Edgar Filing: TIDEWATER INC

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

¨	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: 1-6311

Tidewater Inc.

(Exact name of registrant as specified in its charter)


Delaware				72-0487776
(State of incorporation)				(I.R.S. Employer Identification No.)

601 Poydras St., Suite 1500

New Orleans, Louisiana 70130

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (504) 568-1010

Not Applicable

(Former name or former address, if changed since last report)

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 of 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 ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

49,584,249 shares of Tidewater Inc. common stock $.10 par value per share were outstanding on October 25, 2013. Registrant has no other class of common stock outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TIDEWATER INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In thousands, except share and par value data)
ASSETS	September 30, 2013			March 31, 2013
Current assets:
Cash and cash equivalents	$	45,534			40,569
Trade and other receivables, net		558,824			393,438
Marine operating supplies		53,744			62,348
Other current assets		23,653			11,735

Total current assets		681,755			508,090

Investments in, at equity, and advances to unconsolidated companies		52,254			46,047
Properties and equipment:
Vessels and related equipment		4,533,231			4,250,169
Other properties and equipment		65,791			83,779

		4,599,022			4,333,948
Less accumulated depreciation and amortization		1,067,673			1,144,129

Net properties and equipment		3,531,349			3,189,819

Goodwill		339,982			297,822
Other assets		149,239			126,277

Total assets	$	4,754,579			4,168,055


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	89,689			63,602
Accrued expenses		168,185			159,086
Accrued property and liability losses		4,099			4,133
Other current liabilities		39,334			39,808

Total current liabilities		301,307			266,629

Long-term debt		1,445,628			1,000,000
Deferred income taxes		188,771			189,763
Accrued property and liability losses		9,936			10,833
Other liabilities and deferred credits		174,370			139,074

Commitments and Contingencies (Note 8)

Stockholders’ equity:
Common stock of $0.10 par value, 125,000,000 shares authorized, issued 49,577,276 shares at September 30, 2013 and 49,485,832 shares at March 31, 2013		4,958			4,949
Additional paid-in capital		133,386			119,975
Retained earnings		2,513,193			2,453,973
Accumulated other comprehensive loss		(16,970	)		(17,141	)

Total stockholders’ equity		2,634,567			2,561,756

Total liabilities and stockholders’ equity	$	4,754,579			4,168,055

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

TIDEWATER INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)


(In thousands, except share and per share data)
	Quarter Ended September 30,						Six Months Ended September 30,
	2013			2012			2013			2012
Revenues:
Vessel revenues	$	363,668			309,822			695,298			599,916
Other operating revenues		4,269			2,096			6,724			6,450
		367,937			311,918			702,022			606,366
Costs and expenses:
Vessel operating costs		195,316			172,652			391,477			333,988
Costs of other operating revenues		4,040			1,585			6,060			5,108
General and administrative		46,038			41,867			96,518			82,531
Vessel operating leases		3,971			4,403			8,002			8,895
Depreciation and amortization		42,056			36,047			82,164			71,831
Gain on asset dispositions, net		(49	)		(1,833	)		(2,189	)		(2,671	)
		291,372			254,721			582,032			499,682

Operating income		76,565			57,197			119,990			106,684
Other income (expenses):
Foreign exchange gain (loss)		3,017			529			2,928			(1,222	)
Equity in net earnings of unconsolidated companies		3,781			3,357			8,201			5,720
Interest income and other, net		538			1,128			1,278			1,847
Loss on early extinguishment of debt		(4,144	)		---			(4,144	)		---
Interest and other debt costs		(9,918	)		(7,148	)		(18,831	)		(14,735	)

		(6,726	)		(2,134	)		(10,568	)		(8,390	)

Earnings before income taxes		69,839			55,063			109,422			98,294
Income tax expense		15,667			13,707			25,167			24,082

