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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, 1999
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, 1998, 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,
1999, the aggregate market value of the voting stock of the Registrant held by
nonaffiliates of the Registrant, based upon the book value of such shares as of
such date, was approximately $2,450,000.
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.
Page 1 of 35
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 79,000 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.
Page 2 of 35
(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 1999 1998 1997 1996 1995
---- ----- ----- ---- ----
Real Estate $ 43,280 $ 46,836 $ 78,759 $124,401 $193,429
Business and
Miscellaneous $ 75,259 72,295 62,332 153,150 118,396
--------- --------- --------- --------- ---------
Total: $ 118,539 $ 119,131 $ 141,091 $ 277,551 $ 311,825
========= ========= ========= ========= ==========
Of the Registrant's aggregate loan portfolio as of December 31, 1999,
approximately 36% was secured by mortgages on real estate and approximately 30%
was unsecured.
Interest Income. The following tabulation sets forth certain
information respecting the Registrant's net interest income for each of the
years indicated:
1999 1998 1997
---- ----- ----
Interest Income $69,920 $ 32,270 $ 82,138
Net Interest Income $69,920 $ 32,270 $ 82,138
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.
Page 3 of 35
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 1999 and 1998, 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 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.
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 October 27, 1999. 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 of 35
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, 1999, no matter was
submitted to a vote of the security holders of the Registrant.
Page 5 of 35
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, 1999 there were
1,890 holders of record of the outstanding Common Stock of the Registrant, and
1,059 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, 1999, the Registrant
reflected earned surplus of $1,365,481 and reflected capital surplus of
$1,241,011.
As of December 31, 1999, 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 1999 and 1998,
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 of 35
SELECTED FINANCIAL DATA
The following tabulation sets forth certain financial information
respecting the Registrant
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Revenues $ 199,001 $ 167,074 $ 197,149 $ 182,303 $ 234,686
========== ========== ============ ============ ===========
Net Income
(Loss) $ (2,720) $ 239,671 $ 64,656 $ (57,242) $ 70,513
=========== ========== ============ ============ ===========
Earnings
(Loss) per
Common Share:
Net Income
(Loss) $ (.03) $ .16 $ . 02 $ (.07) $ .03
=========== =========== ============ ============ ===========
Total
Assets $2,641,492 $ 3,617,935 $ 3,368,378 $ 3,110,572 $ 3,210,614
========== =========== ============ ============ ===========
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 $ 1.67 $ 2.28 $ 2.20 $ 1.98 $ 1.96
=========== =========== ============ ============ ===========
- -------------------------------
(1) Reflects dividend respecting Preferred Stock declared on
February 26, 2000.
(2) Reflects dividend respecting Preferred Stock declared on
February 27, 1999.
(3) Reflects dividend respecting Preferred Stock declared on
February 10, 1998.
(4) Reflects dividend respecting Preferred Stock declared on
February 15, 1997.
(5) Reflects dividend respecting Preferred Stock declared on
February 15, 1996.
Page 7 of 35
7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources. During 1999 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 will continue to
use net cash flows, that its 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 $2,720 in
1999 as compared to net income of $279,237 in 1998. The decrease was due
primarily to the receipt of a contingent payment from the prior sale of
Statesman Group stock in the amount of $332,834 in 1998. General and
administrative expenses decreased from $149,211 in 1998 to $146,102 in 1999.
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 of 35
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 67 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 56 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;
Page 9 of 35
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 56 Director, American
Equity Investment Life
Holding Company,
Des Moines, Iowa,
since 1995.
Jack C. Bridges 72 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 of 35
11. EXECUTIVE COMPENSATION
Current Remuneration. During 1999 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, 1998.
