FORM 10-Q
UNITED STATES
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, 2007
[ ] 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
---- ----
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelarated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer X
---- ---- ----
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No X
---- ----
Indicate the number of shares outstanding of the issuer's common stock, as of
the latest practicable date.
Class Outstanding at June 6, 2007
Common Stock, $1 par value 2,015,780 shares
This report contains 20 pages.
- 1 -
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 Comprehensive Income 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6 - 11
Management's Discussion and Analysis of Results
of Operations and Financial Condition 12 - 15
Controls and Procedures 15
Part II - Other Information 16
Signatures 17
(31) Certifications Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(31.1) - Chief Executive Officer 18
(31.2) - Chief Financial Officer 19
(32) Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002;
18 U.S.C. Section 1350 20
- 2 -
J. W. MAYS, INC.
CONSOLIDATED BALANCE SHEET
April 30 July 31
ASSETS 2007 2006
-------- --------------- ---------------
(Unaudited) (Audited)
Property and Equipment - Net (Notes 6 and 7) $44,979,436 $45,794,108
------------- -------------
Current Assets:
Cash and cash equivalents 2,337,654 2,335,328
Marketable securities (Note 4) 46,891 45,942
Receivables 194,568 86,199
Deferred income taxes 97,000 131,000
Income taxes refundable 434,615 -
Prepaid expenses 822,440 1,722,222
Security deposits 8,297 8,297
------------- -------------
Total current assets 3,941,465 4,328,988
------------- -------------
Other Assets:
Deferred charges 3,492,371 2,761,585
Less accumulated amortization 1,519,647 1,301,110
------------- -------------
Net 1,972,724 1,460,475
Receivables 5,067 6,267
Security deposits 1,440,397 1,337,900
Unbilled receivables (Note 9) 3,790,567 4,204,567
Marketable securities (Note 4) 170,000 158,000
------------- -------------
Total other assets 7,378,755 7,167,209
------------- -------------
TOTAL ASSETS $56,299,656 $57,290,305
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
--------------------------------------
Long-Term Debt:
Mortgages and term loan payable (Note 6) $11,814,194 $10,696,864
Note payable - related party (Note 8) 1,000,000 1,000,000
Security deposits payable 1,133,297 1,030,800
------------- -------------
Total long-term debt 13,947,491 12,727,664
------------- -------------
Deferred Income Taxes 2,338,000 2,445,000
------------- -------------
Current Liabilities:
Accounts payable 251,177 61,908
Payroll and other accrued liabilities 1,470,308 1,269,578
Income taxes payable - 794,314
Other taxes payable 3,615 5,645
Current portion of mortgages payable (Note 6) 801,591 2,338,492
Current portion of security deposits payable 8,297 8,297
------------- -------------
Total current liabilities 2,534,988 4,478,234
------------- -------------
Total liabilities 18,820,479 19,650,898
------------- -------------
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 - net of
deferred taxes of $20,000 at April 30, 2007 and $16,000
at July 31, 2006 39,748 31,748
Retained earnings 33,202,739 33,370,969
------------- -------------
38,767,029 38,927,259
Less common stock held in treasury, at cost - 162,517
shares at April 30, 2007 and at July 31, 2006 (Note 12) 1,287,852 1,287,852
------------- -------------
Total shareholders' equity 37,479,177 37,639,407
------------- -------------
Contingencies (Note 13)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $56,299,656 $57,290,305
============= =============
See Notes to Consolidated Financial Statements.
