J.W. MAYS, INC. ANNUAL REPORT 2002 Year Ended July 31, 2002 J.W. MAYS, INC. CONTENTS Page No. ================================================================================ Summary of Selected Financial Data ....................................... 2 The Company .............................................................. 2 Message to Shareholders .................................................. 3 Consolidated Balance Sheets .............................................. 4-5 Consolidated Statements of Income and Retained Earnings .................. 6 Consolidated Statements of Comprehensive Income .......................... 6 Consolidated Statements of Cash Flows .................................... 7 Notes to Consolidated Financial Statements ............................... 8-16 Report of Management ..................................................... 17 Independent Auditors' Report ............................................. 17 Five Year Summary of Consolidated Operations ............................. 18 Management's Discussion and Analysis of Financial Condition and Results of Operations .......................................................... 19-21 Quarterly Financial Information (Unaudited) .............................. 21 Common Stock and Dividend Information ........................................21 Officers and Directors .......................................................22 EXECUTIVE OFFICES 9 Bond Street, Brooklyn, N.Y. 11201-5805 TRANSFER AGENT AND REGISTRAR American Stock Transfer & Trust Company 59 Maiden Lane New York, N.Y. 10038-4502 SPECIAL COUNSEL Holland & Knight LLP 195 Broadway New York, N.Y. 10007-3189 INDEPENDENT AUDITORS D'Arcangelo & Co., LLP 3000 Westchester Avenue Purchase, N.Y. 10577-2538 ANNUAL MEETING The Annual Meeting of Shareholders will be held on Tuesday, November 26, 2002, at 10:00 A.M., New York time, at J.W. MAYS, INC., 9 Bond Street, Brooklyn, New York. J.W. MAYS, INC SUMMARY OF SELECTED FINANCIAL DATA (dollars in thousands except per share data) 2002 2001 2000 1999 1998 ============================================================================== Rental Income $12,533 $11,281 $10,451 $10,250 $10,249 Rental Income--Affiliated Company 462 414 414 411 414 Recovery of Real Estate Taxes 69 -- -- -- 1,219 - ------------------------------------------------------------------------------ Total Revenues 13,064 11,695 10,865 10,661 11,882 - ------------------------------------------------------------------------------ Net Income 1,254 1,291 1,066 1,164 1,838 - ------------------------------------------------------------------------------ Real Estate-Net 32,094 31,525 29,339 28,586 28,024 - ------------------------------------------------------------------------------ Total Assets 48,266 45,578 42,485 41,657 41,375 - ------------------------------------------------------------------------------ Long-Term Debt: Mortgages Payable 7,779 7,332 6,000 6,440 7,814 Other 399 364 362 491 582 ------- ------- ------- ------- ------- Total 8,178 7,696 6,362 6,931 8,396 - ------------------------------------------------------------------------------ Shareholders' Equity 34,652 33,033 31,803 31,067 30,059 - ------------------------------------------------------------------------------ Net Income Per Common Share $ .62 $ .62 $ .50 $ .54 $ .86 - ------------------------------------------------------------------------------ Cash Dividends Declared Per Share -- -- -- -- -- - ------------------------------------------------------------------------------ Average common shares outstanding for fiscal 2002, 2,033,280; 2001, 2,066,390; 2000, 2,118,908; 1999 and 1998, 2,135,780. THE COMPANY ================================================================================ J.W. Mays, Inc. was founded in 1924 and incorporated under the laws of the State of New York on July 6, 1927. The Company operates a number of commercial real estate properties located in Brooklyn and Jamaica in New York City, in Levittown, Long Island, New York, in Fishkill, Dutchess County, New York and in Circleville, Ohio. The major portion of these properties is owned and the balance is leased. A substantial percentage of these properties is leased to tenants while the remainder is available for lease. More comprehensive information concerning the Company appears in its Form 10-K Annual Report for the fiscal year ended July 31, 2002. 2 J.W. MAYS, INC. TO OUR SHAREHOLDERS ================================================================================ Despite this difficult year economically, I am pleased to report that our Company finished this past year with an increase in revenues and with net income per share virtually identical to last year's excellent year. In fiscal 2002 our revenues were $13,064,424 compared to $11,694,953 in the 2001 fiscal year. Net income for fiscal 2002 was $1,254,190, or $.62 per share. This compares to net income of $1,290,594, or $.62 per share. [Our results for fiscal year 2002 would have been significantly better but for the default and subsequent bankruptcy filing by a large retail tenant in our Jamaica building.] During fiscal 2002, the Company leased 15,527 square feet primarily for retail use to an existing tenant in the Company's Brooklyn, New York property. Rent for this additional space commenced in April, 2002. The Company also leased 5,460 square feet of office space to an existing tenant in the Company's Jowein building also in Brooklyn, New York. Rent for that additional space commenced in June, 2002. We are continuing to actively pursue governmental agencies and prospective corporate tenants which may be seeking office or retail space in our properties. We are taking all appropriate legal action to remove the tenant which filed for bankruptcy so that we may ultimately rent such space or a portion thereof to a qualified tenant or tenants. In closing, I believe that our Company is well positioned to continue its growth, and I want to thank the personnel of Mays and our Board colleagues for their continuing commitment and support. /s/ Lloyd J. Shulman - ----------------------------------------------- Lloyd J. Shulman Chairman, President and Chief Executive Officer October 11, 2002 3 J.W. MAYS, INC. CONSOLIDATED BALANCE SHEETS July 31, 2002 and 2001 ASSETS 2002 2001 ==================================================================================== Property and Equipment-at cost (Notes 1 and 3): Buildings and improvements ........................... $43,962,492 $42,371,769 Improvements to leased property ...................... 9,158,009 9,158,009 Fixtures and equipment ............................... 657,013 613,460 Land ................................................. 4,008,835 4,008,835 Other ................................................ 216,702 214,426 Construction in progress ............................. 68,520 4,100 ----------- ----------- 58,071,571 56,370,599 Less accumulated depreciation and amortization ....... 25,704,058 24,607,468 ----------- ----------- Property and equipment-net ......................... 32,367,513 31,763,131 ----------- ----------- Current Assets: Cash and cash equivalents (Notes 10 and 11) .......... 2,951,013 1,003,130 Marketable securities (Notes 1, 2 and 11) ............ 44,653 43,741 Receivables (Note 7) ................................. 551,678 619,062 Deferred income taxes (Notes 1 and 5) ................ 