<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
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)
<TABLE>
<CAPTION>
<C> <C>
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 77056
HOUSTON, TEXAS (Zip Code)
(Address of principal executive offices)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 940-6100
---------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
Common Stock, $0.25 par value............................... New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None.
On December 17, 1997, there were outstanding 22,909,870 shares of the
Company's Common Stock, $0.25 par value. The aggregate market value of the
Company's voting and non-voting common equity held by nonaffiliates of the
Company is $86,010,664, based on the closing price in consolidated trading on
December 17, 1997, for the Company's Common Stock.
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 [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE: PORTIONS OF THE REGISTRANT'S
DEFINITIVE PROXY STATEMENT FOR ITS COMBINED 1997-1998 ANNUAL MEETING OF
STOCKHOLDERS, WHICH WILL BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
WITHIN 120 DAYS AFTER SEPTEMBER 30, 1997, ARE INCORPORATED BY REFERENCE TO THE
EXTENT SET FORTH IN PART III.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I
Items 1 and 2. Business and Properties..................................... 1
General..................................................... 1
Financial Information about Industry Segments............... 1
Marine Protein Operations................................... 1
Envirodyne.................................................. 3
Employees................................................... 4
Geographical Information.................................... 4
Executive Officers of the Registrant........................ 4
Properties.................................................. 5
Item 3. Legal Proceedings........................................... 5
Item 4. Submission of Matters to a Vote of Security Holders......... 6
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 7
Item 6. Selected Financial Data..................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 9
Item 8. Financial Statements and Supplementary Data................. 14
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 40
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 40
Item 11. Executive Compensation...................................... 40
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 40
Item 13. Certain Relationships and Related Transactions.............. 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 40
</TABLE>
<PAGE> 3
PART I
ITEM 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
Zapata Corporation is a Delaware corporation organized in 1954. As used
herein, the term "Zapata" or the "Company" refers to Zapata Corporation or to
Zapata Corporation and its consolidated subsidiaries, as applicable. The
Company's principal executive offices are at 1717 St. James Place, Suite 550,
Houston, Texas 77056 (Telephone: (713) 940-6100).
Zapata conducts operations in two business segments: marine proteins and
food services. Zapata conducts its marine protein operations through Marine
Genetics Corporation ("Marine Genetics") (formerly Zapata Protein, Inc.) which
produces and sells marine protein products. Zapata's food services operations
are conducted through its 40% ownership interest in Envirodyne Industries, Inc.
("Envirodyne").
In late 1994 and early 1995, the Company began to develop a plan that
involved exiting the energy business. The plan that was developed called for the
divestiture of the Company's remaining energy operations and remaining oil and
gas assets. In fiscal 1995, Zapata sold its U.S. natural gas producing
properties and in fiscal 1996, Zapata sold the assets of its natural gas
compression operations and its gathering and processing operations.
Additionally, in fiscal 1997, Zapata disposed of its Bolivian oil and gas
interests. These dispositions completed Zapata's exit from the energy business.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Information concerning revenues, operating results (before net interest
expense, other income and income taxes), identifiable assets, depreciation,
depletion and amortization and capital expenditures for the Company's continuing
operations, by major division is incorporated herein by reference from Note 16
of the Notes to Consolidated Financial Statements.
MARINE PROTEIN OPERATIONS
The Company's marine protein operations involve the production and sale of
a variety of protein products from menhaden, a species of fish found along the
Gulf of Mexico and Atlantic coasts. Marine Genetics is the largest processor,
marketer and distributor of marine products (fish meal) and fats (fish oil) in
the United States. The Company processes two grades of fish meal (regular or
"FAQ" meal and specialty meals), as well as fish oil and fish solubles. Marine
Genetics' fish meal products are primarily used as an ingredient in animal feed
for poultry, swine, cattle, aquaculture and household pets. The Company's fish
oil is primarily used as an ingredient in margarine and shortening. The
Company's fish solubles are sold primarily to livestock feed manufacturers and
for use as an organic fertilizer.
In connection with the Company's plan to expand its marine protein
operations, Marine Genetics acquired the fishing and processing assets of
American Proteins, Inc. and Gulf Protein, Inc. in November 1997. These assets
included 16 fishing vessels, 5 spotter aircraft and 2 processing plants. The
Company intends to close one of these plants and redeploy the plant assets to
its other operations along the Gulf of Mexico. These acquisitions are expected
to substantially increase the Company's fish catch and related fish meal and
fish oil production.
Fishing. During fiscal 1997, the Company owned a fleet of 50 fishing
vessels and 27 spotter aircraft for use in its fishing operations and also
leased aircraft where necessary to facilitate operations. During the 1997
fishing season in the Gulf of Mexico, where the fishing season runs from
mid-April through October, the Company operated 32 fishing vessels and 26
spotter aircraft. The fishing area in the Gulf stretches from the south Texas
coastline to the panhandle of western Florida, with a concentration off the
Louisiana and Mississippi coasts. The fishing season on the Atlantic coast
begins in early May and usually extends into December. The Company operated 10
fishing vessels and 8 spotter aircraft along the mid-Atlantic coast,
concentrated in and around the Chesapeake Bay.
1
<PAGE> 4
Menhaden usually school in large, tight clusters and are commonly found in
warm, shallow waters. Spotter aircraft locate the schools and direct the fishing
vessels to them. The principal fishing vessels are steamers, which transport two
40-foot purse boats, each carrying several fishermen and one end of a 1,500-foot
net. The purse boats encircle the school and capture the fish in the net. The
fish are then pumped from the net into refrigerated holds of the steamer, and
then are unloaded at the Company's processing plants.
Processing. During fiscal 1997, the Company owned and operated four
processing plants -- two in Louisiana, one in Mississippi and one in
Virginia -- where the menhaden are processed into fish meal, fish oil and fish
solubles. The fish are unloaded from the vessels into storage boxes and then
conveyed into steam cookers. The fish are then passed through presses to remove
most of the oil and water. The solid portions of the fish are dried and then
ground into fish meal. The liquid that is produced in the cooking and pressing
operations contains oil, water, dissolved protein and some fish solids. This
liquid is decanted to remove the solids and is then put through a centrifugal
oil/water separation process. The separated fish oil is a finished product. The
separated water and protein mixture is further processed through evaporators to
remove the soluble protein, which can be sold as a finished product or added to
the solid portions of the fish for processing into fish meal.
Fish meal, the principal product made from menhaden, is sold primarily as a
high-protein ingredient. It is also used as a protein supplement in feed
formulated for pigs and other livestock. Each use requires certain standards to
be met regarding quality and protein content, which are determined by the
freshness of the fish and by processing conditions such as speed and
temperatures. Fish solubles are a liquid protein product used as an additive in
fish meal and also marketed as an independent product to animal feed formulators
and the fertilizer industry.
Fish oil from menhaden is widely used for human consumption as an edible
fat in Europe. Refined and hydrogenated menhaden oils have a wide variety of
applications as ingredients of margarine, cooking oil and solid cooking fats
used in baked goods. In June 1997, the U.S. Food and Drug Administration
approved the use of refined menhaden oil, a natural source of Omega-3 fatty
acids, for human consumption in the United States. Ongoing scientific studies
continue to link consumption of Omega-3-rich fish oil to a number of nutritional
and health benefits. Marine Genetics is the only processor of refined menhaden
oil in the United States.
In September 1997, the Company sold the assets of Venture Milling Company
("Venture"), a Delaware corporation owned by the Company involved in the
blending of animal feeds and protein-ingredient products for the poultry, hog
and dairy industries. Venture had leased and operated a feed mill in Seaford,
Delaware which blended fish meal with other proteins to produce a less expensive
protein ingredient than fish meal. The product margins of such blended meals
were very low and as a result, the Company decided to exit the market and
Venture's net assets were sold. The Company's results of operations for the
1997, 1996 and 1995 fiscal years were not materially impacted by activity
related to Venture.
The Company owns a 50% equity interest in a joint venture involved in the
manufacturing and marketing of animal feed ingredients in the Peoples Republic
of China. While the Company's investment was made in 1995, initial operations
commenced in late 1996 with no material impact on the Company's financial
results for fiscal years 1996 and 1997. The investment is accounted for in the
Company's financial statements using the equity method of accounting.
Marketing. Most of the Company's marine protein products are sold directly
to about 300 customers by the Company's marketing department, while a smaller
amount is sold through independent sales agents. Total product inventory was
$35,210,000 as of September 30, 1997 versus $26,522,000 on September 30, 1996.
While the fishing season usually extends from April into December, sales from
inventory continue throughout the year.
The Company's fish meal is sold primarily to domestic feed producers for
utilization as a high-protein ingredient for the poultry, swine, aquaculture and
pet food industries. Fish oil sales primarily involve export markets where the
fish oil is refined for use as an edible oil. One customer for fish oil,
Unilever Raw Material B.V., accounted for approximately 12.9% of the Company's
consolidated revenues in fiscal 1995, and lesser
2
<PAGE> 5
amounts in fiscal 1996 and 1997. Sales to Unilever Raw Material B.V. were
approximately $12.3 million in 1995.
Competition. The principal competition for the Company's fish meal and fish
solubles is from other protein sources such as soybean meal and other vegetable
or animal products. The Company believes, however, that these other sources are
not complete substitutes because fish meal offers nutritional values not
contained in such sources. Vegetable fats and oils, such as soybean and palm
oils, provide the primary market competition for fish oil. In addition, the
Company competes against domestic, privately owned menhaden fishing companies as
well as domestic and international producers of fish meal and fish oil derived
from species such as anchovy and mackerel.
Fish meal prices generally bear a direct relationship to prevailing soybean
meal prices, while prices for fish oil are generally influenced by prices for
vegetable fats and oils, such as soybean and palm oils. Thus, the prices for the
Company's products are established 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.
Regulation. The Company's marine protein operations are subject to federal,
state and local laws and regulations relating to the location and periods in
which fishing may be conducted as well as environmental and safety matters. The
Company, through its operation of fishing vessels, is subject to the
jurisdiction of the U.S. Coast Guard, the National Transportation Safety Board
and the U.S. Customs Service. The U.S. Coast Guard and the National
Transportation Safety Board set safety standards and are authorized to
investigate vessel accidents and recommend improved safety standards. The U.S.
Customs Service is authorized to inspect vessels at will.
The marine protein operations of the Company also are subject to federal,
state and local laws and regulations relating to the protection of the
environment, including the federal Water Pollution Control Act of 1972, which
was significantly modified in 1977 to deal with toxic water pollutants and
re-named as the Clean Water Act, and which imposes strict controls against the
discharge of oil and other water pollutants into navigable waters. The Clean
Water Act provides penalties for any discharge of pollutants in reportable
quantities and, along with the Oil Pollution Act of 1990, imposes substantial
liability for the costs of oil removal, remediation and damages. The Company's
marine protein operations also are subject to the federal Clean Air Act, as
amended; the federal Resource Conservation and Recovery Act, which regulates
treatment, storage and disposal of hazardous wastes; the federal Comprehensive
Environmental Response, Compensation, and Liability Act, which imposes
liability, without regard to fault, on certain classes of persons that
contributed to the release of any "hazardous substance" into the environment;
and the federal Occupational Safety and Health Act ("OSHA"). The OSHA hazard
communications standard, the Environmental Protection Agency community
right-to-know regulations under Title III of the federal Superfund Amendment and
Reauthorization Act and similar state statutes require the Company to organize
information about hazardous materials used or produced in its operations.
Certain of this information must be provided to employees, state and local
governmental authorities and local citizens. Numerous other environmental laws
and regulations, along with similar state laws, also apply to the marine protein
operations of the Company, and all such laws and regulations are subject to
change.
The Company has made, and anticipates that it will make in the future,
expenditures in the ordinary course of its business in connection with
environmental matters. Such expenditures have not been material in the past and
are not expected to be material in the future. However, there is no assurance
that environmental laws and regulations enacted in the future will not adversely
affect the Company's marine protein operations.
ENVIRODYNE
In August 1995, Zapata acquired 4,189,298 common shares of Envirodyne,
representing 31% of the then-outstanding common stock of Envirodyne. In June and
July 1996, Zapata purchased 1,688,006 additional shares of Envirodyne and as a
result of these transactions, Zapata currently owns approximately 40% of the
outstanding shares of Envirodyne common stock. Zapata's investment in Envirodyne
is accounted for using the equity method of accounting.
3
<PAGE> 6
Envirodyne is a major supplier of food packaging products and food service
supplies and is a leading worldwide producer of cellulosic casings used in the
preparation of packaging of processed meat products. It is a major producer of
heat shrinkable plastic bags and specialty films for packaging and preserving
fresh and processed meat products, poultry and cheeses. Envirodyne is also a
leading domestic producer of (i) disposable plastic cutlery, drinking straws,
custom dining kits and related products and (ii) thermo-formed and
injection-molded plastic containers and horticultural trays and inserts.
EMPLOYEES
At September 30, 1997, the Company employed approximately 1,100 persons.
Approximately 130 employees of the Company are represented by an affiliate of
the United Food and Commercial Workers Union. The Company considers its employee
relations to be generally satisfactory.
GEOGRAPHICAL INFORMATION
Certain geographical information with respect to the Company's business is
set forth in Note 16 of Notes to Consolidated Financial Statements.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and current offices of the executive officers of the
Company, who are to serve until their successors are elected and qualified, are
set forth below. Also indicated is the date when each such person commenced
serving as an executive officer of the Company.
<TABLE>
<CAPTION>
DATE BECAME
NAME AND AGE OFFICE EXECUTIVE OFFICER
------------ ------ -----------------
<S> <C> <C>
Malcolm I. Glazer(69)................ Chairman of the Board of Directors of July 1994
Zapata
Eric T. Furey(35).................... Vice President, General Counsel and July 1997
Corporate Secretary of Zapata
Robert A. Gardiner(49)............... Senior Vice President and Chief January 1996
Financial Officer of Zapata
Avram A. Glazer(37).................. President and Chief Executive Officer of March 1995
Zapata
Joseph L. von Rosenberg(39).......... President and Chief Executive Officer of August 1994
Marine Genetics Corporation; Executive
Vice President of Zapata
</TABLE>
A description of the business experience during the past five years for
each of the executive officers of Zapata is set forth below. Unless otherwise
noted, positions are with the Company.
Eric T. Furey has served as General Counsel and Corporate Secretary since
July 1997. Prior to that time, he was engaged in the private practice of law.
Robert A. Gardiner has served as Chief Financial Officer since January 1996
and Vice President since January 1995. He served as Controller from November
1991 to January 1996. Mr. Gardiner has held various positions with the Company
since 1979.
Avram A. Glazer, a director since July 1993, has served as President and
Chief Executive Officer since March 1995. For the past five years, he has been
employed by, and has worked on behalf of, Malcolm I. Glazer and a number of
entities owned and controlled by Malcolm I. Glazer. He also serves as a director
of Houlihan's Restaurant Group, Inc. and Specialty Equipment Companies, Inc.
Avram A. Glazer is a son of Malcolm I. Glazer.
Malcolm I. Glazer, a director since July 1993, has served as Chairman of
the Board of Directors since July 1994 and served as President and Chief
Executive Officer from August 1994 until March 1995. Mr. Glazer has been a
self-employed private investor whose diversified portfolio consists of ownership
of the Tampa Bay Buccaneers National Football League franchise and investments
in television broadcasting,
4
<PAGE> 7
restaurants, restaurant equipment, food services equipment, health care,
banking, real estate, stocks, government securities and corporate bonds. He is a
director and Chairman of the Board of Houlihan's Restaurant Group, Inc. and also
is a director of Specialty Equipment Companies, Inc. Malcolm I. Glazer is the
father of Avram A. Glazer.
Joseph L. von Rosenberg III has served as President and Chief Executive
Officer of Marine Genetics Corporation (a subsidiary of the Company) since July
1997 and has served as Executive Vice President since November 1995. He served
as General Counsel from August 1994 to July 1997 and Corporate Secretary from
June 1993 to July 1997. From August 1994 through November 1995, Mr. von
Rosenberg also held the position of Vice President of the Company. Prior to
joining Zapata in June 1993, he served as General Counsel and Corporate
Secretary of both The Permian Corporation and The Simmons Group.
PROPERTIES
In addition to the properties discussed above with respect to each business
segment, the Company leases office space in Houston, Texas for its executive
offices pursuant to a lease. The Company believes its facilities are adequate
and suitable for its current level of operations. The Company maintains
customary compensation, liability, property and marine insurance for all of its
operations.
