Harbinger Group Inc.
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SEC Filings

DEF 14A
HRG GROUP, INC. filed this Form DEF 14A on 11/15/1995
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<PAGE>
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 9. INCOME TAXES--(CONTINUED)
 
  Zapata and its domestic subsidiaries file a consolidated U.S. federal income
tax return. The provision for income tax expense (benefit) consisted of the
following:

<TABLE>
<CAPTION>
                                                              1994    1993  1992
                                                             ------  ------ ----
                                                               (IN THOUSANDS)
      <S>                                                    <C>     <C>    <C>
      Current:
        State............................................... $  882  $   75 $280
        U.S. ...............................................  3,902     619   --
      Deferred:
        State...............................................    150      --   --
        U.S. ............................................... (4,360)  2,956  480
                                                             ------  ------ ----
                                                             $  574  $3,650 $760
                                                             ======  ====== ====
</TABLE>

 
  Income tax expense (benefit) was allocated to operations as follows:

<TABLE>
<CAPTION>
                                                             1994     1993  1992
                                                            -------  ------ ----
                                                              (IN THOUSANDS)
      <S>                                                   <C>      <C>    <C>
      Continuing Operations................................ $   574  $3,650 $760
      Discontinued Operations..............................  (3,710)     --   --
                                                            -------  ------ ----
          Total............................................ $(3,136) $3,650 $760
                                                            =======  ====== ====
</TABLE>

 
  The provision for deferred taxes results from timing differences in the
recognition of revenues and expenses for tax and financial reporting purposes.
The sources and income tax effects of these differences were as follows:

<TABLE>
<CAPTION>
                                                       1994     1993     1992
                                                     --------  -------  -------
                                                          (IN THOUSANDS)
      <S>                                            <C>       <C>      <C>
      Book depreciation in excess of tax
       depreciation................................  $    897  $(1,344) $(2,452)
      Tax deduction related to oil and gas
       exploration and production over (under) book
       expenses....................................    (6,277)    (163)   1,254
      Tax gain in excess of book gain on stock
       sale........................................   (10,116)  (8,065)
      Changes to tax carryforwards and other.......     8,044   12,528    1,678
      Amortization of intangibles..................       452       --       --
      Charge off uncollectible note................     2,790       --       --
                                                     --------  -------  -------
                                                     $ (4,210) $ 2,956  $   480
                                                     ========  =======  =======
</TABLE>

 
  For federal income tax purposes, Zapata has $17.6 million of investment tax
credit carryforwards expiring in 1995 through 2001, and has $11.7 million of
alternative minimum tax credit carryforwards. The use of tax credits may be
limited as a result of a change of ownership as calculated for tax purposes.
Investment tax credit carryforwards are reflected in the balance sheet as a
reduction of deferred taxes using the flow-through method.
 
  The following table reconciles the income tax provisions for continuing
operations for 1994, 1993 and 1992 computed using the U.S. statutory rate of
35%, 34% and 34%, respectively, to the provisions reflected in the financial
statements.
 

<TABLE>
<CAPTION>
                                                          1994    1993    1992
                                                          -----  ------  ------
                                                            (IN THOUSANDS)
      <S>                                                 <C>    <C>     <C>
      Taxes at statutory rate...........................  $ 403  $4,427  $1,085
      Recovery of nondeductible book losses.............     --    (259)     --
      Amortization of intangibles not deductible for
       tax..............................................    196      --      --
      Other.............................................   (881)    (26)   (159)
      Equity/dividend income not recognized for tax pur-
       poses............................................   (176)   (567)   (446)
      State taxes.......................................  1,032      75     280
                                                          -----  ------  ------
                                                          $ 574  $3,650  $  760
                                                          =====  ======  ======
</TABLE>

 
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