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10-Q
HRG GROUP, INC. filed this Form 10-Q on 08/14/1995
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<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 June 30, 1995

                                      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 umber  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 per share, on August 10, 1995:  29,502,815.

<PAGE>
 

                         PART I.  FINANCIAL INFORMATION


Item 1.  FINANCIAL STATEMENTS

     Zapata Corporation
 
     Condensed Consolidated Balance Sheet
     Condensed Consolidated Income Statement
     Divisional Revenues and Operating Results
     Condensed Consolidated Statement of Cash Flows

     Notes to Financial Statements

                                       2

<PAGE>
 
                              ZAPATA CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEET
                                    ASSETS
                                (in thousands)


<TABLE> 
<CAPTION> 
                                                  June 30,       September 30,
                                                    1995             1994
                                                 ---------       -------------
<S>                                              <C>             <C> 
Current assets:
  Cash and cash equivalents                      $   1,854          $ 11,416

  Restricted cash                                       77               779

  Receivables                                       21,031            28,206

  Inventories:
    Fish products                                   25,845            34,143
    Gas liquids products                               656               414
    Materials, parts and supplies                    3,456             3,601

  Prepaid expenses and other current assets          4,269             2,609

  Net assets of discontinued operations             79,639            80,687
                                                 ---------          --------
      Total current assets                         136,827           161,855
                                                 ---------          --------

Investments and other assets:
  Notes receivable                                      --             1,925

  Investments                                        2,100            14,471

  Goodwill                                           6,915             7,220

  Deferred income taxes                              5,968             2,915

  Other assets                                      16,903            15,600
                                                 ---------          --------
                                                    31,886            42,131
                                                 ---------          --------
Property and equipment                             165,563           160,862

Accumulated depreciation                          (101,162)          (95,748)
                                                 ---------          --------
                                                    64,401            65,114
                                                 ---------          --------
      Total assets                               $ 233,114          $269,100
                                                 =========          ========
</TABLE>
 

   The accompanying notes are an integral part of the financial statements.

                                       3


<PAGE>
 
                              ZAPATA CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEET
                     LIABILITIES AND STOCKHOLDERS' EQUITY
                                (in thousands)


<TABLE> 
<CAPTION> 

                                                   June 30,       September 30,
                                                     1995             1994
                                                   --------       -------------
<S>                                                <C>            <C> 
Current liabilities: 
  Current maturities of long-term debt             $  8,437          $  2,915 

  Accounts payable and accrued liabilities           27,776            41,532
                                                   --------          --------
    Total current liabilities                        36,213            44,447
                                                   --------          --------
Long-term debt                                       34,385            53,972
                                                   --------          --------
Other liabilities                                    19,365            16,139
                                                   --------          --------
Stockholders' equity:
  Preferred and preference stock                          3             2,258

  Common stock                                        7,376             7,930

  Capital in excess of par value                    129,344           138,293

  Reinvested earnings from October 1, 1990            7,168             1,785

  Investments unrealized gain (loss), net of taxes     (740)            4,276
                                                   --------          --------
                                                    143,151           154,542
                                                   --------          --------
    Total liabilities and stockholders' equity     $233,114          $269,100
                                                   ========          ========
</TABLE>
 
   The accompanying notes are an integral part of the financial statements.

                                       4


<PAGE>
 
                              ZAPATA CORPORATION
                    CONDENSED CONSOLIDATED INCOME STATEMENT
                   (in thousands, except per share amounts)


<TABLE> 
<CAPTION> 
                                      Three Months Ended    Nine Months Ended
                                           June 30,              June 30,
                                      ------------------    ------------------
                                        1995      1994        1995      1994
                                      --------  --------    --------  --------
<S>                                   <C>       <C>         <C>       <C> 
  