Salaries, fees,
Name of Individuals or Directors' or fees
Number of Persons Capacities Commission and
in Group which served Bonuses
- -------- ------------ -------
All directors and Directors and $37,600
officers as a group Officers
(three (3) persons)
REMUNERATION IN THE FUTURE. As of December 31, 1999, 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 $200,
plus expenses, for each meeting of the Board of Directors and each meeting of
any committee of the Board of Directors which they attend (except the Executive
Committee of the Board of Directors). Members of the Executive Committee receive
compensation of $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 of 35
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 14,
2000, 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 of 35
As of February 14, 2000, 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 1999 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 of 35
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 OF 35
TWENTY SERVICES, INC.
Index to Financial Statements and Financial Statement Schedule
December 31, 1999, 1998, and 1997
- --------------------------------------------------------------------------------
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
Notes to Financial Statements..................................... F-9 - F-18
Financial Statement Schedule:
Schedule I - Marketable Securities - Other Investments.........F-19 & F-20
Page 15 of 35 F-1
[LETTERHEAD APPEARS HERE]
[GRAPHIC]BORELAND 2100A Southbridge Parkway, Suite 590
[GRAPHIC]BENEFIELD Birmingham, AL 35209
CRAWFORD AND WEBSTER, P.C. 205-802-7212 o Fax 205-802-7332
Certified Public Accountants -----------------------------------
o Established 1922 Sun Trust Building
201 S. Court St., Suite 500,
Florence, AL 35631
P.O. Box 1311, Florence, AL 35631
256-767-3555 o Fax 256-767-3556
Independent Auditors' Report
----------------------------
The Shareholders and
the Board of Directors
Twenty Services, Inc.
We have audited the financial statements and the financial statement schedule of
Twenty Services, Inc. (the Company) at December 31, 1999 and 1998, and for the
years ended December 31, 1999, 1998, and 1997, listed in the index on page F-1
of this Form 10-K. These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule 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, 1999 and 1998 and the results of its operations and its cash flows
for the years ended December 31, 1999, 1998, and 1997, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
BORLAND, BENEFIELD, CRAWFORD & WEBSTER, P.C.
Birmingham, Alabama
BORLAND BENEFIELD CRAWFORD & WEBSTER, P.C.
February 9, 2000
B K R
INTERNATIONAL
Independent Member Firms In Principal Cities Worldwide. F-2
Page 16 of 35
TWENTY SERVICES, INC.
Balance Sheets
- --------------------------------------------------------------------------------
December 31,
1999 1998
---- ----
As Restated
Assets
Cash and Temporary Investments.................................. $ 164,122 $ 85,653
Accounts Receivable............................................. 1,245 1,488
Marketable Securities........................................... 1,664,209 2,276,983
Finance Receivables, Net........................................ 108,189 104,131
Refundable Income Taxes......................................... 42,645 0
Deferred Tax Benefit............................................ 78,720 0
Investment - American Equity Investment Life Holding
Company........................................................ 576,648 1,137,445
Property and Equipment, Net of Accumulated Depreciation......... 5,714 12,235
-------------- --------------
Total Assets.................................................... $ 2,641,492 $ 3,617,935
============== ==============
Liabilities and Stockholders' Equity
Liabilities:
Accounts Payable and Accrued Expenses........................ $ 34,879 $ 15,081
Deferred Income Taxes........................................ 0 66,682
Income Taxes Payable......................................... 0 55,713
-------------- --------------
Total Liabilities........................................ 34,879 137,476
-------------- --------------
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................................... 1,528,768 2,070,299
Retained Earnings............................................ 1,365,481 1,403,559
Net Unrealized Gain (Loss) on Available-for-Sale Securities,
Net of $118,795 and $35,051 Deferred Income Taxes in 1999
and 1998, Respectively...................................... (356,387) (105,148)
Less: Investment in Twenty Services Holding, Inc............. (60,000) (60,000)
Preferred Treasury Stock..................................... (2,753) (547)
Common Treasury Stock........................................ (47,314) (6,522)
-------------- --------------
Net Stockholders' Equity.............................. 2,606,613 3,480,459
-------------- --------------
Total Liabilities and Stockholders' Equity...................... $ 2,641,492 $ 3,617,935
============== ==============
The accompanying notes are an integral part of these financial statements.
