Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: April 30, 2007 (Nine months ended April 30, 2007)
Business Overview: The Company operates as a real estate enterprise, managing properties in Brooklyn, Jamaica, Fishkill, and Levittown, New York. It discontinued its retail department store segment in 1989.
Key Financial Metrics
| Metric (Nine Months Ended April 30) | 2007 | 2006 |
|---|---|---|
| Total Revenues | $10,183,549 | $10,253,732 |
| Net Income (Loss) | $(168,230) | $164,249 |
| Income (Loss) Per Share | $(0.08) | $0.08 |
| Cash Provided by Operating Activities | $792,359 | $2,657,871 |
| Cash and Cash Equivalents (Ending) | $2,337,654 | $906,486 |
| Total Assets | $56,299,656 | $57,290,305 |
| Total Long-Term Debt | $13,947,491 | $12,727,664 |
| Shareholders' Equity | $37,479,177 | $37,639,407 |
Material Changes vs. Prior Period
- Profitability Reversal: The Company reported a net loss of $168,230 for the nine months ended April 30, 2007, compared to net income of $164,249 in the prior year period. This represents a swing of approximately $332,000.
- Revenue Decline: Total revenues decreased by $70,183 (0.7%) primarily due to a significant drop in the recovery of real estate taxes ($39,483 in 2007 vs. $195,605 in 2006).
- Expense Increases: Real estate operating expenses increased by $521,304 (8.9%) due to higher rental, maintenance, and utility costs. Interest expense increased by $65,948, driven by additional bank loans.
- Debt Growth: Total long-term debt increased by $1.22 million, largely due to draws on a multiple-draw term loan to finance tenant improvements and brokerage commissions.
- Occupancy Changes: A major tenant vacated 32,890 square feet at the Jamaica property on April 30, 2007, resulting in an estimated annual rental income loss of $700,000. However, new leases were signed for over 123,000 square feet across various properties.
Outlook, Risks, and Contingencies
- Liquidity: Management considers current working capital and borrowing capabilities adequate. The Company is considering selling a small Brooklyn property to generate additional working capital if necessary.
- Legal Contingency: The Company is involved in litigation regarding a termination notice received from landlords of the Jowein building in Brooklyn. The Company filed a lawsuit seeking to declare the termination improper and obtained a preliminary injunction preventing eviction. Management cannot predict the outcome or potential costs.
- Interest Rate Risk: The Company holds $6.33 million in variable-rate debt. A 100 basis point increase in interest rates would decrease net income by approximately $63,294.
- Forward-Looking Statements: Future results depend on the successful leasing of vacant space (specifically the 32,890 sq. ft. in Jamaica) and the commencement of rent for new tenants in Levittown and Brooklyn.
Investor Verification Checklist
- Lease Renewal Status: Verify the status of negotiations for the 32,890 square feet vacated in Jamaica, NY, which represents a significant annual revenue loss of $700,000.
- Legal Outcome: Monitor the resolution of the lawsuit regarding the Jowein building lease termination to assess potential eviction risks or legal costs.
- Debt Conversion: Review the terms for converting the variable-rate multiple draw term loan (currently at 7.57%) to a permanent fixed-rate mortgage upon maturity.
- Capital Expenditures: Track the completion and cost of the $1.1 million elevator project at the Bond Street building.
- Tenant Concentration: Note that two tenants accounted for over 30% of rental income in the nine-month period; monitor the stability of these key relationships.