Net earnings	$	54,172			41,356			84,255			74,212


Basic earnings per common share	$	1.10			0.84			1.71			1.49

Diluted earnings per common share	$	1.09			0.83			1.70			1.48


Weighted average common shares outstanding		49,274,816			49,392,973			49,253,409			49,792,212
Dilutive effect of stock options and restricted stock		448,303			232,097			395,983			214,291

Adjusted weighted average common shares		49,723,119			49,625,070			49,649,392			50,006,503


Cash dividends declared per common share	$	0.25			0.25			0.50			0.50

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

TIDEWATER INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	Quarter Ended September 30,					Six Months Ended September 30,
	2013			2012		2013			2012
Net earnings	$	54,172			41,356		84,255			74,212
Other comprehensive income/(loss):
Unrealized gains/(losses) on available-for-sale securities net of tax of $(93), $225, $(33) and $(110)		(173	)		419		(62	)		(205	)
Amortization of loss on derivative contract net of tax of $62, $63, $125 and $125		116			117		233			233

Total comprehensive income	$	54,115			41,892		84,426			74,240

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

TIDEWATER INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


(In thousands)
	Six Months Ended September 30,
	2013			2012

Operating activities:
Net earnings	$	84,255			74,212
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		82,164			71,831
Benefit for deferred income taxes		(10,215	)		(4,372	)
Gain on asset dispositions, net		(2,189	)		(2,671	)
Equity in earnings of unconsolidated companies, less dividends		(6,167	)		(4,031	)
Compensation expense - stock-based		10,999			10,320
Excess tax benefit on stock options exercised		(341	)		(95	)
Changes in assets and liabilities, net:
Trade and other receivables		(165,573	)		(20,707	)
Marine operating supplies		9,363			(2,281	)
Other current assets		(10,666	)		(5,565	)
Accounts payable		11,461			16,195
Accrued expenses		8,631			6,176
Accrued property and liability losses		39			(241	)
Other current liabilities		276			1,134
Other liabilities and deferred credits		(531	)		3,508
Other, net		(1,678	)		2,846

Net cash provided by operating activities		9,828			146,259

Cash flows from investing activities:
Proceeds from sales of assets		7,646			9,977
Proceeds from sale/leaseback of assets		65,550			---
Additions to properties and equipment		(220,309	)		(189,826	)
Payments for acquisition, net of cash acquired		(127,737	)		---
Other		(687	)		(1,338	)

Net cash used in investing activities		(275,537	)		(181,187	)

Cash flows from financing activities:
Debt issuance costs		(3,845	)		---
Principal payment on long-term debt		(691,615	)		(60,000	)
Debt borrowings		986,262			---
Proceeds from exercise of stock options		4,421			938
Cash dividends		(24,890	)		(25,058	)
Excess tax benefit on stock options exercised		341			95
Stock repurchases		---			(65,028	)

Net cash provided by (used in) financing activities		270,674			(149,053	)

Net change in cash and cash equivalents		4,965			(183,981	)
Cash and cash equivalents at beginning of period		40,569			320,710

Cash and cash equivalents at end of period	$	45,534			136,729

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	23,338			19,259
Income taxes	$	32,144			27,075
Supplemental disclosure of non-cash investing activities:
Additions to properties and equipment	$	4,157			6,724
Increase in receivables due to sale of shipyard	$	6,500			---

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

TIDEWATER INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


(In thousands)
	Common stock			Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Total
Balance at March 31, 2013	$	4,949			119,975		2,453,973			(17,141	)		2,561,756
Total comprehensive income		---			---		84,255			171			84,426
Stock option activity		12			4,763		---			---			4,775
Cash dividends declared		---			---		(25,035	)		---			(25,035	)
Amortization/cancellation of restricted stock units		---			6,220		---			---			6,220
Amortization/cancellation of restricted stock		(3	)		2,428		---			---			2,425

Balance at September 30, 2013	$	4,958			133,386		2,513,193			(16,970	)		2,634,567