ITEM 3. LEGAL PROCEEDINGS
On August 11, 1995, a derivative and class action was filed by Elly Harwin
against Zapata and its then directors in the Court of Chancery of the State of
Delaware, New Castle County. On January 18, 1996, a second derivative action was
filed by Crandon Capital Partners against Zapata and its directors in the same
court. On May 7, 1996, a third derivative action was filed by Elly Harwin and
Crandon Capital Partners against Zapata and its directors in the same court.
These cases have since been consolidated into one action (the "Harwin/Crandon
Case") by way of an amended, consolidated complaint. The consolidated complaint
alleges that Zapata's directors engaged in conduct constituting breach of
fiduciary duty and waste of Zapata's assets in connection with Zapata's
investment in Envirodyne, in connection with the decision to shift Zapata's
business focus from energy to food services, and in connection with the proposed
(but subsequently abandoned) merger with Houlihan's Restaurant Group, Inc.
("Houlihan's Merger"). The complaint alleges, among other things, that the
purchase of Envirodyne common stock from Malcolm I. Glazer's affiliate was a
wrongful expenditure of Zapata's funds and was designed to permit Malcolm I.
Glazer to obtain personal financial advantage to the detriment of Zapata. The
complaint also alleges that Zapata's Board of Directors is controlled by Malcolm
I. Glazer and that George Loar, now deceased, lacked independence from Malcolm
I. Glazer because he was employed until his retirement by a corporation
indirectly controlled by Malcolm I. Glazer, that Mr. Leffler lacks such
independence because of his status as a paid consultant to Malcolm I. Glazer,
that Avram A. Glazer lacks such independence because of familial relationship
and that Mr. Lassiter lacks such independence by reason of an employment or
consulting relationship with Zapata. The complaint seeks relief including, among
other things, rescission of Zapata's purchase of the shares of Envirodyne common
stock from the Malcolm Glazer Trust; injunctive relief to void the election of
Messrs. Leffler and Loar as directors at Zapata's Annual Meeting of Stockholders
held on July 27, 1995 and to enjoin any transaction in which Malcolm I. Glazer
has an interest; and an award of unspecified compensatory damages and expenses,
including attorneys' fees. Zapata believes that the complaint and the
allegations contained therein are without merit and intends to defend the
Harwin/Crandon Case vigorously.
On May 31, 1996, a derivative and class action (the "Pasternak Case") was
filed by Arnold Pasternak against Zapata and its directors in the Court of
Chancery of the State of Delaware, New Castle County. The plaintiff alleged that
Zapata's directors engaged in conduct constituting breach of fiduciary duty and
waste of Zapata's assets in connection with the Houlihan's Merger; that the
Houlihan's Merger consideration was unfair and excessive; that the Houlihan's
Merger would result in voting power dilution, unfairly benefiting Malcolm I.
Glazer; and that the Houlihan's Merger agreement was in conflict with Article
SEVENTH of Zapata's Restated Certificate of Incorporation, which provides that
an affirmative vote or consent of a supermajority of 80% of outstanding voting
stock is necessary under certain circumstances. The plaintiff filed a motion for
a preliminary injunction requesting that the court preliminarily enjoin Zapata
from consummating
5
<PAGE> 8
the Houlihan's Merger based on the contention that under Article SEVENTH the
Houlihan's Merger would require the approval of holders of 80% of Zapata's
outstanding voting stock. The Delaware Chancery Court agreed with the plaintiff
and issued the preliminary injunction enjoining the proposed merger. Zapata
appealed to the Supreme Court of Delaware, but prior to any action being taken
by the Supreme Court, Zapata terminated the proposed merger. Zapata's appeal was
dismissed as moot and the order of the Chancery Court was vacated. Final orders
concluding this litigation were issued by the Court on October 23, 1997.
On January 22, 1997, a derivative and class action (the "Hawley Case") was
filed by Hawley Opportunity Fund against Zapata and its directors in the Court
of Chancery of the State of Delaware, New Castle County. The complaint alleged
that a $4.50 per share self-tender offer initiated by Zapata on January 14,
1997, for up to 15 million shares of its Common Stock was unfair and that
Zapata's offer to purchase in connection with the tender offer failed to
disclose material facts concerning patent litigation to which Viskase
Corporation, a unit of Envirodyne Industries, Inc., is the plaintiff and
material facts concerning the value of Zapata's Bolivian oil and gas reserves.
Zapata terminated the self-tender offer on February 24, 1997, rendering moot the
issues raised in the Hawley Case. Final orders concluding this litigation were
issued by the Court on August 25, 1997.
On November 9, 1995, a petition was filed in the 148th Judicial District
Court of Nueces County, Texas by Peter M. Holt, a former director of the
Company, and certain of his affiliates who sold their interests in Energy
Industries, Inc. and other natural gas compression companies ("Energy
Industries") to the Company in November 1993. The petition names the Company,
Malcolm I. Glazer and Avram A. Glazer as defendants and alleges several causes
of action based on alleged misrepresentations concerning the Company's long-term
development strategy focusing its efforts on the natural gas services business.
The petition does not allege a breach of any provision of the purchase agreement
pursuant to which the Company acquired Energy Industries from the plaintiffs.
The remedies sought by the plaintiffs include: (i) the disgorgement to the
plaintiffs of the Company's profit made on its sale of Energy Industries, plus
the cash profit the Company made from the operations of Energy Industries, which
the plaintiffs contend equals approximately $54 million; (ii) money damages
based on the alleged lower value of the Company's Common Stock had the alleged
misrepresentations not been made, which the plaintiffs contend is approximately
$6 million; (iii) money damages based on the plaintiffs' assumption that the
Company's Common Stock price would have increased if it had remained in the
natural gas services industry after 1995, which the plaintiffs contend equals
approximately $23 million; or (iv) money damages based on the assumption that
the plaintiffs had not sold Energy Industries and had taken it public in January
1997, which the plaintiffs contend amounts to more then $100 million. The
Company, Malcolm I. Glazer, and Avram A. Glazer filed counterclaims against the
plaintiffs for breach of the purchase agreement, breach of fiduciary duty, and
material misrepresentations and omissions by Mr. Holt. Trial is currently set
for February 1998. The Company believes that the petition and the allegations
made therein are without merit and intends to defend the case vigorously.
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of its business. The Company
maintains insurance coverage against potential claims in an amount which it
believes to be adequate. In the opinion of management, uninsured losses, if any,
resulting from these matters and from the matters discussed above will not have
a material adverse effect on Zapata's results of operations, cash flows or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of Zapata's stockholders during the
fourth quarter of fiscal 1997.
6
<PAGE> 9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Zapata's Common Stock is listed on the New York Stock Exchange. The high
and low sales prices for the Common Stock, as reported in the consolidated
transactions reporting system, for each quarterly period for the last two fiscal
years, as well as the amounts per share of dividends declared during such
periods, are shown in the following table.
<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31,
1997 1997 1997 1996 1996 1996 1996 1995
------------- -------- --------- ------------ ------------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
High sales price..... $8.25 $5.00 $5.00 $4.38 $3.88 $3.88 $3.75 $4.50
Low sales price ..... 4.63 4.00 4.00 3.38 3.38 3.13 3.00 3.00
Dividends declared... 0.07 -- -- -- -- -- -- --
</TABLE>
The Company announced in July 1997 that its Board of Directors had
determined to institute a quarterly cash dividend on its Common Stock in the
amount of $0.07 per share. The rights of holders of the Common Stock to receive
dividends or other payments with respect thereto are subject to the prior and
superior rights of holders of Zapata's Preferred Stock and Preference Stock,
then outstanding.
Zapata's Board of Directors has authorized purchases of up to 7.5 million
shares of Common Stock from time to time, depending on market conditions.
Pursuant to the repurchase program, Zapata repurchased 6.7 million shares of
Common Stock on May 30, 1997 in a privately negotiated transaction at a price of
$4.52 per share, including commissions. As it is the Company's intent to use
these shares for general corporate purposes, such shares are reflected in the
financial statements as treasury stock, at cost.
On September 1, 1997, the Company redeemed all of the outstanding shares of
its $2 Noncumulative Convertible Preference Stock at a redemption price of $80
per share.
On December 17, 1997, there were 12,486 holders of record of Common Stock.
7
<PAGE> 10
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial information for
the periods presented and should be read in conjunction with the Consolidated
Financial Statements of the Company and the related notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this Report. The Company's financial statements were
restated in fiscal 1997 to reflect the Company's oil and gas operations as a
discontinued operation. The Company's financial statements were previously
restated in fiscal 1995 to reflect the Company's natural gas compression and
natural gas gathering, processing and marketing operations as discontinued
operations.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................... $117,564 $93,609 $94,959 $96,614 $58,565
Operating income (loss)........... 12,842 5,951(1) (9,878)(2) (3,322) (2,473)
Income (loss) from continuing
operations..................... 7,412 598 (4,322) 22,361(3) 6,477(4)
Per share income (loss) from
continuing operations.......... 0.27 0.02 (0.14) 0.70 0.22
Cash dividend paid................ 1,604 -- 1,153 1,566 2,933
Common Stock, dividends declared,
per share...................... 0.07 -- -- 0.07 --
CASH FLOW DATA:
Capital expenditures.............. 8,541 4,010 5,574 3,738 1,485
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................... $ 86,391 $104,780 $116,949 $156,044 $174,989(5)
Property and equipment, net....... 40,997 36,702 36,125 32,424 48,176
Assets of discontinued
operations..................... -- 6,473 106,167 119,630 58,083
Total assets...................... 190,951 232,966 238,957 251,239 320,699
Current maturities of long-term
debt........................... 1,034 16,108 16,148 531 330
Long-term debt.................... 11,294 18,159 37,468 52,581 135,659
Stockholders' equity.............. 143,405 152,313 145,290 154,542 146,264
</TABLE>
- ---------------
(1) Includes $2.1 million of merger costs that were expensed when the proposed
merger with Houlihan's Restaurant Group, Inc. was terminated.
(2) Includes a $12.3 million provision for asset impairment of the Company's
marine protein assets.
(3) Includes a $37.5 million pretax gain from the sale of 4.1 million shares of
Tidewater, Inc. common stock.
(4) Includes a $32.9 million pretax gain from the sale of 3.5 million shares of
Tidewater, Inc. common stock and a $5.7 million pretax loss resulting from
the disposition of Zapata's investment in Arethusa (Offshore) Limited.
(5) Includes $75.1 million of restricted cash primarily generated from the sale
of Tidewater, Inc. common stock in June 1993 which was subsequently used to
fund the cash portion of the purchase price for the acquisition of Energy
Industries.
8
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the Company's financial condition and
results of operations. This discussion should be read in conjunction with the
Consolidated Financial Statements of the Company appearing under Item 8 herein.
Forward-looking statements in this Form 10-K, future filings by the Company
with the Securities and Exchange Commission, the Company's press releases and
oral statements by authorized officers of the Company are intended to be subject
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 insure against certain risks, the
adequacy of its loss reserves, fluctuations in commodity prices that affect the
prices for fish meal and fish oil, weather and other factors affecting fish
catch levels, changing government regulations, political risks of operations in
foreign countries, as well as general market conditions, competition and
pricing. The Company believes that forward-looking statements made by it are
based on reasonable expectations. However, no assurances can be given that
actual results will not differ materially from those contained in such
forward-looking statements. The words "estimate," "project," "anticipate,"
"expect," "predict," "believe" and similar expressions are intended to identify
forward-looking statements.
GENERAL
In late 1994 and early 1995, the Company began to develop a plan that
involved exiting the energy business. In fiscal 1995, Zapata completed the sale
of its six natural gas producing properties in the Gulf of Mexico, representing
the Company's domestic oil and gas producing operations. Zapata received cash of
$4.0 million and recorded an $8.9 million receivable representing (i) a
production payment entitling Zapata to a share of revenues from certain
properties and (ii) a share of future proceeds from a revenue sharing agreement.
In fiscal 1996, Zapata recorded a $5.5 million write-down of the production
payment receivable due to a reduction of the estimated gas reserves associated
with the receivable as prepared by the purchaser's reserve engineers.
In fiscal 1996, Zapata sold its natural gas compression assets (the "Energy
Industries Sale") for approximately $131 million in cash resulting in an
after-tax gain of approximately $12.6 million. Zapata also sold its natural gas
gathering and processing assets (the "Cimarron Sales") in fiscal 1996 for
approximately $23.7 million resulting in an after-tax loss of approximately $3
million.
On July 11, 1997, Zapata completed the sale of its Bolivian oil and gas
interests to Tesoro Bolivia Petroleum Company ("Tesoro") for $18.8 million cash
and the assumption by Tesoro of certain liabilities (collectively, the "Bolivian
Sale"). The Bolivian Sale completes Zapata's exit from the oil and gas business.
As a result, Zapata has restated its financial statements to reflect its oil and
gas operations as a discontinued operation. The terms of the Bolivian Sale were
determined by negotiations between Zapata and Tesoro, Zapata's co-venturer with
respect to the Bolivian operations. In connection with the Bolivian Sale, Zapata
established a $4.0 million letter of credit in favor of Tesoro as security
against the possibility of a Bolivian income tax liability incurred by Zapata as
a result of the Bolivian Sale. Zapata's obligations with respect to the letter
of credit will terminate on the first business day following the first to occur
of the recording of the assignment of Zapata's interest by Tesoro as a public
deed in Bolivia or the receipt by Tesoro of evidence of payment by Zapata of all
taxes due in Bolivia, if any. The Bolivian Sale resulted in an after-tax gain of
approximately $5.7 million.
The Bolivian Sale completes Zapata's exit from the energy business. The
Company is currently reviewing its business strategy and evaluating various
options to determine those which are in the best interests of the Company and
its stockholders. In connection with the Company's plan to expand its marine
protein operations, Zapata acquired the fishing and production assets of
American Proteins, Inc. and Gulf Protein, Inc. in two separate transactions in
November 1997 for approximately $28.1 million cash and the assumption of certain
debt. These acquisitions are expected to substantially increase the Company's
production of fish meal and fish oil through increased processing capacity and
by enlarging the Company's fleet of fishing vessels in the Gulf of Mexico and
the Atlantic.
9
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, Zapata's working capital totaled $86.4 million
including unrestricted cash of $55.6 million. During fiscal 1997, the Company
reduced its overall indebtedness to $12.3 million at September 30, 1997 from
$34.3 million at September 30, 1996. The Company considers its current liquidity
and capital resources to be adequate for current needs, although the Company
does not currently have any committed lines of credit available to it.
Operating activities used $1.6 million of cash in fiscal 1997 and $1.7
million in fiscal 1996 as the improvement in the Company's marine protein
operating results in 1997 was offset by the combination of an increase in the
Company's protein inventory balances and the $4.0 million restricted cash
investment associated with the Bolivian Sale letter of credit. While the fiscal
1996 operating activities consumed $1.7 million, the fiscal 1995 operating
activities provided $9.7 million reflecting an increase in the Company's protein
inventories in fiscal 1996 and a higher contribution from the Company's
discontinued operations in fiscal 1995.
Net cash provided by investing activities decreased to $11.6 million in
fiscal 1997 from $117.9 million in fiscal 1996. During fiscal 1997, Zapata
received proceeds of $18.8 million from the Bolivian Sale versus aggregate
proceeds of $128.6 million in fiscal 1996 from the Energy Industries Sale and
the Cimarron Sales. Capital expenditures increased to $8.5 million in fiscal
1997 from $4.0 million in fiscal 1996 due primarily to the construction of a dry
dock facility for the Company's marine protein fishing fleet in fiscal 1997.
Excluding any acquisitions, the Company's capital expenditures for fiscal 1998
are currently estimated to be approximately $13.0 million.
Net cash provided by investing activities increased substantially in fiscal
1996 to $117.9 from $14.5 million in fiscal 1995. The increase reflects the
proceeds from the Energy Industries Sale and the Cimarron Sales. Investing
activities in fiscal 1996 also included the acquisition of approximately 1.7
million shares of Envirodyne Industries, Inc. ("Envirodyne") common stock for
approximately $7.0 million. In fiscal 1995, Zapata generated proceeds totaling
$24.0 million that included $12.7 million from the disposition of its remaining
673,077 shares of Tidewater Inc. common stock, $4.0 million from the disposition
of the Company's domestic oil and gas operations and $5.5 million from a note
receivable. Investing activities in fiscal 1995 also included a $3.5 million
investment in subordinated debt of an unaffiliated company. Capital expenditures
totaled $4.0 million in fiscal 1996 as compared to $5.6 million in fiscal 1995.
