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, 2006
[ ] 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
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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
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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 8, 2006
___________________________ ___________________________
Common Stock, $1 par value 2,015,780 shares
This report contains 20 pages.
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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
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J.W. MAYS, INC.
CONSOLIDATED BALANCE SHEET
April 30, July 31,
ASSETS 2006 2005
--------------------------------------------------------------- ------------- -------------
(Unaudited) (Audited)
Property and Equipment - Net (Notes 6 and 7) $45,556,431 $44,636,667
------------- -------------
Current Assets:
Cash and cash equivalents 906,486 522,897
Marketable securities (Note 4) 45,874 45,668
Receivables 98,267 141,192
Deferred income taxes 85,000 104,000
Income taxes refundable 37,760 234,616
Prepaid expenses 694,288 1,552,114
Security deposits 85,000 66,998
------------- -------------
Total current assets 1,952,675 2,667,485
------------- -------------
Other Assets:
Deferred charges 3,047,452 2,830,730
Less accumulated amortization 1,432,115 1,188,451
------------- -------------
Net 1,615,337 1,642,279
Security deposits 1,332,707 1,233,116
Unbilled receivables (Note 10) 4,201,004 4,422,984
Marketable securities (Note 4) 2,872,554 2,574,514
------------- -------------
Total other assets 10,021,602 9,872,893
------------- -------------
TOTAL ASSETS $57,530,708 $57,177,045
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------------------------
Long-Term Debt:
Mortgages and term loan payable (Note 6) $10,342,248 $12,476,347
Note payable - related party (Note 8) 1,000,000 1,000,000
Security deposits payable 1,023,802 924,341
------------- -------------
Total long-term debt 12,366,050 14,400,688
------------- -------------
Deferred Income Taxes 3,133,000 3,151,000
------------- -------------
Current Liabilities:
Payable to securities broker (Note 9) 541,647 -
Accounts payable 35,704 65,539
Payroll and other accrued liabilities 1,269,497 1,133,918
Other taxes payable 3,520 5,188
Current portion of mortgages payable (Note 6) 2,396,459 1,015,173
Current portion of security deposits payable 85,000 66,998
------------- -------------
Total current liabilities 4,331,827 2,286,816
------------- -------------
Total liabilities 19,830,877 19,838,504
------------- -------------
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 $701,000 at April 30, 2006 and
$600,000 at July 31, 2005 1,361,305 1,164,264
Retained earnings 32,101,836 31,937,587
------------- -------------
38,987,683 38,626,393
Less common stock held in treasury, at cost - 162,517
shares at April 30, 2006 and at July 31, 2005 (Note 13) 1,287,852 1,287,852
------------- -------------
Total shareholders' equity 37,699,831 37,338,541
------------- -------------
Contingencies (Note 14)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $57,530,708 $57,177,045
============= =============
See Notes to Consolidated Financial Statements.
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J.W. MAYS, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
Three Months Ended Nine Months Ended
April 30, April 30,
--------------- -------------- -------------- ---------------
2006 2005 2006 2005
-------------- -------------- -------------- ---------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenues
Rental income (Notes 5 and 10) $3,362,194 $3,172,878 $10,058,127 $ 9,501,724
Recovery of real estate taxes 163,835 - 195,605 -
Gain on disposition of fixed assets - 3,739 - 3,739
-------------- -------------- -------------- -------------
Total revenues 3,526,029 3,176,617 10,253,732 9,505,463
-------------- -------------- -------------- -------------
Expenses
Real estate operating expenses 2,020,651 1,890,989 5,890,592 5,540,126
Administrative and general expenses 829,390 680,744 2,318,316 2,124,253
Depreciation and amortization 381,264 373,649 1,143,017 1,086,358
-------------- -------------- -------------- -------------
Total expenses 3,231,305 2,945,382 9,351,925 8,750,737
-------------- -------------- -------------- -------------
Income from operations before investment income,
interest expense and income taxes 294,724 231,235 901,807 754,726
-------------- -------------- -------------- -------------
Investment income and interest expense
Investment income (Note 4) 38,111 20,307 79,234 61,232
Interest expense (Notes 6, 8, 9 and 12) (216,698) (179,061) (698,792) (509,678)
-------------- -------------- -------------- -------------
(178,587) (158,754) (619,558) (448,446)
-------------- -------------- -------------- -------------
Income before income taxes 116,137 72,481 282,249 306,280
Income taxes provided 21,000 29,000 118,000 112,000
-------------- -------------- -------------- -------------
Net income 95,137 43,481 164,249 194,280
