<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 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
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 FEBRUARY 13, 1998: 22,940,481
================================================================================
<PAGE> 2
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
2
<PAGE> 3
ZAPATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
ASSETS 1997 1997
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 28,047 $ 55,598
Restricted cash 4,337 4,337
Receivables 10,070 11,150
Inventories:
Marine protein products 32,809 35,210
Materials, parts and supplies 2,978 3,238
Prepaid expenses and other current assets 2,846 2,414
--------- ---------
Total current assets 81,087 111,947
--------- ---------
Investments and other assets:
Investments in unconsolidated affiliates 17,936 19,033
Production payment receivable 2,363 2,656
Deferred income taxes 2,190 1,787
Other assets 15,540 14,531
--------- ---------
38,029 38,007
--------- ---------
Property and equipment 105,652 76,878
Accumulated depreciation (37,306) (35,881)
--------- ---------
68,346 40,997
--------- ---------
Total assets $ 187,462 $ 190,951
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,532 $ 1,034
Accounts payable and accrued liabilities 17,592 24,522
--------- ---------
Total current liabilities 19,124 25,556
--------- ---------
Long-term debt 11,290 11,294
--------- ---------
Other liabilities 10,660 10,696
--------- ---------
Stockholders' equity:
Common stock 7,396 7,395
Capital in excess of par value 139,398 139,400
Reinvested earnings from October 1, 1990 29,765 26,781
Treasury stock, at cost (30,171) (30,171)
--------- ---------
146,388 143,405
--------- ---------
Total liabilities and stockholders' equity $ 187,462 $ 190,951
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
ZAPATA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------- --------
1997 1996
-------- --------
<S> <C> <C>
Revenues $ 29,503 $ 25,623
-------- --------
Expenses:
Operating 17,603 19,638
Depreciation and amortization 1,678 1,186
Selling, general and administrative 2,040 1,637
-------- --------
21,321 22,461
-------- --------
Operating income 8,182 3,162
-------- --------
Other income (expense):
Interest income 515 1,252
Interest expense (255) (876)
Equity in loss of unconsolidated affiliates (1,097) (1,283)
Other (20) 806
-------- --------
(857) (101)
-------- --------
Income from continuing operations before income taxes 7,325 3,061
-------- --------
Provision for income taxes 2,737 1,142
-------- --------
Income from continuing operations 4,588 1,919
-------- --------
Discontinued operations:
Income from discontinued operations, net of income taxes -- 25
-------- --------
Net income $ 4,588 $ 1,944
======== ========
Per share data (basic):
Income from continuing operations $ 0.20 $ 0.07
Income from discontinued operations -- --
-------- --------
Net income per share (basic) $ 0.20 $ 0.07
======== ========
Average common shares outstanding 22,910 29,549
======== ========
Per share data (diluted) :
Income from continuing operations $ 0.19 $ 0.07
Income from discontinued operations -- --
-------- --------
Net income per share (diluted) $ 0.19 $ 0.07
======== ========
Average common shares and common share equivalents
outstanding 23,731 29,566
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 5
ZAPATA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows provided (used) by operating activities:
Net income $ 4,588 $ 1,944
--------- ---------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,678 1,186
Gain on sale of assets (30) (722)
Equity in loss of unconsolidated affiliates 1,097 1,283
Changes in other assets and liabilities (4,596) (3,612)
--------- ---------
Total adjustments (1,851) (1,865)
--------- ---------
Net cash provided by operating activities 2,737 79
--------- ---------
Cash flows provided (used) by investing activities:
Proceeds from dispositions 503 1,661
Proceeds from production payment receivable 293 150
Asset acquisitions (28,116) --
Capital additions (975) (1,291)
--------- ---------
Net cash provided (used) by investing activities (28,295) 520
--------- ---------
Cash flows provided (used) by financing activities:
Borrowings -- 1,849
Repayments of long-term obligations (389) (119)
Common stock dividend (1,604) --
--------- ---------
Net cash provided (used) by financing activities (1,993) 1,730
--------- ---------
Net increase (decrease) in cash and cash equivalents (27,551) 2,329
Cash and cash equivalents at beginning of period 55,598 99,601
--------- ---------
Cash and cash equivalents at end of period $ 28,047 $ 101,930
========= =========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE> 6
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 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 adopted
the statement in October 1, 1997. Basic earnings per share was computed by
dividing income by the weighted average number of common shares outstanding.
Diluted earnings per share was computed by dividing income by the sum of the
weighted average number of common shares outstanding and the effect of
unexercised employee stock options.
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.
6
<PAGE> 7
NOTE 2. ASSET ACQUISITION
Zapata recently acquired certain assets that increase its marine
protein harvesting and production capabilities. On November 3, 1997, Zapata
acquired the fishing and processing assets of American Protein, Inc.