Revenues                              $ 36,708  $ 64,686    $126,622  $192,050
                                      --------  --------    --------  --------
Expenses:
  Operating                             30,916    58,171     112,602   172,735
  Provisions for asset write-downs      12,607    18,810      12,607    18,810
  Depreciation, depletion and
   amortization                          2,158     3,107       6,453     8,369
  Selling, general and administrative    2,195     3,116       6,462     9,579
                                      --------  --------    --------  --------
                                        47,876    83,204     138,124   209,493
                                      --------  --------    --------  --------
Operating loss                         (11,168)  (18,518)    (11,502)  (17,443)
                                      --------  --------    --------  --------
Other income (expense):
  Interest income                          303       382         840     1,448
  Interest expense                        (735)   (1,213)     (2,449)   (4,753)
  Gain on sales of Tidewater common
   stock                                    --        --       4,811    37,457
  Other                                   (115)    3,016         453    (2,859)
                                      --------  --------    --------  --------
                                          (547)    2,185       3,655    31,293
                                      --------  --------    --------  --------
Income (loss) from continuing
 operations before taxes               (11,715)  (16,333)     (7,847)   13,850
                                      --------  --------    --------  --------
Provision for income taxes
  State                                     97        98         186       567
  Federal                               (4,133)   (5,750)     (2,810)    4,650
                                      --------  --------    --------  --------
                                        (4,036)   (5,652)     (2,624)    5,217
                                      --------  --------    --------  --------
Income (loss) from continuing
 operations                             (7,679)  (10,681)     (5,223)    8,633
                                      --------  --------    --------  --------
Discontinued operations: 
Income from discontinued operations,
 net of income taxes                       537     1,107       1,760     1,393
Reversal of reserve for loss on 
 disposition, net of income taxes        8,897        --       8,897        --
                                      --------  --------    --------  --------
                                         9,434     1,107      10,657     1,393
                                      --------  --------    --------  --------
Net income (loss)                        1,755    (9,574)      5,434    10,026
                                      --------  --------    --------  --------
Preferred stock dividends                   --       101          51       303
                                      --------  --------    --------  --------
Net income (loss) to common
 stockholders                         $  1,755  $ (9,675)   $  5,383  $  9,723
                                      ========  ========    ========  ========
Per share data:
  Income (loss) from continuing
   operations                         $  (0.26) $  (0.34)   $  (0.17) $   0.26
  Income from discontinued
   operations                             0.32      0.03        0.34      0.05
                                      --------  --------    --------  --------
  Net income (loss) per share         $   0.06  $  (0.31)   $   0.17  $   0.31
                                      ========  ========    ========  ========
Average common shares and
 equivalents outstanding                29,824    31,671      31,120    31,708
                                      ========  ========    ========  ========
</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    Nine Months Ended
                                           June 30,              June 30,
                                      ------------------    ------------------
                                        1995      1994        1995      1994
                                      --------  --------    --------  --------
<S>                                   <C>       <C>         <C>       <C> 
  
Revenues:

Marine protein                        $ 21,737  $ 19,703    $ 61,311  $ 62,307
Natural gas gathering and processing    12,509    41,957      57,829   120,456
Oil and gas                              2,462     3,026       7,482     9,287
                                      --------  --------    --------  --------
                                      $ 36,708  $ 64,686    $126,622  $192,050
                                      ========  ========    ========  ========
Operating income (loss):

Marine protein                        $(10,428) $  2,122    $ (8,599) $  6,016
Natural gas gathering and processing       (39)     (473)       (482)     (696)
Oil and gas                                310   (18,743)        528   (18,103)
Corporate                               (1,011)   (1,424)     (2,949)   (4,660)
                                      --------  --------    --------  --------
                                      $(11,168) $(18,518)   $(11,502) $(17,443)
                                      ========  ========    ========  ========
</TABLE>
 

   The accompanying notes are an integral part of the financial statements.

                                       6


                  

<PAGE>
 
                              ZAPATA CORPORATION
                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                (in thousands)


<TABLE> 
<CAPTION> 
                                                        Nine Months Ended
                                                             June 30,
                                                       -------------------
                                                          1995      1994
                                                       ---------  ---------
<S>                                                    <C>        <C> 
Cash flow provided (used) by operating activities:
  Continuing operations:
    Net income (loss) from continuing operations       $ (5,223)   $  8,633
                                                       --------    --------
    Adjustments to reconcile net income (loss) to
     net cash provided (used) by operating activities:
      Depreciation, amortization and valuation
       provisions                                        19,060      27,179
      Gain on sale of assets                             (5,268)    (37,457)
      Changes in other assets and liabilities            (1,987)     (1,570)
                                                       --------    --------
          Total adjustments                              11,805     (11,848)
                                                       --------    --------
        Cash flow provided (used) by continuing
         operations                                       6,582      (3,215)
                                                       --------    --------
  Discontinued operations:
    Income from discontinued operations                  10,657       1,393
    Change in net assets of discontinued operations     (11,559)    (10,322)
                                                       --------    --------
        Cash flow used by discontinued operations          (902)     (8,929)
                                                       --------    --------
          Net cash provided (used) by operating
           activities                                     5,680     (12,144)
                                                       --------    --------
Cash flow provided (used) by investing activities:
  Proceeds from dispositions of investments and other    12,381      88,533
  Proceeds from restricted cash investments                 702      75,083
  Proceeds from notes receivable                          5,495       1,061
  Business acquisitions, net of cash acquired                --     (73,222)
  Capital expenditures                                   (6,844)    (15,054)
                                                       --------    --------
          Net cash provided by investing activities      11,734      76,401
                                                       --------    --------
Cash flow used by financing activities:
  Principal payments of long-term obligations, net      (14,065)    (69,263)
  Preferred stock redemption and common stock buybacks  (11,758)     (2,245)
  Dividend payments                                      (1,153)       (404)
                                                       --------    --------
          Net cash used by financing activities         (26,976)    (71,912)
                                                       --------    --------
Net decrease in cash and cash equivalents                (9,562)     (7,655)
Cash and cash equivalents at beginning of period         11,416      15,273
                                                       --------    --------
Cash and cash equivalents at end of period             $  1,854    $  7,618
                                                       ========    ========
</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 Corporation ("Zapata" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The financial statements reflect all adjustments that 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.

