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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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)
STATE OF DELAWARE C-74-1339132
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1717 ST. JAMES PLACE, SUITE 550
HOUSTON, TEXAS 77056
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 940-6100
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INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES x NO .
--- ---
NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, PAR
VALUE $0.25 PER SHARE, ON MAY 13, 1997: 29,553,226.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Zapata Corporation
Condensed Consolidated Balance Sheet . . . . . . . . . . 3
Condensed Consolidated Statement of Operations . . . . 4
Condensed Consolidated Statement of Cash Flows . . . . . 5
Notes to Condensed Consolidated Financial Statements . . 6
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ZAPATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
ASSETS 1997 1996
--------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 86,849 $ 99,601
Restricted cash 337 337
Receivables 7,915 11,839
Inventories:
Fish products 23,874 26,522
Materials, parts and supplies 3,419 3,397
Prepaid expenses and other current assets 2,644 2,852
-------- --------
Total current assets 125,038 144,548
-------- --------
Investments and other assets:
Investments in unconsolidated affiliates 21,193 22,061
Production payment receivable 3,004 3,237
Deferred income taxes 4,386 5,641
Other assets 15,002 15,501
-------- --------
43,585 46,440
-------- --------
Property and equipment 84,161 78,586
Accumulated depreciation (38,378) (36,431)
-------- --------
45,783 42,155
-------- --------
Total assets $214,406 $233,143
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $595 $16,108
Accounts payable and accrued liabilities 20,105 29,113
-------- --------
Total current liabilities 20,700 45,221
-------- --------
Long-term debt 19,782 18,159
-------- --------
Other liabilities 16,976 17,450
-------- --------
Stockholders' equity:
Preference stock 3 3
Common stock 7,388 7,387
Capital in excess of par value 131,961 131,963
Reinvested earnings from October 1, 1990 17,596 12,960
-------- --------
156,948 152,313
-------- --------
Total liabilities and stockholders' equity $214,406 $233,143
======== ========
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements.
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ZAPATA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------ ----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $23,741 $14,800 $49,724 $38,742
------- ------- ------- -------
Expenses:
Operating 17,559 10,732 37,691 29,967
Depreciation, depletion and amortization 962 778 1,978 1,553
Selling, general and administrative 2,228 1,865 3,865 3,430
------- ------- ------- -------
20,749 13,375 43,534 34,950
------- ------- ------- -------
Operating income 2,992 1,425 6,190 3,792
------- ------- ------- -------
Other income (expense):
Interest income 1,203 1,323 2,457 1,602
Interest expense (708) (888) (1,584) (1,898)
Equity in income (loss) of unconsolidated
affiliates 445 (1,438) (838) (2,157)
Other 308 (144) 1,114 (18)
------- ------- ------- -------
1,248 (1,147) 1,149 (2,471)
------- ------- ------- -------
Income from continuing operations before
income taxes 4,240 278 7,339 1,321
------- ------- ------- -------
Provision for income taxes
State 99 87 207 174
Federal 1,449 68 2,496 402
------- ------- ------- -------
1,548 155 2,703 576
------- ------- ------- -------
Income from continuing operations 2,692 123 4,636 745
------- ------- ------- -------
Discontinued operations:
Loss from discontinued operations,
net of income taxes --- --- --- (42)
Gain (loss) on disposition of
discontinued operations,
net of income taxes --- (4,110) --- 9,118
------- ------- ------- -------
--- (4,110) --- 9,076
------- ------- ------- -------
Income (loss) before cumulative effect
of change in accounting principle 2,692 (3,987) 4,636 9,821
Cumulative effect of change in accounting
principle, net of income taxes --- --- --- 467
------- ------- ------- -------
Net income (loss) to common stockholders $2,692 ($3,987) $4,636 $10,288
======= ======= ======= =======
Per share data:
Income from continuing operations $0.09 --- $0.16 $0.02
Income (loss) from discontinued
operations --- ($0.13) --- 0.31
Cumulative effect of change in accounting
principle --- --- --- 0.02
------- ------- ------- -------
Net income (loss) per share $0.09 ($0.13) $0.16 $0.35
======= ======= ======= =======
Average common shares and equivalents
outstanding 29,578 29,558 29,571 29,562
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements.