Retained earnings, beginning of period 32,006,699 31,740,018 31,937,587 31,589,219
-------------- -------------- -------------- -------------
Retained earnings, end of period $32,101,836 $31,783,499 $32,101,836 31,783,499
============== ============== ============== =============
Income per common share (Note 2) $.05 $.02 $.08 $.09
============== ============== ============== =============
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,
-------------- -------------- --------------- ------------
2006 2005 2006 2005
-------------- -------------- -------------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Net income $95,137 $43,481 $164,249 $194,280
-------------- -------------- -------------- ------------
Other comprehensive income, net of taxes (Note 3)
Unrealized gain on available-for-sale securities:
Net of taxes (benefit) of $43,000 and ($81,000) for the three
months ended April 30, 2006 and 2005, respectively,
and $101,000 and ($32,000) for the nine months ended
April 30, 2006 and 2005, respectively. 85,619 (155,625) 197,041 (61,132)
-------------- -------------- -------------- ------------
Net change in comprehensive income 85,619 (155,625) 197,041 (61,132)
-------------- -------------- -------------- ------------
-------------- -------------- -------------- ------------
Comprehensive income (loss) $180,756 $(112,144) $361,290 $133,148
============== ============== ============== ============
See Notes to Consolidated Financial Statements.
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J.W. MAYS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended
April 30,
--------------- ---------------
2006 2005
--------------- ---------------
(Unaudited) (Unaudited)
Cash Flows From Operating Activities:
Net income $164,249 $194,280
Adjustments to reconcile income to
net cash provided by operating activities:
Gain on disposition of fixed assets - 3,739
Depreciation and amortization 1,143,017 1,086,358
Amortization of deferred expenses 261,164 225,624
Other assets - deferred expenses (234,222) (819,251)
- unbilled receivables 221,980 (79,806)
Deferred income taxes (100,000) -
Changes in:
Receivables 42,925 111,667
Prepaid expenses 857,826 881,428
Income taxes refundable 196,856 (323,878)
Accounts payable (29,835) (32,842)
Payroll and other accrued liabilities 135,579 437,502
Other taxes payable (1,668) (1,738)
------------- -------------
Cash provided by operating activities 2,657,871 1,683,083
------------- -------------
Cash Flows From Investing Activities:
Capital expenditures (2,062,781) (4,966,148)
Security deposits (117,593) (158,528)
Marketable securities:
Payments for purchases (205) (205)
------------- -------------
Cash (used) by investing activities (2,180,579) (5,124,881)
------------- -------------
Cash Flows From Financing Activities:
Borrowings - securities broker 563,572 666,182
Payments - securities broker (21,925) (1,455,305)
Increase - security deposits 117,463 229,882
Borrowings - mortgage and other debt - 5,520,000
Decrease - mortgage and other debt payments (752,813) (478,634)
------------- -------------
Cash provided (used) by financing activities (93,703) 4,482,125
------------- -------------
Increase in cash and cash equivalents 383,589 1,040,327
Cash and cash equivalents at beginning of period 522,897 603,289
------------- -------------
Cash and cash equivalents at end of period $906,486 $1,643,616
============= =============
See Notes to Consolidated Financial Statements.
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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, 2005 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, 2005. 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, 2006.
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
nine months ended April 30, 2006 and April 30, 2005.
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, 2006, 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 $45,874 $- $- $45,874
============ ============= ============= =============
Noncurrent:
Available-for-sale:
Equity securities $810,250 $2,062,304 $- $2,872,554
============ ============= ============= =============
Investment income consists of the following:
Three Months Ended Nine Months Ended
April 30, April 30,
---------------------------- ----------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
Interest income $18,436 $1,278 $20,209 $6,079
Dividend income 19,675 19,029 59,025 55,153
------------- ------------- ------------- -------------
Total $38,111 $20,307 $79,234 $61,232
============= ============= ============= =============
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 and cash and cash
equivalents are placed with high credit quality financial institutions and
instruments to minimize risk.
The Company derives rental income from forty-eight tenants, of which one
tenant accounted for 16.46% and another tenant accounted for 12.27% of
rental income during the nine months ended April 30, 2006. 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, 2006 and July 31, 2005, provided by two tenants.
