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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-8488
For the fiscal year ended December 31, 2000
TWENTY SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
------------------------------------------------------
ALABAMA 63-0372577
- -------------------------------- ------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
20 Cropwell Road
Pell City, Alabama 35128
Registrant's telephone number, including area code (205) 884-7932
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
7% Cumulative Preferred Stock*
(Title of Class)
----------------
Indicate by checkmark whether the Registrant (1 has filed all reports required
to be filed by Section 13 or l5(d) of the Securities Exchange Act of 1934 during
the preceding twelve (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 ninety (90) days.
YES [X] NO [_]
As of December 31, 2000, the Registrant had issued and outstanding 1,283,068
shares of common stock, par value of $0.10 per share, and as of December 31,
2000, the aggregate market value of the voting stock of the Registrant held by
non affiliates of the Registrant, based upon the book value of such shares as of
such date, was approximately $2,480,000.
Documents incorporated by reference: None
_____________________________________________________
* Includes 7% Cumulative Series A-1980 Preferred Stock,
7% Cumulative Series A-1981 Preferred Stock, 7% Cumulative
Series A-1982 Preferred Stock, and 7% Cumulative Series
A-1985 Preferred Stock.
1. BUSINESS.
(a) General Development of Business. Since its inception in 1955, Twenty
Services, Inc. (hereinafter sometimes referred to as the "Registrant" or
"Company"), has been engaged principally in the general finance business,
including the purchase and sale of real estate. In October 1980, the
stockholders of the Registrant authorized the Board of Directors to redeploy the
Registrant's assets and reinvest the proceeds derived from such redeployment in
a business other than the general finance business. During 1982 and 1983, the
Company and an affiliate of Twenty Services Holding, Inc. ("Holding"), the owner
of approximately 56% of the Registrant's outstanding common stock, acquired an
interest in the common stock of The Statesman Group, Inc., an insurance holding
company based in Des Moines, Iowa ("Statesman"). The investment in Statesman was
sold in 1994. The Registrant invested the proceeds in equities and fixed income
securities that offer attractive returns commensurate with the risk assumed. In
1995, the Company acquired an interest in the common stock of American Equity
Investment Life Holding Company, an insurance holding company based in Des
Moines, Iowa ("American Equity"). As of the date of this Annual Report on Form
10-K the Registrant owns 237,000 shares of common stock of American Equity.
Depending upon the financial condition of the Registrant, the opportunities
available to the Registrant and other matters, the Registrant may acquire
majority interests in, and thereafter direct the operations of, other
corporations or business entities engaged in one or more active businesses. The
Registrant will continue to engage in certain aspects of the general finance
business, including extending credit to certain persons and collecting its loan
receivables. As of the date of this annual report on Form 10-K, the Registrant
does not believe that the composition of its investments and the nature of its
business activities render it subject to the Investment Act of 1940, and the
Board of Directors of the Registrant intend that any future acquisitions by
and/or business activities of the Registrant will be structured in a manner so
that the Registrant will not become subject to the Investment Company Act of
1940.
(b) Financial Information Regarding Industry Segments.
The Registrant is not required to supply information respecting industry
segments. However, for certain information respecting the general finance and
other business activities of the Registrant, see the Financial Statements of
Twenty Services, Inc., including the notes thereto, which are included elsewhere
herein.
2
(c) Narrative Description of Business.
General Finance Business. As stated above, the Registrant historically has
engaged in the general finance business which has consisted of (i) extending
credit to finance various real estate projects, including the purchase of
single-family dwellings and commercial real estate, and to finance home
improvements (the "Real Estate Loans"), and (ii) extending credit for business
and miscellaneous purposes (the "Business and Miscellaneous Loans").
Loan Portfolio. The following tabulation sets forth the outstanding
balances of the Registrant's loan portfolio as of December 31 of each year
indicated below (including, if appropriate, unearned interest), classified
according to the types of loans comprising the Registrant's loan portfolio:
Type of Loans 2000 1999 1998 1997 1996
-------- -------- -------- -------- ---------
Real Estate $107,178 $ 43,280 $ 46,836 $ 78,759 $ 124,401
Business and
Miscellaneous $ 67,046 75,259 72,295 62,332 153,1 50
-------- -------- -------- -------- ---------
Total: $174,224 $118,539 $119,131 $141,091 $ 277,551
======== ======== ======== ======== =========
Of the Registrant's aggregate loan portfolio as of December 31, 2000,
approximately 65% was secured by mortgages on real estate and approximately 35%
was unsecured.
Interest Income. The following tabulation sets forth certain information
respecting the Registrant's net interest income for each of the years indicated:
2000 1999 1998
-------- -------- --------
Interest Income $75,107 $69,920 $32,270
Net Interest Income $75,107 $69,920 $32,270
The Registrant utilizes the interest (actuarial) method in recognizing
income attributable to interest charges. Accrual of interest income on finance
receivables is suspended when a loan is contractually delinquent for 90 days or
more and resumed when the loan becomes contractually current.
3
Other Business Activities. As described above, the Registrant's
stockholders have authorized the Registrant to redeploy the Registrant's assets
by conversion of such assets into cash and the reinvestment of the proceeds
thereof in other business entities. The Registrant intends to invest in equities
and fixed income securities that offer attractive returns commensurate with the
risk assumed. In December 1996, the Company acquired a 19.75% interest in a
newly formed insurance holding company, American Equity Investment Life Holding
Company. The Chairman of the Des Moines, Iowa based company is also the Chairman
of the Board of the Registrant. American Equity acquired a block of individual
and group insurance policies in 1995 and 1996. In 1996, 1997, 1998 and 1999
American Equity obtained additional equity financing from other investors which
reduced the Company's interest therein to 1.7%.
Competition. With respect to the general finance business, the Registrant
is in direct competition with banks and other finance companies located within
and without the State of Alabama. Many of these firms are substantially larger
than the Registrant, have more capital available for lending activities, pursue
more actively new loan activity and enjoy a distinct competitive advantage over
the Registrant.
Employees. During 2000 and 1999, the Registrant employed two (2) persons
to fill two (2) positions; one (l) of such positions was an executive position,
and one (l) of such positions was a clerical/administrative position.
At February 2001, the Registrant employed two (2) persons to fill two (2)
positions; one (l) of such positions was an executive position and one (l) of
such positions was a clerical/administrative position.
The Registrant considers its relationship with its employees to be good.
Certain Government Regulations. The Registrant is subject to federal and
state regulations relating to consumer credit financing and is subject to
periodic examinations by officials of the State of Alabama charged with the
responsibility of enforcing such regulations. The last examination of the
Registrant by officials of the State of Alabama occurred on July 28/th/, 2000.
As a result of such examination, the Registrant was found to be in compliance
with the regulations described above, and the Board of Directors of the
Registrant believes that the Registrant presently is in compliance with such
regulations. No material monetary claim has been made by any borrower against
the Registrant respecting failure to comply with such regulations.
