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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): APRIL 8, 1998
ZAPATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 1-4219 C-74-1339132
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
1717 ST. JAMES PLACE
SUITE 550
HOUSTON, TEXAS 77056
(Address of principal executive offices)
(713) 940-6100
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION AND DISPOSITION OF ASSETS
On April 2, 1998, Omega Protein Corporation ("Omega Protein")
completed an initial public offering of 8.5 million shares of its
common stock for $16 per share (the "Offering") less underwriting
discounts and selling commissions. Prior to the Offering, Omega
Protein was a wholly-owned subsidiary of Zapata Corporation
("Zapata" or the "Company"). Of the 8.5 million shares of Omega
Protein common stock sold in the Offering, Zapata sold 4.5 million
shares and Omega Protein sold 4 million shares. Immediately
following the Offering, Zapata owns 64.1% of the outstanding
common stock of Omega Protein (59.7% if the underwriters'
over-allotment options are exercised in full). (See Item 5 "Other
Events" for a description of the underwriters' over-allotment
options contained in the Underwriting Agreement). Following the
Offering, the Company will continue to report Omega Protein's
results on a consolidated basis using a minority interest
adjustment.
ITEM 5. OTHER EVENTS
On April 2, 1998, Zapata and Omega Protein executed an
Underwriting Agreement (the "Underwriting Agreement") with
Prudential Securities Incorporated ("Prudential") and Deutsche
Morgan Grenfell Inc., as representatives for the underwriters
named therein, pursuant to which Zapata and Omega Protein sold,
through an underwritten public offering, the shares described in
Item 2. "Acquisitions and Disposition of Assets" above. The Common
Stock was sold at a net price of $14.92 per share under Omega
Protein's registration statement on Form S-1 (File No. 333-44967),
which became effective on April 2, 1998, and Omega Protein's
abbreviated registration statement on Form S-1 (File No.
333-49321) filed pursuant to Rule 462(b), which became effective
on April 3, 1998.
Under the Underwriting Agreement, Zapata and Omega Protein granted
the Underwriters over-allotment options, exercisable through May
8, 1998, to purchase, in the aggregate, up to 1,275,000 additional
shares of common stock, on a pro rata basis according to the
number of shares sold by them at the first closing, at the net
price of $14.92 per share. The Underwriters may exercise these
options solely for the purpose of covering over-allotments
incurred in the sale of shares in the Offering. If the
Underwriters exercise their options in full, Zapata' ownership
interest in Omega Protein will be further reduced to as low as
59.7% of Omega Protein's outstanding common stock. As of the date
of this Report, the Underwriters have not exercised these options.
The Underwriting Agreement requires Zapata and Omega Protein to
indemnify the Underwriters and contribute to losses arising out of
certain liabilities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act"). The Underwriting
Agreement prohibits Zapata, directly or indirectly, from offering
or selling any shares of Omega Protein's Common Stock or entering
into similar or related transactions until April 8, 1999, without
the prior written consent of Prudential, on behalf of the
Underwriters. The Underwriting Agreement further provides that
Zapata may not take any action during this period that would cause
its net book value to decrease below the net proceeds received
from by Zapata from the sale of its Omega Protein stock.
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On April 8, 1998, Zapata entered into several agreements with
Omega Protein to define their post-Offering relationship. The
following is a summary of each of these agreements:
Separation Agreement. Zapata and Omega Protein have entered into a
Separation Agreement, which, among other things, required Omega
Protein to repay to Zapata $33.3 million of intercompany
indebtedness owed by Omega Protein to Zapata contemporaneously
with the consummation of the Offering. The Separation Agreement
also prohibits Zapata from engaging in the harvesting of menhaden
or the production or marketing of fish meal, fish oil or fish
solubles anywhere in the United States for a period of five years
from the date of the Separation Agreement. Under the Separation
Agreement, Zapata and Omega Protein and its subsidiaries have
agreed to indemnify each other with respect to any future losses
that might arise from the Offering as a result of any untrue
statement or alleged untrue statement in any Offering document or
the omission or alleged omission to state a material fact in any
Offering document (i) in Omega Protein's case except to the extent
such statement was based on information provided by Zapata and
(ii) in Zapata's case, only to the extent such loss relates to
information supplied by Zapata.