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ZAPATA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
1997 1996
------- -------
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income $4,636 $10,288
------- -------
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,978 1,553
Equity in loss of unconsolidated affiliates 838 2,157
Gain on sales of assets (750) ---
Cumulative effect of change in accounting principle,
net of income taxes --- (467)
Gain on sale of discontinued assets, net of
income taxes --- (9,118)
Changes in other assets and liabilities (1,883) (96)
------- -------
Total adjustments 183 (5,971)
------- -------
Net cash provided by operating activities 4,819 4,317
------- -------
Cash flows provided (used) by investing activities:
Proceeds from dispositions 1,661 103,421
Proceeds from production payment receivable 233 ---
Capital expenditures (5,455) (2,728)
------- -------
Net cash provided (used) by investing
activities (3,561) 100,693
------- -------
Cash flows provided (used) by financing activities:
Borrowings 1,849 ---
Repayments of long-term obligations (15,859) (19,112)
------- -------
Net cash used by financing activities (14,010) (19,112)
------- -------
Net increase (decrease) in cash and cash equivalents (12,752) 85,898
Cash and cash equivalents at beginning of period 99,601 2,488
------- -------
Cash and cash equivalents at end of period $86,849 $88,386
======= =======
</TABLE>
The accompanying notes are an integral part
of the condensed consolidated financial statements.
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ZAPATA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have
been prepared by Zapata Corporation ("Zapata" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The financial statements reflect all adjustments that are, in the
opinion of management, necessary to fairly present such information. All such
adjustments are of a normal recurring nature. Although Zapata believes that
the disclosures are adequate to make the information presented not misleading,
certain information and footnote disclosures, including a description of
significant accounting policies, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
condensed or omitted pursuant to such rules and regulations. These condensed
financial statements should be read in conjunction with the financial
statements and the notes thereto included in Zapata's latest Annual Report on
Form 10-K.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). The Company did not adopt the
recognition provisions of SFAS 123, but adopted its disclosure requirements
October 1, 1996.
In February 1997, the Financial Accounting Standards Board 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.
NOTE 2. UNCONSOLIDATED AFFILIATES
In August 1995, Zapata acquired 4,189,298 shares of Envirodyne
Industries, Inc. ("Envirodyne") common stock, representing 31% of the then
outstanding common stock of Envirodyne, for $18.8 million from a trust
controlled by Malcolm I. Glazer, Chairman of the Board of Zapata and a director
of Envirodyne. 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 40.4% of the
outstanding shares of Envirodyne common stock.
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. The financial statement information
presented below for Envirodyne is based upon its December 26, 1996 annual
report (in millions, except per share amount):
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ENVIRODYNE INDUSTRIES, INC.
<TABLE>
<CAPTION>
DECEMBER 26,
1996
------------
<S> <C>
BALANCE SHEET
Current assets . . . . . . . . . . . . . . . . . . . . . $238.1
Other assets . . . . . . . . . . . . . . . . . . . . . . 173.8
Property and equipment, net . . . . . . . . . . . . . . 461.8
------
Total assets . . . . . . . . . . . . . . . . . . $873.7
======
Current liabilities . . . . . . . . . . . . . . . . . . $130.4
Long-term debt . . . . . . . . . . . . . . . . . . . . . 521.2
Deferred income taxes and other . . . . . . . . . . . . 118.5
Stockholders' equity . . . . . . . . . . . . . . . . . . 103.6
------
Total liabilities and stockholders' equity . . . $873.7
======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 26,
1996
-------------
<S> <C>
INCOME STATEMENT
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 162.0
========
Loss before income taxes . . . . . . . . . . . . . . . . $ (0.6)
========
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 0.3
========
Net income per share . . . . . . . . . . . . . . . . . . $ 0.02
=========
</TABLE>
NOTE 3. DIVISIONAL REVENUES AND OPERATING RESULTS
The Company's divisional revenues and operating results for the three-
and six-month periods ended March 31, 1997 and 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ --------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Marine protein $22,964 $14,383 $48,587 $37,849
Oil and gas 777 417 1,137 893
------- ------- ------- -------
$23,741 $14,800 $49,724 $38,742
======= ======= ======= =======
Operating income (loss):
Marine protein $ 3,503 $ 1,980 $ 7,295 $ 5,043
Oil and gas 524 224 560 153
Corporate (1,035) (779) (1,665) (1,404)
------- ------- ------- -------
$ 2,992 $ 1,425 $ 6,190 $ 3,792
======= ======= ======= =======
</TABLE>
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NOTE 4. LITIGATION
Zapata has been named as a defendant in various derivative and
stockholder class actions alleging, among other things, that Zapata's Board of
Directors engaged in conduct constituting breach of fiduciary duty and waste of
Zapata's assets in connection with Zapata's investment in Envirodyne, the
decision to shift Zapata's focus from energy to food services and a proposed,
but subsequently abandoned, merger with Houlihan's Restaurant Group, Inc.
