<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly period ended December 31, 1994
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________________to____________________
Commission file number 1-4219
ZAPATA CORPORATION
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE C-74-1339132
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 4240, Houston, Texas 77210
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (713) 940-6100
-----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------ ------
Number of shares outstanding of the registrant's Common Stock, par value $.25,
on February 10, 1995: 31,752,407.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Zapata Corporation
Consolidated Balance Sheet
Consolidated Income Statement
Divisional Revenues and Operating Results
Consolidated Statement of Cash Flows
Notes to Financial Statements
2
<PAGE>
ZAPATA CORPORATION
CONSOLIDATED BALANCE SHEET
ASSETS
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
-------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,288 $ 14,386
Restricted cash -- 779
Receivables 30,128 27,591
Inventories:
Compressor equipment and components 20,734 17,629
Gas liquids products 860 414
Prepaid expenses and other current assets 2,722 2,049
Net assets of discontinued operations 55,000 55,000
-------- --------
Total current assets 115,732 117,848
-------- --------
Investment and other assets:
Notes receivable 914 1,925
Investment in equity securities 12,452 14,471
Goodwill 25,598 25,812
Deferred income taxes 3,811 3,315
Other assets 8,328 8,420
-------- --------
51,103 53,943
-------- --------
Property and equipment 157,934 157,335
Accumulated depreciation (72,545) (70,252)
-------- --------
85,389 87,083
-------- --------
Total assets $252,224 $258,874
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ZAPATA CORPORATION
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1994 1994
------------ -------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 2,481 $ 2,478
Accounts payable and accrued liabilities 25,116 27,258
-------- --------
Total current liabilities 27,597 29,736
-------- --------
Long-term debt 59,239 59,860
-------- --------
Other liabilities 14,574 14,736
-------- --------
Stockholders' equity:
Preferred and preference stock 3 2,258
Common stock 7,931 7,930
Capital in excess of par value 137,790 138,293
Reinvested earnings from October 1, 1990 2,127 1,785
Investment in equity securities-unrealized gain,
net of taxes 2,963 4,276
-------- --------
150,814 154,542
-------- --------
Total liabilities and stockholders' equity $252,224 $258,874
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ZAPATA CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------------
1994 1993
--------- ---------
<S> <C> <C>
Revenues $45,970 $59,539
------- -------
Expenses:
Operating 39,221 53,384
Depreciation, depletion and amortization 2,877 2,414
Selling, general and administrative 2,542 3,403
------- -------
44,640 59,201
------- -------
Operating income 1,330 338
------- -------
Other income (expense):
Interest income 353 806
Interest expense (1,449) (2,518)
Gain on sale of Tidewater common stock -- 33,852
Other 490 (6,273)
------- -------
(606) 25,867
------- -------
Income from continuing operations before
income taxes 724 26,205
------- -------
Provision for income taxes
State 120 29
Federal 211 9,161
------- -------
331 9,190
------- -------
Income from continuing operations 393 17,015
------- -------
Income from discontinued operations, net of
income taxes -- 313
------- -------
Net income 393 17,328
------- -------
Preferred stock dividends 51 101
------- -------
Net income to common stockholders $342 $17,227
======= =======
Per share data:
Income from continuing operations $0.01 $0.55
Income from discontinued operations -- 0.01
------- -------
Net income per share $0.01 $0.56
======= =======
Average common shares and equivalents
outstanding 31,785 31,001
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ZAPATA CORPORATION
DIVISIONAL REVENUES AND OPERATING RESULTS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1994 1993
------- -------
<S> <C> <C>
Revenues
Natural gas compression $18,163 $12,631
Natural gas gathering and processing 25,031 43,471
Oil and gas 2,776 3,437
------- -------
$45,970 $59,539
======= =======
Operating income (loss)
Natural gas compression $ 1,923 $ 987
Natural gas gathering and processing (170) 561
Oil and gas 410 208
Corporate (833) (1,418)
------- -------
$ 1,330 $ 338
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ZAPATA CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months ended
December 31,
------------------
1994 1993
------- --------
<S> <C> <C>
Cash flow used by operating activities:
Continuing operations:
Net income from continuing operations $ 393 $ 17,015
------- --------
Adjustments to reconcile net income to net cash used by
operating activities:
Depreciation and amortization 2,877 2,414
Gain on sale of assets, net (457) (33,852)
Changes in other assets and liabilities (7,581) 12,954
