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or reduce pollution and have increased financial exposure as in the case of
federal laws and regulations which may result in absolute liability for cleanup
and removal of offshore oil spills. Governments may from time to time suspend
or curtail operations considered to be detrimental to the ecology or which may
jeopardize public safety. The Company does not anticipate any material adverse
effect on its financial or competitive position as a result of compliance with
such laws and regulations.
 
MARINE PROTEIN OPERATIONS
 
  The Company's marine protein operations involve the production and sale of a
variety of protein and oil products from menhaden, a species of fish found
along the Gulf of Mexico and Atlantic coasts.
 
  In July 1994, Zapata announced that it intended to separate its marine
protein operations from its energy-related businesses. Alternatives for a sale
of the marine protein operations or a spin-off of the business to the
stockholders of Zapata were considered. In September 1994, the Board of
Directors determined that the interests of Zapata's stockholders would best be
served by a sale of the marine protein operations. As a result, the operating
results related to the marine protein operations are reported under the
discontinued operations classification. Based on preliminary offers to purchase
the marine protein operations, the Company has recorded an $8.9 million after-
tax book loss.
 
  Because the magnitude of the fish catch depends on the availability of the
natural resource, which is affected by various factors beyond the Company's
control, and because the prices for the Company's products are established by
worldwide supply and demand relationships over which the Company has no
control, the Company cannot predict the profitability of this business segment
in any given year.
 
  Fishing. The Company owns a fleet of 51 fishing vessels and 27 spotter
aircraft for use in its fishing operations and also leases or charters
additional vessels and aircraft where necessary to facilitate operations.
During the 1994 fishing season in the Gulf of Mexico, where the fishing season
runs from mid-April through October, the Company operated 35 fishing vessels
and 26 spotter aircraft. The fishing area in the Gulf stretches from the south
Texas coastline to the panhandle of western Florida, with a concentration off
the Louisiana and Mississippi coasts. The fishing season on the Atlantic coast
begins in early May and usually extends into December. The Company operated 9
fishing vessels and 8 spotter aircraft along the mid-Atlantic coast,
concentrated in and around the Chesapeake Bay.
 
  Menhaden usually school in large, tight clusters and are commonly found in
warm, shallow waters. Spotter aircraft locate the schools and direct the
fishing vessels to them. The principal fishing vessels are steamers. Each
steamer transports two 40-foot purse boats, each carrying several fishermen and
one end of a 1,500-foot net. The purse boats encircle the school and capture
the fish in the net. The fish are then pumped from the net into refrigerated
holds of the steamer, which unloads the fish at the Company's processing
plants.
 
  Processing. The Company owns five processing plants--three in Louisiana, one
in Mississippi and one in Virginia--where the menhaden are processed into fish
meal, fish oil and fish solubles. The fish are unloaded from the vessels into
storage boxes and then conveyed into steam cookers. The fish are then passed
through presses to remove most of the oil and water. The solid portions of the
fish are dried and then ground into fish meal. The liquid that is produced in
the cooking and pressing operations contains oil, water, dissolved protein and
some fish solids. This liquid is decanted to remove the solids and is then put
through a centrifugal oil/water separation process. The separated fish oil is a
finished product. The separated water and protein mixture is further processed
through evaporators to remove the soluble protein, which can be sold as a
finished product or added to the solid portions of the fish for processing into
fish meal.
 
  Fish meal, the principal product made from menhaden, is sold primarily as a
high-protein ingredient. It is also used as a protein supplement in feed
formulated for pigs and other livestock. Each use requires certain standards to
be met regarding quality and protein content, which are determined by the
freshness of the fish and by processing conditions such as speed and
temperatures. Fish solubles are a liquid protein product used
 
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