("American Protein"), which operated 10 steamers and a menhaden processing
plant in the Chesapeake Bay area, for $14.5 million in cash (the "American
Protein Acquisition"). American Protein's facilities were located in close
proximity to the Company's Reedville, Virginia facility. Shortly after
completing this transaction, Zapata closed the American Protein processing
plant and began integrating its assets into the Company's existing operations.
Additionally, on November 25, 1997, Zapata purchased the fishing and
processing assets of Gulf Protein, Inc. ("Gulf Protein"), which included six
steamers, five spotter planes and the processing equipment located at the Gulf
Protein plant near Morgan City, Louisiana, for $13.6 million in cash and the
assumption of $883,000 in liabilities (the "Gulf Protein Acquisition" and,
together with the American Protein Acquisition, the "Recent Acquisitions"). In
connection with the Gulf Protein Acquisition, Zapata also entered into a
five-year lease for the Gulf Protein plant at $220,000 annual rental rate. The
Company is currently upgrading this plant's processing capabilities so that it
can manufacture specialty meals. Zapata intends to begin operations at the
Morgan City, Louisiana plant at the start of the 1998 fishing season.
NOTE 3. 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. In June and
July 1996, Zapata purchased 1,688,006 additional shares of Envirodyne common
stock 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.
Zapata reports 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 interim report for the quarter ended September 25, 1997 (in millions,
except per share amount):
7
<PAGE> 8
ENVIRODYNE INDUSTRIES, INC.
<TABLE>
<CAPTION> SEPTEMBER 25,
1997
-------------
<S> <C>
BALANCE SHEET
Current assets . . . . . . . . . . . . . . . . . . . . . $220.4
Other assets . . . . . . . . . . . . . . . . . . . . . . 162.0
Property and equipment, net . . . . . . . . . . . . . . 447.0
------
Total assets . . . . . . . . . . . . . . . . . . $829.4
======
Current liabilities . . . . . . . . . . . . . . . . . . $133.9
Long-term debt . . . . . . . . . . . . . . . . . . . . . 509.6
Deferred income taxes and other . . . . . . . . . . . . 97.3
Stockholders' equity . . . . . . . . . . . . . . . . . . 88.6
------
Total liabilities and stockholders' equity . . . $829.4
======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 25,
1997
-------------
<S> <C>
INCOME STATEMENT
Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 155.0
========
Loss before income taxes . . . . . . . . . . . . . . . . $ (11.5)
========
Net loss . . . . . . . . . . . . . . . . . . . . . . . . $ (3.8)
========
Net loss per share . . . . . . . . . . . . . . . . . . . $ (0.26)
========
</TABLE>
NOTE 4. 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
8
<PAGE> 9
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 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 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 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 has been
rescheduled from February 18, 1998; no date has been set. The Company believes
that the petition and the allegations made therein are without merit and
intends to defend the case vigorously.
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. SUBSEQUENT EVENTS
In connection with Zapata's sale of its Bolivian oil and gas interests
(the "Bolivian Sale") to Tesoro Bolivia Petroleum Company ("Tesoro") in July
1997, Zapata established a $4.0 million letter of credit in favor of Tesoro as
security against the possibility of a Bolivian income tax liability
9
<PAGE> 10
incurred by Zapata as a result of the sale. On January 8, 1998, Tesoro
released Zapata from the requirement to maintain the letter of credit in
accordance with the terms of the Bolivian Sale agreement.
On January 27, 1998, Zapata announced that its marine protein
subsidiary, Omega Protein Corporation ("Omega Protein") filed a Registration
Statement on Form S-1 with the Securities and Exchange Commission to effect an
initial public offering of six million shares of Omega Protein's common stock.
The Registration Statement has not yet become effective, and the offering will
be made only by means of a prospectus. Omega Protein is the successor by merger
to Marine Genetics Corporation. In the offering, four million shares are to be
sold by Omega Protein and two million shares are to be sold by Zapata. Omega
Protein plans to use a portion of its net proceeds to repay approximately $33.3
million of intercompany indebtedness owed to Zapata. Following completion of the
offering, Zapata would own approximately 75% of the outstanding Omega Protein
common stock (approximately 72% if the underwriters' over-allotment options are
exercised in full).
10
<PAGE> 11
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, 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 January 27, 1998, Zapata announced that its marine protein
subsidiary, Omega Protein Corporation ("Omega Protein") filed a Registration
Statement on Form S-1 with the Securities and Exchange Commission to effect an
initial public offering of six million shares of Omega Protein's common stock.