------- --------
Total adjustments (5,161) (18,484)
------- --------
Cash flow used by continuing operations (4,768) (1,469)
------- --------
Discontinued operations:
Income from discontinued operations -- 313
Increase in net assets of discontinued operations -- (3,604)
------- --------
Cash flow used by discontinued operations -- (3,291)
------- --------
Net cash used by operating activities (4,768) (4,760)
------- --------
Cash flow provided by investing activities:
Proceeds from dispositions of investments and other 1,777 80,528
Restricted cash investments 779 75,083
Proceeds from notes receivable 920 859
Business acquisitions, net of cash acquired -- (73,622)
Capital expenditures (2,277) (2,981)
------- --------
Net cash provided by investing activities 1,199 79,867
------- --------
Cash flow used by financing activities:
Principal payments of long-term obligations (618) (68,220)
Preferred stock redemption and common stock buyback (2,758) --
Dividend payments (1,153) (202)
------- --------
Net cash used by financing activities (4,529) (68,422)
------- --------
Net increase (decrease) in cash and cash equivalents (8,098) 6,685
Cash and cash equivalents at beginning of period 14,386 16,008
------- --------
Cash and cash equivalents at end of period $ 6,288 $ 22,693
======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
ZAPATA CORPORATION NOTES TO FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
- -----------------------------
The condensed consolidated financial statements included herein have been
prepared by Zapata, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The financial statements reflect all
adjustments which are, in the opinion of management, necessary to fairly present
such information. All such adjustments are of a normal recurring nature.
Although Zapata believes that the disclosures are adequate to make the
information presented not misleading, certain information and footnote
disclosures, including significant accounting policies, normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these condensed financial statements be read
in conjunction with the financial statements and the notes thereto included in
Zapata's latest annual report on Form 10-K.
On December 8, 1994, Zapata announced that it would redeem the remaining
22,498 outstanding shares of the Company's $6 Cumulative Preferred Stock
(Preferred Stock). The Preferred Stock was redeemed at $100 a share.
NOTE 2. ACQUISITION
- --------------------
In November 1993, Zapata purchased the natural gas compression business of
Energy Industries, Inc. and certain other affiliated companies ("Energy
Industries"), as well as certain real estate used by the business ("Energy
Industries Acquisition"). The following pro forma information for Zapata for
the three months ended December 31, 1993 includes the historical results of
Zapata, adjusted for the results of Energy Industries as if the Energy
Industries Acquisition had been consummated on October 1, 1993 (unaudited) (in
thousands, except per share amounts).
<TABLE>
<CAPTION>
<S> <C>
Revenues $65,553
Income from continuing operations before taxes 26,503
Income from continuing operations 17,209
Income per share from continuing operations 0.55
</TABLE>
The pro forma adjustments to Zapata's results for the three months ended
December 31, 1993 to reflect the Energy Industries Acquisition increased
revenues by $6,014,000, as well as income before tax by $174,000. Additional
pro forma adjustments for the first three months of fiscal 1994 included the
elimination of $124,000 of various operating and administrative expenses that
were charged to Energy Industries from an affiliate, additional depreciation of
$120,000 and $41,000 of goodwill amortization, a reduction in net interest
expense of $161,000 related to notes receivable and payable that were not
acquired by Zapata and a federal tax provision of $104,000.
The pro forma amounts presented above may not be indicative of the results
that would have actually resulted if the transactions had occurred on the date
indicated or which may be obtained in the future.
8
<PAGE>
I
TEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1994, Zapata's financial condition remains strong. Long-
term debt of $59.2 million compares favorably to working capital of $88.1
million and stockholders' equity of $150.8 million. Mandatory principal
payments for the next twelve months total $2.5 million. Zapata currently owns
673,077 shares of common stock of Tidewater Inc., all of which are reserved for
possible exchange, at the election of the holder, for $17.5 million of the
Company's 8.5% unsecured exchangeable notes due in 1996.
As of December 31, 1994, Zapata redeemed the remaining 22,498 shares of its
outstanding $6 Cumulative Preferred Stock (Preferred Stock) at $100 per share.
In the first quarter of fiscal 1995, the Company announced that payment of
dividends on its Common Stock and $2 Noncumulative Convertible Preference Stock
would be discontinued until further notice.