("Houlihan's). The complaints variously allege that Zapata's purchase of
Envirodyne common stock was designed to permit Malcolm I. Glazer to obtain
personal financial advantage to the detriment of Zapata and that the merger
consideration in the transaction with Houlihan's was excessive and would result
in voting power dilution, unfairly benefitting Malcolm I. Glazer. The
complaints seek injunctive and various forms of monetary relief. Zapata denies
the substantive allegations of the complaints and intends to defend these cases
vigorously. In one of the actions, the plaintiff sought an injunction to
prevent consummation of the merger with Houlihan's based on the contention that
it would violate a supermajority vote requirement in Zapata's Restated
Certificate of Incorporation. On September 24, 1996, the Court of Chancery
decided that the supermajority vote requirement applied to the merger. Zapata
filed a notice of appeal with the Supreme Court of the State of Delaware
regarding the decision of the Court of Chancery. On May 5, 1997, the Delaware
Supreme Court issued its opinion finding that the matter was moot since the
proposed transaction had been abandoned and vacating the opinion of the Court
of Chancery.
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 on the part of the Company and
the other defendants concerning the Company's intent to follow a 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 natural gas services industry after 1995, which
the plaintiffs contend equals approximately $23 million; or (iv) money damages
if 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. No trial date is
currently set in this case. The Company believes that the petition and the
allegations made therein are without merit and intends to defend the case
vigorously.
On January 24, 1997, the Company announced that a lawsuit had been
filed against the Company and its directors in the Court of Chancery of
Delaware seeking injunctive relief against the Company's offer to purchase up
to 15 million shares of its Common Stock (the "Offer"). The Offer was
terminated without
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the purchase of any shares in February 1997. The lawsuit, filed by Hawley
Opportunity Fund ("Hawley"), alleges, among other things, that the Offer was
unfair and that the Offer documents failed to disclose material facts
concerning the Company. The Company believes that the Offer documents properly
disclosed all material information required to be disclosed concerning the
matters referred to in Hawley's complaint and that Hawley's allegations as to
the unfairness of the Offer are unfounded. Since the Offer was terminated in
February 1997, the complaint is now moot. Hawley has filed a petition for
attorney fees, which the Company intends to contest.
The Company is defending various claims and litigation arising from
continuing and discontinued operations. 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.
NOTE 5. REPAYMENT OF SUBORDINATED DEBENTURES
On February 10, 1997, the Company redeemed the entire $15.6 million
principal amount of its 10 1/4% subordinated debentures due March 15, 1997, at
the redemption price of 100% of the principal amount thereof, together with
accrued and unpaid interest.
NOTE 6. SUBSEQUENT EVENT
On May 14, 1997, Zapata announced that it has proposed a transaction
to acquire all of the remaining common stock of Envirodyne for $8 per share.
Zapata currently owns approximately 40.4% of Envirodyne's common stock. The
proposed transaction would occur through a merger in which Envirodyne
stockholders, other than Zapata, would receive $4 per share in cash and $4 per
share in Zapata common stock, based on an exchange ratio to be determined.
Zapata's merger proposal is subject to the negotiation and execution of
a definitive merger agreement and satisfactory refinancing of Envirodyne's debt.
