MAYS

Business Context and Reporting Period

Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Three and nine months ended April 30, 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 the Jowein Building in Brooklyn, NY, and properties in Jamaica, NY, Fishkill, NY, and Circleville, OH.

Key Financial Metrics

Liquidity: Current assets to current liabilities ratio is 2.32 to 1. Cash and cash equivalents increased to $642,091 from $234,288 at the prior year-end.

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased significantly due to new tenant leases and a one-time recovery of prior years' real estate taxes.
  • Three-month revenue increased from $2.43M to $3.59M.
  • Nine-month revenue increased from $7.34M to $9.19M.
• Profitability Surge: Net income for the nine months ended April 30, 1998, was $1.52M compared to $218K in the prior year. This is primarily driven by a pre-tax net recovery of real estate taxes of $1.21M (nine months) and $924K (three months) from the City of New York and Town of Fishkill.
• Expense Trends: Real estate operating expenses decreased due to lower tax and fuel costs, partially offset by higher payroll and maintenance. Administrative expenses increased due to payroll and legal costs.
• Debt Service: Interest expense increased, primarily due to the Jamaica Building loan ($4M term loan), though the Company maintains adequate borrowing capabilities.

Outlook, Risks, and Contingencies

• Management Commentary: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements. New leases (including U.S. Post Office and State of New York) are expected to provide additional working capital.
• Year 2000 Compliance: The Company does not believe material expenditures will be required to resolve Year 2000 issues.
• Contingencies (Litigation):
  • McCrory Stores: The Company holds an unsecured claim of $7.75M and an administrative claim of ~$296K following McCrory's Chapter 11 bankruptcy and lease rejection. The Company has not recorded these claims due to uncertainty of collection; McCrory has sold assets with insufficient proceeds for unsecured creditors. Approximately 30,000 sq. ft. of the former McCrory space remains unleased due to renovation needs.
  • Jamesway Corporation: The Company has an allowed unsecured claim of $950,635 and administrative claim of $54,887. As of April 30, 1998, the Company has realized $520,698 (49% of unsecured claim). No provision has been made for the remaining balance due to collection uncertainty.
• Concentration Risk: Two tenants accounted for more than 10% of rental income in the quarter ended April 30, 1998 (City of New York and 510 Fulton Street Realty Associates).

Investor Verification Checklist

• Real Estate Tax Recovery: Verify the sustainability of the $1.2M tax recovery, which was a non-recurring item driving the majority of the period's profit.
• McCrory Claim Status: Monitor the status of the $7.75M unsecured claim against McCrory Stores and the re-leasing status of the 30,000 sq. ft. vacant space in the Jowein Building.
• Jamesway Collection: Track further collections on the remaining balance of the Jamesway unsecured claim.
• Debt Covenants: Review the terms of the $4M Jamaica Building loan (Note 5a) regarding restrictions on indebtedness and prepayment options.
• Tenant Concentration: Assess the risk associated with the City of New York and 510 Fulton Street Realty Associates comprising over 20% of rental income.