107,000 112,000 Security deposits .................................... 14,745 -- Prepaid expenses ..................................... 1,431,240 1,083,256 Real estate taxes refundable ......................... 82,769 -- ----------- ----------- Total current assets ............................... 5,183,098 2,861,189 ----------- ----------- Other Assets: Deferred charges (Note 1) ............................ 2,858,009 2,980,935 Less accumulated amortization ........................ 1,629,773 1,654,395 ----------- ----------- Net ................................................ 1,228,236 1,326,540 Security deposits .................................... 701,455 663,358 Unbilled receivables (Notes 1 and 7) ................. 4,313,327 4,756,828 Unbilled receivable-affiliated company (Notes 1 and 7) -- 181,937 Receivables (Note 7) ................................. 193,444 430,914 Marketable securities (Notes 1, 2 and 11) ............ 4,278,813 3,593,770 ----------- ----------- Total other assets ................................. 10,715,275 10,953,347 ----------- ----------- TOTAL ASSETS ....................................... $48,265,886 $45,577,667 =========== =========== See Notes to Consolidated Financial Statements. 4 LIABILITIES AND SHAREHOLDERS' EQUITY 2002 2001 ================================================================================================== Long-Term Debt: Mortgages payable (Notes 3 and 11) ................................. $ 7,778,871 $ 7,331,449 Other (Note 4) ..................................................... 399,328 364,190 ----------- ----------- Total long-term debt ............................................. 8,178,199 7,695,639 ----------- ----------- Deferred Income Taxes (Notes 1 and 5) ................................ 3,093,000 2,924,000 ----------- ----------- Current Liabilities: Accounts payable ................................................... 55,605 29,324 Payroll and other accrued liabilities (Note 8) ..................... 808,807 680,746 Income taxes payable (Notes 1 and 5) ............................... 747,268 200,689 Other taxes payable ................................................ 3,676 2,941 Current portion of long-term debt-mortgages payable (Notes 3 and 11) 712,864 968,395 Current portion of long-term debt-other (Note 4) ................... 14,745 43,333 ----------- ----------- Total current liabilities ........................................ 2,342,965 1,925,428 ----------- ----------- Total liabilities ................................................ 13,614,164 12,545,067 ----------- ----------- 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 (Notes 1 and 2) ... 880,810 515,878 Retained earnings .................................................. 29,306,722 28,052,532 ----------- ----------- 35,712,074 34,092,952 Less common stock held in treasury, at cost-145,017 shares at July 31, 2002 and at July 31, 2001 ................................ 1,060,352 1,060,352 ----------- ----------- Total shareholders' equity ....................................... 34,651,722 33,032,600 ----------- ----------- Commitments (Notes 6 and 7) and Contingencies (Note 12) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ....................... $48,265,886 $45,577,667 =========== =========== 5 J.W. MAYS, INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Years Ended July 31, -------------------------------------------- 2002 2001 2000 =============================================================================================== Revenues Rental income (Notes 1 and 7) ................. $ 12,533,168 $ 11,281,344 $ 10,450,955 Rental income--affiliated company (Note 7) .... 462,282 413,609 413,610 Recovery of real estate taxes ................. 68,974 -- -- ------------ ------------ ------------ Total revenues .............................. 13,064,424 11,694,953 10,864,565 ------------ ------------ ------------ Expenses Real estate operating expenses (Note 6) ....... 6,025,464 5,885,113 5,529,850 Administrative and general expenses ........... 2,599,405 2,392,218 2,240,372 Bad debts (recovery) (Notes 12 and 13) ........ 483,050 (47,532) -- Depreciation and amortization (Note 1) ........ 1,141,889 1,079,449 1,009,859 ------------ ------------ ------------ Total expenses .............................. 10,249,808 9,309,248 8,780,081 ------------ ------------ ------------ Income from operations before investment income, interest expense and income taxes ............. 2,814,616 2,385,705 2,084,484 ------------ ------------ ------------ Investment income and interest expense Investment income (Notes 1 and 2) ............. 232,538 263,641 296,768 Interest expense (Notes 3 and 10) ............. 673,964 572,752 618,314 ------------ ------------ ------------ (441,426) (309,111) (321,546) ------------ ------------ ------------ Income before income taxes ..................... 2,373,190 2,076,594 1,762,938 Income taxes provided (Notes 1 and 5) .......... 1,119,000 786,000 697,000 ------------ ------------ ------------ Net income ..................................... 1,254,190 1,290,594 1,065,938 Retained earnings, beginning of year ........... 28,052,532 26,761,938 25,696,000 ------------ ------------ ------------ Retained earnings, end of year ................. $ 29,306,722 $ 28,052,532 $ 26,761,938 ============ ============ ============ Income per common share (Note 1) ............... $ .62 $ .62 $ .50 ============ ============ ============ Dividends per share ............................ -- -- -- ============ ============ ============ Average common shares outstanding .............. 2,033,280 2,066,390 2,118,908 ============ ============ ============ See Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended July 31, ---------------------------------------- 2002 2001 2000 =========================================================================================================== Net Income ..................................................... $ 1,254,190 $ 1,290,594 $ 1,065,938 ----------- ----------- ----------- Other comprehensive income, net of tax Unrealized gain (loss) on available-for-sale securities, net of taxes (benefit) of $189,000, $233,000 and $(38,000) for the fiscal years 2002, 2001 and 2000, respectively ........ 364,932 452,761 (73,881) Reclassification adjustment .................................... (18,595) 761 (26,734) ----------- ----------- ----------- Other comprehensive income (loss) .............................. 346,337 453,522 (100,615) ----------- ----------- ----------- Comprehensive income ........................................... $ 1,600,527 $ 1,744,116 $ 965,323 =========== =========== =========== See Notes to Consolidated Financial Statements. 6 J.W. MAYS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended July 31, ----------------------------------------- 2002 2001 2000 ==================================================================================================== Cash Flows From Operating Activities Net income ............................................ $ 1,254,190 $ 1,290,594 $ 1,065,938 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes ............................... (15,000) 426,000 530,000 Realized (gain) loss on marketable securities ....... 17,705 761 (26,734) Impairment of marketable securities ................. 49,890 -- -- Depreciation and amortization ....................... 