Financing activities consumed $54.0 million during fiscal 1997 versus $19.3
million in fiscal 1996. During fiscal 1997, Zapata repurchased 6.7 million
shares of Common Stock for $4.52 per share or $30.2 million, paid dividends
totaling $1.6 million and repaid its 10 1/4% and 10 7/8% subordinated debenture
balances that totaled $25.5 million. Debt repayments in fiscal 1996 included a
$3.2 million prepayment of the Company's remaining indebtedness incurred in
connection with the purchase of common stock of Envirodyne, a $4.8 million
repayment of the Company's remaining indebtedness owed to Norex Drilling Ltd.
("Norex") and a $10.0 million net repayment of a revolving credit facility.
Financing activities consumed $19.3 million in fiscal 1996 as compared to
$31.4 million in fiscal 1995. The higher use of cash in fiscal 1995 was
primarily attributable to repurchases of the Company's preferred and common
stock. Zapata redeemed the remaining balance of its outstanding $6 Cumulative
Preferred Stock at $100 per share for $2.3 million in 1995 and repurchased 2.25
million shares of Common Stock from Norex for $4.00 per share. Fiscal 1995 debt
payments included a $15.6 million prepayment of indebtedness associated with the
purchase of common stock of Envirodyne and a $12.7 million reduction of the
Company's indebtedness to Norex.
RESULTS OF OPERATIONS
Fiscal 1997-1996
Zapata's income from continuing operations increased substantially in
fiscal 1997 as compared to fiscal 1996. Zapata reported income from continuing
operations of $7.4 million on revenues of $117.6 million in fiscal 1997 versus
income from continuing operations of $598,000 on revenues of $93.6 million in
fiscal 1996. Additionally, Zapata's operating income rose to $12.8 million in
fiscal 1997 from $6.0 million in fiscal 1996
10
<PAGE> 13
reflecting improved operating results from the Company's marine protein
operations and $2.1 million of merger costs that were expensed in fiscal 1996
when Zapata terminated an agreement relating to Zapata's proposed merger
agreement with Houlihan's Restaurant Group, Inc. ("Houlihan's"). The Company's
administrative expenses increased in fiscal 1997 due primarily to costs related
to defending and concluding various legal matters as discussed in Note 12 to the
Notes to Consolidated Financial Statements. Additional factors that contributed
to the increase in the Company's fiscal 1997 income from continuing operations
included a $1.5 million decrease in interest expense reflecting Zapata's lower
level of indebtedness and a reduction in equity losses from Zapata's 40% equity
interest in Envirodyne.
The Company's fiscal 1997 net income of $15.4 million improved
significantly from the fiscal 1996 net income of $7.0 million. Zapata's net
income included income from discontinued operations of $8.0 million and $6.0
million in fiscal 1997 and 1996, respectively. In fiscal 1997, discontinued
operations included the after-tax gain of $5.7 million from the Bolivian Sale
and net income of $2.3 million from the Zapata's discontinued oil and gas
operations. In fiscal 1996, net income from discontinued operations included an
after-tax gain of $12.6 million from the Energy Industries Sale, a $3.0 million
after-tax loss from the Cimarron Sales and associated 1996 operations, and a
$3.2 million net loss primarily from the fiscal 1996 discontinued oil and gas
operating activities.
Fiscal 1996-1995
Zapata reported income from continuing operations of $598,000 in fiscal
1996 on revenues of $93.6 million as compared to a loss from continuing
operations of $4.3 million on revenues of $95.0 million in fiscal 1995. In
fiscal 1996, Zapata's operating income improved significantly to $6.0 million
from an operating loss of $9.9 million in fiscal 1995 due primarily to improved
operating results from the Company's marine protein operations. Additionally,
the fiscal 1995 operating loss included a $12.3 million pretax provision for
asset impairment of the Company's marine protein assets recorded as a result of
adopting Statement of Financial Accounting Standards No. 121 ("SFAS 121").
The Company's fiscal 1996 net income of $7.0 million improved from the
fiscal 1995 net income of $4.2 million. Zapata's net income included income from
discontinued operations of $6.0 million and $8.5 million in fiscal 1996 and
1995, respectively. In fiscal 1996, net income from discontinued operations
included the after-tax gain of $12.6 million from the Energy Industries Sale,
the $3.0 million after-tax loss from the Cimarron Sales and the $3.2 million net
loss from operations while the fiscal 1995 discontinued operations included a
net loss of $371,000. The results from discontinued operations included pretax
allocations of interest on general corporate debt of $260,000 and $2.1 million
in fiscal 1996 and 1995, respectively. Reflecting the Company's decision in
fiscal 1995 to retain its marine protein operations that had previously been
scheduled for disposition, the results from discontinued operations in fiscal
1995 also included net income of $8.9 million to reverse the estimated loss on
the disposition of the marine protein operations that was recorded in fiscal
1994.
Marine Protein Operations
Fiscal 1997 revenues of $117.6 million and operating income of $18.2
million improved substantially from the fiscal 1996 revenues of $93.6 million
and operating income of $10.5 million. The improvement was attributable to
increased sales volumes of the Company's specialty meals, higher prices for the
Company's fish meal and fish oil products, higher sales volumes for fish meal
and the effects of an 11% increase in the 1997 fish catch. Prices for marine
protein products have continued to increase reflecting the Company's emphasis on
producing value-add specialty products. As a result, prices for the Company's
fish meal and fish oil products improved 17% and 9%, respectively in fiscal 1997
as compared to fiscal 1996 prices. During 1997, the average per-ton price for
fish meal, the division's primary product, increased to $501 and the average
per-ton price for fish oil increased to $424. Sales volumes of fish meal
increased approximately 3% in fiscal 1997 as compared to fiscal 1996 sales while
sales volumes of fish oil decreased approximately 16% in fiscal 1997 as compared
to fiscal 1996 sales. The decrease in the 1997 fish oil sales volumes was
attributable to the Company's decision to defer marketing of its fish oil to
fiscal 1998 and to a lower level of inventory that was carried over to fiscal
1997 from fiscal 1996. The deferral of the Company's marketing of fish oil
coupled with
11
<PAGE> 14
the increased fish catch in 1997 has resulted in a substantial increase in the
Company's fish meal and fish oil year-end inventories in fiscal 1997 as compared
to the fiscal 1996 year-end inventory balances.
In fiscal 1997, the Company sold the assets of its protein blending
operation, Venture Milling Company ("Venture"), resulting in a pretax loss of
$533,000. Zapata's results of operations for the 1997, 1996 and 1995 fiscal
years were not materially impacted by the activities related to Venture's
operations. Revenues associated with these operations totaled $34.0 million,
$18.7 million and $8.9 million in fiscal 1997, 1996 and 1995, respectively,
however, its operating results were insignificant to the Company's results of
operations.
Fiscal 1996 revenues of $93.6 million and operating income of $10.5 million
compared to fiscal 1995 revenues of $95.0 million and an operating loss of $6.4
million. The improvement in the fiscal 1996 operating results was attributable
to higher prices for the Company's fish meal and fish oil products that more
than offset the effects of a lower fish catch and to a $12.3 million provision
for asset impairment recorded in fiscal 1995. As a result of adopting SFAS 121,
in April 1995 the Company recorded a $12.3 million pretax provision for asset
impairment to reduce its marine protein assets to their estimated fair market
value that was determined based on the highest third-party competitive bid that
had been received by the Company for its marine protein operations in connection
with the then-planned disposition of these operations. Prices for the Company's
fish meal and fish oil improved 22% in fiscal 1996 as compared to prices in
fiscal 1995. In 1996 the average per-ton price of fish meal increased to $427
and the average per-ton price of fish oil increased to $390. However, sales
volumes of fish meal and fish oil in fiscal 1996 were 28% and 34% lower,
respectively, than the fiscal 1995 levels, reflecting the effects of a 14% drop
in the fiscal 1996 fish catch as compared to the 1995 fish catch and to lower
levels of inventories that were carried over to fiscal 1996 from fiscal 1995.
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. Thus, 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.
The Company's fish catch improved in fiscal 1997 after dropping in fiscal
1996 and fiscal 1995. The Company attributes the drop in fish catch during the
fiscal 1996 and 1995 periods to adverse weather conditions that hampered the
Company's fishing activities. The annual fish catch can vary from year to year
depending on weather conditions and other factors outside the Company's control;
the Company cannot predict future fish catch.
OTHER INCOME (EXPENSE)
Envirodyne
Effective October 1, 1995, Zapata changed its method of accounting for its
equity interest in Envirodyne. Zapata began reporting its equity in Envirodyne's
results of operations on a three-month delayed basis since Envirodyne's
financial statements are not available to the Company on a basis that would
permit concurrent reporting. For fiscal 1997, Zapata reported an equity loss of
$2.7 million based on its 40% interest in Envirodyne's results for Envirodyne's
twelve-month period ending June 26, 1997. The Company's equity loss for fiscal
1996 of $4.5 million included Zapata's equity interest in Envirodyne for
Envirodyne's twelve-month period ending June 27, 1996 prorated to Zapata's
August 1995 acquisition. The 1996 equity loss was offset by the cumulative
effect of change in accounting principle of $719,000 (before taxes) that
reversed the Company's equity loss as reported in the fourth quarter of fiscal
1995. For fiscal 1995, Zapata reported an equity loss of $719,000 that was based
on its then 31% interest in Envirodyne's results for the three months ended
September 28, 1995 prorated to Zapata's August 1995 acquisition.
Tidewater
In fiscal 1995, the Company sold its remaining 673,077 shares of Tidewater,
Inc. common stock for a net price of $18.87 per share or $12.7 million resulting
in a $4.8 million pretax gain that is reflected on the statement of operations
as other income.
12
<PAGE> 15
Other
In fiscal 1997, Zapata's net interest income increased to $2.0 million from
$678,000 in fiscal 1996 reflecting the Company's lower level of indebtedness.
Other expense of $176,000 in fiscal 1997 included a $533,000 loss related to the
sale of the Company's protein blending operation and a $722,000 gain associated
with the sale of certain real estate.
Reflecting the reduction of Zapata's indebtedness and higher cash balances
in fiscal 1996, the Company recorded net interest income of $678,000 in fiscal
1996 as compared to net interest expense of $1.8 million in fiscal 1995. Other
expense of $892,000 in fiscal 1996 included a $499,000 loss related to an
investment in subordinated debentures of Wherehouse Entertainment, Inc.
("Wherehouse Debentures").
Other income of $894,000 in fiscal 1995 included a $453,000 gain from the
sale of the Company's corporate aircraft, a receipt of $595,000 from a note that
was written down in previous years, the reversal of a $3.2 million reserve
related to a note that was fully collected and a $2.8 million loss related to
the investment in Wherehouse Debentures.
TAXES
The Company's consolidated provisions for U.S. income tax for fiscal 1997,
1996 and 1995 reflect expenses resulting from pretax income from consolidated
operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). The Company did not adopt the recognition provisions
of SFAS 123 but adopted the disclosure requirements October 1, 1996.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128") which established standards
for computing and presenting earnings per share. The Company will adopt the
provisions of the statement in fiscal 1998 and does not expect that adoption of
SFAS 128 will have a significant effect on the Company's earnings per share.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130") which is effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. It requires (a) classification of items of other comprehensive
income by their nature in a financial statement and (b) display of the
accumulated balance of other comprehensive income separate from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. The Company will adopt the provisions of the statement in
fiscal 1999.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131") which is effective for periods beginning after
December 15, 1997. SFAS 131 establishes standards for reporting information
about operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This Statement
supersedes SFAS 14, Financial Reporting for Segments of a Business Enterprise,
but retains the requirement to report information about major customers. The
Company will adopt the provisions of the statement in fiscal 1999.
YEAR 2000
The Company has converted most of its computer information systems enabling
proper processing of transactions related to the year 2000 and beyond. The cost
of conversion has been expensed and was immaterial. The Company continues to
evaluate its systems and expects that all of its systems will be compliant prior
to the year 2000.
13
<PAGE> 16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors,
Zapata Corporation:
We have audited the accompanying consolidated balance sheet of Zapata
Corporation as of September 30, 1997 and 1996 and the related consolidated
statements of operations, cash flows and stockholders' equity for each of the
three years in the period ended September 30, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Zapata
Corporation as of September 30, 1997 and 1996 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles.
The Company changed its method of accounting for its equity investment in
an unconsolidated affiliate during 1996 and the Company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" during 1995.
COOPERS & LYBRAND L.L.P.
