<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
COMMISSION FILE NUMBER: 1-4219
ZAPATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
STATE OF DELAWARE C-74-1339132
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1717 ST. JAMES PLACE, SUITE 550
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 940-6100
_________________
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [_]
NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, PAR VALUE
$0.25 PER SHARE, ON MAY 13, 1996: 29,548,407.
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1. FINANCIAL STATEMENTS
<S> <C>
Zapata Corporation
Condensed Consolidated Balance Sheet............ 3
Condensed Consolidated Income Statement......... 4
Condensed Consolidated Statement of Cash Flows.. 5
Notes to Financial Statements................... 6
</TABLE>
2
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ZAPATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
ASSETS 1996 1995
---------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 88,386 $ 2,488
Receivables 5,360 17,550
Inventories:
Fish products 20,629 22,947
Materials, parts and supplies 3,594 3,358
Prepaid expenses and other current assets 3,457 2,400
Net assets of discontinued operations 22,724 101,894
-------- --------
Total current assets 144,150 150,637
-------- --------
Investments and other assets:
Notes receivable 8,864 8,864
Investments in unconsolidated affiliates 16,833 18,235
Deferred income taxes 2,973 6,247
Other assets 16,220 16,170
-------- --------
44,890 49,516
-------- --------
Property and Equipment 76,998 74,275
Accumulated depreciation (36,579) (35,037)
-------- --------
40,419 39,238
-------- --------
Total assets $229,459 $239,391
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 16,098 $ 16,148
Accounts payable and accrued liabilities 20,825 20,953
-------- --------
Total current liabilities 36,923 37,101
-------- --------
Long-term debt 18,406 37,468
-------- --------
Other liabilities 18,552 19,532
-------- --------
Stockholders' equity:
Preference stock 3 3
Common stock 7,387 7,387
Capital in excess of par value 131,962 131,962
Reinvested earnings from October 1, 1990 16,226 5,938
-------- --------
155,578 145,290
-------- --------
Total liabilities and stockholders' equity $229,459 $239,391
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ZAPATA CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
---------------------------------------
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
--------------------- --------------------
1996 1995 1996 1995
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $14,800 $22,237 $38,742 $44,594
------- ------- ------- -------
Expenses:
Operating 10,732 18,748 29,967 37,341
Depreciation, depletion and amortization 778 1,639 1,553 3,318
Selling, general and administration 1,865 2,052 3,430 3,826
------- ------- ------- -------
13,375 22,439 34,950 44,485
------- ------- ------- -------
Operating income (loss) 1,425 (202) 3,792 109
------- ------- ------- -------
Other income (expense):
Interest income 1,323 212 1,602 470
Interest expense (888) (630) (1,898) (1,270)
Gain on sale of Tidewater common stock --- 4,811 --- 4,811
Equity in loss of unconsolidated affiliate (1,438) --- (1,438) ---
Other (144) 41 (18) 568
------- ------- ------- -------
(1,147) 4,434 (1,752) 4,579
------- ------- ------- -------
Income from continuing operations
before income taxes 278 4,232 2,040 4,688
------- ------- ------- -------
Provision for income taxes
State 87 56 174 89
Federal 68 1,462 654 1,610
------- ------- ------- -------
155 1,518 828 1,699
------- ------- ------- -------
Income from continuing operations 123 2,714 1,212 2,989
Discontinued operations:
Income (loss) from discontinued operations,
net of income taxes --- 217 (42) 690
Gain (loss) on disposition of Energy Industries,
net of income taxes (610) --- 12,618 ---
Loss on sale of Cimarron, net of income taxes (3,500) --- (3,500) ---
------- ------- ------- -------
Net income (loss) (3,987) 2,931 10,288 3,679
------- ------- ------- -------
Preferred stock dividends --- --- --- 51
------- ------- ------- -------
Net income (loss) to common stockholders $(3,987) $ 2,931 $10,288 $ 3,628
======= ======= ======= =======
Per share data:
Income from continuing operations $ --- $ 0.08 $ 0.04 $ 0.09
Income (loss) from discontinued operations (0.13) 0.01 0.31 0.02
------- ------- ------- -------
Net income (loss) per share $ (0.13) $ 0.09 $ 0.35 $ 0.11
======= ======= ======= =======
Average common shares and
equivalents outstanding 29,558 31,779 29,562 31,768
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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ZAPATA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Cash flow provided (used) by operating activities:
Continuing operations:
Net income from continuing operations $ 1,212 $ 2,989
-------- --------
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 1,553 3,318
Gain on sale of assets --- (5,268)
Equity in loss of unconsolidated affiliate 1,438 ---
Changes in other assets and liabilities 2,926 (247)
-------- --------
Total adjustments 5,917 (2,197)
-------- --------
Cash flow provided by continuing operations 7,129 792
-------- --------
Discontinued operations:
Income from discontinued operations 9,076 690
Net gain on sales of assets, net of taxes (9,118) ---
Change in net assets of discontinued operations (2,770) (2,577)
-------- --------
Cash flow used by discontinued operations (2,812) (1,887)
-------- --------
Net cash provided (used) by operating activities 4,317 (1,095)
-------- --------
Cash flow provided (used) by investing activities:
Proceeds from dispositions 103,421 14,481
Proceeds from notes receivable --- 920
Restricted cash investments --- (12,704)
Capital Expenditures (2,728) (3,715)
-------- --------
Net cash provided (used) by investing activities 100,693 (1,018)
-------- --------
Cash flow used by financing activities:
Repayments of long-term obligations, net (19,112) (582)
Preferred stock redemption and common stock buybacks --- (2,758)
Dividend payments --- (1,153)
-------- --------
Net cash used by financing activities (19,112) (4,493)
-------- --------
Net increase (decrease) in cash and cash equivalents 85,898 (6,606)
Cash and cash equivalents at beginning of period 2,488 9,717
-------- --------
Cash and cash equivalents at end of period $ 88,386 $ 3,111
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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ZAPATA CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by Zapata Corporation ("Zapata" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The financial statements reflect all adjustments that are, in the opinion of
management, necessary to fairly present such information. All such adjustments
are of a normal recurring nature. Although Zapata believes that the disclosures
are adequate to make the information presented not misleading, certain
information and footnote disclosures, including a description of significant
accounting policies, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been condensed or
omitted pursuant to such rules and regulations. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto included in Zapata's latest annual report on Form 10-K.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). The Company does not intend to adopt the
recognition provisions of the statement but will adopt the disclosure
requirements in fiscal year 1997.
NOTE 2. DISCONTINUED NATURAL GAS COMPRESSION OPERATIONS
In September 1995, Zapata entered into an agreement (the "Purchase
Agreement") to sell the assets of its natural gas compression operations to
Weatherford Enterra, Inc. and its wholly owned subsidiary, Enterra Compression
Company (collectively, "Weatherford Enterra"). Pursuant to the Purchase
Agreement, Weatherford Enterra purchased from the Company all of the assets of
its natural gas compression operations, and assumed certain liabilities relating
to those operations, for approximately $131 million in cash including a post-
closing adjustment of $300,000 which was finalized in April 1996. A portion of
the proceeds from the sale was used to repay certain indebtedness of
approximately $26 million and expenses of approximately $1.4 million. The sale
closed on December 15, 1995, after receiving stockholder approval, and resulted
in a pre-tax gain of approximately $20.8 million or an after-tax gain of
approximately $12.6 million.
The Company's consolidated financial statements reflect the natural gas
compression operations as a discontinued operation. Summarized results of the
discontinued natural gas compression operations are shown below (amounts in
millions):
6
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
--------------------------
1996 1995
------ -----
<S> <C> <C>
FINANCIAL RESULTS
Revenues.............. $13.1 $33.8
Expenses *............ 13.0 31.7
----- -----
Income before taxes... .1 2.1
Income tax provision.. .1 .9
----- -----
Net income (loss)..... $ -- $ 1.2
===== =====
</TABLE>
_____________
* Expenses include allocations of interest expense on general corporate debt
of $260,000 and $878,000 in the six-month periods ending March 31, 1996 and
1995, respectively. Interest expense was allocated to discontinued
operations based on a ratio of net assets to be sold to the sum of total
net assets of the Company plus general corporate debt.