1,141,889 1,079,449 1,009,859 Amortization of deferred expenses ................... 259,671 228,746 214,139 Other assets--deferred expenses ..................... (161,367) (402,749) (145,848) --unbilled receivables .................. 443,501 (21,713) (311,698) --unbilled receivable--affiliated company 181,937 181,938 181,937 --receivables ........................... 237,470 -- 12,534 Changes in: Receivables .......................................... 67,384 (834,104) 199,371 Prepaid expenses ..................................... (347,984) (77,977) (44,665) Income taxes refundable .............................. -- -- 38,727 Real estate taxes refundable ......................... (82,769) -- -- Accounts payable ..................................... 26,281 (14,339) 13,935 Payroll and other accrued liabilities ................ 128,061 (75,914) 376,520 Income taxes payable ................................. 546,579 178,324 22,365 Other taxes payable .................................. 735 (473) 1,209 ----------- ----------- ----------- Net cash provided by operating activities .......... 3,748,173 1,958,543 3,137,589 ----------- ----------- ----------- Cash Flows From Investing Activities Acquisition of property and equipment ................. (1,746,271) (3,288,175) (1,778,229) Security deposits ..................................... (52,842) (16,434) (7,335) Marketable securities: Receipts from sales or maturities .................... 348,794 276,000 139,134 Payments for purchases ............................... (548,412) (127,056) (280,342) ----------- ----------- ----------- Net cash (used) by investing activities ............ (1,998,731) (3,155,665) (1,926,772) ----------- ----------- ----------- Cash Flows From Financing Activities Borrowing--mortgage ................................... 1,200,000 2,300,000 -- Increase--security deposits ........................... 49,883 11,955 2,687 Payments--mortgage and other debt ..................... (1,051,442) (1,127,035) (917,765) Purchase of treasury stock ............................ -- (513,750) (256,500) ----------- ----------- ----------- Net cash provided (used) by financing activities ... 198,441 671,170 (1,171,578) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents .. 1,947,883 (525,952) 39,239 Cash and cash equivalents at beginning of year ........ 1,003,130 1,529,082 1,489,843 ----------- ----------- ----------- Cash and cash equivalents at end of year .............. $ 2,951,013 $ 1,003,130 $ 1,529,082 =========== =========== =========== See Notes to Consolidated Financial Statements. 7 J.W. MAYS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ================================================================================ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: CONSOLIDATION: The consolidated financial statements include the accounts of the Company, a New York corporation and its subsidiaries, which are wholly-owned. Material intercompany items have been eliminated in consolidation. 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. Significant estimates in these consolidated statements include allowances for uncollectible rent receivable and unbilled rent receivable. Actual results could differ from those estimates. RENTAL INCOME: All of the real estate owned by the Company is held for leasing to tenants except for a small portion used for Company offices. Rent is recognized from tenants under executed leases no later than on an established date or on an earlier date if the tenant should commence conducting business. 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 the lease. Contingent rental income is recorded when earned and is not based on tenant revenue. 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. Realized gains and losses are determined on a specific identification basis. The Company reviews marketable securities for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Depreciation is calculated using the straight-line method and the declining-balance method. Amortization of improvements to leased property is calculated over the shorter of the life of the lease or the estimated useful life of the improvements. Lives used to determine depreciation and amortization are generally as follows: Building and improvements ........................... 18-40 years Improvements to leased property ..................... 3-40 years Fixtures and equipment .............................. 7-12 years Other ............................................... 3-5 years Maintenance, repairs, renewals and improvements of a non-permanent nature are charged to expense when incurred. Expenditures for additions and major renewals or improvements are capitalized. The cost of assets sold or retired and the accumulated depreciation or amortization thereon are eliminated from the respective accounts in the year of disposal, and the resulting gain or loss is credited or charged to income. Interest is capitalized in connection with the construction/renovations of real property. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful life. The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. At July 31, 2002 and 2001, there were no impairments of its property and equipment. COMPREHENSIVE INCOME: 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. 8 ================================================================================ DEFERRED CHARGES: Deferred charges consist principally of costs incurred in connection with the leasing of property to tenants. Such costs are amortized over the related lease periods, ranging from 1 to 23 years, using the straight-line method. INCOME TAXES: Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. Deferred tax assets result principally from the recording of certain accruals and reserves which currently are not deductible for tax purposes. Deferred tax liabilities result principally from temporary differences in the recognition of gains and losses from certain investments and from the use, for tax purposes, of accelerated depreciation. INCOME PER SHARE OF COMMON STOCK: Income per share has been computed by dividing net income for the year by the weighted average number of shares of common stock outstanding during the year, adjusted for the purchase of treasury stock. Shares used in computing income per share were 2,033,280 in fiscal 2002, 2,066,390 in fiscal 2001 and 2,118,908 in fiscal 2000. The Company's adoption of FASB 128 "Earnings per Share" has had no effect on the computation of previously reported earnings per share. 2. MARKETABLE SECURITIES: As of July 31, 2002 and 2001, the Company's marketable securities were classified as follows: 2002 2001 ----------------------------------------------- ---------------------------------------------- GROSS GROSS GROSS GROSS UNREALIZED UNREALIZED FAIR UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE ---------- ---------- -------- ---------- ---------- -------- -------- ---------- Current: Certificate of deposit ... $ 44,653 $ -- $ -- $ 44,653 $ 43,741 $ -- $ -- $ 43,741 ========== ========== ======== ========== ========== ======== ======== ========== Non-current: Available-for-sale: Equity securities ...... $2,944,003 $1,334,810 $ -- $4,278,813 $2,812,892 $780,878 $ -- $3,593,770 ========== ========== ======== ========== ========== ======== ======== ========== Investment income for the years ended July 31, 2002, 2001 and 2000 consists of the following 2002 2001 2000 --------- --------- --------- Interest income ................. $ 106,137 $ 60,511 $ 67,516 Dividend income ................. 