Houston, Texas
December 11, 1997
14
<PAGE> 17
ZAPATA CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 55,598 $ 99,601
Restricted cash........................................... 4,337 337
Receivables............................................... 11,150 10,942
Inventories:
Protein products....................................... 35,210 26,522
Materials, parts and supplies.......................... 3,238 3,397
Prepaid expenses and other current assets................. 2,414 2,552
Net assets of discontinued operations..................... -- 6,473
-------- --------
Total current assets.............................. 111,947 149,824
-------- --------
Investments and other assets:
Investments in unconsolidated affiliates.................. 19,033 22,061
Production payment and other receivable................... 2,656 3,237
Deferred income taxes..................................... 1,787 5,641
Other assets.............................................. 14,531 15,501
-------- --------
Total investments and other assets................ 38,007 46,440
-------- --------
Property and equipment:
Marine protein............................................ 76,374 69,299
Corporate................................................. 504 3,349
-------- --------
76,878 72,648
Accumulated depreciation and amortization................. (35,881) (35,946)
-------- --------
40,997 36,702
-------- --------
Total assets...................................... $190,951 $232,966
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 1,034 $ 16,108
Accounts payable.......................................... 1,907 5,697
Accrued liabilities:
Compensation and employee benefits..................... 8,770 7,614
Insurance.............................................. 4,792 4,964
Income taxes........................................... 1,630 2,111
Other.................................................. 7,423 8,550
-------- --------
Total current liabilities......................... 25,556 45,044
-------- --------
Long-term debt.............................................. 11,294 18,159
-------- --------
Other liabilities........................................... 10,696 17,450
-------- --------
Commitments and contingencies (Note 12)
Stockholders' equity:
$2.00 noncumulative convertible preference stock ($1.00
par), outstanding: zero shares (1997) and 2,627 shares
(1996)................................................. -- 3
Common Stock ($0.25 par), issued: 29,579,978 shares (1997)
and 29,548,707 shares (1996)........................... 7,395 7,387
Capital in excess of par value............................ 139,400 131,963
Reinvested earnings, from October 1, 1990
quasi-reorganization................................... 26,781 12,960
Treasury stock, at cost, 6,675,100 shares (1997).......... (30,171) --
-------- --------
Total stockholders' equity........................ 143,405 152,313
-------- --------
Total liabilities and stockholders' equity........ $190,951 $232,966
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE> 18
ZAPATA CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
------------------------------
1997 1996 1995
-------- ------- -------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues.................................................... $117,564 $93,609 $94,959
-------- ------- -------
Expenses:
Operating................................................. 90,054 75,248 82,486
Provision for asset write-downs........................... -- -- 12,341
Depreciation and amortization............................. 3,744 3,252 2,751
Merger expenses........................................... -- 2,066 --
Selling, general and administrative....................... 10,924 7,092 7,259
-------- ------- -------
104,722 87,658 104,837
-------- ------- -------
Operating income (loss)..................................... 12,842 5,951 (9,878)
-------- ------- -------
Other income (expense):
Interest income........................................... 4,278 4,427 905
Interest expense.......................................... (2,247) (3,749) (2,694)
Gain on sale of Tidewater common stock.................... -- -- 4,811
Equity in loss of unconsolidated affiliates............... (2,845) (4,471) (719)
Other..................................................... (176) (892) 894
-------- ------- -------
(990) (4,685) 3,197
-------- ------- -------
Income (loss) from continuing operations before income
taxes..................................................... 11,852 1,266 (6,681)
Provision (benefit) for income taxes........................ 4,440 668 (2,359)
-------- ------- -------
Income (loss) from continuing operations.................... 7,412 598 (4,322)
-------- ------- -------
Discontinued operations (Notes 3, 4, 5 and 6):
Income (loss) from discontinued operations, net of income
taxes.................................................. 2,332 (3,161) (371)
Gain on disposition of discontinued operations, net of
income taxes........................................... 5,681 9,118 --
Reversal of loss on disposition, net of income taxes...... -- -- 8,897
-------- ------- -------
8,013 5,957 8,526
-------- ------- -------
Income before cumulative effect of change in accounting
principle................................................. 15,425 6,555 4,204
Cumulative effect of change in accounting principle, net of
income taxes.............................................. -- 467 --
-------- ------- -------
Net income.................................................. 15,425 7,022 4,204
Preferred and preference stock dividends.................... 2 -- 51
-------- ------- -------
Net income to Common Stockholders........................... $ 15,423 $ 7,022 $ 4,153
======== ======= =======
Per share data:
Income (loss) from continuing operations.................. $ 0.27 $ 0.02 $ (0.14)
Income from discontinued operations....................... 0.29 0.20 0.28
Cumulative effect of change in accounting principle....... -- 0.02 --
-------- ------- -------
Net income per share...................................... $ 0.56 $ 0.24 $ 0.14
======== ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE> 19
ZAPATA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flow provided (used) by operating activities:
Net income................................................ $ 15,425 $ 7,022 $ 4,204
-------- -------- --------
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation, amortization and asset write-downs....... 3,744 8,729 15,092
Write-down of investment in subordinated debentures.... -- 499 2,788
Cumulative effect of change in accounting principle,
net of income taxes.................................. -- (467) --
Reversal of loss on disposition........................ -- -- (8,897)
Discontinued operations net gain on sales of assets.... (5,681) (9,118) --
Gain on sales of other assets, net..................... (219) -- (5,268)
Equity in loss of unconsolidated affiliates............ 2,845 4,471 719
Restricted cash investments............................ (4,000) (337) --
Changes in assets and liabilities:
Receivables.......................................... (1,963) 5,057 (1,918)
Inventories.......................................... (9,291) (3,614) 11,439
Accounts payable and accrued liabilities............. (648) (2,145) (5,825)
Deferred income taxes................................ 2,668 (1,917) (2,828)
Other assets and liabilities......................... (865) (2,978) (304)
Decrease (increase) in net assets of discontinued
operations........................................ (3,587) (6,924) 543
-------- -------- --------
Total adjustments................................. (16,997) (8,744) 5,541
-------- -------- --------
Net cash provided (used) by operating
activities...................................... (1,572) (1,722) 9,745
-------- -------- --------
Cash flow provided (used) by investing activities:
Proceeds from disposition of assets, net.................. 19,513 128,969 18,537
Proceeds from notes receivable............................ 581 -- 5,505
Investment in unconsolidated affiliates................... -- (7,032) (450)
Investment in subordinated debentures..................... -- -- (3,481)
Capital expenditures...................................... (8,541) (4,010) (5,574)
-------- -------- --------
Net cash provided by investing activities......... 11,553 117,927 14,537
-------- -------- --------
Cash flow provided (used) by financing activities:
Borrowings................................................ 4,061 11,000 11,439
Principal payments of short- and long-term obligations.... (26,071) (30,349) (29,889)
Preferred and preference stock redemptions................ (199) -- (2,255)
Common Stock repurchases.................................. (30,171) -- (9,508)
Dividend payments......................................... (1,604) -- (1,153)
-------- -------- --------
Net cash used by financing activities............. (53,984) (19,349) (31,366)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ (44,003) 96,856 (7,084)
Cash and cash equivalents at beginning of year.............. 99,601 2,745 9,829
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 55,598 $ 99,601 $ 2,745
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE> 20
ZAPATA CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN INVESTMENTS
PREFERRED PREFERENCE COMMON EXCESS OF REINVESTED IN EQUITY TREASURY
STOCK STOCK STOCK PAR VALUE EARNINGS SECURITIES STOCK
--------- ---------- ------ ---------- ---------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994..... $ 2,255 $ 3 $7,929 $138,294 $ 1,785 $ 4,276 $ --
Net income...................... 4,204
Preferred stock dividend
declared...................... (51)
Preferred stock redemption...... (2,255)
Common Stock buyback............ (23) (485)
Repurchase Common Stock (2.25
million shares) from
Norex......................... (563) (8,438)
Reverse unrealized gain (net of
taxes)........................ (4,276)
Reclassification of deferred tax
asset......................... 2,573
Other........................... 44 18
------- --- ------ -------- ------- ------- --------
Balance at September 30, 1995..... -- 3 7,387 131,962 5,938 -- --
Net income...................... 7,022
Other........................... 1
------- --- ------ -------- ------- ------- --------
Balance at September 30, 1996..... -- 3 7,387 131,963 12,960 -- --
Net income...................... 15,425
Cash dividends declared:
Common Stock.................. (1,602)
Preference stock.............. (2)
Common Stock buyback (6.7
million shares)............... (30,171)
Preference stock redemption..... (3) (196)
Resolution of pre-quasi-
reorganization liability...... 4,930
Reclassification of deferred tax
asset......................... 2,643
Other........................... 8 60
------- --- ------ -------- ------- ------- --------
Balance at September 30, 1997..... $ -- $-- $7,395 $139,400 $26,781 $ -- $(30,171)
======= === ====== ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE> 21
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Consolidation
The financial statements include Zapata Corporation and its wholly and
majority-owned domestic and foreign subsidiaries (collectively, "Zapata" or the
"Company"). Investments in affiliated companies and joint ventures representing
a 20% to 50% voting interest are accounted for using the equity method, while
interests of less than 20% are accounted for using the cost method. All
significant intercompany accounts and transactions are eliminated in
consolidation. Reclassifications of prior year information have been made to
conform with the current year presentation. These reclassifications had no
effect on net income, total assets or stockholders' equity. Additionally, prior
year information and footnotes have been restated to reflect the Company's oil
and gas operations as a discontinued operation.
Zapata conducts operations in two business segments: marine proteins and
food services. Zapata conducts its marine protein operations through Marine
Genetics Corporation ("Marine Genetics") (formerly Zapata Protein, Inc.) which
produces and sells marine protein products. Zapata's food services operations
are conducted through its 40% ownership interest in Envirodyne Industries, Inc.
("Envirodyne").
Inventories
Materials, parts and supplies are stated at average cost. Protein product
inventories are stated at the lower of cost or market.
The marine protein operation allocates costs to production from its fish
catch on a basis of total fish catch and total costs associated with each
fishing season. The marine protein inventory is calculated on a standard cost
basis each month and adjusted to an actual cost basis quarterly. The costs
incurred during the off-season period of January through mid-April are deferred
to the next fishing season (mid-April through December) and allocated to
production as the fish catch is processed. The off-season deferred cost was
approximately $2.4 million and $2.5 million at September 30, 1997 and 1996,
respectively.
Investments in unconsolidated affiliates
In August 1995, Zapata acquired 4,189,298 common shares of Envirodyne,
representing 31% of the then-outstanding common stock of Envirodyne. In June and
July 1996, Zapata purchased 1,688,006 additional shares of Envirodyne and as a
result of these transactions, Zapata currently owns approximately 40% of the
outstanding shares of Envirodyne common stock. Zapata's investment in Envirodyne
is accounted for using the equity method of accounting.
Investment in Debentures
In May 1995, Zapata acquired $7,000,000 of 13% Wherehouse Entertainment
senior subordinated debentures due August 1, 2002 ("Wherehouse Debentures") for
$3,238,750 plus accrued interest. As of September 30, 1995, Zapata's investment
in the Wherehouse Debentures was written down to its estimated fair market value
of $910,000. The write-down was based on quoted prices of the Wherehouse
Debentures and the financial condition of Wherehouse Entertainment, Inc. which
was operating as a debtor in possession under Chapter 11 of the U.S. Bankruptcy
Code. As of September 30, 1996, Zapata's remaining investment was written down
to $411,000 based on proceeds received by the Company upon the disposition of
the investment in December 1996.
19
<PAGE> 22
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Property, equipment and depreciation
Property and equipment are recorded at cost except as adjusted by the
quasi-reorganization as of October 1, 1990. As a result of the
quasi-reorganization the carrying value of the assets utilized in the marine
protein operations was reduced to estimated fair value.
In April 1995, Zapata adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," which established accounting standards
for the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used or to be disposed of. As a
result of adopting SFAS 121, in April 1995 the Company recorded a $12.3 million
pretax provision for asset impairment to reduce its marine protein assets to
their estimated fair market value. The fair market value of the marine protein
assets was determined based upon the highest third-party competitive bid which
had been received by the Company in connection with a contemplated sale of the
marine protein operations in 1995. In accordance with SFAS 121, the Company
periodically evaluates its long-lived assets for impairment if events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.
Depreciation of property and equipment is provided using the straight-line
method over the estimated useful lives of the assets. Estimated useful lives of
assets acquired new, determined as of the date of acquisition, are as follows:
<TABLE>
<CAPTION>
USEFUL
LIVES
-------
(YEARS)
<S> <C>
Fishing vessels and fish processing plants.................. 15-20
Furniture and fixtures...................................... 3-10
</TABLE>
Revenue recognition
The Company's marine protein operation recognizes revenue when title to its
products is transferred to the customer.
Income taxes
The Company utilizes the liability method to account for income taxes. This
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing temporary differences between the
financial reporting and tax reporting basis of assets and liabilities, and
operating loss and tax credit carryforwards for tax purposes.
Earnings per share
Income per share is based on the weighted average number of common shares
and common share equivalents outstanding during each year. Common share
equivalents include the average shares issuable for convertible preference stock
and stock options. Income used for purposes of this calculation has been reduced
by accruals for preferred and preference stock dividends when and if declared.
Loss per share is based on the weighted average number of common shares
outstanding during each year.
The average shares used in the per share calculations were 27,302,626 in
fiscal 1997, 29,564,786 in fiscal 1996 and 30,706,256 in fiscal 1995.
Quasi-reorganization
In connection with the comprehensive restructuring accomplished in 1991,
the Company implemented, for accounting purposes, a "quasi-reorganization," an
elective accounting procedure that permits a company
20
<PAGE> 23
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
that has emerged from previous financial difficulty to restate its accounts and
establish a fresh start in an accounting sense. After implementation of the
accounting quasi-reorganization, the Company's assets and liabilities were
revalued and its deficit in reinvested earnings was charged to capital in excess
of par value. The Company effected the accounting quasi-reorganization as of
October 1, 1990. During fiscal 1997, the Company reclassified a $4.9 million
after-tax contingent liability to capital in excess of par value as a result of
the resolution of certain liabilities that were established at the date of the
quasi-reorganization. Capital in excess of par value may be adjusted in the
future as a result of the resolution of remaining pre-quasi-reorganization
liabilities.
Use of 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.
Recently Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). The Company did not adopt the recognition provisions
of SFAS 123 but adopted the disclosure requirements October 1, 1996.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS 128") which established standards
for computing and presenting earnings per share. The Company will adopt the
provisions of the statement in fiscal 1998 and does not expect that adoption of
SFAS 128 will have a significant effect on the Company's earnings per share.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS 130") which is effective for
fiscal years beginning after December 15, 1997. SFAS 130 establishes standards
for reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. It requires (a) classification of items of other comprehensive
income by their nature in a financial statement and (b) display of the
accumulated balance of other comprehensive income separate from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. The Company will adopt the provisions of the statement in
fiscal 1999.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131") which is effective for periods beginning after
December 15, 1997. SFAS 131 establishes standards for reporting information
about operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This Statement
supersedes SFAS 14, Financial Reporting for Segments of a Business Enterprise,
but retains the requirement to report information about major customers. The
Company will adopt the provisions of the statement in fiscal 1999.
Other Income and Expense
Other expense of $176,000 in fiscal 1997 included a $533,000 loss related
to the sale of the Company's protein blending operation, and a $722,000 gain
associated with the sale of certain real estate.
21
<PAGE> 24
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other expense of $892,000 in fiscal 1996 included a $499,000 loss related
to an investment in Wherehouse Debentures.
Other income of $894,000 in fiscal 1995 included a $453,000 gain from the
sale of the Company's corporate aircraft, a receipt of $595,000 from a note that
was written down in previous years, the reversal of a $3.2 million reserve
related to a note that was fully collected and a $2.8 million loss related to
the investment in Wherehouse Debentures.
NOTE 2. CHANGE IN ACCOUNTING PRINCIPLE
Effective October 1, 1995, the Company changed its method of accounting for
its equity interest in Envirodyne. Since Envirodyne's financial statements are
not available to the Company on a basis that would permit concurrent reporting,
the Company began reporting its equity in Envirodyne's results of operations on
a three-month delayed basis. The Company's financial statements for the quarter
ended December 31, 1995 did not include the Company's equity interest in
Envirodyne for the corresponding period. The change reduced previously reported
income from continuing operations by $467,000 ($719,000 before tax), or $.02 per
share, with a corresponding cumulative effect for the change in accounting
principle of $467,000 in the quarter ended December 31, 1995.
The following table reflects on a pro forma basis the effect of
retroactively applying the new accounting principle (amounts in thousands,
except per share amounts):
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
----------------
1996 1995
------ ------
<S> <C> <C>
Net income.................................................. $6,555 $4,671
Net income per share........................................ $ 0.22 $ 0.15
</TABLE>
Envirodyne's net loss reported in their Form 10-Q for the quarter ended
September 25, 1997 but not yet recorded in Zapata's financial statements is $3.8
million, of which Zapata's interest is approximately $1.1 million. This loss,
net of amortization of $404,000, will be recorded by the Company in its results
of operations for the quarter ending December 31, 1997.
NOTE 3. DISCONTINUED OIL & GAS ASSETS
In September 1994, the Board of Directors determined that the Company would
undertake efforts to sell its U.S. natural gas producing properties. The six
properties in the Gulf of Mexico, representing Zapata's domestic oil and gas
producing operations, were sold during fiscal 1995. Zapata received cash of $4.0
million and an $8.9 million production payment and other receivable. No gain or
loss was recorded from the sales in fiscal 1995. During fiscal 1996, the Company
recorded a $5.5 million write-down of the production payment receivable as a
result of a reduction in the estimated oil and gas reserves associated with the
production payment as prepared by the purchaser's reserve engineers.
The production payment and other receivable balance at September 30, 1997
consisted of a $637,000 production payment receivable and a $2.1 million
receivable related to future proceeds from a revenue sharing agreement. The
Company will begin collecting the production payment receivable only after
certain cumulative production volumes have been achieved; collection will cease
upon the earlier of (i) receipt of $13.5 million or (ii) when the designated oil
and gas reserves have been depleted. The $2.1 million receivable related to the
revenue sharing agreement will be collected based on payments made by a third
party for the use of a platform and related facilities. Receipts under the
revenue sharing agreement began in November 1996 and will cease at the earlier
of (i) the receipt of $6.0 million or (ii) the cessation of payments made by a
third
22
<PAGE> 25
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
party for usage of the platform and related facilities. The receivable's
estimated fair market value of $2.7 million is based on discounted expected cash
flows and approximates book value at September 30, 1997.
On July 11, 1997, Zapata completed the sale of its Bolivian oil and gas
interests to Tesoro Bolivia Petroleum Company ("Tesoro") for $18.8 million cash
and the assumption by Tesoro of certain liabilities (collectively, the "Bolivian
Sale"). The Bolivian Sale completes Zapata's exit from the oil and gas business.
As a result, Zapata has restated its financial statements to reflect its oil and
gas operations as a discontinued operation. The terms of the Bolivian Sale were
determined by negotiations between Zapata and Tesoro, Zapata's co-venturer with
respect to the Bolivian operations. In connection with the Bolivian Sale, Zapata
established a $4.0 million letter of credit in favor of Tesoro as security
against the possibility of a Bolivian income tax liability incurred by Zapata as
a result of the Bolivian Sale. Zapata's obligations with respect to the letter
of credit will terminate on the first business day following the first to occur
of the recording of the assignment of Zapata's interest by Tesoro as a public
deed in Bolivia or the receipt by Tesoro of evidence of payment by Zapata of all
taxes due in Bolivia, if any. The Bolivian Sale resulted in an after-tax gain of
approximately $5.7 million.
