<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, 1998
TWENTY SERVICES, INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF Registrant AS SPECIFIED IN ITS CHARTER)
------------------------------------------------------
ALABAMA 63-0372577
------- ----------
(State or other jurisdiction (I.R.S. Employer
------------ Identification No.)
of incorporation or organization)
20 Cropwell Road
Pell City, Alabama 35128
Registrant's telephone number, including area code (205) 884-7932
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, 1998, 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,
1998, 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 $2,930,000.
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. 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>
(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 1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Real Estate $ 46,836 $ 78,759 $124,401 $193,429 $198,854
Business and
Miscellaneous 72,295 62,332 153,150 118,396 148,640
-------- -------- -------- -------- --------
Total: $119,131 $141,091 $277,551 $311,825 $347,494
Of the Registrant's aggregate loan portfolio as of December 31, 1998,
approximately 39% 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:
1998 1997 1996
-------- -------- --------
Interest Income $ 32,270 $ 82,138 $ 82,903
Net Interest Income $ 32,270 $ 82,138 $ 82,903
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>
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 and 1998 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 1998 and 1997, 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 15, 1999, The Registrant employed two (2) persons to fill two (2)
positions; one (l) of such positions was an executive position and one (l) of
such positions was a clerical/administrative position.
The Registrant considers its relationship with its employees to be good.
Certain Government Regulations. The Registrant is subject to federal and
state regulations relating to consumer credit financing and is subject to
periodic examinations by officials of the State of Alabama charged with the
responsibility of enforcing such regulations. The last examination of the
Registrant by officials of the State of Alabama occurred on June 12, 1998. 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>
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, 1998, no matter was submitted to
a vote of the security holders of the Registrant.
<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, 1998 there were 1,926
holders of record of the outstanding Common Stock of the Registrant, and 1,064
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, 1998, the Registrant reflected
earned surplus of $1,443,125 and reflected capital surplus of $2,030,733.
As of December 3l, 1998, 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, 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 1998 and 1997, 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>
SELECTED FINANCIAL DATA
The following tabulation sets forth certain financial information
respecting the Registrant
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $ 167,074 $ 197,149 $ 182,303 $ 234,686 $ 118,337
============== ============= ============== ============= ============
Net Income
(Loss) $ 279,237 $ 64,656 $ ( 57,242) $ 70,513 $1,777,270
============== ============= ============== ============= ============
Earnings
(Loss) Per
Common Share:
Net Income
(Loss) $ .19 $ .02 $ (.07) $ .03 $ 1.36
============== ============= ============== ============= =============
Total
Assets $3,617,935 $3,368,378 $3,110,572 $3,210,614 $3,134,191
============== ============= ============== ============= =============
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 Out-
Standing $ 2.28 $ 2.20 $ 1.98 $ 1.96 $ .64
============== ============= ============== ============= =============
</TABLE>
- -------------------
1 Reflects dividend respecting Preferred Stock declared on February 27, 1999.
2 Reflects dividend respecting Preferred Stock declared on February 10, 1998.
3 Reflects dividend respecting Preferred Stock declared on February 15, 1997.
4 Reflects dividend respecting Preferred Stock declared on February 4, 1996.
5 Reflects dividend respecting Preferred Stock declared on February 15, 1995.
<PAGE>
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Liquidity and Capital Resources. During 1998, 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 net income of
$279,237 in 1998 as compared to net income of $64,656 in 1997. The increase was
due primarily to the receipt of a contingent payment from the prior sale of
Statesman Group stock in the amount of $332,834. General and administrative
expenses decreased from $161,673 in 1997 to $149,211 in 1998 due primarily to a
decrease in professional services.
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>
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, 1999.
Material Occupations
Names and Positions and Positions During
with the Registrant AGE the last five (5) years
- ------------------- --- -----------------------
David J. Noble 66 Chairman of the Board of
Chairman of the Board Directors, Twenty Services, Inc.
Birmingham, Alabama
(finance business),
since 1980 And 1979
respectively;
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 55 Director and Vice-
Vice-Chairman of the Board Chairman 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>
PART III (CONTINUED)
NAME & POSITION Material Occupations & Positions
WITH THE REGISTRANT AGE During the Last Five (5) Years
- ------------------- --- --------------------------------
Dr. A.J. Strickland, III 55 Director, American
Equity Investment Life
Holding Company,
Des Moines, Iowa,
since 1995.
