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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, 2001
TWENTY SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
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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, 2001, 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,
2001, 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 $2,260,000.
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.
(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").
Page -2-
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 2001 2000 1999 1998 1997
------- -------- -------- -------- --------
Real Estate $35,343 $107,178 $ 43,280 $ 46,836 $ 78,759
Business and
Miscellaneous $59,824 67,046 75,259 72,295 62,332
-------- -------- -------- -------- --------
Total: $95,167 $174,224 $118,539 $119,131 $141,091
======== ======== ======== ======== ========
Of the Registrant's aggregate loan portfolio as of December 31, 2001,
approximately 37% was secured by mortgages on real estate and approximately 63%
was unsecured.
Interest Income. The following tabulation sets forth certain
information respecting the Registrant's net interest income for each of the
years indicated:
2001 2000 1999
------- ------- -------
Interest Income $68,941 $75,107 $69,920
Net Interest Income $68,941 $75,107 $69,920
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.
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 1.63%.
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.
Page -3-
Employees. During 2001 and 2000, 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 2002, 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 June 8th, 2001. 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.
Page -4-
Other Matters. The Registrant's business is not seasonal.
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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, 2001, no matter was submitted to
a vote of the security holders of the Registrant.
Page -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 of 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, 2001 there were 1,751
holders of record of the outstanding Common Stock of the Registrant, and 1,038
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, 2001, the Registrant reflected
earned surplus of $1,283,610 and reflected capital surplus of $1,508,619.
As of December 31, 2001, 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.
Page -6-
SELECTED FINANCIAL DATA
The following tabulation sets forth certain financial information
respecting the Registrant.
2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ----------
Revenues $ 167,740 $ 189,706 $ 199,001 $ 167,074 $ 197,149
========== ========== ========== ========= ==========
Net Income (Loss) $ (89,070) $ 77,915 $ (2,720) $ 239,671 $ 64,656
========== ========== ========== =========== ==========
Earnings (Loss) per Common Share:
Net Income (Loss) $ (.10) $ .03 $ (.03) $ .16 $ .02
========== ========== ========== ========== ==========
Total Assets $2,842,737 $2,983,774 $2,641,492 $3,617,935 $3,368,378
========== ========== ========== ========== ==========
Dividends Declared:
Common Stock $ 0 $ 0 $ 0 $ 0 $ 0
========== ========== ========== ========== ==========
Preferred Stock $ 35,3571/1/ $ 35,3572/2/ $ 35,3573/3/ $ 35,3574/4/ $ 35,3575/5/
========== ========== ========== ========== ==========
Total $ 35,357 $ 35,357 $ 35,357 $ 35,357 $ 35,357
========== ========== ========== ========== ==========
Book Value Per Common Share
Outstanding $ 1.77 $ 2.25 $ 1.67 $ 2.28 $ 2.20
========== ========== ========== ========== ==========
- ------------------
/1/ Reflects dividend respecting Preferred Stock declared on February 28, 2002.
/2/ Reflects dividend respecting Preferred Stock declared on February 28, 2001.
/3/ Reflects dividend respecting Preferred Stock declared on February 26, 2000.
/4/ Reflects dividend respecting Preferred Stock declared on February 27, 1999.
/5/ Reflects dividend respecting Preferred Stock declared on February 10, 1998.
Page -7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources. During 2001 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 loss of $89,070 in
2001 as compared to net income of $77,915 in 2000. The decrease was due
primarily to a write-down in 2001 of approximately $139,000 for loss in value of
a marketable security due to bankruptcy. General and administrative expenses
decreased from $145,303 in 2000 to $133,357 in 2001.
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.
Page -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 28, 2002.
Material Occupations
Names and Positions And Positions During
with the Registrant Age The last five (5) years
- ---------------------- --- -----------------------
David J. Noble 70 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 60 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;
- continued -
Page -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 60 Director, American
Equity Investment Life
Holding Company,
Des Moines, Iowa,
since 1995.