The consolidated financial statements were restated in fiscal 1997 to
report the net assets and operating results of Zapata's oil and gas operations
as a discontinued operation. Summarized results of Zapata's oil and gas
discontinued operations are shown below (amounts in millions):
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
--------------------
1997 1996 1995
---- ----- -----
<S> <C> <C> <C>
FINANCIAL RESULTS
Revenue................................................... $4.3 $ 2.1 $ 8.1
Expenses.................................................. 0.7 6.9 10.4
---- ----- -----
Income (loss) before taxes................................ 3.6 (4.8) (2.3)
Income tax provision (benefit)............................ 1.3 (1.7) (.8)
---- ----- -----
Net income (loss)......................................... $2.3 $(3.1) $(1.5)
==== ===== =====
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1996
-------------
<S> <C>
FINANCIAL POSITION
Current Assets............................................ $1.2
Property and equipment, net............................... 5.5
----
6.7
Current Liabilities....................................... .2
----
Net book value............................................ $6.5
====
</TABLE>
NOTE 4. DISCONTINUED NATURAL GAS COMPRESSION OPERATIONS
In late 1994 and early 1995, the Company began to develop a plan which
included the divestiture of most of the Company's remaining energy operations,
including its natural gas compression operations ("Energy Industries").
In September 1995, Zapata entered into an agreement (the "Purchase
Agreement") to sell the assets of Energy Industries 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 Energy Industries for
approximately $131.0 million in cash, and assumed certain liabilities of Energy
Industries. A portion of the proceeds from the sale was used to repay
indebtedness of Energy Industries totaling approximately $26.0 million and to
pay expenses of approximately
23
<PAGE> 26
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$1.4 million incurred in connection with the sale. The sale closed in December
1995 after receiving stockholder approval and resulted in an aftertax gain of
approximately $12.6 million.
The consolidated financial statements were restated in fiscal 1995 to
report the net assets and operating results of the Energy Industries operations
as a discontinued operation. Summarized results of the Energy Industries
discontinued operations are shown below (amounts in millions):
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
-------------
1996 1995
----- -----
<S> <C> <C>
FINANCIAL RESULTS
Revenues.................................................. $13.1 $66.6
Expenses.................................................. 13.0 63.2
----- -----
Income (loss) before taxes................................ 0.1 3.4
Income tax provision...................................... 0.1 1.4
----- -----
Net income*....................................... $ -- $ 2.0
===== =====
</TABLE>
- ---------------
* Net income includes allocations of interest expense on general corporate debt
of $260,000 in 1996 and $1.7 million in 1995. 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 5. DISPOSITION OF 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. The aggregate cash consideration paid by Conoco and Enogex totaled
approximately $23.0 million. Subsequently, the Company sold Cimarron's remaining
assets for an additional $700,000. A portion of the proceeds from the sales was
used to repay $1.0 million of Cimarron's debt and to pay approximately $1.8
million for expenses associated with such sales. The sales resulted in an
after-tax loss of approximately $3.0 million. Additionally, Cimarron recognized
an after-tax loss of approximately $500,000 from operations during fiscal 1996.
The consolidated financial statements were restated in fiscal 1995 to
report the net assets and operating results of Cimarron's operations as a
discontinued operation. Summarized results of Cimarron's discontinued operations
are shown below (amounts in millions):
<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30,
--------------
1996 1995
----- -----
<S> <C> <C>
FINANCIAL RESULTS
Revenues.................................................. $23.9 $67.8
Expenses.................................................. 24.7 69.1
----- -----
Loss before taxes......................................... (0.8) (1.3)
Income tax benefit........................................ (0.3) (0.5)
----- -----
Net loss*......................................... $(0.5) $(0.8)
===== =====
</TABLE>
24
<PAGE> 27
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- ---------------
* Net loss includes allocations of interest expense on general corporate debt of
$452,000 in 1995. 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 6. DISCONTINUED OPERATIONS SUBSEQUENTLY RETAINED
On May 5, 1995, the Board of Directors decided to retain its marine protein
operations that had previously been reflected as a discontinued operation by the
Company. Zapata had previously announced that an agreement to sell its marine
protein operations had been reached. However, the acquisition group failed to
close the transaction and as a result, the marine protein net assets and results
of operations and cash flows for all periods were reclassified from discontinued
operations to continuing operations. Additionally, an $8.9 million after-tax
book loss that was recorded in fiscal 1994 was reversed in fiscal 1995.
NOTE 7. UNCONSOLIDATED AFFILIATES
In August 1995, Zapata acquired 4,189,298 shares of Envirodyne common
stock, representing 31% of the then outstanding common stock of Envirodyne, for
$18.8 million from a trust controlled by Malcolm Glazer, Chairman of the Board
of Zapata and a then-director of Envirodyne. Zapata paid the purchase price by
issuing to the seller a subordinated promissory note bearing interest at prime
and maturing in August 1997, subject to prepayment at the Company's option. The
Company prepaid approximately $15.6 million on the promissory note in fiscal
1995 and the remaining $3.2 million in fiscal 1996. In June and July 1996,
Zapata purchased 1,688,006 additional shares of Envirodyne common stock in
brokerage and privately negotiated transactions for aggregate consideration of
approximately $7.0 million. As a result of these transactions, Zapata currently
owns approximately 40% of the outstanding shares of Envirodyne common stock.
The difference between Zapata's share of Envirodyne's equity and Zapata's
recorded investment in Envirodyne is being amortized over 15 years. At September
30, 1997, the unamortized balance of this difference was $21.1 million. The
aggregate market value of Zapata's shares of Envirodyne's common stock as of
September 30, 1997 was $49.2 million based on the closing price of $8.38 per
publicly traded share on that date.
Due to the significance of the Company's investment, the unaudited
financial position and results of operations of Envirodyne are summarized below.
The financial statement information presented below for Envirodyne is based upon
its annual and interim reports for the corresponding periods presented
(unaudited, in millions, except per share amounts):
ENVIRODYNE INDUSTRIES, INC.
<TABLE>
<CAPTION>
JUNE 26, 1997 JUNE 27, 1996
------------- -------------
<S> <C> <C>
BALANCE SHEET
Current assets........................................... $216.0 $239.3
Other.................................................... 165.2 179.6
Property and equipment, net.............................. 449.5 461.0
------ ------
Total assets..................................... $830.7 $879.9
====== ======
Current liabilities...................................... $121.1 $125.7
Long-term debt........................................... 509.8 522.7
Deferred income taxes and other.......................... 106.9 126.3
Stockholders' equity..................................... 92.9 105.2
------ ------
Total liabilities and stockholders' equity....... $830.7 $879.9
====== ======
</TABLE>
25
<PAGE> 28
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED THREE MONTHS
------------------------------ ENDED
JUNE 26, 1997 JUNE 27, 1996 SEPTEMBER 28, 1995
------------- ------------- ------------------
<S> <C> <C> <C>
INCOME STATEMENT
Revenues............................... $636.9 $654.7 $167.7
Loss before income taxes............... (21.1) (26.3) (7.5)
Net loss............................... (10.6) (20.2) (4.5)
Net loss per share..................... (0.73) (1.47) (0.33)
</TABLE>
In January 1992, Zapata exchanged its 34.7% interest in Zapata Gulf Marine
Corporation for approximately 8.3 million shares of Tidewater, Inc.
("Tidewater") common stock. In March 1995, Zapata sold its remaining 673,077
shares of Tidewater common stock for a net price of $18.87 per share, or $12.7
million, resulting in a pretax gain of $4.8 million. The gain is reflected on
the statement of operations as other income. Zapata included Tidewater's
dividends of approximately $135,000 in other income in fiscal 1995.
In fiscal 1995, the Company's marine protein division invested $450,000 to
obtain a 50% share in a joint venture to manufacture and market animal feed
ingredients overseas. The joint venture began operations in late 1996. During
fiscal 1997, this investment was written down by $253,000. This investment is
accounted for using the equity method of accounting.
A summary of equity in net income (loss) of and investments in
unconsolidated affiliates is shown below:
<TABLE>
<CAPTION>
INVESTMENTS
EQUITY IN AS OF
NET LOSS SEPTEMBER 30
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
1997
Envirodyne................................................ $(2,685) $18,845
Marine protein joint ventures............................. (160) 188
------- -------
$(2,845) $19,033
======= =======
1996
Envirodyne................................................ $(4,456) $21,530
Marine protein joint ventures............................. (15) 531
------- -------
$(4,471) $22,061
======= =======
1995
Envirodyne................................................ $ (719) $18,235
Marine protein joint venture.............................. -- 450
------- -------
$ (719) $18,685
======= =======
</TABLE>
26
<PAGE> 29
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8. DEBT
At September 30, 1997 and 1996, Zapata's consolidated debt consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Senior Debt:
U.S. government guaranteed obligations:
Amounts due in installments through 2011, interest from
6.63% to 7.17%....................................... $ 8,678 $ 7,267
Amounts due in installments through 2014, interest at
Eurodollar rates plus .45%; 6.17% and 6.08% at
September 30, 1997 and 1996, respectively............ 1,350 1,429
Hibernia National Bank term note due 2002, interest at
prime or Eurodollar rates plus 1.75%; 8.5% at September
30, 1997, collateralized by certain assets of Marine
Genetics............................................... 2,175 --
Other debt at 4% and 5.6% at September 30, 1997 and 1996,
respectively........................................... 125 78
------- -------
12,328 8,774
------- -------
Subordinated debt:
10 1/4% debentures due 1997............................... -- 15,621
10 7/8% debentures due 2001............................... -- 9,872
------- -------
-- 25,493
------- -------
Total debt.................................................. 12,328 34,267
------- -------
Less current maturities..................................... 1,034 16,108
------- -------
Long-term debt.............................................. $11,294 $18,159
======= =======
</TABLE>
The fair value of the Company's debt obligations are estimated based upon
quoted market prices for the same or similar issues or on current rates offered
to the Company for debt of the same remaining maturities. The fair value of
total debt at September 30, 1997 and 1996 approximated book value.
On May 17, 1993, Zapata completed certain financial transactions with Norex
Drilling Ltd. ("Norex Drilling"), a wholly owned subsidiary of Norex America,
Inc. ("Norex America" and, collectively with Norex Drilling and other
affiliates, "Norex"), through which Zapata raised $111.4 million from the
issuance of debt and equity (the "Norex Agreement"). In April 1995, Zapata used
proceeds of $12.7 million from the sale of its remaining 673,077 shares of
Tidewater common stock to reduce the Company's indebtedness due to Norex. In
March 1996, Zapata repaid the remaining $4.8 million of indebtedness due to
Norex.
In 1995, two of the Company's subsidiaries, Marine Genetics Corporation
(formerly Zapata Protein, Inc.) and Zapata Protein (USA), Inc. (collectively
"Marine Genetics") entered into a loan agreement with Internationale Nederlanden
(U.S.) Capital Corporation ("ING Loan Agreement"). The ING Loan Agreement
provided Marine Genetics with a $15 million revolving credit facility that was
due June 30, 1997. The ING Loan Agreement was terminated in fiscal 1997.
In August 1995, Zapata acquired 4,189,298 shares of Envirodyne common stock
for $18.8 million from a trust controlled by Malcolm Glazer, Chairman of the
Board of Zapata and a then-director of Envirodyne. Zapata paid the purchase
price by issuing to the seller a subordinated promissory note bearing interest
at prime and maturing in August 1997, subject to prepayment at the Company's
option. The Company prepaid approximately $15.6 million of the promissory note
in fiscal 1995 and prepaid the remaining $3.2 million balance in fiscal 1996.
27
<PAGE> 30
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Annual maturities
The annual maturities of long-term debt for the five years ending September
30, 2002 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002
- ------ ------ ------ ------ ------
<C> <C> <C> <C> <C>
$1,034 $1,061 $1,092 $1,136 $1,108
</TABLE>
NOTE 9. CASH FLOW INFORMATION
For purposes of the statement of cash flows, all highly liquid investments
with an original maturity of three months or less are considered to be cash
equivalents.
Net cash provided by operating activities reflects cash payments of
interest and income taxes.
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the fiscal year for:
Interest................................................. $2,700 $3,888 $6,609
Income tax payments...................................... 4,000 6,276 544
</TABLE>
During fiscal 1995, the Company exchanged certain assets held for sale for
property and equipment and also exercised an option to purchase certain real
estate resulting in the reclassification of a deposit from other assets to
property and equipment. These transactions resulted in the reclassification of
approximately $2.0 million from other assets to property and equipment.
In connection with the sale of Energy Industries' and Cimarron's assets
during fiscal 1996, Zapata retained certain assets and liabilities related to
those operations. As a result, the Company reclassified liabilities totaling
approximately $2.6 million from net assets of discontinued operations to
continuing operations. Additionally, a portion of the Energy Industries' asset
sale proceeds was paid directly to certain lenders to repay indebtedness
totaling approximately $26 million; the Company received net proceeds of $105
million from the sale.
NOTE 10. PREFERRED, PREFERENCE AND COMMON STOCK
Preferred stock
Zapata has authorized two million shares of preferred stock issuable in one
or more series. In January 1995, Zapata redeemed the balance of its outstanding
preferred stock. The preferred stock was redeemed at $100 a share. Quarterly
dividends of $2.25 per share were declared and paid in fiscal 1995.
Preference stock
Zapata has authorized 18 million shares of preference stock issuable in one
or more series. Zapata redeemed the balance of its outstanding preference stock
in September 1997 at the redemption price of $80 per share.
Common stock
Zapata has authorized 165 million shares of Common Stock, of which
22,904,878 were issued and outstanding at September 30, 1997. On July 10, 1997,
Zapata declared a quarterly cash dividend of $0.07 per share that was paid on
August 1, 1997 to stockholders of record on July 25, 1997.
Zapata's board of directors has authorized purchases of up to 7.5 million
shares of Common Stock from time to time, depending on market conditions. The
repurchase program may include privately negotiated
28
<PAGE> 31
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
transactions in addition to purchases in the open market. Pursuant to the
repurchase program, Zapata repurchased 6.7 million shares of Common Stock on May
30, 1997 in a privately negotiated transaction at a price of $4.52 per share,
including commissions. As it is the Company's intent to use these shares for
general corporate purposes, such shares are reflected in the financial
statements as treasury stock, at cost. Malcolm I. Glazer has informed the board
of directors that he does not intend to sell to the Company any of the
approximately 10.4 million shares of Common Stock beneficially owned by him
(currently approximately 45.5% of that outstanding) under the stock repurchase
program. The Company has entered into an agreement with Malcolm I. Glazer under
which he has represented that he does not intend to take any action or cause the
Company to take any action to "go private" or otherwise cause its Common Stock
to cease to be publicly traded, and that should that intent change in the
future, no such transaction will be undertaken (with certain exceptions) except
on terms approved by a special committee of independent directors and determined
to be fair to the Company's stockholders from a financial point of view by a
nationally recognized investment banking firm.
In April 1995, Zapata repurchased 2.25 million shares of Common Stock from
Norex for $4.00 per share. The shares repurchased by Zapata represented 7% of
the Company's then outstanding Common Stock.
Stock Option Plans
Under the Company's 1981 Stock Incentive Plan (the "1981 Plan"), options
may be granted at prices equivalent to the market value of the Company's Common
Stock at the date of the grant. Options become exercisable in annual
installments equal to one-third of the shares covered by the grant beginning one
year from the grant date. Options not exercised in the period they become
exercisable may be carried forward and exercised in subsequent periods. During
1986, the Company amended and restated the 1981 Plan to provide for the award of
restricted shares of Common Stock. No shares of Common Stock are available for
further grants of stock options or awards of restricted stock under the 1981
Plan.
Zapata's Amended and Restated Special Incentive Plan (the "1987 Plan")
provides for the granting of stock options and the awarding of restricted stock.
Under the 1987 Plan, options may be granted at prices equivalent to the market
value of the Common Stock at the date of grant. Options become exercisable on
dates as determined by the Committee, provided that the earliest such date
cannot occur before six months after the date of grant. Unexercised options will
expire on varying dates, up to a maximum of ten years from the date of grant.
The awards of restricted stock have a restriction period of not less than six
months and not more than five years. The 1987 Plan provided for the issuance of
up to 600,000 shares of the Common Stock. During 1992, the stockholders approved
an amendment to the 1987 Plan that provides for the automatic grant of a
nonqualified stock option to directors of Zapata who are not employees of Zapata
or any subsidiary of Zapata. At September 30, 1997, a total of 296,334 stock
options had been exercised and a total of 143,666 shares of Common Stock were
reserved for the future granting of stock options or the awarding of restricted
stock under the 1987 Plan.
