SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q/A
(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 NUMBER 1-4219
ZAPATA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE C-74-1339132
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1717 ST. JAMES PLACE, SUITE 550 77056
HOUSTON, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
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 November 13, 1995: 29,548,407.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Zapata Corporation
Condensed Consolidated Balance Sheet ..................................... 3
Condensed Consolidated Income Statement .................................. 4
Divisional Revenues and Operating Results ................................ 5
Condensed Consolidated Statement of Cash Flows ........................... 6
Notes to Financial Statements ............................................ 7
2
ZAPATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, SEPTEMBER 30,
1995 1994
--------- -------------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents............................ $ 4,081 $ 13,094
Restricted cash...................................... 77 779
Receivables.......................................... 31,228 39,595
Inventories:
Compressor equipment and components................. 24,174 17,629
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
--------- --------
Total current assets............................... 93,786 111,864
--------- --------
Investments and other assets:
Notes receivable..................................... -- 1,925
Investments.......................................... 2,100 14,471
Goodwill............................................. 25,438 26,105
Deferred income taxes................................ 5,968 2,915
Other assets......................................... 18,396 16,149
--------- --------
51,902 61,565
--------- --------
Property and equipment................................. 232,870 217,523
Accumulated depreciation............................... (108,972) (99,913)
--------- --------
123,898 117,610
--------- --------
Total assets....................................... $ 269,586 $291,039
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt................. $ 8,866 $ 3,009
Accounts payable and accrued liabilities............. 36,256 48,271
--------- --------
Total current liabilities.......................... 45,122 51,280
--------- --------
Long-term debt......................................... 61,948 69,078
--------- --------
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......... $ 269,586 $291,039
========= ========
The accompanying notes are an integral part of the financial statements.
3
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............................... $ 56,037 $ 86,496 $179,708 $241,924
-------- -------- -------- --------
Expenses:
Operating............................ 45,877 74,214 152,823 209,215
Provisions for asset write-downs..... 12,607 18,810 12,607 18,810
Depreciation, depletion and amortiza-
tion................................ 3,641 4,475 10,775 11,969
Selling, general and administrative.. 3,376 5,055 10,204 14,531
-------- -------- -------- --------
65,501 102,554 186,409 254,525
-------- -------- -------- --------
Operating loss......................... (9,464) (16,058) (6,701) (12,601)
-------- -------- -------- --------
Other income (expense):
Interest income...................... 371 431 1,055 1,628
Interest expense..................... (1,583) (1,869) (4,872) (7,482)
Gain on sales of Tidewater common
stock............................... -- -- 4,811 37,457
Other................................ (92) 3,016 928 (2,859)
-------- -------- -------- --------
(1,304) 1,578 1,922 28,744
-------- -------- -------- --------
Income (loss) from continuing opera-
tions before taxes.................... (10,768) (14,480) (4,779) 16,143
-------- -------- -------- --------
Provision for income taxes
State................................ 217 248 546 717
Federal.............................. (3,843) (5,154) (1,862) 5,400
-------- -------- -------- --------
(3,626) (4,906) (1,316) 6,117
-------- -------- -------- --------
Income (loss) from continuing opera-
tions................................. (7,142) (9,574) (3,463) 10,026
Discontinued operations:
Reversal of reserve for loss on
disposition, net of income taxes.... 8,897 -- 8,897 --
-------- -------- -------- --------
Net income (loss)...................... 1,755 (9,574) 5,434 10,026
Preferred stock dividends.............. -- 101 51 303
-------- -------- -------- --------
Net income (loss) to common stockhold-
ers................................... $ 1,755 $ (9,675) $ 5,383 $ 9,723
======== ======== ======== ========
Per share data:
Income (loss) from continuing opera-
tions............................... $ (0.24) $ (0.31) $ (0.11) $ 0.31
Income from discontinued operations.. 0.30 -- 0.28 --
-------- -------- -------- --------
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.