Jack C. Bridges 71 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>
11. EXECUTIVE COMPENSATION
Current Remuneration. During 1998 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,
directors' or
Name of individuals fees,
number of persons Capacities commission
in group which served and bonuses
- -------- ------------ -----------
All directors and Directors and $37,600
officers as a group Officers
(three (3) persons)
REMUNERATION IN THE FUTURE. As of December 31, 1998, 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>
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 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, 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 653,207 Indirect(l) 50.90%
Common Stock A.J. Strickland, III 48,204 Indirect(l) 3.76%
- --------------
(1) 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, 1998, 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>
As of March 15, 1999, 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 1998 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>
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>
TWENTY SERVICES, INC.
Financial Statements
and
Financial Statement Schedule
For the Years Ended
December 31, 1998, 1997, and 1996
<PAGE>
TWENTY SERVICES, INC.
Index to Financial Statements and Financial Statement Schedule
December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
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.................................. 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
- -------------------------------------------------------------------------------
F-1
<PAGE>
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, 1998 and 1997, and for the
years ended December 31, 1998, 1997, and 1996, 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, 1998 and 1997 and the results of its operations and its cash flows
for the years ended December 31, 1998, 1997, and 1996, 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
/s/Borland, Benefield, Crawford & Webster P.C.
March 3, 1999
F-2
<PAGE>
TWENTY SERVICES, INC.
---------------------
Balance Sheets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31,
1998 1997
----- -----
Assets
<S> <C> <C>
Cash and Temporary Investments................................. $ 85,653 $ 85,272
Accounts Receivable............................................ 1,488 0
Marketable Securities.......................................... 2,276,983 2,122,716
Finance Receivables, Net....................................... 104,131 126,091
Notes Receivable - Related Parties, Net........................ 0 25,875
Investment - American Equity Investment Life Holding
Company....................................................... 1,137,445 986,189
Property and Equipment, Net.................................... 12,235 22,235
----------- -----------
Total Assets................................................... $3,617,935 $3,368,378
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Accounts Payable and Accrued Expenses....................... $ 15,081 $ 18,671
Deferred Income Taxes....................................... 66,682 26,008
Income Taxes Payable........................................ 55,713 0
----------- -----------
Total Liabilities....................................... 137,476 44,679
----------- -----------
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.................................. 2,030,733 1,960,007
Retained Earnings........................................... 1,443,125 1,199,245
Net Unrealized Gain (Loss) on Available-for-Sale
Securities, Net of $50,378 and $15,328 Deferred
Income Taxes in 1998 and 1997, Respectively................ (105,148) 45,985
Less: Investment in Twenty Services Holding, Inc............ (60,000) (60,000)
Preferred Treasury Stock.................................... (547) (356)
Common Treasury Stock....................................... (6,522) 0
------------ -----------
Net Stockholders' Equity................................ 3,480,459 3,323,699
------------ -----------
Total Liabilities and Stockholders' Equity..................... $ 3,617,935 $3,368,378
============ ===========
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
TWENTY SERVICES, INC.
---------------------
Statements of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1998 1997 1996
---- ---- ----
Revenues:
<S> <C> <C> <C>
Interest..................................... $ 32,270 $ 82,138 $ 82,903
Lease........................................ 9,651 12,217 9,289
Dividends.................................... 124,391 97,848 90,111
Other........................................ 762 4,946 0
------------- ------------- ---------------
Total Revenues........................... 167,074 197,149 182,303
------------- ------------- ---------------
Expenses:
General and Administrative................... 149,211 161,673 138,019
Depreciation................................. 10,000 10,667 7,268
Provision for Doubtful Notes Receivable...... 0 24,795 140,500
------------- ------------- ---------------
Total Expenses........................... 159,211 197,135 285,787
------------- ------------- --------------
Gain (Loss) from Operations..................... 7,863 14 (103,484)
------------- ------------- ---------------
Other Income (Loss):
Gain (Loss) on Sale of Marketable
Securities.................................. 1,775 (10,222) 21,142
Gain (Loss) on Sale of Property.............. 3,000 (18,612) 0
Provision for Equity in Gain (Loss) of
American Equity............................. 4,200 (52,755) (76,300)
Provision for Recovery of Bad Debts.......... 0 140,500 0
Contingent Payment Rights From
Statesman Group Stock....................... 332,834 0 0
------------- ------------- ---------------
Total Other Income (Loss)................ 341,809 58,911 (55,158)
------------- ------------- ---------------
Income (Loss) Before Income Taxes............... 349,672 58,925 (158,642)
Provision for Income Taxes...................... (70,435) 5,731 101,400
------------- ------------- ---------------
Net Income (Loss)............................... $ 279,237 $ 64,656 $ (57,242)
============= ============= ===============
Income (Loss) Per Common Share.................. $ .19 $ .02 $ (.07)
============= ============= ===============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
TWENTY SERVICES, INC.
