Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: January 31, 1998 (Six months ended January 31, 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
| Metric | Six Months Ended Jan 31, 1998 | Six Months Ended Jan 31, 1997 |
|---|---|---|
| Total Revenues | $5,605,592 | $4,914,667 |
| Net Income | $671,761 | $199,877 |
| Earnings Per Share (EPS) | $0.31 | $0.09 |
| Operating Cash Flow | $1,957,241 | $990,091 |
| Cash and Equivalents (End of Period) | $1,065,418 | $287,279 |
| Total Assets | $41,899,936 | $40,405,980 |
| Total Liabilities | $13,165,614 | $12,375,944 |
| Long-Term Debt | $8,840,696 | $9,282,701 |
| Working Capital | $2,660,486 | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased by approximately 14% ($690,925) compared to the prior six-month period. This was driven by new tenant leases and a one-time pre-tax net recovery of real estate taxes totaling $283,085.
- Profitability Surge: Net income increased by 236% ($471,884). The primary drivers were the aforementioned tax recovery and a bad debt recovery of $41,453 related to the Jamesway Corporation bankruptcy claim.
- Expense Management: Real estate operating expenses decreased by $169,901 due to lower real estate taxes and fuel costs, partially offset by increases in payroll, maintenance, and leasing commissions.
- Interest Expense: Interest expense increased by $66,452, primarily due to interest on the Jamaica Building loan ($4 million facility).
- Liquidity Improvement: Cash and cash equivalents increased by $831,130, resulting in a current ratio of 1.73 to 1.
Outlook, Risks, and Contingencies
- Real Estate Tax Settlement: The Company has reached a settlement with the City of New York regarding property tax assessments for the Jowein Building (1991/92 through 1995/96). The Company expects a refund of approximately $919,000 (net of legal fees and tenant credits) but has not recorded this in financial statements pending court execution of the order.
- Bankruptcy Contingencies:
- McCrory Stores: The Company holds an unsecured claim of $7,753,732 and an administrative claim of ~$296,000. McCrory has sold substantially all assets, and distributions to unsecured creditors are uncertain. Approximately 30,000 sq. ft. of space remains unleased due to renovation requirements.
- Jamesway Corporation: The Company has realized 49% of its unsecured claim ($465,811) and 100% of its administrative 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: the City of New York and 510 Fulton Street Realty Associates.
- Management Outlook: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements. New leases in Jamaica, NY, and Fishkill, NY, are expected to provide additional working capital.
Investor Verification Checklist
- Tax Refund Timing: Verify the status of the court order for the $919,000 New York City tax settlement, as this is a significant potential cash inflow not yet recognized.
- McCrory Claim Recovery: Assess the likelihood of recovering any portion of the $7.75 million unsecured claim against McCrory Stores, given the debtor's asset liquidation status.
- Lease Occupancy: Confirm the leasing status of the remaining 30,000 sq. ft. in the Jowein Building previously occupied by McCrory.
- Debt Covenants: Review the terms of the $4 million Jamaica Building loan (Note 5a) regarding restrictions on indebtedness and prepayment options.
- Recurring vs. Non-Recurring Income: Distinguish between the $283,085 tax recovery and $41,453 bad debt recovery (non-recurring) and core rental income when projecting future earnings.