- 3 -
J. W. MAYS, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Three Months Ended Nine Months Ended
April 30 April 30
2007 2006 2007 2006
------------- ------------- ------------- -------------
<
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Rental income (Notes 5 and 9) $3,450,801 $3,362,194 $10,144,066 $10,058,127
Recovery of real estate taxes 25,487 163,835 39,483 195,605
------------- ------------- ------------- -------------
Total revenues 3,476,288 3,526,029 10,183,549 10,253,732
------------- ------------- ------------- -------------
Expenses
Real estate operating expenses 2,191,194 2,020,651 6,411,896 5,890,592
Administrative and general expenses 760,432 829,390 2,187,700 2,318,316
Depreciation and amortization 395,382 381,264 1,184,185 1,143,017
------------- ------------- ------------- -------------
Total expenses 3,347,008 3,231,305 9,783,781 9,351,925
------------- ------------- ------------- -------------
Income from operations before investment income,
interest expense and income taxes 129,280 294,724 399,768 901,807
------------- ------------- ------------- -------------
Investment income and interest expense
Investment income (Note 4) 18,422 38,111 60,742 79,234
Interest expense (Notes 6, 8, and 11) (251,272) (216,698) (764,740) (698,792)
------------- ------------- ------------- -------------
(232,850) (178,587) (703,998) (619,558)
------------- ------------- ------------- -------------
Income (loss) before income taxes (103,570) 116,137 (304,230) 282,249
Income taxes provided (benefit) (122,000) 21,000 (136,000) 118,000
------------- ------------- ------------- -------------
Net income (loss) 18,430 95,137 (168,230) 164,249
Retained earnings, beginning of period 33,184,309 32,006,699 33,370,969 31,937,587
------------- ------------- ------------- -------------
Retained earnings, end of period $33,202,739 $32,101,836 $33,202,739 $32,101,836
============= ============= ============= =============
Income (loss) per common share (Note 2) $.01 $.05 $(.08) $.08
============= ============= ============= =============
Dividends per share $- $- $- $-
============= ============= ============= =============
Average common shares outstanding 2,015,780 2,015,780 2,015,780 2,015,780
------------- ------------- ------------- -------------
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Three Months Ended Nine Months Ended
April 30 April 30
-------------- --------------- -------------- ------------
2007 2006 2007 2006
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net income (loss) $18,430 $95,137 $(168,230) $164,249
------------- ------------- ------------- -------------
Other comprehensive income, net of taxes (Note 3)
Unrealized gain on available-for-sale securities:
Net of taxes of $ 0 and $43,000 for the three
months ended April 30, 2007 and 2006, respectively,
and $4,000 and $101,000 for the nine months ended
April 30, 2007 and 2006, respectively. (1,000) 85,619 8,000 197,041
------------- ------------- ------------- -------------
Net change in comprehensive income - 85,619 - 197,041
------------- ------------- ------------- -------------
Comprehensive income (loss) $17,430 $180,756 $(160,230) $361,290
============= ============= ============= =============
See Notes to Consolidated Financial Statements.
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J. W. MAYS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
April 30
--------------------------------
2007 2006
------------- -------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net income (loss) $(168,230) $164,249
Adjustments to reconcile income to
net cash provided by operating activities:
Depreciation and amortization 1,184,185 1,143,017
Amortization of deferred expenses 218,537 261,164
Other assets - deferred expenses (730,786) (234,222)
- unbilled receivables 414,000 221,980
Deferred income taxes (77,000) (100,000)
Changes in:
Receivables (107,169) 42,925
Prepaid expenses 899,782 857,826
Income taxes refundable (434,615) 196,856
Accounts payable 189,269 (29,835)
Payroll and other accrued liabilities 200,730 135,579
Income taxes payable (794,314) -
Other taxes payable (2,030) (1,668)
------------- -------------
Cash provided by operating activities 792,359 2,657,871
------------- -------------
Cash Flows From Investing Activities:
Capital expenditures (369,513) (2,062,781)
Security deposits (102,497) (117,593)
Marketable securities:
Payments for purchases (949) (205)
------------- -------------
Cash (used) by investing activities (472,959) (2,180,579)
------------- -------------
Cash Flows From Financing Activities:
Borrowings - securities broker - 563,572
Payments - securities broker - (21,925)
Increase - security deposits 102,497 117,463
Borrowings - mortgage and other debt 315,706 -
Decrease - mortgage and other debt payments (735,277) (752,813)
------------- -------------
Cash (used) by financing activities (317,074) (93,703)
------------- -------------
Increase in cash 2,326 383,589
Cash and cash equivalents at beginning of period 2,335,328 522,897
------------- -------------
Cash and cash equivalents at end of period $2,337,654 $906,486
============= =============
See Notes to Consolidated Financial Statements.
- 5 -
J. W. MAYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Records and Use of Estimates:
The accounting records are maintained in accordance with accounting
principles generally accepted in the United States of America ("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 income and retained earnings, comprehensive
income, and the 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, 2006 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 Form 10-K Annual Report for the fiscal
year ended July 31, 2006. 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 fiscal year ending July 31, 2007.
2. Income Per Share of Common Stock:
Income per share has been computed by dividing the net 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 share were 2,015,780 for the
three months and nine months ended April 30, 2007 and April 30, 2006.
