification of a $987,610 mortgage balance on the Jowein Building as a current liability (maturing March 31, 1996).
- Investment Portfolio: The Company adopted FAS No. 115, resulting in a net unrealized loss on marketable equity securities of $16,606 reflected in shareholders' equity.
Outlook, Risks, and Management Commentary
- Liquidity: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements. The current ratio is 1.9 to 1.
- New Leasing Activity:
- Jowein Building: Leased approx. 26,000 sq. ft. to a chain store tenant for a 14.5-year term commencing Nov 1, 1995. Fixed rent aggregates approx. $2.675M for the first five years.
- Jamaica Property: Leased approx. 47,000 sq. ft. to a chain store tenant for a 10-year term (with options) commencing Nov 1, 1995. Fixed rent for the initial term is $4.25M.
- Management Changes: Effective June 1, 1995, Max L. Shulman vacated the CEO position to become Co-Chairman. Lloyd J. Shulman was elected Co-Chairman and assumed the role of CEO.
- Risks and Contingencies:
- McCrory Stores: The Company holds a claim of $7.75M against McCrory (Chapter 11) for lease rejection damages. This amount is not included in financial statements due to uncertainty of recovery.
- Jamesway Corporation: Emerged from bankruptcy in Jan 1995. The Company granted a $250,000 cumulative rent reduction, with $100,000 applied in the current nine-month period.
- IBM Lease: The lease with IBM (approx. 8% of annual rental income) expired March 31, 1994.
Investor Verification Checklist
- Mortgage Renewal: Verify the status of negotiations to renew the $987,610 Jowein Building mortgage maturing March 31, 1996, which is currently classified as a current liability.
- Lease Commencement: Confirm the actual commencement dates and rent collection for the new leases signed in June 1995 (Jowein and Jamaica properties) scheduled for November 1995.
- McCrory Claim Recovery: Monitor the status of the McCrory bankruptcy proceedings and the likelihood of recovering the $7.75M claim.
- Tenant Concentration: Review the financial stability of the three tenants accounting for over 10% of rental income each, given the recent history of tenant bankruptcies.