Page 17 of 35 F-3
TWENTY SERVICES, INC.
Statements of Operations
- --------------------------------------------------------------------------------
For the Years Ended December 31,
1999 1998 1997
As Restated
Revenues:
Interest.................................................. $ 69,920 $ 32,270 $ 82,138
Lease..................................................... 8,584 9,651 12,217
Dividends................................................. 111,711 124,391 97,848
Other..................................................... 8,786 762 4,946
------------- -------------- --------------
Total Revenues........................................ 199,001 167,074 197,149
------------- -------------- --------------
Expenses:
General and Administrative................................ 141,198 149,211 161,673
Depreciation.............................................. 4,904 10,000 10,667
Provision for Doubtful Notes Receivable................... 0 0 24,795
------------- -------------- --------------
Total Expenses........................................ 146,102 159,211 197,135
------------- -------------- --------------
Gain from Operations......................................... 52,899 7,863 14
------------- -------------- --------------
Other Income (Loss):
Gain (Loss) on Sale of Marketable Securities.............. (130,695) 1,775 (10,222)
Gain (Loss) on Sale of Property........................... 2,218 3,000 (18,612)
Provision for Equity in Gain (Loss) of
American Equity.......................................... 41,048 4,200 (52,755)
Provision for Recovery of Bad Debts....................... 0 0 140,500
Contingent Payment Rights From Statesman
Group Stock.............................................. 0 332,834 0
------------- -------------- --------------
Total Other Income (Loss)............................. (87,429) 341,809 58,911
------------- -------------- --------------
Income (Loss) Before Income Taxes............................ (34,530) 349,672 58,925
Provision for Income Taxes................................... 31,810 (110,001) 5,731
------------- -------------- --------------
Net Income (Loss)............................................ $ (2,720) $ 239,671 $ 64,656
============= ============== ==============
Income (Loss) Per Common Share............................... $ (.03) $ .16 $ .02
============= ============== ==============
The accompanying notes are an integral part of these financial statements.
Page 18 of 35 F-4
TWENTY SERVICES, INC.
Statements of Comprehensive Income (Loss)
- --------------------------------------------------------------------------------
For the Years Ended December 31,
1999 1998 1997
---- ---- ----
As Restated
Net Income (Loss)............................................. $ (2,720) $ 239,671 $ 64,656
Other Comprehensive Income, Net of Tax -
Unrealized Gain (Loss) on Securities....................... (356,387) (105,148) 45,985
------------ ------------- -----------
Comprehensive Income (Loss)................................... $ (359,107) $ 134,523 $ 110,641
============ ============= ===========
The accompanying notes are an integral part of these financial statements.
Page 19 of 35 F-5
TWENTY SERVICES, INC.
Statements of Cash Flows
- --------------------------------------------------------------------------------
For the Years Ended December 31,
1999 1998 1997
---- ---- ----
As Restated
Cash Flows From Operating Activities:
Interest and Dividends Received........................... $ 181,865 $ 163,504 $ 178,478
Lease Income.............................................. 8,584 9,651 12,217
Other Income.............................................. 8,552 762 4,946
Cash Paid to Suppliers and Employees...................... (137,340) (154,288) (163,161)
Income Taxes Paid......................................... (125,000) 0 0
Income Tax Refunds Received............................... 69,451 0 47,451
------------- -------------- --------------
Net Cash Flows From Operating Activities..................... 6,112 19,629 79,931
------------- -------------- --------------