Jack C. Bridges 74 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.
Page -10-
11. EXECUTIVE COMPENSATION
Current Remuneration. During 2001 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, 2001.
Name of Individuals or
Number of Persons Capacities Salaries and
In Group which served Directors' Fees
- ---------------------- ------------ ---------------
All directors and Directors and $37,200
officers as a group Officers
(three (3) persons)
REMUNERATION IN THE FUTURE. As of December 31, 2001, 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.
Page -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, 2002, 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.
Page -12-
As of February 28, 2002, 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 2001 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.
Page -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.
Page -14-
TWENTY SERVICES, INC.
Financial Statements
and
Financial Statement Schedule
For the Years Ended
December 31, 2001, 2000, and 1999
TWENTY SERVICES, INC.
Index to Financial Statements and Financial Statement Schedule
December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
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-19
Financial Statement Schedule:
Schedule I - Marketable Securities - Other Investments ......... F-20 & F-21
F-1
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, 2001 and 2000, 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, 2001. 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 auditing standards generally accepted
in the United States of America. 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, 2001 and 2000 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.
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, 2001, 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.
/s/ BORLAND, BENEFIELD, CRAWFORD & WEBSTER, P.C.
Birmingham, Alabama
March 22, 2002
F-2
TWENTY SERVICES, INC.
Balance Sheets
- --------------------------------------------------------------------------------
December 31,
2001 2000
---------- ----------
Assets
Cash and Temporary Investments ............................. $ 206,208 $ 165,009
Accounts Receivable ........................................ 2,378 3,966
Marketable Securities ...................................... 1,813,084 1,640,949
Finance Receivables, Net ................................... 84,440 163,874
Deferred Tax Benefit ....................................... 41,690 52,498
Investment - American Equity Investment Life Holding
Company ................................................... 694,937 956,662
Property and Equipment, Net of Accumulated Depreciation .... - 816
---------- ----------
Total Assets ............................................... $2,842,737 $2,983,774
========== ==========
Liabilities and Stockholders' Equity
Liabilities -
Accounts Payable and Accrued Expenses .................. $ 50,508 $ 41,297
---------- ----------
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 .............................. 1,618,630 1,829,159
Retained Earnings ....................................... 1,283,610 1,408,038
Net Unrealized Loss on Available-for-Sale Securities,
Net of $17,433 and $95,195 Deferred Income Taxes in 2001
and 2000, Respectively ................................. (52,301) (285,584)
Less: Investment in Twenty Services Holding, Inc. ...... (60,000) (60,000)
Preferred Treasury Stock ................................ (5,104) (3,657)
Common Treasury Stock ................................... (171,424) (124,297)
---------- ----------
Net Stockholders' Equity ......................... 2,792,229 2,942,477
---------- ----------
Total Liabilities and Stockholders' Equity ................. $2,842,737 $2,983,774
========== ==========
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,
2001 2000 1999
-------- -------- --------
Revenues:
Interest ................................................ $ 68,941 $ 75,107 $ 69,920
Lease ................................................... - 1,460 8,584
Dividends ............................................... 97,383 102,585 111,711
Other ................................................... 1,416 10,554 8,786
-------- -------- --------
Total Revenues ...................................... 167,740 189,706 199,001
-------- -------- --------
Expenses:
General and Administrative .............................. 132,541 140,405 141,198
Depreciation ............................................ 816 4,898 4,904
-------- -------- --------
Total Expenses ...................................... 133,357 145,303 146,102