     In April 1995, Zapata adopted Statement of Financial Accounting Standards
No. 121 ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," which established accounting standards for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used, and for long-lived assets
and certain identifiable intangibles to be disposed of.  As a result of adopting
SFAS 121, the Company recorded a $12.6 million pretax provision for asset
impairment to reduce its marine protein assets to their estimated fair market
value.

NOTE 2.  DISCONTINUED OPERATIONS OF NATURAL GAS COMPRESSION

     In April 1995, Zapata announced that the Company was considering the sale
of its natural gas compression operations.  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 to Enterra Corporation.  The agreement is
subject to the signing of a definitive agreement and certain governmental
approvals. The Company is currently negotiating the terms of the agreement,
however, no assurances can be made that this transaction will be completed.  The
Company's consolidated financial statements have been restated to reflect the
natural gas compression operations as a discontinued operation.  Summarized
results and financial position of the discontinued operations are shown below
(amounts in thousands):

<TABLE>
<CAPTION>
                                      NINE MONTHS ENDED JUNE 30,
                                      --------------------------
                                            1995      1994
                                          --------  --------
<S>                                       <C>       <C>
Financial Results
Revenues                                   $53,086  $49,874
Expenses                                    50,018   47,581
                                           -------  -------
Income before taxes                          3,068    2,293
Income tax provision                         1,308      900
                                           -------  -------
Net income  *                              $ 1,760  $ 1,393
                                           =======  =======
</TABLE>


                                       8

<PAGE>
 

<TABLE>
<CAPTION>
                                          JUNE 30,   SEPTEMBER 30,
                                            1995         1994
                                          --------   ------------
<S>                                       <C>       <C>
Financial Position
 Current assets                           $ 36,598       $ 30,696
 Other assets                               20,016         19,434
 Property and equipment, net                59,497         52,496
                                          --------       --------
                                           116,111        102,626
                                          --------       --------
 Debt                                       27,992         15,200
 Other liabilities                           8,480          6,739
                                          --------       --------
                                            36,472         21,939
                                          --------       --------
 Net assets of discontinued operations    $ 79,639       $ 80,687
                                          ========       ========
---------
</TABLE>


*  Net income includes allocations of interest expense on general corporate debt
of $1.2 million in 1995 and $2.7 million in 1994.  Interest expense was
allocated to discontinued operations based on a ratio of net assets to be sold
to the sum of total net assets of the Company plus general corporate debt.

NOTE 3.  DISCONTINUED MARINE PROTEIN OPERATIONS SUBSEQUENTLY RETAINED

          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 its 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.  Marine protein's results of operations from October 1994
through March 1995 had previously been offset against an after-tax reserve of
$8.9 million established in the fourth quarter of fiscal 1994 for the estimated
loss on disposition. As a result of the Company's decision to retain the marine
protein operations, the $8.9 million reserve has been reversed in the current
quarter. Marine protein revenues of $39.6 million and operating income of $1.8
million for the first six months of fiscal 1995 have been reclassified to
continuing operations. Also, marine, protein assets and liabilities of $80.7 
million and $24.9 million, respectively, as of June 30, 1995 and assets and 
liabilities of $100.2 million and $32.6 million, respectively, as of
September 30, 1994 have been reclassified to continuing operations.

          As a result of adopting SFAS 121, Zapata recorded a $12.6 million
pretax provision for asset impairment to reduce its marine protein assets.  The
provision was based on the estimated fair market value of the marine protein
assets.