---------------------
Statements of Comprehensive Income
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net Income (Loss)............................... $ 279,237 $ 64,656 $ (57,242)
Other Comprehensive Income, Net of Tax -
Unrealized Gain (Loss) on Securities......... (105,148) 45,985 60,523
------------ ----------- -----------
Comprehensive Income............................ $ 174,089 $ 110,641 $ 3,281
============ =========== ===========
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
TWENTY SERVICES, INC.
---------------------
Statements of Cash Flows
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1998 1997 1996
---- ---- ----
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Interest and Dividends Received........................... $ 163,504 $ 178,478 $ 156,069
Lease Income.............................................. 9,651 12,217 9,289
Other Income.............................................. 762 4,946 0
Cash Paid to Suppliers and Employees...................... (154,288) (163,161) (136,713)
Income Tax Refunds Received (Paid)........................ 0 47,451 0
-------------- -------------- ---------------
Net Cash Flows From Operating Activities..................... 19,629 79,931 28,645
-------------- -------------- ---------------
Cash Flows From Investing Activities:
Principal Collected on Loans.............................. 13,060 178,959 159,408
Loans Made to Customers................................... (16,100) (56,300) (22,566)
Loans Made to Related Parties............................. 0 (3,608) (398,648)
Principal Collected on Loans - Related Parties............ 25,875 381,381 0
Principal Collected on Held-to-Maturity Securities 6,348 300,000 0
Proceeds from Sale of Available-for-Sale Securities 905,631 574,518 191,578
Purchases of Available-for-Sale Securities................ (1,272,826) (1,429,690) (254,503)
Initial Investment in American Equity Collection
of Account Receivable from American Equity
Investment Life Holding Company.......................... 0 0 410,000
Purchases of Property and Equipment....................... 0 0 (24,498)
Contingent Payment Right From Statesman
Group Stock.............................................. 332,834 0 0
Proceeds From the Sale of Repossessed Property............ 28,000 0 0
-------------- -------------- ---------------
Net Cash Flows From Investing Activities..................... 22,822 (54,740) 60,771
-------------- -------------- ---------------
Cash Flows From Financing Activities:
Preferred Stock Dividends Paid............................ (35,357) (35,357) (35,357)
Purchase of Treasury Stock................................ (6,713) 0 0
-------------- -------------- ---------------
Net Cash Flows From Financial Activities..................... (42,070) (35,357) (35,357)
-------------- -------------- ---------------
Net Increase (Decrease) in Cash.............................. 381 (10,166) 54,059
Cash and Temporary Investments - Beginning of Year........... 85,272 95,438 41,379
-------------- -------------- ---------------
Cash and Temporary Investments - End of Year................. $ 85,653 $ 85,272 $ 95,438
============== ============== ===============
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
TWENTY SERVICES, INC. AND SUBSIDIARY
- ------------------------------------
Statements of Cash Flows (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended
December 31,
1998 1997 1996
---- ---- ----
Reconciliation of Net Income to Net Cash From
Operating Activities:
<S> <C> <C> <C>
Net Income (Loss)......................................... $ 279,237 $ 64,656 $ (57,242)
Adjustments to Reconcile Net Income to Net Cash
From Operating Activities:
Contingent Payment From Statesman Group
Stock................................................ (332,834) 0 0
Purchased Interest.................................... 6,843 0 0
Depreciation and Amortization......................... 10,000 10,667 7,268
Recovery of Bad Debt.................................. 0 (140,500) 0
Provision for Doubtful Notes Receivable............... 0 24,795 140,500
Provision for Equity in (Gain) Loss of American
Equity............................................... (4,200) 52,755 76,300
Provision for Recovery of Prior Year Income
Taxes................................................ 0 43,000 (43,000)
Provision for Deferred Income Tax Benefits............ 14,723 (5,731) (64,900)
(Gain) Loss on Sale of Marketable Securities.......... (1,775) 10,222 (21,142)
(Gain) Loss on Sale of Property....................... (3,000) 18,612 0
Amortization of Bond Premium and Discount,
Net.................................................. 0 0 826
(Increase) Decrease in Accrued Investment
Interest............................................ 0 5,051 (18,039)
(Increase) Decrease in Prepaid Income Taxes........... 0 4,500 (500)
(Increase) Decrease in Other Receivables.............. (1,488) (14,135) 0
Increase (Decrease) in Accounts Payable and
Accrued Liabilities.................................. (3,590) 6,039 8,574
Increase (Decrease) in Income Taxes Payable 55,713 0 0
----------- ---------- -----------
Net Cash From Operating Activities........................... $ 19,629 $ 79,931 $ 28,645
=========== ========== ===========
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
TWENTY SERVICES, INC.
