<PAGE>
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, 1997
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.)
105 Vulcan Road
Birmingham, Alabama 35209
------------------------------ ----------------------
Registrant's telephone number, including area code (205) 945-1581
----------------
Securities registered pursuant to Section l2(g) of the Act:
Common Stock
7% Cumulative Preferred Stock*
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by checkmark whether the Registrant (l) has filed all reports required
to be filed by Section l3 or l5(d) of the Securities Exchange Act of 1934 during
the preceding twelve (l2) 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, 1977, the Registrant had issued and outstanding l,283,068
shares of common stock, par value of $0.l0 per share, and as of December 31,
1997, 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 $l,429,000.
Documents incorporated by reference: None
- -------------------------------
* Includes 7% Cumulative Series A-1980 Preferred Stock, 7% Cumulative
Series A-198l Preferred Stock, 7% Cumulative Series A-1982 Preferred
Stock, and 7% Cumulative Series A-1985 Preferred Stock.
Page 1 of 33
<PAGE>
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 33
<PAGE>
(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:
<TABLE>
<CAPTION>
Type of Loans 1997 1996 1995 l994 l993
- --------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Real Estate $78,759 $124,401 $193,429 $198,854 $205,820
Business and
Miscellaneous 62,332 153,150 118,396 148,640 123,647
------- -------- -------- -------- --------
Total: $141,091 $277,551 $311,825 $347,494 $329,467
======== ======== ======== ======== ========
</TABLE>
Of the Registrant's aggregate loan portfolio as of December 31, 1997,
approximately 56% was secured by mortgages on real estate and approximately 44%
was unsecured.
Interest Income. The following tabulation sets forth certain information
----------------
respecting the Registrant's net interest income for each of the years indicated:
1997 1996 1995
---- ---- ----
Interest Income $ 82,138 $ 82,903 $129,953
Net Interest Income $ 82,138 $ 82,903 $ 59,532
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 33
<PAGE>
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 and 1997
American Equity obtained additional equity financing from other investors which
reduced the Company's interest therein to 1.8%.
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 1997 and 1996, 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 March l5, 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.
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 August l3, 1997. 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 33
<PAGE>
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 Birmingham, Alabama, which it leases on a month-to-month basis and
for which it pays aggregate annual rentals of $7,200. The Registrant believes
its office facilities are adequate for its present needs.
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, 1997, no matter was submitted to a vote
of the security holders of the Registrant.
Page 5 of 33
<PAGE>
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,
although the Common Stock is quoted from time to time in certain interdealer
quotations by brokers. Except for such transactions and sales in privately
negotiated transactions among stockholders, 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, 1997 there were 1,946 holders of
------------------
record of the outstanding Common Stock of the Registrant, and 1,072 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, 1997, the Registrant reflected
earned surplus of $1,199,245 and reflected capital surplus of $1,960,007.
As of December 3l, 1997, the Registrant has issued and outstanding 505,ll0
shares of Series A-Preferred Stock, consisting of four (4) series of such
Preferred Stock issued in 1980, 198l, 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 1997 and 1996, 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 33
<PAGE>
6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
The following tabulation sets forth certain financial information respecting
the Registrant
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 197,149 $ 182,303 $ 234,686 $ 118,337 $ 101,356
========== ========== ========== ========== ===========
Net Income (Loss) $ 64,656 $ (57,242) $ 70,5l3 $l,777,270 $ (26,137)
========== ========== ========= ========== ===========
Earnings (Loss) Per
Common Share:
Net Income (Loss) $ .01 $ (.07) $ .03 $ 1.36 $ (.05)
========== ========== ========== ========== ==========
Total
Assets $3,368,378 $3,110,572 $3,210,614 $3,134,191 $l,355,001
========== ========== ========== ========== ==========
Dividends Declared:
Common Stock $ 0 $ 0 $ 0 $ 0 $ 0
========== ========== ========== ========== ==========
Preferred stock $ 35,357/1/ $ 35,357/2/ $ 35,357/3/ $ 35,357/4/ $ 35,358/5/
========== ========== ========== ========== ==========
Total $ 35,357 $ 35,357 $ 35,357 $ 35,358 $ 35,357
========== ========== ========== ========== ==========
Book Value Per Common
Share Outstanding $ 2.59 $ 2.06 $ 1.96 $ .64 $ .68
========== ========== ========== ========== ==========
</TABLE>
- -------------------------------
1 REFLECTS DIVIDEND RESPECTING PREFERRED STOCK DECLARED ON FEBRUARY 27, 1997.
2 REFLECTS DIVIDEND RESPECTING PREFERRED STOCK DECLARED ON FEBRUARY 10, L996.
3 REFLECTS DIVIDEND RESPECTING PREFERRED STOCK DECLARED ON FEBRUARY 15, 1995.
4 REFLECTS DIVIDEND RESPECTING PREFERRED STOCK DECLARED ON FEBRUARY 4, 1994.
5 REFLECTS DIVIDEND RESPECTING PREFERRED STOCK DECLARED ON FEBRUARY 15, 1993.
Page 7 of 33
<PAGE>
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
Liquidity and Capital Resources. During 1997, 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 income of $64,656 in 1997
---------------------
as compared to net loss of $57,242 in 1996. The increase was due primarily to
the collection in 1997 of the note receivable for $l40,500 which was reserved in
the prior year. General and administrative expenses increased from $138,019 in
1996 to $161,673 in 1997 due primarily to an increase in professional services.
During 1994, the Registrant reflected net income of $1,777,270, as compared to
a loss of $26,137 during 1993. The increase is due primarily to 1994 including a
gain on sale of marketable securities net of taxes of approximately $1,796,000.
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-18 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 33
<PAGE>
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 March 15, 1997.
Material Occupations
Names and Positions and Positions During
with the Registrant Age the last five (5) years
- ------------------- --- -----------------------
David J. Noble 65 Chairman of the Board
Chairman of the Board Directors, Twenty
of Directors and Services, Inc.,
Director Birmingham, Alabama
(finance business),
since 1980 and 1979
respectively;
Chairman of the Board
of Directors, Treasurer
and Director, Twenty
Services Holding, Inc.
Birmingham, Alabama
President of American
Equity Investment Life
Holding Company since
1995.
Dr. A. J. Strickland, III 54 Director and Vice-
Vice-Chairman of the Board Chairman of the Board of
Directors, 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 33
<PAGE>
PART III (CONTINUED)
Names and Material Occupations
Positions and Positions During
with the Registrant Age the last five (5) years
- ------------------- --- -----------------------
Dr. A.J. Strickland, III 54 Director, American
Equity Investment Life
Holding Company,
Des Moines, Iowa,
since 1995.
Jack C. Bridges 70 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 (l0) 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 33
<PAGE>
11. EXECUTIVE COMPENSATION
----------------------
Current Remuneration. During 1997 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, 1997.
<TABLE>
<CAPTION>
<S> <C> <C>
Salaries,
fees,
directors'
Name of Individuals fees,
or number of persons Capacities commission
in group which served and bonuses
- -------- ------------ -----------
All directors and Directors and $43,300
officers as a group Officers
(five (5) persons)
</TABLE>
REMUNERATION IN THE FUTURE. As of December 31, 1997, no officer or
--------------------------
directors 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 33
<PAGE>
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 105 Vulcan Road, Birmingham, Alabama. As of such
date, Twenty Services Holding, Inc. and an affiliate of Holding own 724,069
shares of Common Stock of the Registrant and approximately 56% 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 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 of Directors of the
Registrant, owns indirectly and beneficially approximately 63% 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 648,877 Indirect(l) 50.57%
Common Stock A.J. Strickland,III 48,204 Indirect(l) 3.76%
- -----------------------------------
(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 March 15, 1997, excluding 6,000 shares of common stock of Twenty
Services Holding, Inc. held by the Registrant. Twenty Services Holding, Inc.
owns 724,069 shares or approximately 56% of the outstanding shares of common
stock.