Net cash used by operating activities for the first quarters of fiscal 1995
and 1994 each totalled $4.8 million. However, cash provided by investing
activities of $1.2 million during the first quarter of fiscal 1995 was
significantly lower than the $79.9 million provided in the corresponding fiscal
1994 period as a result of the sale of 3.75 million shares of Zapata's Tidewater
common stock in November 1993. Reflecting a senior debt prepayment in December
1993, net cash used by financing activities of $4.5 million in the first quarter
of fiscal 1995 was substantially lower than the $68.4 million used in the prior-
year period.
RESULTS OF OPERATIONS
- ---------------------
Zapata reported net income of $393,000 for the first quarter of fiscal 1995
as compared to net income of $17.3 million for the same period in fiscal 1994.
The decrease was primarily attributable to a $33.8 million pretax gain from the
sale of 3.75 million shares of Zapata's Tidewater common stock in the fiscal
1994 period. This gain was partially offset by a $6.8 million expense
associated with the partial prepayment of the Company's senior indebtedness
during the first quarter of fiscal 1994. Interest expense was lower in the
first quarter of fiscal 1995 as compared to the corresponding 1994 period due
primarily to the 1994 senior debt prepayment. The fiscal 1994 results include
net income of $313,000 from the Company's discontinued marine protein
operations.
The Company's operating income of $1.3 million for the first quarter of
fiscal 1995 compared favorably to operating income of $338,000 for the
corresponding fiscal 1994 period. The improvement was primarily attributable to
Zapata's natural gas compression division that was acquired in November 1993.
The benefits of reduced general and administrative expenses associated with the
Company's corporate headquarters and the absence of domestic oil and gas
operations workover expenses in the first quarter of fiscal 1995 were offset by
an operating loss from the Company's natural gas gathering, processing and
marketing operations. Revenues for the first quarter of fiscal 1995 totalled
$46.0 million as compared to $59.5 million for the first quarter of fiscal 1994.
9
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NATURAL GAS COMPRESSION - In November 1993, Zapata purchased Energy Industries,
- -----------------------
Inc. ("Energy Industries") a participant in all segments of the natural gas
compression industry. Energy Industries operates one of the ten largest rental
fleets of natural gas compressor packages in the United States. Its compressor
fleet is located in Texas, Louisiana, Arkansas, Oklahoma and New Mexico, as well
as offshore in the Gulf of Mexico.
Energy Industries primarily supplies natural gas compressor packages in
natural gas production and processing applications. In natural gas production
applications, natural gas compression is used to increase the flow rate of gas
wells with low reservoir pressures. In natural gas processing applications,
natural gas compression is used in the process of separating the various
hydrocarbon components of the wellhead natural gas stream. In interstate
natural gas pipeline applications, natural gas compression is used to increase
the pressure of natural gas from reservoir levels to interstate pipeline
standards. Energy Industries maintains an inventory of compressor and engine
components to support the fabrication, service and repair of natural gas
compressor packages.
The major segments of Energy Industries' natural gas compression revenues
and operating results for the three months ended December 31, 1994 and the two
months ended December 31, 1993, in thousands, are identified below.
<TABLE>
<CAPTION>
Revenues Operating Results
-------------------- --------------------
1995 1994 1995 1994
---------- -------- --------------------
<S> <C> <C> <C> <C>
Compressor Rental $ 4,329 $ 2,914 $ 1,450 $ 976
Fabrication and Sales 6,845 3,493 921 334
Parts & Service 5,384 4,166 1,006 777
Other 1,605 2,058 176 92
Selling & Administrative --- --- (1,630) (1,192)
---------- ---------- ------- ----------
$18,163 $12,631 $ 1,923 $ 987
========== ========== ======= ==========
</TABLE>
Natural gas compressor package rental utilization is affected primarily by
the number and age of producing oil and gas wells, the volume of natural gas
consumed and natural gas prices. Rental rates are determined primarily by the
demand for compressor packages and vary by size and horsepower of a compressor
package. Energy Industries' utilization, rental rates and fleet size as of
December 31, 1994 and 1993 are compared in the following table.