-7-
6. Long-Term Debt - Mortgages and Term Loan:
Long Term Debt - Mortgages and Term Loan:
April 30, 2006 July 31, 2005
-------------------------------- ---------------------------------
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) 5% 4/01/07 $1,600,000 $- $266,667 $1,533,333
Jamaica, New York property (b) 6.98% 8/01/06 188,533 2,596,971 178,937 2,739,452
Jowein building, Brooklyn, NY (c) 9 % 4/01/09 52,440 1,175,988 49,055 1,215,752
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 - 2,820,000 - 2,820,000
Term-loan payable to bank (f) 6.50% 5/01/10 315,486 1,114,563 300,514 1,353,084
Jowein building, Brooklyn, NY (g) Variable 8/01/10 240,000 800,000 220,000 980,000
-------------- -------------- -------------- ---------------
Total $2,396,459 $10,342,248 $1,015,173 $12,476,347
============== ============== ============== ===============
(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. The
outstanding balance of the loan, totaling $1,355,555 will become due and
payable on April 1, 2007.
(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, will become due
and payable on August 1, 2006. The Company has the option to extend this
loan for an additional five (5) years. The interest rate for the extended
period will be 2.25% above the 5-year treasury rate in effect on the first
maturity date. It is the intention of the Company to exercise its option
to extend the loan for the additional five (5) years. At the end of the
five year period there will be a balance due on the loan, which will be
determined when the interest rate is finalized.
Payments are to be 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 funds were used to purchase a
one-half interest in a property that is part of the Company's Brooklyn,
New York building (Bond Street building). 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
- 8-
loan would be on a seventeen (17) year level 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)).
(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 refinances 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 of $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 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. The outstanding
balance as of April 30, 2006 was $4,654,726.
(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 will be used to finance the construction costs and brokerage
commissions associated with the leasing of 28,801 square feet for office
use to a tenant at the Company's Jowein building, in Brooklyn, New York.
The loan is a multiple draw demand 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 the
aforementioned lease. 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.
- 9-
7. Property and Equipment - at cost:
April 30, July 31,
2006 2005
--------------- ---------------
Property:
Buildings and improvements $59,004,670 $57,368,282
Improvements to leased property 9,158,009 9,158,009
Land 6,146,554 6,146,554
Construction in progress 1,017,161 592,545
------------- -------------
75,326,394 73,265,390
Less accumulated depreciation 29,992,411 28,895,827
------------- -------------
Property - net 45,333,983 44,369,563
------------- -------------
Fixtures and equipment and other:
Fixtures and equipment 721,099 719,322
Other fixed assets 257,472 257,472
------------- -------------
978,571 976,794
Less accumulated depreciation 756,123 709,690
------------- -------------
Fixtures and equipment and other - net 222,448 267,104
------------- -------------
Property and equipment - net $45,556,431 $44,636,667
============= =============
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 funds were used
towards the purchase of a one-half interest in a parcel which is part of
the Company's Brooklyn, New York properties. The total purchase price was
$1,500,000. The constant quarterly payments of interest are $18,750.
9. Payable to Securities Broker:
The Company borrowed funds, payable on demand, from a securities broker.
The loan balance at April 30, 2006 in the amount of $541,647, secured by
the Company's marketable securities, accrues interest at a floating rate,
which at April 30, 2006, was at the annual rate of 8.00%.
10. 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.
11. Employees' Retirement Plan:
The Company sponsors a noncontributory Money Purchase Plan covering
substantially all of its employees. Operations were charged $77,353 and
$225,595 as contributions to the Plan for the three and nine months ended
April 30, 2006, respectively, and $78,411 and $220,804 as contributions to
the Plan for the three and nine months ended April 30, 2005, respectively.
-10-
12. 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,
------------------------------
2006 2005
-------------- --------------
Interest paid, net of capitalized interest of
$42,882 and $15,450 for the nine months
ended April 30, 2006 and 200 $ 691,740 $ 496,194
Income taxes paid $ 21,145 $ 435,878
13. 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, 2006 and at July 31,
2005.
14. 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.
-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, 2006 Compared to the Three Months Ended April 30,
2005:
In the three months ended April 30, 2006, the Company reported net income of
$95,137, or $.05 per share. In the comparable three months ended April 30,
2005, the Company reported net income of $43,481, or $.02 per share.