- ------------------------------------
Page 12 of 33
<PAGE>
As of March 15, 1998, 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 1997 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 33
<PAGE>
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 3l, 1980, December 3l, 1981, December 3l, 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 33
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
Financial Statements
and
Financial Statement Schedule
For the Years Ended
December 31, 1997, 1996, and 1995
<PAGE>
TWENTY SERVICES. INC. AND SUBSIDIARY
Index to Financial Statements and Financial Statement Schedule
December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
Index to Financial Statements and Financial Statement Schedule..... F-1
Independent Auditors' Report....................................... F-2
Consolidated Balance Sheets........................................ F-3
Consolidated Statements of Operations.............................. F-4
Consolidated Statements of Cash Flows.............................. F-5 & F-6
Consolidated Statements of Changes in Stockholders' Equity......... F-7
Notes to Consolidated Financial Statements......................... F-8 - F-17
Consolidated Financial Statement Schedule:
Schedule I - Marketable Securities - Other Investments........... F-18
F-1
<PAGE>
[LETTERHEAD OF BORLAND BENEFIELD CRAWFORD AND WEBSTER, P.C. APPEARS HERE]
Independent Auditors' Report
----------------------------
The Shareholders and
the Board of Directors
Twenty Services, Inc.
We have audited the consolidated financial statements and the financial
statement schedule of Twenty Services, Inc. (the Company) and subsidiary at
December 31, 1997 and 1996, and for the years ended December 31, 1997, 1996, and
1995, 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 consolidated financial position of Twenty Services,
Inc. and subsidiary at December 31, 1997 and 1996 and the consolidated results
of their operations and their cash flows for the years ended December 31, 1997,
1996, and 1995, in conformity with generally accepted accounting principals. 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.
/s/ Borland, Benefield, Crawford & Webster, P.C.
March 21, 1998
F-2
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
------------------------------------
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
December 31,
1997 1996
---- ----
Assets
Cash and Temporary Investments........................ $ 85,272 $ 95,438
Marketable Securities................................. 2,122,716 1,597,040
Finance Receivables, Net.............................. 126,091 248,750
Notes Receivable - Related Parties, Net............... 25,875 263,148
Other Receivables..................................... 0 71,581
Investment - American Equity Investment
Life Holding Company................................ 986,189 713,700
Property Held for Sale................................ 0 13,205
Property and Equipment, Net........................... 22,235 38,310
Prepaid Income Taxes.................................. 0 4,500
Deferred Income Tax Benefit........................... 0 64,900
---------- ----------
Total Assets.......................................... $3,368,378 $3,110,572
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Accounts Payable and Accrued Expenses............... $ 18,671 $ 20,211
Deferred Income Taxes............................... 26,008 25,000
---------- ----------
Total Liabilities................................. 44,679 45,211
---------- ----------
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............................ 1,960,007 1,716,074
Retained Earnings..................................... 1,199,245 1,169,946
Net Unrealized Gain, on Available-for-Sale Securities,
Net of $15,328 and $25,000 Deferred Income Taxes
in 1997 and 1996, Respectively....................... 45,985 60,523
Less Investment-in Twenty Services Holding, Inc....... (60,000) (60,000)
Preferred Treasury Stock.............................. (356) 0
---------- ----------
Net Stockholders' Equity............................ 3,323,699 3,065,361
---------- ----------
Total Liabilities and Stockholders' Equity............ $3,368,378 $3,110,572
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
------------------------------------
Consolidated Statements of Operations
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Revenues:
Interest................................. $ 82,138 $ 82,903 $129,953
Lease.................................... 12,217 9,289 2,901
Dividends................................ 97,848 90,111 101,781
Other.................................... 4,946 0 51
-------- --------- --------
Total Revenues......................... 197,149 182,303 234,686
-------- --------- --------
Expenses:
General and Administrative............... 161,673 138,019 163,900
Depreciation............................. 10,667 7,268 2,818
Provision for Doubtful Notes Receivable.. 24,795 140,500 0
-------- --------- --------
Total Expenses......................... 197,135 285,787 166,718
-------- --------- --------
Gain (Loss) from Operations................ 14 (103,484) 67,968
