<PAGE>
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. PREFERRED, PREFERENCE AND COMMON STOCK--(CONTINUED)
the Common Stock on the date of grant. Options become exercisable in one or
more installments on such dates as the Committee may determine, provided that
such date cannot occur prior to the expiration of one year of continued
employment with the Company following the date of grant. Unexercised options
will expire on varying dates up to a maximum of ten years from the date of
grant. The 1990 Plan provides for the issuance of options to purchase up to
1,000,000 shares of Common Stock. At September 30, 1995, a total of 32,666
shares of Common Stock were reserved for the future granting of stock options
under the 1990 Plan. During 1995, options to purchase 621,900 shares under the
1990 Plan at $3.13 were exercised. At September 30, 1995, a total of 42,000
options at a price of $3.13 were outstanding and exercisable under the 1990
Plan. No options were granted in 1995 under the 1990 Plan.
NOTE 10. INCOME TAXES
Zapata adopted Statement of Financial Accounting Standards No. 109 ("SFAS
109"), "Accounting for Income Taxes" as of October 1, 1993. The adoption of
SFAS 109 changed Zapata's method of accounting for income taxes to the asset
and liability approach. This approach requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of existing
temporary differences between the financial reporting and tax reporting base of
assets and liabilities, and operating loss and tax credit carryforwards for tax
purposes. Due to the implementation of the quasi-reorganization as of October
1, 1990, the Company was required to adjust capital in excess of par value for
the recognition of deductible temporary differences and credit carryforward
items which existed at the date of the quasi-reorganization. Future reductions,
if any, in the deferred tax valuation allowance relating to tax attributes that
existed at the time of the quasi-reorganization will also be allocated to
capital in excess of par value.
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>
1995 1994 1993
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
State........................................... $ 268 $ 507 $ 75
U.S............................................. -- 5,403 619
Deferred
State........................................... (300) 150 --
U.S............................................. (3,147) (6,632) 3,516
------- ------ ------
$(3,179) $ (572) $4,210
======= ====== ======
</TABLE>
Income tax expense (benefit) was allocated to operations as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Continuing Operations
Domestic operations........................... $(3,676) $(1,812) $3,135
Foreign operations............................ 497 1,240 1,075
------- ------- ------
Total....................................... (3,179) (572) 4,210
Discontinued Operations......................... 4,579 (2,564) (560)
------- ------- ------
Total....................................... $ 1,400 $(3,136) $3,650
======= ======= ======
</TABLE>
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