193,996 203,891 202,518 Gain (loss) on sale of securities (67,595) (761) 26,734 --------- --------- --------- Total ......................... $ 232,538 $ 263,641 $ 296,768 ========= ========= ========= 9 3. LONG-TERM DEBT: JULY 31, 2002 JULY 31, 2001 ----------------------- ----------------------- 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 $ 266,667 $2,333,333 $ 266,667 $2,600,000 Jamaica, New York property .... (b) 6.98% 8/01/06 145,257 3,240,406 74,623 2,225,377 Jowein building, Brooklyn, N.Y (c) 9% 3/31/05 123,220 243,872 112,727 367,092 Fishkill, New York property ... (d) 8.25% 7/01/04 105,275 1,961,260 96,965 2,066,535 Circleville, Ohio property .... (e) 7% 9/30/02 72,445 -- 417,413 72,445 ---------- ---------- ---------- ---------- Total ....................... $ 712,864 $7,778,871 $ 968,395 $7,331,449 ========== ========== ========== ========== (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 interest rate on the loan was 8.50% for a period of five (5) years and six (6) months, with such rate to change on the first day of the sixty-seventh (67th) month of the term to a rate equal to the then prime rate plus .25%, fixed for the balance of the term. As of April 1, 2002, the effective rate was reduced to 5.00% per annum. The loan is to become due and payable on the first day of the month following the expiration of ten (10) years and six (6) months from the closing date. (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 loan proceeds are to be utilized by the Company toward its costs of capital improvements of the premises in connection with the Company's lease of 42,250 square feet of a floor in the building to the State of New York. The loan is structured in two phases: 1.) A fifteen-month construction term with interest only on the amount owed at a floating rate per annum equal to the prime rate. 2.) Upon completion of the renovations, the construction loan was converted to a ten (10) year second mortgage permanent loan on a fifteen (15) year level amortization, plus interest. The interest rate on the permanent loan during the first five (5) years is fixed at 6.98% per annum. The interest rate during the five (5) year renewal term is at a fixed rate per annum equal to 2.25% above the five (5) year Treasury Note Rate then in effect. Payments are made, in arrears, on the first day of each and every month calculated (a) during the period of the construction loan, interest only, and (b) 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 and the sale or transfer of the Company's ground lease interest in the premises. Both credit facilities will be subject to the bank's existing first position mortgage loan on the premises. On August 2, 2001, the Company took down the principal balance of the loan of $1,200,000. (c) Mortgage is held by an affiliated corporation owned by members, including certain directors of the Company, of the family of the late Joe Weinstein, former Chairman of the Board of Directors. Interest and amortization of principal are paid quarterly. Effective April 1, 2000, the maturity date of the mortgage, which was scheduled to be on March 31, 2000, was extended to March 31, 2005. The interest rate remained at 9%. During the extended period the constant quarterly payments of interest and principal increased from $37,263 to $38,044. The mortgage loan is self-amortizing. 10 (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 are to be made in constant monthly amounts based upon a fifteen (15) year payout period. (e) The mortgage loan, which is self-amortizing, matures September 30, 2002. The loan is payable at an annual interest rate of 7%. Under the terms of the loan, constant monthly payments, including interest and principal, are currently in the amount of $36,540. The final payment was made September 1, 2002. Maturities of long-term debt--mortgages payable outstanding at July 31, 2002, are as follows: Years ending July 31, 2003 (included in current liabilities), $712,864; 2004, $2,517,727; 2005, $542,756; 2006, $445,602; and 2007, $4,272,786. 4. LONG-TERM DEBT--OTHER: Long-Term debt-Other consists of the following: JULY 31, 2002 JULY 31, 2001 --------------------- -------------------- DUE WITHIN DUE AFTER DUE WITHIN DUE AFTER ONE YEAR ONE YEAR ONE YEAR ONE YEAR -------- -------- -------- -------- Deferred compensation* .. $ -- $ -- $ 43,333 $ -- Lease security deposits** 14,745 399,328 -- 364,190 -------- -------- -------- -------- Total ................ $ 14,745 $399,328 $ 43,333 $364,190 ======== ======== ======== ======== Maturities of long-term debt-other, outstanding at July 31, 2002, are as follows: Years ending July 31, 2003 (included in current liabilities), $14,745; 2004, $6,539; 2005, $114,734; 2006, $63,023; 2007, $23,308, and thereafter, $191,724. - --------- * In fiscal 1964, the Company entered into a deferred compensation agreement with Max L. Shulman, its then Chairman of the Board. The agreement, as amended, provided for $520,000 to be paid in monthly installments of $8,666.67 for a period of 60 months, payable upon the expiration of his employment, retirement or permanent disability as defined in the agreement, or death. Mr. Shulman retired December 31, 1996 and the monthly payments commenced January, 1997. The final payment was made December 13, 2001. ** Does not include three irrevocable letters of credit totaling $319,000 at July 31, 2002 and $291,500 at July 31, 2001, provided by three tenants. 11 5. INCOME TAXES: Significant components of the Company's deferred tax assets and liabilities as of July 31, 2002 and 2001, are a result of temporary differences related to the items described as follows: 2002 2001 ---------------------------- ---------------------------- DEFERRED DEFERRED DEFERRED DEFERRED TAX ASSETS TAX LIABILITIES TAX ASSETS TAX LIABILITIES ---------- --------------- ---------- --------------- Alternative minimum tax credit carryforward .... $ -- $ -- $ 197,888 $ -- Deferred compensation not currently deductible . -- -- 14,733 -- Rental income received in advance .............. 74,413 -- 59,128 -- Unbilled receivables ........................... -- 1,466,531 -- 1,679,180 Property and equipment ......................... -- 1,180,645 -- 1,160,513 Impairment of marketable securities ............ 16,962 -- -- -- Unrealized gain on available-for-sale securities -- 453,835 -- 265,499 Other .......................................... 23,636 -- 21,443 -- ---------- ---------- ---------- ---------- $ 115,011 $3,101,011 $ 293,192 $3,105,192 ========== ========== ========== ========== The Company has determined, based on its history of operating earnings and expectations for the future, that it is more likely than not that future taxable income will be sufficient to fully utilize the deferred tax assets at July 31, 2002. Income taxes provided for the years ended July 31, 2002, 2001 and 2000 consist of the following: 2002 2001 2000 ----------- ----------- ----------- Current: Federal ......... $ 675,900 $ 202,900 $ 29,600 State and City .. 