Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: October 31, 1998
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 significant holdings in Jamaica and Brooklyn, New York, and Fishkill, New York.
Key Financial Metrics
| Metric | Q3 1998 (Unaudited) | Q3 1997 (Unaudited) |
|---|---|---|
| Total Revenues | $2,679,905 | $2,800,861 |
| Net Income | $321,315 | $345,011 |
| Earnings Per Share | $0.15 | $0.16 |
| Operating Cash Flow | $1,285,417 | $2,031,203 |
| Cash and Equivalents | $1,520,022 | $1,252,666 |
| Total Assets | $41,436,756 | $41,374,924 |
| Total Liabilities | $11,114,849 | $11,315,427 |
| Long-Term Debt | $8,158,198 | $8,395,834 |
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased by approximately $120,956 (4.3%) compared to the prior year quarter. This decrease is primarily attributable to the absence of a $159,276 recovery of real estate taxes recorded in the 1997 period, which was a non-recurring item related to prior years' taxes from the City of New York.
- Net Income Decrease: Net income fell by $23,696 (6.9%) to $321,315. The decline mirrors the revenue drop due to the lack of the tax recovery in the current period.
- Expense Reductions: Real estate operating expenses decreased by $31,240, largely due to lower real estate taxes. Administrative and general expenses also declined slightly by $9,038.
- Interest Expense: Interest expense decreased by $43,182 to $172,849, primarily due to the elimination of a loan payable to a securities broker.
- Operating Cash Flow: Cash provided by operating activities dropped significantly by $745,786 to $1,285,417, reflecting the lower net income and changes in working capital accounts.
Outlook, Risks, and Contingencies
Management Commentary and Outlook
Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements. The Company is actively leasing space, including 54,000 square feet at its Jamaica, New York building to the State of New York and other tenants, which is expected to provide additional working capital.
Capital Projects
The Company is undertaking an exterior facade renovation at its Jamaica building with an anticipated total cost of approximately $1,000,000. As of October 31, 1998, $673,512 has been expended, with completion expected by May 1999.
Year 2000 Compliance
The Company is implementing a Year 2000 compliant accounting system. Management does not anticipate material expenditures or significant operational disruptions related to Year 2000 issues, though they acknowledge reliance on third-party systems without absolute guarantees.
Material Contingencies (Litigation/Bankruptcy)
- McCrory Stores Corporation: McCrory rejected its lease in 1994. The Company holds an unsecured claim for lease rejection damages of $7,753,732 and an administrative claim of $170,000. McCrory has sold substantially all assets, and distributions to unsecured creditors are expected to be minimal. The Company has received only $19,304 on the administrative claim to date.
- Jamesway Corporation: Jamesway rejected its lease in 1996. The Company has an allowed unsecured claim of $950,635 and an administrative claim of $54,887. To date, the Company has recovered $520,698 (49% of the unsecured claim and 100% of the administrative claim).
- Accounting Treatment: No provision has been made in the financial statements for the remaining balances of these claims due to the uncertainty of collection.
Investor Verification Checklist
- Recurring Revenue Quality: Verify the sustainability of rental income excluding the one-time $159,276 tax recovery from the prior year.
- Lease Concentration Risk: Confirm the status of the single tenant accounting for 16.10% of rental income and the progress of leasing the remaining 30,000 square feet of the former McCrory space.
- Capital Expenditure Completion: Monitor the completion of the $1,000,000 Jamaica building renovation and any potential cost overruns.
- Debt Maturities: Review the schedule for mortgage maturities, specifically the Fishkill property mortgage maturing November 1, 1999, and the Jowein building mortgage maturing March 31, 2000.
- Contingency Recovery: Assess the likelihood of further recoveries from the McCrory and Jamesway bankruptcy proceedings, noting the low probability of significant unsecured claim payments.