3. Comprehensive Income:
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", establishes standards for the reporting of
comprehensive income and its components. It requires all items that are
required to be recognized as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as
other income statement information. Comprehensive income is defined to
include all changes in equity except those resulting from investments by
and distributions to shareholders.
4. Marketable Securities:
The Company categorizes marketable securities 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.
- 6 -
As of April 30, 2007, the Company's marketable securities were classified as follows:
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
------------- ------------- ------------- -------------
Current:
Held-to-maturity:
Certificate of deposit $46,891 $- $- $46,891
============= ============= ============= =============
Noncurrent:
Available-for-sale:
Equity securities $110,252 $59,748 $- $170,000
============= ============= ============= =============
Investment income consists of the following:
Three Months Ended Nine Months Ended
April 30 April 30
------------------------------ -----------------------------
2007 2006 2007 2006
--------------- ------------- -------------- -------------
Interest income $6,490 $18,436 $15,661 $20,209
Dividend income 11,932 19,675 45,081 59,025
------------- ------------- ------------- -------------
Total $18,422 $38,111 $60,742 $79,234
============= ============= ============= =============
5. Financial Instruments and Credit Risk Concentrations:
Financial instruments that are potentially subject to concentrations of
credit risk consist principally of marketable securities, cash and cash
equivalents and receivables. Marketable securities, cash and cash
equivalents are placed with high credit quality financial institutions and
instruments to minimize risk.
The Company derives rental income from fifty-two tenants, of which one
tenant accounted for 17.34% and another tenant accounted for 13.70% of
rental income during the nine months ended April 30, 2007. No other
tenant accounted for more than 10% of rental income during the same
period.
The Company has two irrevocable Letters of Credit totaling $137,500 at
April 30, 2007 and July 31, 2006, provided by two tenants.
- 7 -
6. Long-Term Debt - Mortgages and Term Loan:
Long Term Debt - Mortgages and Term Loan:
April 30, 2007 July 31, 2006
-------------------------------- ---------------------------------
Current
Annual Final Due Due Due Due
Interest Payment Within After Within After
Rate Date One Year One Year One Year One Year
------- -------- -------------- -------------- -------------- ---------------
Mortgages:
Jamaica, New York property (a) 6% 4/01/12 $57,498 $1,298,058 $1,533,333 $-
Jamaica, New York property (b) 6.81% 10/01/11 110,156 2,530,080 190,899 2,548,553
Jowein building, Brooklyn, NY (c) 9 % 4/01/09 57,323 1,118,665 53,621 1,162,131
Fishkill, New York property (d,e) Variable 2/18/08 - 1,834,726 - 1,834,726
Bond St. building, Brooklyn, NY (e) Variable 2/18/08 - 3,694,715 - 3,379,009
Term-loan payable to bank (f) 6.50% 5/01/10 336,614 777,950 320,639 1,032,445
Jowein building, Brooklyn, NY (g) Variable 8/01/10 240,000 560,000 240,000 740,000
-------------- -------------- -------------- ---------------
Total $801,591 $11,814,194 $2,338,492 $10,696,864
============== ============== ============== ===============
(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, New York property. In
March 2007, the Company extended the loan for five years with an option
for an additional five year period. The interest rate for the initial
five years will be 6.00% per annum. Interest and amortization of
principal will be made in constant monthly amounts based on a fifteen year
(15) payout period. The outstanding balance of the loan totaling
$1,036,602 will become due and payable on April 1, 2012.
(b) The Company, on December 13, 2000, closed a loan with a bank in the
amount of $3,500,000. The loan is secured by a second position leasehold
mortgage covering the entire leasehold interest of the Company, as tenant,
in a certain ground lease and building in the Jamaica, New York property.
The outstanding balance of the loan, totaling $2,739,452, became due and
payable on October 1, 2006. The Company exercised its option to extend
the loan for a additional five (5) years to October 1, 2011. The interest
rate for the extended period is 6.81% per annum. At the end of the five
year period there will be a balance due on the loan of $2,077,680.
