FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 1-3647
J.W. Mays, Inc.
(Exact name of registrant as specified in its charter)
New York 11-1059070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 Bond Street, Brooklyn, New York 11201-5805
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 718-624-7400
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X . No .
Number of shares outstanding of the issuer's common stock as of the latest
practicable date.
Class Outstanding at June 8, 1998
Common Stock, $1 par value 2,135,780 shares
This report contains 18 pages.
<PAGE>
J. W. MAYS, INC.
INDEX
Page No.
Part I - Financial Information:
Consolidated Balance Sheet 3
Consolidated Statement of Income
and Retained Earnings 4
Consolidated Statement of Cash Flows 5
Notes to the Consolidated Financial Statements 6 - 13
Management's Discussion and Analysis of Results
of Operations and Financial Condition 14 - 16
Part II - Other Information 17
<PAGE>
<TABLE>
<CAPTION>
J. W. MAYS, INC.
CONSOLIDATED BALANCE SHEET
April 30, July 31,
ASSETS 1998 1997
--------------------------------------------------------------- --------------- ---------------
(Unaudited) (Audited)
<S> <C> <C>
Property and Equipment - Net (Notes 5 and 7) $28,069,183 $28,125,834
------------- -------------
Current Assets:
Cash and cash equivalents 642,091 234,288
Marketable securities - other investments (Notes 4 and 8) 3,484,710 2,721,127
Receivables (Note 9) 298,691 563,410
Real estate taxes refundable 2,509,222 -
Deferred income taxes 109,000 67,000
Security deposits 8,471 -
Prepaid expenses 604,539 1,150,916
------------- -------------
Total current assets 7,656,724 4,736,741
------------- -------------
Other Assets:
Deferred charges 2,803,123 2,745,524
Less accumulated amortization 1,193,612 1,030,351
------------- -------------
Net 1,609,511 1,715,173
Security deposits 588,148 589,492
Unbilled receivables (Note 9) 3,926,384 3,651,795
Unbilled receivables - affiliated company (Note 9) 773,234 909,688
Receivables 232,884 384,088
Receivables - affiliated company (Note 9) 66,224 194,453
Marketable securities - other investments (Notes 4 and 8) 99,210 98,716
------------- -------------
Total other assets 7,295,595 7,543,405
------------- -------------
TOTAL ASSETS $43,021,502 $40,405,980
============= =============
LIABILITIES AND SHAREHOLDERS ' EQUITY
---------------------------------------------------------------
Long-Term Debt:
Mortgages payable (Note 5) $8,025,182 $8,641,833
Other (Note 6) 581,909 640,868
------------- -------------
Total long-term debt 8,607,091 9,282,701
------------- -------------
Deferred Income Taxes 1,267,000 326,000
------------- -------------
Current Liabilities:
Payable to securities broker (Note 8) 402,645 1,270,053
Accounts payable 27,850 46,256
Payroll and other accrued liabilities 1,923,521 553,215
Income taxes payable 8,609 11,436
Other taxes payable 3,353 1,918
Current portion of long-term debt - mortgages payable (Note 5) 816,908 780,365
Current portion of long-term debt - other (Note 6) 112,471 104,000
------------- -------------
Total current liabilities 3,295,357 2,767,243
------------- -------------
Total liabilities 13,169,448 12,375,944
------------- -------------
Shareholders' Equity:
Common stock, par value $1 each share (shares - 5,000,000
authorized; 2,178,297 issued) 2,178,297 2,178,297
Additional paid in capital 3,346,245 3,346,245
Unrealized gain on available for sale securities 403,762 101,151
Retained earnings 24,213,852 22,694,445
------------- -------------
30,142,156 28,320,138
Less common stock held in treasury, at cost - 42,517
shares at April 30, 1998 and July 31, 1997 290,102 290,102
------------- -------------
Total shareholders' equity 29,852,054 28,030,036
------------- -------------
Contingencies (Note 14)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $43,021,502 $40,405,980
============= =============
See Notes to the Consolidated Financial Statements.
