Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: April 30, 1996 (Nine months and three months)
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 and properties in Fishkill, NY, and Circleville, OH.
Key Financial Metrics
| Metric | Three Months Ended Apr 30, 1996 |
Nine Months Ended Apr 30, 1996 |
Nine Months Ended Apr 30, 1995 |
|---|---|---|---|
| Rental Income | $2,429,902 | $6,924,337 | $6,276,449 |
| Total Expenses | $2,284,402 | $6,910,880 | $6,369,284 |
| Net Income (Loss) | $4,133 | $(231,987) | $(199,539) |
| EPS (Basic) | $0.00 | $(0.11) | $(0.09) |
| Cash & Equivalents | $363,341 | (Balance Sheet Data) | |
| Working Capital | $2,005,649 | ||
| Total Debt (Long-Term + Current) | $8,403,931 | (Includes $636k current portion) | |
| Net Cash from Operating Activities | $146,293 (9 months) | $184,926 (9 months) |
Material Changes vs. Prior Period
- Revenue Growth: Rental income increased by approximately 16% for the three months and 10% for the nine months ended April 30, 1996, compared to the prior year. This growth is attributed to the addition of three new tenants in the Jowein Building and a lease with the U.S. Post Office in Fishkill, NY.
- Expense Increases: Administrative and general expenses rose significantly in the nine-month period, primarily due to a $424,011 bad debt write-off related to the lease rejection by tenant Jamesway Corporation. Real estate operating expenses increased due to higher maintenance and fuel costs.
- Profitability: The Company reported a net income of $4,133 for the quarter ended April 30, 1996, a reversal from the net loss of $110,756 in the same quarter of 1995. However, the nine-month period ended with a net loss of $231,987, compared to $199,539 in the prior year.
- Debt Levels: Total long-term debt increased from $6.63 million to $7.77 million. Current liabilities decreased slightly, but the current portion of long-term debt increased from $404,813 to $636,432.
Outlook, Risks, and Contingencies
- Management Commentary: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements. The Company has a current asset to current liability ratio of 2 to 1.
- Significant Contingencies (Bankruptcies):
- McCrory Stores: A former tenant that rejected its lease in 1994. The Company has filed a proof of claim for $7,753,732 but has not recorded this amount due to uncertainty. The Company has re-leased 58,000 sq. ft. of the vacated space.
- Jamesway Corporation: Re-filed for Chapter 11 bankruptcy in October 1995 and rejected its lease effective February 29, 1996. The Company intends to file a claim for $1,036,142 in damages. A $424,011 bad debt related to this tenant was written off in the current period.
- Subsequent Event: On June 11, 1996, the Company signed a commitment letter for a $4,000,000 loan secured by a first mortgage lien on the Jamaica property. Proceeds will pay off an existing $1.5 million term loan and fund renovations.
- Concentration Risk: Two tenants accounted for more than 10% of rental income during the nine months ended April 30, 1996 (City of New York and 510 Fulton Street Realty Associates).
Investor Verification Checklist
- Bad Debt Recovery: Verify the status of the $7.75 million claim against McCrory Stores and the $1.04 million claim against Jamesway Corporation, as these are not currently reflected in the financial statements.
- Tenant Concentration: Assess the risk associated with the two tenants comprising over 20% of rental income.
- Debt Service: Review the terms of the new $4 million loan commitment and the existing variable rate loans to ensure cash flow can service the increased debt load.
- Lease Renewals: Confirm the occupancy status and lease terms for the newly leased spaces in the Jowein Building and Fishkill property to validate the revenue growth trajectory.