On December 6, 1990, the Company's stockholders approved a new stock option
plan (the "1990 Plan"). The 1990 Plan provides for the granting of nonqualified
stock options to key employees of the Company. Under the 1990 Plan, options may
be granted by the Committee at prices equivalent to the market value of the
Common Stock on the date of grant. Options become exercisable in one or more
installments on such dates as the Committee may determine, provided that such
date cannot occur prior to the expiration of one year of continued employment
with the Company following the date of grant. Unexercised options will expire on
varying dates up to a maximum of ten years from the date of grant. The 1990 Plan
provides for the issuance of options to purchase up to 1,000,000 shares of
Common Stock. At September 30, 1997, a total of 946,534 stock options had been
exercised and a total of 32,666 shares of Common Stock were reserved for the
future granting of stock options under the 1990 Plan.
29
<PAGE> 32
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 5, 1996, the Company's stockholders approved a new stock option
plan (the "1996 Plan"). The 1996 Plan provides for the granting of nonqualified
stock options to key employees of the Company. Under the 1996 Plan, options may
be granted by the Committee at prices equivalent to the market value of the
Common Stock on the date of grant. Options become exercisable in one or more
installments on such dates as the Committee may determine. Unexercised options
will expire on varying dates up to a maximum of ten years from the date of
grant. The 1996 Plan provides for the issuance of options to purchase up to
5,000,000 shares of Common Stock. At September 30, 1997, no stock options had
been exercised and a total of 2,856,500 shares of Common Stock were reserved for
the future granting of stock options under the 1996 Plan.
The Company has granted stock options under the 1981 Plan, the 1987 Plan,
the 1990 Plan and the 1996 Plan (collectively, the "Plans"). The Company applies
APB Opinion 25 and related Interpretations in accounting for the Plans. In 1995,
the FASB issued SFAS 123 which, if fully adopted by the Company, would change
the methods the Company applies in recognizing the cost of the Plans. Adoption
of the cost recognition provisions of SFAS 123 is optional and the Company has
decided not to elect these provisions of SFAS 123. However, pro forma
disclosures as if the Company adopted the cost recognition provisions of SFAS
123 are presented below.
Under the Plans, the Company is authorized to issue shares of Common Stock
pursuant to "Awards" granted in various forms, including incentive stock options
(intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended), non-qualified stock options, and other similar stock-based Awards. The
Company granted stock options in fiscal 1997 under the Plans in the form of
nonqualified stock options.
The Company granted stock options in fiscal 1997 to employees and
directors. The stock options granted in fiscal 1997 have contractual terms of 10
years. All of the options granted to the employees and directors have an
exercise price equal to the fair market value of the stock at grant date. The
options granted in fiscal 1997 vest ratably over three years beginning on the
first anniversary of the date of grant.
A summary of the status of the Company's stock options as of September 30,
1997 and 1996 and the changes during the year ended on these dates is presented
below:
<TABLE>
<CAPTION>
STOCK OPTIONS
---------------------------------------------
1997 1996
--------------------- ---------------------
# SHARES WEIGHTED # SHARES WEIGHTED
OF AVERAGE OF AVERAGE
UNDERLYING EXERCISE UNDERLYING EXERCISE
OPTIONS PRICES OPTIONS PRICES
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............ 165,700 $4.13 186,000 $4.46
Granted..................................... 2,223,500 4.62 -- --
Exercised................................... 58,900 3.21 300 3.13
Forfeited................................... -- -- 20,000 7.19
Outstanding at end of year.................. 2,330,300 4.62 165,700 4.13
Exercisable at end of year.................. 100,133 4.72 152,366 4.20
</TABLE>
The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants in fiscal 1997: dividend yield of 6.06%,
risk-free interest rate of 6.54%, an expected life of options of 5 years and a
volatility of 37.9% for all grants. The weighted-average fair value of options
granted for fiscal 1997 was $1.16 per share; no options were granted in fiscal
1996.
30
<PAGE> 33
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Options outstanding and exercisable as of September 30, 1997 are summarized
below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ----------------------
WEIGHTED WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING CONTR. LIFE PRICE EXERCISABLE PRICE
- -------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$3.13 to $4.63 2,270,300 9.68 $4.59 40,133 $3.21
$5.31 to $5.94 60,000 5.72 5.73 60,000 5.73
- -------------- --------- ---- ----- ------- -----
$3.13 to $5.94 2,330,300 9.58 $4.62 100,133 $4.72
========= =======
</TABLE>
If the compensation cost for the Company's stock-based compensation plans
had been determined consistent with SFAS 123, the Company's net income and net
income per common share for fiscal 1997 and 1996 would approximate the pro forma
amounts presented below (amounts in thousands, except per share amounts):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------- ------------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
-------- ------- -------- ------
<S> <C> <C> <C> <C>
SFAS 123 charge.............................. $ -- $ 195 $ -- $ --
Net income................................... 15,425 15,297 7,022 7,022
Net income per Common Share.................. 0.56 0.56 0.24 0.24
</TABLE>
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards granted prior to
fiscal 1996.
NOTE 11. INCOME TAXES
The Company utilizes the liability method to account for income taxes. This
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing temporary differences between the
financial reporting and tax reporting base of assets and liabilities, and
operating loss and tax credit carryforwards for tax purposes. Due to the
implementation of the quasi-reorganization as of October 1, 1990, the Company
was required to adjust capital in excess of par value for the recognition of
deductible temporary differences and credit carryforward items which existed at
the date of the quasi-reorganization. Future reductions, if any, in the deferred
tax valuation allowance relating to tax attributes that existed at the time of
the quasi-reorganization will also be allocated to capital in excess of par
value.
Zapata and its domestic subsidiaries file a consolidated U.S. federal
income tax return. The provision for income tax expense (benefit) from
continuing operations consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
State................................................ $ 448 $ 348 $ 268
U.S.................................................. (2,863) 979 --
Deferred
State................................................ -- -- (300)
U.S.................................................. 6,855 (659) (2,327)
------ ----- -------
$4,440 $ 668 $(2,359)
====== ===== =======
</TABLE>
31
<PAGE> 34
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) was allocated to operations as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Continuing domestic operations........................ $4,440 $ 668 $(2,359)
Discontinued operations............................... 4,314 8,517 3,759
Cumulative effect of a change in accounting
principle........................................... -- 252 --
------ ------ -------
Total....................................... $8,754 $9,437 $ 1,400
====== ====== =======
</TABLE>
For federal income tax purposes, Zapata has $11.0 million of investment tax
credit carryforwards expiring in fiscal 1999 through 2001, and $6.3 million of
alternative minimum tax credit carryforwards. Investment tax credits are limited
to a maximum of $5.5 million as a result of a change of ownership as calculated
for tax purposes. As a result of the change in ownership, the use of the
Company's tax credit carryforwards is limited to a maximum of $1.5 million per
year. Investment tax credit carryforwards are reflected in the balance sheet as
a reduction of deferred taxes using the flowthrough method.
The following table reconciles the income tax provisions for fiscal 1997,
1996 and 1995 computed using the U.S. statutory rate of 35% to the provisions
from continuing operations as reflected in the financial statements.
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Taxes at statutory rate................................ $4,148 $ 443 $(2,338)
Amortization of intangibles not deductible for tax..... 123 11 11
Other.................................................. (279) (134) --
State taxes............................................ 448 348 (32)
------ ----- -------
$4,440 $ 668 $(2,359)
====== ===== =======
</TABLE>
Temporary differences and tax credit carryforwards that gave rise to
significant portions of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1997 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Asset write-downs and accruals not yet deductible......... $ 3,173 $ 5,006
Investment tax credit carryforwards....................... 10,999 12,557
Alternative minimum tax credit carryforwards.............. 6,331 6,331
Equity in loss of unconsolidated affiliates............... 2,645 1,560
Other..................................................... 1,246 2,934
-------- -------
Total deferred tax assets......................... 24,394 28,388
Valuation allowance....................................... (14,214) (16,857)
-------- -------
Net deferred tax assets........................... 10,180 11,531
-------- -------
Deferred tax liabilities:
Property and equipment.................................... (2,723) (483)
Pension................................................... (4,337) (4,001)
Other..................................................... (1,333) (1,406)
-------- -------
Total deferred tax liabilities.................... (8,393) (5,890)
-------- -------
Net deferred tax asset............................ $ 1,787 $ 5,641
======== =======
</TABLE>
32
<PAGE> 35
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The valuation allowance decreased approximately $2.6 million in fiscal 1997
reflecting changes in the Company's estimated utilization of tax credit
carryforwards. A valuation allowance is provided to reduce the deferred tax
assets to a level which, more likely than not, will be realized. Primary factors
considered by management to determine the size of the allowance include the
competitive and cyclical nature of the Company's primary business and the
limitations on the use of such carryforwards and expiration dates.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Operating leases payable
Future minimum payments under non-cancelable operating lease obligations
aggregate $4.9 million. The total future minimum rental payments have not been
reduced by $3.2 million of sublease rentals to be received in the future under
noncancelable subleases. Future minimum payments, net of sublease rentals, for
the five years ending September 30, 2002 are:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002
---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Lease obligations.............................. $547 $484 $451 $199 $ --
</TABLE>
Rental expenses for operating leases were $500,000, $602,000 and $1.8
million in fiscal 1997, 1996 and 1995, respectively.
Litigation
On August 11, 1995, a derivative and class action was filed by Elly Harwin
against Zapata and its then directors in the Court of Chancery of the State of
Delaware, New Castle County. On January 18, 1996, a second derivative action was
filed by Crandon Capital Partners against Zapata and its directors in the same
court. On May 7, 1996, a third derivative action was filed by Elly Harwin and
Crandon Capital Partners against Zapata and its directors in the same court.
These cases have since been consolidated into one action (the "Harwin/Crandon
Case") by way of an amended, consolidated complaint. The consolidated complaint
alleges that Zapata's directors engaged in conduct constituting breach of
fiduciary duty and waste of Zapata's assets in connection with Zapata's
investment in Envirodyne, in connection with the decision to shift Zapata's
business focus from energy to food services, and in connection with the proposed
(but subsequently abandoned) merger with Houlihan's Restaurant Group, Inc.
("Houlihan's Merger"). The complaint alleges, among other things, that the
purchase of Envirodyne common stock from Malcolm I. Glazer's affiliate was a
wrongful expenditure of Zapata's funds and was designed to permit Malcolm I.
Glazer to obtain personal financial advantage to the detriment of Zapata. The
complaint also alleges that Zapata's Board of Directors is controlled by Malcolm
I. Glazer and that George Loar, now deceased, lacked independence from Malcolm
I. Glazer because he was employed until his retirement by a corporation
indirectly controlled by Malcolm I. Glazer, that Mr. Leffler lacks such
independence because of his status as a paid consultant to Malcolm I. Glazer,
that Avram A. Glazer lacks such independence because of familial relationship
and that Mr. Lassiter lacks such independence by reason of an employment or
consulting relationship with Zapata. The complaint seeks relief including, among
other things, rescission of Zapata's purchase of the shares of Envirodyne common
stock from the Malcolm Glazer Trust; injunctive relief to void the election of
Messrs. Leffler and Loar as directors at Zapata's Annual Meeting of Stockholders
held on July 27, 1995 and to enjoin any transaction in which Malcolm I. Glazer
has an interest; and an award of unspecified compensatory damages and expenses,
including attorneys' fees. Zapata believes that the complaint and the
allegations contained therein are without merit and intends to defend the
Harwin/Crandon Case vigorously.
On May 31, 1996, a derivative and class action (the "Pasternak Case") was
filed by Arnold Pasternak against Zapata and its directors in the Court of
Chancery of the State of Delaware, New Castle County. The plaintiff alleged that
Zapata's directors engaged in conduct constituting breach of fiduciary duty and
waste of Zapata's assets in connection with the Houlihan's Merger; that the
Houlihan's Merger consideration was
33
<PAGE> 36
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
unfair and excessive; that the Houlihan's Merger would result in voting power
dilution, unfairly benefiting Malcolm I. Glazer; and that the Houlihan's Merger
agreement was in conflict with Article SEVENTH of Zapata's Restated Certificate
of Incorporation, which provides that an affirmative vote or consent of a
supermajority of 80% of outstanding voting stock is necessary under certain
circumstances. The plaintiff filed a motion for a preliminary injunction
requesting that the court preliminarily enjoin Zapata from consummating the
Houlihan's Merger based on the contention that under Article SEVENTH the
Houlihan's Merger would require the approval of holders of 80% of Zapata's
outstanding voting stock. The Delaware Chancery Court agreed with the plaintiff
and issued the preliminary injunction enjoining the proposed merger. Zapata
appealed to the Supreme Court of Delaware, but prior to any action being taken
by the Supreme Court, Zapata terminated the proposed merger. Zapata's appeal was
dismissed as moot and the order of the Chancery Court was vacated. Final orders
concluding this litigation were issued by the Court on October 23, 1997.
On January 22, 1997, a derivative and class action (the "Hawley Case") was
filed by Hawley Opportunity Fund against Zapata and its directors in the Court
of Chancery of the State of Delaware, New Castle County. The complaint alleged
that a $4.50 per share self-tender offer initiated by Zapata on January 14,
1997, for up to 15 million shares of its Common Stock was unfair and that
Zapata's offer to purchase in connection with the tender offer failed to
disclose material facts concerning patent litigation to which Viskase
Corporation, a unit of Envirodyne Industries, Inc., is the plaintiff and
material facts concerning the value of Zapata's Bolivian oil and gas reserves.
Zapata terminated the self-tender offer on February 24, 1997, rendering moot the
issues raised in the Hawley Case. Final orders concluding this litigation were
issued by the Court on August 25, 1997.
On November 9, 1995, a petition was filed in the 148th Judicial District
Court of Nueces County, Texas by Peter M. Holt, a former director of the
Company, and certain of his affiliates who sold their interests in Energy
Industries, Inc. and other natural gas compression companies ("Energy
Industries") to the Company in November 1993. The petition names the Company,
Malcolm I. Glazer and Avram A. Glazer as defendants and alleges several causes
of action based on alleged misrepresentations concerning the Company's long-term
development strategy focusing its efforts on the natural gas services business.
The petition does not allege a breach of any provision of the purchase agreement
pursuant to which the Company acquired Energy Industries from the plaintiffs.
The remedies sought by the plaintiffs include: (i) the disgorgement to the
plaintiffs of the Company's profit made on its sale of Energy Industries, plus
the cash profit the Company made from the operations of Energy Industries, which
the plaintiffs contend equals approximately $54 million; (ii) money damages
based on the alleged lower value of the Company's Common Stock had the alleged
misrepresentations not been made, which the plaintiffs contend is approximately
$6 million; (iii) money damages based on the plaintiffs' assumption that the
Company's Common Stock price would have increased if it had remained in the
natural gas services industry after 1995, which the plaintiffs contend equals
approximately $23 million; or (iv) money damages based on the assumption that
the plaintiffs had not sold Energy Industries and had taken it public in January
1997, which the plaintiffs contend amounts to more then $100 million. The
Company, Malcolm I. Glazer, and Avram A. Glazer filed counterclaims against the
plaintiffs for breach of the purchase agreement, breach of fiduciary duty, and
material misrepresentations and omissions by Mr. Holt. Trial is currently set
for February 1998. The Company believes that the petition and the allegations
made therein are without merit and intends to defend the case vigorously.
From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of its business. The Company
maintains insurance coverage against potential claims in an amount which it
believes to be adequate. In the opinion of management, uninsured losses, if any,
resulting from these matters and from the matters discussed above will not have
a material adverse effect on Zapata's results of operations, cash flows or
financial position.
34
<PAGE> 37
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. FINANCIAL INSTRUMENTS
Concentrations of Credit Risk
As indicated in the industry segment information which appears in Note 16,
the market for the Company's services and products is primarily related to the
marine protein operations whose customers consist primarily of domestic feed
producers. The Company performs ongoing credit evaluations of its customers and
generally does not require material collateral. The Company maintains reserves
for potential credit losses, and such losses have historically been within
management's expectations.