-3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
J. W. MAYS, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Three Months Ended Nine Months Ended
April 30, April 30,
<S> <C> <C> <C> <C>
--------------- ---------------- --------------- ----------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Rental income (Note 9) $2,561,133 $2,325,791 $7,676,835 $7,033,653
Rental income - affiliated company (Note 9) 103,402 103,402 310,207 310,207
Recovery of real estate taxes 924,195 - 1,207,280 -
-------------- -------------- -------------- --------------
Total revenues 3,588,730 2,429,193 9,194,322 7,343,860
-------------- -------------- -------------- --------------
Expenses
Real estate operating expenses 1,367,739 1,490,821 4,160,982 4,453,965
Administrative and general expenses 536,552 489,693 1,542,577 1,457,732
Bad debts (recovery) (Note 14) - - (41,453) -
Depreciation and amortization 253,108 251,217 757,324 722,804
-------------- -------------- -------------- --------------
Total expenses 2,157,399 2,231,731 6,419,430 6,634,501
-------------- -------------- -------------- --------------
Income from operations before investment income,
interest expense and income taxes 1,431,331 197,462 2,774,892 709,359
-------------- -------------- -------------- --------------
Investment income and interest expense:
Investment income 75,133 64,006 207,765 189,966
Interest expense (Notes 5 and 11) (207,818) (168,455) (626,250) (520,435)
-------------- -------------- -------------- --------------
(132,685) (104,449) (418,485) (330,469)
-------------- -------------- -------------- --------------
Income before income taxes 1,298,646 93,013 2,356,407 378,890
Income taxes provided 451,000 75,000 837,000 161,000
-------------- -------------- -------------- --------------
Net income 847,646 18,013 1,519,407 217,890
Retained earnings, beginning of period 23,366,206 22,083,397 22,694,445 21,883,520
-------------- -------------- -------------- --------------
Retained earnings, end of period $24,213,852 $22,101,410 $24,213,852 $22,101,410
============== ============== ============== ==============
Net income per common share (Note 2) $.40 $.01 $.71 $.10
============== ============== ============== ==============
Dividends per share $- $- $- $-
============== ============== ============== ==============
Weighted average common shares outstanding 2,135,780 2,136,124 2,135,780 2,136,308
============== ============== ============== ==============
See Notes to the Consolidated Financial Statements.
-4-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
J. W. MAYS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
April 30,
-------------- - ---------------
1998 1997
------------- -------------
<S> <C> <C>
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net income $1,519,407 $217,890
Adjustments to reconcile income to
net cash provided by operating activities:
Amortization of premium on marketable debt securities (494) (251)
Realized loss on marketable securities 13,489 2,360
Depreciation and amortization 757,324 722,804
Amortization of deferred expenses 201,127 165,730
Other assets - deferred expenses (95,465) (207,369)
- security deposits (7,127) 302,378
- unbilled receivables (274,589) (334,973)
- unbilled receivables - affiliated company 136,454 33,621
- receivables 151,204 39,112
- receivables - affiliated company 128,229 38,438
Deferred income taxes 743,000 73,000
Changes in:
Receivables 264,719 (17,122)
Prepaid expenses 546,377 472,298
Income taxes refundable - 4,496
Real estate taxes refundable (2,509,222) 13,409
Accounts payable (18,406) 6,685
Payroll and other accrued liabilities 1,370,306 (14,237)
Income taxes payable (2,827) 5,725
Other taxes payable 1,435 (2,089)
------------- -------------
Cash provided by operating activities 2,924,941 1,521,905
------------- -------------
Cash Flows From Investing Activities:
Capital expenditures (700,673) (2,914,185)
Marketable securities - other investments:
Receipts from sales or maturities 286,524 170,000
Payments for purchases (604,985) (50,963)
------------- -------------
Cash (used) by investing activities (1,019,134) (2,795,148)
------------- -------------
Cash Flows From Financing Activities:
Borrowings - mortgage debt - 2,500,000
Borrowings - securities broker 1,705,588 129,347
Payments - securities broker (2,572,996) (345,675)
Increase in long-term debt 27,445 11,060
(Decrease) in long-term debt (658,041) (686,426)
Purchase of treasury stock - (5,634)
------------- -------------
Cash provided (used) by financing activities (1,498,004) 1,602,672
------------- -------------
Increase in cash 407,803 329,429
Cash and cash equivalents at beginning of period 234,288 412,653
------------- -------------
Cash and cash equivalents at end of period $642,091 $742,082
============= =============
See Notes to the Consolidated Financial Statements.