-------- -------- --------
Gain from Operations ....................................... 34,383 44,403 52,899
-------- -------- --------
Other Income (Loss):
Loss on Sale of Marketable Securities ................... 139,210) (43,488) 130,695)
Gain on Sale of Property ................................ - - 2,218
Provision for Equity in Gain of
American Equity ........................................ 14,236 78,031 41,048
-------- -------- --------
Total Other Income (Loss) ........................... 124,974) 34,543 (87,429)
-------- -------- --------
Income (Loss) Before Income Taxes .......................... (90,591) 78,946 (34,530)
Provision for Income Taxes ................................. (1,521) 1,031 31,810
-------- -------- --------
Net Income (Loss) .......................................... $(89,070) $ 77,915 $ (2,720)
======== ======== ========
Income (Loss) Per Common Share ............................. $ (.10) $ .03 $ (.03)
======== ======== ========
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,
2001 2000 1999
-------- -------- ---------
Net Income (Loss) ............................................ $(89,070) $ 77,915 $ (2,720)
Other Comprehensive Income, Net of Tax -
Unrealized Gain (Loss) on Securities ...................... 233,283 70,803 (251,239)
-------- -------- ---------
Comprehensive Income (Loss) .................................. $144,213 $148,718 $(253,959)
======== ======== =========
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,
2001 2000 1999
--------- --------- ---------
Cash Flows From Operating Activities:
Interest and Dividends Received ......................... $ 167,912 $ 175,213 $ 181,865
Lease Income ............................................ - 1,460 8,584
Other Income ............................................ 1,416 2,419 8,552
Cash Paid to Suppliers and Employees .................... (127,705) (135,670) (137,340)
Income Taxes Paid ....................................... - - (125,000)
Income Tax Refunds Received ............................. - 50,538 69,451
--------- --------- ---------
Net Cash Flows From Operating Activities ................... 41,623 93,960 6,112
--------- --------- ---------
Cash Flows From Investing Activities:
Principal Collected on Loans ............................ 79,434 12,373 34,904
Loans Made to Customers ................................. - (68,058) (38,962)
Principal Collected on Held-to-Maturity
Securities ............................................. 220 204 2,826
Proceeds from Sale of Available-for-Sale
Securities ............................................. 39,041 133,971 146,071
Proceeds From Sale of Fixed Assets ...................... - - 3,831
Purchases of Available-for-Sale Securities .............. (39,560) (60,000) (1,797)
--------- --------- ---------
Net Cash Flows From Investing Activities ................... 79,135 18,490 146,873
--------- --------- ---------
Cash Flows From Financing Activities:
Preferred Stock Dividends Paid .......................... (30,985) (33,676) (31,518)
Purchase of Treasury Stock .............................. (48,574) (77,887) (42,998)
--------- --------- ---------
Net Cash Flows From Financial Activities ................... (79,559) (111,563) (74,516)
--------- --------- ---------
Net Increase in Cash ....................................... 41,199 887 78,469
Cash and Temporary Investments -
Beginning of Year ......................................... 165,009 164,122 85,653
--------- --------- ---------
Cash and Temporary Investments -
End of Year ............................................... $ 206,208 $ 165,009 $ 164,122
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-6
TWENTY SERVCES, INC,
Statements of Cash Flows (Continued)
- --------------------------------------------------------------------------------
For the Years Ended December 31,
2001 2000 1999
--------- --------- ---------
Reconciliation of Net Income to Net Cash From
Operating Activities:
Net Income (Loss) ....................................... $ (89,070) $ 77,915 $ (2,720)
Adjustments to Reconcile Net Income to Net
Cash From Operating Activities:
Depreciation and Amortization ....................... 816 4,898 4,904
Provision for Equity in Gain of American
Equity ............................................. (14,236) (78,031) (41,048)
Provision for Recovery of Prior Year Income
Taxes .............................................. - 42,645 (42,645)
Net Change in Deferred Income Taxes ................. (1,521) 1,031 (1,344)
