Business Context and Reporting Period
Company: J.W. Mays, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: October 31, 1995
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
| Metric | Q1 FY1996 (Oct 31, 1995) |
Q1 FY1995 (Oct 31, 1994) |
|---|---|---|
| Revenues (Rental Income) | $2,026,254 | $2,070,749 |
| Total Expenses | $2,005,982 | $2,084,196 |
| Net Loss | $(69,522) | $(35,407) |
| Loss Per Share | $(0.03) | $(0.02) |
| Operating Cash Flow | $371,877 | $248,843 |
| Cash and Equivalents | $587,355 | $408,387 |
| Total Debt (Long-Term + Current) | $7,339,616 | N/A |
| Working Capital | $2,067,438 | N/A |
Note: Total Debt calculated as Long-Term Debt ($6,918,419) plus Current Portion of Long-Term Debt ($421,197).
Material Changes vs. Prior Period
- Revenue Decline: Rental income decreased by approximately $44,500 (2.1%) compared to the prior year quarter. This was primarily due to the loss of two tenants and rent concessions granted to another tenant, partially offset by income from a new tenant.
- Expense Reduction: Real estate operating expenses decreased by $81,945, largely due to a credit for utility costs. Administrative expenses also saw a slight decrease.
- Interest Expense: The net cost of debt (interest expense less investment income) increased significantly to $106,794 from $64,729 in the prior year, driven by interest on a new broker loan.
- Capital Expenditures: Investing cash outflows increased to $742,141 from $556,408, reflecting higher capital expenditures of $741,820 for property improvements.
Outlook, Risks, and Contingencies
Management Commentary and Outlook
Management considers current working capital and borrowing capabilities adequate to cover planned requirements. New leases for 50,000 sq. ft. in Brooklyn and 25,000 sq. ft. to the U.S. Post Office in Fishkill commenced in November 1995, expected to provide additional working capital. Negotiations are ongoing for other vacant spaces.
Material Risks and Contingencies
- Jamesway Corporation Bankruptcy: Jamesway, a tenant accounting for approximately 5.2% of annual rental income, filed for Chapter 11 bankruptcy protection again on October 18, 1995. The tenant is conducting a "Going Out of Business Sale" expected to conclude in January 1996. The Company is marketing the leasehold.
- McCrory Stores Claim: The Company holds a claim of $7,753,732 against McCrory Stores Corporation (formerly 14% of rental income) for lease rejection damages. This amount is not included in financial statements due to uncertainty of recovery.
- Tenant Concentration: Three tenants accounted for more than 10% of rental income each during the quarter. The City of New York is one of these major tenants.
- Debt Covenants: The Company has a $1.5 million loan facility for renovations, with $400,000 drawn as of the report date. Mortgages on the Jowein Building and Fishkill property have specific maturity dates and interest rate structures.
Investor Verification Checklist
- Jamesway Lease Status: Verify the outcome of the Jamesway bankruptcy proceedings and the likelihood of lease assumption or vacancy.
- McCrory Claim Recovery: Assess the probability of recovering any portion of the $7.75 million claim against McCrory.
- New Lease Occupancy: Confirm the start dates and rent rates for the new Brooklyn and Fishkill leases mentioned in the outlook.
- Broker Loan Terms: Review the terms of the $1.39 million payable to the securities broker, specifically the 8% interest rate and collateral requirements.
- Capital Expenditure Plan: Evaluate the necessity and return on investment for the $741,820 in capital expenditures incurred during the quarter.