Payments are made, in arrears, on the first day of each and every month
calculated during the ten (10) year period of the term loan, at the sum of
the interest rate plus amortization sufficient to fully liquidate the loan
over a fifteen (15) year period. As additional collateral security, the
Company will conditionally assign to the bank all leases and rents on the
premises, or portions thereof, whether now existing or 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,
without premium or penalty. Other provisions of the loan agreement
provide certain restrictions on the incurrence of indebtedness on the
Jamaica property and the sale or transfer of the Company's ground lease
interest in the premises.
(c) The Company, on May 7, 2004, closed a loan with 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, in the amount of $1,350,000. The term of the loan is for a
period of five (5) years at an interest rate of 9.00% per annum. Interest
and amortization of principal are paid quarterly based on a fifteen (15)
year level amortization period. The constant quarterly payments of
interest and principal are $40,316. The outstanding balance of the loan,
totaling $1,056,007, will become due and payable on April 1, 2009.
(d) On June 2, 1999, the existing first mortgage loan balance on the
Fishkill, New York property was extended for a period of five years.
Under the terms of the extension agreement, the annual interest rate was
reduced from 9% to 8.25% and the interest and principal payments were made
in constant monthly amounts based upon a fifteen (15) year payout period.
On August 19, 2004 the Company extended the loan for an additional
forty-two (42) months, with an option to convert the loan to a seven (7)
year permanent mortgage loan. The payments for the extended period of
forty-two (42) months will be interest only on the amount owing at a
floating rate per annum equal to the one-month LIBOR rate plus 2.25%, but
not less than 3.40%. The payments for the seven- year permanent mortgage
loan would be on a seventeen (17) year level
- 8 -
amortization, plus interest. The interest rate on the permanent loan
would be a fixed rate equal to the Federal Home Loan Bank of New York's
seven-year (7) fixed interest rate plus 2.25% per annum. (See Note 6(e)).
The Company intends to convert the loan to a seven (7) year permanent
mortgage loan upon maturity.
(e) The Company, on August 19, 2004, closed a loan with a bank for a
$12,000,000 multiple draw term loan. This loan finances seventy-five
(75%) percent of the cost of capital improvements for an existing lease to
a tenant and capital improvements for future tenant leases at the
Company's Brooklyn, New York (Bond Street building) and Fishkill, New York
properties. The loan also refinanced the existing mortgage on the
Company's Fishkill, New York property which matured on July 1, 2004 (see
Note 6(d)). The Company will have three and one-half years to draw down
amounts under this loan. The loan consists of: a) a permanent, first
mortgage loan to refinance an existing first mortgage loan affecting the
Fishkill Property (the "First Permanent Loan") (see Note 6(d)), b) a
permanent subordinate mortgage loan in the amount $1,870,000 (the "Second
Permanent Loan"), and c) multiple, successively subordinate loans in the
amount $8,295,274 ("Subordinate Building Loans"). The loan is structured
in two phases: 1) a forty-two (42) month loan with payments of interest
only at the floating one-month LIBOR rate plus 2.25% per annum, but not
less than 3.40%; and 2) after the forty-two month period, the loan would
convert to a seven-year (7) permanent mortgage loan on a seventeen (17)
year level amortization, plus interest, at the option of the Company. The
interest rate on the permanent loan would be at a fixed rate equal to the
Federal Home Loan Bank of New York's seven-year (7) fixed interest rate
plus 2.25% per annum at the time of conversion. As of August 19, 2004,
the Company refinanced the existing mortgage on the Company's Fishkill,
New York property, which balance was $1,834,726 and took down an
additional $2,820,000 for capital improvements for two tenants at the
Company's Bond Street building in Brooklyn, New York. On May 9, 2006 and
November 16, 2006, the Company drew down additional amounts of $559,009
and $315,706, respectively, on its multiple draw term loan to finance
tenant improvements and brokerage commissions for the leasing of 13,026
square feet for office use at the Company's Bond Street building in
Brooklyn, New York. The total amount financed for tenant improvements and
brokerage commissions was $874,715. The outstanding balance as of April
30, 2007 was $5,529,441. The Company intends to convert the loan to a
seven (7) year permanent mortgage loan upon maturity. The interest rate
at April 30, 2007 was 7.57% per annum.
(f) On February 18, 2005, the Company secured financing in the amount of
$1,700,000, from a bank whose president is a director of the Company. The
loan is a multiple draw loan, for a period of five (5) years, and is self-
amortizing, at an interest rate of 6.50% per annum.
