Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: October 31, 2010
Business Overview: The Company operates as a real estate enterprise, deriving revenue primarily from rental income across a portfolio of properties in New York. The Company is a non-accelerated filer and is not a shell company.
Key Financial Metrics
| Metric | Q1 2011 (Oct 31, 2010) | Q1 2010 (Oct 31, 2009) |
|---|---|---|
| Total Revenues | $3,608,290 | $3,753,252 |
| Net Income | $174,955 | $298,454 |
| Net Income Per Share | $0.09 | $0.15 |
| Operating Cash Flow | $1,480,754 | $1,416,076 |
| Cash and Equivalents | $2,767,160 | $1,551,630 (Beginning Balance) |
| Total Debt (Current + Long-Term) | $11,113,030 | $11,018,869 |
| Total Assets | $55,928,300 | $55,245,052 |
Note: Total Debt includes mortgages, term loans, and related party notes. Current portion of debt is $2,429,787; Long-term portion is $8,683,243.
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased by approximately $145,000 (3.9%) compared to the prior year. This decrease is primarily attributed to the absence of a $114,251 real estate tax recovery recorded in the 2009 period.
- Profitability: Net income from continuing operations dropped from $328,834 to $174,955. The prior year included a loss from discontinued operations of $30,380, whereas the current period had no discontinued operations.
- Expense Increases:
- Real estate operating expenses increased slightly to $1,863,977 due to higher maintenance costs.
- Depreciation and amortization rose to $391,195, driven by improvements at the Nine Bond Street building.
- Interest expense increased to $177,856, largely due to an additional elevator loan.
- Liquidity Improvement: Cash and cash equivalents increased significantly from $1,551,630 to $2,767,160, driven by strong operating cash flows of $1.48 million.
Outlook, Risks, and Unusual Items
- Discontinued Operations Settlement: The Company settled a dispute regarding the Jowein building lease. The Company paid $1,000,000 and transferred title to 484 Fulton Street (appraised at $4.49M) in exchange for title to 14 Hanover Place (appraised at $0.9M) and a release of claims. The lawsuit was dismissed with prejudice.
- Capital Expenditures and Leasing:
- The Company entered a lease for 18,218 sq. ft. at Nine Bond Street. Construction costs are estimated at $1.5M to $2.0M, with rent anticipated to commence in late 2011.
- A drive-in restaurant lease at Massapequa is pending permits, with rent expected in late 2011.
- Debt Obligations: The Company has a related party note of $1,000,000 extended to December 2013 at 5.0% interest. Several mortgages mature between 2011 and 2015.
- Risks: Management cites risks including economic growth rates, credit availability, lease cancellations, and litigation outcomes. The Company is required to remove a foot bridge over Bond Street by June 2012, with costs currently undetermined.
Investor Verification Checklist
- Debt Maturity Profile: Verify the ability to refinance or repay the $2.2M mortgage maturing in October 2011 and the $1.0M related party note.
- Capital Project Costs: Monitor the actual costs of the Nine Bond Street renovation against the $1.5M - $2.0M estimate and the timing of rent commencement.
- Tenant Concentration: Review the impact of the top two tenants, who accounted for 18.46% and 16.76% of rental income respectively.
- Unbilled Receivables: Assess the collectability of $1.82M in unbilled receivables, which represent straight-line rent recognition exceeding cash receipts.
- Contingent Liabilities: Track the estimated cost for the removal of the Bond Street foot bridge and potential condominium unit creation obligations.