SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly period ended June 30, 1995
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 umber 1-4219
ZAPATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE C-74-1339132
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 4240, Houston, Texas 77210
(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 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
$.25 per share, on August 10, 1995: 29,502,815.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Zapata Corporation
Condensed Consolidated Balance Sheet
Condensed Consolidated Income Statement
Divisional Revenues and Operating Results
Condensed Consolidated Statement of Cash Flows
Notes to Financial Statements
2
ZAPATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(in thousands)
June 30, September 30,
1995 1994
--------- -------------
Current assets:
Cash and cash equivalents $ 1,854 $ 11,416
Restricted cash 77 779
Receivables 21,031 28,206
Inventories:
Fish products 25,845 34,143
Gas liquids products 656 414
Materials, parts and supplies 3,456 3,601
Prepaid expenses and other current assets 4,269 2,609
Net assets of discontinued operations 79,639 80,687
--------- --------
Total current assets 136,827 161,855
--------- --------
Investments and other assets:
Notes receivable -- 1,925
Investments 2,100 14,471
Goodwill 6,915 7,220
Deferred income taxes 5,968 2,915
Other assets 16,903 15,600
--------- --------
31,886 42,131
--------- --------
Property and equipment 165,563 160,862
Accumulated depreciation (101,162) (95,748)
--------- --------
64,401 65,114
--------- --------
Total assets $ 233,114 $269,100
========= ========
The accompanying notes are an integral part of the financial statements.
3
ZAPATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands)
June 30, September 30,
1995 1994
-------- -------------
Current liabilities:
Current maturities of long-term debt $ 8,437 $ 2,915
Accounts payable and accrued liabilities 27,776 41,532
-------- --------
Total current liabilities 36,213 44,447
-------- --------
Long-term debt 34,385 53,972
-------- --------
Other liabilities 19,365 16,139
-------- --------
Stockholders' equity:
Preferred and preference stock 3 2,258
Common stock 7,376 7,930
Capital in excess of par value 129,344 138,293
Reinvested earnings from October 1, 1990 7,168 1,785
Investments unrealized gain (loss), net of taxes (740) 4,276
-------- --------
143,151 154,542
-------- --------
Total liabilities and stockholders' equity $233,114 $269,100
======== ========
The accompanying notes are an integral part of the financial statements.
4
ZAPATA CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
Revenues $ 36,708 $ 64,686 $126,622 $192,050
-------- -------- -------- --------
Expenses:
Operating 30,916 58,171 112,602 172,735
Provisions for asset write-downs 12,607 18,810 12,607 18,810
Depreciation, depletion and
amortization 2,158 3,107 6,453 8,369
Selling, general and administrative 2,195 3,116 6,462 9,579
-------- -------- -------- --------
47,876 83,204 138,124 209,493
-------- -------- -------- --------
Operating loss (11,168) (18,518) (11,502) (17,443)
-------- -------- -------- --------
Other income (expense):
Interest income 303 382 840 1,448
Interest expense (735) (1,213) (2,449) (4,753)
Gain on sales of Tidewater common
stock -- -- 4,811 37,457
Other (115) 3,016 453 (2,859)
-------- -------- -------- --------
(547) 2,185 3,655 31,293
-------- -------- -------- --------
Income (loss) from continuing
operations before taxes (11,715) (16,333) (7,847) 13,850
-------- -------- -------- --------
Provision for income taxes
State 97 98 186 567
Federal (4,133) (5,750) (2,810) 4,650
-------- -------- -------- --------
(4,036) (5,652) (2,624) 5,217
-------- -------- -------- --------
Income (loss) from continuing
operations (7,679) (10,681) (5,223) 8,633
-------- -------- -------- --------
Discontinued operations:
Income from discontinued operations,
net of income taxes 537 1,107 1,760 1,393
Reversal of reserve for loss on
disposition, net of income taxes 8,897 -- 8,897 --
-------- -------- -------- --------
9,434 1,107 10,657 1,393
-------- -------- -------- --------
Net income (loss) 1,755 (9,574) 5,434 10,026
-------- -------- -------- --------
Preferred stock dividends -- 101 51 303
-------- -------- -------- --------
Net income (loss) to common
stockholders $ 1,755 $ (9,675) $ 5,383 $ 9,723
======== ======== ======== ========
Per share data:
Income (loss) from continuing
operations $ (0.26) $ (0.34) $ (0.17) $ 0.26
Income from discontinued
operations 0.32 0.03 0.34 0.05
-------- -------- -------- --------
Net income (loss) per share $ 0.06 $ (0.31) $ 0.17 $ 0.31
======== ======== ======== ========
Average common shares and
equivalents outstanding 29,824 31,671 31,120 31,708
======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
5
ZAPATA CORPORATION
DIVISIONAL REVENUES AND OPERATING RESULTS
(in thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
Revenues:
Marine protein $ 21,737 $ 19,703 $ 61,311 $ 62,307
Natural gas gathering and processing 12,509 41,957 57,829 120,456
Oil and gas 2,462 3,026 7,482 9,287
-------- -------- -------- --------