(g) The Company, on July 22, 2005, closed a loan with a bank for
$1,200,000. The loan will be used to finance the construction costs and
brokerage commissions associated with the leasing of 15,000 square feet
for office use to a tenant at the Company's Jowein building in Brooklyn,
New York. The loan will be secured by the assignment of lease of 15,000
square feet. The loan is for a period of five (5) years and is
self-amortizing, at a floating interest rate of prime plus 1.00% per
annum. The interest rate at April 30, 2007 was 9.25% per annum
- 9 -
7. Property and Equipment - at cost:
April 30 July 31
2007 2006
--------------- ---------------
Property:
Buildings and improvements $60,932,961 $60,601,064
Improvements to leased property 9,158,009 9,158,009
Land 6,146,554 6,146,554
Construction in progress 64,105 59,846
------------- -------------
76,301,629 75,965,473
Less accumulated depreciation 31,496,069 30,379,314
------------- -------------
Property - net 44,805,560 45,586,159
------------- -------------
Fixtures and equipment and other:
Fixtures and equipment 722,471 721,099
Other fixed assets 227,747 257,472
------------- -------------
950,218 978,571
Less accumulated depreciation 776,342 770,622
------------- -------------
Fixtures and equipment and other - net 173,876 207,949
------------- -------------
Property and equipment - net $44,979,436 $45,794,108
============= =============
8. Note Payable:
On December 15, 2004, the Company borrowed $1,000,000 from a director of
the Company, who is also a greater than 10% beneficial owner of the
outstanding common stock of the Company. The term of the loan is for a
period of three (3) years maturing on December 15, 2007, at an interest
rate of 7.50% per annum. The loan is unsecured. The note is prepayable
in whole or in part at any time without penalty. The constant quarterly
payments of interest are $18,750. The Company intends to negotiate with
the director to extend this loan.
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.
10. Employees' Retirement Plan:
The Company sponsors a noncontributory Money Purchase Plan covering
substantially all of its employees. Operations were charged $69,448 and
$207,343 as contributions to the Plan for the three and nine months ended
April 30, 2007, respectively, and $77,353 and $225,595 as contributions to
the Plan for the three and nine months ended April 30, 2006, respectively.
- 10 -
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.
Supplemental disclosure: Nine Months Ended
April 30
------------------------------
2007 2006
--------------- -------------
Interest paid, net of capitalized interest of $42,882 (2006) $768,464 $691,740
Income taxes paid $1,169,928 $21,145
12. Capitalization:
The Company is capitalized entirely through common stock with identical
voting rights and rights to liquidation. Treasury stock is recorded at
cost and consists of 162,517 shares at April 30, 2007 and at July 31,
2006.
13. Contingencies:
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.
In response to a termination notice that the Company received concerning
its tenancy in a portion of the Jowein building, Brooklyn, New York, on
April 25, 2007, the Company filed a lawsuit against its landlords in New
York State Supreme Court, Kings County. In the lawsuit, the Company seeks
a judgment declaring that the landlords' termination notice was improperly
issued and that the Company is not required to correct or cure the
purported defaults cited in the termination notice. In addition, the
Company seeks an order temporarily, preliminarily and permanently
enjoining the landlords from taking any action to terminate the lease or
otherwise interfere with the Company's possession of the premises.
On May 16, 2007, the New York State Supreme Court granted the Company's
motion for preliminary injunctive relief and enjoined the landlords,
during the pendency of this action, from taking any action to evict the
Company, terminate the Company's lease which is scheduled to expire on
April 30, 2010, and/or commencing summary action adverse to the Company's
rights or otherwise disturb the Company's possession of the premises. The
landlords have answered the complaint denying the allegations and
asserting counterclaims against the Company relating to the premises.
Discovery is ongoing. Management of the Company is unable to predict
the outcome of this matter or whether the Company will be required to
expend significant amounts of money in order to correct any of the
purported defaults.
- 11 -
J. W. MAYS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Results of Operations:
Three Months Ended April 30, 2007 Compared to the Three Months Ended April 30,
2006:
In the three months ended April 30, 2007, the Company reported net income of
$18,430, or $.01 per share. In the comparable three months ended April 30,
2006, the Company reported net income of $95,137, or $.05 per share.
Revenues in the current three months decreased to $3,476,288 from $3,526,029
in the comparable 2006 three months.