4
ZAPATA CORPORATION
DIVISIONAL REVENUES AND OPERATING RESULTS
(IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ------------------
1995 1994 1995 1994
--------- --------- -------- --------
Revenues:
Natural gas compression............ $ 19,329 $ 21,810 $ 53,086 $ 49,874
Marine protein..................... 21,737 19,703 61,311 62,307
Natural gas gathering and process-
ing............................... 12,509 41,957 57,829 120,456
Oil and gas........................ 2,462 3,026 7,482 9,287
--------- --------- -------- --------
$ 56,037 $ 86,496 $179,708 $241,924
========= ========= ======== ========
Operating income (loss):
Natural gas compression............ $ 1,704 $ 2,460 $ 4,801 $ 4,842
Marine protein..................... (10,428) 2,122 (8,599) 6,016
Natural gas gathering and process-
ing............................... (39) (473) (482) (696)
Oil and gas........................ 310 (18,743) 528 (18,103)
Corporate.......................... (1,011) (1,424) (2,949) (4,660)
--------- --------- -------- --------
$ (9,464) $ (16,058) $ (6,701) $(12,601)
========= ========= ======== ========
The accompanying notes are an integral part of the financial statements.
5
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............ $ (3,463) $ 10,026
-------- --------
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation, amortization and valuation provisions.... 23,382 30,779
Gain on sale of assets................................. (5,268) (37,457)
Changes in other assets and liabilities................ (9,719) (6,282)
-------- --------
Total adjustments.................................... 8,395 (12,960)
-------- --------
Net cash provided (used) by continuing operations...... 4,932 (2,934)
-------- --------
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..................................... (18,339) (20,049)
-------- --------
Net cash provided by investing activities............ 239 71,406
-------- --------
Cash flow used by financing activities:
Borrowings............................................... 12,864 --
Principal payments of long-term obligations.............. (14,137) (69,360)
Preferred stock redemption and common stock buybacks..... (11,758) (2,245)
Dividend payments........................................ (1,153) (404)
-------- --------
Net cash used by financing activities................ (14,184) (72,009)
-------- --------
Net decrease in cash and cash equivalents.................. (9,013) (3,537)
Cash and cash equivalents at beginning of period........... 13,094 15,273
-------- --------
Cash and cash equivalents at end of period................. $ 4,081 $ 11,736
======== ========
The accompanying notes are an integral part of the financial statements.
6
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. The fair market value of the marine protein
assets was determined based upon the highest third-party competitive bid which
had been received by the Company.
NOTE 2. SALE OF NATURAL GAS COMPRESSION OPERATIONS
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 and reflected
these operations as discontinued operations in the Company's financial
statements as of and for the periods presented in its Form 10-Q. The sale is
subject to stockholder approval and certain governmental approvals.
Subsequent to filing the Company's Form 10-Q for the period ended June 30,
1995, management concluded that it would seek stockholder approval, under
Delaware law, for the sale of its natural gas compression operations. As a
result of this additional condition, the criteria for reporting these
operations as discontinued as of June 30, 1995 had not been met. Therefore,
the Company's Form 10-Q as of June 30, 1995 has been amended to show the
natural gas compression operations in continuing operations. The result of
this restatement had no effect on net income or net income per share data, for
any period presented however, it did have the following effects (in
thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ------------------
1995 1994 1995 1994
--------- --------- -------- --------
Income statement:
Income (loss) from continuing
operations:
As previously reported............. $ (7,679) $ (10,681) $ (5,223) $ 8,633
As restated........................ (7,142) (9,574) (3,463) 10,026
-------- --------- -------- --------
Effect of correction................. $ 537 $ 1,107 $ 1,760 $ 1,393
======== ========= ======== ========
Income from discontinued operations,
net of income taxes:
As previously reported............. $ 537 $ 1,107 $ 1,760 $ 1,393
As restated........................ -- -- -- --
-------- --------- -------- --------
Effect of correction................. $ (537) $ (1,107) $ (1,760) $ (1,393)
======== ========= ======== ========
(Table continued on the next page)
7
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- ------------------
1995 1994 1995 1994
--------- --------- -------- --------
Per share data:
Income (loss) from continuing
operations:
As previously reported............ $ (0.26) $ (0.34) $ (0.17) $ 0.26
As restated....................... (0.24) (0.31) (0.11) 0.31
--------- --------- -------- --------
Effect of correction................ $ 0.02 $ 0.03 $ 0.06 $ 0.05
========= ========= ======== ========
Income from discontinued operations:
As previously reported............ $ 0.32 $ 0.03 $ 0.34 $ 0.05
As restated....................... 0.30 -- 0.28 --
--------- --------- -------- --------
Effect of correction................ $ (0.02) $ (0.03) $ (0.06) $ (0.05)
========= ========= ======== ========
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 $23.9 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. The fair market value of the marine protein assets was determined
based upon the highest third-party competitive bid which had been received by
the Company.