Loss on Sale of Marketable Securities ............... 139,210 43,488 130,695
Gain on Sale of Property ............................ - - (2,218)
(Increase) Decrease in Accounts Receivable .......... 1,588 (2,721) 243
Increase in Accounts Payable and Accrued
Liabilities ........................................ 4,836 4,735 15,958
Decrease in Income Taxes Payable .................... - - (55,713)
--------- --------- ---------
Net Cash From Operating Activities ......................... $ 41,623 $ 93,960 $ 6,112
========= ========= =========
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, 2001, 2000, and 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Investment
Accumulated in Twenty
Additional Other Services Preferred Common
Preferred Common Paid-In Retained Comprehensive Holding, Treasury Treasury
Stock $.10 Stock $.10 Capital Earnings Income Inc. Stock Stock Total
---------- ---------- ---------- ---------- ------------- ---------- --------- --------- ----------
Balance - December 31, 1998,
As Restated .................. $50,511 $128,307 $2,070,299 $1,403,559 $(105,148) $(60,000) $ (547) $ (6,522) $3,480,459
Net Loss ...................... - - - (2,720) - - - - (2,720)
Purchase of Treasury Stock .... - - - - - - (2,206) (40,792) (42,998)
Dividends on Preferred Stock,
($.07 Per Share) ............. - - - (35,358) - - - - (35,358)
Share of Decrease in American
Equity Capital, Net of
Deferred Income Tax
of $60,314 ................... - - (541,531) - - - - - -
Change in Unrealized Loss on
Available-for-Sale
Securities, Net of Deferred
Income Tax Benefits
of $83,744 ................... - - - - (251,239) - - - -
Balance - December 31, 1999 ... 50,511 128,307 1,528,768 1,365,481 (356,387) (60,000) (2,753) (47,314) 2,606,613
Net Income .................... - - - 77,915 - - - - 77,915
Purchase of Treasury Stock .... - - - - - - (904) (76,983) (77,887)
Dividends on Preferred
Stock,($.07 Per Share) ....... - - - (35,358) - - - - (35,358)
Share of Increase in American
Equity Capital, Net of
Deferred Income Tax
of $1,592 .................... - - 300,391 - - - - - 300,391
Change in Unrealized Loss on
Available-for-Sale
Securities, Net of Deferred
Income Tax of $23,600 ........ - - - - 70,803 - - - 70,803
F-8
TWENTY SERVICES, INC.
Statements of Changes in Stockholders' Equity (continued) For the Years Ended
December 31, 2001, 2000, and 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Investment
Accumulated in Twenty
Additional Other Services Preferred Common
Preferred Common Paid-In Retained Comprehensive Holding, Treasury Treasury
Stock $.10 Stock $.10 Capital Earnings Income Inc. Stock Stock Total
---------- ---------- ---------- --------- ------------- ----------- ---------- --------- -----------
Balance - December 31, 2000 . $50,511 $128,307 $1,829,159 $1,408,038 $(285,584) $(60,000) $(3,657) $(124,297) $2,942,477
Net Loss .................... - - - (89,070) - - - - (89,070)
Purchase of Treasury Stock .. - - - - - (1,447) (47,127) (48,574)
Dividend on Preferred Stock
($.07 Per Share) ........... - - - (35,358) - - - - (35,358)
Change in Unrealized
Loss on Available-for-Sale
Securities, Net of
Deferred Income Tax
of $(77,761) ............... - - - - 233,283 - - - 233,283
Share of Increase of
American Equity
Capital, Net of
Deferred Income Tax
of $(65,432) ............... - - - - - - - - (210,529)
Balance - December 31, 2001 . $50,511 $128,307 $1,618,630 $1,283,610 $ (52,301) $(60,000) $(5,104) $(171,424) $2,792,229
F-9
TWENTY SERVICES, INC.
Notes to Financial Statements
For the Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
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:
o 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.
o 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, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
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,
2001, 2000, and 1999 was 1,283,068.
F-11
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
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.
2001 2000
--------------------------- ---------------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------- ---------- ----------- ----------
Cash and Temporary
Investments $ 206,208 $ 206,208 $ 165,009 $ 165,009
Marketable Securities 1,813,084 1,813,084 1,640,949 1,640,949
Finance Receivables, Net 84,440 84,440 163,874 163,874
The following methods and assumptions were used by the Company in
estimating the fair values of financial instruments:
o 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.
o Marketable securities are valued at quoted market values.