The Registration Statement has not yet become effective, and the offering will
be made only by means of a prospectus. Omega Protein is the successor by merger
to Marine Genetics Corporation. In the offering, four million shares are to be
sold by Omega Protein and two million shares are to be sold by Zapata. Omega
Protein plans to use a portion of its net proceeds to repay approximately $33.3
million of intercompany indebtedness owed to Zapata. Following completion of the
offering, Zapata would own approximately 75% of the outstanding Omega Protein
common stock (approximately 72% if the underwriters' over-allotment options are
exercised in full).
Zapata recently acquired certain assets that increase Omega Protein's
harvesting and production capabilities. On November 3, 1997, Omega Protein
acquired the fishing and processing assets of American Protein, Inc. ("American
Protein"), which operated 10 steamers and a menhaden processing plant in the
Chesapeake Bay area, for $14.5 million in cash (the "American Protein
Acquisition"). American Protein's facilities were located in close proximity
to Omega Protein's Reedville, Virginia facility. Shortly after completing this
transaction, Omega Protein closed the American Protein processing plant and
began integrating its assets into the Company's existing operations.
Additionally, on November 25, 1997, Zapata purchased the fishing and
processing assets of Gulf Protein, Inc. ("Gulf Protein"), which included six
steamers, five spotter planes and the processing equipment located at the Gulf
Protein plant near Morgan City, Louisiana, for $13.6 million in cash and the
assumption of $883,000 in liabilities (the "Gulf Protein Acquisition" and,
11
<PAGE> 12
together with the American Protein Acquisition, the "Recent Acquisitions"). In
connection with the Gulf Protein Acquisition, Omega Protein also entered into a
five-year lease for the Gulf Protein plant at $220,000 annual rental rate.
Omega Protein is currently upgrading this plant's processing capabilities so
that it can manufacture specialty meals. Omega Protein intends to begin
operations at the Morgan City, Louisiana plant at the start of the 1998 fishing
season.
In connection with Zapata's sale of its Bolivian oil and gas interests
(the "Bolivian Sale") to Tesoro Bolivia Petroleum Company ("Tesoro") in July
1997, 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 sale. On January 8, 1998, Tesoro released Zapata
from the requirement to maintain the letter of credit in accordance with the
terms of the Bolivian Sale agreement.
LIQUIDITY AND CAPITAL RESOURCES
Zapata's unrestricted cash balance totaled $28.0 million at December
31, 1997, down from $55.6 million at September 30, 1997; the decline was due
primarily to the Recent Acquisitions that used $28.1 million. For the same
reason, Zapata's working capital decreased to $62.0 million at December 31,
1997 from $86.4 million at September 30, 1997.
Cash provided by operating activities increased to $2.7 million for
the first quarter of fiscal 1998 from $79,000 for the first quarter of fiscal
1997 due primarily to the improved performance of the Company's marine protein
operations. Reflecting the Recent Acquisitions, investing activities used
$28.3 million during the first quarter of fiscal 1998 while providing $520,000
during the corresponding fiscal 1997 period. Investing activities used $2.0
million during the three-month period ended December 31, 1997 versus providing
$1.7 million during the same quarter in the prior year. Investing activities
included a $1.6 million common stock dividend payment in the fiscal 1998 period
and proceeds of $1.8 million from Title XI financing in the fiscal 1997 period.
Zapata has historically utilized Title XI financing of the Marine Act of 1936
to finance certain of its marine protein capital additions.
RESULTS OF OPERATIONS
Zapata's net income increased to $4.6 million for the first quarter of
fiscal 1998 from $1.9 million for the first quarter of fiscal 1997. Revenues
totaled $29.5 million during the fiscal 1998 period versus $25.6 million during
the fiscal 1997 period. Results for the first quarter of fiscal 1997 included
net income from discontinued operations of $25,000 from Zapata's discontinued
Bolivian oil and gas operations that were sold in July 1997.
Zapata's operating income for the first quarter of fiscal 1998 rose to
$8.2 million from $3.2 million for the corresponding prior-year period. The
increase was attributable to the improved performance of the Company's marine
protein operations conducted through Omega Protein.
Zapata recorded an equity loss of $1.1 million in the first quarter of
fiscal 1998 from its 40% interest in Envirodyne Industries, Inc. compared to a
$1.3 million equity loss recorded in the first
12
<PAGE> 13
quarter of fiscal 1997. Zapata's net income in the fiscal 1997 period also
included a $722,000 pretax gain from the sale of certain real estate.
Marine Protein
Omega Protein generated operating income of $9.1 million on revenues
of $29.5 million in the first quarter of fiscal 1998 versus operating income of
$3.8 million on revenues of $25.6 million in the first quarter of fiscal 1997.