458,100 157,100 137,400 Deferred taxes ... (15,000) 426,000 530,000 ----------- ----------- ----------- Total provision $ 1,119,000 $ 786,000 $ 697,000 =========== =========== =========== Components of the deferred tax provision for the years ended July 31, 2002, 2001 and 2000 consist of the following: 2002 2001 2000 --------- --------- --------- Book depreciation over (under) tax depreciation . $ 20,132 $ 45,941 $ (15,088) Reduction (increase) of rental income received in advance ........................................ (15,285) 46,935 (92,652) Increase (decrease) in unbilled receivables ..... (212,649) (54,477) 44,119 Deferred compensation ........................... 14,733 35,360 35,360 Net operating loss carryforwards ................ -- 192,056 571,506 Alternative minimum tax (benefit) ............... 197,888 158,926 (29,521) (Decrease) in impairment of marketable securities (16,962) -- -- Other ........................................... (2,857) 1,259 16,276 --------- --------- --------- $ (15,000) $ 426,000 $ 530,000 ========= ========= ========= 12 Taxes provided for the years ended July 31, 2002, 2001 and 2000 differ from amounts which would result from applying the federal statutory tax rate to pre-tax income, as follows: 2002 2001 2000 ----------- ----------- ----------- Income before income taxes ................ $ 2,662,158 $ 2,076,594 $ 1,762,937 Dividends received deduction .............. (91,500) (80,700) (45,694) Other-net ................................. 10,200 11,424 44,522 ----------- ----------- ----------- Adjusted pre-tax income ................... $ 2,580,858 $ 2,007,318 $ 1,761,765 =========== =========== =========== Statutory rate ............................ 34% 34% 34% Income tax provision at statutory rate .... $ 877,500 $ 682,420 $ 599,000 State and City income taxes, net of federal income tax benefit ....................... 241,500 103,580 98,000 ----------- ----------- ----------- Income taxes provided ..................... $ 1,119,000 $ 786,000 $ 697,000 =========== =========== =========== The Company's fiscal 2000 federal income tax liability of $30,000 was determined using the Alternative Minimum Tax ("AMT"), a separate parallel tax system. The excess of the AMT over the regular tax is a credit which can be carried forward indefinitely to reduce future regular tax liabilities. The Company had additional AMT credits from prior years. AMT credits totalling $197,888 and $158,926 were utilized to reduce the fiscal 2002 and 2001 regular federal tax liability. At July 31, 2002 the Company had utilized all of its available AMT credits. 6. LEASES: The Company's real estate operations encompass both owned and leased properties. The current leases on leased property, most of which have options to extend the terms, range from 1 year to 25 years. Certain of the leases provide for additional rentals under certain circumstances and obligate the Company for payments of real estate taxes and other expenses. Rental expense for leased real property for each of the three fiscal years ended July 31, 2002 was exceeded by sublease rental income, as follows: 2002 2001 2000 ---------- ---------- ---------- Minimum rental expense ................ $1,163,427 $1,160,973 $1,158,749 Contingent rental expense ............. 1,173,187 1,169,893 1,094,897 ---------- ---------- ---------- 2,336,614 2,330,866 2,253,646 Sublease rental income ................ 7,129,183 6,155,370 5,512,126 ---------- ---------- ---------- Excess of rental income over expense $4,792,569 $3,824,504 $3,258,480 ========== ========== ========== Rent expense paid to an affiliate principally owned by certain directors of the Company totaled $169,800 for fiscal year ended July 31, 2002, $165,300 for fiscal year ended July 31, 2001 and $160,800 for fiscal year ended July 31, 2000. Rent expense is recognized on a straight-line basis over the lives of the leases. Future minimum non-cancellable rental commitments for operating leases with initial or remaining terms of one year or more are payable as follows: OPERATING LEASES ---------- 2003 .................................... $1,139,869 2004 .................................... 1,139,869 2005 .................................... 1,127,612 2006 .................................... 1,120,869 2007 .................................... 1,120,869 After 2007 .............................. 4,235,867 ---------- Total required* ..................... $9,884,955 ========== * Minimum payments have not been reduced by minimum sublease rentals of $35,058,765 under operating leases due in the future under non-cancellable leases. 13 7. RENTAL INCOME: Rental income for each of the fiscal years 2002, 2001 and 2000 is as follows: JULY 31, --------------------------------------- 2002 2001 2000 ----------- ----------- ----------- Minimum rentals Company owned property $ 5,260,341 $ 5,006,728 $ 4,890,946 Operating leases ..... 6,167,925 5,256,494 4,751,200 ----------- ----------- ----------- 11,428,266 10,263,222 9,642,146 ----------- ----------- ----------- Contingent rentals Company owned property 605,926 532,855 461,493 Operating leases ..... 961,258 898,876 760,926 ----------- ----------- ----------- 1,567,184 1,431,731 1,222,419 ----------- ----------- ----------- Total .............. $12,995,450 $11,694,953 $10,864,565 =========== =========== =========== Future minimum non-cancellable rental income for leases with initial or remaining terms of one year or more is as follows: FISCAL COMPANY OPERATING YEAR OWNED PROPERTY LEASES TOTAL - ------ ----------- ----------- ----------- 2003 .............. $ 5,111,795 $ 5,691,022 $10,802,817 2004 .............. 4,494,669 5,078,560 9,573,229 2005 .............. 3,870,820 4,580,830 8,451,650 2006 .............. 3,352,038 4,247,218 7,599,256 2007 .............. 3,067,413 3,761,680 6,829,093 After 2007 ........ 10,309,259 9,590,008 19,899,267 ----------- ----------- ----------- Total ......... $30,205,994 $32,949,318 $63,155,312 =========== =========== =========== Rental income from an affiliate principally owned by certain directors of the Company totaled $462,282 for fiscal year 2002, $413,609 for fiscal year 2001 and $413,610 for fiscal year 2000. Rental income is recognized on a straight-line basis over the lives of the leases. Amounts due from the affiliated company are as follows: JULY 31, -------------------- 2002 2001 -------- -------- Unbilled receivables ..................................... $ -- $181,937 8. PAYROLL AND OTHER ACCRUED LIABILITIES: Payroll and other accrued liabilities for the fiscal years ended July 31, 2002 and 2001 consist of the following: 2002 2001 -------- -------- Payroll ................. $119,088 $ 97,826 Interest ................ 47,924 54,779 Professional fees ....... 109,181 50,465 Rents received in advance 218,861 173,906 Utilities ............... 52,400 51,766 Brokers commissions ..... 10,496 122,996 Construction costs ...... 106,577 32,000 Other ................... 144,280 97,008 -------- -------- Total ............... $808,807 $680,746 ======== ======== 14 9. EMPLOYEES' RETIREMENT PLAN: The Company sponsors a noncontributory Money Purchase Plan covering substantially all of its employees. Operations were charged $255,840, $260,785 and $230,719 as contributions to the Plan for fiscal years 2002, 2001 and 2000, respectively. 10. 