NOTE 4.  RESTATED FISCAL 1995 RESULTS OF OPERATIONS

          Zapata's first and second quarter income statements for fiscal 1995
have been restated as follows to reflect the natural gas compression operations
as a discontinued operation and to reclassify the marine protein operating
results to continuing operations, amounts in thousands.

                                       9

<PAGE>
 

<TABLE>
<CAPTION>
                                          Three Months Ended
                                       --------------------------
                                       December 31,     March 31,
                                           1994            1995
                                       ------------     ---------
<S>                                    <C>                 <C>
 
Revenues                                   $47,388       $42,526
Operating income (loss)                        141          (475)
Income from continuing operations               40         2,416
Income from discontinued operations            708           515
Net income                                 $   748       $ 2,931
</TABLE>


NOTE 5.  SUBSEQUENT EVENT

          In July 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 consideration. No gain or loss was recognized from the sale as
the transaction was recorded at book value.

          In August 1995, Zapata announced that it had acquired 31% of the
outstanding common stock of Envirodyne Industries, Inc. ("Envirodyne") for $18.8
million from Malcolm Glazer, Chairman of the Board of Zapata and a director of
Envirodyne. Zapata paid the purchase price by issuing to the seller a
subordinated promissory note bearing interest at prime and maturing in August
1997. Envirodyne is one of the world's major suppliers of food packaging
products and food service supplies.. 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.

                                       10

<PAGE>
 

I
tem 2.              MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 
agreement is subject to the signing of a definitive agreement and certain 
governmental approvals. The Company is currently negotiating the terms of the 
agreement, however, no assurances can be made that this transaction will be
completed. The Company's consolidated financial statements have been restated to
reflect the natural gas compression operations as a discontinued operation. 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 July 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

     At June 30, 1995, Zapata's long-term debt of $34.4 million compared
favorably to working capital of $100.6 million and stockholders' equity of
$143.2 million. In April 1995, Zapata used the proceeds of $12.7 million from
the sale of its remaining 673,077 shares of Tidewater Inc.

                                      11


<PAGE>
 
("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 $5.7 million during the 
first nine months of fiscal 1995 as compared to a $12.1 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 $11.7 million during the first nine months of fiscal 1995 as
compared to $76.4 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 $27.0 million during the first nine months of fiscal 1995 as
compared to $71.9 million in the corresponding prior-year period, which included
a $68.5 million prepayment of senior debt.

     In April 1995, Zapata repurchased 2.25 million shares of Zapata's common 
stock from Norex America, Inc. for $4.00 per share. The shares repurchased by 
Zapata represented 7% of the Company's then outstanding common stock. Following 
the repurchase of these shares, Zapata had approximately 29.5 million shares of 
common stock outstanding.

     In June 1995, Zapata announced that its board of directors had authorized 
the repurchase of up to 7.5 million shares of its common stock depending on
market conditions.

     In August 1995, Zapata announced that it had acquired 31% of the 
outstanding common stock of Envirodyne Industries, Inc. ("Envirodyne") for $18.8
million from Malcolm Glazer, Chairman of the Board of Zapata and a director of 
Envirodyne. Zapata paid the purchase price by issuing to the seller a
subordinated promissory note bearing interest at prime and maturing in August
1997. Envirodyne is one of the world's major suppliers of food packaging
products and food service supplies. 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.

RESULTS OF OPERATIONS

     Zapata's net income of $1.8 million for the third quarter of fiscal 1995 
compared favorably to the fiscal 1994 third quarter net loss of $9.6 million. 
Net income includes income from the discontinued natural gas compression 
operations of $537,000 in the fiscal 1995 period and $1.1 million in the 
corresponding fiscal 1994 period. The discontinued natural gas compression 
results include allocations of interest on general corporate debt of $341,000 in
the fiscal 1995 quarter and $650,000 in the fiscal 1994 quarter. The fiscal 1995
third quarter net income also included net income of $8.9 million from
discontinued operations as a result of the reversal of an estimated loss on the
disposition of the marine protein operations which was recorded in fiscal 1994.