F-12
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
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, 2001:
- ------------------
Available-for-Sale Securities:
Equity Securities ........................... $1,276,462 $42,750 $ 42,168 $1,277,044
Debt Securities ............................. 602,875 6,170 76,486 532,559
---------- ------- -------- ----------
Total Available-for-Sale
Securities ....................... $1,879,337 $48,920 $118,654 $1,809,603
========== ======= ======== ==========
Held-to-Maturity Securities -
Obligations of U.S. Government
Corporations and Agencies .................. $ 3,481 $ - $ - $ 3,481
========== ======= ======== ==========
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
========== ======= ======== ==========
The amortized cost and aggregate fair value of debt securities at
December 31, 2001 and 2000, 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, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
Note 4 - Marketable Securities (Continued)
Available-For-Sale Held-to-Maturity
---------------------- ----------------------
Amortized Market Amortized Market
Cost Value Cost Value
----------- -------- --------- ------
December 31, 2001
-----------------
Corporate Due in:
1-5 Years .................... $247,788 $230,020 $ - $ -
6-10 Years ................... 100,004 84,500 - -
After 10 Years ............... 255,083 218,039 - -
-------- -------- ------ ------
602,875 532,559 - -
U.S. Government
Corporations and
Agencies Due in -
After 10 Years ................ - - 3,481 3,481
-------- -------- ------ ------
Total ........................... $602,875 $532,559 $3,481 $3,481
======== ======== ====== ======
December 31, 2000
-----------------
Corporate Due in:
1-5 Years .................... $386,478 $238,038 $ - $ -
6-10 Years ................... 100,004 91,250 - -
After 10 Years ............... 255,083 226,276 - -
-------- -------- ------ ------
741,565 555,564 - -
U.S. Government
Corporations and
Agencies Due in -
After 10 Years ............... - - 3,701 3,701
-------- -------- ------ ------
Total ........................... $741,565 $555,564 $3,701 $3,701
======== ======== ====== ======
Proceeds from the sale of available-for-sale securities were
$39,041 for the year ended December 31, 2001. A net loss of $519
was realized. There were no sales of held-to-maturity securities
during the year ended December 31, 2001.
At December 31, 2001, certain securities classified as
available-for-sale were written down to the estimated realizable
values because, in the opinion of management, the decline in market
value of those securities is considered to be other than temporary.
The write-down of $138,691 has been recorded as a realized loss on
sale-of-securities.
F-14
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
Note 4 - Marketable Securities (Continued)
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.
Note 5 - Finance Receivables and Allowance for Credit Losses
Finance receivables consisted of the following at December 31:
2001 2000
------- --------
Real Estate ................................ $35,341 $107,178
Business and Other ......................... 59,449 67,046
------- --------
Total Finance Receivables .................. 94,790 174,224
Less Allowance for Credit Losses ........... 10,350 10,350
------- --------
Finance Receivables, Net ................... $84,440 $163,874
======= ========
At December 31, 2001, contractual maturities of finance receivables
were as follows:
2002 2003 2004 2005 2006 After Total
------- ------ ------ ------ ------ ------- -------
Real Estate $ 4,506 $2,270 $1,168 $1,283 $1,411 $24,703 $35,341
Business and
Other 56,706 2,366 300 77 - - 59,449
------- ------ ------ ------ ------ ------- -------
Totals $61,212 $4,636 $1,468 $1,360 $1,411 $24,703 $94,790
======= ====== ====== ====== ====== ======= =======
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.
F-15
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
Note 6 - Investment - American Equity Investment Life Holding Company
(American) (continued)
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%.
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%.
There was no change in the Company's ownership percentage in 2001.