The recovery of real estate taxes in the current three months in the amount of
$25,487, net of legal expenses, represents prior years' real estate taxes from
one of the Company's properties. The comparable 2006 three months had a
recovery of real estate taxes in the amount of $163,835, net of legal
expenses.
Real estate operating expenses in the current three months increased to
$2,191,194 from $2,020,651 in the comparable 2006 three months primarily due
to increases in rental expense, maintenance expense, utility costs and
licenses and permits, partially offset by decreases in real estate taxes and
payroll costs.
Administrative and general expenses in the current three months decreased to
$760,432 from $829,390 in the comparable 2006 three months primarily due to
decreases in payroll costs, insurance costs, and bad debt expense, partially
offset by increases in legal and professional costs.
Depreciation and amortization expense in the current three months increased to
$395,382 from $381,264 in the comparable 2006 three months primarily due to
depreciation on the additional improvements to the Brooklyn, New York
properties.
Interest expense in the current three months exceeded investment income by
$232,850 and by $178,587 in the comparable 2006 three months. The increase was
due primarily to increased interest expense on the additional loans with
banks, partially offset by scheduled repayments of debt.
Nine Months Ended April 30, 2007 Compared to the Nine Months Ended April 30,
2006:
In the nine months ended April 30, 2007, the Company reported a net loss of
($168,230), or ($.08) per share. In the comparable nine months ended April
30, 2006, the Company reported net income of $164,249, or $.08 per share.
Revenues in the current nine months decreased to $10,183,549 from $10,253,732
in the comparable 2006 nine months.
The recovery of real estate taxes in the current nine months in the amount of
$39,483, net of legal expenses, represents prior years' real estate taxes from
one of the Company's properties. The comparable 2006 nine months had a
recovery of real estate taxes in the amount of $195,605, net of legal
expenses.
Real estate operating expenses in the current nine months increased to
$6,411,896 from $5,890,592 in the comparable 2006 nine months primarily due to
increases in rental expense, maintenance costs and licenses and permits,
partially offset by decreases in real estate taxes, payroll costs and utility
costs.
Administrative and general expenses in the current nine months decreased to
$2,187,700 from $2,318,316 in the comparable 2006 nine months primarily due to
decreases in payroll costs, insurance costs, and bad debt expense, partially
offset by increases in legal and professional costs.
- 12 -
Depreciation and amortization expense in the current nine months increased to
$1,184,185 from $1,143,017 in the comparable 2006 nine months primarily due to
depreciation on the additional improvements to the Brooklyn, New York
properties.
Interest expense in the current nine months exceeded investment income by
$703,998 and by $619,558 in the comparable 2006 nine months. The increase was
due primarily to increased interest expense on the additional loans with
banks, partially offset by scheduled repayments of debt.
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.
Management considers current working capital and borrowing capabilities
adequate to cover the Company's planned operating and capital requirements.
The Company's cash and cash equivalents amounted to $2,337,654 at April 30,
2007.
The Company is considering selling a small property in Brooklyn, New York in
order to produce additional working capital in case additional capital
requirements become necessary.
On October 11, 2005, a tenant in our Jowein building filed for Chapter 11
protection. This tenant accounts for approximately 5% of our annual rental
income. Pursuant to an amendment to the lease and the assumption and
assignment of the lease to PLVTZ, LLC and the Pride Capital Group (d/b/a Great
American Group) ("PLVTZ"), the Company has assigned the lease to PLVTZ and
reduced the rent payable under the lease by 12% for the first year ($84,905)
commencing April 1, 2006 ("Commencement Date"), and 10% during the second year
($70,754) after the Commencement Date. In addition, the Company agreed to
waive certain pre-petition arrears owed by the tenant ($49,427).
In March 2006, the Company leased an additional 7,411 square feet for office
use to an existing tenant at the Company's Bond Street building, in Brooklyn,
New York. Rent commenced in October 2006.
In August and September 2006, the Company entered into three additional lease
agreements. Two of the lease agreements were for retail use at the Company's
Jamaica, New York building. One tenant leased 47,100 square feet and the
other tenant leased 28,335 square feet. These tenants replaced the tenants
who vacated the premises in February 2006 and June 2006, respectively. Rent
commenced in November 2006 for the tenant that leased 28,335 square feet and
commenced in May 2007 for the tenant that leased 47,100 square feet. The
rental income from these lease agreements will more than offset the rental
income lost from the previous tenants. The third lease agreement is for
10,000 square feet and will be used for office space at the Company's Jowein
building in Brooklyn, New York. Rent commenced in December 2006. The cost of
construction to the Company for these tenants will be insignificant.
