Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: January 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
| Metric | Three Months Ended Jan 31, 1997 | Six Months Ended Jan 31, 1997 |
|---|---|---|
| Revenues (Rental Income) | $2,472,658 | $4,914,667 |
| Total Expenses | $2,239,950 | $4,402,770 |
| Net Income | $99,877 | $199,877 |
| Earnings Per Share | $0.05 | $0.09 |
| Cash and Equivalents | $287,279 (Balance Sheet) | $287,279 (Balance Sheet) |
| Working Capital | $1,779,026 | |
| Current Ratio | 1.7 to 1 | |
| Total Long-Term Debt | $8,155,597 | |
| Net Cash from Operating Activities | $990,091 (Six Months) |
Material Changes vs. Prior Period
- Profitability Turnaround: The Company reported a net income of $99,877 for the quarter ended January 31, 1997, compared to a net loss of $166,598 in the same period in 1996. The prior year loss was significantly impacted by a $424,011 pre-tax bad debt write-off related to a tenant lease rejection.
- Revenue Growth: Rental income increased slightly for the quarter ($2.47M vs $2.47M) and significantly for the six-month period ($4.91M vs $4.49M), driven by the addition of three new tenants.
- Expense Reduction: Administrative and general expenses decreased substantially ($462,803 vs $891,624 for the quarter) primarily due to the absence of the bad debt write-off recorded in the prior year.
- Operating Expenses: Real estate operating expenses increased due to higher maintenance and fuel costs.
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 to fund renovations for new State of New York leases anticipated to commence in May 1997.
- Leasing Outlook: Significant leasing activity is expected to provide additional working capital, including 69,000 sq. ft. in the Jowein Building, 25,000 sq. ft. to the U.S. Post Office, and 46,000 sq. ft. to the State of New York.
- Legal Contingencies (McCrory Stores): McCrory Stores Corporation rejected its lease in 1994. The Company has filed claims totaling approximately $7.75 million for lease rejection damages and $296,000 for administrative damages. These amounts are not included in financial statements due to pending litigation and uncertainty of collection. Approximately 30,000 sq. ft. of the former McCrory space remains unleased due to renovation requirements.
- Legal Contingencies (Jamesway Corporation): Jamesway rejected its lease in 1996. The Company has filed unsecured claims of approximately $981,255 and administrative claims of $189,000. No provision has been made for these claims in the financial statements except for a small pre-petition rental obligation.
- Concentration Risk: Two tenants accounted for more than 10% of rental income during the quarter, including the City of New York.
Investor Verification Checklist
- Lease Execution: Verify the commencement of the Jamaica, NY leases with the State of New York and the U.S. Post Office in Fishkill, as these are critical to the projected working capital increase.
- Renovation Costs: Monitor the utilization of the $2.5 million loan facility and the actual costs associated with renovating the Jowein Building to accommodate six new tenants.
- Legal Resolution: Track the status of the McCrory and Jamesway bankruptcy claims, as a resolution could materially impact future cash flows or result in write-offs.
- Debt Servicing: Review the interest rate exposure on the variable rate term loan and the 8.5% mortgage, particularly given the Company's reliance on rental income to service $8.15 million in long-term debt.
- Tenant Concentration: Assess the risk associated with the two tenants comprising over 20% of rental income.