$ 36,708 $ 64,686 $126,622 $192,050
======== ======== ======== ========
Operating income (loss):
Marine protein $(10,428) $ 2,122 $ (8,599) $ 6,016
Natural gas gathering and processing (39) (473) (482) (696)
Oil and gas 310 (18,743) 528 (18,103)
Corporate (1,011) (1,424) (2,949) (4,660)
-------- -------- -------- --------
$(11,168) $(18,518) $(11,502) $(17,443)
======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
6
ZAPATA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Nine Months Ended
June 30,
-------------------
1995 1994
--------- ---------
Cash flow provided (used) by operating activities:
Continuing operations:
Net income (loss) from continuing operations $ (5,223) $ 8,633
-------- --------
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation, amortization and valuation
provisions 19,060 27,179
Gain on sale of assets (5,268) (37,457)
Changes in other assets and liabilities (1,987) (1,570)
-------- --------
Total adjustments 11,805 (11,848)
-------- --------
Cash flow provided (used) by continuing
operations 6,582 (3,215)
-------- --------
Discontinued operations:
Income from discontinued operations 10,657 1,393
Change in net assets of discontinued operations (11,559) (10,322)
-------- --------
Cash flow used by discontinued operations (902) (8,929)
-------- --------
Net cash provided (used) by operating
activities 5,680 (12,144)
-------- --------
Cash flow provided (used) by investing activities:
Proceeds from dispositions of investments and other 12,381 88,533
Proceeds from restricted cash investments 702 75,083
Proceeds from notes receivable 5,495 1,061
Business acquisitions, net of cash acquired -- (73,222)
Capital expenditures (6,844) (15,054)
-------- --------
Net cash provided by investing activities 11,734 76,401
-------- --------
Cash flow used by financing activities:
Principal payments of long-term obligations, net (14,065) (69,263)
Preferred stock redemption and common stock buybacks (11,758) (2,245)
Dividend payments (1,153) (404)
-------- --------
Net cash used by financing activities (26,976) (71,912)
-------- --------
Net decrease in cash and cash equivalents (9,562) (7,655)
Cash and cash equivalents at beginning of period 11,416 15,273
-------- --------
Cash and cash equivalents at end of period $ 1,854 $ 7,618
======== ========
The accompanying notes are an integral part of the financial statements.
7
ZAPATA CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by Zapata Corporation ("Zapata" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The financial statements reflect all adjustments that are, in the opinion of
management, necessary to fairly present such information. All such adjustments
are of a normal recurring nature. Although Zapata believes that the disclosures
are adequate to make the information presented not misleading, certain
information and footnote disclosures, including 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. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in Zapata's latest annual report on Form 10-K.
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, and for long-lived assets
and certain identifiable intangibles to be disposed of. As a result of adopting
SFAS 121, the Company recorded a $12.6 million pretax provision for asset
impairment to reduce its marine protein assets to their estimated fair market
value.
NOTE 2. DISCONTINUED OPERATIONS OF NATURAL GAS COMPRESSION
In April 1995, Zapata announced that the Company was considering the sale
of its natural gas compression operations. In June 1995, Zapata announced that
it had entered into an agreement to sell the assets of its natural gas
compression division for $130 million to Enterra Corporation. The agreement is
subject to the signing of a definitive agreement and certain governmental
approvals. The Company is currently negotiating the terms of the agreement,
however, no assurances can be made that this transaction will be completed. The
Company's consolidated financial statements have been restated to reflect the
natural gas compression operations as a discontinued operation. Summarized
results and financial position of the discontinued operations are shown below
(amounts in thousands):
NINE MONTHS ENDED JUNE 30,
--------------------------
1995 1994
-------- --------
Financial Results
Revenues $53,086 $49,874
Expenses 50,018 47,581
------- -------
Income before taxes 3,068 2,293
Income tax provision 1,308 900
------- -------
Net income * $ 1,760 $ 1,393
======= =======
8
JUNE 30, SEPTEMBER 30,
1995 1994
-------- ------------
Financial Position
Current assets $ 36,598 $ 30,696
Other assets 20,016 19,434
Property and equipment, net 59,497 52,496
-------- --------
116,111 102,626
-------- --------
Debt 27,992 15,200
Other liabilities 8,480 6,739
-------- --------
36,472 21,939
-------- --------
Net assets of discontinued operations $ 79,639 $ 80,687
======== ========
---------
* Net income includes allocations of interest expense on general corporate debt
of $1.2 million in 1995 and $2.7 million in 1994. Interest expense was
allocated to discontinued operations based on a ratio of net assets to be sold
to the sum of total net assets of the Company plus general corporate debt.