It would require the approval of the respective stockholders of Envirodyne and
Zapata. Zapata's proposal also is conditioned on its slate of nominees being
elected at Envirodyne's annual meeting . Any agreement for a business
combination transaction between Envirodyne and Zapata would be subject to
approval by a committee of Envirodyne's board of directors consisting entirely
of persons not representatives of, or otherwise affiliated with, Zapata. The
Envirodyne board approval also would need to encompass redemption of rights
issued under Envirodyne's stockholder rights plan.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking statements in this Form 10-Q, 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, the inherent
limitations in the ability to estimate oil and gas reserves, 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.
BUSINESS
On December 30, 1996, the Company announced its intention to commence
an offer to purchase for cash up to 15 million shares of the Company's common
stock for a price of $4.50 per share. The offer (the "Offer") was commenced on
January 14, 1997. The Company subsequently terminated the Offer on February
24, 1997 after receiving a letter from Michael E. Heisley proposing that Mr.
Heisley or a company he controls would acquire any or all (but not less than
50.1%) of the outstanding shares of Zapata for a purchase price of $5.50 per
share (the "Heisley Proposal").
After completing a review of the Heisley Proposal and a related review
of alternative business strategies for the Company, Zapata's board of
directors decided not to pursue a sale or liquidation of the Company. Instead,
the board of directors intends to change its strategy of repositioning the
Company into food services businesses into a new multi-strategy that includes
expansion into various businesses as appropriate opportunities present
themselves. Concurrently, the board of directors announced that it is
considering the sale of the Company's marine protein operations and is
continuing to consider a possible sale of its oil and gas operations in
Bolivia.
The Company does not intend to recommence the Offer; however, the
board of directors continues to believe that the Company's common stock is
undervalued. For this reason, the board of directors has authorized purchases
of up to 7.5 million shares of the Company's common stock from time to time,
depending on market conditions. The repurchase program may include privately
negotiated transactions in addition to purchases in the open market. 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 (approximately 35.2% of that outstanding) under the
stock repurchase program. In connection with the stock repurchase program,
prior to commencing any such purchases, the Company will enter into an
agreement with Malcolm I. Glazer under which he will represent that he does
not intend to take any action or cause the Company to take any action
to "go private" or otherwise cause
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its stock to cease to be publicly traded, and that should that intent change in
the future, no such transaction will be undertaken 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.
On May 14, 1997, Zapata announced that it has proposed a transaction
to acquire all of the remaining common stock of Envirodyne for $8 per share.
Zapata currently owns approximately 40.4% of Envirodyne's common stock. The
proposed transaction would occur through a merger in which Envirodyne
stockholders, other than Zapata, would receive $4 per share in cash and $4 per
share in Zapata common stock, based on an exchange ratio to be determined.
Zapata's merger proposal is subject to the negotiation and execution of
a definitive merger agreement and satisfactory refinancing of Envirodyne's debt.
It would require the approval of the respective stockholders of Envirodyne and
Zapata. Zapata's proposal also is conditioned on its slate of nominees being
elected at Environdyne's annual meeting. Any agreement for a business
combination transaction between Envirodyne and Zapata would be subject to
approval by a committee of Envirodyne's board of directors consisting entirely
of persons not representatives of, or otherwise affiliated with, Zapata. The
Envirodyne board approval also would need to encompass redemption of rights
issued under Envirodyne's stockholder rights plan.
LIQUIDITY AND CAPITAL RESOURCES
Zapata's cash and cash equivalents balance decreased $12.8 million
during the first six months of fiscal 1997 and totaled $86.8 million at March
31, 1997. However, the Company's working capital increased $5.0 million during
the same period to $104.3 million as of March 31, 1997. On February 10, 1997
Zapata redeemed the entire $15.6 million principal amount of its 10 1/4%
subordinated debentures due March 15, 1997 at the redemption price of 100% of
the principal amount thereof, together with accrued and unpaid interest.