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1993
------------------ ------------------
<S> <C> <C>
Fleet utilization:
- -----------------------------------------
Horsepower 79.5% 76.8%
Monthly rental rate, based on:
- -----------------------------------------
Horsepower $ 16.36 $ 16.83
Fleet size:
- -----------------------------------------
Number of units 711 684
Horsepower 113,706 106,139
</TABLE>
10
<PAGE>
Although utilization of the Company's compressor packages was higher
at December 31, 1994 as compared to that at December 31, 1993, compressor
utilization and rental rates have both been negatively impacted during the
current fiscal quarter by the effects of low natural gas prices.
In addition to operating a fleet of natural gas compressor packages
for rental purposes, Energy Industries designs, fabricates and sells natural gas
compressor packages to customer specifications. Energy Industries sells
compressor packages to natural gas producers, gatherers and transmission
companies which expect the long life of their associated reserves or pipeline to
justify the capital cost of acquiring, rather than renting, a natural gas
compressor package. Most of Energy Industries' natural gas compressor package
sales are for larger, high horsepower packages.
NATURAL GAS GATHERING, PROCESSING AND MARKETING - Zapata's natural gas
- -----------------------------------------------
gathering, processing and marketing operations are conducted through Cimarron
Gas Holding Company and its subsidiaries. Cimarron was acquired early in fiscal
1993 to serve as the vehicle for the Company's expansion into the natural gas
services market. As a division of Zapata, Cimarron's operations involve two
major categories of business activities: the gathering and processing of natural
gas and its constituent products and the marketing and trading of natural gas
liquids (NGL's).
Revenues and operating results for the first quarters of fiscal 1995
and 1994 are presented in the following table by major category, in thousands.
<TABLE>
<CAPTION>
Revenues Operating Results
------------------ --------------------
1995 1994 1995 1994
--------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Gathering & Processing $ 4,305 $ 6,080 $ 36 $ 558
NGL Marketing 20,726 37,391 16 535
Selling & Administrative --- --- (222) (532)
--------- ---------- ------- ----------
$25,031 $43,471 $(170) $ 561
========= ========== ======= ==========
</TABLE>
For the first quarter of fiscal 1995, gathering and processing
revenues and operating income were lower than the prior-year results as the
negative impact of significantly lower natural gas prices more than offset
improved processing margins. Marketing revenues and operating income also
declined in the 1995 period reflecting the Company's decision to reduce its
natural gas trading activities.
Gas gathering is the collection of natural gas from various individual
wells, combining it into a single gas stream and delivering it into a major
transmission line for transportation to market. A gathering system sometimes
includes an associated processing plant for the removal of gas liquids,
depending on the content of liquefiable hydrocarbons in the gas streams and the
capabilities of transmission lines.
11
<PAGE>
In fiscal 1994 and 1993, Cimarron significantly expanded its natural
gas gathering and processing activities through the acquisition and expansion of
natural gas gathering systems in West Texas and Oklahoma and a gas processing
plant in Sutton County, Texas. A comparison of average daily volumes of gas,
measured in millions of cubic feet, gathered and processed during the first
quarters of fiscal 1995 and 1994 are shown below.
<TABLE>
<CAPTION>
1995 1994
------------
<S> <C> <C>
Gathering 51.3 40.4
Processing 27.2 18.8
</TABLE>
OIL AND GAS - Operating income of $410,000 for the first quarter of fiscal 1995
- -----------
compared favorably to the fiscal 1994 period's operating income of $208,000
while revenues declined to $2.8 million in the 1995 period as compared to $3.4
million in the prior-year period. The improvement in operating income was due
primarily to the absence of workover expenses in fiscal 1995; the fiscal 1994
period included $400,000 of workover expenses at the Company's Wisdom gas field.
The division's results were negatively impacted by the significantly lower
natural gas prices in the first quarter of fiscal 1995, as well as reduced
receipts from the Bolivian operations ($700,000 in 1995 compared to $1.0 million
in 1994). Additionally, the Company curtailed production in the Gulf of Mexico
during the first quarter of fiscal 1995 as a result of the low gas prices.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Exhibit 27 - Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZAPATA CORPORATION
February 13, 1995 By: /s/ Joseph L. von Rosenberg III
------------------------------------
Joseph L. von Rosenberg III
Vice President, General Counsel
and Corporate Secretary
February 13, 1995 By: /s/ Lamar C. McIntyre
-------------------------------------
Lamar C. McIntyre
Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
14