NOTE 3. DISCONTINUED MARINE PROTEIN OPERATIONS SUBSEQUENTLY RETAINED
Zapata has decided to retain the marine protein operations which had
previously been reported as a discontinued operation. In April 1995, the
Company announced the cancellation of the sale of the marine protein division.
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.
The Company has concluded that the value of its marine protein
operations could be more effectively realized by retaining these operations as
part of Zapata's ongoing operations, rather than pursuing another sale
transaction. As a result, marine protein's net assets and results of operations
for all periods have been reclassified from discontinued operations to
continuing operations. Marine protein's results of operations from October 1994
through March 1995 had previously been offset against an after-tax reserve of
$8.9 million established in the fourth quarter of fiscal 1994 for the estimated
loss on disposition. As a result of the Company's decision to retain the marine
protein operations, the $8.9 million reserve has been reversed in the current
quarter. Marine protein revenues of $39.6 million and operating income of $1.8
million for the first six months of fiscal 1995 have been reclassified to
continuing operations. Also, marine, protein assets and liabilities of $80.7
million and $24.9 million, respectively, as of June 30, 1995 and assets and
liabilities of $100.2 million and $32.6 million, respectively, as of
September 30, 1994 have been reclassified to continuing operations.
As a result of adopting SFAS 121, Zapata recorded a $12.6 million
pretax provision for asset impairment to reduce its marine protein assets. The
provision was based on the estimated fair market value of the marine protein
assets.
NOTE 4. RESTATED FISCAL 1995 RESULTS OF OPERATIONS
Zapata's first and second quarter income statements for fiscal 1995
have been restated as follows to reflect the natural gas compression operations
as a discontinued operation and to reclassify the marine protein operating
results to continuing operations, amounts in thousands.
9
Three Months Ended
--------------------------
December 31, March 31,
1994 1995
------------ ---------
Revenues $47,388 $42,526
Operating income (loss) 141 (475)
Income from continuing operations 40 2,416
Income from discontinued operations 708 515
Net income $ 748 $ 2,931
NOTE 5. SUBSEQUENT EVENT
In July 1995, Zapata completed the sale of its remaining U.S. offshore
oil and gas properties. The Company received cash, a production payment
entitling Zapata to a share of future revenues derived from the properties and
other contract consideration. No gain or loss was recognized from the sale as
the transaction was recorded at book value.
In August 1995, Zapata announced that it had acquired 31% of the
outstanding common stock of Envirodyne Industries, Inc. ("Envirodyne") for $18.8
million from Malcolm Glazer, Chairman of the Board of Zapata and a 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. Envirodyne is one of the world's major suppliers of food packaging
products and food service supplies.. This acquisition is the first major step in
the transformation of Zapata away from the energy business and into food-related
businesses. Zapata is evaluating acquiring additional shares or proposing a
merger with, or acquisition of, Envirodyne in the future.
10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
In April 1995, Zapata announced that the Company was considering the sale
of its two natural gas services businesses: the natural gas compression
operation and the natural gas gathering and processing operation. The decision
to consider exiting the energy industry was based on the belief that businesses
outside the energy industry may provide better opportunities for the Company to
pursue. The decision to consider redirecting operations away from the energy
industry does not imply a decision to liquidate Zapata. The Company is
evaluating opportunities to reinvest the stockholders' capital.
In August 1995, Zapata announced that it had acquired 31% of the
outstanding common stock of Envirodyne Industries, Inc. ("Envirodyne"), a
manufacturer of food packaging and food service supplies for $18.8 million. This
acquisition is the first major step in the transformation of Zapata away from
the energy business and into food-related businesses. Zapata is evaluating
acquiring additional shares or proposing a merger with, or acquisition of,
Envirodyne in the future. Zapata is also looking at other opportunities in food-
related areas.
In June 1995, Zapata announced that it had entered into an agreement to
sell the assets of its natural gas compression division for $130 million. The
agreement is subject to the signing of a definitive agreement and certain
governmental approvals. The Company is currently negotiating the terms of the
agreement, however, no assurances can be made that this transaction will be
completed. The Company's consolidated financial statements have been restated to
reflect the natural gas compression operations as a discontinued operation. Due
to the preliminary nature of the decision process regarding the possible sale of
the natural gas gathering and processing operation, the financial statement
impact of the ultimate disposition of this business cannot be determined at this
time.
Zapata has decided to retain the marine protein operations which had
previously been reported as a discontinued operation. In April 1995, the Company
announced the cancellation of the sale of the marine protein division. 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. The Company has concluded that the value of the marine protein
operations could be more effectively realized by retaining these operations as
part of Zapata's ongoing operations, rather than pursuing another sale
transaction. As a result, marine protein's net assets and results of operations
for all periods have been reclassified from discontinued operations to
continuing operations.
