Harbinger Group Inc.
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SEC Filings

10-Q
HRG GROUP, INC. filed this Form 10-Q on 05/10/2002
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percentage of revenues was primarily due to higher sales prices of 18% and 79%
for Omega's fish meal and fish oil, respectively. Manufacturing costs remained
relatively unchanged between the quarters.

Selling, General, and Administrative Expenses. Zapata's consolidated selling,
general and administrative expenses increased $148,000 or 5% compared to the
quarter ended March 31, 2001. This increase was primarily due to Omega Protein's
increases in uncollectible accounts receivables, advertising expenses and
employee related costs, partially offset by the decrease in expenses associated
with the termination of the Company's Internet operations.

Contract Termination Settlement. There were no contract termination settlements
in the quarter ended March 31, 2002. For the quarter ended March 31, 2001,
Zap.Com favorably settled disputes over two of its contracts which had been
reserved for in the fourth quarter of 2000 in connection with the termination of
Internet operations. Accordingly, Zap.Com reversed previous accruals of $403,000
as income resulting from the settlement amounts being less than the associated
accrued liabilities.

Interest Income, Net. Interest income decreased by $773,000 for the quarter
ended March 31, 2002 as compared to the quarter ended March 31, 2001. The
decrease was primarily due to lower interest rates on cash and cash equivalents
and short-term investments as compared to the previous quarter.

Realized loss on non-investment grade securities. The Company did not incur any
realized losses on non-investment grade securities for the quarter ended March
31, 2002. For the quarter ended March 31, 2001, Zapata had other than temporary
write-downs related to investments in the corporate debt of Franks Nursery &
Crafts, Inc. ("Franks") and Decora Industries, Inc. ("Decora"). Management
deemed the decline in the fair value of the Company's investments in Franks and
Decora to be "other than temporary" following both companies' announcements that
they had filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In
connection with these impairments, the Company recognized a loss of
approximately $917,000.

LIQUIDITY AND CAPITAL RESOURCES

Prior to Omega Protein's 1998 initial public offering, Zapata, as the sole
stockholder of Omega Protein, caused cash to be moved between it and Omega
Protein as each company had cash needs. As a result of the offering, Zapata and
Omega Protein are now separate public companies. Similarly, since Zapata's
distribution of Zap.Com shares to Zapata stockholders in November 1999, Zapata
and Zap.Com are separate public companies. Accordingly, the capital resources
and liquidity of Omega Protein and Zap.Com are legally independent of Zapata.
The working capital and other assets of Omega Protein and Zap.Com are dedicated
to their respective operations and are not expected to be readily available for
the general corporate purposes of Zapata, except for any dividends that may be
declared and paid to their respective stockholders. For the foreseeable future,
Zapata does not expect to receive cash dividends on its Omega Protein or Zap.Com
shares.

Zapata's current source of liquidity is its cash, cash equivalents and
investments and the interest income it earns on its investments. Zapata expects
these assets to continue to be a source of liquidity until it effects an
acquisition. Zapata's investments consist of U.S. Government agency securities
and cash equivalents. At March 31, 2002, the Company's cash, cash equivalents
and U.S. Government agency securities were $102.9 million (including $30.1
million attributable to Omega Protein) as compared to $96.4 million (including
$21.8 million attributable to Omega Protein) as of December 31, 2001. The
increase in Zapata Corporation's cash, cash equivalents and U.S. Government
agency securities was mainly attributable to increased cash balances at Omega
Protein, partially offset by cash paid for operating expenses at the Corporate
level.

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


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