NOTE 3. DISCONTINUED NATURAL GAS GATHERING, PROCESSING AND MARKETING OPERATIONS
During fiscal 1995, the Company determined to dispose of its natural gas
gathering, processing and marketing operations, which were conducted through a
wholly owned subsidiary of the Company, Cimarron Gas Holding Company (together
with its subsidiaries, "Cimarron"). On April 9, 1996, Zapata sold substantially
all of the assets of Cimarron in two separate transactions with Conoco Inc.
("Conoco") and Enogex Products Corporation ("Enogex"). Conoco purchased certain
of the Texas-based assets and Enogex purchased certain of the Oklahoma-based
assets of Cimarron. The aggregate cash consideration paid by Conoco and Enogex
totaled approximately $23 million, subject to final post-closing adjustments.
Subsequently, the Company sold Cimarron's remaining assets for an additional
$900,000. A portion of the proceeds from the sales was used to repay $1.0
million of Cimarron's debt and approximately $1.8 million for commissions, fees
and other expenses associated with the sales. The sales resulted in an after-
tax loss of approximately $3 million. Additionally, Cimarron recognized an
after-tax loss of approximately $500,000 from operations for fiscal 1996 that
had previously been deferred against a reserve for discontinued operations.
7
<PAGE>
The consolidated financial statements reflect the net assets and operating
results of Cimarron's operations as a discontinued operation. The summarized
financial position of Cimarron's discontinued operations is shown below (amount
in millions):
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
--------- -------------
<S> <C> <C>
FINANCIAL POSITION
Current assets............... $ 7.8 $ 9.6
Other assets................. 6.5 6.7
Property and equipment, net.. 16.3 16.9
----- -----
30.6 33.2
----- -----
Debt......................... 1.2 2.2
Other liabilities............ 6.7 9.6
----- -----
7.9 11.8
----- -----
Net book value............... $22.7 $21.4
===== =====
</TABLE>
NOTE 4. DIVISIONAL REVENUES AND OPERATING RESULTS
The Company's divisional revenues and operating results for the three- and
six-month periods ended March 31, 1996 and 1995 are as follows:
ZAPATA CORPORATION
DIVISIONAL REVENUES AND OPERATING RESULTS
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
1996 1995 1996 1995
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Revenues:
Marine protein $14,383 $19,993 $37,849 $39,574
Oil and gas 417 2,244 893 5,020
------- ------- ------- -------
$14,800 $22,237 $38,742 $44,594
======= ======= ======= =======
Operating income (loss):
Marine protein $ 1,980 $ 1,095 $ 5,043 $ 1,829
Oil and gas 224 (192) 153 218
Corporate (779) (1,105) (1,404) (1,938)
------- ------- ------- -------
$ 1,425 $ (202) $ 3,792 $ 109
======= ======= ======= =======
</TABLE>
8
<PAGE>
NOTE 5. UNCONSOLIDATED AFFILIATES
The Company's financial statements for the six-month period ending March
31, 1996 include Zapata's 31% equity interest in Envirodyne Industries, Inc.
("Envirodyne") for the three-month period ending December 31, 1995. Zapata's
investment in Envirodyne is accounted for under the equity method of accounting.
Since Envirodyne's financial statements are not available to the Company on a
timely basis, Zapata reports its equity in Envirodyne's results of operations on
a three-month delayed basis.
Due to the significance of the Company's investment, the unaudited
financial position and results of operation of Envirodyne are summarized below.
The financial statement information presented below for Envirodyne is based upon
its annual report for the year ended December 28, 1995 (unaudited, in millions,
except per share amounts):
ENVIRODYNE INDUSTRIES, INC.