---------------------
Statements of Changes in Stockholders' Equity
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment
in Twenty
Additional Retained Services Preferred Common
Preferred Common Paid-In Earnings Comprehensive Holding, Treasury Treasury
Stock $.10 Stock $.10 Capital (Deficit) Income Inc. Stock Stock Total
---------- ---------- ------- --------- ------------ ---------- --------- -------- -----
Balance - December 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995.................... $ 50,511 $ 128,307 $ 1,716,074 $1,262,545 $ 70,540 $ (60,000) $ 0 $ 0 $3,167,977
Net Loss................. (57,242) (57,242)
Dividends on Preferred
Stock, ($.07 Per Share). (35,357) (35,357)
Change in Unrealized
Gain (Loss) on
Available-for-Sale
Securities, Net of
Deferred Income
Taxes of $25,000........ (10,017) (10,017)
-------- ---------- ---------- ------------ ---------- --------- ------- ------- ------------
Balance - December 31,
1996.................... 50,511 128,307 1,716,074 1,169,946 60,523 (60,000) 0 0 3,065,361
Net Income............... 64,656 64,656
Purchase of Treasury
Stock................... (356) (356)
Dividend on Preferred
Stock ($.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 $81,311.......... 243,933 243,933
-------- ---------- ---------- ------------ ----------- --------- ------- ------- -----------
Balance, December 31,
1997.................... 50,511 128,307 1,960,007 1,199,245 45,985 (60,000) (356) 0 3,323,699
Net Income............... 279,237 279,237
Purchase of Treasury
Stock................... (191) (6,522) (6,713)
Dividend on Preferred
Stock ($.07 Per Share) (35,357) (35,357)
Change in Unrealized
Loss on Available-for-
Sale Securities, Net
of Deferred Income
Tax of $50,378.......... (151,133) (151,133)
Share of Increase of
American Equity
Capital, Net of Deferred
Income Tax of $76,330... 70,726 70,726
--------- --------- ----------- ----------- ----------- --------- ------- ------- -----------
Balance at December 31,
1998.................... $ 50,511 $ 128,307 $ 2,030,733 $1,443,125 $ (105,148) $(60,000) $ (547) $(6,522) $ 3,480,459
======== ========= =========== =========== =========== ========= ======= ======= ===========
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
TWENTY SERVICES, INC.
---------------------
Notes to Financial Statements
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
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 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."
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
- -------------------------------------------------------------------------------
F-9
<PAGE>
as held-to-maturity and common stocks are report at fair value.
TWENTY SERVICES, INC.
- ---------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
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, 1998,
1997, and 1996 was 1,283,068.
- -------------------------------------------------------------------------------
F-10
<PAGE>
TWENTY SERVICES, INC.
- ---------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
1998 1997
------------------------- ------------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cash and Temporary
Investments..................... $ 85,653 $ 85,653 $ 85,272 $ 85,272
Marketable Securities............ 2,276,983 2,276,983 2,122,716 2,122,716
Finance Receivables, Net......... 104,131 104,131 126,091 126,091
Notes Receivable - Related
Parties......................... 0 0 25,875 25,875
</TABLE>
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
- -------------------------------------------------------------------------------
F-11
<PAGE>
TWENTY SERVICES, INC.