The Registrant is not subject in any material way to regulations relating
to the discharge of materials into the environment.
4
Other Matters. The Registrant's business is not seasonal.
- --------------
No material portion of the contracts or subcontracts of the Registrant is
subject to renegotiation by the United States Government.
The business of the Registrant is not dependent upon any raw materials, and
as of the date of this annual report on Form 10-K, the Registrant does not own
any material patent, trademark, license, franchise or concession. During the
last two (2) years, the Registrant has not spent any money on research and
development activities.
Due to the nature of its business, the Registrant does not have backlogs of
orders believed to be firm. In addition, except as described in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
Registrant does not follow any specified practice with respect to working
capital.
The Registrant is not dependent upon a single customer or related customers
or a very few customers, the loss of any one (l) or more of which would have a
materially adverse effect upon its business.
Financial Information Regarding Foreign and Domestic
Operations and Export Sales.
All of the Registrant's business activities have been conducted within the
southeastern portion of the United States.
2. PROPERTIES.
The Registrant maintains its principal executive office in an office
facility located in Pell City, Alabama for which it pays aggregate annual
rentals of $7,200. The Registrant believes its office facilities are adequate
for its present needs.
The Registrant maintains its accounting records on a personal computer
which is in compliance with the Y2K.
3. LEGAL PROCEEDINGS.
As of the date of this annual report on Form 10-K, the Registrant is
not a party of any legal proceedings.
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the quarter ended December 31, 2000, no matter was submitted to
a vote of the security holders of the Registrant.
5
PART II
5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS.
(a) Market Information. No broker or dealer makes an active market
in the shares of Common Stock or the Series A-Preferred Stock of the Registrant.
Thus, there is no established trading market for the Common Stock or the Series
A-Preferred Stock of the Registrant.
(b) Holder of Records. As of December 31, 2000 there were 1,801
holders of record of the outstanding Common Stock of the Registrant, and 1,043
holders of record of the outstanding Series A-Preferred Stock of the Registrant.
(c) Dividends. During the past two (2) years, no dividends have been
paid respecting the shares of Common Stock of the Registrant. Under Alabama
law, cash dividends may be paid only out of earned surplus (or retained
earnings) of the Registrant, except that dividends respecting securities
entitled to preferential treatment in the payment of dividends may be paid out
of capital surplus of the Registrant. As of December 31, 2000, the Registrant
reflected earned surplus of $1,408,038 and reflected capital surplus of
$1,534,439.
As of December 31, 2000, the Registrant has issued and outstanding
505,110 shares of Series A-Preferred Stock, consisting of four (4) series of
such Preferred Stock issued in 1980, 1981, 1982 and 1985. The holders of the
Series A-Preferred Stock are entitled to cumulative dividends at the rate of
$.07 per share per annum before any dividend may be declared or paid respecting
the shares of Common Stock of the Registrant. During 2000 and 1999, the
Registrant paid a dividend of $.07 per share respecting the outstanding Series
A-Preferred Stock.
The Registrant intends, to the extent that future earnings and its
capital surplus permit, to pay dividends respecting the shares of Series A-
Preferred Stock. The Registrant believes it is unlikely that dividends will be
paid in the future respecting the shares of Common Stock of the Company,
although such payment will depend upon the future earnings and business
prospects of the Registrant.
6
SELECTED FINANCIAL DATA
The following tabulation sets forth certain financial information
respecting the
Registrant 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
Revenues $ 189,706 $ 199,001 $ 167,074 $ 197,149 $ 182,303
========== ========== ========== ========== ==========
Net Income
(Loss) $ 77,915 $ (2,720) $ 239,671 $ 64,656 $ ( 57,242)
========== ========== ========== ========== ==========
Earnings
(Loss) per
Common Share:
Net Income
(Loss) $ (.03) $ (.03) $ .16 $ .02 $ (.07)
========== ========== ========== ========== ==========
Total
Assets $2,983,774 $2,641,492 $3,617,935 $3,368.378 $3,110,572
========== ========== ========== ========== ==========
Dividends
Declared:
Common
Stock $ 0 $ 0 $ 0 $ 0 $ 0
========== ========== ========== ========== ==========
Preferred
Stock $ 35,357/1/ $35,357/2/ $35,357/3/ $35,357/4/ $35,357/5/
========== ========== ========== ========== ==========
Total $ 35,357 $ 35,357 $ 35,357 $ 35,357 $ 35,357
========== ========== ========== ========== ==========
Book Value
Per Common Share
Outstanding $ 2.25 $ 1.67 $ 2.28 $ 2.20 $ 1.98
========== ========== ========== ========== ==========
________________
1 Reflects dividend respecting Preferred Stock declared on February 28, 2001.
2 Reflects dividend respecting Preferred Stock declared on February 26, 2000.
3 Reflects dividend respecting Preferred Stock declared on February 27, 1999.
4 Reflects dividend respecting Preferred Stock declared on February 10, 1998.
5 Reflects dividend respecting Preferred Stock declared on February 15, 1997.
7
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources. During 2000 the Registrant's liquidity
remained virtually unchanged. The Company has no notes payable nor long term
debt and does not anticipate the need for borrowing in the near future. The
Registrant has sufficient cash and temporary cash investments to meet its short
term liquidity needs. Should long term liquidity needs exceed cash and
temporary cash investments, then the Registrant would dispose of marketable
securities as it deems appropriate. Current trends and known demands and
commitments do not create a need for liquidity in excess of the Company's
current abilities to generate liquidity.
The Company anticipates that its operating activities and investing
activities will continue to generate positive net cash flows and that its
financing activities will continue to use cash flows.
Results of Operations. The Registrant reported a net income of $77,915 in
2000 as compared to net loss of $2,720 in 1999. The increase was due primarily
to the decrease of approximately $87,000 in loss on sale of marketable
securities. General and administrative expenses decreased from $146,102 in 1999
to $145,303 in 2000.
Impact of Inflation. Inflation has an impact upon the Registrant's
financial position. Inflationary pressures generally increase the cost of
borrowed funds to the Registrant, rendering it less economic for the Registrant
to borrow money for re-lending purposes.
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements of the Registrant are set forth at page F-3
through F-20 hereof and are incorporated herein by reference.
9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There has been no disagreement between the Registrant and its independent
certified public accountants respecting any matter of disclosure, during the
past twenty-four (24) months.
8
Part III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a)-(e) - Identification of Directors and Executive Officers and Other
Matters. The following tabulation sets forth certain information respecting the
persons who are serving as the directors and executive officers of the
Registrant as of February 14, 2000.
Material Occupations
Names and Positions And Positions During
with the Registrant Age The last five (5) years
- ---------------------- --- -----------------------
David J. Noble 69 Chairman of the Board of
Chairman of the Board Directors, Twenty Services, Inc.
Birmingham, Alabama
(finance business),
since 1980 and 1979.