The fiscal 1997 period results included revenues of $7.0 million and operating
income of $63,000 from a blending operation that was sold in September 1997.
The improvement in Omega Protein's results was attributable to higher
prices and sales volumes for its fish meal and fish oil products. The average
per-ton selling prices for the Company's regular grade and special select fish
meal products were approximately 8% and 9%, respectively, higher in the current
quarter as compared to the prior-year period, while the average per-ton selling
price for crude fish oil was approximately 31% higher. The increase in sales
volumes for fish meal and fish oil reflect higher levels of inventory carried
over into fiscal 1998 from the fiscal 1997 fishing season as compared to the
levels of inventory the Company carried over into fiscal 1997 from the fiscal
1996 fishing season. Sales volumes and average selling price per ton for Omega
Protein's marine protein products are as follows (all references to tons with
respect to fish meal and fish solubles are to short tons and all references to
tons with respect to fish oil are to metric tons):
13
<PAGE> 14
<TABLE>
<CAPTION>
Three Months Ended
December 31,
----------------------
1997 1996
--------- ---------
<S> <C> <C>
Sales (tons)
Fish meal:
Regular grade. . . . . . . . . . . 10,429 8,483
Special Select . . . . . . . . . . 14,053 11,018
Sea-Lac. . . . . . . . . . . . . . 3,501 3,147
Fish Oil:
Refined. . . . . . . . . . . . . . 1,923 2,665
Crude. . . . . . . . . . . . . . . 22,329 12,300
Solubles. . . . . . . . . . . . . . . 3,929 4,479
Average selling price per ton
Fish meal:
Regular grade. . . . . . . . . . . $470 $436
Special Select . . . . . . . . . . 589 541
Sea-Lac. . . . . . . . . . . . . . 528 501
Fish Oil:
Refined. . . . . . . . . . . . . . 552 502
Crude. . . . . . . . . . . . . . . 539 410
Solubles. . . . . . . . . . . . . . . 209 173
</TABLE>
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.
14
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(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)).
10(a)* -- Asset Purchase Agreement dated as of November 3, 1997 among Protein (USA) Company, American
Proteins, Inc. and Chesapeake Bay Fishing Co., L.C. (Exhibit 10.45 to Omega Protein Corporation's
Form S-1 (Reg. No. 333-44967)).
10(b)* -- Asset Purchase Agreement dated as of November 25, 1997 among Protein Securities Company and Gulf
Protein, Inc. (Exhibit 10.46 to Omega Protein Corporation's Form S-1 (Reg. No. 333-44967)).
27 -- Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K:
During the quarter ended December 31, 1997, Zapata filed the following
Current Reports on Form 8-K with the Securities and Exchange
Commission:
Date of Earliest Financial
Event Reported Item Reported Statements Filed
-------------- ------------- ----------------
December 24, 1997 Item 5. Description of the None
Common Stock, $0.25 par value
of Zapata Corporation
15
<PAGE> 16
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)
February 17, 1998 By: /s/ ERIC T. FUREY
-------------------------------
(Eric T. Furey,
Vice President, General Counsel
and Corporate Secretary)
February 17, 1998 By: /s/ ROBERT A. GARDINER
----------------------------
(Robert A. Gardiner,
Senior Vice President and Chief
Financial Officer)
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C> <C> <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)).
10(a)* -- Asset Purchase Agreement dated as of November 3, 1997 among Protein (USA) Company, American
Proteins, Inc. and Chesapeake Bay Fishing Co., L.C. (Exhibit 10.45 to Omega Protein
Corporation's Form S-1 (Reg. No. 333-44967)).
10(b)* -- Asset Purchase Agreement dated as of November 25, 1997 among Protein Securities Company and
Gulf Protein, Inc. (Exhibit 10.46 to Omega Protein Corporation's Form S-1 (Reg. No.
333-44967)).
27 -- Financial Data Schedule
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 28,047
<SECURITIES> 0
<RECEIVABLES> 10,070
<ALLOWANCES> 0
<INVENTORY> 35,787
<CURRENT-ASSETS> 81,087
<PP&E> 105,652
<DEPRECIATION> 37,306
<TOTAL-ASSETS> 187,462
<CURRENT-LIABILITIES> 19,124
<BONDS> 11,290
0
0
<COMMON> 7,396
<OTHER-SE> 138,992
<TOTAL-LIABILITY-AND-EQUITY> 187,462
<SALES> 29,503
<TOTAL-REVENUES> 29,503
<CGS> 19,281
<TOTAL-COSTS> 19,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 255
<INCOME-PRETAX> 7,325
<INCOME-TAX> 2,737
<INCOME-CONTINUING> 4,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,588
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.19
</TABLE>