-5-
</TABLE>
<PAGE>
J. W. MAYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Records:
The accounting records are maintained in accordance with generally accepted
accounting principles (GAAP). The preparation of the Company's financial
statements in accordance with GAAP, requires management to make estimates
that affect the reported consolidated statements of operations and
consolidated balance sheets and related disclosures. Actual results could
differ from those estimates.
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10-Q. The July 31, 1997 balance sheet was derived
from audited financial statements but does not include all disclosures
required by GAAP. The interim financial statements and notes thereto
should be read in conjunction with the financial statements and notes
included in the Company's latest Annual Report on Form 10-K for the year
ended July 31, 1997. In the opinion of management, the interim financial
statements reflect all adjustments of a normal recurring nature necessary
for a fair statement of the results for interim periods. The results of
operations for the current period are not necessarily indicative of the
results for the entire year ending July 31, 1998.
2. Income per common share:
Income per common share has been computed by dividing the income for the
periods by the weighted average number of shares of common stock
outstanding during the periods, adjusted for the purchase of treasury
stock. Shares used in computing income per common share were 2,135,780 in
each of the three and nine month periods ended April 30, 1998, and
2,136,124 and 2,136,308 in the three and nine month periods ended April 30,
1997, respectively.
3. Financial Accounting Standards No. 121:
In May 1995, the Financial Accounting Standards Board issued statement of
Financial Standards No. 121 ("FAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", effective
for fiscal years beginning after December 15, 1995. FAS 121 requires the
recognition of an impairment loss related to long-lived assets and certain
identifiable intangibles whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of this accounting standard has had no effect on the consolidated
financial statements.
4. Marketable Securities - Other Investments:
Effective August 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("FAS 115"), "Accounting for Certain
Investments in Debt and Equity Securities". FAS 115 requires certain
securities to be categorized as either trading, available for sale or held
to maturity. Trading securities are carried at fair value with unrealized
gains and losses included in income. Available for sale securities are
carried at fair value with unrealized gains and losses recorded as a
separate component of shareholders' equity. Held to maturity securities
are carried at amortized cost. Dividends and interest income are accrued
as earned.
<TABLE>
<CAPTION>
Marketable Securities - Other Investments (continued)
As of April 30, 1998, the Company's marketable securities were classified as follows:
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C> <C>
------------- ------------- ------------- -------------
Current
Available for sale:
Equity securities $2,836,045 $610,762 $- $3,446,807
Certificate of deposit 37,903 - - 37,903
------------- ------------- ------------- -------------
Total current $2,873,948 $610,762 $- $3,484,710
============= ============= ============= =============
Noncurrent
Held to maturity:
Corporate debt securities $99,210 $2,405 $- $101,615
============= ============= ============= =============
Investment income consists of the following:
Three Months Ended Nine Months Ended
April 30, April 30,
------------------------------ ------------------------------
1998 1997 1998 1997
________ ________ ________ ________
Interest income $20,003 $9,132 $63,595 $26,197
Dividend income 55,138 55,604 157,659 166,129
(Loss) on sale of marketable securities (8) (730) (13,489) (2,360)
------------- ------------- ------------- -------------
Total $75,133 $64,006 $207,765 $189,966
============= ============= ============= =============
-7-
</TABLE>
<PAGE>
5. Long-Term Debt:
<TABLE>
<CAPTION>
April 30, 1998 July 31, 1997
-------------------------------- ------------------------------
Current
Annual Final Due Due Due Due
Interest Payment Within After Within After
Rate Date One Year One Year One Year One Year
------- -------- -------------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Mortgages:
Jamaica, New York property (a) 8 1/2 % 4/01/07 $266,667 $3,466,666 $266,667 $3,666,666
Jowein Building, Brooklyn, N.Y. (b) 9 % 3/31/00 81,706 696,639 76,431 758,595
Fishkill, New York property (c) 9 % 11/01/99# 127,110 2,346,192 118,844 2,442,584
Circleville, Ohio property (d) 7 % 9/30/02 332,698 1,329,026 310,233 1,580,714
Other 8 1/2 % 5/01/01 8,727 186,659 8,190 193,274
-------------- -------------- -------------- ------------