Chairman of the Board
of Directors, Treasurer
and Director, Twenty
Services Holding, Inc.
Birmingham, Alabama
(holding company) since
1979; Chairman of the
Board of Directors and
President of American
Equity Investment Life
Holding Company since
1995.
Dr. A. J. Strickland, III 59 Director and Vice-Chairman
Vice-Chairman of of the Board of
Directors of Twenty
Services, Inc.,
Birmingham, Alabama
(general finance
business), since 1977;
Director, Twenty
Services Holding, Inc.,
Birmingham, Alabama
(holding company),
since 1970;
Professor of Strategic
Management -
School of Commerce,
University of Alabama,
Tuscaloosa, Alabama
since 1980;
9
PART III (CONTINUED)
Material Occupations
Names and Positions And Positions During
with the Registrant Age the last five (5) years
- ------------------- --- -----------------------
Dr. A.J. Strickland, III 59 Director, American
Equity Investment Life
Holding Company,
Des Moines, Iowa,
since 1995.
Jack C. Bridges 73 Executive Vice-President,
Twenty Services, Inc. since
April 1997.
There is no family relationship between any of the persons named above.
Directors of the Registrant are elected at each annual meeting of the
stockholders of the Registrant and serve until their successors have been
elected and qualified. Executive officers of the Registrant are elected at a
meeting of the Board of Directors immediately following each annual meeting of
the stockholders of the Registrant. Mr. Noble was elected director of the
Registrant in November 1979 pursuant to a resolution adopted by the Board of
Directors of the Registrant stating that if Twenty Services Holding, Inc.
acquired approximately 20% of the outstanding Common Stock of the Registrant,
the Registrant would make available to nominees of Twenty Services, Inc.
Holding, Inc. two (2) places on the Registrant's Board of Directors.
(F) Involvement in Certain Legal Proceedings.
During the past ten (10) years, no officer or director of the Registrant
has been involved in any event of the type described in Item 3(f) of the
Regulations S-K of the Securities Exchange Act of 1934.
10
11. EXECUTIVE COMPENSATION
Current Remuneration. During 2000 no officer or director of the
Registrant received aggregate direct remuneration from the Registrant in excess
of $60,000. The following tabulation sets forth certain information concerning
all remuneration paid by the Registrant to all officers and directors of the
Registrant during the year ended December 31, 2000.
Name of Individuals or
Number of Persons Capacities Salaries and
In Group which served Directors' Fees
- -------- ------------ ---------------
All directors and Directors and $37,600
officers as a group Officers
(three (3) persons)
REMUNERATION IN THE FUTURE. As of December 31, 2000, no officer or
director of the Registrant has any contact or other arrangement with the
Registrant relating to any future remuneration, except that as long as such
officers and directors continue to serve in such capacity, they will receive
from the Registrant the customary fees and salaries at a rate to be agreed upon
by the Registrant and such persons.
Directors' Remuneration. All directors of the Registrant receive $300 per
month.
Options, Warrants, or Rights. The Registrant does not maintain any plan
pursuant to which persons are entitled to acquire any equity securities of the
Registrant.
Termination of Employment. Except as otherwise described in Item 11 of
this annual report on Form 10-K, there are no plans or arrangements relating to
payments to be made to any officer, or director of the Registrant, which
resulted or will result from any person's resignation, retirement, or
termination or employment with the Registrant.
11
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
As of the date of this annual report on Form 10-K, the only person who
owns of record and directly more than 5% of the Registrant's outstanding voting
securities is Twenty Services Holding, Inc., a Delaware corporation, whose
principal business address is 20 Cropwell Drive, Suite 100, Pell City, Alabama.
As of such date, Twenty Services Holding, Inc. and an affiliate of Holding own
725,267 shares of Common Stock of the Registrant and approximately 57% of the
combined outstanding shares of Common Stock and Series A Preferred Stock of the
Registrant. Except as otherwise required by Alabama law and except for certain
rights accorded by the Registrant's Certificate of Incorporation in the event
that dividends respecting the Series A-Preferred stock are not paid the holders
of the Series A-Preferred Stock are not entitled to vote respecting matters
coming before any meeting of the stockholders of the Registrant.
By virtue of his ownership of Common Stock of Twenty Services Holding,
Inc., Mr. David J. Noble, the Chairman of the Board or Directors of the
Registrant, indirectly and beneficially, owns approximately 52% of the
outstanding Common Stock of the Registrant.
(b) Security Ownership of Management. The following tabulation sets
forth certain information regarding the shares of equity securities of the
Registrant.
Approximate Amount Percent
Title of Name of and Nature of of
Class Beneficial Owner Beneficial Owner Class
- ----- ---------------- ---------------- -----
Common Stock David J. Noble 668,183 Indirect(1) 52.29%
Common Stock A.J. Strickland,III 49,638 Indirect(1) 3.88%
Common Stock All directors and
executive officers as
a group (3) persons 717,821 Indirect(1) 56.18%
______________
(l) Reflects each person's interest in the shares of common stock of
the Registrant owned by Twenty Services Holding, Inc. based upon
such person's ownership of the outstanding shares of common stock
of Twenty Services Holding, Inc. as of February 28, 2001,
excluding 6,000 shares of common stock of Twenty Services
Holding, Inc. held by the Registrant. Twenty Services Holding,
Inc. owns 725,267 shares or approximately 57% of the outstanding
shares of common stock.
______________
12
As of February 28, 2001, all officers and directors of the Registrant
as a group beneficially owned, based upon their ownership of the outstanding
common stock of Twenty Services Holding, Inc. ("Holding"), and excluding
adjustment for the shares of common stock of Holding, held by the Registrant,
718,069 shares of common stock of the Registrant, or approximately 55% of the
outstanding common stock of the Registrant as of such date.
(c) Changes in Control. There are no arrangements known to the
Registrant which subsequently could result in a change of control of the
Registrant.
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no transactions during 2000 nor are there any currently
proposed transactions between any pension, retirement, savings or similar plan
of the Registrant and its affiliates, on the other hand, and the Registrant and
its affiliates, any officer, director or principal stockholder of the
Registrant, or any person who has been nominated as a director of the
Registrant, on the other hand.
13
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (l) - (a) (2) - Financial Statements and Financial Statement
Schedules. The financial statements and the financial statement schedules
required to be filed as part of this report are listed in the accompanying Index
to Financial Statements and Financial Statement Schedules, and are set forth at
the pages shown in such Index.
(a) (d) - Exhibits. The Certificate of Incorporation of the
Registrant, as amended, the By Law of the Registrant, as amended, and
Resolutions of the Board of Directors of the Registrant creating the 7%
Cumulative Series A-1980 Preference Stock, the 7% Cumulative Series A-1981
Preference Stock, the 7% Cumulative Series A-1985 Preference Stock, which were
filed as exhibits to the Registrant's Annual Report on Form 10-K for the years
ended December 31, 1980, December 31, 1981, December 31, 1982 and 1985, and the
Registrant's report on Form 8-K dated as of April 10 1984, are incorporated by
reference.