In October 2006, the Company entered into a lease agreement with a restaurant
at the Company's Levittown premises. The restaurant intends to construct a
new building. The tenant's occupancy is subject to it receiving the necessary
building permits and licenses to construct the building and open for business
within a reasonable time period. Rent is anticipated to commence in August
2007. This will replace the tenant that vacated the premises in September
2004. The annual rental income from this lease agreement will more than
offset the annual rental income lost from the previous tenant.
The Company was informed by a tenant who occupies 32,890 square feet of office
space at its Jamaica, New York property, that the tenant would not be
exercising its option to extend its lease agreement. The tenant vacated the
premises on April 30, 2007. The annual loss in rental income to the Company
will be approximately $700,000. The Company is negotiating a lease with a new
tenant for the occupancy of the entire 32,890 square feet. As of May 1, 2007,
the new tenant is occupying the premises on a month to month basis.
In May 2007, the Company entered into a lease agreement with a tenant for
15,900 square feet of office space at its Jowein building in Brooklyn, New
York. Rent is anticipated to commence in December 2007.
- 13 -
The following table represents the increase in square foot occupancy at
the Company's properties, due to the aforementioned lease agreements.
Bond Street building, Brooklyn, New York 7,411
Jowein building, Brooklyn, New York 25,900
Jamaica building, Jamaica, New York 75,435
Levittown, New York building 15,243
-------
Total 123,989
=======
On November 16, 2006, the Company closed a loan with a bank to finance the
cost of two new elevators at the Company's Bond Street building in Brooklyn,
New York. The amount to be financed will be $850,000 and is part of the
$12,000,000 multiple draw term loan. (See Note 6(e) to the Consolidated
Financial Statements). The total cost of the elevator project is estimated to
be $1,100,000 and is anticipated to be completed prior to July 31, 2008.
Cash Flows From Operating Activities:
Prepaid Expenses: Expenditures for the nine months ended April 30, 2007
decreased by $60,751 compared to the period ended April 30, 2006, due to
decreases in insurance premiums paid. There was no decrease in insurance
coverage.
Deferred Expenses: The Company had expenditures for brokerage commissions in
the nine months ended April 30, 2007, in the amount of $600,969 relating to
tenants at its Brooklyn, New York and Jamaica, New York properties.
Payroll and Other Accrued Liabilities: The Company paid $432,670 for
commissions incurred in order to lease space at the Company's properties in
the nine months ended April 30, 2007. The original amount of the brokerage
commissions was $1,910,791. As of April 30, 2007, $1,481,746 had been paid.
The Company also incurred additional brokerage commissions in the amount of
$608,548 relating to four new tenants.
Cash Flows From Financing Activities:
Borrowing: The Company drew down an additional $315,706 on its multiple draw
term loan, to finance tenant improvements and brokerage commissions for the
leasing of 13,026 square feet for office use at the Company's Bond Street
building in Brooklyn New York. The total amount financed for tenant
improvements and brokerage commissions was $874,715. (See Note 6(e) to the
Consolidated Financial Statements).
Lease security: The Company increased tenant security deposits by $99,167 due
to the leasing of space to two tenants at the Company's Brooklyn, New York and
Jamaica, New York properties.
Quantitative and Qualitative Disclosures About Market Risks:
The Company uses both fixed-rate and variable-rate debt to finance its capital
requirements. These transactions expose the Company to market risk related to
changes in interest rates. The Company does not use derivative financial
instruments. At April 30, 2007, the Company had fixed-rate debt of $7,286,344
and variable-rate debt of $6,329,441. Because of the variable rates on the
extension of the Fishkill, New York property loan, the Bond Street building,
Brooklyn, New York and the Jowein building, Brooklyn, New York loans
(presently with balances of $1,834,726, $3,694,715, and $800,000,
respectively), if interest rates were to change 100 basis points, the effect
on net income from operations and future cash flows would be a decrease,
should the rates increase, or an increase, should the rates decline, of
$63,294 for these loans.