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: YEARS ENDED JULY 31, ------------------------------ 2002 2001 2000 -------- -------- -------- Interest paid, net of capitalized interest of $45,205 for fiscal year 2001. There was no capitalized interest for fiscal years 2002 and 2000 ................................... $680,820 $567,153 $623,688 Income taxes paid ........................... $587,421 $181,676 $105,908 11. FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATIONS: The following disclosure of estimated fair value was determined by the Company, using available market information and appropriate valuation methods. Considerable judgment is necessary to develop estimates of fair value. The estimates presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The Company estimates the fair value of its financial instruments using the following methods and assumptions: (i) quoted market prices, when available, are used to estimate the fair value of investments in marketable debt and equity securities; (ii) discounted cash flow analyses are used to estimate the fair value of long-term debt, using the Company's estimate of current interest rates for similar debt; and (iii) carrying amounts in the balance sheet approximate fair value for cash and cash equivalents and tenant security deposits due to their high liquidity. JULY 31, 2002 ----------------------- CARRYING FAIR VALUE VALUE ---------- ---------- Cash and cash equivalents ...... $2,951,013 $2,951,013 Marketable securities .......... $4,278,813 $4,278,813 Tenant security deposits ....... $ 414,073 $ 414,073 Long-term debt-mortgages payable $8,491,735 $8,537,565 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 thirty-nine tenants, of which one tenant accounted for 15.96% and another tenant accounted for 15.73% of rental income during the year ended July 31, 2002. No other tenant accounted for more than 10% of rental income during the year ended July 31, 2002. 15 ================================================================================ 12. CONTINGENCIES: Jamesway Corporation ("Jamesway"), which occupied retail space in the Fishkill, New York property and whose lease extended to January 31, 2005, filed for relief under Chapter 11 of the Bankruptcy Code on October 18, 1995. Jamesway rejected its lease for the Fishkill location with the approval of the Bankruptcy Court, effective February 29, 1996, but continued occupancy until March 22, 1996. The Company has realized from Jamesway $513,343 or 54% on account of its unsecured claim and 100% of its allowed administrative claim of $54,887, for a total of $568,230. The Company has made no provision in its financial statements for the balance of its claims filed against Jamesway due to the fact that the recovery of $47,532 in the year ended July 31, 2001 represents the final recovery from Jamesway. 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. 13. SUBSEQUENT EVENT: As of July 31, 2002, one of the retail tenants at the Company's Jamaica, New York location, under lease dated March 29, 1990 covering approximately 95,060 square feet, the lease subsequently amended and the space reduced to 81,242 square feet, is in arrears in the payment of fixed rent, additional rent and expenses of $163,009 for which the Company is seeking to terminate the lease. In addition, the Company has recorded as Unbilled Receivables the sum of $320,041 applicable to this tenant, for a combined total of $483,050. The tenant filed under Chapter 11 of the United States Bankruptcy Code on October 7, 2002. The tenant has not paid the amounts due and is in arrears on rent due for August through October. The Company has reason to believe that the tenant does not intend to pay such amounts and, therefore, has elected to write off the amount of fixed rent due of $136,704 and the additional rent and expenses of $26,305, plus the amount of the Unbilled Receivables of $320,041, for a combined total of $483,050. The unbilled receivables at July 31, 2002, a non-cash item, represents the excess of scheduled rental income recognized on a straight-line basis over rental income as it becomes receivable according to the provisions of the lease. 16 J.W. MAYS, INC. REPORT OF MANAGEMENT ================================================================================ Management is responsible for the preparation and reliability of the financial statements and the other financial information in this Annual Report. Management has established systems of internal control over financial reporting designed to provide reasonable assurance that the financial records used for preparing financial statements are reliable and reflect the transactions of the Company and that established policies and procedures are carefully followed. The Company reviews, modifies and improves its system of internal controls in response to changes in operations. The Board of Directors, acting through the Audit Committee which is comprised solely of independent directors who are not employees of the Company, oversees the financial reporting process. The financial statements have been prepared in accordance with accounting standards generally accepted in the United States of America and include amounts based on judgments and estimates made by management. Actual results could differ from amounts estimated. To ensure complete independence, D'Arcangelo & Co., LLP, the independent auditors, has full and free access to meet with the Audit Committee, without management representatives present, to discuss results of the audit, the adequacy of internal controls and the quality of financial reporting. INDEPENDENT AUDITORS' REPORT ================================================================================ To the Board of Directors and Shareholders J.W. Mays, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of J.W. Mays, Inc. and subsidiaries as of July 31, 2002 and 2001, and the related consolidated statements of income and retained earnings, comprehensive income and cash flows for the three years ended July 31, 2002. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of J.W. Mays, Inc. and its subsidiaries as of July 31, 2002 and 2001, and the results of their operations and their cash flows for the three years ended July 31, 2002 in conformity with accounting principles generally accepted in the United States of America. D'ARCANGELO & CO., LLP Purchase, New York October 11, 2002 17 J.W. MAYS, INC. FIVE YEAR SUMMARY OF CONSOLIDATED OPERATIONS (dollars in thousands except per share data) YEARS ENDED JULY 31, ----------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Revenues Rental income .................................. $ 12,533 $ 11,281 $ 10,451 $ 10,250 $ 10,249 Rental income-affiliated company ............... 462 414 414 411 414 Recovery of real estate taxes .................. 69 -- -- -- 1,219 ----------- ----------- ----------- ----------- ----------- Total revenues ............................... 13,064 11,695 10,865 10,661 11,882 ----------- ----------- ----------- ----------- ----------- Expenses Real estate operating expenses ................. 6,025 5,885 5,530 5,312 5,416 Administrative and general expenses ............ 2,600 2,392 2,240 2,119 2,077 Bad debts (recovery) ........................... 483 (48) -- (17) (53) Depreciation and amortization .................. 1,142 1,080 1,010 1,003 1,011 ----------- ----------- ----------- ----------- ----------- Total expenses ............................... 