effects an acquisition. Zapata's investments consist of U.S. Government agency
securities and cash equivalents. At December 31, 2001, the Company's cash, cash
equivalents and short-term investments were $96.4 million (including $21.8
million attributable to Omega Protein) as compared to $74.6 million (including
$7.4 million attributable to Omega Protein) as of the previous year. The
decrease in Zapata Corporation's cash, cash equivalents and short-term
investments was mainly attributable to a decrease in interest rates during 2001
as compared to 2000.
Through June 2000, Zapata had invested its excess cash reserves in U.S.
Government agency securities and cash equivalents. In June 2000, Zapata
management believed that the non-investment grade debt market provided an
opportunity for the Company to meet the funding requirements of its Internet
business and corporate overhead activities while leveraging its available funds
for future acquisitions. Specifically, Zapata management believed that this debt
would yield sufficient income to support its direct operations and free-up
capital otherwise committed for this purpose for deployment in future
acquisitions. Based on the Company's decision to terminate its Internet
operations and adverse non-investment grade market conditions, management
decided to sell its non-investment grade securities during the second and third
quarters of 2001. These sales resulted in losses from which the Company expects
to receive a tax refund of approximately $7.9 million during 2002. Also in 2001,
the Company sold its investment in Viskase and expects to receive an associated
tax refund of approximately $8.4 million during 2002. See Item 7A "Quantitative
and Qualitative Disclosures about Market Risk." See also Note 8 to the Company's
Consolidated Financial Statements included in Item 8 of this Report.
In addition to its cash, cash equivalents, investments and interest income,
Zapata has a potential secondary source of liquidity in its publicly traded
securities of Omega Protein and Zap.Com. Zapata's holdings of Omega Protein and
Zap.Com stock constitute "restricted stock" under SEC Rule 144 and may only be
sold in the public market pursuant to an effective registration statement under
the Securities Act of 1933 and under any required state securities laws or
pursuant to an available exemption. These and other securities law restrictions
could prevent or delay any sale by Zapata of these securities or reduce the
amount of proceeds that might otherwise be realized therefrom.
Currently, all of Zapata's equity securities holdings are eligible for sale
under Rule 144. Zapata also has demand and piggyback registration rights for its
Omega Protein and Zap.Com shares and Zapata has registered with the SEC for
resale 1,000,000 shares of Zap.Com common stock. As of the date of this report,
it has not sold any of its Zap.Com shares and there is no assurance that it will
or can sell these shares. Although Zap.Com is publicly traded, the market for
its shares has to date been thin.
At December 31, 2001, Zapata had $16.8 million in consolidated
indebtedness, all of which was Omega Protein's indebtedness. Zapata has not
guaranteed nor otherwise agreed to be liable for the repayment of this debt.
Zapata's liquidity needs are primarily for operating expenses, litigation
and insurance reserves, possible stock repurchases and acquisitions. Zapata also
intends to invest a significant portion of its cash assets in operating
businesses as soon as practicable. To pay for or fund these acquisitions, Zapata
may need to raise additional capital through the issuance of equity or debt.
There is no assurance, however, that such capital will be available at the time,
in the amounts necessary or with terms satisfactory to Zapata. See Item 1
"Descriptions of Business -- Business Acquisitions."