Total $816,908 $8,025,182 $780,365 $8,641,833
============== ============== ============== ============
</TABLE>
(a) The Company, on September 11, 1996, closed a loan with a bank in the
amount of $4,000,000. The loan is secured by a first mortgage lien covering
the entire leasehold interest of the Company, as tenant, in a certain ground
lease and building in the Jamaica property. The loan proceeds were utilized
by the Company toward (i) payment in full of the outstanding term loan by
the Company in favor of the same bank in the amount of $1,500,000 plus
interest and (ii) its costs for the renovations to the portions of the
premises in connection with the Company's sublease of a significant portion
of the building. Although the loan was closed on September 11, 1996 the
entire $4,000,000 was not drawn down until March 31, 1997. The interest
rate on the loan is 8 1/2% for a period of five (5) years and six (6)
months, with such rate to change on the first day of the sixty-seventh
(67th) month of the term to a rate equal to the then prime rate plus 1/4%,
fixed for the balance of the term. The loan is to become due and payable on
the first day of the month following the expiration of ten (10) years and
six (6) months from the closing date. During the first six (6) months of
the term, the Company had the option to secure advances against the loan
amount with the loan to convert to a ten (10) year term at the expiration of
the initial six (6) month period thereof.
Payments are payable in arrears, on the first day of each and every month
during the term, calculated (a) during the initial six (6) month period of
the term, interest only, and (b) during the final ten (10) year period of
the term, at the sum of the interest plus amortization sufficient to fully
liquidate the loan over a fifteen (15) year period. As additional
security, the Company conditionally assigned to the bank certain leases and
rents on the premises, or portions thereof, now existing and assigned
certain leases on the premises hereafter consummated. The Company has an
option to prepay principal, in whole or in part, plus interest accrued
thereon, at any time during the term, upon thirty (30) days prior notice to
the bank, without premium or penalty. Other provisions of the loan
agreement provide certain restrictions on the incurrence of indebtedness
and the sale or transfer of the Company's ground lease interest in the
premises.
(b) Mortgage is held by an affiliated corporation owned by members, including
certain directors of the Company, of the family of the late Joe Weinstein,
former Chairman of the Board of Directors. Interest and amortization of
principal are paid quarterly. Effective April 1, 1997, the maturity date of
the mortgage which was scheduled to be on March 31, 1998, was extended to
March 31, 2000. The interest rate increased from 7 3/8% to 9% commencing
April 1, 1997. During the renewal period there will be no change in the
constant quarterly payments of interest and principal in the amount of
$37,263.
(c) On October 28, 1994, the existing first mortgage loan balance on the
Fishkill property was paid down by a $200,000 payment and the due date of
the mortgage loan was extended for a period of five (5) years from November
1, 1994. The annual interest rate was reduced from 10% to 9% and the
principal and interest payments are to be made in constant monthly amounts
based upon a fifteen (15) year payout period.
(d)The mortgage loan, which is self-amortizing, matures September 30, 2002.
The loan is payable at an annual interest rate of 7%. Under the terms of
the loan, constant monthly payments, including interest and principal,
commenced April 1, 1994 in the amount of $33,767, until October 1, 1997, at
which time the monthly payments of interest and principal increased to
$36,540.
6. Long-Term Debt - Other:
Long-Term debt - other consists of the following:
<TABLE>
<CAPTION>
April 30, 1998 July 31, 1997
------------------------------- -------------------------------
Due Within Due After Due Within Due After
One Year One Year One Year One Year
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Deferred compensation * $104,000 $277,333 $104,000 $355,333
Lease security deposits ** 8,471 304,576 - 285,535
------------- ------------- ------------- -------------
Total $112,471 $581,909 $104,000 $640,868
============= ============= ============= =============
</TABLE>
* In fiscal 1964 the Company entered into a deferred compensation
agreement with Max L. Shulman, its then Chairman of the Board. This
agreement, as amended, provides for a total of $520,000 to be paid in
monthly installments of $8,666.67 for a period of 60 months, payable
upon the expiration of his employment, retirement or permanent
disability as defined in the agreement, or death. Mr Shulman retired
as an employee on December 31, 1996.