<TABLE>
<CAPTION>
DECEMBER 28,
1995
------------
<S> <C>
BALANCE SHEET
Current Assets................................... $240.9
Other............................................ 189.2
Property and equipment, net...................... 469.5
------
Total assets................................ $899.6
======
Current liabilities.............................. $119.2
Long-term debt................................... 530.2
Deferred income taxes and other.................. 133.1
Stockholders' equity............................. 117.1
------
Total liabilities and stockholders' equity.. $899.6
======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 28,
1995
-------------
<S> <C>
INCOME STATEMENT
Revenues.................................. $162.5
=======
Loss before income taxes.................. $ (5.5)
=======
Net loss.................................. $ (5.6)
=======
Net loss per share........................ $ (0.42)
=======
</TABLE>
9
<PAGE>
NOTE 6. CASH FLOW INFORMATION
In connection with the sale of the Company's natural gas compression
operations, Zapata has retained certain liabilities related to these operations.
As a result, the Company reclassified approximately $2.1 million from net assets
of discontinued operations to current liabilities of continuing operations.
NOTE 7. SUBSEQUENT EVENT
On May 2, 1996, Zapata and Houlihan's Restaurant Group, Inc. ("Houlihan's")
announced that they have entered into a letter of intent relating to Zapata's
proposed acquisition of Houlihan's for a combination of cash and stock amounting
to $8.00 per share. In view of Malcolm I. Glazer's ownership of Zapata and
Houlihan's, the letter of intent was negotiated by representatives of special
committees of the directors of both Zapata and Houlihan's who are not members of
the Glazer family. The proposed transaction is subject to the negotiation and
execution of a definitive merger agreement and, among other things, approval of
the transaction by the directors and stockholders of both companies, compliance
with the Hart-Scott-Rodino Antitrust Improvements Act, registration of the
Zapata shares issuable in the merger under the Securities Act of 1933 and
receipt of a consent from Houlihan's primary lending bank or the refinancing of
Houlihan's outstanding bank debt. There can be no assurance that a transaction
will be consummated or, if consummated, will be on the terms as proposed.
Zapata also announced that Malcolm Glazer has entered into a standstill
agreement with Zapata. Under the standstill agreement, Mr. Glazer has agreed on
behalf of himself, his family and entities controlled by him not to increase his
or their ownership of voting securities in Zapata above 49.9% on either an
outstanding or fully diluted share basis, unless, among other things, such
increase is approved by a majority of the directors on the Zapata board who are
not members of the Glazer family or is in response to a tender offer or other
proposal by others to acquire more than 14.9% of Zapata's voting securities.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-looking statements in this Form 10-Q are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty, including without limitation, the risk of a significant natural
disaster, the inability of the Company to reinsure certain risks, the adequacy
of its loss reserves, oil and gas reserve estimates, changing regulations in
foreign countries, as well as general market conditions, competition and
pricing. The Company believes that this information is based on reasonable
expectations. However, no assurances can be given that the Company will achieve
all of its goals and expectations.
BUSINESS
In late 1994 and early 1995, the Company began to develop a strategic plan
involving the repositioning of the Company in the food packaging, food and food
service equipment and supply (collectively, "food services") businesses and
exiting the energy business. The strategic plan that was developed called for
the divestiture of most of the Company's remaining energy operations, including
its natural gas compression operations, its natural gas gathering, processing
and marketing operations and the Company's remaining domestic oil and gas
assets, and the acquisition of, or joint ventures with, selected companies in
the food services industry.
In December 1995, Zapata sold the assets of its subsidiaries engaged in
natural gas compression operations (collectively, "Energy Industries") to
Weatherford Enterra, Inc. and its wholly owned subsidiary, Enterra Compression
Company (collectively, "Weatherford Enterra"). In that transaction, Weatherford
Enterra purchased from the Company all of the assets of Energy Industries for
$131 million in cash, and assumed certain liabilities of Energy Industries,
based on the net asset value of Energy Industries on the closing date (the
"Energy Industries Sale"). The Energy Industries Sale resulted in an after-tax
gain of approximately $12.6 million. Of the approximately $131 million in cash
proceeds received from the Energy Industries Sale, the Company used
approximately $26 million to repay certain bank debt. Additionally,
approximately $1.4 million was used to pay commissions and fees associated with
the sale.