Cash Flows From Investing Activities:
Principal Collected on Loans.............................. 34,904 13,060 178,959
Loans Made to Customers................................... (38,962) (16,100) (56,300)
Loans Made to Related Parties............................. 0 0 (3,608)
Principal Collected on Loans - Related Parties............ 0 25,875 381,381
Principal Collected on Held-to-Maturity
Securities............................................... 2,826 6,348 300,000
Proceeds from Sale of Available-for-Sale
Securities............................................... 146,071 905,631 574,518
Proceeds From Sale of Fixed Assets........................ 3,831 0 0
Purchases of Available-for-Sale Securities................ (1,797) (1,272,826) (1,429,690)
Contingent Payment Right From Statesman
Group Stock.............................................. 0 332,834 0
Proceeds From the Sale of Repossessed
Property................................................. 0 28,000 0
------------- -------------- --------------
Net Cash Flows From Investing Activities..................... 146,873 22,822 (54,740)
------------- -------------- --------------
Cash Flows From Financing Activities:
Preferred Stock Dividends Paid............................ (31,518) (35,357) (35,357)
Purchase of Treasury Stock................................ (42,998) (6,713) 0
------------- -------------- --------------
Net Cash Flows From Financial Activities..................... (74,516) (42,070) (35,357)
------------- -------------- --------------
Net Increase (Decrease) in Cash.............................. 78,469 381 (10,166)
Cash and Temporary Investments - Beginning of
Year ...................................................... 85,653 85,272 95,438
------------- -------------- --------------
Cash and Temporary Investments - End of Year................. $ 164,122 $ 85,653 $ 85,272
============= ============== ==============
The accompanying notes are an integral part of these financial statements.
Page 20 of 35 F-6
TWENTY SERVICES, INC. AND SUBSIDIARY
Statements of Cash Flows (Continued)
- --------------------------------------------------------------------------------
For the Years Ended December 31,
1999 1998 1997
---- ---- ----
As Restated
Reconciliation of Net Income to Net Cash From
Operating Activities:
Net Income (Loss)......................................... $ (2,720) $ 239,671 $ 64,656
Adjustments to Reconcile Net Income to Net
Cash From Operating Activities:
Contingent Payment From Statesman Group
Stock................................................ 0 (332,834) 0
Purchased Interest.................................... 0 6,844 0
Depreciation and Amortization......................... 4,904 10,000 10,667
Recovery of Bad Debt.................................. 0 0 (140,500)
Provision for Doubtful Notes Receivable............... 0 0 24,795
Provision for Equity in (Gain) Loss of
American Equity...................................... (41,048) (4,200) 52,755
Provision for Recovery of Prior Year Income
Taxes................................................ (42,645) 0 43,000
Net Change in Deferred Income Taxes................... (1,344) 54,288 (5,731)
(Gain) Loss on Sale of Marketable Securities.......... 130,695 (1,775) 10,222
(Gain) Loss on Sale of Property....................... (2,218) (3,000) 18,612
Decrease in Accrued Investment Interest............... 0 0 5,051
Decrease in Prepaid Income Taxes...................... 0 0 4,500
(Increase) Decrease in Accounts
Receivables......................................... 243 (1,488) (14,135)
Increase (Decrease) in Accounts Payable and
Accrued Liabilities.................................. 15,958 (3,590) 6,039
Increase (Decrease) in Income Taxes Payable........... (55,713) 55,713 0
------------- -------------- --------------
Net Cash From Operating Activities........................... $ 6,112 $ 19,629 $ 79,931
============= ============== ==============
The accompanying notes are an integral part of these financial statements.
Page 21 of 35 F-7
TWENTY SERVICES, INC.
Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1999, 1998 and 1997
- --------------------------------------------------------------------------------
Investment
in Twenty
Additional Retained Other Services Preferred
Preferred Common Paid-In Earnings Comprehensive Holding, Treasury
Stock $.10 Stock $.10 Capital (Deficit) Income Inc. Stock
---------- ---------- ------- --------- ------ ---- -----
Balance - December 31, 1996.. $ 50,511 $ 128,307 $1,716,074 $1,169,946 $ 60,523 $(60,000) $ 0
Net Income................... 64,656
Purchase of Treasury
Stock....................... (356)
Dividend on Preferred Stock
($.07 Per Share)........... (35,357)
Change in Unrealized Loss on
Net Available-for-Sale Securities,
of Deferred Income Tax of
$15,328..................... (14,538)
Share of Increase of American
Equity Capital, Net of Deferred
Income Tax of $81,311....... 243,933
---------- ---------- ---------- ---------- --------- -------- -------
Balance, December 31, 1997... 50,511 128,307 1,960,007 1,199,245 45,985 (60,000) (356)
Net Income................... 239,671
Purchase of Treasury Stock... (191)
Dividend on Preferred Stock
($.07 Per Share)............ (35,357)
Change in Unrealized Loss on
Available-for-Sale Securities,
Net of Deferred Income Tax of
$35,051..................... (151,133)
Share of Increase of American
Equity Capital, Net of Deferred
Income Tax of $36,764....... 110,292
---------- ---------- ---------- ---------- --------- -------- -------
Balance - December 31, 1998,
As Restated................. 50,511 128,307 2,070,299 1,403,559 (105,148) (60,000) (547)
Net Income (Loss)............ (2,720)
Purchase of Treasury Stock... (2,206)
Dividends on Preferred Stock,
($.07 Per Share)............. (35,358)
Share of Decrease in American
Equity Capital, Net of Deferred
Income Tax of $60,314....... (541,531)
Change in Unrealized Loss on
Available-for-Sale Securities, Net
of Deferred Income Tax Benefits
of $118,794................. (251,239)
---------- ---------- ---------- ---------- --------- -------- -------
Balance at December 31, 1999. $ 50,511 $ 128,307 $1,528,768 $1,365,481 $ (356,387) $(60,000) $(2,753)
========== ========== ========== ========== ========== ======== =======
Common
Treasury
Stock Total
----- -----
Balance - December 31, 1996.. $ 0 $ 3,065,361
Net Income................... 64,656
Purchase of Treasury
Stock....................... (356)
Dividend on Preferred Stock
($.07 Per Share)........... (35,357)
Change in Unrealized Loss on
Net Available-for-Sale Securities,
Net of Deferred Income Tax of
$15,328..................... (14,538)
Share of Increase of American
Equity Capital, Net of Deferred
Income Tax of $81,311....... 243,933
------- -----------
Balance, December 31, 1997... 0 3,323,699
Net Income................... 239,671
Purchase of Treasury Stock... (6,522) (6,713)
Dividend on Preferred Stock
($.07 Per Share)............ (35,357)
Change in Unrealized Loss on
Available-for-Sale Securities,
Net of Deferred Income Tax of
$35,051..................... (151,133)
Share of Increase of American
Equity Capital, Net of Deferred
Income Tax of $36,764....... 110,292
------- -----------
Balance - December 31, 1998,
As Restated................. (6,522) 3,480,459
Net Income (Loss)............ (2,720)
Purchase of Treasury Stock... (40,792) (42,998)
Dividends on Preferred Stock,
($.07 Per Share)............. (35,358)
Share of Decrease in American
Equity Capital, Net of Deferred
Income Tax of $60,314....... (541,531)
Change in Unrealized Loss on
Available-for-Sale Securities, Net
of Deferred Income Tax Benefits
of $118,794................. (251,239)
------- -----------
Balance at December 31, 1999. $ (47,314) $ 2,606,613
========= ===========
Page 22 of 35 F-8
TWENTY SERVICES, INC.
Notes to Financial Statements
For the Years Ended December 31, 1999, 1998, and 1997
- --------------------------------------------------------------------------------
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.
Page 23 of 35 F-9
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999, 1998, and 1997
- --------------------------------------------------------------------------------
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,
1999, 1998, and 1997 was 1,283,068.
Page 24 of 35 F-10
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999 1998, and 1997
- --------------------------------------------------------------------------------
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.
1999 1998
----------------------------- -----------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----- ----- ----- -----
Cash and Temporary
Investments ......................... $ 164,122 $ 164,122 $ 85,653 $ 85,653
Marketable Securities.................... 1,664,209 1,664,209 2,276,983 2,276,983
Finance Receivables, Net................. 108,189 108,189 104,131 104,131
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.
o The investment in American Equity Investment Life Holding
Company is not valued since it is a relatively new company and
the shares are not traded.