**Does not include three irrevocable letters of credit totaling $275,000
at April 30, 1998 provided by three tenants as lease security deposits.
<PAGE>
7. Property and Equipment - Net:
<TABLE>
<CAPTION>
April 30, July 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Property:
Buildings and improvements $35,556,974 $34,944,039
Improvements to leased property 9,143,369 9,143,369
Land 4,008,835 4,008,835
------------- -------------
48,709,178 48,096,243
Less accumulated depreciation 20,863,141 20,143,617
------------- -------------
Property - net 27,846,037 27,952,626
------------- -------------
Fixtures and equipment and other:
Fixtures and equipment 525,183 510,108
Other fixed assets 209,293 180,382
------------- -------------
734,476 690,490
Less accumulated depreciation 511,330 517,282
------------- -------------
Fixtures and equipment and other - net 223,146 173,208
------------- -------------
Property and equipment - net $28,069,183 $28,125,834
============= =============
</TABLE>
8. Payable to Securities Broker:
The Company borrowed funds, payable on demand, from a securities broker.
The loan balance at April 30, 1998 in the amount of $402,645, secured by
the Company's marketable securities, accrues interest, which at April 30,
1998, was at the annual rate of 7 3/4%.
9. Unbilled Receivables and Rental Income:
Unbilled receivables represent the excess of scheduled rental income
recognized on a straight-line basis over rental income as it becomes
receivable according to the provisions of each lease.
Rental income includes $103,402 for each of the quarters ended April 30,
1998 and April 30, 1997 and $310,207 for each of the nine month periods
ended April 30, 1998 and April 30, 1997, representing rentals from an
affiliated company.
Amounts due from the affiliated company are as follows:
<TABLE>
<CAPTION>
April 30, July 31,
1998 1997
------------------------------
<S> <C> <C>
Unbilled receivables $773,234 $909,688
Receivables - noncurrent 66,224 194,453
------------- -------------
</TABLE> $839,458 $1,104,141
10. Employees' Retirement Plan:
The Company sponsors a noncontributory Money Purchase Plan covering
substantially all of its employees. Operations were charged $35,000 and
$105,000 as contributions to the Plan for the three and nine months ended
April 30, 1998, respectively, and $33,750 and $101,925 as contributions to
the plan for the three and nine months ended April 30, 1997, respectively.
In February 1998, the Financial Accounting Standards Board issued
statement of Financial Standards No. 132 ("FAS 132"), "Employers'
Disclosure about Pensions and Other Post-Retirement Benefits", effective
for fiscal years beginning after December 15, 1997. The adoption of this
accounting standard will have no effect on the consolidated financial
statements since the Company's Retirement Plan is 100% funded, with
Company contributions made quarterly, and there will be no additional
liability recognized by the Company.
11. Cash Flow Information:
For purposes of reporting cash flows, the Company considers cash
equivalents to consist of short-term highly liquid investments with
maturities of three months or less, which are readily convertible into
cash.
<TABLE>
Supplemental disclosure:
<CAPTION>
Nine Months Ended
April 30,
------------------------------
1998 1997
__________ __________
<S> <C> <C>
Interest paid $633,152 $494,814
Income taxes paid $96,827 $77,779
</TABLE>
12. Financial Instruments and Credit Risk Concentrations:
Financial instruments that are potentially subject to concentrations of
credit risk consist principally of marketable securities-other
investments, cash equivalents and receivables. Marketable securities-
other investments and cash equivalents are placed with high credit quality
financial institutions and instruments to minimize risk.
The Company derives rental income from thirty-five tenants, of which two
tenants each accounted for more than 10% of rental income during the
quarter ended April 30, 1998. The City of New York is one of the two
tenants and the other tenant is 510 Fulton Street Realty Associates, the
owners of which are long established in business.
