Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Six months ended January 31, 2011 (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, primarily in New York.
Key Financial Metrics
| Metric | Six Months Ended Jan 31, 2011 | Six Months Ended Jan 31, 2010 |
|---|---|---|
| Total Revenues | $7,315,221 | $7,378,074 |
| Net Income (Loss) | $(8,019) | $417,103 |
| Net Income from Continuing Ops | $169,341 | $439,337 |
| Net Loss from Discontinued Ops | $(177,360) | $(22,234) |
| Cash Provided by Operating Activities | $1,733,655 | $1,518,677 |
| Cash and Cash Equivalents (Ending) | $2,793,348 | $2,115,813 |
| Total Debt (Current + Long-Term) | $11,133,877 | $11,018,869 |
| Working Capital | $767,847 | $1,294,383 |
Note: Total Debt includes mortgages, term loans, and related party notes. Working Capital is calculated as Total Current Assets minus Total Current Liabilities.
Material Changes vs. Prior Period
- Profitability Decline: The Company reported a net loss of $(8,019) for the six months ended Jan 31, 2011, compared to net income of $417,103 in the prior year. This shift was primarily driven by a significant loss from discontinued operations.
- Discontinued Operations Impact: A net loss of $(177,360) from discontinued operations occurred in the current period, compared to $(22,234) in the prior year. This relates to the settlement of the Jowein building lease, including a $1,000,000 payment to the landlord's successor and lease termination expenses.
- Revenue Composition: Total revenues decreased slightly ($62,853) year-over-year. The prior year included a one-time recovery of real estate taxes of $114,251, which was absent in the current period.
- Expense Increases: Administrative and general expenses increased by approximately $99,000, attributed to higher payroll, medical costs, and bad debt expense related to a tenant at the Jamaica, NY building.
- Liquidity Improvement: Cash and cash equivalents increased by $1.24 million, driven by strong operating cash flows of $1.73 million.
Guidance, Outlook, and Risks
- Capital Projects: The Company is undertaking construction for a new 18,218 sq. ft. office lease at Nine Bond Street, Brooklyn. Estimated costs are $1.5 million to $2.0 million, with rent anticipated to commence in late 2011. Costs are planned to be financed through operating funds.
- Lease Settlements: The Company settled its tenancy at the Jowein building (490 Fulton St.) in May 2010. As part of the settlement, it transferred title to 484 Fulton St. and received title to 14 Hanover Place. The Company also entered a new 49-year lease at 25 Elm Place.
- Debt Obligations: A significant portion of long-term debt ($2.18 million) matures on October 1, 2011. Management has not yet determined if this loan will be extended or paid in full.
- Risk Factors: Risks include the ability to obtain credit, changes in economic conditions, lease cancellations, and the outcome of pending litigation. The Company uses fixed-rate debt and does not use derivative financial instruments.
- Unusual Items: The Company recorded an out-of-period tax adjustment of approximately $65,000 related to the 2010 income tax provision, deemed immaterial to current year results.
Investor Verification Checklist
- Debt Maturity: Verify the refinancing status of the $2.18 million mortgage maturing October 1, 2011.
- Capital Expenditures: Monitor the completion and cost overruns of the Nine Bond Street renovation project (estimated $1.5M - $2.0M).
- Tenant Concentration: Review the financial stability of the two tenants accounting for 18.20% and 16.59% of rental income.
- Discontinued Operations: Confirm no further liabilities or costs associated with the Jowein building settlement.
- Bad Debt: Assess the collectability of receivables from the Jamaica, NY building tenant cited as a cause for increased bad debt expense.