Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: January 31, 2007 (Six months ended January 31, 2007)
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 in New York, including locations in Brooklyn, Jamaica, Fishkill, and Levittown.
Key Financial Metrics
| Metric | Six Months Ended Jan 31, 2007 | Six Months Ended Jan 31, 2006 |
|---|---|---|
| Total Revenues | $6,707,261 | $6,727,703 |
| Net Income (Loss) | $(186,660) | $69,112 |
| Income (Loss) Per Share | $(0.09) | $0.03 |
| Operating Cash Flow | $(169,626) | $1,217,311 |
| Cash and Cash Equivalents | $1,791,419 | $604,512 |
| Total Assets | $56,421,451 | $57,290,305 |
| Total Liabilities | $18,959,704 | $19,650,898 |
| Long-Term Debt | $14,180,249 | $12,727,664 |
Margins: The filing text does not explicitly state operating margin percentages. Net loss for the six-month period was approximately 2.8% of total revenues.
Material Changes vs. Prior Period
- Profitability: The Company reported a net loss of $186,660 for the six months ended January 31, 2007, compared to net income of $69,112 in the prior year period. This represents a swing of approximately $255,772.
- Revenues: Total revenues decreased slightly by $20,442 (0.3%) year-over-year. Rental income remained relatively flat, but the recovery of real estate taxes decreased from $31,770 in 2006 to $13,996 in 2007.
- Expenses:
- Real Estate Operating Expenses: Increased by $350,761 (9.1%) to $4,220,702, driven by higher rental expenses, maintenance costs, and lease commissions.
- Interest Expense: Increased by $31,374 to $513,468 due to additional bank loans, partially offset by scheduled debt repayments.
- Administrative Expenses: Decreased by $61,658 to $1,427,268 due to lower payroll and insurance costs.
- Cash Flow: Operating cash flow turned negative, using $169,626, compared to providing $1,217,311 in the prior year. This was primarily due to a significant payment of income taxes ($794,314) and increased deferred expenses.
Outlook, Risks, and Management Commentary
- Liquidity: Management considers current working capital and borrowing capabilities adequate. Cash on hand is $1.79 million. The Company is considering selling its Circleville, Ohio property and a small Brooklyn property to generate additional working capital if needed.
- Leasing Activity:
- Positive: The Company signed leases for approximately 108,089 square feet across its properties (Brooklyn, Jamaica, Levittown), which management expects will offset lost rental income from previous vacancies.
- Negative: A major tenant occupying 32,890 square feet at the Jamaica property will vacate on April 30, 2007, resulting in an estimated annual rental income loss of $700,000. The Company is actively seeking replacement tenants.
- Debt and Interest Rate Risk: The Company holds $6.39 million in variable-rate debt. A 100 basis point increase in interest rates would decrease net income by approximately $63,894. The Company does not use derivative instruments to hedge this risk.
- Capital Projects: The Company is financing a $1.1 million elevator project at the Bond Street building, with completion anticipated in the latter half of 2007.
- Contingencies: Various lawsuits are pending, but management believes the resolution will not have a material adverse effect on financial statements.
Investor Verification Checklist
- Lease Replacement: Verify the status of leasing efforts for the 32,890 sq. ft. Jamaica property vacating in April 2007, representing a $700,000 annual revenue risk.
- Debt Maturities: Review the specific terms and maturity dates of the $14.2 million in long-term debt, particularly the variable-rate portions exposed to interest rate hikes.
- Cash Burn: Monitor the negative operating cash flow trend and the sufficiency of the $1.79 million cash balance against upcoming capital expenditures (elevator project) and debt service.
- Tenant Concentration: Note that two tenants accounted for over 30% of rental income in the first six months of the fiscal year.
- Asset Sales: Track any progress on the potential sale of the Circleville, Ohio property and the small Brooklyn property mentioned as liquidity options.