TEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1993, Zapata's financial condition was stronger than that
of any time in recent history. Total debt of $74.5 million compares very
favorably to stockholders' equity of $194.6 million. Additionally, the Company
owns approximately 1.0 million shares of Tidewater Inc. ("Tidewater") common
In November 1993, Zapata purchased the natural gas compression business of
Energy Industries, Inc. and certain other affiliated companies as well as
certain real estate used by the business (collectively, "Energy Industries").
Energy Industries is engaged in the business of renting, fabricating, selling,
installing and servicing natural gas compressor packages. Total consideration
paid for the purchase and for a related noncompetition agreement (collectively,
the "Energy Industries Acquisition") was $90.9 million. The purchase price
consisted of $75.2 million and 13.5 million shares of the Company's common stock
valued at $1.16 per share, which approximated the average trading price prior to
closing of the acquisition.
To fund the cash portion of the purchase price, Zapata used the proceeds
from the June 1993 sale of 3.5 million shares of its Tidewater common stock. In
November 1993, Zapata sold an additional 3.75 million shares of its Tidewater
common stock in an underwritten public offering for a net price of $20.75 per
share or $77.8 million. In December 1993, most of the proceeds from this sale
were used to prepay $68.5 million of the 13% senior indebtedness owed to Norex
Drilling Ltd., along with accrued interest, and to pay a negotiated prepayment
premium of $3.5 million.
While the Company considers its current liquidity position to be adequate,
it has entered into discussions with several financial institutions with the
intent of establishing committed lines of credit to fund future growth.
Following the acquisition of Energy Industries, Zapata believes that its cash
flow from operations will be sufficient to meet operating needs and its
financial commitments. In connection with the December debt prepayment, the
Norex debt agreement was amended to remove or lessen various restrictions on the
Reflecting the Energy Industries Acquisition, Zapata's working capital
decreased $51.4 million during the first quarter of fiscal 1994 and totalled
$67.7 million as of December 31, 1993. At the end of the first quarter, cash
and restricted cash components were $68.3 million lower than that as of
September 30, 1993.