- ---------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
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>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
December 31, 1998:
- -----------------
Available-for-Sale Securities:
<S> <C> <C> <C> <C>
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
========== ========= ========= ==========
December 31, 1997:
- -----------------
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>
The amortized cost and aggregate fair value of debt securities at
December 31, 1998, by contractual maturity, are as follows. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
prepayment penalties.
- -------------------------------------------------------------------------------
F-12
<PAGE>
TWENTY SERVICES, INC.
- ---------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
Note 4 - Marketable Securities (Continued)
<TABLE>
<CAPTION>
Available-For-Sale Held-to-Maturity
----------------------- ------------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- --------- ----------
Corporate Due in:
<S> <C> <C> <C> <C>
1-5 Years............ $ 228,777 $ 217,338 $ 0 $ 0
6-10 Years........... 360,518 318,250 0 0
After 10 Years....... 255,084 246,500 0 0
---------- ---------- --------- ----------
844,379 782,088 0 0
U.S. Government
Corporations and
Agencies Due in -
After 10 Years....... 0 0 6,731 6,731
---------- ---------- --------- ----------
Total................... $ 844,379 $ 782,088 $ 6,731 $ 6,731
========== ========== ========= ==========
</TABLE>
Proceeds from the sale of available-for-sale securities were $905,631
for 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.
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 $1,098 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-13
<PAGE>
TWENTY SERVICES, INC.
- ---------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
Note 5 - Finance Receivables and Allowance for Credit Losses
Finance receivables consisted of the following at December 31:
1998 1997
---- ----
Real Estate.......................... $ 46,836 $ 78,759
Business and Other................... 72,295 62,332
------------- ------------
Total Finance Receivables............ 119,131 141,091
Less Allowance for Credit Losses..... 15,000 15,000
------------- ------------
Finance Receivables, Net............. $ 104,131 $ 126,091
============= ============
At December 31, 1998, contractual maturities of finance receivables
were as follows:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 After Total
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate......... $ 3,556 $ 3,848 $ 4,164 $ 4,506 $ 2,270 $ 28,492 $ 46,836
Business and
Other.............. 18,836 42,077 8,102 1,502 1,635 143 72,295
-------- -------- -------- -------- -------- -------- --------
Totals.............. $ 22,392 $ 45,925 $ 12,266 $ 6,008 $ 3,905 $ 28,635 $119,131
======== ======== ======== ======== ======== ======== ========
</TABLE>
Changes in the allowance for credit losses on finance receivables for
the years ended December 31, 1998, 1997, and 1996 are as follows:
Balance - December 31, 1996................. $ 27,293
Reduction in Allowance for Credit Losses.... (12,293)
Balance - December 31, 1998 and 1997........ $ 15,000
=========
- -------------------------------------------------------------------------------
F-14
<PAGE>
TWENTY SERVICES, INC.
- ---------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
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
which had transactions with the Company during the years. The
activity in this account was as follows for the years ended December
31:
1998 1997
---------- -------------
Balance, January 1.......... $ 25,875 $ 263,148
Recovery of Bad Debts....... 0 140,500
Advances.................... 0 3,608
Reductions.................. (25,875) (381,381)
---------- -------------
Balance December 31......... $ 0 $ 25,875
========== =============
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.
During 1996, American had a 100 for 1 stock split. Subsequently, it
issued 780,000 shares of common stock through a private placement for
net proceeds of $7,493,050. These transactions caused the Company's
percentage of ownership to decrease from 19.75% to 6.7%.
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%.
- -------------------------------------------------------------------------------
F-15
<PAGE>
TWENTY SERVICES, INC.
- ---------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
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>
1998 1997
---- ----
<S> <C> <C>
Total Assets.................................. $683,011,836 $230,086,455
============ ============
Total Liabilities............................. $616,881,315 $174,992,080
Stockholders' Equity.......................... 66,130,521 55,094,375
------------ ------------
Total Liabilities and Stockholders' Equity.... $683,011,836 $230,086,455
============ ============
Revenues...................................... $ 37,953,909 $ 16,261,525
Benefits and Expenses......................... 37,709,722 19,208,740
------------ ------------
Net (Gain) Loss............................... $ 244,187 $ (2,947,215)
============ =============
</TABLE>
For 1997, as required by the equity method of accounting, the
Company's investment of $713,700 was 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 increase 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.