The Company had cash deposits concentrated primarily in two major banks at
September 30, 1997 and three major banks at September 30, 1996. In addition, the
Company had certificates of deposits, commercial paper and Eurodollar time
deposits with a variety of companies and financial institutions with strong
credit ratings. As a result of the foregoing, the Company believes that credit
risk in such instruments is minimal.
NOTE 14. BENEFIT PLANS
Qualified Defined Benefit Plans
Zapata has two noncontributory defined benefit pension plans covering
certain U.S. employees. Plan benefits are generally based on employees' years of
service and compensation level. All of the costs of these plans are borne by
Zapata. The plans have adopted an excess benefit formula integrated with covered
compensation. Participants are 100% vested in the accrued benefit after five
years of service.
Net pension credits for fiscal 1997, 1996 and 1995 included the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost -- benefits earned during the year....... $ 624 $ 610 $ 567
Interest cost on projected benefit obligations........ 2,578 2,430 2,354
Actual gain on plan assets............................ (7,583) (3,854) (6,452)
Amortization of transition assets and other
deferrals........................................... 3,422 (462) 2,864
------- ------- -------
Net pension credit.......................... $ (959) $(1,276) $ (667)
======= ======= =======
</TABLE>
The Company's funding policy is to make contributions as required by
applicable regulations. No contributions to the plans have been required since
1984. The plans' funded status and amounts recognized in the Company's balance
sheet at September 30, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Fair value of plan assets................................... $48,247 $43,695
Actuarial present value of benefit obligations:
Vested benefits........................................... 34,093 33,635
Nonvested benefits........................................ 360 440
------- -------
Accumulated benefit obligation............................ 34,453 34,075
Additional benefits based on projected salary increases... 1,904 1,994
------- -------
Projected benefit obligations............................. 36,357 36,069
------- -------
Excess of plan assets over projected benefit obligations.... 11,890 7,626
Unrecognized transition asset............................... (4,187) (5,024)
Unrecognized prior service cost............................. 912 1,034
Unrecognized net loss....................................... 3,775 7,795
------- -------
Prepaid pension cost........................................ $12,390 $11,431
======= =======
</TABLE>
35
<PAGE> 38
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The unrecognized transition asset at October 1, 1987, was $10.6 million,
which is being amortized over 15 years. For 1997 and 1996, the actuarial present
value of the projected benefit obligation was based on a 4.75% weighted average
annual increase in salary levels and a 7.5% discount rate. Pension plan assets
are invested in cash, common and preferred stocks, short-term investments and
insurance contracts. The projected long-term rate of return on plan assets was
9.0% in fiscal 1997 and 1996. The unrecognized net loss of $3.8 million at
September 30, 1997 is expected to be reduced by future returns on plan assets
and through decreases in future net pension credits.
Supplemental Retirement Plan
Effective April 1, 1992, Zapata adopted a supplemental pension plan, which
provides supplemental retirement payments to senior executives of Zapata. The
amounts of such payments equal the difference between the amounts received under
the applicable pension plan, and the amounts that would otherwise be received if
pension plan payments were not reduced as the result of the limitations upon
compensation and benefits imposed by federal law. Effective December 1994, the
supplemental pension plan was frozen.
Net pension expense for fiscal 1997, 1996 and 1995 included the following
components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost -- benefits earned during the year............. $-- $-- $--
Interest cost on projected benefit obligations.............. 67 67 67
Amortization of prior service cost.......................... -- -- --
--- --- ---
Net pension expense....................................... $67 $67 $67
=== === ===
</TABLE>
No contributions to the plan have been required since the plan is unfunded.
For fiscal 1997 and 1996 the actuarial present value of the projected benefit
obligation was based on a 7.5% discount rate. The plan's funded status and
amounts recognized in the Company's balance sheet at September 30, 1997 and 1996
are presented below:
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN THOUSANDS)
<S> <C> <C>
Fair value of plan assets................................... $ -- $ --
----- -----
Actuarial present value of benefit obligations:
Vested benefits........................................... 931 943
Nonvested benefits........................................ -- --
----- -----
Accumulated benefit obligation............................ 931 943
Additional benefits based on projected salary increases... -- --
----- -----
Projected benefit obligation.............................. 931 943
----- -----
Excess of projected benefit obligations over plan assets.... (931) (943)
Unrecognized net loss....................................... -- --
Unrecognized prior service costs............................ -- --
Additional minimum liability................................ -- --
----- -----
Unfunded accrued liability.................................. $(931) $(943)
===== =====
</TABLE>
Qualified Defined Contribution Plan
The Company sponsors a defined contribution plan, the Zapata Profit Sharing
Plan (the "Profit Sharing Plan"), for certain eligible employees of the Company.
The Company's contributions are calculated based on employee contributions and
compensation. The Company's contribution to the Profit Sharing Plan totaled
$527,292, $429,588 and $673,298 in fiscal 1997, 1996 and 1995, respectively.
36
<PAGE> 39
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15. RELATED PARTY TRANSACTIONS
In August 1995, Zapata acquired 4,189,298 shares of the outstanding common
stock of Envirodyne for $18.8 million from a trust controlled by Malcolm Glazer,
Chairman of the Board of Zapata and a then-director of Envirodyne. Zapata paid
the purchase price by issuing to the seller a subordinated promissory note
bearing interest at prime and maturing in August 1997, subject to prepayment at
the Company's option. The Company prepaid the balance of the promissory note in
December 1996.
During fiscal 1996, Zapata and Houlihan's Restaurant Group, Inc.
("Houlihan's") entered into the Houlihan's Merger Agreement. In view of Malcolm
I. Glazer's significant ownership of common stock of both Zapata and Houlihan's,
the transaction was negotiated by representatives of special committees of the
respective boards of directors of both Zapata and Houlihan's. On October 8,
1996, Zapata terminated the Houlihan's Merger Agreement pursuant to a provision
of such agreement that gave either party the right to terminate the merger
agreement if the Houlihan's Merger was not consummated before October 1, 1996.
The termination followed a decision of the Court of the Chancery of Delaware
that an 80% supermajority vote of Zapata's stockholders was required for
approval of the proposed transaction. Zapata recorded $2.1 million of merger
expenses in connection with the proposed transaction.
During fiscal 1995, Zapata made purchases totaling $10.4 million from a
company owned by a shareholder and former director of Zapata. Zapata received
$7,000 in fiscal 1995 from a former director of the Company for use of the
Company's executive aircraft under an arrangement which provided for full
recovery of expenses associated with such use. Additionally, during fiscal 1995,
Zapata received $24,000 from Norex in accordance with an administrative services
arrangement pursuant to which Zapata provided office space and certain
administrative services to Norex. See Note 8 and Note 10 for discussions of
additional transactions with Norex.
37
<PAGE> 40
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 16. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION
Zapata's continuing business is comprised of one industry segment operating
in the U.S. The marine protein segment is engaged in menhaden fishing for the
production and sale of fish meal and fish oil. Export sales of fish oil and fish
meal were approximately $21.5 million, $20.9 million and $26.7 million in fiscal
1997, 1996 and 1995, respectively. Such sales were made primarily to European
markets. In fiscal 1995, net sales to one customer by the marine protein segment
were approximately $12.3 million; in 1997 and 1996 no sales to any one customer
exceeded 10% of consolidated sales. Based on Envirodyne's December 26, 1996
annual report, Envirodyne's operations are primarily in North/South America and
Europe. Envirodyne is a supplier of food packaging products and food service
supplies.
<TABLE>
<CAPTION>
AS OF OR FOR OPERATING
THE YEAR ENDED INCOME IDENTIFIABLE DEPRECIATION CAPITAL
SEPTEMBER 30, REVENUES (LOSS) ASSETS AMORTIZATION EXPENDITURES
-------------- -------- --------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997
Marine protein............ $117,564 $18,205 $100,440 $ 3,692 $8,535
Corporate................. -- (5,363) 90,511(4) 52 6
-------- ------- -------- ------- ------
$117,564 $12,842 $190,951 $ 3,744 $8,541
======== ======= ======== ======= ======
1996
Marine protein............ $ 93,609 $10,504 $ 86,969 $ 3,167 $4,009
Corporate................. -- (4,553)(1) 139,524(4) 85 1
-------- ------- -------- ------- ------
$ 93,609 $ 5,951 $226,493(3) $ 3,252 $4,010
======== ======= ======== ======= ======
1995
Marine protein............ $ 94,959 $(6,437)(2) $ 85,012 $14,977(2) $5,573
Corporate................. -- (3,441) 47,778(4) 115 1
-------- ------- -------- ------- ------
$ 94,959 $(9,878) $132,790(3) $15,092 $5,574
======== ======= ======== ======= ======
</TABLE>
- ---------------
(1) Includes $2.1 million of merger costs that were expensed when the proposed
merger with Houlihan's was terminated.
(2) Includes a $12.3 million provision for asset impairment to reduce the marine
protein assets to their fair market value as a result of adopting SFAS No.
121.
(3) Excludes net assets of discontinued operations of $6.5 million and $106.2
million in fiscal 1996 and 1995, respectively.
(4) Includes Zapata's investment in Envirodyne.
38
<PAGE> 41
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)
CONSOLIDATED QUARTERLY INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
----------- -------- ------- ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
FISCAL 1997
Revenues................................ $25,623 $22,964 $31,025 $37,952
Operating income........................ 3,162 2,468 4,952 2,260
Income from continuing operations....... 1,919 2,349 2,868 276
Income from discontinued operations..... 25 343 1,962 5,683
Net income.............................. 1,944 2,692 4,830 5,959
Per share:
Income from continuing operations....... 0.07 0.08 0.11 0.01
Income from discontinued operations..... -- 0.01 0.07 0.24
Net income.............................. 0.07 0.09 0.18 0.25
FISCAL 1996
Revenues................................ 23,466 14,383 20,920 34,840
Operating income (loss)................. 2,505 1,134 3,198 (886)(2)
Income (loss) from continuing
operations........................... 712 (66) 1,003 (1,051)
Income (loss) from discontinued
operations........................... 13,096 (3,921) 178 (3,396)
Cumulative effect of change in
accounting principle, net............ 467(1) -- -- --
Net income (loss)....................... 14,275 (3,987) 1,181 (4,447)
Per share:
Income (loss) from continuing
operations........................... 0.02 -- 0.03 (0.03)
Income (loss) from discontinued
operations........................... 0.44 (0.13) 0.01 (0.12)
Cumulative effect of change in
accounting
principle............................ 0.02 -- -- --
Net income (loss)....................... 0.48 (0.13) 0.04 (0.15)
</TABLE>
- ---------------
(1) Effective October 1, 1995, Zapata changed its method of accounting for its
investment in Envirodyne to a three-month lag basis. See Note 2.
(2) Includes $2.1 million of merger costs that were expensed when the proposed
merger with Houlihan's was terminated.
NOTE 18. SUBSEQUENT EVENT (UNAUDITED)
In November 1997, Zapata acquired the fishing and production assets of
American Proteins, Inc. and Gulf Protein, Inc. in two separate transactions for
approximately $28.1 million cash and the assumption of certain debt. These
acquisitions are expected to substantially increase the Company's production of
fish meal and fish oil through increased processing capacity and by enlarging
the Company's fleet of fishing vessels in the Gulf of Mexico and the Atlantic.
39
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to General Instruction G on Form 10-K, the information called for
by Item 10 of Part III of Form 10-K is incorporated by reference to the
information set forth in the Company' definitive proxy statement relating to its
combined 1997-1998 Annual Meeting of Stockholders (the "1998 Proxy Statement")
to be filed pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in response to Items 401 and 405 of
Regulation S-K under the Securities Act of 1933, as amended, and the Exchange
Act ("Regulation S-K"). Reference is also made to the information appearing in
Item 1 of Part I of this Annual Report on Form 10-K under the caption "Business
and Properties -- Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G of Form 10-K, the information called for
by Item 11 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 1998 Proxy Statement in response to Item 402 of
Regulation S-K, excluding the material concerning the report on executive
compensation and the performance graph specified by paragraphs (k) and (l) of
such Item.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G of Form 10-K, the information called for
by Item 12 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 1998 Proxy Statement in response to Item 403 of
Regulation S-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G of Form 10-K, the information called for
by Item 13 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 1998 Proxy Statement in response to Item 404 of
Regulation S-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(A) LIST OF DOCUMENTS FILED.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(1) Consolidated financial statements, Zapata Corporation
and subsidiary companies --
Report of Coopers & Lybrand L.L.P., independent
accountants........................................... 14
Consolidated balance sheet -- September 30, 1997 and
1996.................................................. 15
Consolidated statement of operations for the years
ended September 30, 1997, 1996 and 1995............... 16
Consolidated statement of cash flows for the years
ended September 30, 1997, 1996 and 1995............... 17
Consolidated statement of stockholders' equity for the
years ended September 30, 1997, 1996 and 1995......... 18
Notes to consolidated financial statements............. 19
</TABLE>
All schedules have been omitted since the information required to be
submitted has been included in the financial statements or notes or has been
omitted as not applicable or not required.
40
<PAGE> 43
(2) Exhibits
The exhibits indicated by an asterisk (*) are incorporated by reference.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
----------- -----------------------
<C> <S>
3(a)* -- Restated Certificate of Incorporation of Zapata filed
with Secretary of State of Delaware 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 11,
1996, are incorporated herein by reference to Exhibit
3(b) to Zapata's report on Form 10-K for the fiscal year
ended September 30, 1996.
Certain instruments respecting long-term debt of Zapata and
its subsidiaries have been omitted pursuant to Regulation
S-K, Item 601. Zapata hereby agrees to furnish a copy of
any such instrument to the Commission upon request.
10(a)*+ -- Zapata 1990 Stock Option Plan (Exhibit 10(b) to Zapata's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1990 (File No. 1-4219)).
10(b)*+ -- First Amendment to Zapata 1990 Stock Option Plan (Exhibit
10(c) to Zapata's Registration Statement on Form S-1
(Registration No. 33-40286)).
10(c)*+ -- Zapata Special Incentive Plan, as amended and restated
effective February 6, 1992 (Exhibit 10(a) to Zapata's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1992 (File No. 1-4219)).
10(d)*+ -- Zapata 1981 Stock Incentive Plan, as amended and restated
effective February 12, 1986 (Exhibit 19(a) to Zapata's
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1986 (File No. 1-4219)).
10(e)*+ -- Zapata Supplemental Pension Plan effective as of April 1,
1992 (Exhibit 10(b) to Zapata's Quarterly Report on Form
10-Q for the quarter ended March 31, 1992 (File No.
1-4219)).
10(f)*+ -- Zapata Annual Incentive Plan effective January 1, 1991
(Exhibit 10(h) to Zapata's Registration Statement on Form
S-1 (Registration No. 33-40286)).
10(g)*+ -- Employment Agreement between Lamar C. McIntyre and Zapata
dated as of October 1, 1994 (Exhibit 10(v) to Zapata's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 (File No. 1-4219)).
10(h)* -- Stock Purchase Agreement dated as of August 7, 1995
between Zapata Corporation and Malcolm I. Glazer (Exhibit
10(o) to Zapata's Annual Report on Form 10-K for the
fiscal year ended September 30, 1995 (File No. 1-4219)).
10(i)* -- 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(j)* -- 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)).
</TABLE>
41
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
----------- -----------------------
<C> <S>
10(k)* -- Agreement and Plan of Merger dated as of June 4, 1996
among Zapata, Zapata Acquisition Corp. and Houlihan's
(Exhibit 2.1 to Zapata's Registration Statement on Form
S-4 (Reg. No. 333-06729)).
10(l)* -- Standstill Agreement dated April 30, 1996 between Zapata
and Malcolm I. Glazer (Exhibit 10.18 to Zapata's
Registration Statement on Form S-4 (Reg. No. 333-06729)).
10(m)* -- Irrevocable proxy dated June 4, 1996 granted by Malcolm
I. Glazer to members of a Special Committee of the Board
of Directors of Zapata (Exhibit 10.19 to Zapata's
Registration Statement on Form S-4 (Reg. No. 333-06729)).
10(n)* -- Supplemental Agreement dated June 4, 1996 between Malcolm
I. Glazer and Zapata (Exhibit 10.20 to Zapata's
Registration Statement on Form S-4 (Reg. No. 333-06729)).
10(o)*+ -- 1996 Long-Term Incentive Plan of Zapata (Appendix A to
Zapata's Definitive Proxy Statement Dated November 13,
1996 (File No. 1-4219)).