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 reclassify the marine protein operating results to
continuing operations, amounts in thousands.
THREE MONTHS ENDED
----------------------
DECEMBER 31, MARCH 31,
1994 1995
------------ ---------
Revenues.............................................. $65,551 $58,120
Operating income (loss)............................... 2,064 699
Net income............................................ $ 748 $ 2,931
8
NOTE 5. SUBSEQUENT EVENT
In August 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.
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.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. 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 sale
is subject to stockholder approval and certain governmental approvals. 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 August 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
In April 1995, Zapata used the proceeds of $12.7 million from the sale of
its remaining 673,077 shares of Tidewater Inc. ("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 $4.9 million during the first
nine months of fiscal 1995 as compared to a $2.9 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 $239,000 during the first nine months of fiscal 1995 as
compared to $71.4 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 $14.2 million during the first nine months of fiscal 1995
as compared to $72.0 million in the corresponding prior-year period, which
included a $68.5 million prepayment of senior debt.
10
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.
The fiscal 1995 third quarter net income 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 $7.1 million for the
three months ended June 30, 1995 compared favorably to a net loss of $9.6
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 with the Company's oil and gas
operations. Revenues of $56.0 million and an operating loss of $9.5 million in
the fiscal 1995 third quarter compared to revenues of $86.5 million and an
operating loss of $16.1 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 $179.7 million, an operating loss of
$6.7 million and net income of $5.4 million compared to fiscal 1994 revenues
of $241.9 million, an operating loss of $12.6 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. The fair market value of the marine protein assets was
determined based upon the highest third-party competitive bid which had been
received by the Company. 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.
11
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.
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
(MMCF) 1995 1994 1995 1994
--------------------- --------- --------- -------- --------
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
12
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.
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.
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 sale is subject to stockholder approval and certain
governmental approvals.
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.
NINE MONTHS EIGHT MONTHS
THREE MONTHS ENDED ENDED ENDED
JUNE 30, JUNE 30, 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.
13
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
of fiscal 1994.
PART II OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
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.
14
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. The exhibits indicated by double asterisk (**) were filed
on Form 10-Q for quarter ended June 30, 1995.
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.
(b) REPORTS ON FORM 8-K
Current Report on Form 8-K dated June 9, 1995 reporting event of May 30,
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).
Current Report on Form 8-K dated April 21, 1995 reporting event of April 13,
1995 (Item 5. Other events reported the repurchase by the Company of 2.25
million shares of its common stock and the resignation of Kristian Siem as a
director of the Company).
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
November 13, 1995 By: /s/ Joseph L. Von Rosenberg III
------------------------
JOSEPH L. VON ROSENBERG III
VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
November 13, 1995 By: /s/ Lamar C. McIntyre
------------------------
LAMAR C. MCINTYRE
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER,
TREASURER AND ASSISTANT
SECRETARY
16
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)).
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.
**Filed with Form 10-Q for quarter ended June 30, 1995.
17
5
1,000
9-mos
SEP-30-1995
OCT-01-1994
JUN-30-1995
4,158
0
31,228
0
54,131
93,786
232,870
108,972
269,586
45,122
61,948
7,376
0
3
135,772
269,586
179,708
179,708
186,409
186,409
(6,794)
0
4,872
(4,779)
(1,316)
(3,463)
8,897
0
0
5,434
.17
.17