Sublease Agreement. Zapata and Omega Protein have entered into a
Sublease Agreement which provides for Omega Protein to lease its
principal corporate offices in Houston, Texas, comprising
approximately 3,354 square feet, at an annual rent of
approximately $36,204 and for a term that coincides with the
remaining term of the primary lease under which Zapata occupies
the space which expires in 2000. The Sublease also provides for
Omega Protein to utilize certain shared office equipment for no
additional charge.
Registration Rights Agreement. Zapata and Omega Protein have
entered into a Registration Rights Agreement. Under the
Registration Rights Agreement, Omega Protein has granted Zapata
certain rights (the "Registration Rights") with respect to the
registration under the Securities Act of Omega Protein's common
stock owned by Zapata immediately following the Offering (the
"Registrable Securities"). Pursuant to the Registration Rights
Agreement, Zapata may require Omega Protein, not more than once in
any 365 day period commencing on the first anniversary of the
closing of the Offering and on not more than three occasions after
Zapata no longer owns a majority of the voting power of the
outstanding capital stock of Omega Protein, to file a registration
statement under the Securities Act covering the registration of
the Registrable Securities, including in connection with an
offering by Zapata of its securities that are exchangeable for the
Registrable Securities (the "Demand Registration Rights").
Zapata's Demand Registration Rights are subject to certain
limitations, including that any such registration cover a number
of Registrable Securities having a fair market value of at least
$50.0 million at the time of the request for registration and that
Omega Protein may be able to temporarily defer a Demand
Registration to the extent it conflicts with another public
offering of securities by Omega Protein or would require Omega
Protein to disclose certain material non-public information.
Zapata will also be able to require Omega Protein to include
Registrable Securities owned by Zapata in a registration by Omega
Protein of its securities (the "Piggyback Registration Rights"),
subject to certain
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conditions, including the ability of the underwriters for the
Offering to limit or exclude Registrable Securities therefrom.
Omega Protein and Zapata will share equally the out-of-pocket fees
and expenses of Omega Protein associated with a demand
registration and Zapata will pay its pro rata share of
underwriting discounts, commissions and related expenses (the
"Selling Expenses"). Omega Protein will pay all expenses
associated with a piggyback registration, except that Zapata will
pay its pro rata share of the Selling Expenses. The Registration
Rights Agreement contains certain indemnification and contribution
provisions (i) by Zapata for the benefit of the Omega Protein and
related persons, as well as any potential underwriter and (ii) by
Omega Protein for the benefit of Zapata and related persons, as
well as any potential underwriter. Zapata's Demand Registration
Rights will terminate on the date that Zapata owns, on a fully
converted or exercised basis with respect to such securities held
by Zapata, Registrable Securities representing less than 10% of
the then issued and outstanding voting stock of Omega Protein.
Zapata's Piggyback Registration Rights will terminate at such time
as it is able to sell all of its Registrable Securities pursuant
to Rule 144 under the Securities Act within a three month period.
Zapata also may transfer its Registration Rights to any transferee
from it of Registrable Securities that represent, on a fully
converted or exercised basis with respect to the Registrable
Securities transferred, at least 20% of the then issued and
outstanding voting stock of Omega Protein at the time of transfer;
provided, however, that any such transferee will be limited to (i)
two demand registrations if the transfer conveys less than a
majority but more than 30% and (ii) one demand registration if the
transfer conveys 30% or less of the then issued and outstanding
voting stock of Omega Protein.