10,250 9,309 8,780 8,417 8,451 ----------- ----------- ----------- ----------- ----------- Income from operations before investment income, interest expense and income taxes ................................... 2,814 2,386 2,085 2,244 3,431 ----------- ----------- ----------- ----------- ----------- Investment income and interest expense Investment income .............................. 233 264 297 278 269 Interest expense ............................... 674 573 619 684 812 ----------- ----------- ----------- ----------- ----------- (441) (309) (322) (406) (543) ----------- ----------- ----------- ----------- ----------- Income before income taxes ...................... 2,373 2,077 1,763 1,838 2,888 Income taxes provided ........................... 1,119 786 697 674 1,050 ----------- ----------- ----------- ----------- ----------- Net Income ...................................... $ 1,254 $ 1,291 $ 1,066 $ 1,164 $ 1,838 =========== =========== =========== =========== =========== Net income per common share ..................... $ .62 $ .62 $ .50 $ .54 $ .86 =========== =========== =========== =========== =========== Dividends per share ............................. -- -- -- -- -- =========== =========== =========== =========== =========== Average common shares outstanding ............... 2,033,280 2,066,390 2,118,908 2,135,780 2,135,780 =========== =========== =========== =========== =========== 18 J.W. MAYS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ================================================================================ FISCAL 2002 COMPARED TO FISCAL 2001 Net income for the year ended July 31, 2002 amounted to $1,254,190, or $.62 per share, compared to net income for the year ended July 31, 2001 of $1,290,594, or $.62 per share. Revenues in the current year increased to $13,064,424 from $11,694,953 in the comparable 2001 fiscal year. The increase is primarily due to the leasing of 42,250 square feet to a tenant, at the Company's Jamaica, New York property. The lease commenced May 1, 2001. The increase is also due to increases in rent from two tenants at the Company's Jowein building in Brooklyn, New York. There was also a real estate tax refund on a portion of the Company's Brooklyn, New York property. Real estate operating expenses in the current year increased to $6,025,464 from $5,885,113 in the comparable 2001 year primarily due to an increase in real estate taxes, insurance and maintenance costs, partially offset by a decrease in utility costs. Administrative and general expenses in the current year increased to $2,599,405 from $2,392,218 in the comparable 2001 year primarily due to an increase in payroll, medical costs and legal and professional costs. Depreciation and amortization expense in the current year increased to $1,141,889 from $1,079,449 in the 2001 year primarily due to depreciation on the additional improvements to the Jamaica, New York property. Interest expense exceeded investment income by $441,426 in fiscal 2002 and by $309,111 in the comparable 2001 year. The increase was due to interest expense on the additional mortgage on the Jamaica, New York property and the write-down of $49,890 due to the impairment of the Company's investment in Enron Capital Resources Series A preferred stock offset in part by scheduled repayment of debt. The bad debt recovery in the amount of $47,532 in the year ended July 31, 2001 relates to the bad debt write-off of $424,011 in the 1996 fiscal year. See Note 12 to the Consolidated Financial Statements. There was no comparable item in the 2002 year. A tenant filed under Chapter 11 of the United States Bankruptcy Code on October 7, 2002. The amount of $483,050 "bad-debt" represents the write off of fixed rent due of $136,704, the additional rent and expenses of $26,305 and unbilled receivables (a non-cash item) of $320,041, for the total of $483,050. See Note 13 to the Consolidated Financial Statements. There was no comparable item in the 2001 year. FISCAL 2001 COMPARED TO FISCAL 2000 Net income for the year ended July 31, 2001 amounted to $1,290,594, or $.62 per share, compared to net income for the year ended July 31, 2000 of $1,065,938, or $.50 per share. Revenues in the current year increased to $11,694,953 from $10,864,565 in the comparable 2000 fiscal year. The increase is primarily due to the leasing of 11,200 square feet to one tenant and 42,250 square feet to a second tenant, both at the Company's Jamaica, New York property. The leases commenced September 1, 2000 and May 1, 2001, respectively. Real estate operating expenses in the current year increased to $5,885,113 from $5,529,850 in the comparable 2000 year primarily due to an increase in real estate taxes, payroll, utility, insurance and maintenance costs, partially offset by a decrease in water and sewer costs and licenses and permits. Administrative and general expenses in the current year increased to $2,392,218 from $2,240,372 in the comparable 2000 year primarily due to an increase in payroll, pension and medical costs. Depreciation and amortization expense in the current year increased to $1,079,449 from $1,009,859 in the 2000 year primarily due to depreciation on the additional improvements to the Jamaica, New York property. Interest expense exceeded investment income by $309,111 in fiscal 2001 and by $321,546 in the comparable 2000 year. The decrease was due to scheduled repayments of debt. The bad debt recovery in the amount of $47,532 in the year ended July 31, 2001 relates to the bad debt write-off of $424,011 in the 1996 fiscal year. See Note 12 to the Consolidated Financial Statements. There was no comparable item in the 2000 year. 19 ================================================================================ The Company purchased 55,000 shares of its outstanding common stock during the year ended July 31, 2001. The effect on earnings per share for the year ended July 31, 2001 was to increase it by $0.0066. 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 $2,951,013 at July 31, 2002. The Company's rate of return on investments in preferred and common stock is 7.01% annualized, exclusive of unrealized gains. For the year ending July 31, 2002 the Company increased its cash flow by approximately $478,000 due to scheduled rental increases from existing tenants. The Company had obtained a judgment at a Trial Court in the New York State Court of Claims in the amount of $4,147,500, plus interest and legal fees, against the State of New York in connection with a condemnation by the State affecting a portion of the Fishkill, New York property. On appeal to the Appellate Division of the State of New York, the judgment was reversed and the award reduced to $24,105. The Company has made a motion to (1) increase the award and (2) obtain leave to appeal to the Court of Appeals. One tenant occupies the entire Circleville, Ohio property comprising a warehouse distribution building of approximately 193,000 square feet on approximately 11.66 acreage of land. The term of the lease terminated September 30, 2002. An extension and modification of lease (term and rental) for the entire premise has been negotiated and executed for three years to September 30, 2005. Tenant has the option to surrender up to 73,350 square feet of the 193,000 square feet, on/and after May 31, 2003. The Company had leased from an affiliate one of the stores which was closed in connection with its reorganization proceedings in 