The Company's cash flows from operating activities increased to $4.8
million for the first six months of fiscal 1997 compared to $4.3 million in the
corresponding prior-year period. The increase was due primarily to increased
collections. Zapata's investing activities used $3.6 million during the first
two quarters of fiscal 1997 while providing $100.7 million during the first two
quarters of fiscal 1996 when the Company received $103.4 from the sale of its
natural gas compression operations assets. Reflecting lower debt repayments,
Zapata's cash flows used by financing activities decreased to $14.0 million
during the first six months of fiscal 1997 from $19.1 million during the first
six months of fiscal 1996.
RESULTS OF OPERATIONS
Zapata reported revenues of $23.7 million and net income of $2.7
million for the second quarter of fiscal 1997 ended March 31, 1997 compared to
revenues of $14.8 million and a net loss of $4.0 million for the second quarter
of fiscal 1996. The loss in the fiscal 1996 period includes net losses from
the Company's discontinued natural gas services operations totaling $4.1
million.
Zapata's net income from continuing operations for the second quarter
of fiscal 1997 improved to $2.7 million from $123,000 reported for the second
quarter of fiscal 1996. The improvement in fiscal 1997 was attributable to a
twofold increase in Zapata's operating income and to equity income from
Zapata's investment in Envirodyne Industries, Inc. ("Envirodyne"). The
Company's operating income for the three months ended March 31, 1997 increased
to $3.0 million from $1.4 million for the three months ended March 31, 1996 due
primarily to an increased contribution from Zapata's marine protein operation
that continues to benefit from tight supplies of protein products. Zapata's
net income from continuing operations also included equity income from its
investment in Envirodyne of $445,000 in the current quarter compared to an
equity loss of $1.4 million in the corresponding prior-year period.
For the first six months of fiscal 1997, Zapata generated revenues of
$49.7 million and net income of $4.6 million compared to revenues of $38.7
million and net income of $10.3 million for the first six months of fiscal
1996. The fiscal 1996 results include a $9.1 million gain relating to the
disposition of its discontinued natural gas compression and natural gas
gathering and marketing assets. Net income from Zapata's continuing operations
for the first two quarters of fiscal 1997 totaled $4.6 million compared to
$745,000 for the corresponding prior-year period. The improvement in the
fiscal 1997 period was
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attributable to an increase in the Company's operating income, reduced equity
losses from Zapata's equity interest in Envirodyne, a $750,000 pretax gain from
the sale of certain real estate and higher interest income.
Marine Protein
Revenues of $23.0 million and operating income of $3.5 million for the
second quarter of fiscal 1997 compared favorably to revenues of $14.4 million
and operating income of $2.0 million for the second quarter of fiscal 1996.
The improvement was attributable to higher prices for the Company's fish meal
products and to increased sales volumes for fish meal and fish oil. The
average per ton price for fish meal, the division's primary product, increased
to $513 in the second quarter of fiscal 1997 from $442 in the second quarter of
fiscal 1996, while the average per ton price of fish oil decreased to $420 in
the 1997 period from $486 in the 1996 period. Sales volumes of fish meal and
fish oil increased by approximately 38% and 21%, respectively, in the current
quarter as compared to the prior-year quarter.
Similarly, year-to-date revenues of $48.6 million and operating income
of $7.3 million for fiscal 1997 compared to revenues of $37.8 million and
operating income of $5.0 million for the corresponding fiscal 1996 period. For
the first six months of fiscal 1997, fish meal prices have averaged $505 per
ton versus $406 per ton in fiscal 1996, while fish oil prices have averaged
$413 per ton in the fiscal 1997 period versus $461 per ton in fiscal 1996.
Year-to-date, sales volumes of fish meal in fiscal 1997 have approximated the
corresponding prior-year period sales volumes while sales volumes of fish oil
in fiscal 1997 were approximately 11% lower than the corresponding fiscal 1996
period sales volumes.
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 which tend to
fluctuate to a significant extent over the course of a year and from year to
year.