Tax Indemnity Agreement. Prior to the Offering, Omega Protein was
a member of Zapata's affiliated group and filed its tax returns on
a consolidated basis with such group. As a result of the Offering,
Omega Protein is no longer a member of the Zapata affiliated
group. Zapata and Omega Protein have entered into a Tax Indemnity
Agreement pursuant to which Zapata shall be responsible for paying
all federal income taxes relating to taxable periods ending before
and including the date on which Omega Protein is no longer a
member of Zapata's affiliated group. Omega Protein shall be
responsible for all taxes of Omega Protein with respect to taxable
periods beginning after the date on which Omega Protein is no
longer a member of Zapata's affiliated group. Omega Protein shall
be entitled to any refunds (or reductions in tax liability)
attributable to any carryback of Omega Protein's post-Offering tax
attributes (i.e., net operating losses) realized by Omega Protein
after it is no longer a member of Zapata's affiliated group. Any
other refunds arising from the reduction in tax liability
involving the Zapata affiliated group while Omega Protein was a
member of such group, including but not limited to, taxable
periods ending before or including such date, (with the exception
of any refunds arising from a reduction in tax liability
attributable to Omega Protein) shall belong to Zapata.
Administrative Services Agreements. Zapata and Omega Protein
entered into an Administrative Services Agreement pursuant to
which Omega Protein will provide Zapata with administrative
services upon reasonable request of Zapata. Zapata will pay
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Omega Protein for these services at Omega Protein's estimated cost
of providing these services. This Agreement will continue until
Zapata terminates it on 5 days advance written notice or Omega
Protein terminates it after Zapata fails to cure a breach of the
Agreement for 30 days after Omega Protein has given Zapata written
notice of the breach.
Each of the Underwriting Agreement, Separation Agreement,
Administrative Services Agreement, Sublease Agreement and
Registration Rights Agreement have been filed as exhibits to this
report and are hereby incorporated herein. Reference is made to
such Agreement for a more full and complete description of the
terms and conditions therein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) UNAUDITED PRO FORMA FINANCIAL INFORMATION
Filed herewith is unaudited pro forma condensed consolidated
financial information for Zapata reflecting the financial
position of the Company as of December 31, 1997 giving effect
to the Offering as if it had occurred as of such date and the
results of its operations for the three months ended December
31, 1997 and the fiscal year ended September 30, 1997, giving
effect to the Offering as if it had occurred as of October 1,
1996. The Pro Forma Financial Statements should be read in
conjunction with the historical consolidated financial
statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
contained in Zapata's Annual Report on Form 10-K for the year
ended September 30, 1997 and in Zapata's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 31, 1997.
The Pro Forma Financial Statements may not be indicative of
what the actual results of operations would have been had the
Offering occurred on the dates indicated or that may be
obtained in the future.
(c) EXHIBITS
The following exhibits are filed herewith:
1 - Underwriting Agreement dated April 12, 1998
among Zapata, Omega Protein and Prudential
Securities Incorporated and Deutsche Morgan
Grenfell, Inc., as representatives of the
Underwriters named therein.
10.1 - Separation Agreement dated April 8, 1998
between Zapata and Omega Protein.
10.2 - Administrative Services Agreement dated April 8,
1998 between Zapata and Omega Protein.
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10.3 - Tax Indemnity Agreement dated April 8, 1998
between Zapata and Omega Protein.
10.4 - Registration Rights Agreement dated April 8,
1998 between Zapata and Omega Protein.
10.5 - Sublease Agreement dated April 8, 1998 between
Zapata and Omega Protein.
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ZAPATA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(in thousands)
Historical
Zapata Pro Forma Pro Forma
Corporation Adjustments Total
------------ ----------- ---------
Current assets:
Cash and cash equivalents $ 28,047 $ 66,610(1) $ 153,807
59,150(2)
Restricted cash 4,337 -- 4,337
Other current assets 48,703 -- 48,703
--------- --------- ---------
Total current assets 81,087 125,760 206,847
Investments and other assets 38,029 (2,190)(2) 35,839
Property and equipment, net 68,346 -- 68,346
--------- --------- ---------
Total assets $ 187,462 $ 123,570 $ 311,032
========= ========= =========
Current liabilities $ 19,124 $ 18,037(1) $ 37,161
--------- --------- ---------
Long-term debt 11,290 -- 11,290
--------- --------- ---------
Other liabilities 10,660 (2,190)(2) 18,563
10,093(2)
--------- --------- ---------
Minority interest -- 15,933(1) 46,247
30,314(2)
--------- --------- ---------
Stockholders' equity:
Common stock 7,396 7,396
Capital in excess of par value 139,398 139,398
Reinvested earnings 29,765 32,640(1) 81,148
18,743(2)
Treasury stock, at cost (30,171) (30,171)
--------- --------- ---------
146,388 51,383 197,771
--------- --------- ---------
Total liabilities and stockholders' equity $ 187,462 $ 123,570 $ 311,032
========= ========= =========
(The accompanying notes are an intergral part of the Pro Forma
Financial Statements.)
