Harbinger Group Inc.
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SEC Filings

10-Q/A
HRG GROUP, INC. filed this Form 10-Q/A on 11/13/1995
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<PAGE>
 
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 

ITEM 2. BUSINESS
 
  In April 1995, Zapata announced that the Company was considering the sale of
its two natural gas services businesses: the natural gas compression operation
and the natural gas gathering and processing operation. The decision to
consider exiting the energy industry was based on the belief that businesses
outside the energy industry may provide better opportunities for the Company
to pursue. The decision to consider redirecting operations away from the
energy industry does not imply a decision to liquidate Zapata. The Company is
evaluating opportunities to reinvest the stockholders' capital.
 
  In August 1995, Zapata announced that it had acquired 31% of the outstanding
common stock of Envirodyne Industries, Inc. ("Envirodyne"), a manufacturer of
food packaging and food service supplies for $18.8 million. This acquisition
is the first major step in the transformation of Zapata away from the energy
business and into food-related businesses. Zapata is evaluating acquiring
additional shares or proposing a merger with, or acquisition of, Envirodyne in
the future. Zapata is also looking at other opportunities in food-related
areas.
 
  In June 1995, Zapata announced that it had entered into an agreement to sell
the assets of its natural gas compression division for $130 million. The sale
is subject to stockholder approval and certain governmental approvals. Due to
the preliminary nature of the decision process regarding the possible sale of
the natural gas gathering and processing operation, the financial statement
impact of the ultimate disposition of this business cannot be determined at
this time.
 
  Zapata has decided to retain the marine protein operations which had
previously been reported as a discontinued operation. In April 1995, the
Company announced the cancellation of the sale of the marine protein division.
Zapata had previously announced that an agreement to sell its marine protein
operations had been reached. However, the acquisition group failed to close
the transaction. The Company has concluded that the value of the marine
protein operations could be more effectively realized by retaining these
operations as part of Zapata's ongoing operations, rather than pursuing
another sale transaction. As a result, marine protein's net assets and results
of operations for all periods have been reclassified from discontinued
operations to continuing operations.
 
  In August 1995, Zapata completed the sale of its remaining U.S. offshore oil
and gas properties. The Company received cash, a production payment entitling
Zapata to a share of future revenues derived from the properties and other
contract considerations. The Company currently plans to retain its Bolivian
oil and gas operations.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  In April 1995, Zapata used the proceeds of $12.7 million from the sale of
its remaining 673,077 shares of Tidewater Inc. ("Tidewater") common stock to
reduce the Company's $17.5 million in notes due to Norex America, Inc.
Remaining mandatory principal payments for the next twelve months total $8.4
million. In July 1995, a subsidiary of the Company, Zapata Protein, Inc.,
arranged a $15.0 million bank credit facility.
 
  Cash provided by operating activities totalled $4.9 million during the first
nine months of fiscal 1995 as compared to a $2.9 million use of cash during
the corresponding prior-year period. The use of cash in fiscal 1994 was
primarily due to increases in working capital. Cash provided by investing
activities totalled $239,000 during the first nine months of fiscal 1995 as
compared to $71.4 million during the first nine months of fiscal 1994. The
fiscal 1994 period included proceeds of $85.9 million from the sale of 4.13
million shares of Zapata's Tidewater common stock. Net cash used by financing
activities totalled $14.2 million during the first nine months of fiscal 1995
as compared to $72.0 million in the corresponding prior-year period, which
included a $68.5 million prepayment of senior debt.
 
                                      10

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