-------- --------- --------
Other Income (Loss):
Gain (Loss) on Sale of Marketable
Securities ............................ (10,222) 21,142 8,575
Gain (Loss) on Sale of Property.......... (18,612) 0 2,970
Provision for Equity in Loss of
American Equity........................ (52,755) (76,300) 0
Provision for Recovery of Bad Debts...... 140,500 0 0
-------- --------- --------
Total Other Income (Loss).............. 58,911 (55,158) 11,545
-------- --------- --------
Income (Loss) Before Income Taxes.......... 58,925 (158,642) 79,513
Provision for Income Taxes................. 5,731 101,400 (9,000)
-------- --------- --------
Net Income (Loss).......................... $ 64,656 $ (57,242) $ 70,513
======== ========= ========
Income (Loss) Per Common Share............. $ .01 $ (.13) $ .03
======== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
------------------------------------
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1997 1996 1995
--------- --------- ----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Interest and Dividends Received................ $ 178,478 $ 156,069 $ 253,158
Rental Income.................................. 12,217 9,289 2,901
Lease Income................................... 4,946 0 51
Cash Paid to Suppliers and Employees........... (163,161) (136,713) (163,241)
Income Tax Refunds Received (Paid)............. 47,451 0 (110,000)
--------- --------- ---------
Net Cash Flows From Operating
Activities..................................... 79,931 28,645 (17,131)
--------- --------- ---------
Cash Flows From Investing Activities:
Principal Collected on Loans................... 178,959 159,408 215,782
Loans Made to Customers........................ (56,300) (22,566) (177,100)
Loans Made to Related Parties.................. (3,608) (398,648) (95,000)
Principal Collected on Loans - Related
Parties...................................... 381,381 0 0
Principal Collected on Held-to-Maturity
Securities................................... 300,000 0 1,075,675
Proceeds from Sale of Available-for-Sale
Securities................................... 574,518 191,578 463,115
Purchases of Available-for-Sale Securities..... (1,429,690) (254,503) (461,861)
Initial Investment in American Equity
Investment Life Holding Company.............. 0 0 (1,200,000)
Collection of Account Receivable from
American Equity Investment Life Holding
Company...................................... 0 410,000 0
Proceeds From Sale of Investment and
Other Property and Equipment................. 0 0 2,970
Purchases of Property and Equipment............ 0 (24,498) (20,985)
--------- --------- ---------
Net Cash Flows From Investing Activities....... (54,740) 60,771 (197,404)
--------- --------- ---------
Cash Flows From Financing Activities -
Preferred Stock Dividends Paid................. (35,357) (35,357) (35,357)
--------- --------- ---------
Net Increase (Decrease) in Cash.................. (10,166) 54,059 (249,892)
Cash and Temporary Investments -
Beginning of Year............................... 95,438 41,379 291,271
--------- --------- ---------
Cash and Temporary Investments -
End of Year.................................... $ 85,272 $ 95,438 $ 41,379
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
------------------------------------
Consolidated Statements of Cash Flows (Continued)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash
From Operating Activities:
Net Income (Loss)......................... $ 64,656 $(57,242) $ 70,513
Adjustments to Reconcile Net Income to
Net Cash From Operating Activities:
Depreciation and Amortization............ 10,667 7,268 2,818
Recovery of Bad Debt..................... (140,500) 0 0
Provision for Doubtful Notes Receivable.. 24,795 140,500 0
Provision for Equity in Loss of
American Equity......................... 52,755 76,300 0
Provision for Recovery of Prior Year
Income Taxes............................ 43,000 (43,000) 0
Provision for Deferred Income Tax Benefits.. (5,731) (64,900) 0
(Gain) Loss on Sale of
Marketable Securities..................... 10,222 (21,142) (8,575)
(Gain) Loss on Sale of Property............. 18,612 0 (2,970)
Amortization of Bond Premium and
Discount, Net.............................. 0 826 866
(Increase) Decrease in Accrued
Investment Interest........................ 5,051 (18,039) 20,558
Increase (Decrease) in Prepaid Income
Taxes...................................... 4,500 (500) (101,000)
Decrease in Other Receivables............... (14,135) 0 0
Increase (Decrease) in Accounts
Payable and Accrued Liabilities............ 6,039 8,574 659
------- -------- -------
Net Cash From Operating Activities.......... $ 79,931 $ 28,645 $ (17,131)
========= ======== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
TWENTY SERVICES, INC. AND SUBSIDIARY
------------------------------------
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1997, 1996, and 1995
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized Investment
Gain (Loss) in Twenty
Additional Retained on Available- Services Preferred
Preferred Common Paid-In Earnings for-Sale Holding, Treasury