In July 1995, Zapata completed the sale of its remaining U.S. offshore oil
and gas properties. The Company received cash, a production payment entitling
Zapata to a share of future revenues derived from the properties and other
contract considerations. The Company currently plans to retain its Bolivian oil
and gas operations.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, Zapata's long-term debt of $34.4 million compared
favorably to working capital of $100.6 million and stockholders' equity of
$143.2 million. In April 1995, Zapata used the proceeds of $12.7 million from
the sale of its remaining 673,077 shares of Tidewater Inc.
11
("Tidewater") common stock to reduce the Company's $17.5 million in notes due to
Norex America, Inc. Remaining mandatory principal payments for the next twelve
months total $8.4 million. In July 1995, a subsidiary of the Company, Zapata
Protein, Inc., arranged a $15.0 million bank credit facility.
Cash provided by operating activities totalled $5.7 million during the
first nine months of fiscal 1995 as compared to a $12.1 million use of cash
during the corresponding prior-year period. The use of cash in fiscal 1994 was
primarily due to increases in working capital. Cash provided by investing
activities totalled $11.7 million during the first nine months of fiscal 1995 as
compared to $76.4 million during the first nine months of fiscal 1994. The
fiscal 1994 period included proceeds of $85.9 million from the sale of 4.13
million shares of Zapata's Tidewater common stock. Net cash used by financing
activities totalled $27.0 million during the first nine months of fiscal 1995 as
compared to $71.9 million in the corresponding prior-year period, which included
a $68.5 million prepayment of senior debt.
In April 1995, Zapata repurchased 2.25 million shares of Zapata's common
stock from Norex America, Inc. for $4.00 per share. The shares repurchased by
Zapata represented 7% of the Company's then outstanding common stock. Following
the repurchase of these shares, Zapata had approximately 29.5 million shares of
common stock outstanding.
In June 1995, Zapata announced that its board of directors had authorized
the repurchase of up to 7.5 million shares of its common stock depending on
market conditions.
In August 1995, Zapata announced that it had acquired 31% of the
outstanding common stock of Envirodyne Industries, Inc. ("Envirodyne") for $18.8
million from Malcolm Glazer, Chairman of the Board of Zapata and a 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. Envirodyne is one of the world's major suppliers of food packaging
products and food service supplies. This acquisition is the first major step in
the transformation of Zapata away from the energy business and into food-related
businesses. Zapata is evaluating acquiring additional shares or proposing a
merger with, or acquisition of, Envirodyne in the future.
RESULTS OF OPERATIONS
Zapata's net income of $1.8 million for the third quarter of fiscal 1995
compared favorably to the fiscal 1994 third quarter net loss of $9.6 million.
Net income includes income from the discontinued natural gas compression
operations of $537,000 in the fiscal 1995 period and $1.1 million in the
corresponding fiscal 1994 period. The discontinued natural gas compression
results include allocations of interest on general corporate debt of $341,000 in
the fiscal 1995 quarter and $650,000 in the fiscal 1994 quarter. The fiscal 1995
third quarter net income also included net income of $8.9 million from
discontinued operations as a result of the reversal of an estimated loss on the
disposition of the marine protein operations which was recorded in fiscal 1994.
The Company's net loss from continuing operations of $7.7 million for the
three months ended June 30, 1995 compared favorably to a net loss of $10.7
million for the corresponding 1994 period. The fiscal 1995 results include a
$12.6 million pretax provision for asset impairment of the Company's marine
protein assets as a result of adopting Statement of Financial Accounting
Standards No. 121 ("SFAS 121") while the fiscal 1994 results include a pretax
valuation provision of $18.8 million associated
12
with the Company's oil and gas operations. Revenues of $36.7 million and an
operating loss of $11.2 million in the fiscal 1995 third quarter compared to
revenues of $64.7 million and an operating loss of $18.5 million in the 1994
third quarter. The decrease in revenues from the prior year reflects the
Company's decision to decrease natural gas trading activity in its gathering and
processing operations.
Year-to-date, fiscal 1995 revenues of $126.6 million, an operating loss of
$11.5 million and net income of $5.4 million compared to fiscal 1994 revenues of
$192.1 million, an operating loss of $17.4 million and net income of $10.0
million.
MARINE PROTEIN--As a result of the Company's decision to retain the marine
protein operations, the net assets and results of marine protein's operations
for all periods have been reclassified from discontinued operations to
continuing operations and the $8.9 million after-tax loss on disposition
recorded September 1994 has been reversed in the current quarter. As a result of
adopting SFAS 121, the Company recorded a $12.6 million pretax provision for
asset impairment to reduce its marine protein assets to their estimated fair
market value. SFAS 121 requires companies to write down assets to their
estimated fair market value when assets are determined to be impaired.
Reflecting the provision for asset impairment, revenues of $21.7 million
and operating loss of $10.4 million in the third quarter of fiscal 1995 compared
unfavorably to revenues of $19.7 million and operating income of $2.1 million in
the third quarter of 1994. Current quarter sales volume of fish oil was double
the prior-year period level while fish meal sales volume was 14% lower in the
current quarter as compared to the prior-year quarter. The average price for
fish oil increased to $349 per ton in the third quarter of fiscal 1995 from $302
per ton in the 1994 third quarter; fish meal prices averaged $355 per ton in the
1995 period and $346 per ton in the 1994 period. The fiscal 1995 fish catch is
approximately 22% lower than the fiscal 1994 fish catch due principally to
inclement weather conditions that hampered fishing during the current quarter.