- 14 -
Cautionary Statement Regarding Forward-Looking Statements:
This Quarterly Report on Form 10-Q may contain forward-looking statements
which include assumptions about future market conditions, operations and
financial results. These statements are based on current expectations and are
subject to risks and uncertainties. They are made pursuant to safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The
Company's actual results, performance or achievements in the future could
differ significantly from the results, performance or achievements discussed
or implied in such forward-looking statements herein and in prior Securities
and Exchange Commission filings by the Company. The Company assumes no
obligation to update these forward-looking statements or to advise of changes
in the assumptions on which they were based.
Factors that could cause or contribute to such differences include, but are
not limited to, changes in the competitive environment of the Company, general
economic and business conditions, industry trends, changes in government rules
and regulations and environmental rules and regulations. Statements concerning
interest rates and other financial instrument fair values and their estimated
contribution to the Company's future results of operations are based upon
market information as of a specific date. This market information is often a
function of significant judgment and estimation. Further, market interest
rates are subject to significant volatility.
Controls and Procedures:
The Company's management reviewed the Company's internal controls and
procedures and the effectiveness of these controls. As of April 30, 2007, the
Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including its Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Rules 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934. Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective
in timely alerting them to material information relating to the Company
required to be included in its periodic SEC filings.
There was no change in the Company's internal controls over financial
reporting or in other factors during the Company's last fiscal quarter that
materially affected, or are reasonably likely to materially affect, the
Company's internal controls over financial reporting. There were no
significant deficiencies or material weaknesses, and therefore there were no
corrective actions taken.
Our Accounting Department is comprised of four persons. Due to such a limited
number of persons, a complete segregation of all of the duties as to which the
department is responsible is not possible. In order to make sure that the
inability to segregate all duties does not affect our timely and accurate
financial reporting, we need to remain vigilant in maintaining compensating
controls. These compensating controls will continue to be monitored in order
to assure us that our internal controls over financial reporting remain at a
high level despite the limited number of Accounting Department personnel.
- 15 -
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
(31) Additional exhibits--Certifications Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
(31.1) Chief Executive Officer 18
(31.2) Chief Financial Officer 19
(32) Certification Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, 18 U.S.C. Section. 1350. 20
(b) Reports on Form 8-K - A report on Form 8-K was filed by the
registrant during the three months ended April 30, 2007.
Item reported - The Company reported its financial results
for the three months ended January 31, 2007.
Date of report filed - March 8, 2007.
- 16 -
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 6, 2007 Lloyd J. Shulman
---------------------
Lloyd J. Shulman
President
Chief Executive Officer
Date June 6, 2007 Mark S. Greenblatt
---------------------
Mark S. Greenblatt
Vice President
Chief Financial Officer
- 17 -
EXHIBIT 31.1
CERTIFICATION
I, Lloyd J. Shulman, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of J.W. Mays, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: June 6, 2007
/s/ Lloyd J. Shulman
---------------------------
Lloyd J. Shulman
President
Chief Executive Officer
- 18 -
EXHIBIT 31.2
CERTIFICATION
I, Mark S. Greenblatt, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of J.W. Mays, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: June 6, 2007
/s/ Mark S. Greenblatt
---------------------------
Mark S. Greenblatt
Vice President
Chief Financial Officer
- 19 -
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The following certification is being furnished solely to accompany the Report
pursuant to 18 U.S.C. Section 1350 and in accordance with SEC Release No. 33-
8238. This certification shall not be deemed "filed" for purposes of Section
18 of the Securities Exchange Act of 1934, as amended, nor shall it be
incorporated by reference in any filing of the Company under the Securities
Act of 1933, as amended, whether made before or after the date hereof,
regardless of any general incorporation language in such filing.
In connection with the Quarterly Report of J. W. Mays, Inc. (the "Company") on
Form 10-Q for the period ending April 30, 2007 as filed with the Securities
and Exchange Commission (the "Report"), we, Lloyd J. Shulman and Mark S.
Greenblatt, Chief Executive Officer and Chief Financial Officer, respectively,
of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our
knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
June 6, 2007
/s/ Lloyd J. Shulman
---------------------------
Lloyd J. Shulman
Chief Executive Officer
/s/ Mark S. Greenblatt
---------------------------
Mark S. Greenblatt
Chief Financial Officer
A signed original of this written statement required by Section 906 has been
provided to J.W. Mays, Inc. and will be retained by J. W. Mays, Inc. and
furnished to the Securities and Exchange Commission or its staff upon request.
- 20 -