Stock $.10 Stock $.10 Capital (Deficit) Securities Inc. Stock Total
---------- ---------- ---------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -
December 31, 1996............ $50,511 $128,307 $1,716,074 $1,227,389 $(29,068) $(60,000) $ 0 $3,033,213
Net Income.................... 70,513 70,513
Dividends on Preferred
Stock, ($.07 Per Share)...... (35,357) (35,357)
Change in Unrealized
Gain (Loss) on Available-
for-Sale Securities,
Net of Deferred Income
Taxes of $50,000............. 99,608 99,608
------- -------- ---------- ---------- -------- -------- ----- ----------
Balance -
December 31, 1995............ 50,511 128,307 1,716,074 1,262,545 70,540 (60,000) 0 3,167,977
Net Loss...................... (57,242) (57,242)
Dividend on Preferred
Stock ($.07 Per Share)....... (35,357) (35,357)
Change in Unrealized Gain
(Loss) on Available-for-
Sale Securities, Net of
Deferred Income Tax of
$25,000...................... (10,017) (10,017)
------- -------- ---------- ---------- -------- -------- ----- ----------
Balance,
December 31, 1996............ 50,511 128,307 1,716,074 1,169,946 60,523 (60,000) 0 3,065,361
Net Income.................... 64,656 64,656
Purchase of
Treasury Stock............... (356) (356)
Dividend on Preferred
Stock ($.07 per share)....... (35,357) (35,357)
Change in Unrealized Loss
on Available-for-Sale
Securities, Net of
Deferred Income Tax of
$15,328...................... (14,538) (14,538)
Share of Increase of
American Equity Capital,
Net of Deferred Income
Tax of $81,311............... 243,933 243,933
------- -------- ---------- ---------- -------- -------- ----- ----------
Balance -
December 31, 1997............ $50,511 $128,307 $1,960,007 $1,199,245 $ 45,985 $(60,000) $(356) $3,323,699
======= ======== ========== ========== ======== ======== ===== ==========
</TABLE>
F-7
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
------------------------------------
Notes to Consolidated Financial Statements
For the Years Ended December 31, 1997, 1996, and 1995
- -------------------------------------------------------------------------------
Note 1 - Accounting Policies
Principles of Consolidation - The accompanying consolidated financial
---------------------------
statements include the accounts of Twenty Services, Inc. (the Company)
and its wholly-owned subsidiary TSI Development Corporation. All
significant intercompany accounts and transactions have been eliminated
in consolidation.
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 which 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."
F-8
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
Note 1 - Accounting Policies (Continued)
Management determines the appropriate classification of its investment
in debt and equity securities at the time of purchase and reevaluates
such determination at each balance sheet date. The Company's securities
are classified in two categories and accounted for as follows:
. Securities Held-to-Maturity. Bonds, notes, certain preferred stocks
and other debt securities for which the Company has the positive
intent and ability to hold to maturity are reported at cost, adjusted
for amortization of premiums and accretion of discounts which are
recognized in interest income using methods which approximate level
yields over the period to maturity.
. Securities Available-for-Sale. Bonds, notes and certain preferred
stocks not classified as held-to-maturity and common stocks are
reported at fair value.
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 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 range from 3 to
10 years.
F-9
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
Note 1 - Accounting Policies (Continued)
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, 1997, 1996, and
1995 was 1,283,068.
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 consolidated 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.
<TABLE>
<CAPTION>
1997 1996
--------------------- -------------------
<S> <C> <C> <C> <C>
Carrying Fair Carrying Fair
Value Value Value Value
------ ----- ------ -----
Cash and Temporary
Investments.............$ 85,272 $ 85,272 $ 95,438 $ 95,438
Marketable Securities.....2,122,716 2,122,716 1,597,040 1,602,467
Finance Receivables, Net.. 126,091 126,091 248,750 248,750
Notes Receivable - Related
Parties................. 25,875 25,875 263,148 263,148
Other Receivables......... 0 0 28,581 28,581
</TABLE>
F-10
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
Note 3 - Fair Values of Financial Instruments (Continued)
The following methods and assumptions were used by the Company in
estimating the fair values of financial instruments:
. Short-term financial instruments are carried at their carrying
amounts reported in the balance sheet which are reasonable estimates
of fair values due to the relatively short period to maturity of the
instruments. This approach applies to cash and temporary investments,
finance receivables, notes receivable from related parties and other
receivables.
. Marketable securities are valued at quoted market values.
. 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.