10(p)*+ -- Employment Agreement between Joseph L. von Rosenberg III
and Zapata effective as of June 1, 1996.
10(q)* -- Shareholders' Agreement dated May 30, 1997 by Malcolm I.
Glazer and the Malcolm I. Glazer Family Limited
Partnership in favor of Zapata (Exhibit 10(z) to Zapata's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997 (File No. 1-4219)).
21 -- Subsidiaries of the Registrant.
23 -- Consent of Coopers & Lybrand L.L.P.
24 -- Powers of attorney.
27 -- Financial Data Schedule.
</TABLE>
- ---------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to the requirements of Item 14(c) of Form 10-K.
(B) REPORTS ON FORM 8-K.
Current Report on Form 8-K dated July 11, 1997 reporting (Items 2 and 7)
that Zapata had completed the sale of its Bolivian oil and gas interests for
$18.8 million.
(C) FINANCIAL STATEMENT SCHEDULE.
Filed herewith as a financial statement schedule is the schedule supporting
Zapata's consolidated financial statements listed under paragraph (a) of this
Item, and the Independent Accountants' Report with respect thereto.
42
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ZAPATA CORPORATION
(Registrant)
By: /s/ ERIC T. FUREY
----------------------------------
(Eric T. Furey
Vice President, General Counsel
and Corporate Secretary)
December 19, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ AVRAM A. GLAZER* President and Chief December 19, 1997
- ----------------------------------------------------- Executive Officer
(Avram A. Glazer) (Principal Executive
Officer) and Director
/s/ ROBERT A. GARDINER Senior Vice President and December 19, 1997
- ----------------------------------------------------- Chief Financial Officer
(Robert A. Gardiner) (Principal Financial and
Accounting Officer)
/s/ WARREN H. GFELLER*
- -----------------------------------------------------
(Warren H. Gfeller)
/s/ BRYAN G. GLAZER*
- -----------------------------------------------------
(Bryan G. Glazer)
/s/ EDWARD S. GLAZER*
- -----------------------------------------------------
(Edward S. Glazer)
/s/ MALCOLM I. GLAZER* Directors of the Registrant December 19, 1997
- -----------------------------------------------------
(Malcolm I. Glazer)
/s/ RONALD C. LASSITER*
- -----------------------------------------------------
(Ronald C. Lassiter)
/s/ ROBERT V. LEFFLER, JR.*
- -----------------------------------------------------
(Robert V. Leffler, Jr.)
/s/ DAVID N. LITMAN*
- -----------------------------------------------------
(David N. Litman)
*By: /s/ ERIC T. FUREY
-------------------------------------------------
(Eric T. Furey
Attorney-in-Fact)
</TABLE>
43
<PAGE> 46
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
----------- -----------------------
<C> <S>
3(a)* -- Restated Certificate of Incorporation of Zapata filed
with Secretary of State of Delaware 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 11,
1996, are incorporated herein by reference to Exhibit
3(b) to Zapata's report on Form 10-K for the fiscal year
ended September 30, 1996.
Certain instruments respecting long-term debt of Zapata and
its subsidiaries have been omitted pursuant to Regulation
S-K, Item 601. Zapata hereby agrees to furnish a copy of
any such instrument to the Commission upon request.
10(a)*+ -- Zapata 1990 Stock Option Plan (Exhibit 10(b) to Zapata's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1990 (File No. 1-4219)).
10(b)*+ -- First Amendment to Zapata 1990 Stock Option Plan (Exhibit
10(c) to Zapata's Registration Statement on Form S-1
(Registration No. 33-40286)).
10(c)*+ -- Zapata Special Incentive Plan, as amended and restated
effective February 6, 1992 (Exhibit 10(a) to Zapata's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1992 (File No. 1-4219)).
10(d)*+ -- Zapata 1981 Stock Incentive Plan, as amended and restated
effective February 12, 1986 (Exhibit 19(a) to Zapata's
Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1986 (File No. 1-4219)).
10(e)*+ -- Zapata Supplemental Pension Plan effective as of April 1,
1992 (Exhibit 10(b) to Zapata's Quarterly Report on Form
10-Q for the quarter ended March 31, 1992 (File No.
1-4219)).
10(f)*+ -- Zapata Annual Incentive Plan effective January 1, 1991
(Exhibit 10(h) to Zapata's Registration Statement on Form
S-1 (Registration No. 33-40286)).
10(g)*+ -- Employment Agreement between Lamar C. McIntyre and Zapata
dated as of October 1, 1994 (Exhibit 10(v) to Zapata's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1994 (File No. 1-4219)).
10(h)* -- Stock Purchase Agreement dated as of August 7, 1995
between Zapata Corporation and Malcolm I. Glazer (Exhibit
10(o) to Zapata's Annual Report on Form 10-K for the
fiscal year ended September 30, 1995 (File No. 1-4219)).
10(i)* -- 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(j)* -- 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)).
10(k)* -- Agreement and Plan of Merger dated as of June 4, 1996
among Zapata, Zapata Acquisition Corp. and Houlihan's
(Exhibit 2.1 to Zapata's Registration Statement on Form
S-4 (Reg. No. 333-06729)).
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBITS
----------- -----------------------
<C> <S>
10(l)* -- Standstill Agreement dated April 30, 1996 between Zapata
and Malcolm I. Glazer (Exhibit 10.18 to Zapata's
Registration Statement on Form S-4 (Reg. No. 333-06729)).
10(m)* -- Irrevocable proxy dated June 4, 1996 granted by Malcolm
I. Glazer to members of a Special Committee of the Board
of Directors of Zapata (Exhibit 10.19 to Zapata's
Registration Statement on Form S-4 (Reg. No. 333-06729)).
10(n)* -- Supplemental Agreement dated June 4, 1996 between Malcolm
I. Glazer and Zapata (Exhibit 10.20 to Zapata's
Registration Statement on Form S-4 (Reg. No. 333-06729)).
10(o)*+ -- 1996 Long-Term Incentive Plan of Zapata (Appendix A to
Zapata's Definitive Proxy Statement Dated November 13,
1996 (File No. 1-4219)).
10(p)*+ -- Employment Agreement between Joseph L. von Rosenberg III
and Zapata effective as of June 1, 1996.
10(q)* -- Shareholders' Agreement dated May 30, 1997 by Malcolm I.
Glazer and the Malcolm I. Glazer Family Limited
Partnership in favor of Zapata (Exhibit 10(z) to Zapata's
Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997 (File No. 1-4219)).
21 -- Subsidiaries of the Registrant.
23 -- Consent of Coopers & Lybrand L.L.P.
24 -- Powers of attorney.
27 -- Financial Data Schedule.
</TABLE>
- ---------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to the requirements of Item 14(c) of Form 10-K.
<PAGE> 1
EXHIBIT 21
ZAPATA CORPORATION SUBSIDIARIES
<TABLE>
<CAPTION>
NAME PLACE OF INCORPORATION OWNERSHIP
---- ---------------------- ---------
<S> <C> <C>
Energy Industries, Inc...................................... Delaware 100%
Marine Genetics Corporation................................. Delaware 100%
Zapata Protein (USA), Inc................................. Virginia 100%
Zapata Acquisition Corporation.............................. Delaware 100%
Zapata Exploration Company.................................. Delaware 100%
Zapata Off-Shore Company.................................... Delaware 100%
Zapata North Sea, Inc..................................... Panama 100%
Zapata Overseas Capital Corporation......................... Delaware 100%
Zapata Services Corporation................................. Delaware 100%
Zapata Tankships, Inc....................................... Delaware 100%
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements
of Zapata Corporation on Form S-3 (File No. 33-68034) and on Form S-8's (File
Nos. 33-19085 and 33-45251) of our report which included an explanatory
paragraph that states during 1996, Zapata Corporation changed its accounting for
its equity investment in an unconsolidated affiliate, and during 1995, Zapata
Corporation adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and For Long-Lived Assets to
be Disposed Of" dated December 11, 1997, on our audits of the consolidated
financial statements of Zapata Corporation as of September 30, 1997 and 1996 and
for each of the three years in the period ended September 30, 1997, which
reports are included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Houston, Texas
December 19, 1997
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Zapata Corporation, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an annual
report on Form 10-K for the fiscal year ended September 30, 1997 (the "Form
10-K") pursuant to the Act of the rules and regulations of the Commission
promulgated thereunder;
NOW, THEREFORE, the undersigned in the capacity of a director, officer or
both a director and officer of the Company, as the case may be, does hereby
appoint Joseph L. von Rosenberg III, Robert A. Gardiner and Eric T. Furey, and
each of them severally, as his true and lawful attorney or attorneys-in-fact
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as director, officer or both, as the case may
be, the Form 10-K and any and all documents necessary or incidental in
connection therewith, including without limitation any amendments to the Form
10-K, and to file the same with the Commission. Each of said attorneys-in-fact
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and confirming the acts that said attorneys-in-fact and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 11th day of December, 1997.
/s/ AVRAM A. GLAZER
------------------------------------
Avram A. Glazer
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Zapata Corporation, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an annual
report on Form 10-K for the fiscal year ended September 30, 1997 (the "Form
10-K") pursuant to the Act of the rules and regulations of the Commission
promulgated thereunder;
NOW, THEREFORE, the undersigned in the capacity of a director, officer or
both a director and officer of the Company, as the case may be, does hereby
appoint Joseph L. von Rosenberg III, Robert A. Gardiner and Eric T. Furey, and
each of them severally, as his true and lawful attorney or attorneys-in-fact
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as director, officer or both, as the case may
be, the Form 10-K and any and all documents necessary or incidental in
connection therewith, including without limitation any amendments to the Form
10-K, and to file the same with the Commission. Each of said attorneys-in-fact
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and confirming the acts that said attorneys-in-fact and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 18th day of December, 1997.
/s/ BRYAN G. GLAZER
------------------------------------
Bryan G. Glazer
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Zapata Corporation, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an annual
report on Form 10-K for the fiscal year ended September 30, 1997 (the "Form
10-K") pursuant to the Act of the rules and regulations of the Commission
promulgated thereunder;
NOW, THEREFORE, the undersigned in the capacity of a director, officer or
both a director and officer of the Company, as the case may be, does hereby
appoint Joseph L. von Rosenberg III, Robert A. Gardiner and Eric T. Furey, and
each of them severally, as his true and lawful attorney or attorneys-in-fact
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as director, officer or both, as the case may
be, the Form 10-K and any and all documents necessary or incidental in
connection therewith, including without limitation any amendments to the Form
10-K, and to file the same with the Commission. Each of said attorneys-in-fact
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and confirming the acts that said attorneys-in-fact and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 12th day of December, 1997.
/s/ EDWARD S. GLAZER
------------------------------------
Edward S. Glazer
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Zapata Corporation, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an annual
report on Form 10-K for the fiscal year ended September 30, 1997 (the "Form
10-K") pursuant to the Act of the rules and regulations of the Commission
promulgated thereunder;
NOW, THEREFORE, the undersigned in the capacity of a director, officer or
both a director and officer of the Company, as the case may be, does hereby
appoint Joseph L. von Rosenberg III, Robert A. Gardiner and Eric T. Furey, and
each of them severally, as his true and lawful attorney or attorneys-in-fact
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as director, officer or both, as the case may
be, the Form 10-K and any and all documents necessary or incidental in
connection therewith, including without limitation any amendments to the Form
10-K, and to file the same with the Commission. Each of said attorneys-in-fact
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and confirming the acts that said attorneys-in-fact and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 13th day of December, 1997.
/s/ WARREN F. GFELLER
------------------------------------
Warren H. Gfeller
<PAGE> 5
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Zapata Corporation, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an annual
report on Form 10-K for the fiscal year ended September 30, 1997 (the "Form
10-K") pursuant to the Act of the rules and regulations of the Commission
promulgated thereunder;
NOW, THEREFORE, the undersigned in the capacity of a director, officer or
both a director and officer of the Company, as the case may be, does hereby
appoint Joseph L. von Rosenberg III, Robert A. Gardiner and Eric T. Furey, and
each of them severally, as his true and lawful attorney or attorneys-in-fact
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as director, officer or both, as the case may
be, the Form 10-K and any and all documents necessary or incidental in
connection therewith, including without limitation any amendments to the Form
10-K, and to file the same with the Commission. Each of said attorneys-in-fact
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and confirming the acts that said attorneys-in-fact and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 11th day of December, 1997.
/s/ R. C. LASSITER
------------------------------------
R. C. Lassiter
<PAGE> 6
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Zapata Corporation, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an annual
report on Form 10-K for the fiscal year ended September 30, 1997 (the "Form
10-K") pursuant to the Act of the rules and regulations of the Commission
promulgated thereunder;
NOW, THEREFORE, the undersigned in the capacity of a director, officer or
both a director and officer of the Company, as the case may be, does hereby
appoint Joseph L. von Rosenberg III, Robert A. Gardiner and Eric T. Furey, and
each of them severally, as his true and lawful attorney or attorneys-in-fact
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as director, officer or both, as the case may
be, the Form 10-K and any and all documents necessary or incidental in
connection therewith, including without limitation any amendments to the Form
10-K, and to file the same with the Commission. Each of said attorneys-in-fact
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and confirming the acts that said attorneys-in-fact and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 11th day of December, 1997.
/s/ ROBERT V. LEFFLER, JR.
------------------------------------
Robert V. Leffler, Jr.
<PAGE> 7
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Zapata Corporation, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an annual
report on Form 10-K for the fiscal year ended September 30, 1997 (the "Form
10-K") pursuant to the Act of the rules and regulations of the Commission
promulgated thereunder;
NOW, THEREFORE, the undersigned in the capacity of a director, officer or
both a director and officer of the Company, as the case may be, does hereby
appoint Joseph L. von Rosenberg III, Robert A. Gardiner and Eric T. Furey, and
each of them severally, as his true and lawful attorney or attorneys-in-fact
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as director, officer or both, as the case may
be, the Form 10-K and any and all documents necessary or incidental in
connection therewith, including without limitation any amendments to the Form
10-K, and to file the same with the Commission. Each of said attorneys-in-fact
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and confirming the acts that said attorneys-in-fact and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 17th day of December, 1997.
/s/ DAVID N. LITMAN
------------------------------------
David N. Litman
<PAGE> 8
EXHIBIT 24
POWER OF ATTORNEY
WHEREAS, Zapata Corporation, a Delaware corporation (the "Company"),
intends to file with the Securities and Exchange Commission (the "Commission")
under the Securities Exchange Act of 1934, as amended (the "Act"), an annual
report on Form 10-K for the fiscal year ended September 30, 1997 (the "Form
10-K") pursuant to the Act of the rules and regulations of the Commission
promulgated thereunder;
NOW, THEREFORE, the undersigned in the capacity of a director, officer or
both a director and officer of the Company, as the case may be, does hereby
appoint Joseph L. von Rosenberg III, Robert A. Gardiner and Eric T. Furey, and
each of them severally, as his true and lawful attorney or attorneys-in-fact
with full power of substitution and resubstitution, to execute in his name,
place and stead, in his capacity as director, officer or both, as the case may
be, the Form 10-K and any and all documents necessary or incidental in
connection therewith, including without limitation any amendments to the Form
10-K, and to file the same with the Commission. Each of said attorneys-in-fact
shall have full power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities, every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes as
the undersigned might or could do in person, the undersigned hereby ratifying
and confirming the acts that said attorneys-in-fact and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 18th day of December, 1997.
/s/ MALCOLM I. GLAZER
------------------------------------
Malcolm I. Glazer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> SEP-30-1997
<CASH> 55,598
<SECURITIES> 0
<RECEIVABLES> 11,150
<ALLOWANCES> 0
<INVENTORY> 38,448
<CURRENT-ASSETS> 111,947
<PP&E> 76,878
<DEPRECIATION> 35,881
<TOTAL-ASSETS> 190,951
<CURRENT-LIABILITIES> 25,556
<BONDS> 11,294
0
0
<COMMON> 7,395
<OTHER-SE> 136,010
<TOTAL-LIABILITY-AND-EQUITY> 190,951
<SALES> 117,564
<TOTAL-REVENUES> 117,564
<CGS> 90,054
<TOTAL-COSTS> 90,054
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,247
<INCOME-PRETAX> 11,852
<INCOME-TAX> 4,440
<INCOME-CONTINUING> 7,412
<DISCONTINUED> 8,013
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,425
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.56
</TABLE>