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE
SHEET
The following notes set forth the assumptions used in preparing the
unaudited pro forma condensed consolidated balance sheet as of December 31,
1997.
(1) To record Zapata's sale of 4.5 million shares of Omega Protein
common stock in connection with the Offering. Proceeds to Zapata from the
Offering were $66.6 million after commissions and selling expenses of $5.4
million. As a result of Zapata's sale of Omega Protein's common stock, Zapata
recorded a gain of $32.6 million, net of tax effects of $18.0 million, and
minority interest of $15.9 million. If the underwriters' over-allotment options
are exercised, Zapata will sell up to an additional 675,000 shares of its Omega
Protein common stock, which, if the maximum number of shares are sold by Zapata
will result in additional net proceeds to Zapata of $10.1 million. In such
event, Zapata will record an additional $5.0 million increase to its gain, net
of tax effects of $2.7 million, and additional minority interest of $2.4
million.
(2) To record the issuance and sale by Omega Protein of 4 million
shares of Omega Protein common stock in connection with the Offering. Proceeds
to Omega Protein from the Offering were $59.2 million after commissions and
selling expenses of $4.9 million. As a result of Omega Protein's sale of its
common stock, Zapata recorded a gain of $18.7 million, net of tax effects of
$10.1 million, and minority interest of $30.3 million. If the underwriters'
over-allotment options are exercised, Omega Protein will sell up to an
additional 600,000 shares of common stock, which, if the maximum number of
shares are sold by Omega Protein will result in additional net proceeds of $9.0
million; in such event, Zapata will record an additional $1.4 million gain, net
of tax effects of $.7 million, and additional minority interest of $6.8 million.
The Company also reclassified the $2.2 million deferred tax asset balance at
December 31 ,1997 from investments and other assets to other liabilities to
offset against the pro forma tax liability.
Immediately following the Offering, Zapata will own 64.1% of the
outstanding common stock of Omega Protein as of December 31, 1997. Assuming both
underwriters' over-allotment options are exercised in full, Zapata would own
59.7% of Omega Protein's outstanding common stock.
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ZAPATA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
THREE MONTHS ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)
Historical
Zapata Pro Forma Pro Forma
Corporation Adjustments Total
------------ ------------ ----------
Revenues $ 29,503 $ - $ 29,503
-------- -------- --------
Expenses:
Operating 17,603 - 17,603
Depreciation, depletion and amortization 1,678 - 1,678
Selling, general and administrative 2,040 - 2,040
-------- -------- --------
21,321 - 21,321
-------- -------- --------
Operating income 8,182 - 8,182
-------- -------- --------
Other income (expense):
Interest income, net 260 - 260
Equity in loss of unconsolidated affiliates (1,097) - (1,097)
Other (20) - (20)
-------- -------- --------
(857) - (857)
-------- -------- --------
Income from continuing operations
before taxes 7,325 - 7,325
Provision for income taxes 2,737 - 2,737
-------- -------- --------
Income from continuing operations before
minority interest 4,588 - 4,588
Minority interest - $ (1,907) (1,907)
-------- -------- --------
Income from continuing operations $ 4,588 $ (1,907) $ 2,681
======== ======== ========
Per share data (basic):
Income from continuing operations $ 0.20 $ (0.08) $ 0.12
======== ======== ========
Average common shares outstanding 22,910 22,910 22,910
======== ======== ========
Per share data (diluted):
Income from continuing operations $ 0.19 $ (0.08) $ 0.11
======== ======== ========
Average common shares and common share
equivalents outstanding 23,731 23,731 23,731
======== ======== ========
(The accompanying notes are an integral part of the Pro Forma Financial
Statements.)
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NOTE TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENT
The following note sets forth the assumption used in preparing the
unaudited pro forma condensed consolidated income statement for the three months
ended December 31, 1997.