Note 4 - Marketable Securities
The amortized cost and aggregate fair values of investments in
securities are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
December 31, 1997
---------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ---------- --------- ---------
Available-For-Sale Securities:
Equity Securities........... $1,859,685 $ 92,913 $28,417 $1,924,181
Debt Securities............. 188,639 0 3,183 185,456
---------- -------- ------- ----------
Total Available-for-
Sale Securities.......... $2,048,324 $ 92,913 $31,600 $2,109,637
========== ======== ======= ==========
Held-to-Maturity Securities -
Obligations of U.S. Government
Corporations and Agencies... $ 13,079 $ 0 $ 0 $ 13,079
=========== ========= ======= ==========
</TABLE>
F-11
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
Note 4 - Marketable Securities (Continued)
<TABLE>
<CAPTION>
December 31, 1996
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Available-for-Sale Securities:
Equity Securities............. $1,192,351 $86,277 $753 $1,277,875
========== ======= ==== ==========
Held-to-Maturity Securities:
Obligations of U.S. Government
Corporations and Agencies.... $ 319,165 $ 6,027 $ 0 $ 325,192
========== ======= ==== ==========
</TABLE>
The amortized cost and aggregate fair value of debt securities at December 31,
1997, 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.
Amortized Fair
Cost Value
--------- --------
Held-to-Maturity Securities:
Due After Ten Years............... $ 13,079 $ 13,079
======== ========
Proceeds from the sale of available-for-sale securities were $574,518 for the
year ended December 31, 1997. Gross gains of $800 were realized on these sales.
Proceeds from the sale of held-to-maturity securities were $300,000 for the year
ended December 31, 1997. Gross losses of $482 were realized. Held-to maturity
securities were sold prior to maturity because they were called.
Proceeds from the sale of available-for-sale securities were $191,578 for the
year ended December 31, 1996. Gross gains of $21,142 were realized on these
sales. There were no sales of held-to-maturity securities during the year ended
December 31, 1996.
F-12
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
Note 5 - Finance Receivables and Allowance for Credit Losses
Finance receivables consisted of the following at December 31:
1997 1996
-------- --------
Real Estate....................... $ 78,759 $124,401
Business and Other................ 62,332 153,150
-------- --------
Total Finance Receivables......... 141,091 277,551
Less Unearned Interest............ 0 1,508
Less Allowance for Credit Losses.. 15,000 27,293
-------- -------
Finance Receivables, Net.......... $126,091 $248,750
======== ========
At December 31, 1997, contractual maturities of finance receivables
were as follows:
1998 1999 2000 2001 2002 After Total
------- ------- ------- ------ ------ ------- --------
Real Estate...... $31,662 $ 3,556 $ 3,848 $4,164 $4,506 $31,023 $ 78,759
Business and
Other.......... 9,389 8,103 39,120 5,720 0 0 62,332
------- ------- ------- ------ ------ ------- --------
Totals........... $41,051 $11,659 $42,968 $9,884 $4,506 $31,023 $141,091
======= ======= ======= ====== ====== ======= ========
Changes in the allowance for credit losses on finance receivables for
the years ended December 31, 1997, 1996, and 1995 are as follows:
Balance - December 31, 1994..................... $ 27,137
Recoveries of Write-offs in Prior Years......... 156
--------
Balance - December 31, 1996 and 1995............ 27,293
Reduction in Allowance for Credit Losses........ (12,293)
--------
Balance - December 31, 1997..................... $ 15,000
========
F-13
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
Note 6 - Notes Receivable - Related Parties
The Chairman of the Board of the Company and the Former Executive Vice
President, individually or together, had equity interests in four other
entities which had transactions with the Company during the years. The
activity in this account was as follows for the years ended December
31:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Balance, January 1......................... $ 263,148 $ 95,000
Recovery of Bad Debts...................... 140,500 0
Advances................................... 3,608 398,648
Reductions................................. (381,381) (90,000)
Provision for Possible Uncollectible Note.. 0 (140,500)
--------- ---------
Balance December 31........................ $ 25,875 $ 263,148
========= =========
</TABLE>
Note 7 - Investment - American Equity Investment Life Holding Company
On December 27, 1995, the Company invested $790,000 in American Equity
Investment Life Holding Company (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. American acquired
some blocks of life insurance as of December 31, 1995. This investment
represented a 19.75% ownership of the common stock. The Company's
pro-rata share of American's net worth at December 31, 1995
approximated its investment.