On April 9, 1996, Zapata sold substantially all of the assets of its
subsidiaries engaged in natural gas gathering and processing operations
(collectively, "Cimarron") in two separate transactions with Conoco Inc.
("Conoco") and Enogex Products Corporation ("Enogex"). Conoco purchased certain
of the Texas-based assets and Enogex purchased certain of the Oklahoma-based
assets of Cimarron. The aggregate cash consideration paid by Conoco and Enogex
totaled approximately $23 million, subject to final post-closing adjustments.
Subsequently, the Company sold Cimarron's remaining assets for an additional
$900,000. A portion of the proceeds from the sales were used to repay $1.0
million of Cimarron's debt and approximately $1.8 million for commissions, fees
and other expenses associated with the sales. The sales resulted in an after-
tax
11
<PAGE>
loss of approximately $3 million. Additionally, Cimarron recognized an after-tax
loss of approximately $500,000 from operations for fiscal 1996 that had
previously been deferred against a reserve for discontinued operations.
The sale of Cimarron's assets substantially completes the transformation of
Zapata away from the energy business. The Company intends to use the remaining
net proceeds from the Energy Industries and Cimarron dispositions for general
corporate purposes, which may include further repayment of debt, and for future
expansion into the food services industry.
On May 2, 1996, Zapata and Houlihan's Restaurant Group, Inc. ("Houlihan's")
announced that they have entered into a letter of intent relating to Zapata's
proposed acquisition of Houlihan's for a combination of cash and stock amounting
to $8.00 per share. In view of Malcolm I. Glazer's ownership of Zapata and
Houlihan's, the letter of intent was negotiated by representatives of special
committees of the directors of both Zapata and Houlihan's who are not members of
the Glazer family. Zapata's special committee is comprised of Board members
Ronald C. Lassiter, Robert V. Leffler, Jr. and W. George Loar. The proposed
transaction is subject to the negotiation and execution of a definitive merger
agreement and, among other things, approval of the transaction by the directors
and stockholders of both companies, compliance with the Hart-Scott-Rodino
Antitrust Improvements Act, registration of the Zapata shares issuable in the
merger under the Securities Act of 1933 and receipt of a consent from Houlihan's
primary lending bank or the refinancing of Houlihan's outstanding bank debt.
There can be no assurance that a transaction will be consummated or, if
consummated, will be on the terms as proposed.
Zapata also announced that Malcolm Glazer has entered into a standstill
agreement with Zapata. Under the standstill agreement, Mr. Glazer has agreed on
behalf of himself, his family and entities controlled by him during the term of
the standstill agreement not to increase his or their ownership of voting
securities in Zapata above 49.9% on either an outstanding or fully diluted share
basis, unless, among other things, such increase is approved by a majority of
the directors on the Zapata board who are not members of the Glazer family or is
in response to a tender offer or other proposal by others to acquire more than
14.9% of Zapata's voting securities.
LIQUIDITY AND CAPITAL RESOURCES
Reflecting the Energy Industries Sale in December 1995, the Company's cash
component totaled $88.4 million at March 31, 1996 as compared to $2.5 million at
September 30, 1995. Additionally, Zapata's long-term debt of $18.4 million
compared favorably to working capital of $107.2 million and stockholders' equity
of $155.6 million.
Cash provided from operating activities totaled $4.3 million during the
first six months of fiscal 1996 as compared to a $1.1 million use of cash during
the corresponding fiscal 1995 period. The improvement in the fiscal 1996 period
was primarily attributable to an increased contribution from the Company's
marine protein operations. Investing activities provided $100.7 million during
the fiscal 1996 period as compared to a $1.0 million use of cash in the fiscal
1995 period. The fiscal
12
<PAGE>
1996 period included the net proceeds generated from the Energy Industries Sale
while the fiscal 1995 period included proceeds of $12.7 million from the sale of
the Company's remaining shares of Tidewater Inc. ("Tidewater") common stock; the
Tidewater stock proceeds were required to be used to partially prepay certain
Company indebtedness in April 1995. Financing activities consumed $19.1 million
and $4.5 million in the 1996 and 1995 periods, respectively. The increased use
of cash in the fiscal 1996 period included a $3.2 million prepayment of
indebtedness owing to the Malcolm I. Glazer Trust incurred in connection with
the Company's purchase of stock of Envirodyne Industries, Inc. ("Envirodyne"), a
$4.8 prepayment of the Company's remaining indebtedness owed to Norex America,
Inc. and a $10.0 million repayment of a revolving credit facility for the
Company's marine protein division. The fiscal 1995 period included payments
totaling $3.9 million for redemption of the Company's preferred stock, an odd-
lot common stock repurchase program and dividend payments.
