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Technology Stocks : Zapata (ZAP) -- Ignore unavailable to you. Want to Upgrade?

To: MARIO PASQUA who wrote (526)	7/26/1998 11:02:00 AM
From: DanZ	Read Replies (1) \| Respond to of 1206

Mario, Thanks for posting the information on the extraordinary gain from OME again. I just recently started reading this thread and didn't see your post. I found information on the sales proceeds from Edgar but couldn't find the cost basis. Given that they will record a one time gain of $2.31 per share from the sale of 40% of OME, I'm unsure how to interpret the following statement from a recent company press release. The Company, which holds major equity interest in two other publicly traded companies, Omega Protein (NYSE: OME) and Envirodyne Industries (Nasdaq: EDYN), said that in addition to the superior results it expects from Omega Protein, it will record as part of its operating earnings profit proceeds attributed to its spinoff of 40% of Omega in an initial public offering in April. "We expect to post one of the most profitable quarters in Zapata's 45 year history," said Avram Glazer, president and CEO of Zapata." Since they earned 27 cents last quarter, they are saying that they will earn more 27 cents this quarter. Obviously with a gain of $2.31 from the sale of OME, they will earn more than 27 cents and report a very high EPS this quarter. The real question is will they earn more than 27 cents excluding the one time gain from OME. The press release isn't clear in that regard. A couple of questions... Do you know why the estimate for this quarter was 10 cents below what they earned last quarter? After reviewing prior earnings releases, I don't see a seasonal trend towards lower earnings in the June quarter. Operating income last quarter was $9.179 million out of $10.262 million total income. They reported other income of $1.083 million, $868,000 of which was from equity in unconsolidated affiliates (presumably OME and EDYN). I think this type of income will be considered substantive by investors because it occurs on a continuing basis (not a one time shot). I'm a little confused on the gain that they will record. ZAP received gross proceeds of $82.8 million ($76.7 million net) from their 40% sale of OME. Do you know why the pre-tax gain will be recorded as $86.7 million? That is more than the sales proceeds. I wonder if they are including part of the gain that OME made on this transaction as well since they still own 59.7% of the company. To Bob C., you are absolutely correct...margins are also very important. I missed that part and thank you for pointing it out.