     The Company's net loss from continuing operations of $7.7 million for the 
three months ended June 30, 1995 compared favorably to a net loss of $10.7 
million for the corresponding 1994 period. The fiscal 1995 results include a 
$12.6 million pretax provision for asset impairment of the Company's marine 
protein assets as a result of adopting Statement of Financial Accounting 
Standards No. 121 ("SFAS 121") while the fiscal 1994 results include a pretax
valuation provision of $18.8 million associated

                                      12

<PAGE>
 
with the Company's oil and gas operations. Revenues of $36.7 million and an 
operating loss of $11.2 million in the fiscal 1995 third quarter compared to 
revenues of $64.7 million and an operating loss of $18.5 million in the 1994 
third quarter. The decrease in revenues from the prior year reflects the 
Company's decision to decrease natural gas trading activity in its gathering and
processing operations.

     Year-to-date, fiscal 1995 revenues of $126.6 million, an operating loss of 
$11.5 million and net income of $5.4 million compared to fiscal 1994 revenues of
$192.1 million, an operating loss of $17.4 million and net income of $10.0 
million.

MARINE PROTEIN--As a result of the Company's decision to retain the marine 
protein operations, the net assets and results of marine protein's operations 
for all periods have been reclassified from discontinued operations to 
continuing operations and the $8.9 million after-tax loss on disposition 
recorded September 1994 has been reversed in the current quarter. As a result of
adopting SFAS 121, the Company recorded a $12.6 million pretax provision for 
asset impairment to reduce its marine protein assets to their estimated fair 
market value. SFAS 121 requires companies to write down assets to their 
estimated fair market value when assets are determined to be impaired.

     Reflecting the provision for asset impairment, revenues of $21.7 million 
and operating loss of $10.4 million in the third quarter of fiscal 1995 compared
unfavorably to revenues of $19.7 million and operating income of $2.1 million in
the third quarter of 1994. Current quarter sales volume of fish oil was double 
the prior-year period level while fish meal sales volume was 14% lower in the 
current quarter as compared to the prior-year quarter. The average price for 
fish oil increased to $349 per ton in the third quarter of fiscal 1995 from $302
per ton in the 1994 third quarter; fish meal prices averaged $355 per ton in the
1995 period and $346 per ton in the 1994 period. The fiscal 1995 fish catch is 
approximately 22% lower than the fiscal 1994 fish catch due principally to 
inclement weather conditions that hampered fishing during the current quarter.

     Reflecting the effects of the provision for asset impairment and the lower
fish catch, year-to-date fiscal 1995 revenues of $61.3 million and operating
loss of $8.6 million compared unfavorably to fiscal 1994 revenues of $62.3
million and operating income of $6.0 million. Fiscal 1995 sales volume of fish
oil was 6% higher than the fiscal 1994 sales volume while fiscal 1995 fish meal
sales volume declined 3% as compared to fiscal 1994. Year-to-date, fiscal 1995
fish oil prices have averaged $301 per ton versus $317 per ton in fiscal 1994.
Likewise, fiscal 1995 fish meal prices have averaged $347 per ton versus $353
per ton in fiscal 1994.

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 (collectively, "Cimarron"), which were acquired 
early in fiscal 1993. 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 three-month and nine-month periods 
ended June 30, 1995 and 1994 are presented in the following table by major 
category, in thousands.

                                      13


<PAGE>
 

<TABLE> 
<CAPTION> 

                                      Three Months Ended   Nine Months Ended
                                           June 30,             June 30,
                                      ------------------   -----------------
                                        1995      1994       1995      1994
                                      --------  --------   --------  -------
<S>                                   <C>       <C>        <C>       <C> 
Revenues
Gathering & Processing                $ 4,420    $ 7,255    $14,010  $ 18,458
NGL Marketing                           8,089     34,702     43,819   101,998
                                      -------    -------    -------  --------
                                      $12,509    $41,957    $57,829  $120,456
                                      =======    =======    =======  ========
Operating Results
Gathering & Processing                $   203    $  (164)   $   357  $    148
NGL Marketing                              35        147         63       696
Selling & Administrative                 (277)      (456)      (902)   (1,540)
                                      -------    -------    -------  --------
                                      $   (39)   $  (473)   $  (482) $   (696)
                                      =======    =======    =======  ========
</TABLE>
 

     For the third quarter of fiscal 1995, gathering and processing revenues 
were lower than the prior year as a result of the negative impact of 
lower natural gas prices, while operating results improved, reflecting increased
processing margins. However, marketing revenues and operating income have
declined in fiscal 1995 as compared to 1994, due to the Company's decision to
reduce its natural gas trading activities.

     A comparison of average daily volumes of gas, measured in millions of cubic
feet, gathered and processed during the three-month and nine-month periods ended
June 30, 1995 and 1994 is shown below.