Oil and Gas
In fiscal 1995, the Company sold its U.S. natural gas producing
properties. As a result, the Company's only significant remaining oil and gas
activity is the production of natural gas through a joint venture in Bolivia in
which the Company has a 25% interest. Revenues of $777,000 and operating
income of $524,000 in the second quarter of fiscal 1997 compared to revenues of
$417,000 and operating income of $224,000 in the comparable fiscal 1996
quarter. Year-to-date, fiscal 1997 revenues of $1.1 million and operating
income of $560,000 compared to fiscal 1996 revenues of $893,000 and operating
income of $153,000.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 24, 1997, the Company announced that a lawsuit had been
filed against the Company and its directors in the Court of Chancery of
Delaware seeking injunctive relief against the Company's offer to purchase up
to 15 million shares of its Common Stock (the "Offer"). The Offer was
terminated without the purchase of any shares in February 1997. The lawsuit,
filed by Hawley Opportunity Fund ("Hawley"), alleges, among other things, that
the Offer was unfair and that the Offer documents failed to disclose material
facts concerning the Company. The Company believes that the Offer documents
properly disclosed all material information required to be disclosed concerning
the matters referred to in Hawley's complaint and that Hawley's allegations as
to the unfairness of the Offer are unfounded. Since the Offer was terminated
in February 1997, the complaint is now moot. Hawley has filed a petition for
attorney fees, which the Company intends to contest.
On May 5, 1997, the Supreme Court of the State of Delaware issued its
opinion in a lawsuit by a stockholder which sought to enjoin consummation of
the Company's proposed merger with Houlihan's Restaurant Group, Inc. based on
the contention that it would violate a supermajority vote requirement in the
Company's Restated Certificate of Incorporation. Since the proposed merger was
abandoned, the Delaware supreme Court found that the matter was moot and
vacated the opinion of the Court of Chancery.
13
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits indicated by an asterisk (*) are incorporated by
reference.
3(a)* -- Restated Certificate of Incorporation of Zapata filed
with Secretary of State of Delaware on May 3, 1994
(Exhibit 3(a) to Zapata's 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 (Exhibit 3(d) to Zapata's Annual Report on Form
10-K for the fiscal year ended September 30, 1996
(File No. 1-4219)).
27 -- Financial Data Schedule
(b) Reports on Form 8-K:
During the quarter ended March 31, 1997, Zapata filed the following
Current Reports on Form 8-K with the Securities and Exchange
Commission:
<TABLE>
<CAPTION>
Date of Earliest Financial
Event Reported Item Reported Statements Filed
-------------- ------------- ----------------
<S> <C> <C>
January 14, 1997 Zapata commenced self tender offer to None
purchase up to 15 million shares of its common
stock at a price of $4.50 per share
February 24, 1997 Zapata terminated self tender to purchase None
up to 15 million shares of it common stock
at a price of $4.50 per share.
</TABLE>
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ZAPATA CORPORATION
(Registrant)
May 15, 1997 By: /s/ JOSEPH L. VON ROSENBERG III
------------------------------------------
(Joseph L. von Rosenberg III,
Executive Vice President, General Counsel
and Corporate Secretary)
May 15, 1997 By: /s/ ROBERT A. GARDINER
------------------------------------------
(Robert A. Gardiner,
Vice President and Chief Financial Officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
3(a)* -- Restated Certificate of Incorporation of Zapata filed
with Secretary of State of Delaware on May 3, 1994
(Exhibit 3(a) to Zapata's 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 (Exhibit 3(d) to Zapata's Annual Report on Form
10-K for the fiscal year ended September 30, 1996
(File No. 1-4219)).
27 -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 87,186
<SECURITIES> 0
<RECEIVABLES> 7,915
<ALLOWANCES> 0
<INVENTORY> 27,293
<CURRENT-ASSETS> 125,038
<PP&E> 84,161
<DEPRECIATION> 38,378
<TOTAL-ASSETS> 214,406
<CURRENT-LIABILITIES> 20,700
<BONDS> 19,782
0
3
<COMMON> 7,388
<OTHER-SE> 149,557
<TOTAL-LIABILITY-AND-EQUITY> 214,406
<SALES> 49,724
<TOTAL-REVENUES> 49,724
<CGS> 37,691
<TOTAL-COSTS> 43,534
<OTHER-EXPENSES> 2,733
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,584
<INCOME-PRETAX> 7,339
<INCOME-TAX> 2,703
<INCOME-CONTINUING> 4,636
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,636
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