13. Year 2000 Compliance:
The Company has assessed the exposure of its computer systems presented by
the upcoming change in the millennium. The Company does not believe that
any material expenditures will be required to resolve the year 2000 issue.
14. Contingencies:
McCrory Stores Corporation ("McCrory"), which occupied space in the
Company's Jowein Building in the Fulton Mall in downtown Brooklyn, New
York, and whose lease, as amended, extended to April 29, 2010, filed for
relief under Chapter 11 of the Bankruptcy Code in February 1992. McCrory
rejected its lease, as amended, with the Company with the approval of the
Bankruptcy Court effective January 31, 1994. The Company has filed an
unsecured proof of claim with the United States Bankruptcy Court, Southern
District of New York for lease rejection damages in the amount of
$7,753,732 ("Lease Rejection Claim"), and an administrative claim in the
amount of approximately $296,000 ("Administrative Claim") for damages
resulting from McCrory's failure to repair and maintain the premises as
required by the lease. McCrory objected to the Company's Lease Rejection
Claim and Administrative Claim, and asserts that no amount is due and
owing. The Company has not included its claims against McCrory in its
financial statements due to (a) the fact that McCrory has disclosed that
it has sold substantially all of its assets and that the proceeds of sale
are insufficient to make any distributions to unsecured creditors and that
holders of allowed administrative claims will only receive approximately
10 to 20 percent of the allowed amount of their claims, (b) the pending
litigation over the Administrative Claim, and (c) the uncertainty of the
amount that may ultimately be allowed and collected. The Company has
leased approximately 69,000 square feet of the approximate 99,000 square
feet of space surrendered by McCrory. The remainder of the space of
approximately 30,000 square feet is not leaseable due to the renovations
required to accommodate six tenants where formerly there was one. The
rental income to be derived from the six tenants over the terms of their
leases will be approximately $5,040,000 less than the total rental income
that would have been due from McCrory for the period February 1, 1994
through April 29, 2010, the termination date of the McCrory lease.
Jamesway Corporation ("Jamesway"), which occupied retail space in the
Fishkill, New York property and whose lease extended to January 31, 2005,
filed for relief under Chapter 11 of the Bankruptcy Code on October 18,
1995. Jamesway rejected its lease for the Fishkill location with the
approval of the Bankruptcy Court, effective February 29, 1996, but
continued occupancy until March 22, 1996. The Company filed an amended
unsecured claim in the amount of $883,635 for damages resulting from the
breach and rejection of the lease and an administrative priority claim in
the amount of approximately $189,000 for certain amounts due under the
lease after the filing of Jamesway's Chapter 11 petition and for the
costs of repairs resulting from Jamesway's failure to fulfill its repair
and maintenance obligations under the lease. Pursuant to a settlement
that was approved by the Bankruptcy Court, the Company has an allowed
unsecured claim in the amount of $950,635 and an allowed administrative
claim in the amount of $54,887. The Company has realized, to date,
$465,811, or 49% on account of its unsecured claim and 100% of its allowed
administrative claim of $54,887 for a total of $520,698. At July 31,
1997, the amount of $418,789 was recorded in Bad Debt Recovery which
amount represents the amount realized of $473,166 less legal expenses of
$22,406 and a previously recorded pre-petition rental claim of $31,971.
At April 30, 1998 the Company recorded an additional amount in Bad Debt
Recovery of $41,453, which amount represents the amount realized of
$47,532 less legal expenses of $6,079. The Company has made no provision
in its financial statements for the balance of its unsecured claim filed
against Jamesway due to the uncertainty of the amount that may ultimately
be collected.
The Company reports scheduled rental income recognized on a straight-line
basis rather than rental income as it becomes a receivable according to
the provisions of the lease, in compliance with the provisions of
Statement of Financial Accounting Standards No. 13, "Accounting for
Leases". The excess of the scheduled rental income of McCrory, recognized
on a straight-line basis over rental income reported through January 31,
1994, the effective date of McCrory's rejection of its lease, amounts to
$708,673 and such amount was written off and classified as a bad debt
during the twelve month period ended July 31, 1994. The excess of the
scheduled rental income of Jamesway recognized on a straight-line basis
over rental income receivable according to the lease reported through
January 31, 1996, amounted to $424,011 and such amount was written off and
classified as a bad debt during the twelve month period ended July 31,
1996.