(b) Reports on Form 8-K. No report on Form 8-K was filed during the
year.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TWENTY SERVICES, INC.
By: /s/ Jack C. Bridges
-------------------------
Jack C. Bridges
Executive Vice-President
Dated: 3-29-2001
SIGNATURE CAPACITY DATE
- --------- -------- ----
/s/ David J. Noble
- ----------------------- Chairman and Director
David J. Noble of Twenty Services, Inc. 3-29-2001
(The Registrant)
Principal Executive
Officer)
/s/ A.J. Strickland, III
- ------------------------ Vice-Chairman and 3-29-2001
A.J. Strickland, III Director of the
Registrant
15
TWENTY SERVICES, INC.
Financial Statements
and
Financial Statement Schedule
For the Years Ended
December 31, 2000, 1999, and 1998
TWENTY SERVICES, INC.
Index to Financial Statements and Financial Statement Schedule
December 31, 2000, 1999, and 1998
Index to Financial Statements and Financial Statement
Schedule........................................................ F-1
Independent Auditors' Report.................................... F-2
Balance Sheets.................................................. F-3
Statements of Operations........................................ F-4
Statements of Comprehensive Income (Loss)....................... F-5
Statements of Cash Flows........................................ F-6 & F-7
Statements of Changes in Stockholders' Equity................... F-8 & F-9
Notes to Financial Statements................................... F-10 - F-18
Financial Statement Schedule:
Schedule I - Marketable Securities - Other Investments......... F-19 & F-20
F-1
[LETTERHEAD OF BORLAND, BENEFIELD, CRAWFORD & WEBSTER, P.C.]
Independent Auditors' Report
----------------------------
The Shareholders and
the Board of Directors
Twenty Services, Inc.
We have audited the accompanying balance sheets of Twenty Services, Inc. (the
Company) as of December 31, 2000 and 1999, and the related statements of
operations, comprehensive income, cash flows and of changes in stockholders'
equity for each of the three years in the period ended December 31, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Twenty Services, Inc. at
December 31, 2000 and 1999 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of marketable securities -
other investments for the year ended December 31, 2000, is presented for
purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
BORLAND, BENEFIELD, CRAWFORD & WEBSTER, P.C.
Birmingham, Alabama
/s/ Borland, Benefield, Crawford & Webster, P.C.
March 16, 2001
B K R
INTERNATIONAL
Independent Member Firms In Principal Cities Worldwide.
F-2
TWENTY SERVICES, INC.
Balance Sheets
December 31,
2000 1999
---------- ----------
Assets
Cash and Temporary Investments................................. $ 165,009 $ 164,122
Accounts Receivable............................................ 3,966 1,245
Marketable Securities.......................................... 1,640,949 1,664,209
Finance Receivables, Net....................................... 163,874 108,189
Refundable Income Taxes........................................ - 42,645
Deferred Tax Benefit........................................... 52,498 78,720
Investment - American Equity Investment Life Holding
Company....................................................... 956,662 576,648
Property and Equipment, Net of Accumulated Depreciation........ 816 5,714
---------- ----------
Total Assets................................................... $2,983,774 $2,641,492
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts Payable and Accrued Expenses....................... $ 41,297 $ 34,879
---------- ----------
Stockholders' Equity:
Preferred Stock, Cumulative Nonvoting, Par Value $.10;
2,500,000 Shares Authorized; 505,110 Shares Issued and
Outstanding (Involuntary Liquidation Value $530,366)....... 50,511 50,511
Common Stock, Par Value $.10; 2,500,000 Shares
Authorized, 1,283,068 Shares Issued and Outstanding....... 128,307 128,307
Additional Paid-In Capital.................................. 1,829,159 1,528,768
Retained Earnings........................................... 1,408,038 1,365,481
Net Unrealized Loss on Available-for-Sale Securities,
Net of $95,195 and $118,795 Deferred Income Taxes in 2000
and 1999, Respectively..................................... (285,584) (356,387)
Less: Investment in Twenty Services Holding, Inc............ (60,000) (60,000)
Preferred Treasury Stock.................................... (3,657) (2,753)
Common Treasury Stock....................................... (124,297) (47,314)
---------- ----------
Net Stockholders' Equity............................. 2,942,477 2,606,613
---------- ----------
Total Liabilities and Stockholders' Equity..................... $2,983,774 $2,641,492
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
TWENTY SERVICES, INC.
Statements of Operations
For the Years Ended December 31,
2000 1999 1998
---- ---- ----
As Restated
Revenues:
Interest...................................... $ 75,107 $ 69,920 $ 32,270
Lease......................................... 1,460 8,584 9,651
Dividends..................................... 102,585 111,711 124,391
Other......................................... 10,554 8,786 762
-------- --------- ---------
Total Revenues.............................. 189,706 199,001 167,074
-------- --------- ---------
Expenses:
General and Administrative.................... 140,405 141,198 149,211
Depreciation.................................. 4,898 4,904 10,000
-------- --------- ---------
Total Expenses.............................. 145,303 146,102 159,211
-------- --------- ---------
Gain from Operations........................... 44,403 52,899 7,863
-------- --------- ---------
Other Income (Loss):
Gain (Loss) on Sale of Marketable Securities.. (43,488) (130,695) 1,775
Gain on Sale of Property...................... - 2,218 3,000
Provision for Equity in Gain of
American Equity.............................. 78,031 41,048 4,200
Contingent Payment Rights From Statesman
Group Stock.................................. - - 332,834
-------- --------- ---------
Total Other Income (Loss)................... 34,543 (87,429) 341,809
-------- --------- ---------
Income (Loss) Before Income Taxes.............. 78,946 (34,530) 349,672
Provision for Income Taxes..................... 1,031 31,810 (110,001)
-------- --------- ---------
Net Income (Loss).............................. $ 77,915 $ (2,720) $ 239,671
======== ========= =========
Income (Loss) Per Common Share................. $ .03 $ (.03) $ .16
======== ========= =========
The accompanying notes are an integral part of these financial statements.
F-4
TWENTY SERVICES, INC.
Statements of Comprehensive Income (Loss)
For the Years Ended December 31,
2000 1999 1998
-------- --------- ---------
As Restated
Net Income (Loss)......................... $ 77,915 $ (2,720) $ 239,671
Other Comprehensive Income, Net of Tax -
Unrealized Gain (Loss) on Securities..... 70,803 (251,239) (151,133)
-------- --------- ---------
Comprehensive Income (Loss)............... $148,718 $(253,959) $ 88,538
======== ========= =========
The accompanying notes are an integral part of these financial statements.
F-5
TWENTY SERVICES, INC.
