MAYS

Business Context and Reporting Period

Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: January 31, 1996
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 Fishkill, NY, and Circleville, OH.

Key Financial Metrics

Debt Profile: Total long-term debt increased to $7,945,285 from $6,631,903. This includes a new $1,500,000 loan facility (with $1,250,000 drawn) for building renovations and a payable to a securities broker of $1,310,679.

Material Changes vs. Prior Period

• Net Loss Expansion: The net loss for the six months ended January 31, 1996, was $236,120, compared to $88,783 in the prior year. This deterioration is primarily driven by a one-time bad debt write-off of $424,011 related to the lease rejection by tenant Jamesway Corporation.
• Revenue Growth: Rental income increased by approximately 7.5% ($314,531) due to the addition of three new tenants, including the U.S. Post Office in Fishkill, NY.
• Expense Increases: Administrative and general expenses rose significantly due to the aforementioned bad debt write-off. Real estate operating expenses increased due to higher maintenance and fuel costs.
• Investment Income Decline: Investment income dropped from $221,549 to $125,166, largely due to a decrease in interest income and the absence of gains on the sale of marketable securities recorded in the prior year.

Outlook, Risks, and Contingencies

Management Commentary: Management considers current working capital and borrowing capabilities adequate to cover planned operating and capital requirements. New leases in Brooklyn and Fishkill are expected to provide additional working capital.

Material Risks and Contingencies:

• Jamesway Corporation Bankruptcy: Jamesway filed for Chapter 11 bankruptcy again in October 1995 and rejected its lease effective February 29, 1996. The Company intends to file a Proof of Claim for approximately $853,478 in damages but has made no provision for post-petition damages of $821,507 in its financial statements due to uncertainty.
• McCrory Stores Corporation: The Company holds a claim of $7,753,732 against McCrory for lease rejection damages. This amount is not included in financial statements due to uncertainty regarding the ultimate court-determined amount.
• Tenant Concentration: Two tenants accounted for more than 10% of rental income during the quarter, including the City of New York and 510 Fulton Street Realty Associates.
• Interest Rate Risk: The Company has variable rate debt, including a $1,500,000 loan facility tied to the bank's prime rate and a mortgage on the Jowein Building that will convert to a prevailing bank rate in April 1996.

Investor Verification Checklist

• Bad Debt Recovery: Verify the status of the $424,011 bad debt write-off and the likelihood of recovering the $853,478 claim against Jamesway Corporation.
• McCrory Claim Status: Monitor the bankruptcy proceedings of McCrory Stores Corporation to assess the recoverability of the $7.75 million claim.
• Debt Service Coverage: Review the impact of rising interest rates on the variable-rate loan facility and the Jowein Building mortgage on future cash flows.
• Lease Occupancy: Confirm the execution of leases for the remaining 70,000 square feet of space vacated by Jamesway in Fishkill, NY.
• Broker Loan Terms: Review the terms of the $1.31 million payable to the securities broker, which is secured by marketable securities and payable on demand.