<TABLE> 
<CAPTION> 

                                      Three Months Ended   Nine Months Ended
                                           June 30,             June 30,
                                      ------------------   -----------------
Average Daily Volumes                   1995      1994       1995      1994
---------------------                 --------  --------   --------  -------
(MMCF)
<S>                                   <C>       <C>        <C>       <C> 
Gathering                                57.0      47.7       53.5     44.9
Processing                               26.5      25.0       26.6     21.9
</TABLE>
 

     In April 1995, Zapata announced that the Company was considering the sale 
of its natural gas gathering and processing operation. 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.

OIL AND GAS--Revenues of $2.5 million and operating income of $310,000 for the 
third quarter of fiscal 1995 compared favorably to the corresponding fiscal 1994
period's revenues of $3.0 million and operating loss of $18.7 million. The 
fiscal 1994 period loss included an $18.8 million property valuation provision. 
Although the Company's U.S. natural gas prices improved during the third quarter
of fiscal 1995, current quarter prices were lower than the prior-year quarter 
prices. Zapata's domestic natural gas production for the third quarter of fiscal
1995 approximated the level of production in the corresponding fiscal 1994 
period. The Company's Bolivian operations contributed $399,000 to operating 
income in the third quarter of fiscal 1995 as compared to $483,000 in the third 
quarter of fiscal 1994.

                                      14



<PAGE>
 
     Year-to-date, fiscal 1995 revenues of $7.5 million and operating income of 
$528,000 compared favorably to the fiscal 1994 revenues of $9.3 million and 
operating loss of $18.1 million due primarily to the 1994 property write-down. 
Bolivian operations contributed operating income of $1.2 million in fiscal 1995 
and $2.4 million in fiscal 1994.

DISCONTINUED OPERATIONS--NATURAL GAS COMPRESSION

     In April 1995, Zapata announced that the Company was considering the sale 
of its natural gas compression operations. 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 to Enterra Corporation. The agreement is 
subject to the signing of a definitive agreement and certain governmental 
approvals. The Company is currently negotiating the terms of the agreement, 
however, no assurance can be made that this transaction will be completed. The 
Company's consolidated financial statements have been restated to reflect the 
natural gas compression operations as a discontinued operation.

     The major segments of Energy Industries' natural gas compression revenues 
and operating results for the three-month and nine-month periods ended June 30, 
1995 and the three-month and eight-month periods ended June 30, 1994, in 
thousands, are identified below.


<TABLE> 
<CAPTION> 
                              Three Months Ended      Nine Months   Eight Months
                                    June 30,                Ended June 30,
                              ------------------      --------------------------
                               1995        1994        1995               1994
                              ------      ------      ------             ------
<S>                           <C>         <C>         <C>               <C> 
Revenues 
Compressor Rental             $ 4,403     $ 5,163     $12,978           $12,066
Fabrication and Sales           8,989       9,272      21,879            17,150
Parts & Service                 4,731       5,187      14,919            14,123
Other                           1,206       2,188       3,310             6,535
                              -------     -------     -------           -------
                              $19,329     $21,810     $53,086           $49,874
                              =======     =======     =======           =======
Operating Results
Compressor Rental             $ 1,175     $ 1,336     $ 3,592           $ 3,686
Fabrication and Sales             875       1,206       2,421             1,762
Parts & Service                   850       1,152       2,818             2,760
Other                             198         383         348               908
Selling & Administrative       (1,394)     (1,617)     (4,378)           (4,274)
                              -------     -------     -------           -------
                              $ 1,704     $ 2,460     $ 4,801           $ 4,842
                              =======     =======     =======           =======
</TABLE>
 

     (The Other segment includes the results of the heat exchanger manufacturing
operation which was sold during the second quarter of fiscal 1995 and used 
equipment sales.)

     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 June 
30, 1995 and 1994 are compared in the following table.

                                      15


<PAGE>
 

<TABLE> 
<CAPTION> 
                                           June 30, 1995       June 30, 1994
                                           -------------       -------------
<S>                                        <C>                 <C> 
Fleet utilization:
  Horsepower                                     81.5%                77.8%

Monthly rental rate, based on:
  Horsepower                                   $15.54               $17.43

Fleet size:
  Number of units                                 771                  701
  Horsepower                                  129,467              107,494
</TABLE>
 

     Reflecting the effects of low natural gas prices, Energy Industries' 
operating results continued to be negatively impacted during the third quarter 
of fiscal 1995. As a result, Energy Industries' operating income during the 
third quarter of fiscal 1995 compared unfavorably to the third quarter income in
fiscal 1994.