For 1998, as required by the equity method of accounting, the
Company's investment of $986,189 was increased by $4,200 which 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 $76,300 deferred taxes.
- -------------------------------------------------------------------------------
F-16
<PAGE>
TWENTY SERVICES, INC.
- ---------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
Note 8 - Property and Equipment
Property and equipment consisted of the following at December 31:
1998 1997
--------- ---------
Equipment, Furniture and Automobiles.. $ 40,004 $ 40,004
Less: Accumulated Depreciation........ 27,769 17,769
--------- ---------
Net Property and Equipment............ $ 12,235 $ 22,235
========= =========
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>
1998 1997 1996
---- ---- ----
Current:
<S> <C> <C> <C>
Federal................................... $ 55,713 $ 0 $ 3,000
State..................................... 0 0 3,500
Benefit of Net Operating Loss Carryback... 0 0 (43,000)
Deferred Tax Benefit...................... 14,722 (5,731) (64,900)
-------- --------- ----------
Total Provision for Income Taxes.......... $ 70,435 (5,731) $(101,400)
======== ========= ==========
</TABLE>
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
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. The 1997 dividend
(approximately $35,400) was declared in February 1998 and paid in
March 1998.
- -------------------------------------------------------------------------------
F-17
<PAGE>
TWENTY SERVICES, INC.
- --------------------
Notes to Financial Statements (Continued)
For the Years Ended December 31, 1998, 1997, and 1996
- -------------------------------------------------------------------------------
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 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 $2,270,252 of investment at Everen Securities at December 31,
1998.
Note 13 - Treasury Stock
The Company purchased 5,344 shares of its common stock for an
aggregate purchase price of $6,522, or $1.22 per share and 333 shares
of its preferred stock for an aggregate purchase price of $191, or
$.57 per share, during the year ended December 31, 1998. The Company
purchased $1,422 shares of its preferred stock for an aggregate
purchase price of $356, or $.25 per share, during the year ended
December 31, 1997. The shares are held as common treasury stock and
preferred treasury stock.
- -------------------------------------------------------------------------------
F-18
<PAGE>
TWENTY SERVICES, INC.
---------------------
Schedule I - Marketable Securities - Other Investments
For the Year Ended December 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
--------------------------- ------------------ ----------- ------------------ ----------------------------
<S> <C> <C> <C> <C>
Equity Securities Available-for-Sale: Alcl Cap Tr
Pfd Secs 9% 9-30-27................................ 5,000 $ 125,000 $ 124,375 $ 124,375
Amern Hlth Pptys Inc Pfd Repstg 1/100th Ser B
Shs 8.6%........................................... 6,000 150,000 143,625 143,625
Amern Resdtl Invstmnt Tr........................... 5,000 75,000 26,875 26,875
Fedl Rlty Invt Tr Pfd 7.95%........................ 10,000 250,000 238,750 238,750
Health Care Property Investors Inc................. 5,000 191,563 153,750 153,750
Health Care Reit Inc............................... 6,250 149,609 161,718 161,718
HECO Capital Trust II Quids 7.3% Due 12/15/28...... 6,000 150,000 150,000 150,000
Merrill Lynch & Co Inc 9% Dep Shs Rep Ser A
1/400 Cum Pfd...................................... 2,000 50,000 62,000 62,000
New Plan Excel Rlty Pfd Tr Inc Ser D 7.8%.......... 3,000 150,005 147,000 147,000
Realty Income Corp 8.25% Sr Unsecd Nts Due
2008 Monthly....................................... 6,000 150,005 149,625 149,625
Repsol Intl Cap Ltd Pfde Non Cum Gtd Ser A
7.45%.............................................. 1,000 25,000 25,625 25,625
Taubman Centers Inc Pfd 8.30%...................... 1,300 32,500 28,600 28,600
US Home & Garden Tri Pfd 9.4% 4/30/28.............. 425 10,625 8,659 8,659
US Restaurant Pptys Pfd Ser A Conv................. 1,000 25,000 22,937 22,937
West Bancorporation Inc............................ 2,100 31,766 44,625 44,625
------- ------------ ------------ ------------
Total Equity Securities Available-for-Sale......... 1,566,073 1,488,164 1,488,164
------------ ------------ ------------
Debt Securities Available-for-Sale:
1st Trust Unit 245 Reit Growth & Income Tr 98
Quarterly Reinvestment............................. 2,615 26,046 23,226 23,226
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 41,300 41,300
Cendant Corp NT Cpn 7.750% Due 12/1/03
Dtd 11/30/98 Fc 6/1/99............................. 150,000 152,783 152,812 152,812
Northwest Airlines Inc Cpn 7.625% due 3/15/05
Dtd 3/4/98 Fc 9/15/98.............................. 100,000 95,005 92,000 92,000
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................. 175,000 138,691 99,750 99,750
Comcast Cellular Hldg Inc Sr Nts Ser B Int
Pays 11/1 and 5/1 Cpn 9.500% Due 5/1/07
Dtd 5/8/97 Fc 11/1/97 Call 5/1/02 @ 104.750........ 25,000 26,817 26,500 26,500
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-19
<PAGE>
TWENTY SERVICES, INC.