Page 25 of 35 F-11
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999 1998, and 1997
- --------------------------------------------------------------------------------
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, 1999:
Available-for-Sale Securities:
Equity Securities.............................. $ 1,366,072 $ 19,398 $ 368,163 $ 1,017,307
Debt Securities................................ 769,411 0 126,414 642,997
-------------- ----------- ----------- --------------
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 $ 0 $ 0 $ 3,905
============== =========== =========== ==============
December 31, 1998:
Available-for-Sale Securities:
Equity Securities.............................. $ 1,566,073 $ 37,591 $ 115,500 $ 1,488,164
Debt Securities................................ 844,379 30 62,321 782,088
-------------- ----------- ----------- --------------
Total Available-for-Sale
Securities.......................... $ 2,410,452 $ 37,621 $ 177,821 $ 2,270,252
============== =========== =========== ==============
Held-to-Maturity Securities -
Obligations of U.S. Government
Corporations and Agencies..................... $ 6,731 $ 0 $ 0 $ 6,731
============== =========== =========== ==============
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.
Page 26 of 35 F-12
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999 1998, and 1997
- --------------------------------------------------------------------------------
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 $ 0 $ 0
6-10 Years................... 238,696 150,969 0 0
After 10 Years............... 255,084 229,805 0 0
------------ ------------- --------- ----------
769,411 642,997 0 0
U.S. Government
Corporations and
Agencies Due in -
After 10 Years............... 0 0 3,905 3,905
------------ ------------- --------- ----------
Total........................... $ 769,411 $ 642,997 $ 3,905 $ 3,905
============ ============= ========= ==========
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.
Proceeds from the sale of available-for-sale securities were
$905,631for the year ended December 31, 1998. Gross gains of $1,775
were realized on these sales. There were no sales of
held-to-maturity securities during the year ended December 31,
1998.
Page 27 of 35 F-13
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999 1998, and 1997
- --------------------------------------------------------------------------------
Note 5 - Finance Receivables and Allowance for Credit Losses
Finance receivables consisted of the following at December 31:
1999 1998
---- ----
Real Estate............................................................ $ 43,280 $ 46,836
Business and Other..................................................... 75,259 72,295
------------- ------------
Total Finance Receivables.............................................. 118,539 119,131
Less Allowance for Credit Losses....................................... 10,350 15,000
------------- ------------
Finance Receivables, Net............................................... $ 108,189 $ 104,131
============= ============
At December 31, 1998, contractual maturities of finance receivables
were as follows:
2000 2001 2002 2003 2004 After Total
---- ---- ---- ---- ---- ----- -----
Real Estate.......... $ 3,848 $ 4,164 $ 4,506 $ 2,270 $ 1,168 $ 27,324 $ 43,280
Business and
Other............... 63,878 8,102 1,502 1,635 142 0 75,259
--------- --------- --------- -------- --------- ------------- --------------
Totals............... $ 67,726 $ 12,266 $ 6,008 $ 3,905 $ 1,310 $ 27,324 $ 118,539
========= ========= ========= ======== ========= ============= ==============
Changes in the allowance for credit losses on finance receivables
for the year ended December 31, 1999 are as follows:
Balance - December 31, 1998.........................$ 15,000
Reduction in Allowance for Credit Losses............ (4,650)
------------
Balance - December 31, 1999.........................$ 10,350
=== ===== ============
Page 28 of 35 F-14
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999 1998, and 1997
- --------------------------------------------------------------------------------
Note 6 - Notes Receivable - Related Parties
The Chairman of the Board and the Former Executive Vice President,
individually or together, had equity interests in four other
entities that had transactions with the Company during the years.
The activity in this account was as follows for the years ended
December 31:
1999 1998
-------- ----------
Balance, January 1....................... $ 0 $ 25,875
Reductions............................... 0 (25,875)
-------- ----------
Balance December 31...................... $ 0 $ 0
======== ==========
Note 7 - Investment - American Equity Investment Life Holding Company
(American)
The Company's investment of 1.68% 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%.
