Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: October 31, 2008
Business Overview: The Company operates as a real estate enterprise, deriving revenue primarily from rental income across properties in Brooklyn, New York, Jamaica, New York, Fishkill, New York, and Circleville, Ohio. The Company discontinued its retail department store segment in 1989.
Key Financial Metrics
| Metric | Q1 FY2009 (Oct 31, 2008) | Q1 FY2008 (Oct 31, 2007) |
|---|---|---|
| Total Revenues | $3,922,846 | $3,477,207 |
| Net Income (Loss) | $60,338 | $(36,138) |
| Earnings Per Share | $0.03 | $(0.02) |
| Operating Cash Flow | $1,330,377 | $(367,073) |
| Cash and Equivalents | $1,981,103 | $4,080,629 |
| Total Assets | $56,183,931 | $57,283,328 |
| Total Liabilities | $16,796,231 | $17,829,783 |
| Long-Term Debt | $11,547,581 | $11,883,934 |
Profitability: The Company reported a net income margin of approximately 1.5% for the quarter. Operating income was $402,662.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by $445,639 (12.8%) compared to the prior year quarter. This increase is attributed to leasing space to five additional tenants at properties in Brooklyn and Circleville.
- Expense Increases:
- Real estate operating expenses rose to $2,242,687 from $2,145,580, driven by higher rental expenses and real estate taxes.
- Administrative and general expenses increased to $872,405 from $780,356 due to higher payroll, legal, and professional costs.
- Investment Loss: Investment income turned negative at $(62,899) compared to $64,445 in the prior year. This was primarily due to a $99,976 impairment write-down on preferred stock of Lehman Brothers Holdings Inc.
- Debt Reduction: The Company made a $300,000 partial principal payment on a loan related to the Jowein Building in September 2008. Total long-term debt decreased by approximately $336,000.
Outlook, Risks, and Contingencies
- Liquidity: Management considers current working capital and borrowing capabilities adequate. Cash and cash equivalents increased by $505,713 during the quarter.
- Capital Projects: The Company is constructing two new elevators at the Bond Street building in Brooklyn. Total project cost is estimated at $1,100,000, with $850,000 financed by a bank. Completion is anticipated in fiscal 2009.
- Leasing Activity: A lease agreement for 57,209 square feet at the Brooklyn property was signed in July 2008, with rent commencing in February 2009.
- Legal Contingency: The Company is involved in litigation regarding a termination notice received from landlords of the Jowein building. The Company obtained a preliminary injunction preventing eviction. Management cannot predict the outcome or potential costs to cure alleged defaults.
- Market Risk: The Company has $440,000 in variable-rate debt. A 100 basis point increase in interest rates would decrease net income by approximately $4,400.
Investor Verification Checklist
- Lehman Brothers Exposure: Verify the status of the $99,976 impairment charge and any remaining exposure to Lehman Brothers Holdings Inc. securities.
- Jowein Building Litigation: Monitor the status of the lawsuit regarding the lease termination notice and potential costs to cure defaults.
- Tenant Concentration: Note that two tenants accounted for 11.29% and 16.70% of rental income, respectively, in the quarter.
- Debt Covenants: Review loan agreements for the Jamaica and Bond Street properties to ensure compliance with covenants, particularly regarding indebtedness and lease assignments.
- Internal Controls: Acknowledge the limited segregation of duties within the four-person Accounting Department and the reliance on compensating controls.