During 1996, American had a 100 for 1 stock split. Subsequently, it
issued 780,000, shares of commom stock through a private placement for
net proceeds of $7,493,050. These transactions caused the Company's
percentage ownership to decrease from 19.75% to 6.70%.
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%.
F-14
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
Note 7 - Investment - American Equity Investment Life Holding Company
(Continued)
The following is a summary of the audited balance sheets and statements
of operations of American:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Total Assets................................ $230,086,455 $ 35,214,597
============ ============
Total Liabilities........................... $174,992,080 $ 25,077,495
Stockholders' Equity........................ 55,094,375 10,137,102
------------ ------------
Total Liabilities and Stockholders' Equity.. $230,086,455 $ 35,214,597
============ ============
Revenues.................................... $ 16,261,525 $ 15,419,869
Benefits and Expenses....................... 19,208,740 16,558,842
------------ ------------
Net Loss.................................... $ (2,947,215) $ (1,138,973)
============ ============
</TABLE>
For 1996, as required by the equity method of accounting, the Company's
investment of $790,000 has been reduced by $76,300 which is 6.7% of
American's loss.
For 1997, as required by the equity method of accounting, the
Company's investment of $713,700 decreased by $52,755 which is 1.79%
of American's loss. The investment was also increased by $325,244 for
the Company's share of American's increased in capital through sale
of stock. The net effect on the Company's investment in American is
an increase of $243,933, net of $28,556 deferred taxes.
Note 8 - Property and Equipment
Property and equipment consisted of the following at December 31:
1997 1996
-------- --------
Equipment, Furniture and Automobiles.... $ 40,004 $ 78,195
Less Accumulated Depreciation........... (17,769) (39,885)
-------- --------
Net Property and Equipment............. $ 22,235 $ 38,310
======== ========
F-15
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
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 which
are not recognized for tax purposes.
The provision for income taxes was as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Current:
Federal..............................$ 0 $ 3,000 $7,000
State................................ 0 3,500 2,000
Benefit of Net Operating
Loss Carryback..................... 0 (43,000) 0
Deferred Tax Benefit................. (5,731) (64,900) 0
---------- -------- -----
Total Provision for Income Taxes $ (5,731) $(101,400) $9,000
========== ========== ======
</TABLE>
The Company has available at December 31, 1997, unused operating loss
carryforwards that may be applied against future taxable income and
that expire as follows:
Amount of Unused Operating Expiration During Years Ended
Loss Carryforward December 31:
----------------- -----------
$ 4,919 2011
149,651 2012
---------
$ 154,570
=========
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
1994 dividend (approximately $35,400) was declared in February 1995
and paid in March 1995. The 1995 dividend (approximately $35,400) was
declared in February 1996 and paid in March 1996. The 1996 dividend
(approximately $35,400) was declared in February 1997 and paid in
March 1997.
F-16
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Notes to Consolidated Financial Statements (Continued)
For the Years Ended December 31, 1997, 1996, and 1995
- --------------------------------------------------------------------------------
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 which owns
approximately 54% of the Company's outstanding common stock. The
amount paid for the Holding Company's common stock $(60,000) has been
deducted from stockholders' equity in the accompanying balance sheet.