Statements of Cash Flows
For the Years Ended December 31,
2000 1999 1998
--------- --------- -----------
As Restated
Cash Flows From Operating Activities:
Interest and Dividends Received................. $ 175,213 $ 181,865 $ 163,504
Lease Income.................................... 1,460 8,584 9,651
Other Income.................................... 2,419 8,552 762
Cash Paid to Suppliers and Employees............ (135,670) (137,340) (154,288)
Income Taxes Paid............................... - (125,000) -
Income Tax Refunds Received..................... 50,538 69,451 -
--------- --------- -----------
Net Cash Flows From Operating Activities........... 93,960 6,112 19,629
--------- --------- -----------
Cash Flows From Investing Activities:
Principal Collected on Loans.................... 12,373 34,904 13,060
Loans Made to Customers......................... (68,058) (38,962) (16,100)
Principal Collected on Loans - Related Parties.. - - 25,875
Principal Collected on Held-to-Maturity
Securities..................................... 204 2,826 6,348
Proceeds from Sale of Available-for-Sale
Securities..................................... 133,971 146,071 905,631
Proceeds From Sale of Fixed Assets.............. - 3,831 -
Purchases of Available-for-Sale Securities...... (60,000) (1,797) (1,272,826)
Contingent Payment Right From Statesman
Group Stock.................................... - - 332,834
Proceeds From the Sale of Repossessed
Property....................................... - - 28,000
--------- --------- -----------
Net Cash Flows From Investing Activities........... 18,490 146,873 22,822
--------- --------- -----------
Cash Flows From Financing Activities:
Preferred Stock Dividends Paid.................. (33,676) (31,518) (35,357)
Purchase of Treasury Stock...................... (77,887) (42,998) (6,713)
--------- --------- -----------
Net Cash Flows From Financial Activities........... (111,563) (74,516) (42,070)
--------- --------- -----------
Net Increase in Cash............................... 887 78,469 381
Cash and Temporary Investments -
Beginning of Year................................. 164,122 85,653 85,272
--------- --------- -----------
Cash and Temporary Investments -
End of Year....................................... $ 165,009 $ 164,122 $ 85,653
========= ========= ===========
The accompanying notes are an integral part of these financial statements.
F-6
TWENTY SERVICES, INC. AND SUBSIDARY
Statements of Cash Flows (Continued)
For the Years Ended December 31,
2000 1999 1998
---- ---- ----
As Restated
Reconciliation of Net Income to Net Cash From
Operating Activities:
Net Income (Loss)................................ $ 77,915 $ (2,720) $ 239,671
Adjustments to Reconcile Net Income to Net
Cash From Operating Activities:
Contingent Payment From Statesman Group
Stock........................................ - - (332,834)
Purchased Interest............................ - - 6,844
Depreciation and Amortization................. 4,898 4,904 10,000
Provision for Equity in Gain of American
Equity....................................... (78,031) (41,048) (4,200)
Provision for Recovery of Prior Year Income
Taxes........................................ 42,645 (42,645) 0
Net Change in Deferred Income Taxes........... 1,031 (1,344) 54,288
(Gain) Loss on Sale of Marketable Securities.. 43,488 130,695 (1,775)
Gain on Sale of Property...................... - (2,218) (3,000)
(Increase) Decrease in Accounts Receivable.... (2,721) 243 (1,488)
Increase (Decrease) in Accounts Payable
and Accrued Liabilities...................... 4,735 15,958 (3,590)
Increase (Decrease) in Income Taxes Payable... - (55,713) 55,713
-------- -------- ---------
Net Cash From Operating Activities.................. $ 93,960 $ 6,112 $ 19,629
======== ======== =========
The accompanying notes are an integral part of these financial statements.
F-7
TWENTY SERVICES, INC.
Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 2000, 1999, and 1998
- --------------------------------------------------------------------------------
Investment
Accumulated in Twenty
Additional Retained Other Services
Preferred Common Paid-In Earnings Comprehensive Holding,
Stock $.10 Stock $.10 Capital (Deficit) Income Inc.
---------- ---------- ------- --------- ------ ----
Balance, December 31, 1997............. $ 50,511 $ 128,307 $ 1,960,007 $ 1,199,245 $ 45,985 $ (60,000)
Net Income............................. - - - 239,671 - -
Purchase of Treasury Stock............. - - - - - -
Dividend on Preferred Stock
($.07 Per Share)...................... - - - (35,357) - -
Change in Unrealized Loss on
Available-for-Sale Securities, Net
of Deferred Income Tax of $50,379..... - - - - (151,133) -
Share of Increase of American
Equity Capital, Net of Deferred
Income Tax of $36,764................. - - 110,292 - - -
--------- ---------- ------------ ------------ ---------- ----------
Balance - December 31, 1998,
As Restated........................... 50,511 128,307 2,070,299 1,403,559 (105,148) (60,000)
Net Loss............................... - - - (2,720) - -
Purchase of Treasury Stock............. - - - - - -
Dividends on Preferred Stock,
($.07 Per Share)....................... - - - (35,358) - -
Share of Decrease in American
Equity Capital, Net of Deferred
Income Tax of $60,314................. - - (541,531) - - -
Preferred Common
Treasury Treasury
Stock Stock Total
----- ----- -----
Balance, December 31, 1997............. $ (356) $ - $ 3,323,699
Net Income............................. - - 239,671
Purchase of Treasury Stock............. (191) (6,522) (6,713)
Dividend on Preferred Stock
($.07 Per Share)....................... - - (35,357)
Change in Unrealized Loss on
Available-for-Sale Securities, Net
of Deferred Income Tax of $50,379..... - - (151,133)
Share of Increase of American
Equity Capital, Net of Deferred
Income Tax of $36,764................. - - 110,292
------ -------- -------------
Balance - December 31, 1998,
As Restated........................... (547) (6,522) 3,480,459
Net Loss............................... - - (2,720)
Purchase of Treasury Stock............. (2,206) (40,792) (42,998)
Dividends on Preferred Stock,
($.07 Per Share)....................... - - (35,358)
Share of Decrease in American
Equity Capital, Net of Deferred
Income Tax of $60,314................. - - (541,531)
F-8
TWENTY SERVICES, INC.
Statements of Changes in Stockholders' Equity (Continued)
For the Years Ended December 31, 2000, 1999, and 1998
- --------------------------------------------------------------------------------
Investment
Accumulated in Twenty
Additional Retained Other Services
Preferred Common Paid-In Earnings Comprehensive Holding,
Stock $.10 Stock $.10 Capital (Deficit) Income Inc.