1982. The Company, by agreement with the affiliate, modified and assigned its lease to a third party. The agreement with the affiliate provides for certain monthly payments to be made to the Company through August 30, 2002, the termination date of the agreement. For the twelve months ending July 31, 2002, the Company received $462,282 During fiscal 2002, the Company leased an additional 15,527 square feet primarily for retail use to an existing tenant in the Company's Brooklyn, New York property. Rent for the additional space commenced in April, 2002. The Company also leased an additional 5,460 square feet of office space to an existing tenant in the Company's Jowein building in Brooklyn, New York. Rent for the additional space commenced in June, 2002. The Company secured financing from a bank in the principal amount of $3,500,000 (see Note 3(b) to the Consolidated Financial Statements). As of July 31, 2001, the Company secured advances of $2,300,000 against the principal amount of the loan. On August 2, 2001, the Company took down the balance of the loan of $1,200,000 and immediately converted the loan in the principal amount of $3,500,000 to a ten (10) year second mortgage permanent loan at an interest rate during the first five (5) years at a fixed rate per annum of 6.98% (2.25% above the five (5) year Treasury Note Rate of 4.73%). CASH FLOWS FROM OPERATING ACTIVITIES: Receivables: The Company's is due the amount of $430,914 as of July 31, 2002 as reimbursement for expenditures for renovations made on behalf of a tenant at the Jamaica, New York building. The amount of $430,914 is to be paid in installments through April, 2004. The original amount of the reimbursement was $1,591,753 of which 1,160,839 has been received. The Company is also due as reimbursement for expenditures made on behalf of a tenant at the Jowein building in Brooklyn, New York. The original amount of the reimbursement was $189,110 of which $158,236 has been received. Prepaid Expenses: Cash expenditures for the fiscal year ended July 31, 2002 increased by $519,436 compared to the fiscal year ended July 31, 2001, due to an increase in real estate taxes and insurance costs. Deferred Expenses: The Company had expenditures of $75,888 in connection with a condemnation by the State of New York affecting a portion of the Fishkill, New York property. 20 ================================================================================ CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures: The Company had expenditures of $435,891 to renovate office space for an existing tenant at its Jowein building in Brooklyn, New York for the fiscal year ended July 31, 2002. The total cost of this renovation will be reimbursed by the tenant through increased rental income. The renovations were completed in May, 2002. The Company also had expenditures of $765,949 for the fiscal year ended July 31, 2002 to renovate office space for an existing tenant in the same building. Of the $765,949 of expenditures $189,110 will be reimbursed by the tenant. The renovations were completed in July, 2002. The Company had expenditures of $68,500 as of July 31, 2002 for the upgrading of electrical service and the renovation of a portion of the exterior of its Brooklyn, New York building. The total cost will be approximately $627,000. The project is anticipated to be completed by December, 2002. CASH FLOWS FROM FINANCING ACTIVITIES: Borrowing: Mortgage Debt - The Company secured financing from a bank of the principal amount of $3,500,000 (see Note 3(b) to the Consolidated Financial Statements). On August 2, 2001, the Company took down the balance of the loan of $1,200,000. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (dollars in thousands except per share data) THREE MONTHS ENDED ------------------------------------------------------------- OCT. 31, 2001 JAN. 31, 2002 APR. 30, 2002 JULY 31, 2002 ------------- ------------- ------------- ------------- Revenues .................. $3,166 $3,179 $3,286 $3,433 Revenues less expenses .... 704 521 721 427 Net income ................ 388 345 337 184 Net income per common share $ .19 $ .17 $ .17 $ .09 THREE MONTHS ENDED ------------------------------------------------------------- OCT. 31, 2000 JAN. 31, 2001 APR. 30, 2001 JULY 31, 2001 ------------- ------------- ------------- ------------- Revenues .................. $2,737 $2,812 $2,855 $3,291 Revenues less expenses .... 487 243 434 913 Net income ................ 313 134 294 550 Net income per common share $ .15 $ .07 $ .14 $ .26 Income per share is computed independently for each of the quarters presented on the basis described in Note 1 to the Consolidated Financial Statements. COMMON STOCK AND DIVIDEND INFORMATION Effective November 8, 1999, the Company's common stock commenced trading on The Nasdaq SmallCap Market tier of The Nasdaq Stock Market under the Symbol: "Mays". Such shares were previously traded on The Nasdaq National Market. Following is the sales price range per share of J.W. Mays, Inc. common stock during the fiscal years ended July 31, 2002 and 2001: SALES PRICE --------------- THREE MONTHS ENDED HIGH LOW - ------------------ ----- ------ October 31, 2001 ............. 10.80 9.280 January 31, 2002 ............. 14.90 10.000 April 30, 2002 ............... 13.00 11.500 July 31, 2002 ................ 13.65 12.100 October 31, 2000 ............. 14.00 8.500 January 31, 2001 ............. 10.50 7.594 April 30, 2001 ............... 11.75 9.500 July 31, 2001 ................ 9.95 9.500 The quotations were obtained for the respective periods from the National Association of Securities Dealers, Inc. There were no dividends declared in either of the two fiscal years. On September 18, 2002, the Company had approximately 3,500 shareholders of record. 21 J.W. MAYS, INC. ================================================================================ OFFICERS Lloyd J. Shulman Chairman of the Board, Chief Executive Officer and President and Chief Operating Officer Alex Slobodin Executive Vice President and Treasurer Mark Greenblatt Vice President and Assistant Treasurer Ward N. Lyke, Jr. Vice President-Management Information Services George Silva Vice President-Operations Salvatore Cappuzzo Secretary BOARD OF DIRECTORS Lance D. Myers 1,2,3,4 From March 6, 2000 with the law firm of Holland & Knight LLP. From February 1983 through March 5, 2000, with the law firm of Cullen and Dykman Dean L. Ryder 2,3,4 President, Putnam County National Bank Jack Schwartz 1,2,3,4 Private Consultant Lloyd J. Shulman 1,3,4 Chairman of the Board, Chief Executive Officer and President and Chief Operating Officer, J.W. Mays, Inc. Sylvia W. Shulman 3,4 Retired Lewis D. Siegel 2,3,4 First Vice President-Investments, Salomon Smith Barney Alex Slobodin 1,3 Executive Vice President and Treasurer, J.W. Mays, Inc. COMMITTEE ASSIGNMENTS KEY: 1 Member of Executive Committee 2 Member of Audit Committee 3 Member of Investment Advisory Committee 4 Member of Executive Compensation Committee FORM 10-K ANNUAL REPORT Copies of the Company's Form 10-K Annual Report to the Securities and Exchange Commission for the fiscal year ended July 31, 2002, will be furnished without charge to shareholders upon written request to: Secretary, J.W. Mays, Inc., 9 Bond Street, Brooklyn, New York 11201-5805. 22 [This page intentionally left blank] [This page intentionally left blank]