MAYS

Business Context and Reporting Period

Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: October 31, 2002
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, including locations in Jamaica and Brooklyn, New York, Fishkill, New York, and Circleville, Ohio.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased by approximately 2.5% ($79,191) compared to the prior year quarter, driven by rental income.
• Profit Decline: Net income decreased by 18.2% ($70,496) year-over-year. This was primarily due to increased operating expenses and lower investment income, partially offset by reduced interest expense.
• Expense Increases:
  • Real estate operating expenses rose to $1,640,297 from $1,475,091, attributed to higher payroll, insurance, maintenance, and utility costs.
  • Administrative and general expenses increased to $696,761 from $601,924 due to higher insurance and legal/professional fees.
• Interest Expense Reduction: Interest expense decreased to $141,565 from $182,633, resulting from a reduced interest rate on a Jamaica, NY mortgage and scheduled debt repayments.
• Cash Flow: Operating cash flow dropped significantly to $669,469 from $1,554,209, largely due to a $626,676 decrease in income taxes payable compared to the prior year.

Outlook, Risks, and Contingencies

• Tenant Bankruptcy: A retail tenant at the Jamaica, NY location filed for Chapter 11 bankruptcy on October 7, 2002. The Company has not recorded $186,766 in fixed rent and additional expenses due for the period August 1 through October 6, 2002, as the tenant has not paid and the Company does not expect payment. The tenant resumed payments after October 7, 2002.
• Lease Expiration and Renewal: The lease for the Circleville, Ohio property (193,000 sq. ft.) terminated September 30, 2002. A three-year extension was executed through September 30, 2005, with an option for the tenant to surrender up to 73,350 sq. ft. after May 31, 2003.
• Legal Contingency: The Company obtained a judgment against the State of New York regarding a condemnation of part of the Fishkill property. While the initial award was $4.1 million, it was reduced to $24,105 on appeal. The Company has moved to increase the award and appeal to the Court of Appeals.
• Capital Expenditures: The Company is undertaking renovations in Brooklyn and Jamaica, NY, with total project costs estimated at approximately $930,000 ($650,000 + $280,000), expected to be completed by December 2002.
• Liquidity: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements.

Investor Verification Checklist

• Bankruptcy Impact: Verify the long-term financial impact of the Jamaica, NY tenant's Chapter 11 filing and the likelihood of recovering the $186,766 in unpaid rent/expenses.
• Legal Recovery: Monitor the status of the appeal regarding the State of New York condemnation award, as the potential recovery has been significantly reduced from the initial judgment.
• Lease Concentration: Note that two tenants accounted for 18.03% and 15.33% of rental income respectively; verify the stability of these key leases.
• Capital Projects: Confirm the completion and cost overruns of the Brooklyn and Jamaica renovation projects scheduled for completion in December 2002.
• Debt Maturities: Review the schedule of mortgage maturities, specifically the Jamaica properties due in 2006 and 2007, and the Fishkill property due in 2004.