---------- ---------- ------- --------- ------ ----
Change in Unrealized Loss on
Available-for-Sale Securities, Net
of Deferred Income Tax Benefits
of $83,744............................ $ - $ - $ - $ - $ (251,239) $ -
--------- ---------- ------------ ------------ ----------- ----------
Balance - December 31, 1999,........... 50,511 128,307 1,528,768 1,365,481 (356,387) (60,000)
Net Income............................. - - - 77,915 - -
Purchase of Treasury Stock............. - - - - - -
Dividends on Preferred Stock,
($.07 Per Share)....................... - - - (35,358) - -
Share of Increase in American
Equity Capital, Net of Deferred
Income Tax of $1,592.................. - - 300,391 - - -
Change in Unrealized Loss on
Available-for-Sale Securities, Net
of Deferred Income Tax of $23,600..... - - - - 70,803 -
--------- ---------- ------------ ------------ ----------- ----------
Balance at December 31, 2000........... $ 50,511 $ 128,307 $ 1,829,159 $ 1,408,038 $ (285,584) $ (60,000)
========= ========== ============ ============ =========== ==========
Preferred Common
Treasury Treasury
Stock Stock Total
----- ----- -----
Change in Unrealized Loss on
Available-for-Sale Securities, Net
of Deferred Income Tax Benefits
of $83,744............................ $ - $ - $ (251,239)
--------- ---------- -----------
Balance - December 31, 1999,........... (2,753) (47,314) 2,606,613
Net Income............................. - - 77,915
Purchase of Treasury Stock............. (904) (76,983) (77,887)
Dividends on Preferred Stock,
($.07 Per Share)....................... - - (35,358)
Share of Increase in American
Equity Capital, Net of Deferred
Income Tax of $1,592.................. - - 300,391
Change in Unrealized Loss on
Available-for-Sale Securities, Net
of Deferred Income Tax of $23,600..... - - 70,803
--------- ---------- -----------
Balance at December 31, 2000........... $ (3,657) $ (124,297) $ 2,942,477
========= ========== ===========
F-9
TWENTY SERVICES, INC.
Notes to Financial Statements
For the Years Ended December 31, 2000, 1999, and 1998
Note 1 - Accounting Policies
Income Recognition - Interest income from finance receivables is
------------------
recognized using the interest (actuarial) method. Accrual of interest
income on finance receivables is suspended when a loan is
contractually delinquent for 90 days or more and resumed when the loan
becomes contractually current.
Estimates - The preparation of financial statements in conformity with
---------
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Credit Losses - Provisions for credit losses are charged to income in
-------------
amounts sufficient to maintain the allowance at a level considered
adequate to cover the losses of principal and interest in the existing
portfolio. The Company's charge-off policy is based on a loan-by-loan
review for all receivables that are charged off when they are deemed
uncollectible.
Cash Equivalents - Holdings of highly liquid investments with original
----------------
maturities of three months or less and investments in money market
funds are considered to be cash equivalents.
Marketable Securities - On January 1, 1995, the Company adopted the
---------------------
provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities."
Management determines the appropriate classification of its investment
in debt and equity securities at the time of purchase and reevaluates
such determination at each balance sheet date. The Company's
securities are classified in two categories and accounted for as
follows:
. Securities Held-to-Maturity. Bonds, notes, certain preferred
stocks and other debt securities for which the Company has the
positive intent and ability to hold to maturity are reported at
cost, adjusted for amortization of premiums and accretion of
discounts which are recognized in interest income using methods
which approximate level yields over the period to maturity.
. Securities Available-for-Sale. Bonds, notes and certain preferred
stocks not classified as held-to-maturity and common stocks are
reported at fair value.
F-10
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2000, 1999, and 1998
Note 1 - Accounting Policies (Continued)
Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than
temporary result in write-downs of the individual securities to their
fair value. The write-downs are included in earnings as realized
losses.
Unrealized holding gains and losses, net of deferred income taxes, on
securities available-for-sale are reported as a net amount in a
separate component of stockholders' equity until realized.
Realized gains and losses on the sale of securities available-for-sale
are determined using the specific-identification method.
Investment - American Equity Investment Life Holding Company - This
------------------------------------------------------------
investment is accounted for on the "Equity Basis."
Property and Equipment - Property and equipment are stated at cost.
----------------------
Expenditures for repairs and maintenance are charged to expense as
incurred and additions and improvements that significantly extend the
lives of assets are capitalized. Upon sale or other retirement of
depreciable property, the cost and accumulated depreciation are
removed from the related accounts and any gain or loss is reflected in
operations.
Depreciation is provided primarily by the straight-line method over
the estimated useful lives of the depreciable assets, which is five
years.
Income Taxes - Deferred income taxes are recognized for the effects of
------------
temporary differences between financial statement and tax reporting.
Earnings Per Common Share - Earnings per common share are determined
-------------------------
by dividing net income (loss), after giving effect to preferred stock
dividends, by the weighted average number of common shares outstanding
during the year. The weighted average number of common shares
outstanding for each of the years ended December 31, 2000, 1999, and
1998 was 1,283,068.
F-11
TWENTY SERVICES, INC.
Notes to Financial Statements
For the Years Ended December 31, 2000, 1999, and 1998
Note 2 - Nature of Operations, Risks, and Uncertainties
The Company is primarily engaged in the general finance business. The
Company grants commercial and personal real estate loans and general
business and personal loans to customers located primarily in Alabama.
The majority of the loan portfolio is secured by various types of
collateral including mortgages and security interests in equipment and
other property with a significant concentration in loans
collateralized by residential real estate.
Note 3 - Fair Values of Financial Instruments
Statement of Financial Accounting Standards (SFAS) No. 107,
"Disclosures about Fair Value of Financial Instruments," requires
disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. The following sets forth a
comparison of fair values and carrying values of the Company's
financial instruments subject to the provisions of SFAS No. 107.
2000 1999
-------------------- ---------------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
Cash and Temporary
Investments.................. $ 165,009 $ 165,009 $ 164,122 $ 164,122
Marketable Securities......... 1,640,949 1,640,949 1,664,209 1,664,209
Finance Receivables, Net...... 163,874 163,874 108,189 108,189
The following methods and assumptions were used by the Company in
estimating the fair values of financial instruments:
. Short-term financial instruments are carried at their carrying
amounts reported in the balance sheet that are reasonable
estimates of fair values due to the relatively short period to
maturity of the instruments. This approach applies to cash and
temporary investments, finance receivables, notes receivable from
related parties and other receivables.
. Marketable securities are valued at quoted market values.
F-12
TWENTY SERVICES, INC.
