Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: January 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
| Metric | Six Months Ended Jan 31, 2002 | Six Months Ended Jan 31, 2001 |
|---|---|---|
| Total Revenues | $6,344,677 | $5,548,457 |
| Net Income | $733,001 | $447,302 |
| Earnings Per Share (EPS) | $0.36 | $0.22 |
| Operating Cash Flow | $2,107,995 | $904,517 |
| Cash and Equivalents (Ending) | $3,118,762 | $1,097,186 |
| Total Debt (Long-Term + Current) | $9,400,708 | $8,707,367 |
| Total Assets | $47,308,689 | $45,577,667 |
Note: Total Debt calculated as Total Long-Term Debt ($8,490,028) plus Current Portion of Long-Term Debt ($910,680).
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased by approximately 14.3% ($796,220) compared to the prior six-month period. This increase is primarily attributed to the leasing of 42,250 square feet at the Jamaica, New York property, which commenced on May 1, 2001.
- Profitability: Net income increased by 63.9% ($285,699). Operating income before investment income and taxes rose from $894,546 to $1,449,655.
- Expense Trends:
- Real Estate Operating Expenses: Increased slightly to $2,999,207 from $2,964,582, driven by higher real estate taxes, insurance, and maintenance, partially offset by lower utility costs.
- Administrative Expenses: Increased to $1,334,205 from $1,213,307 due to higher payroll, medical, and legal costs.
- Interest Expense: Increased to $361,564 from $286,034 due to the additional mortgage on the Jamaica property, though offset by scheduled debt repayments.
- One-Time Items: The prior period (2001) included a bad debt recovery of $47,532 related to the Jamesway Corporation bankruptcy, which did not recur in the current period.
Outlook, Risks, and Contingencies
- Liquidity: Management considers current working capital and borrowing capabilities adequate. Cash and cash equivalents increased significantly to $3.12 million.
- Lease Renewal Risk (Circleville, Ohio): The lease for the entire Circleville property (193,000 sq. ft.) terminates on September 30, 2002. The tenant did not exercise the first five-year extension option by the September 30, 2001 deadline. Negotiations are ongoing to determine if the tenant will continue to use the premises. Annual rent is approximately $466,162.
- Legal Contingency (Fishkill, NY): The Company obtained a judgment of $4,147,500 plus interest against the State of New York regarding a condemnation of the Fishkill property. The State has appealed the judgment and the award of legal fees. This amount is not reflected in financial statements until the appeal is resolved.
- Future Leasing:
- 15,527 sq. ft. of storage space in Brooklyn leased to an existing tenant; rent commences April 2002.
- 5,110 sq. ft. of office space in the Jowein building (Brooklyn) leased to an existing tenant; rent expected to commence June 2002.
- Debt Maturities: A mortgage on the Circleville, Ohio property matures on September 30, 2002.
Investor Verification Checklist
- Circleville Lease Status: Verify the outcome of negotiations regarding the Circleville, Ohio property lease expiring September 30, 2002, as this represents a significant portion of rental income.
- State of New York Litigation: Monitor the status of the appeal regarding the $4.15 million condemnation judgment; resolution could materially impact future cash flows.
- Tenant Concentration: Note that two tenants accounted for approximately 15% and 14.9% of rental income in the first six months of 2002.
- Debt Service: Review the impact of the new $3.5 million mortgage on the Jamaica property on future interest coverage ratios.