                                      16


<PAGE>
 

 
                         PART II--OTHER INFORMATION


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

        The Company held its 1995 Annual Meeting of Stockholders on July 27,
        1995 (the "1995 Annual Meeting"). An aggregate of 29,505,034 shares of
        the Company's equity securities were outstanding and entitled to vote at
        the 1995 Annual Meeting as follows: 29,502,407 shares of Common Stock
        and 2,627 shares of $2 Noncumulative Convertible Preference Stock. At
        this meeting, the stockholders voted on the following matters:

                        Election of Class III Directors

                                        For       Against
                                        ---       -------
        Robert V. Leffler, Jr.      23,515,741   1,523,931
        W. George Loar              23,510,424   1,529,248

        In addition to the Class III Directors elected at the 1995 Annual
        Meeting, Malcolm I. Glazer and Ronald C. Lassiter continue to serve as
        Class I Directors until the 1996 Annual Meeting of Stockholders, and
        Avram A. Glazer and Peter M. Holt continue to serve as Class II
        Directors until the 1997 Annual Meeting of Stockholders.

                        Ratification of the Appointment
                        of Coopers & Lybrand L.L.P. as
                        Independent Public Accountants

                                                          Broker
            For         Against        Abstained         Non-Vote
            ---         -------        ---------         --------
        24,603,811      329,905         108,067           91,175

        Subject to stockholder approval, the Board of Directors of the Company
        appointed Coopers & Lybrand L.L.P. to serve as the Company's independent
        public accountants for the year ending September 30, 1995.

                      Stockholder Proposal on Cumulative Voting

                                                          Broker
            For         Against        Abstained         Non-Vote
            ---         -------        ---------        ---------
         1,874,627    15,385,521        234,018         8,250,338

         Mr. Martin Glotzer, a stockholder of the Company, presented the
         stockholder proposal to be voted on at the 1995 Annual Meeting in which
         he requested that the stockholders of the Company amend the Company's
         Restated Certificate of Incorporation, as amended, to provide for
         cumulative voting on the election of directors of the Company.

                                      17



<PAGE>
 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits:

        The exhibits indicated by an asterisk (*) are incorporated by reference
        to the Zapata Corporation Annual Report on Form 10-K for the fiscal year
        ended September 30, 1994.

         3(a)*  --Restated Certificate of Incorporation of Zapata filed with
                  Secretary of State of Delaware May 3, 1994 (Exhibit 3(a) to
                  Current Report on Form 8-K dated April 27, 1994 (File No. 
                  1-4219)).
                  
         3(b)*  --Certificate of Designation, Preferences and Rights of $1
                  Preference Stock (Exhibit 3(c) to Zapata's Quarterly Report
                  on Form 10-Q for the fiscal quarter ended March 31, 1993
                  (File No. 1-4219)).
                  
         3(c)*  --Certificate of Designation, Preferences and Rights of $100
                  Preference Stock (Exhibit 3(d) to Zapata's Quarterly Report
                  on Form 10-Q for the fiscal quarter ended March 31, 1993
                  (File No. 1-4219)).
                  
         3(d)*  --By-laws of Zapata, as amended effective August 17, 1994.
                  
         4(a)*  --Second Amended and Restated Master Restructuring Agreement,
                  dated as of April 16, 1993 between Zapata and Norex Drilling
                  Ltd. (Exhibit 12 to Zapata's Amendment No. 3 to Schedule 13D
                  dated April 30, 1993).
                  
         4(b)*  --First Amendment to Second Amended and Restated Master
                  Restructuring Agreement dated as of May 17, 1993 between
                  Zapata and Norex Drilling Ltd. (Exhibit 4(c) to Zapata's
                  Registration Statement on Form S-1 (No. 33-68034)).
                  
         4(c)*  --Second Amendment to Second Amended and Restated Master
                  Restructuring Agreement, dated as of December 17, 1993
                  between Zapata and Norex Drilling Ltd. (Exhibit 4(c) to
                  Zapata's Annual Report on Form 10-K for the fiscal year
                  ended September 30, 1993 (File No. 1-4219)).
                  
         4(d)*  --Securities Liquidity Agreement, dated as of December 19,
                  1990, by and among Zapata and each of the securities holders
                  parties thereto (Exhibit 4(b) to Zapata's Annual Report on
                  Form 10-K for the fiscal year ended September 30, 1990 (File
                  No. 1-4219)).
                  