RESULTS OF OPERATIONS
Zapata reported a net loss of $4.0 million for the quarter ended March 31,
1996 as compared to net income of $2.9 million for the quarter ended March 31,
1995. The loss in the fiscal 1996 period was primarily attributable to losses
from the Company's discontinued operations totaling $4.1 million. Such loss was
comprised of a $3.5 million net loss associated with the sale of the Company's
natural gas gathering and processing assets and a $610,000 net loss that
included a $300,000 post-closing adjustment and additional expenses associated
with the sale of the Company's compression assets in December 1995. The $3.5
million loss included an estimated net loss of approximately $500,000 from the
natural gas gathering and processing operations for fiscal 1996 that had
previously been deferred against a reserve for discontinued operations. In the
second quarter of fiscal 1995, Zapata's discontinued operations generated net
income of $217,000.
The Company's net income from continuing operations of $123,000 for the
second quarter of fiscal 1996 compared unfavorably to net income from continuing
operations of $2.7 million for the second quarter of fiscal 1995. The fiscal
1996 three-month period included a $1.4 million equity loss from Zapata's 31%
interest in the net loss of Envirodyne for the three months ended December 31,
1995, while Zapata's fiscal 1995 period results included a $4.8 million pre-tax
gain from the sale of the Company's remaining shares of Tidewater common stock.
Due primarily to improved operating results from the marine protein division,
the Company's operating income of $1.4 million for the three months ended March
31, 1996 compared favorably to an operating loss of $202,000 for the three
months ended March 31, 1995.
For the first six months of fiscal 1996, Zapata's net income increased to
$10.3 million from $3.7 million for the corresponding fiscal 1995 period due
primarily to the $12.6 million after-tax gain from the sale of the Company's
compression assets. Revenues of $38.7 million and operating income of $3.8
million for the 1996 period compared to the 1995 period revenues of $44.6
million and operating income of $109,000.
13
<PAGE>
MARINE PROTEIN
Reflecting higher prices for fish meal and fish oil, the marine protein
division's operating results improved in the second quarter of fiscal 1996 as
compared to the second quarter of fiscal 1995. Revenues of $14.4 million and
operating income of $2.0 million for the three-month period ending March 31,
1996 compared to revenues of $20.0 million and operating income of $1.1 million
for the corresponding period in fiscal 1995. Although sales volumes of fish oil
and fish meal were lower in the current period as compared to the prior-year
period, the average price of fish oil increased to $486 per ton in the second
quarter of fiscal 1996 from $284 per ton in the fiscal 1995 second quarter and
the average price for fish meal improved to $442 per ton in the 1996 period from
$354 per ton in the 1995 period.
Similarly, year-to-date revenues of $37.8 million and operating income of
$5.0 million for fiscal 1996 compared to revenues of $39.6 million and operating
income of $1.8 million for the corresponding fiscal 1995 period.
The price for fish meal generally bears a relationship to prevailing
soybean meal prices, while prices for fish oil are usually based on prices for
vegetable fats and oils, such as soybean and palm oils. Accordingly, the prices
for the Company's products are significantly influenced by worldwide supply and
demand relationships over which the Company has no control and tend to fluctuate
to a significant extent over the course of a year and from year to year.
OIL AND GAS
In fiscal 1995, the Company sold its U.S. natural gas producing properties.