Reflecting the effects of the provision for asset impairment and the lower
fish catch, year-to-date fiscal 1995 revenues of $61.3 million and operating
loss of $8.6 million compared unfavorably to fiscal 1994 revenues of $62.3
million and operating income of $6.0 million. Fiscal 1995 sales volume of fish
oil was 6% higher than the fiscal 1994 sales volume while fiscal 1995 fish meal
sales volume declined 3% as compared to fiscal 1994. Year-to-date, fiscal 1995
fish oil prices have averaged $301 per ton versus $317 per ton in fiscal 1994.
Likewise, fiscal 1995 fish meal prices have averaged $347 per ton versus $353
per ton in fiscal 1994.
NATURAL GAS GATHERING, PROCESSING AND MARKETING--Zapata's natural gas gathering,
processing and marketing operations are conducted through Cimarron Gas Holding
Company and its subsidiaries (collectively, "Cimarron"), which were acquired
early in fiscal 1993. As a division of Zapata, Cimarron's operations involve two
major categories of business activities: the gathering and processing of natural
gas and its constituent products and the marketing and trading of natural gas
liquids (NGL's).
Revenues and operating results for the three-month and nine-month periods
ended June 30, 1995 and 1994 are presented in the following table by major
category, in thousands.
13
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
-------- -------- -------- -------
Revenues
Gathering & Processing $ 4,420 $ 7,255 $14,010 $ 18,458
NGL Marketing 8,089 34,702 43,819 101,998
------- ------- ------- --------
$12,509 $41,957 $57,829 $120,456
======= ======= ======= ========
Operating Results
Gathering & Processing $ 203 $ (164) $ 357 $ 148
NGL Marketing 35 147 63 696
Selling & Administrative (277) (456) (902) (1,540)
------- ------- ------- --------
$ (39) $ (473) $ (482) $ (696)
======= ======= ======= ========
For the third quarter of fiscal 1995, gathering and processing revenues
were lower than the prior year as a result of the negative impact of
lower natural gas prices, while operating results improved, reflecting increased
processing margins. However, marketing revenues and operating income have
declined in fiscal 1995 as compared to 1994, due to the Company's decision to
reduce its natural gas trading activities.
A comparison of average daily volumes of gas, measured in millions of cubic
feet, gathered and processed during the three-month and nine-month periods ended
June 30, 1995 and 1994 is shown below.
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ -----------------
Average Daily Volumes 1995 1994 1995 1994
--------------------- -------- -------- -------- -------
(MMCF)
Gathering 57.0 47.7 53.5 44.9
Processing 26.5 25.0 26.6 21.9
In April 1995, Zapata announced that the Company was considering the sale
of its natural gas gathering and processing operation. Due to the preliminary
nature of the decision process regarding the possible sale of the natural gas
gathering and processing operation, the financial statement impact of the
ultimate disposition of this business cannot be determined at this time.
OIL AND GAS--Revenues of $2.5 million and operating income of $310,000 for the
third quarter of fiscal 1995 compared favorably to the corresponding fiscal 1994
period's revenues of $3.0 million and operating loss of $18.7 million. The
fiscal 1994 period loss included an $18.8 million property valuation provision.
Although the Company's U.S. natural gas prices improved during the third quarter
of fiscal 1995, current quarter prices were lower than the prior-year quarter
prices. Zapata's domestic natural gas production for the third quarter of fiscal
1995 approximated the level of production in the corresponding fiscal 1994
period. The Company's Bolivian operations contributed $399,000 to operating
income in the third quarter of fiscal 1995 as compared to $483,000 in the third
quarter of fiscal 1994.
14
Year-to-date, fiscal 1995 revenues of $7.5 million and operating income of
$528,000 compared favorably to the fiscal 1994 revenues of $9.3 million and
operating loss of $18.1 million due primarily to the 1994 property write-down.
Bolivian operations contributed operating income of $1.2 million in fiscal 1995
and $2.4 million in fiscal 1994.
DISCONTINUED OPERATIONS--NATURAL GAS COMPRESSION
In April 1995, Zapata announced that the Company was considering the sale
of its natural gas compression operations. In June 1995, Zapata announced that
it had entered into an agreement to sell the assets of its natural gas
compression division for $130 million to Enterra Corporation. The agreement is
subject to the signing of a definitive agreement and certain governmental
approvals. The Company is currently negotiating the terms of the agreement,
however, no assurance can be made that this transaction will be completed. The
Company's consolidated financial statements have been restated to reflect the
natural gas compression operations as a discontinued operation.