The following is a summary of the audited balance sheets and
statements of operations of American:
2001 2000
-------------- --------------
Total Assets ................................ $4,392,495,000 $2,528,126,000
============== ==============
Total Liabilities ........................... $4,249,723,000 $2,369,971,000
Minority Interest ........................... 100,155,000 99,503,000
Stockholders' Equity ........................ 42,567,000 58,652,000
-------------- --------------
Total Liabilities and Stockholders' Equity .. $4,392,445,000 $2,528,126,000
============== ==============
Revenues .................................... $ 180,376,000 $ 114,615,000
Minority Interest ........................... 7,449,000 7,449,000
Benefits and Expenses ....................... 172,055,000 102,382,000
-------------- --------------
Net Gain .................................... $ 872,000 $ 4,784,000
============== ==============
F-16
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
Note 6 - Investment - American Equity Investment Life Holding Company
(American) (continued)
For 2001, as required by the equity method of accounting, the
Company's investment of $956,662 increased by $14,236, which is
1.63% of American's income. The investment was decreased by
$275,961, net of deferred tax benefit of $65,432 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 $261,725.
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.
Note 7 - Property and Equipment
Property and equipment consisted of the following at December 31:
2001 2000
-------- -------
Equipment, Furniture and Automobiles .. $ 24,494 $24,494
Less: Accumulated Depreciation ........ (24,494) 23,678
-------- -------
Net Property and Equipment ............ $ - $ 816
======== =======
Note 8 - Income Taxes
Temporary differences giving rise to the deferred tax liability
(benefit) consist primarily of gains and losses on investments
recognized for financial reporting purposes that are not recognized
for tax purposes and the increase or decrease in the value of the
Company's investment in American Equity Life Holding Company.
The provision for income taxes was as follows for the years ended
December 31:
2001 2000 1999
-------- ------ --------
Current:
Benefit Net Operating Loss Carryback ................. $ - $ - $(42,645)
Deferred Tax Provision ............................... (1,521) 1,031 10,835
------- ------ --------
Total Provision for Income Taxes ....................... $(1,521) $1,031 $(31,810)
======= ====== ========
F-17
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
Note 8 - Income Taxes (continued)
Deferred tax assets and liabilities at December 31 consisted of the
following:
2001 2000
-------- ---------
Deferred tax assets:
Net unrealized loss on available for sale securities .............. $ 17,434 $ 95,195
Net operating loss carryforwards .................................. 97,070 54,570
Net unrealized loss on investment in American Equity
Investment Life Holding Company .................................. 23,766 (41,666)
Other ............................................................. 490 (1,031)
-------- ---------
138,760 107,068
Less valuation allowance ............................................ 97,070 54,570
-------- ---------
Total deferred tax assets ........................................... $ 41,690 $ 52,498
======== =========
The company has available at December 31, 2001, $388,282 of unused
operating loss carryforwards that may be applied against future
taxable income and that expire in the years 2020 and 2021.
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
1998 dividend (approximately $35,400) was declared in February 1999
and paid in March 1999. The 1999 dividend (approximately $31,500)
was declared in February 1999 and paid in March 2000. The 2000
dividend (approximately $33,700) was declared in February 2000 and
paid in March 2001.
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.
F-18
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 2001, 2000, and 1999
- --------------------------------------------------------------------------------
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 $1,512,877 of uninsured investments at December 31,
2001.
Note 12 - Treasury Stock
The Company purchased 37,701 shares of its common stock for an
aggregate purchase price of $47,127, or $1.25 per share and 5,788
shares of its preferred stock for an aggregate purchase price of
$1,447, or $.25 per share, during the year ended December 31, 2001.
The shares are held as common treasury stock and preferred 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, 2000.
The shares are held as common treasury stock and preferred treasury
stock.
F-19
TWENTY SERVICES, INC.
