MAYS J W INC annual report, FY2012

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J.W. Mays, Inc. — FY2012 Form 10-K Summary

Business Context and Reporting Period

J.W. Mays, Inc. is a New York-based commercial real estate company. It discontinued its department store operations in 1989 and now derives its business primarily from leasing commercial properties. The fiscal year ended July 31, 2012. The company had 29 employees and no foreign operations.

The filing covers approximately 1.45 million square feet across properties in Brooklyn, Jamaica, Fishkill, Levittown and Massapequa, New York, and Circleville, Ohio. Several properties have substantial vacant space, particularly the Fishkill property, which had approximately 203,000 square feet available for lease.

Financial Metrics and Capital Structure

  • The filing incorporates the consolidated financial statements and management’s discussion from the 2012 Annual Report to Shareholders. The provided filing text does not state clear values for fiscal 2012 revenue, operating income, net income, earnings per share, cash flow from operations, or liquidity balances.
  • Fixed-rate debt was $6,750,259 at July 31, 2012. The company stated that its debt structure does not expose it to market risk from changes in interest rates and that it does not use derivative financial instruments.
  • Gross real estate carried on the books was $75,779,002, with accumulated depreciation of $31,620,831 at July 31, 2012. Real estate investment declined from $76,643,907 at July 31, 2011, primarily reflecting retirements of $1,967,686, partly offset by $1,102,781 of improvements.
  • Depreciation expense was $1,534,697 in fiscal 2012, compared with $1,506,786 in fiscal 2011.
  • The company paid no dividends and repurchased no common stock during fiscal 2012. It had 2,015,780 shares outstanding as of September 7, 2012.
  • Market prices ranged from $17.10 to $20.25 during the quarter ended July 31, 2012, compared with $16.50 to $20.05 in the comparable 2011 quarter.
  • The allowance for net unrealized gains or losses on marketable securities increased to $243,477 at July 31, 2012 from $190,415 at July 31, 2011.

Material Changes Versus the Prior Comparable Period

  • Reported occupancy improved at several properties. Brooklyn’s Fulton Street property increased to 72.28% from 69.68%; the Jowein Building increased to 76.38% from 76.02%; and Circleville increased to 77.75% from 66.11%.
  • Jamaica occupancy was unchanged at 81.14%.
  • Massapequa occupancy increased to 89.38% from 85.01%, following the commencement of restaurant occupancy in April 2012.
  • Levittown remained fully occupied at 100%.
  • Fiscal 2012 real estate improvements of $1,102,781 were lower than fiscal 2011 improvements of $1,725,462.
  • The company completed removal of the Bond Street footbridge in November 2011 at a cost of $309,423.
  • In July 2012, the company exercised 30-year renewal options relating to certain Brooklyn leases and the Livingston Street garage and related facilities, extending those arrangements to 2043.
  • Five-year cumulative shareholder return was $84.95 per $100 invested at July 31, 2007, versus $105.77 for the S&P 500 and $62.66 for the peer group.

Outlook, Risks, Contingencies, and Unusual Items

  • Management described risks from economic downturns, tenant financial weakness, competition, loss of key personnel, insurance availability, government regulation, financing availability and changing interest rates.
  • Older properties may require costly renovations, including remediation or encapsulation of potentially hazardous materials. Renovation of vacant space is generally dependent on obtaining future leases, and the company provided no assurance that such leases will be executed.
  • The company seeks to diversify its tenant base, but certain tenants occupy more than 10% of rentable space or rental income, creating concentration risk.
  • The controlling shareholder group may vote in its own interests. Potential related-party conflicts exist because a significant shareholder does business with the company and shares the same chief executive officer and certain management personnel.
  • Various lawsuits and claims were pending; management believed their resolution would not materially adversely affect the consolidated financial statements.
  • If the company sells, transfers, disposes of or demolishes 25 Elm Place, it may be required to create a condominium unit for a loading dock. The need and cost could not be determined at the filing date.
  • The company stated that its disclosure controls and internal control over financial reporting were effective, with no significant deficiencies or material weaknesses identified. The independent auditor was not required to provide a separate internal-control attestation because the company is a smaller reporting company.
  • No specific fiscal 2013 earnings, revenue, occupancy or capital-spending guidance was provided in the supplied filing text.

Facts Investors Should Verify

  1. Obtain the incorporated 2012 Annual Report to verify revenue, net income, margins, earnings per share, operating cash flow, cash balances and current liabilities.
  2. Review the maturity schedule, interest rates, collateral and covenant requirements for the $6.75 million of fixed-rate debt.
  3. Assess tenant concentration, lease expirations and renewal assumptions, particularly for the Brooklyn, Jamaica and Circleville properties.
  4. Evaluate the financial and operational impact of vacant space at Fishkill, Jamaica, Brooklyn and Circleville, including required renovation spending.
  5. Review related-party transactions and governance safeguards involving the controlling shareholder group and shared management.
  6. Monitor the potential condominium-unit obligation at 25 Elm Place and any environmental or remediation liabilities associated with older properties.