Page 29 of 35 F-15
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999 1998, and 1997
- --------------------------------------------------------------------------------
Note 7 - Investment - American Equity Investment Life Holding Company
(American) (Continued)
The following is a summary of the audited balance sheets and
statements of operations of American:
1999 1998
---- ----
Total Assets................................................ $ 1,665,503,450 $ 683,011,836
=================== =================
Total Liabilities........................................... $ 1,532,197,530 $ 616,881,315
Minority Interest........................................... 98,981,629 0
Stockholders' Equity........................................ 34,324,291 66,130,521
------------------- -----------------
Total Liabilities and Stockholders' Equity.................. $ 1,665,503,450 $ 683,011,836
=================== =================
Revenues.................................................... $ 79,810,561 $ 37,953,909
Minority Interest........................................... 2,022,359 0
Benefits and Expenses....................................... 75,344,856 37,709,722
------------------- -----------------
Net Gain.................................................... $ 2,443,346 $ 244,187
=================== =================
For 1998, as required by the equity method of accounting, the
Company's investment of $986,189 was increased by $4,200 that is
1.72% of American's income. The investment was also increased by
$147,056 for the Company's share of American's increase in capital
through sale of stock. The net effect on the Company's investment
in American is an increase of $151,256, net of $36,764 deferred
taxes.
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.
Note 8 - Property and Equipment
Property and equipment consisted of the following at December 31:
1999 1998
Equipment, Furniture and Automobiles...... $ 24,494 $ 40,004
Less: Accumulated Depreciation............ 18,780 27,769
--------- ----------
Net Property and Equipment................ $ 5,714 $ 12,235
========= ==========
Page 30 of 35 F-16
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999 1998, and 1997
- --------------------------------------------------------------------------------
Note 9 - 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:
1999 1998 1997
---- ---- ----
Current:
Federal.............................................. $ 0 $ 55,713 $ 0
Benefit Net Operating Loss Carryback................. (42,645) 0 0
Deferred Tax Provision............................... 10,835 54,288 (5,731)
------------ ------------- ------------
Total Provision for Income Taxes....................... $ (31,810) $ 110,001 $ (5,731)
============ ============= ============
Deferred tax assets and liabilities at December 31 consisted of
the following:
1999 1998
Deferred tax assets:
Net unrealized loss on available for sale securities............. $ 118,794 $ 0
Net unrealized loss on investment in American Equity
Investment Life Holding Company................................. 53,340 0
------------- -------------
172,134 0
Less valuation allowance............................................. (93,414) 0
------------- -------------
Total deferred tax assets............................................ $ 78,720 $ 0
============= =============
Deferred tax liability:
Net unrealized gain on investment in American Equity
Investment Life Holding Company................................. $ 0 $ 104,886
Net unrealized loss on available for sale securities............. 0 (35,050)
Other book and tax differences................................... 0 (3,156)
------------- -------------
Net Deferred Tax Liabilities......................................... $ 0 $ 66,682
============= =============
Page 31 of 35 F-17
TWENTY SERVICES, INC.
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1999 1998, and 1997
- --------------------------------------------------------------------------------
Note 10 - 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
1996 dividend (approximately $35,400) was declared in February 1997
and paid in March 1997. 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.
Note 11 - 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 12 - 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 $1,318,643 of uninsured investments at December 31,
1999.
Note 13 - Treasury Stock
The Company purchased 32,633 shares of its common stock for an
aggregate purchase price of $40,792, or $1.25 per share and 8,824
shares of its preferred stock for an aggregate purchase price of
$2,206, or $.25 per share, during the year ended December 31, 1999.
The shares are held as common treasury stock and preferred treasury
stock.
Note 14 - 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.
Page 32 of 35 F-18
TWENTY SERVICES, INC.