Schedule I - Marketable Securities - Other Investments
For the Year Ended December 31, 2001
- --------------------------------------------------------------------------------
Amount at
which each
portfolio of
Number of equity
shares or Market security issues
units - value and each other
principal of each security issue
amount issue carried in the
of bonds Cost of at balance issue balance
Name of issuer and title of each issue and notes each issue sheet date sheet
- -------------------------------------- ---------- ----------- ---------- ---------------
Equity Security Available-for-Sale:
Amern Hlth Pptys Inc Pfd Repstg 1/100th Ser B
Shs 8.6% 6,000 $ 150,000 $ 150,000 $ 150,000
Fedl Rlty Invt Tr Pfd 7.95% 10,000 250,000 241,000 241,000
Health Care Property Investors Inc 5,000 191,561 181,050 181,050
Merrill Lynch & Co Inc 9% Dep Shs Rep Ser A
1/400 Cum Pfd 2,000 50,000 58,100 58,100
Repsol Intl Cap Ltd Pfd Non Cum Gtd Ser A
7.4% 1,000 25,000 22,950 22,950
Taubman Centers Inc Pfd 8.30% 1,300 32,500 30,290 30,290
US Restaurant Pptys Pfd Ser A Conv 7.72
11/17/2002 1,000 25,000 18,300 18,300
West Bancorporation Inc 3,150 31,766 37,170 37,170
Public Storage $2.45 Dep Shs Repstg 1/1000 A
sh. of Eq 3,000 60,000 81,570 81,570
HECO Capital Trust II Quids 7.3% Due 12/15/28 6,000 150,000 150,600 150,600
New Plan Excel Rlty Pfd Tr Inc Ser D 7.8% 3,000 150,005 144,000 144,000
Realty Income Corp 8.25% Sr Unseed Nts Due
2008 Monthly 6,000 150,005 157,080 157,080
US Home & Garden Tr I Pfd 9.4% 04/30/28 425 10,625 4,934 4,934
---------- ---------- ----------
Total Equity Securities Available-for-Sale 1,276,462 1,277,044 1,277,044
---------- ---------- ----------
F-20
TWENTY SERVICES, INC.
Schedule I - Marketable Securities - Other Investments (continued)
For the Year Ended December 31, 2001
- --------------------------------------------------------------------------------
Amount at
which each
portfolio of
Number of equity
shares or Market security issues
units - value and each other
principal of each security issue
amount issue carried in the
of bonds Cost of at balance issue balance
Name of issuer and title of each issue and notes each issue sheet date sheet
- -------------------------------------- ---------- ----------- ---------- ---------------
Debt Securities Available-for-Sale:
Cendant Corp NT CPN 7.750% Due 12/01/03
DTD 11/30/98 FC 06/01/99 150,000 $ 152,782 $ 152,782 152,520
Northwest Airlines Inc CPN 7.625% Due 03/15/05
DTD 03/04/98 FC 09/01/99 100,000 95,005 77,500 77,500
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 84,500 84,500
Aetna Svcs Inc GTD DEB CPN 7.625% Due
08/15/26 DTD 08/19/96 FC 02/15/97 150,000 156,152 162,322 162,322
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 55,717 55,717
---------- ---------- ----------
Total Debt Securities Available-for-Sale 602,875 532,559 532,559
---------- ---------- ----------
Debt Securities Held-to-Maturity -
GNMA Mortgage Backed Certificates, Due 2012 3,481 3,481 3,481
---------- ---------- ----------
Total $1,882,818 $1,813,084 $1,813,084
========== ========== ==========
F-21
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: March 27, 2002
------------------
SIGNATURE CAPACITY DATE
- --------- -------- ----
/s/ David J. Noble Chairman and Director March 27, 2002
- ------------------------- of Twenty Services, Inc. ---------------
David J. Noble (The Registrant)
Principal Executive
Officer)
/s/ A.J. Strickland, III Vice-Chairman and March 27, 2002
- ------------------------- Director of the ---------------
A.J. Strickland, III Registrant