The major segments of Energy Industries' natural gas compression revenues
and operating results for the three-month and nine-month periods ended June 30,
1995 and the three-month and eight-month periods ended June 30, 1994, in
thousands, are identified below.
Three Months Ended Nine Months Eight Months
June 30, Ended June 30,
------------------ --------------------------
1995 1994 1995 1994
------ ------ ------ ------
Revenues
Compressor Rental $ 4,403 $ 5,163 $12,978 $12,066
Fabrication and Sales 8,989 9,272 21,879 17,150
Parts & Service 4,731 5,187 14,919 14,123
Other 1,206 2,188 3,310 6,535
------- ------- ------- -------
$19,329 $21,810 $53,086 $49,874
======= ======= ======= =======
Operating Results
Compressor Rental $ 1,175 $ 1,336 $ 3,592 $ 3,686
Fabrication and Sales 875 1,206 2,421 1,762
Parts & Service 850 1,152 2,818 2,760
Other 198 383 348 908
Selling & Administrative (1,394) (1,617) (4,378) (4,274)
------- ------- ------- -------
$ 1,704 $ 2,460 $ 4,801 $ 4,842
======= ======= ======= =======
(The Other segment includes the results of the heat exchanger manufacturing
operation which was sold during the second quarter of fiscal 1995 and used
equipment sales.)
Natural gas compressor package rental utilization is affected primarily by
the number and age of producing oil and gas wells, the volume of natural gas
consumed and natural gas prices. Rental rates are determined primarily by the
demand for compressor packages and vary by size and horsepower of a compressor
package. Energy Industries' utilization, rental rates and fleet size as of June
30, 1995 and 1994 are compared in the following table.
15
June 30, 1995 June 30, 1994
------------- -------------
Fleet utilization:
Horsepower 81.5% 77.8%
Monthly rental rate, based on:
Horsepower $15.54 $17.43
Fleet size:
Number of units 771 701
Horsepower 129,467 107,494
Reflecting the effects of low natural gas prices, Energy Industries'
operating results continued to be negatively impacted during the third quarter
of fiscal 1995. As a result, Energy Industries' operating income during the
third quarter of fiscal 1995 compared unfavorably to the third quarter income in
fiscal 1994.
16
PART II--OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company held its 1995 Annual Meeting of Stockholders on July 27,
1995 (the "1995 Annual Meeting"). An aggregate of 29,505,034 shares of
the Company's equity securities were outstanding and entitled to vote at
the 1995 Annual Meeting as follows: 29,502,407 shares of Common Stock
and 2,627 shares of $2 Noncumulative Convertible Preference Stock. At
this meeting, the stockholders voted on the following matters:
Election of Class III Directors
For Against
--- -------
Robert V. Leffler, Jr. 23,515,741 1,523,931
W. George Loar 23,510,424 1,529,248
In addition to the Class III Directors elected at the 1995 Annual
Meeting, Malcolm I. Glazer and Ronald C. Lassiter continue to serve as
Class I Directors until the 1996 Annual Meeting of Stockholders, and
Avram A. Glazer and Peter M. Holt continue to serve as Class II
Directors until the 1997 Annual Meeting of Stockholders.
Ratification of the Appointment
of Coopers & Lybrand L.L.P. as
Independent Public Accountants
Broker
For Against Abstained Non-Vote
--- ------- --------- --------
24,603,811 329,905 108,067 91,175
Subject to stockholder approval, the Board of Directors of the Company
appointed Coopers & Lybrand L.L.P. to serve as the Company's independent
public accountants for the year ending September 30, 1995.
Stockholder Proposal on Cumulative Voting
Broker
For Against Abstained Non-Vote
--- ------- --------- ---------
1,874,627 15,385,521 234,018 8,250,338
Mr. Martin Glotzer, a stockholder of the Company, presented the
stockholder proposal to be voted on at the 1995 Annual Meeting in which
he requested that the stockholders of the Company amend the Company's
Restated Certificate of Incorporation, as amended, to provide for
cumulative voting on the election of directors of the Company.
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits indicated by an asterisk (*) are incorporated by reference
to the Zapata Corporation Annual Report on Form 10-K for the fiscal year
ended September 30, 1994.
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 August 17, 1994.
4(a)* --Second Amended and Restated Master Restructuring Agreement,
dated as of April 16, 1993 between Zapata and Norex Drilling
Ltd. (Exhibit 12 to Zapata's Amendment No. 3 to Schedule 13D
dated April 30, 1993).
4(b)* --First Amendment to Second Amended and Restated Master
Restructuring Agreement dated as of May 17, 1993 between
Zapata and Norex Drilling Ltd. (Exhibit 4(c) to Zapata's
Registration Statement on Form S-1 (No. 33-68034)).
4(c)* --Second Amendment to Second Amended and Restated Master
Restructuring Agreement, dated as of December 17, 1993
between Zapata and Norex Drilling Ltd. (Exhibit 4(c) to
Zapata's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993 (File No. 1-4219)).