Revenues in the current three months increased to $3,526,029 from $3,176,617
in the comparable 2005 three months. The increase in revenues was due to the
Company's leasing to two office tenants at its Jowein building in Brooklyn,
New York, the leasing to a retail tenant at its Jamaica, New York building and
the recovery of real estate taxes.
The recovery of real estate taxes in the current three months in the amount of
$163,835, net of legal expenses, represents prior years' real estate taxes
from one of the Company's properties.
Real estate operating expenses in the current three months increased to
$2,020,651 from $1,890,989 in the comparable 2005 three months primarily due
to increases in real estate taxes, payroll costs, licenses and permits,
maintenance costs, lease commission expense and rent expense, partially offset
by a decrease in insurance costs and utility costs.
Administrative and general expenses in the current three months increased to
$829,390 from $680,744 in the comparable 2005 three months primarily due to
increases in payroll costs, insurance costs, bad debt expense due to a tenant
vacating the Company's Jamaica, New York building, partially offset by a
decrease in legal and professional costs.
Depreciation and amortization expense in the current three months increased to
$381,264 from $373,649 in the comparable 2005 three months.
Interest expense and other expenses in the current three months exceeded
investment income by $178,587 and by $158,754 in the comparable 2005 three
months. The increase was due primarily to increased interest expense on the
additional loans with banks, and a note payable from a director, partially
offset by scheduled repayments of debt.
Nine Months Ended April 30, 2006 Compared to the Nine Months Ended April 30,
2005:
In the nine months ended April 30, 2006, the Company reported net income of
$164,249, or $.08 per share. In the comparable nine months ended April 30,
2005, the Company reported net income of $194,280, or $.09 per share.
Revenues in the current nine months increased to $10,253,732 from $9,505,463
in the comparable 2005 nine months. The increase in revenues was due to the
Company's leasing to two office tenants at its Jowein building in Brooklyn,
New York, the leasing to a retail tenant at its Jamaica, New York building and
the recovery of real estate taxes, partially offset by a tenant vacating the
Levittown, New York premises in September 2004.
The recovery of real estate taxes in the current nine months in the amount of
$195,605, net of legal expenses, represents prior years' real estate taxes
from two of the Company's properties.
Real estate operating expenses in the current nine months increased to
$5,890,592 from $5,540,126 in the comparable 2005 nine months primarily due to
increases in real estate taxes, utility costs, maintenance costs, licenses and
permits, lease commission expense and rent expense, partially offset by a
decrease in insurance costs.
Administrative and general expenses in the current nine months increased to
$2,318,316 from $2,124,253 in the comparable 2005 nine months primarily due to
increases in payroll costs, insurance costs, bad debt expense due to a tenant
vacating the Company's Jamaica, New York building, partially offset by a
decrease in legal and professional costs.
-12-
Depreciation and amortization expense in the current nine months increased to
$1,143,017 from $1,086,358 in the comparable 2005 nine months primarily due to
depreciation on the additional improvements to the Brooklyn, New York and the
Jamaica, New York properties and acquisitions of the three parcels in
Brooklyn, New York.
Interest expense and other expenses in the current nine months exceeded
investment income by $619,558 and by $448,446 in the comparable 2005 nine
months. The increase was due primarily to increased interest expense on the
additional loans with banks, and a note payable from a director, 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 $906,486 at April 30,
2006.
In March 2005 and in October 2005, the Company leased 15,000 square feet and
10,000 square feet, respectively, for office use to two tenants at the
Company's Jowein building in Brooklyn, New York. This space was a portion of
the space previously leased to the City of New York Department of Finance,
which vacated the premises in June 2004. Rent commenced in October 2005 for
both tenants. The Company also leased 13,026 square feet for office use to a
tenant in the Company's 9 Bond Street building in Brooklyn, New York. Rent
will commence in August 2006.
The Company, in August 2005, entered into two lease agreements with an
existing tenant at the Company's 9 Bond Street building in Brooklyn, New York.
One lease agreement is for 12,000 square feet and will be used for offices,
and the rent commenced in March 2006. The other lease agreement is for 2,505
square feet and will be used as part of the tenant's retail operation, and
rent commenced in November 2005. The Company, in March, 2006, leased an
additional 7,411 square feet to this same tenant for office space at the
Company's 9 Bond Street building in Brooklyn, New York. Rent will commence in
October 2006.
