Harbinger Group Inc.
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SEC Filings

10-K
HRG GROUP, INC. filed this Form 10-K on 03/28/2002
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<PAGE>
 
  2000-1999
 
     Zapata reported a consolidated net loss of $26.0 million on $84.1 million
in consolidated revenues in 2000 as compared to a consolidated net loss of $20.3
million on consolidated revenues of $93.7 million in 1999. The 2000 net loss was
primarily attributable to an operating loss by Omega Protein, operating losses
and impairment charges by the Company's Internet operations, and investment
impairment charges by Zapata on non-investment grade debt securities, partially
offset by interest income.
 
     The following presents a more detailed discussion of the consolidated
operating results:
 
     Revenues.  2000 revenues decreased $9.5 million to $84.1 million, or 10.2%,
from $93.7 million in 1999. The decrease in revenues from 1999 to 2000 was
mainly attributable to lower selling prices of Omega Protein's fish meal and
fish oil. Fish meal prices and fish oil prices declined 7.3% and 20.0%,
respectively, as compared to 1999. Sales volume for Omega Protein's fish oil
decreased 32.1% during 2000 as compared to 1999. Sales volume for Omega
Protein's fish meal increased 12.8% during 2000 as compared to 1999. Omega
Protein attributes the decrease in selling prices to low cyclical feed cost
affecting the protein industry. Zapata's Internet operations did not have
significant revenue for 2000 or 1999.
 
     Cost of revenues.  Cost of revenues, including depreciation, amortization
and an inventory write-down for 2000 totaled $103.2 million, a decrease of $2.5
million from $105.7 million in 1999. Cost of sales as a percentage of revenue
was 122.6% and 112.8% for the years ended December 31, 2000 and December 31,
1999, respectively. The increase in cost of sales as a percentage of revenues
was primarily due to continued market declines on the inventory values of Omega
Protein's fish meal and fish oil which resulted in an inventory write-down of
$18.1 million and $18.2 million in 2000 and 1999, respectively. The increase is
also due to decreases in Omega Protein's selling prices for fish meal and fish
oil as discussed above. Per ton cost of sales were 1.3% higher in 2000 as
compared to 1999, due to a 38.0% lower fish oil yield in 2000 creating higher
cost inventories. Cost of revenues for Zapata's Internet operations were $1.2
million and $141,000 in 2000 and 1999, respectively. This increase was primarily
due to Zap.Com's amortization of the ZapBox and the development of the
ZapNetwork.
 
     Product Development.  Product development costs decreased $1.4 million or
48.5% from 1999 to 2000. Product development costs consisted mainly of
activities at Charged Productions associated with business development as well
as Zap.Com software development costs. The decrease was mainly due to a large
decrease in spending at Zap.Com during 2000 as compared to 1999.
 
     Selling, general and administrative expenses.  Selling, general and
administrative expenses remained constant for 2000. As a percentage of revenues,
selling, general and administrative expenses were approximately 18.8% and 17.8%
for 2000, and 1999, respectively. Selling, general and administrative expenses
for those Internet operations totaled $4.3 million and $6.2 million during 2000
and 1999, respectively. Included in selling, general and administrative expenses
is a benefit of $428,000 for 2000 and an expense of $1.2 million related to
consulting expenses incurred under an agreement between Zap.Com and American
Internetwork Sports Company, LLC.
 
     Impairment of long-lived assets.  Pursuant to the termination of Charged
Productions and Zap.Com certain assets were deemed to be impaired as of December
31, 2000. These charges for asset impairment totaled $1.3 million in 2000.
Impairment costs for 1999 related to the discontinued utilization of certain
in-line processing facilities at Omega Protein's Morgan City plant.
 
     Interest income, net.  Net interest income increased $2.2 million or 42.2%
from net interest income of $5.2 million in 1999 to $7.4 million in 2000. This
increase was mainly due to approximately $2.4 million of interest income earned
on the Company's non-investment grade securities that the Company purchased to
provide funding for its direct operations. This was partially offset by a
decrease in interest income recognized by Omega Protein. Omega had net interest
income of $614,000 in 1999 compared to net interest expense of $293,000 in 2000.
This decrease in net interest income resulted from Omega Protein's reduction in
cash and cash equivalents available for investment purposes during 2000 compared
to 1999.
 
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