Schedule I - Marketable Securities - Other Investments
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
Amount at which each
Number of shares portfolio of equity security
or units-principal Market value of issues and each other
Name of issuer and title of amount of bonds Cost of each issue at security issue carried in the
each issue and notes each issue balance 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 $ 87,750 $ 87,750
Fedl Rlty Invt Tr Pfd 7.95%................ 10,000 250,000 171,875 171,875
Health Care Property Investors Inc......... 5,000 191,563 119,375 119,375
Merrill Lynch & Co Inc 9% Dep Shs Rep Ser A
1/400 Cum Pfd.............................. 2,000 50,000 59,625 59,625
Repsol Intl Cap Ltd Pfd Non Cum Gtd Ser A
7.45%...................................... 1,000 25,000 20,625 20,625
Taubman Centers Inc Pfd 8.3o%.............. 1,300 32,500 19,662 19,662
US Restaurant Pptys Pfd Ser A Conv 7.72
11/17/02................................... 1,000 25,000 13,875 13,875
West Bancorporation Inc.................... 2,100 31,766 41,539 41,539
Health Care Reit Inc....................... 6,250 149,609 94,531 94,531
HECO Capital Trust II Quids 7.3% Due
12/15/28................................... 6,000 150,000 116,250 116,250
New Plan Excel Rlty Pfd Tr Inc Ser D 7.8%.. 3,000 150,005 134,250 134,250
Realty Income Corp 8.25% Sr Unsecd Nts Due
2008 Monthly............................... 6,000 150,005 132,000 132,000
US Home & Garden Tr 1 Pfd 9.4% 04/30/28.... 425 10,625 5,950 5,950
----------- ---------- -------------
Total Equity Securities Available-for-Sale. 1,366,073 1,017,307 1,017,307
----------- ---------- -------------
DEBT SECURITIES AVAILABLE-FOR-SALE:
AMF Bowling World 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........ 175,000 138,691 57,969 57,969
1st Trust Unit 245 Reit Growth & Income Tr 98
Quarterly Reinvestment..................... 2,832 27,843 22,347 22,347
Cendant Corp NT CPN 7.750% Due 12/01/03
DTD 11/30/98 FC 06/01/99................... 150,000 152,783 149,875 149,875
Northwest Airlines Inc CPN 7.625% Due
03/15/05 DTD 03/04/98 FC 09/15/98.......... 100,000 95,005 90,000 90,000
Page 33 of 35 F-19
TWENTY SERVICES, INC.
Schedule I - Marketable Securities - Other Investments (Continued)
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
Amount at which each
Number of shares portfolio of equity security
or units-principal Market value of issues and each other
Name of issuer and title of amount of bonds Cost of each issue at security issue carried in the
each issue and notes each issue balance 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 $ 93,000 $ 93,000
Aetna Svcs Inc GTD DEB CPN 7.625% Due
08/15/26 DTD 08/19/96 FC 02/15/97.......... 150,000 156,152 134,177 134,177
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 95,629 95,629
----------- ---------- -------------
Total Debt Securities Available-for-Sale... 769,410 642,997 642,997
----------- ---------- -------------
DEBT SECURITIES HELD-TO-MATURITY--
GNMA Mortgage Backed Certificates, Due 2012 3,905 3,905 3,905
----------- ---------- -------------
Total...................................... $ 2,139,388 $1,664,209 $ 1,664,209
=========== ========== =============
Page 34 of 35 F-20
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: JACK C. BRIDGES
------------------------
Jack C. Bridges
Executive Vice-President
Dated: 3/24/00
-----------
SIGNATURE CAPACITY DATE
/S/ DAVID J. NOBLE Chairman and Director
- ------------------------ of Twenty Services, Inc. 3/24/00
David J. Noble (The Registrant) ----------
Principal Executive
Officer)
/s/ A.J. STRICKLAND, III Vice-Chairman and 3/24/00
- ------------------------ Director of the ----------
A.J. Strickland, III Registrant
Page 35 of 35