Notes to Financial Statements
For the Years Ended December 31, 2000, 1999, and 1998
Note 4 - Marketable Securities
The amortized cost and aggregate fair values of investments in
securities are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
December 31, 2000:
- ------------------
Available-for-Sale Securities:
Equity Securities.................... $1,276,462 $19,778 $214,556 $1,081,684
Debt Securities...................... 741,565 - 186,001 555,564
---------- ------- -------- ----------
Total Available-for-Sale
Securities.................... $2,018,027 $19,778 $400,557 $1,637,248
========== ======= ======== ==========
Held-to-Maturity Securities -
Obligations of U.S. Government
Corporations and Agencies........... $ 3,701 $ - $ - $ 3,701
========== ======= ======== ==========
December 31, 1999:
- ------------------
Available-for-Sale Securities:
Equity Securities.................... $1,366,072 $19,398 $368,163 $1,017,307
Debt Securities...................... 769,411 - 126,414 642,997
---------- ------- -------- ----------
Total Available-for-Sale
Securities.................... $2,135,483 $19,398 $494,577 $1,660,304
========== ======= ======== ==========
Held-to-Maturity Securities -
Obligations of U.S. Government
Corporations and Agencies........... $ 3,905 $ - $ - $ 3,905
========== ======= ======== ==========
The amortized cost and aggregate fair value of debt securities at
December 31, 1999, by contractual maturity, are as follows. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
prepayment penalties.
F-13
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2000, 1999, and 1998
Note 4 - Marketable Securities (Continued)
Available-For-Sale Held-to-Maturity
------------------ -----------------
Amortized Market Amortized Market
Cost Value Cost Value
---- ----- ---- -----
Corporate Due in:
1-5 Years......... $275,631 $262,223 $ - $ -
6-10 Years........ 238,696 150,969 - -
After 10 Years.... 255,084 229,805 - -
-------- -------- --------- ------
769,411 642,997 - -
U.S. Government
Corporations and
Agencies Due in -
After 10 Years.... - - 3,701 3,701
-------- -------- --------- ------
Total.............. $769,411 $642,997 $3,701 $3,701
======== ======== ========= ======
Proceeds from the sale of available-for-sale securities were $133,971
for the year ended December 31, 2000. A net loss of $43,488 was
realized. There were no sales of held-to-maturity securities during the
year ended December 31, 2000.
Proceeds from the sale of available-for-sale securities were $146,071
for the year ended December 31, 1999. A net loss of $130,695 was
realized. There were no sales of held-to-maturity securities during the
year ended December 31, 1999.
Note 5 - Finance Receivables and Allowance for Credit Losses
Finance receivables consisted of the following at December 31:
2000 1999
-------- --------
Real Estate....................... $107,178 $ 43,280
Business and Other................ 67,046 75,259
-------- --------
Total Finance Receivables......... 174,224 118,539
Less Allowance for Credit Losses.. 10,350 10,350
-------- --------
Finance Receivables, Net.......... $163,874 $108,189
======== ========
F-14
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2000, 1999, and 1998
Note 5 - Finance Receivables and Allowance for Credit Losses (continued)
At December 31, 1998, contractual maturities of finance receivables
were as follows:
2000 2001 2002 2003 2004 After Total
---- ---- ---- ---- ---- ----- -----
Real Estate... $ 71,842 $4,506 $2,270 $1,168 $1,283 $26,109 $107,178
Business and
Other........ 62,279 2,989 1,635 143 - - 67,046
-------- ------ ------ ------ ------ ------- --------
Totals........ $134,121 $7,495 $3,905 $1,311 $1,283 $26,109 $174,224
======== ====== ====== ====== ====== ======= ========
The allowance for credit losses on finance receivables at December 31,
2000 and 1999, was $10,350.
Note 6 - Investment - American Equity Investment Life Holding Company
(American)
The Company's investment of 1.63% of the common stock of American is
accounted for under the equity method because the Company exercises
significant influence over its operating and financial activities.
Accordingly, the investment in American is carried at cost, adjusted
for the Company's proportionate share of earnings or losses.
On December 27, 1995, the Company invested $790,000 in American. This
was a new company formed by the Chairman of the Board of Twenty
Services, Inc. He is Chairman and Chief Executive Officer of American.
During 1997, American sold 3,240,864 of common stock for net proceeds
of $47,246,469. The transaction caused the Company's percentage of
ownership to decrease from 6.7% to 1.79%.
During 1998, American sold 625,000 shares of preferred stock for net
proceeds of $625,000. American also sold 161,098 shares of common stock
for net proceeds of $10,625,550. These transactions caused the
Company's percentage of ownership to decrease from 1.79% to 1.72%.
During 1999, American sold 130,348 shares of common stock for net
proceeds of $1,405,094. The transaction caused the Company's percentage
of ownership to decrease from 1.72% to 1.68%.
F-15
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2000, 1999, and 1998
Note 6 - Investment - American Equity Investment Life Holding Company
(American) (continued)
During 2000, American effected a three-for-one-split that resulted in
the issuance of 9,424,620 of common stock and a corresponding decrease
of $9,425,000 in additional paid in capital. In addition, the Company
issued 477,687 shares of common stock for net proceeds of $1,956,000.
American also acquired 84,375 shares of common stock for $619,000.
These transactions caused the Company's percentage of ownership to
decrease from 1.68% to 1.63%.
The following is a summary of the audited balance sheets and statements
of operations of American:
2000 1999
---- ----
Total Assets................................ $2,528,126,000 $1,717,619,000
============== ==============
Total Liabilities........................... $2,369,971,000 $1,584,313,000
Minority Interest........................... 99,503,000 98,982,000
Stockholders' Equity........................ 58,652,000 34,324,000
-------------- --------------
Total Liabilities and Stockholders' Equity.. $2,528,126,000 $1,717,619,000
============== ==============
Revenues.................................... $ 114,615,000 $ 79,810,561
Minority Interest........................... 7,449,000 2,022,359
Benefits and Expenses....................... 102,382,000 75,344,856
-------------- --------------
Net Gain.................................... $ 4,784,000 $ 2,443,346
============== ==============
For 2000, as required by the equity method of accounting, the Company's
investment of $576,648 was increased by $78,031, which is 1.63% of
American's income. The investment was also increased by $301,983, net
of deferred tax of $1,592 for the Company's share of American's
increase in capital. The net effect on the Company's investment in
American is an increase of $380,014.
For 1999, as required by the equity method of accounting, the Company's
investment of $1,137,445 was increased by $41,048, which is 1.68% of
American's income. The investment was decreased by $601,845, net of
deferred tax of $60,314 for the Company's share of American's decrease
in capital. The net effect on the Company's investment in American is a
decrease of $560,797.
F-16
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2000, 1999, and 1998
Note 7 - Property and Equipment
Property and equipment consisted of the following at December 31:
2000 1999
---- ----
Equipment, Furniture and Automobiles... $24,494 $24,494
Less: Accumulated Depreciation......... 23,678 18,780
------- -------
Net Property and Equipment............. $ 816 $ 5,714
======= =======
Note 8 - Income Taxes
Temporary differences giving rise to the deferred tax liability
(benefit) consist primarily of the excess of depreciation for tax
purposes over the amount for financial reporting purposes and gains and
losses on investments recognized for financial reporting purposes that
are not recognized for tax purposes.