         4(e)*  --Consent Letter and Waiver dated as of March 7, 1995 by and 
                  between Norex America, Inc. and Zapata Corporation (Exhibit
                  4(e) to Zapata's Quarterly Report on Form 10-Q for the quarter
                  ended March 31, 1995 (File No. 1-4219))
                  
        10(a)   --Letter Agreement dated June 29, 1995 by and between Enterra 
                  Corporation and Zapata Corporation.
                  
        10(b)   --Assignment and Assumption of Consulting Agreement effective
                  as of July 1, 1995 by and between Zapata Corporation and
                  Zapata Protein, Inc.
                  
        27      --Financial Data Schedule.

                                      18


<PAGE>
 
        (b) Reports on Form 8-K

            Current report on Form 8-K dated June 9, 1995 (Item 5. Other
            events--reported the election of Robert V. Leffler, Jr. and
            W. George Loar to serve as Class III Directors, filling the
            vacancies left by the resignations of Myrl S. Gelb and
            Luther W. Miller).

                                      19



<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



August 14, 1995                      By: /s/ JOSEPH L. VON ROSENBERG III
                                        --------------------------------
                                        Joseph L. von Rosenberg III
                                        Vice President, General Counsel
                                        and Corporate Secretary


August 14, 1995                      By: /s/ LAMAR C. MCINTYRE              
                                        --------------------------------
                                        Lamar C. McIntyre           
                                        Vice President, Chief Financial Officer,
                                        Treasurer and Assistant Secretary




                                      20


<PAGE>
 

                                 EXHIBIT INDEX

NUMBER                              EXHIBIT
------                              -------

3(a)*  --Restated Certificate of Incorporation of Zapata filed with Secretary
         of State of Delaware May 3, 1994 (Exhibit 3(a) to Current Report on
         Form 8-K dated April 27, 1994 (File No. 1-4219)).
         
3(b)*  --Certificate of Designation, Preferences and Rights of $1 Preference
         Stock (Exhibit 3(c) to Zapata's Quarterly Report on Form 10-Q for the
         fiscal quarter ended March 31, 1993 (File No. 1-4219)).
         
3(c)*  --Certificate of Designation, Preferences and Rights of $100 Preference
         Stock (Exhibit 3(d) to Zapata's Quarterly Report on Form 10-Q for the
         fiscal quarter ended March 31, 1993 (File No. 1-4219)).
         
3(d)*  --By-laws of Zapata, as amended effective August 17, 1994.
         
4(a)*  --Second Amended and Restated Master Restructuring Agreement, dated as
         of April 16, 1993 between Zapata and Norex Drilling Ltd. (Exhibit 12
         to Zapata's Amendment No. 3 to Schedule 13D dated April 30, 1993).
         
4(b)*  --First Amendment to Second Amended and Restated Master Restructuring
         Agreement dated as of May 17, 1993 between Zapata and Norex Drilling
         Ltd. (Exhibit 4(c) to Zapata's Registration Statement on Form S-1
         (No. 33-68034)).
         
4(c)*  --Second Amendment to Second Amended and Restated Master Restructuring
         Agreement, dated as of December 17, 1993 between Zapata and Norex
         Drilling Ltd. (Exhibit 4(c) to Zapata's Annual Report on Form 10-K
         for the fiscal year ended September 30, 1993 (File No. 1-4219)).
         
4(d)*  --Securities Liquidity Agreement, dated as of December 19, 1990, by and
         among Zapata and each of the securities holders parties thereto
         (Exhibit 4(b) to Zapata's Annual Report on Form 10-K for the fiscal
         year ended September 30, 1990 (File No. 1-4219)).
         
4(e)*  --Consent Letter and Waiver dated as of March 7, 1995 by and
         between Norex America, Inc. and Zapata Corporation (Exhibit 4(e) to
         Zapata's Quarterly Report on Form 10-Q for the quarter ended March
         31, 1995 (File No. 1-4219)).
 
* Incorporated by reference to the Zapata Corporation Annual Report on Form 10-K
  for the fiscal year ended September 30, 1994.

<PAGE>
 
10(a)  --Letter Agreement dated June 29, 1995 by and between Enterra
         Corporation and Zapata Corporation.
         
10(b)  --Assignment and Assumption of Consulting Agreement effective as of
         July 1, 1995 by and between Zapata Corporation and Zapata Protein,
         Inc. 
         
27     --Financial Data Schedule.

* Incorporated by reference to the Zapata Corporation Annual Report on Form 10-K
  for the fiscal year ended September 30, 1994.



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