4(d)* --Securities Liquidity Agreement, dated as of December 19,
1990, by and among Zapata and each of the securities holders
parties thereto (Exhibit 4(b) to Zapata's Annual Report on
Form 10-K for the fiscal year ended September 30, 1990 (File
No. 1-4219)).
4(e)* --Consent Letter and Waiver dated as of March 7, 1995 by and
between Norex America, Inc. and Zapata Corporation (Exhibit
4(e) to Zapata's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995 (File No. 1-4219))
10(a) --Letter Agreement dated June 29, 1995 by and between Enterra
Corporation and Zapata Corporation.
10(b) --Assignment and Assumption of Consulting Agreement effective
as of July 1, 1995 by and between Zapata Corporation and
Zapata Protein, Inc.
27 --Financial Data Schedule.
18
(b) Reports on Form 8-K
Current report on Form 8-K dated June 9, 1995 (Item 5. Other
events--reported the election of Robert V. Leffler, Jr. and
W. George Loar to serve as Class III Directors, filling the
vacancies left by the resignations of Myrl S. Gelb and
Luther W. Miller).
19
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
August 14, 1995 By: /s/ JOSEPH L. VON ROSENBERG III
--------------------------------
Joseph L. von Rosenberg III
Vice President, General Counsel
and Corporate Secretary
August 14, 1995 By: /s/ LAMAR C. MCINTYRE
--------------------------------
Lamar C. McIntyre
Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
20
EXHIBIT INDEX
NUMBER EXHIBIT
------ -------
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 August 17, 1994.
4(a)* --Second Amended and Restated Master Restructuring Agreement, dated as
of April 16, 1993 between Zapata and Norex Drilling Ltd. (Exhibit 12
to Zapata's Amendment No. 3 to Schedule 13D dated April 30, 1993).
4(b)* --First Amendment to Second Amended and Restated Master Restructuring
Agreement dated as of May 17, 1993 between Zapata and Norex Drilling
Ltd. (Exhibit 4(c) to Zapata's Registration Statement on Form S-1
(No. 33-68034)).
4(c)* --Second Amendment to Second Amended and Restated Master Restructuring
Agreement, dated as of December 17, 1993 between Zapata and Norex
Drilling Ltd. (Exhibit 4(c) to Zapata's Annual Report on Form 10-K
for the fiscal year ended September 30, 1993 (File No. 1-4219)).
4(d)* --Securities Liquidity Agreement, dated as of December 19, 1990, by and
among Zapata and each of the securities holders parties thereto
(Exhibit 4(b) to Zapata's Annual Report on Form 10-K for the fiscal
year ended September 30, 1990 (File No. 1-4219)).
4(e)* --Consent Letter and Waiver dated as of March 7, 1995 by and
between Norex America, Inc. and Zapata Corporation (Exhibit 4(e) to
Zapata's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995 (File No. 1-4219)).
* Incorporated by reference to the Zapata Corporation Annual Report on Form 10-K
for the fiscal year ended September 30, 1994.
10(a) --Letter Agreement dated June 29, 1995 by and between Enterra
Corporation and Zapata Corporation.
10(b) --Assignment and Assumption of Consulting Agreement effective as of
July 1, 1995 by and between Zapata Corporation and Zapata Protein,
Inc.
27 --Financial Data Schedule.
* Incorporated by reference to the Zapata Corporation Annual Report on Form 10-K
for the fiscal year ended September 30, 1994.
EXHIBIT 10(a)
[LETTERHEAD OF ENTERRA APPEARS HERE]
VIA FACSIMILE (713) 940-6122
June 29, 1995
Mr. Lamar C. McIntyre
Chief Financial Officer
Zapata Corporation
One Riverway, Suite 2150
Houston, Texas 77056
Dear Mr. McIntyre:
This letter will confirm the agreement between Zapata Corporation ("Zapata") and
Enterra Corporation ("Enterra") pursuant to which Enterra agrees, subject only
to the conditions contained herein, to purchase from Zapata, and Zapata agrees
to sell to Enterra, all of the assets of Zapata's wholly-owned subsidiary,
Energy Industries, Inc. ("EI"), for the cash price of $130,000,000.00 (the
"Purchase Price"). The Purchase Price shall be wire transferred by Enterra to
the bank account designated by Zapata. This agreement shall be subject only to
expiration or termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR Completion"), and to
signing of a definitive asset purchase agreement containing customary and
reasonable representations and warranties and indemnification provisions.
Closing of this transaction shall take place as soon as possible after HSR
Completion. Both Enterra and Zapata agree to use their best efforts to close the
transaction before August 31, 1995.
In exchange, Zapata agrees to discontinue all further discussions with other
potential acquirors of EI and will not solicit or accept any other offers for EI
(the "No-Shop Commitment"). The No-Shop Commitment will remain in force until
HSR Completion.