There are various lawsuits and claims pending against the Company. It is
the opinion of management that the resolution of these matters will not
have a material adverse effect on the Company's Consolidated Financial
Statements.
<PAGE>
J. W. MAYS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations:
Three Months Ended April 30, 1998 Compared to the Three Months Ended April 30,
1997:
In the three months ended April 30, 1998, the Company reported income in the
amount of $847,646, or $.40 per share. In the comparable three months ended
April 30, 1997, the Company reported income of $18,013, or $.01 per share.
The 1998 quarter includes a pre-tax net recovery of real estate taxes of
$924,195 (see below). There was no comparable item in the 1997 three month
period.
Revenues in the current three months increased to $3,588,730 from $2,429,193
in the comparable 1997 three months, primarily due to the addition of new
tenants and the pre-tax net recovery of prior years' real estate taxes.
Interest expense in the current quarter exceeded investment income by $132,685
and by $104,449 in the comparable 1997 quarter. The increase of $28,236 was
primarily due to the interest on the Jamaica Building loan discussed in Note
5(a) to the Consolidated Financial Statements.
Real estate operating expenses in the current three months decreased to
$1,367,739 from $1,490,821 in the comparable 1997 quarter principally due to a
decrease in real estate taxes and fuel costs, partially offset by an increase
in payroll costs, maintenance costs and leasing commissions.
Administrative and general expenses increased to $536,552 from $489,693
principally due to an increase in payroll costs.
The recovery of real estate taxes in the current quarter of $924,195, net of
legal expenses and credits to tenants in accordance with the terms of their
leases, represents prior years' real estate taxes from the City of New York.
Depreciation and amortization expense in the current three months increased to
$253,108 from $251,217 in the three months ended April 30, 1997 because of
additional improvements to property.
Nine Months Ended April 30, 1998 Compared to the Nine Months Ended April 30,
1997:
In the nine months ended April 30, 1998, the Company reported income of
$1,519,407, or $.71 per share. In the comparable nine months ended April 30,
1997, the Company reported income of $217,890, or $.10 per share. The 1998
nine months includes a pre-tax net recovery of real estate taxes of $1,207,280
(see below). There was no comparable item in the 1997 nine month period.
Revenues in the current nine months increased to $9,194,322 from $7,343,860
in the comparable 1997 nine months, primarily due to the addition of new
tenants and the pre-tax net recovery of prior years' real estate taxes.
Interest expense in the current nine months exceeded investment income by
$418,485 and by $330,469 in the comparable 1997 nine month period. The
increase of $88,016 was primarily due to the interest on the Jamaica Building
loan discussed in Note 5(a) to the Consolidated Financial Statements.
Real estate operating expenses in the current nine months decreased to
$4,160,982 from $4,453,965 in the comparable 1997 nine months principally due
to a decrease in real estate taxes and fuel costs, partially offset by an
increase in payroll costs, maintenance costs and leasing commissions.
Administrative and general expenses in the current nine months increased to
$1,542,577 from $1,457,732 in the comparable 1997 nine months principally due
to an increase in payroll, and legal and professional costs, partially offset
by a decrease in insurance costs.
The recovery of real estate taxes in the current nine month period in the
amount of $1,207,280, net of legal expenses and credits to tenants in
accordance with the terms of their leases, represents prior years' real estate
taxes from the City of New York and the Town of Fishkill, New York.
Depreciation and amortization expense in the current nine months increased to
$757,324 from $722,804 in the nine months ended April 30, 1997 because of
additional improvements to property.
The bad debt recovery in the amount of $41,453 in the nine months ended April
30, 1998 relates to the bad debt write-off of $424,011 in the 1996 year. See
Note 14 to the Consolidated Financial Statements (Jamesway).