The provision for income taxes was as follows for the years ended
December 31:
2000 1999 1998
---- ---- ----
Current:
Federal...................................................................... $ - $ - $ 55,713
Benefit Net Operating Loss Carryback......................................... - (42,645) 0
Deferred Tax Provision....................................................... 1,031 10,835 54,288
------ -------- --------
Total Provision for Income Taxes.............................................. $1,031 $(31,810) $110,001
====== ======== ========
Deferred tax assets and liabilities at December 31 consisted of the
following:
2000 1999
---- ----
Deferred tax assets:
Net unrealized loss on available for sale securities......................... $ 95,195 $118,794
Net unrealized loss on investment in American Equity
Investment Life Holding Company.............................................. (41,666) 53,340
Other........................................................................ (1,031) -
-------- --------
52,498 172,134
Less valuation allowance...................................................... - (93,414)
-------- --------
Total deferred tax assets..................................................... $ 52,498 $ 78,720
======== ========
F-17
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2000, 1999, and 1998
Note 9 - Stockholders' Equity
The preferred stock has a cumulative dividend of $.07 per share and is
redeemable at the Company's option of $1.05 per share. In the event of
liquidation, the preferred stockholders receive $1.05 per share before
any distributions are made to common stockholders. The 1997 dividend
(approximately $35,400) was declared in February 1998 and paid in
March 1998. The 1998 dividend (approximately $35,400) was declared in
February 1999 and paid in March 1999. The 1999 dividend (approximately
$35,400) was declared in February 1999 and paid in March 2000.
Note 10 - Investment in Twenty Services Holding, Inc.
The Company owns 6,000 shares of common stock of Twenty Services
Holding, Inc. (the Holding Company), a holding company that owns
approximately 54% of the Company's outstanding common stock. The
amount paid for the Holding Company's common stock of $60,000 has been
deducted from stockholders' equity in the accompanying balance sheet.
Note 11 - Concentration of Credit Risk
The Company maintains an investment account with a brokerage firm.
Balances are insured up to $500,000 (with a limit of $100,000 for
cash) by the Securities Investor Protection Corporation. The Company
had $1,289,576 of uninsured investments at December 31, 2000.
Note 12 - Treasury Stock
The Company purchased 61,957 shares of its common stock for an
aggregate purchase price of $76,983, or $1.25 per share and 3,615
shares of its preferred stock for an aggregate purchase price of $904,
or $.25 per share, during the year ended December 31, 1999. The shares
are held as common treasury stock and preferred treasury stock.
Note 13 - Prior Period Adjustment
The accompanying financial statements for 1998 have been restated to
correct an error in the recording of deferred taxes from the
investment in American. The effect of the restatement was to decrease
net income of 1998 by $39,566 ($.03 per share) and an increase in
additional paid-in capital by the same amount.
F-18
TWENTY SERVICES, INC.
Schedule I - Marketable Securities - Other Investments
For the Year Ended December 31, 2000
- --------------------------------------------------------------------------------
Amount at which
each portfolio of
Number of Market value equity security issues
shares or units - of each issue and each other security
principal amount Cost of at balance issue carried in the
Name of issuer and title of each issue of bonds and notes each issue sheet date balance sheet
- ------------------------------------------------ ------------------ ---------- ------------- -----------------------
Equity Securities Available-for-Sale:
Amern Hlth Pptys Inc Pfd Repstg 1/100th Ser B
Shs 8.6%........................................ 6,000 $ 150,000 $ 111,000 $ 111,000
Fedl Rlty Invt Tr Pfd 7.95%..................... 10,000 250,000 200,000 200,000
Health Care Property Investors Inc.............. 5,000 191,561 149,375 149,375
Merrill Lynch & Co Inc 9% Dep Shs Rep Ser A
1/400 Cum Pfd................................... 2,000 50,000 59,000 59,000
Repsol Intl Cap Ltd Pfd Non Cum Gtd Ser A
7.45%........................................... 1,000 25,000 22,375 22,375
Taubman Centers Inc Pfd 8.30%................... 1,300 32,500 21,775 21,775
US Restaurant Pptys Pfd Ser A Conv 7.72
11/17/02........................................ 1,000 25,000 13,438 13,438
West Bancorporation Inc......................... 3,150 31,766 35,044 35,044
Public Storage $2.45 Dep Shs Repstg 1/1000 A
sh. of Eq....................................... 3,000 60,000 67,500 67,500
HECO Capital Trust II Quids 7.3% Due 12/15/28... 6,000 150,000 132,000 132,000
New Plan Excel Rlty Pfd Tr Inc Ser D 7.8%....... 3,000 150,005 124,500 124,500
Realty Income Corp 8.25% Sr Unsecd Nts Due
2008 Monthly.................................... 6,000 150,005 141,375 141,375
US Home & Garden Tr 1 Pfd 9.4% 04/30/28......... 425 10,625 4,302 4,302
---------- ---------- ----------
Total Equity Securities Available-for-Sale...... 1,276,462 1,081,684 1,081,684
---------- ---------- ----------
Debt Securities Available-for-Sale:
AMF Bowling Worldwide Inv Sr Sub Disc Nt B/E
Steps to 12.25% 3/15/01 Cpn 0.0% Due 03/15/06
Dtd 03/21/96 Call 03/15/01...................... 175,000 138,690 - -
Cendant Corp NT CPN 7.750% Due 12/01/03
DTD 11/30/98 FC 06/01/99........................ 150,000 152,782 146,039 146,039
Northwest Airlines Inc CPN 7.625% Due 03/15/05
DTD 03/04/98 FC 09/15/98........................ 100,000 95,005 92,000 92,000
F-19
TWENTY SERVICES, INC.
Schedule I - Marketable Securities - Other Investments (Continued)
For the Year Ended December 31, 2000
- --------------------------------------------------------------------------------
Amount at which
Number of each portfolio of
shares or units- Market value equity security issues
principal amount of each issue and each other security
of bonds Cost of at balance issue carried in the
Name of issuer and title of each issue and notes each issue sheet date balance sheet
-------------------------------------- --------- ---------- ---------- -------------
AES Corp Sr Notes Death Put CPN 8%
Due 12/31/08 DTD 12/08/98 FC 03/31/99
Call 12/31/00 @ 100.......................... 100,000 $ 100,004 $ 91,250 $ 91,250
Aetna Svcs Inc GTD DEB CPN 7.625% Due
08/15/26 DTD 08/19/96 FC 02/15/97............ 150,000 156,152 147,361 147,361
Land O Lakes Cap Trst 1 144A B/E CPN 7.45%
Due 03/15/28 DTD 03/25/98 FC 09/15/98........ 100,000 98,932 78,914 78,914
---------- ---------- -------------
Total Debt Securities Available-for-Sale..... 741,565 555,564 555,564
---------- ---------- -------------
Debt Securities Held-to-Maturity -
GNMA Mortgage Backed Certificates, Due 2012.. 3,701 3,701 3,701
---------- ---------- -------------
Total........................................ $2,021,728 $1,640,949 $ 1,640,949
========== ========== =============
F-20