As a result, the Company's only significant remaining oil and gas activity is
the production of natural gas through a joint venture in Bolivia in which the
Company has a 25% interest. Revenues of $417,000 and operating income of
$224,000 in the second quarter of fiscal 1996 compared to revenues of $2.2
million and an operating loss of $192,000 in the comparable fiscal 1995 quarter,
which included revenues of $565,000 and operating income of $116,000 from the
Bolivian operations. The Company's fiscal 1995 Bolivian operating results were
negatively impacted by higher operating expenses.
Year-to-date fiscal 1996 revenues of $893,000 and operating income of
$153,000 compared to fiscal 1995 revenues of $5.0 million and operating income
of $218,000. The fiscal 1995 results include Bolivian revenues of $1.5 million
and operating income of $812,000.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits indicated by an asterisk (*) are incorporated by reference.
3(a)* -- Restated Certificate of Incorporation of Zapata filed with
Secretary of State of Delaware on May 3, 1994 (Exhibit 3(a) to
Current Report on Form 8-K dated April 27, 1994 (File No. 1-
4219)).
3(b)* -- Certificate of Designation, Preferences and Rights of $1
Preference Stock (Exhibit 3(c) to Zapata's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1993 (File No.
1-4219)).
3(c)* -- Certificate of Designation, Preferences and Rights of $100
Preference Stock (Exhibit 3(d) to Zapata's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1993 (File No.
1-4219)).
3(d)* -- By-laws of Zapata, as amended effective November 21, 1995
(Exhibit 3(d) to Zapata's Annual Report on Form 10-K for the
fiscal year ended September 30, 1995 (File No. 1-4219)).
10(a)* -- Purchase and Sale Agreement dated March 26, 1996 by and among
Cimarron Gas Holding Company, Conoco Inc. and Enogex Products
Corporation (Exhibit 2.1 to Zapata's Current Report on Form 8-K
dated April 9, 1996 (File No. 1-4219)).
10(b)* -- Amendment and Clarification of Purchase and Sale Agreement,
Waiver and Closing Agreement dated April 9, 1996 (Exhibit 2.2 to
Zapata's Current Report on Form 8-K dated April 9, 1996 (File No.
1-4219)).
27 -- Financial Data Schedule.
(b) Reports on Form 8-K:
None.
15
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ZAPATA CORPORATION
(Registrant)
May 14, 1996 By: /s/ Joseph L. von Rosenberg III
______________________________________
(Joseph L. von Rosenberg III,
Executive Vice President, General Counsel
and Corporate Secretary)
May 14, 1996 By: /s/ Robert A. Gardiner
______________________________________
(Robert A. Gardiner,
Vice President and Chief Financial
Officer)
16
<PAGE>
EXHIBIT INDEX
NUMBER EXHIBIT
- ------ -------
3(a)* -- Restated Certificate of Incorporation of Zapata filed with
Secretary of State of Delaware on May 3, 1994 (Exhibit 3(a) to
Current Report on Form 8-K dated April 27, 1994 (File No. 1-4219)).
3(b)* -- Certificate of Designation, Preferences and Rights of $1 Preference
Stock (Exhibit 3(c) to Zapata's Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1993 (File No. 1-4219)).
3(c)* -- Certificate of Designation, Preferences and Rights of $100
Preference Stock (Exhibit 3(d) to Zapata's Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1993 (File No. 1-
4219)).
3(d)* -- By-laws of Zapata, as amended effective November 21, 1995
(Exhibit 3(d) to Zapata's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995 (File No. 1-4219)).
10(a)* -- Purchase and Sale Agreement dated March 26, 1996 by and among
Cimarron Gas Holding Company, Conoco Inc. and Enogex Products
Corporation (Exhibit 2.1 to Zapata's Current Report on Form 8-K
dated April 9, 1996 (File No. 1-4219)).
10(b)* -- Amendment and Clarification of Purchase and Sale Agreement, Waiver
and Closing Agreement dated April 9, 1996 (Exhibit 2.2 to Zapata's
Current Report on Form 8-K dated April 9, 1996 (File No. 1-4219)).
27 -- Financial Data Schedule.
* Incorporated by reference.
17
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
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