Liquidity and Capital Resources:
The Company has been operating as a real estate enterprise since the
discontinuance of the retail department store segment of its operations on
January 3, 1989.
The City of New York and the Company have agreed to a settlement which
substantially reduces the real property tax assessments applicable to the
Jowein Building, Brooklyn, New York from the 1991/92 through the 1995/96 tax
years. The Company's portion of the tax refund, after legal expenses and
credits to tenants in accordance with the terms of their leases, is in the
amount of $924,195.
The Company, on March 17, 1998, purchased 54,537 shares of an initial public
offering of common stock of a bank in which the Company maintains accounts, at
$10 per share, for a total of $545,370. The closing market price of the stock
at April 30, 1998 was $18.3125 per share, for a total of $998,709.
<PAGE>
Cash Flows From Operating Activities:
Deferred Expenses: The Company had an expenditure of approximately $37,700
for brokerage leasing commissions relating to two new tenants at the Jamaica,
New York building during the nine months ended April 30, 1998.
Real estate taxes refundable increased by $2,509,222 due to a refund of prior
years' real estate taxes on the Fishkill, New York property in the amount of
$267,972, and on the Jowein Building Property in Brooklyn, New York in the
amount of $2,241,250.
Payroll and other accrued liabilities: Included in the increase of $1,370,306
is an amount of $1,289,072 representing attorneys' fees and amounts payable to
six tenants, in accordance with the terms of their leases, due to the recovery
of prior years' real estate taxes from the City of New York and the Town of
Fishkill, New York.
Cash Flows From Investing Activities:
Capital Expenditures: The Company had expenditures of approximately $427,000
for renovations at its Jamaica, New York building to accommodate two new
tenants during the nine months ended April 30, 1998.
Cash Flows From Financing Activities:
Lease Security: The Company received approximately $22,000 in additional
lease security due to the leasing of space to three new tenants at its
Jamaica, New York building during the nine months ended April 30, 1998.
The leasing of 69,000 square feet of space in the Jowein Building located in
the Fulton Mall in downtown Brooklyn, New York to three chain store tenants
and two additional tenants for retail space and one tenant for office space,
the leasing of 25,000 square feet to the U. S. Post Office in Fishkill, New
York and the leasing to the State of New York of approximately 46,000 square
feet of office space for two tenants and 8,000 square feet of office space to
two additional tenants in the Company's former store in Jamaica, New York,
will provide additional working capital for the Company. The Jamaica leases
commenced May 1, 1997. To defray the costs of renovations for the State
occupancy, the Company borrowed from a bank the principal amount of $2,500,000
(see Note 5(a) to the Consolidated Financial Statements).
The Company had working capital of $4,361,367, with a ratio of current
assets to current liabilities of 2.32 to 1 at April 30, 1998.
Management considers current working capital and borrowing capabilities
adequate to cover the Company's planned operating and capital requirements.
<PAGE>
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) List of Exhibits:
Sequentially
Exhibit Numbered
Number Exhibit Page _
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession. N/A
(4) Instruments defining the rights of security holders,
including indentures. N/A
(10) Material contracts. N/A
(11) Statement re computation of per share earnings. N/A
(15) Letter re unaudited interim financial information. N/A
(18) Letter re change in accounting principles. N/A
(19) Report furnished to security holders. N/A
(22) Published report regarding matters submitted to vote
of security holders. N/A
(24) Power of attorney. N/A
(27) Financial data schedule. N/A
(99) Additional exhibits. N/A
(b) Reports on Form 8-K - No report on Form 8-K was required to be filed
by the Company during the three months ended April 30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.W. MAYS, Inc.
(Registrant)
Date June 8, 1998 Lloyd J. Shulman
----------------------
Lloyd J. Shulman
Chairman
Date June 8, 1998 Alex Slobodin
----------------------
Alex Slobodin
Exec. Vice-President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the contained quarterly 10-Q and is qualified in its
entirety by reference to such Form 10-Q.
</LEGEND>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jul-31-1998
<PERIOD-START> Aug-01-1997
<PERIOD-END> Apr-30-1998
<CASH> 642,091
<S>
<SECURITIES> 3,484,710
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