(1) To record minority interest of 35.9% in Omega Protein's results for
the three months ended December 31, 1997. If the underwriters' over-allotment
options are exercised and the maximum number of shares are sold, minority
interest would increase to 40.3% or $2.1 million.
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ZAPATA CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(in thousands, except per share amounts)
Historical
Zapata Pro Forma Pro Forma
Corporation Adjustments Total
------------ ------------- ---------
Revenues $ 117,564 $ - $ 117,564
--------- --------- ---------
Expenses:
Operating 90,054 - 90,054
Depreciation and amortization 3,744 - 3,744
Selling, general and administrative 10,924 - 10,924
--------- --------- ---------
104,722 - 104,722
--------- --------- ---------
Operating income 12,842 - 12,842
--------- --------- ---------
Other income (expense):
Gain on sale of Omega Protein common stock - $ 85,163(1) 85,163
Interest income, net 2,031 0 2,031
Equity in loss of unconsolidated affiliates (2,845) 0 (2,845)
Other (176) 0 (176)
--------- --------- ---------
(990) 85,163 84,173
--------- --------- ---------
Income from continuing operations
before taxes 11,852 85,163 97,015
Provision for income taxes 4,440 30,107(1) 34,547
--------- --------- ---------
Income from continuing operations
before minority interest 7,412 55,056 62,468
Minority interest - (3,743)(2) (3,743)
--------- --------- ---------
Income from continuing operations $ 7,412 $ 51,313 $ 58,725
========= ========= =========
Per share data (basic):
Income from continuing operations $ 0.27 $ 1.88 $ 2.15
========= ========= =========
Average common shares outstanding 27,287 27,287 27,287
========= ========= =========
Per share data (diluted):
Income from continuing operations $ 0.27 $ 1.88 $ 2.15
========= ========= =========
Average common and common equivalent
shares outstanding 27,303 27,303 27,303
========= ========= =========
(The accompanying notes are an integral part of the Pro Forma Financial
Statements.)
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME
STATEMENT
The following notes set forth the assumptions used in preparing the
unaudited pro forma condensed consolidated income statement for the twelve
months ended September 30, 1997.
(1) To record an $85.2 million gain and related tax effects of $30.1
million, as a result of the Offering. As a result of Zapata's sale of 4.5
million shares of Omega Protein's common stock, Zapata recorded a gain of $54.3
million and related tax effects of $19.3 million. Additionally, as a result of
Omega Protein's issuance and sale of 4 million shares of its common stock,
Zapata recorded a gain of $30.9 million and related tax effects of $10.8
million. If the underwriters' over-allotment options are exercised and the
maximum number of shares are sold, the gain will increase by $10.5 million and
the related tax effects will increase by $3.7 million; the gain related to
Zapata's sale will increase by $8.2 million and the related tax effects will
increase by $2.9 million, and the gain associated with Omega Protein's sale will
increase by $2.3 million and the related tax effects will increase by $.8
million.
(2) To record minority interest of 35.9% in Omega Protein's results for
the twelve months ended September 30, 1997. If the underwriter's over-allotment
options are exercised in full, minority interest would increase to 40.3% or $4.2
million.
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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 hereunto duly authorized.
ZAPATA CORPORATION
By: /s/ Avram A. Glazer
------------------------------------
Avram A. Glazer
President and Chief Executive Officer
Date: April 17, 1998
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
1 - Underwriting Agreement dated April 12, 1998 among Zapata,
Omega Protein and Prudential Securities Incorporated and
Deutsche Morgan, Grenfell, Inc., as representatives of the
Underwriters named therein.
10.1 - Separation Agreement dated April 8, 1998 between Zapata dn
Omega Protein.
10.2 - Administrative Services Agreement dated April 8, 1998 between
Zapata and Omega Protein.
10.3 - Tax Indemnity Agreement dated April 8, 1998 between Zapata
and Omega Protein.
10.4 - Registration Rights Agreement dated April 8, 1998 between
Zapata and Omega Protein.
10.5 - Sublease Agreement dated April 8, 1998 between Zapata and
Omega Protein.