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  The price for fish meal generally bears a relationship to prevailing soybean
meal prices, while prices for fish oil are usually based on prices for
vegetable fats and oils, such as soybean and palm oils. Thus, the prices for
the Company's products are significantly influenced by worldwide supply and
demand relationships over which the Company has no control and tend to
fluctuate to a significant extent over the course of a year and from year to
year.
 
  The Company's total fish catch dropped in fiscal 1995 after improving during
fiscal 1994 but remained at a higher level than the 1993 catch. The fiscal 1995
fish catch dropped approximately 22% from the 1994 level while the fiscal 1994
catch improved approximately 37% from the catch in fiscal 1993. The annual fish
catch can vary from year to year depending on weather conditions and other
factors outside the Company's control; the Company cannot predict future fish
catch.
 
 Oil and Gas Operations
 
  In September 1994, Zapata's Board of Directors announced that the Company
would immediately undertake efforts to sell its U.S. natural gas producing
properties. The six properties in the Gulf of Mexico, representing Zapata's
domestic oil and gas producing operations, were sold in fiscal 1995. Zapata
received cash of $4.0 million and recorded an $8.9 million receivable
representing (i) a production payment entitling Zapata to a share of revenues
from certain properties and (ii) a share of future proceeds from a revenue
sharing agreement. No gain or loss was recorded from the sales. The decision to
sell its U.S. natural gas properties did not impact Zapata's Bolivian oil and
gas operations.
 
  Revenues of $8.1 million and operating income of $658,000 for fiscal 1995
compared to revenues of $12.6 million and an operating loss of $28.3 million in
fiscal 1994. The decline in fiscal 1995 revenues reflects the sales of the
Company's domestic oil and gas properties during the third and fourth quarters
of fiscal 1995. The fiscal 1994 operating results include the $29.2 million
property valuation provision.
 
  Bolivian operations contributed revenues of $2.7 million and operating income
of $1.4 million in fiscal 1995 as compared to revenues of $4.1 million and
operating income of $3.5 million in fiscal 1994. In fiscal 1994 Zapata returned
to the accrual method of accounting for its Bolivian oil and gas operations
based on the Bolivian oil and gas company's performance under negotiated
contracts and improved operating conditions.
 
  Reflecting the $29.2 million property valuation provision, as well as lower
prices for U.S. natural gas and lower U.S. natural gas production, revenues of
$12.5 million and an operating loss of $28.3 million for fiscal 1994 compared
unfavorably to the fiscal 1993 revenues of $20.2 million and operating income
of $6.0 million. The valuation provision was the result of several factors:
lower natural gas prices, additional capitalized costs incurred in connection
with several workover wells at the Company's Wisdom gas field and an increase
in estimated future costs. The Bolivian operations contributed $3.5 million and
$3.1 million to operating income in fiscal 1994 and 1993, respectively.
 
  The Company's domestic natural gas production for fiscal 1995 was
approximately 14% lower than the fiscal 1994 level of production as a result of
the sale of its domestic properties. Zapata's domestic natural gas production
for fiscal 1994 was approximately one-half of the fiscal 1993 period's level of
production due to production difficulties encountered at the Wisdom gas field
which was the Company's most significant domestic oil and gas property.
 
 Tidewater
 
  In June 1993, Zapata completed the sale of 3.5 million of its shares of
Tidewater common stock through an underwritten public offering. The shares were
sold for a net price of $21.25 per share or $73.5 million and the sale
generated a 1993 pretax gain of $32.9 million. In November 1993, Zapata sold an
additional 3.75
 
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