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 January 31, 1997 (Fiscal Year ending July 31, 1997).
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, properties in Fishkill and Jamaica, New York, and Circleville, Ohio.

Key Financial Metrics

Note: Working capital calculated as Total Current Assets ($4,542,340) minus Total Current Liabilities ($2,727,388). Management reported working capital of $1,779,026 in the MD&A section.

Material Changes vs. Prior Period

• Profitability Turnaround: The Company reported a net income of $18,013 for the quarter ended January 31, 1997, compared to a net loss of $4,133 in the same period in 1996. For the nine-month period, net income was $217,890 versus a loss of $231,987 in the prior year.
• Bad Debt Write-off Impact: The prior year's results were significantly impacted by a $424,011 pre-tax bad debt write-off related to the lease rejection by tenant Jamesway Corporation. No comparable item occurred in the current period.
• Revenue Growth: Rental income for the nine months ended January 31, 1997, increased to $7,343,860 from $6,924,337 in the prior year, driven by the addition of new tenants.
• Expense Management: Administrative and general expenses decreased significantly year-over-year ($1,457,732 vs. $1,957,123 for nine months), primarily due to the absence of the prior year's bad debt charge and reduced legal/professional costs.
• Debt Structure: Long-term debt increased to $9.5 million from $8.0 million. This includes a new $4.0 million mortgage secured by the Jamaica property to fund renovations and repay a prior term loan.

Outlook, Risks, and Contingencies

• Liquidity and Capital Resources: Management considers current working capital and borrowing capabilities adequate. The Company secured an $800,000 advance against a $2.5 million loan facility for Jamaica property renovations. New leases with the U.S. Post Office and State of New York are anticipated to commence in May 1997, providing additional working capital.
• Tenant Concentration Risk: Two tenants accounted for more than 10% of rental income in the quarter. One is the City of New York; the other is 510 Fulton Street Realty Associates.
• Bankruptcy Contingencies:
  • McCrory Stores: The Company has filed claims totaling approximately $7.8 million for lease rejection damages and administrative claims. No provision has been made in financial statements due to uncertainty of collection.
  • Jamesway Corporation: The Company filed unsecured claims of approximately $981,255 and administrative claims of $189,000. No provision was made except for a $31,971 pre-petition rental obligation.
• Management Changes: Max L. Shulman resigned as Co-Chairman of the Board in November 1996. Lloyd J. Shulman was elected Chairman.

Investor Verification Checklist

• Lease Commencement Dates: Verify the start dates and rent rolls for the new State of New York and U.S. Post Office leases in Jamaica and Fishkill, respectively, which are critical for future cash flow.
• Bankruptcy Claim Status: Monitor the status of the McCrory and Jamesway bankruptcy claims to assess the likelihood of recovering the unrecorded receivables.
• Debt Covenants: Review the terms of the new $4.0 million Jamaica mortgage and the $2.5 million loan facility for restrictive covenants regarding indebtedness and asset sales.
• Renovation Costs: Track capital expenditures related to the Jamaica property renovations to ensure they align with the budget funded by the new debt.
• Tenant Concentration: Assess the financial stability of the two tenants comprising over 20% of rental income.