This agreement shall be governed by and construed in accordance with the laws of
the State of Texas. This agreement contains the entire agreement of the parties
and may not be changed orally but only in writing signed by the parties against
which enforcement of any waiver or modification is sought. If any legal action
is brought for the enforcement of this agreement or because of any alleged
dispute, breach or default in connection with any of the provisions of this
agreement, the successful or prevailing party shall be entitled to recover
reasonable attorney's fees incurred in this action or proceeding in addition
to any other relief to which it may be entitled.
Enterra Corporation . 13100 Northwest Freeway, Sixth Floor . Houston, Texas
77040-6310 . (713) 462-7300 . FAX: (713) 462-7816
Mr. Lamar C. McIntyre
Zapata Corporation
June 29, 1995
Page 2
If this letter accurately reflects our agreement, please execute in the space
provided below and return one fully-executed original to me as soon as possible.
Very truly yours,
ENTERRA CORPORATION
/s/ Steven C. Grant
--------------------------------
Steven C. Grant
Senior Vice President
Corporate Development
ACCEPTED AND AGREED TO:
ZAPATA CORPORATION
/s/ Lamar C. McIntyre
--------------------------------
Lamar C. McIntyre
Chief Financial Officer
EXHIBIT 10(b)
ASSIGNMENT AND ASSUMPTION
OF CONSULTING AGREEMENT
This Assignment and Assumption of Consulting Agreement (the "Assignment") is
effective as of July 1, 1995 (the "Effective Date") and is made by and between
ZAPATA CORPORATION ("Assignor") and ZAPATA PROTEIN, INC. ("Assignee").
Pursuant to the Consulting Agreement dated July 15, 1994 by and between
Assignor, Assignee and R. C. LASSITER ("Executive"), as amended by letter
agreements dated January 23, 1995 and March 15, 1995 (all of which together
constitute the "Agreement"), Executive did agree to serve as an independent
consultant to and as Chairman of the Board of Directors and Chief Executive
Officer of Assignee.
Assignor now desires to assign all of its interest in the Agreement, and
Assignee desires to accept the Assignment and to assume all duties, obligations
and liabilities of the Assignor in connection with the Agreement.
FOR VALUE RECEIVED, the receipt and sufficiency of which hereby are acknowledged
and confessed by Assignor and Assignee, and in further consideration of the
agreements of the Assignee as set forth below, the Assignor hereby assigns,
conveys and transfers to the Assignee all right, title and interest of the
Assignor in and to the Agreement, a copy of which is attached to this document
as EXHIBIT "A" and incorporated herein by this reference for all purposes. As of
the Effective Date and except as provided elsewhere in this Agreement, the
Assignee hereby accepts this assignment and, in addition, expressly assumes and
agrees to perform and fulfill all the terms, covenants, conditions, duties and
obligations required of the Assignor under the Agreement and assumes all
liabilities of the Assignor in connection with the Agreement and agrees to
timely make all payments due or payable and to become due or payable by the
Assignor under the Agreement. Assignee hereby acknowledges that Assignor is not
in default of any of its obligations under the Agreement. Without limiting the
generality of the foregoing, Assignor has performed all obligations required to
be performed by it prior to the date hereof.
The Agreement and this instrument, upon Assignor and Assignee executing in
writing their consent hereof, constitute the full and final understanding and
only agreement of Assignor and Assignee, and may not be modified or amended to
bind either party, except by written instrument signed by their authorized
representatives. Assignee acknowledges having received a copy of and read and
understood the Agreement and agrees to be bound by all of its terms and
conditions.
IN WITNESS WHEREOF, the parties have executed this Assignment by their duly
authorized representatives, Assignee and Assignor each representing and
warranting to the other that Assignee and Assignor are each duly organized and
validly existing and in good standing, Assignor as a Delaware corporation, and
Assignee as a Delaware corporation, and Assignor and Assignee each have full
right, power and authority to execute and deliver and perform under this
Assignment and
the person executing this Assignment on behalf of Assignee and the person
executing this Assignment on behalf of Assignor are each duly authorized and
empowered to do so.
Capitalized terms used herein without definition shall have the same meanings
ascribed to them in the Agreement.
ZAPATA CORPORATION ("Assignor")
By: /s/ Joseph L. von Rosenberg III
------------------------------------
Joseph L. von Rosenberg III
Vice President, General Counsel and
Corporate Secretary
ZAPATA PROTEIN, INC. ("Assignee")
By: /s/ Joseph D. Oliver III
-----------------------------------
Joseph D. Oliver III
Executive Vice President--Finance
5
1,000
9-MOS
SEP-30-1995
JUN-30-1995
1,931
0
21,031
0
29,957
136,827
165,563
101,162
233,114
36,213
34,385
7,376
0
3
135,772
233,114
126,622
126,622
138,124
138,124
(6,104)
0
2,449
(7,847)
(2,624)
(5,223)
10,657
0
0
5,434
.17
.17
