<PAGE>
In March 1994, Zapata sold 375,175 additional shares of its Tidewater common
stock for a net price of $21.34 per share or $8.0 million resulting in a pretax
gain of $3.6 million. The Company currently owns approximately 673,000 shares
of Tidewater common stock. The aggregate market value of Zapata's remaining
shares of Tidewater common stock as of June 30, 1994 was $15.6 million based on
the closing price of $23.25 per publicly-traded share on that date.
Note 4. Accounting for Income Taxes
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In the first quarter of fiscal 1994, Zapata adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The
adoption of SFAS 109 changes Zapata's method of accounting for income taxes to
the asset and liability approach. This approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
existing temporary differences between the financial reporting and tax reporting
basis of assets and liabilities, and operating loss and tax credit carryforwards
for tax purposes. The impact of adopting SFAS 109 was to record an increase to
capital in excess of par value of $15.3 million and a net deferred tax asset of
$11.6 million arising from the recognition of previously existing credit
carryforward items.
Temporary differences and tax credit carryforwards that gave rise to
significant portions of deferred tax assets and liabilities as of October 1,
1993 as adjusted for adoption of SFAS 109 are as follows:
<TABLE>
<CAPTION>
October 1,
Deferred Tax Assets 1993
- - ------------------- -----------
<S> <C>
Asset write-downs not yet deductible $ 8,554
U.S. net operating loss carryforward 33
Investment tax credit carryforwards 27,446
Alternative minimum tax credit
carryforwards 11,180
Other 2,208
--------
Total deferred tax assets 49,421
Valuation allowance (5,596)
--------
Net deferred tax assets 43,825
--------
Deferred Tax Liabilities
------------------------
Property and equipment (12,526)
Investment in Tidewater (11,766)
Pension (3,690)
Other (4,210)
--------
Total deferred tax liabilities (32,192)
--------
Net deferred tax asset $ 11,633
========
</TABLE>
The valuation allowance required under SFAS 109 represents tax credits that
may not be ultimately utilized given current facts and circumstances.
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