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the sale generated a 1993 pretax gain of $32.9 million. The gain is reflected
on the statement of operations as other income. In November 1993, Zapata sold
an additional 3.75 million shares of its Tidewater common stock for a net price
of $20.75 per share or $77.8 million and in March 1994, Zapata sold 375,175
additional shares of its Tidewater stock for a net price of $21.34 per share or
$8.0 million. The fiscal 1994 sales generated pretax gains totaling $37.5
million; the gains are recorded in other income. As of September 1994, the
Company owns 673,077 shares of Tidewater common stock.
 
  As a result of its decision to sell a portion of its Tidewater common stock,
effective January 1, 1993, Zapata changed from the equity to the cost method of
accounting for its investment in Tidewater. Consequently, Zapata has not
included its percentage of Tidewater's results as equity income since December
31, 1992. Instead, Tidewater dividends to Zapata have been included as other
income when, as and if declared.
 
  For fiscal 1993, Zapata's reported equity income of $1.1 million was based on
15.6% of Tidewater's results for the three months ended December 31, 1992. Such
percentage represented Zapata's ownership percentage of Tidewater. For fiscal
1992, the Company's equity income of $1.5 million was based on the combination
of 34.7% of Zapata Gulf's results for the three months ended December 31, 1991
and 15.7% of Tidewater's results for the nine months ended September 30, 1992.
 
OTHER INCOME (EXPENSE)
 
  Other expense of $4.4 million in fiscal 1994 includes expenses of $7.4
million related to the prepayment of the Norex indebtedness, a $2.8 million
gain related to the settlement of a coal note receivable that had previously
been written off and $700,000 dividend income from Zapata's Tidewater common
stock. Also, fiscal 1994 includes a $1.4 million expense related to a
terminated pension plan.
 
  Other expense of $10.5 million incurred during fiscal 1993 included three
significant items: a $6.4 million prepayment penalty incurred in connection
with the refinancing of the Company's senior debt in May 1993, a $5.7 million
loss resulting from the disposition of the Company's investment in Arethusa
which Zapata was required to make when the Company's offshore drilling rig
fleet was sold, and $1.3 million dividend income generated by Tidewater common
stock.
 
  Other income in 1992 of $4.7 million was attributable to a $1.7 million
pension plan curtailment and settlement gain associated with the termination of
management agreements with Arethusa, and to the receipt of $2.7 million from
notes written down in previous years.
 
TAXES
 
  The provision for U.S. income tax for 1994 reflects a benefit resulting from
a pretax loss from consolidated operations. In 1993 and 1992, the provisions
reflect expenses resulting from pretax consolidated income.
 
DISCONTINUED OPERATIONS--MARINE PROTEIN
 
  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. Based on preliminary offers
to purchase the marine protein operations, the Company has recorded an $8.9
million after tax book loss. As a result of the decision to sell, the operating
results related to the marine protein operations are reported under the
discontinued operations classification.
 
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