MAYS

Business Context and Reporting Period

Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Nine months ended April 30, 2009 (Unaudited)
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

Profitability Margins (Nine Months 2009):
- Operating Margin: 12.7% (Income from operations: $1,584,909)
- Net Profit Margin: 5.3%

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by approximately 16.7% ($1.79 million) compared to the prior year. This was driven by leasing to five additional tenants and a significant recovery of real estate taxes ($546,418) from prior years, compared to $91,043 in the prior period.
• Turnaround to Profitability: The Company reported a net income of $664,585, reversing a net loss of $214,021 in the comparable 2008 period.
• Expense Trends: Real estate operating expenses increased by 3.1% due to higher rent, taxes, and payroll costs. Administrative expenses remained relatively flat, though 2008 included a specific bad debt expense not present in 2009.
• Investment Impairment: Investment income decreased significantly due to a $99,976 write-down on the Company's investment in Lehman Brothers Holdings Inc. preferred stock.
• Debt Reduction: The Company reduced its long-term debt by approximately $1.26 million, primarily through the full payoff of a $764,648 loan on the Jowein building in March 2009 and a partial payment of $300,000 in September 2008.

Outlook, Risks, and Management Commentary

• Liquidity: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements. Cash and cash equivalents stood at $1.74 million.
• Capital Projects: The Company is constructing two new elevators at its Bond Street building. Total estimated cost is $1.1 million, with $850,000 financed by a bank term loan. The project is anticipated to be completed in fiscal 2009.
• Lease Expirations: Leases with landlords at the Jowein building expire on April 30, 2010. The Company is committed to returning the premises in the condition received, though the cost to separate the building is currently undetermined.
• Legal Contingencies: The Company is involved in litigation regarding a termination notice received in 2007 concerning its tenancy at the Jowein building. A preliminary injunction was granted in 2007 preventing eviction. Management believes the resolution will not have a material adverse effect, but the outcome remains unpredictable.
• Market Risk: The Company has $320,000 in variable-rate debt. A 100 basis point increase in interest rates would decrease net income by approximately $3,200.

Investor Verification Checklist

• Lease Renewal Risk: Verify the status of negotiations for the Jowein building leases expiring April 30, 2010, and potential costs associated with returning the premises.
• Legal Proceedings: Monitor the scheduling and outcome of the trial regarding the Jowein building termination notice lawsuit.
• Capital Expenditure Completion: Confirm the completion timeline and final cost of the elevator project at the Bond Street building.
• Tenant Concentration: Note that two tenants accounted for 12.51% and 16.63% of rental income in the nine-month period; monitor the stability of these key leases.
• Investment Portfolio: Review the status of the remaining marketable securities, which held a gross unrealized loss of $575,492 as of April 30, 2009.