- ---------------------
Schedule I - Marketable Securities - Other Investments
For the Year Ended December 31, 1998 (Continued)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
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
---------- --------- ---------- ------------------ -------------
<S> <C> <C> <C> <C>
Aes Corp Sr Notes Death Put Cpn 8.000%
Due 12/31/08 Dtd 12/8/98 FC 3/31/99
Call 12/31/00 @ 100.000............................ 100,000 $ 100,005 $ 100,000 $ 100,000
Aetna Svcs Inc Gtd Deb Cpn 7.625% Due
8/15/26 Dtd 8/19/96 Fc 2/15/97..................... 150,000 156,152 151,125 151,125
Land O Lakes Cap Trst 1 144A B/E Cpn 7.450%
Due 3/15/28 Dtd 3/25/98 FC 9/15/98................. 100,000 98,932 95,375 95,375
---------- ------------ ------------
Total Debt Securities Available-for-Sale........... 844,379 782,088 782,088
---------- ------------ ------------
Debt Securities Held-to-Maturity -
GNMA Mortgage Backed Certificates, Due 2012........ 6,731 6,731 6,731
---------- ------------ ------------
Total.............................................. $2,417,183 $ 2,276,983 $ 2,276,983
========== ============ ============
</TABLE>
- -------------------------------------------------------------------------------
F-20
<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: 3/25/99
-----------
SIGNATURE CAPACITY DATE
/s/David J. Noble Chairman and Director
- ----------------------- of Twenty Services, Inc. 3/25/99
David J. Noble (The Registrant) -------
Principal Executive
Officer)
/s/A.J. Strickland, III Vice-Chairman and 3/25/99
- ----------------------- Director of the -------
A.J. Strickland, III Registrant
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 85,653 85,272
<SECURITIES> 2,276,983 2,122,716
<RECEIVABLES> 120,619 166,966
<ALLOWANCES> (15,000) (15,000)
<INVENTORY> 1,137,445 986,189
<CURRENT-ASSETS> 0 0
<PP&E> 40,004 40,004
<DEPRECIATION> (27,769) (17,769)
<TOTAL-ASSETS> 3,617,935 3,368,378
<CURRENT-LIABILITIES> 137,476 44,679
<BONDS> 0 0
0 0
50,511 50,511
<COMMON> 128,307 128,307
<OTHER-SE> 3,439,177 3,189,560
<TOTAL-LIABILITY-AND-EQUITY> 3,617,935 3,368,378
<SALES> 167,074 197,149
<TOTAL-REVENUES> 167,074 197,149
<CGS> 0 0
<TOTAL-COSTS> 159,211 172,340
<OTHER-EXPENSES> 341,809 (58,911)
<LOSS-PROVISION> 0 24,795
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 349,672 58,925
<INCOME-TAX> (70,435) (5,731)
<INCOME-CONTINUING> 279,237 64,656
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 279,237 64,656
<EPS-PRIMARY> .19 .02
<EPS-DILUTED> .19 .02
</TABLE>