The Company has been informed by a tenant, who occupies 47,100 square feet of
retail 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 February 28, 2006. The annual loss in rental income to the Company
will be approximately $600,000. The Company is actively seeking, through
brokers, tenants to occupy the space.
The Company has been informed by a tenant at the Company's Jamaica, New York
property of its intention to vacate the premises in June 2006. The annual
loss in rental income from this tenant is approximately $300,000. The Company
is actively seeking through brokers, tenants to occupy the space.
The lease with the tenant that leased the entire premises at the Company's
Circleville, Ohio building, under a triple-net lease, lease extension and
modification expired September 30, 2005. The tenant entered into a further
lease extension and modification agreement for part of the premises, 75,000
square feet, for a period of five years, with a right to cancel after three
years, to expire on November 11, 2010. The Company has engaged brokers to
pursue tenants for the remaining 118,000 square feet of space available for
leasing.
On October 11, 2005, a tenant in our Jowein building filed for Chapter 11
protection. This tenant is expected to account for 6% of our projected annual
income for the year ending July 31, 2006. 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"), which agreements
are subject to bankruptcy court approval, the Company has agreed to assign the
Lease to PLVTZ and reduce 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 has agreed to waive certain pre-petition arrears owed by the
tenant ($49,427).
The tenant at the Company's Fishkill, New York property, whose lease expired
on November 26, 2005, did not renew the lease and vacated the premises. The
annual loss in rental income from this tenant is approximately $180,000. The
Company is actively seeking, through brokers, tenants to occupy the vacated
space.
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On May 9, 2006, the Company drew down an additional $559,009 on its multiple
draw term loan, to finance tenant improvements for the leasing of 13,026
square feet for office use at the Company's 9 Bond Street building in
Brooklyn, New York. The total amount to be financed for tenant improvements
and brokerage commissions will be approximately $870,000. (See Note 6(e) to
the Consolidated Financial Statements).
Cash Flows From Operating Activities:
Prepaid Expenses: Expenditures for the nine months ended April 30, 2006
increased by $64,239 compared to the period ended April 30, 2005, due to
increases in insurance premiums paid.
Deferred Expenses: The Company had expenditures for brokerage commissions in
the nine months ended April 30, 2006, in the amount of $209,578 relating to
tenants at its Brooklyn, New York properties.
Payroll and Other Accrued Liabilities: The Company paid $150,899 for
commissions incurred in order to lease space at the Company's properties in
the nine months ended April 30, 2006. The original amount of the brokerage
commissions was $1,302,243. As of April 30, 2006, $1,049,076 had been paid.
The Company also incurred additional brokerage commissions in the amount of
$209,578 relating to two tenants.
Cash Flows From Investing Activities:
The Company had expenditures of $530,557 for the nine months ended April 30,
2006 for the renovation of 15,000 square feet for office space for a tenant at
its Jowein building in Brooklyn, New York. The cost of the project was
$1,054,989 and was completed in September 2005.
The Company had expenditures of $266,820 for the nine months ended April 30,
2006 for the renovations to an existing tenant at the Company's Jamaica, New
York property. The tenant was on a month to month lease agreement and upon
completion of the renovations the lease agreement became a ten-year lease with
increased rental income. The total cost of the project was $276,820 and was
completed in December 2005.
The Company had expenditures of $760,973 for the nine months ended April 30,
2006 for the renovation of 13,026 square feet of office space for a tenant at
its 9 Bond Street building in Brooklyn, New York. The cost of the project
will be $1,075,000 and is anticipated to be completed in June 2006.
Cash Flows From Financing Activities:
Lease security: The Company increased tenant security deposits by $108,158
during the nine months ended April 30, 2006, due to the leasing of space to
six tenants at the Company's Brooklyn, 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, 2006, the Company had fixed-rate debt of $8,043,981
and variable-rate debt of $5,694,726. Because of 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, $2,820,000, and $1,040,000, 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 $56,947 for these loans. In connection
with the loan payable to securities broker in the amount of $541,647, 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 $5,416 for this loan.
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.
-14-
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, 2006, 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 nine months ended April 30, 2006.
Item reported - The Company reported its financial results
for the three months ended January 31, 2006.
Date of report filed - March 10, 2006.
-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 8, 2006 Lloyd J. Shulman
------------------ ---------------------------
Lloyd J. Shulman
President
Chief Executive Officer
Date June 8, 2006 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 8, 2006
/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 8, 2006
/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, 2006 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 8, 2006
/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-