F-17
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
------------------------------------
Schedule I - Marketable Securities - Other Investments
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount at which each
portfolio of equity
Number of shares security issues and
Name of Issuer or units-principal Market value of each other security
and title of amount of bonds Cost of each issue at issue carried in the
each issue and notes each issue balance sheet date balance sheet
---------- ------------- --------- ----------------- -------------------
Equity Securities Available-for-Sale: Alcl Cap Tr
Pfd Secs 9% 9-30-27................................. 5,000 $ 125,000 $ 127,188 $ 127,188
Amern Hlth Pptys Inc Pfd Repstg 1/100th Ser B
Shs 8.6%............................................ 6,000 150,000 147,375 147,375
Amern Resdtl Invstmnt Tr............................ 5,000 75,000 59,375 59,375
Bankers Tr Cum Pfd Perpet $25 7.75% Ser S........... 6,000 150,000 162,750 162,750
Berkley WR Corp Dep Shs Repstg 1/6 Cum
Pfd Ser A 7.375%................................... 7,000 147,815 180,250 180,250
Citicorp Dep Shs Repstg 1/10 Pfd Ser 20 Non
Cum 8.3%............................................ 6,000 145,818 162,000 162,000
Citicorp Non Cum 8.5% Pfd........................... 6,000 150,000 162,375 162,375
Fedl Rlty Invt Tr Pfd 7.95%......................... 10,000 250,000 250,625 250,625
Health Care Property Investors Inc.................. 5,000 191,563 189,063 189,063
Imperial Cr Mtg Hldgs Inc........................... 6,000 109,000 107,250 107,250
Laser Mtg Mgmt Inc.................................. 10,000 150,000 145,000 145,000
Merrill Lynch & Co Inc 9% Dep Shs Rep Ser A
1/400 Cum Pfd....................................... 2,000 50,000 62,000 62,000
RJR Nabisco Hldg Dep Sh Each Repstg 1/1000
Sh of Ser B 9.25% Cum Pfd Stk....................... 2,000 51,223 50,875 50,875
Repsol Intl Cap Ltd Pfd Non Cum Gtd Ser A
7.45%............................................... 1,000 25,000 25,187 25,187
Taubman Centers Inc Pfd 8.30% ...................... 1,300 32,500 31,931 31,931
US Restaurant Pptys Ser A Cov 7.72 11/17/02 ........ 1,000 25,000 25,500 25,500
West Bancorporation Inc............................. 2,100 31,766 35,437 35,437
--------- --------- ---------
Total Equity Securities Available-for-Sale.......... 1,859,685 1,924,181 1,924,181
--------- --------- ---------
Debt Securities Available-for-Sale:
Revlon Worldwide Parent Corp Sr Sec D Dls Nt
Ser B Cpn 0.000% Due 03/15/01 Dtd 3/05/97
Call 3/15/00 @ 92.479............................ $ 70,000 49,948 48,300 48,300
AMF Bowling Worldwide Inv Sr Sub Disc Nt B/E
Steps to 12.25% 3/15/01 Cpn 0.000% Due 3/15/06
Dtd 3/21/96 Call 3/15/01 @ 106.125............... $176,000 138,691 137,156 137,156
-------- -------- --------
Total Debt Securities Available-for-Sale......... 188,639 185,456 185,456
-------- -------- --------
Debt Securities Held-to-Maturity:
GNMA Mortgage Backed Certificates, Due 2012...... 13,079 13,079 13,079
-------- -------- --------
Total............................................ $ 2,061,403 $ 2,122,716 $ 2,122,716
=========== =========== ===========
</TABLE>
F-18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or l5() 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: April 9, 1998
-------------
SIGNATURE CAPACITY DATE
- --------- -------- ----
/s/ David J. Noble
__________________ Chairman and Director
David J. Noble of Twenty Services, Inc April 9, 1998
(the Registrant) -------------
(Principal Executive
Officer)
/s/ A.J. Strickland, III
________________________ Vice-Chairman and
A.J. Strickland, III Director of the
Registrant April 9, 1998
-------------
/s/ Mary C. Daniel
_____________________
Mary C. Daniel Secretary/Treasurer April 9, 1998
-------------
Page 15 of 33
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 85,272 95,438
<SECURITIES> 2,122,716 1,597,040
<RECEIVABLES> 166,966 679,691
<ALLOWANCES> 15,000 167,793
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 40,004 78,195
<DEPRECIATION> 17,769 39,885
<TOTAL-ASSETS> 3,368,378 3,110,572
<CURRENT-LIABILITIES> 44,679 45,211
<BONDS> 0 0
0 0
50,511 50,511
<COMMON> 128,307 128,307
<OTHER-SE> 3,189,560 2,931,754
<TOTAL-LIABILITY-AND-EQUITY> 3,368,378 3,110,572
<SALES> 197,149 182,303
<TOTAL-REVENUES> 197,149 182,303
<CGS> 0 0
<TOTAL-COSTS> 172,340 145,287
<OTHER-EXPENSES> (58,911) 55,158
<LOSS-PROVISION> 24,795 140,500
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 58,925 (158,642)
<INCOME-TAX> (5,731) (101,400)
<INCOME-CONTINUING> 64,656 (57,242)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 64,656 (57,242)
<EPS-PRIMARY> .01 (.07)
<EPS-DILUTED> .01 (.07)
</TABLE>
