Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: October 31, 2004
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, primarily in New York, including locations in Brooklyn, Jamaica, and Fishkill.
Key Financial Metrics
| Metric | Q1 2005 (Oct 31, 2004) | Q1 2004 (Oct 31, 2003) |
|---|---|---|
| Total Revenues | $3,156,943 | $3,319,941 |
| Net Income | $114,876 | $280,788 |
| Earnings Per Share | $0.06 | $0.14 |
| Operating Cash Flow | $918,897 | $1,520,048 |
| Cash and Equivalents | $1,807,310 | $603,289 |
| Total Debt (Long-term + Current) | $11,814,098 | $9,059,003 |
| Total Assets | $52,874,280 | $51,809,010 |
Note: Total Debt calculated as Long-Term Debt ($11,258,090) plus Current portion of mortgages ($556,008).
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased by approximately $163,000 (4.9%) compared to the prior year. This was primarily due to the New York City Department of Finance vacating the Jowein building in June 2004. This loss was partially offset by new leases at the Nine Bond Street and Jowein buildings.
- Profitability Drop: Net income fell by 59% to $114,876. The decline was driven by lower rental income, increased administrative expenses (payroll, insurance, legal), and higher interest expense.
- Debt Expansion: Long-term debt increased significantly due to a new $12,000,000 multiple draw term loan facility closed in August 2004. As of October 31, 2004, the company had drawn $2,820,000 from this facility to refinance the Fishkill property mortgage and fund capital improvements.
- Liquidity Improvement: Cash and cash equivalents increased by $1.2 million, driven by financing activities (new borrowings) and a reduction in payables to a securities broker.
Outlook, Risks, and Management Commentary
- Capital Projects: The company is actively pursuing capital improvements at its Brooklyn (9 Bond Street) and Fishkill properties, financed by the new term loan. It has also entered into contracts to purchase additional interests in its Brooklyn properties totaling $2.44 million.
- Vacancy Risk: A tenant at the Levittown, New York property vacated in September 2004, resulting in an estimated annual rental income loss of $350,000. Management is actively seeking new tenants.
- Interest Rate Risk: The company holds $4,654,726 in variable-rate debt. Management estimates that a 100 basis point increase in interest rates would decrease net income by approximately $46,547.
- Legal Contingencies: Various lawsuits are pending, though management believes they will not have a material adverse effect on financial statements.
- Internal Controls: Management noted that the accounting department consists of only four persons, making complete segregation of duties impossible. Compensating controls are being monitored to mitigate this risk.
Investor Verification Checklist
- Leasing Status: Verify the timeline for re-leasing the vacated Levittown property and the commencement of rent for the new Jamaica property tenant (scheduled for March 2005).
- Debt Covenants: Review the specific covenants and drawdown conditions of the new $12 million term loan facility to ensure compliance and availability of funds for future capital improvements.
- Interest Rate Exposure: Monitor the impact of floating interest rates on the $4.65 million variable-rate debt portion.
- Capital Expenditures: Confirm the progress and cost overruns, if any, regarding the $750,000 parcel purchase and the $1.5 million pending purchase in Brooklyn.
- Internal Controls: Assess the effectiveness of the compensating controls in the accounting department given the lack of full segregation of duties.