Balance at March 31, 2012	$	5,125			102,726		2,437,836			(19,330	)		2,526,357
Total comprehensive income		---			---		74,212			28			74,240
Stock option activity		3			2,148		---			---			2,151
Cash dividends declared		---			---		(25,169	)		---			(25,169	)
Retirement of common stock		(140	)		---		(64,888	)		---			(65,028	)
Amortization/cancellation of restricted stock units		---			3,867		---			---			3,867
Amortization/cancellation of restricted stock		(6	)		3,865		---			---			3,859

Balance at September 30, 2012	$	4,982			112,606		2,421,991			(19,302	)		2,520,277

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

(1)

INTERIM FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements for the interim periods presented herein have been prepared in conformity with United States generally accepted accounting principles and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the unaudited condensed consolidated financial statements at the dates and for the periods indicated as required by Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (SEC). Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the company’s Annual Report on Form 10-K for the year ended March 31, 2013, filed with the SEC on May 21, 2013.

The unaudited condensed consolidated financial statements include the accounts of Tidewater Inc. and its subsidiaries. Intercompany balances and transactions are eliminated in consolidation. The company uses the equity method to account for equity investments over which the company exercises significant influence but does not exercise control and is not the primary beneficiary. Unless otherwise specified, all per share information included in this document is on a diluted earnings per share basis.

The company made certain reclassifications to prior period amounts to conform to the current year presentation. These reclassifications did not have a material effect on the condensed consolidated statements of earnings, balance sheets or cash flows.

(2)

ACQUISITION

Troms Offshore Supply AS

On June 4, 2013, the company, through a subsidiary, acquired Troms Offshore Supply AS, a Norwegian company (Troms Offshore). At the time of the acquisition, Troms Offshore owned four deepwater PSVs, and had two additional deepwater PSVs under construction, one of which was delivered shortly after the acquisition. The purchase price (not including transaction costs) included a $150.0 million cash payment to the shareholders of Troms Offshore and the assumption of approximately $261.3 million of combined Troms Offshore obligations, comprised of net interest-bearing debt and the remaining installment payments due on vessels under construction. The company has performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in $42.2 million of goodwill, all of which was allocated to our Sub-Saharan Africa/Europe segment. The allocation is preliminary and based on estimates and assumptions that are subject to change within the purchase price allocation period (generally one year from the acquisition date).

The following table summarizes the allocation of the purchase price for the acquisition of Troms Offshore:


(In thousands)
Cash	$	22,263
Trade receivables and other current assets		9,816
Vessels		245,605
Goodwill		42,160
Payable and other liabilities		(13,020	)
Notes payable		(156,824	)

Total purchase price	$	150,000

The effect of the acquisition on pro forma results of operations and the condensed consolidated statement of operations for the six months ended September 30, 2013 are immaterial and therefore not presented.

(3)

STOCKHOLDERS’ EQUITY

Common Stock Repurchase Program

On May 15, 2013, the company’s Board of Directors authorized the company to spend up to $200 million to repurchase shares of its common stock in open-market or privately-negotiated transactions. The effective period for this authorization is July 1, 2013 through June 30, 2014. The company uses its available cash and, when considered advantageous, borrowings under its revolving credit facility or other borrowings, to fund any share repurchases. The company evaluates share repurchase opportunities relative to other investment opportunities and in the context of current conditions in the credit and capital markets.

On May 17, 2012, the company’s Board of Directors authorized the company to spend up to $200.0 million to repurchase shares of its common stock in open-market or privately-negotiated transactions. The effective period for this authorization was July 1, 2012 through June 30, 2013.

The aggregate dollar outlay for common stock repurchased, along with number of shares repurchased, and average price paid per share, for the quarters and six-month periods ended September 30 is as follows:


	Quarter Ended September 30,				Six Months Ended September 30,
(In thousands, except share and per share data)	2013		2012		2013		2012
Aggregate dollar outlay for common stock repurchased	$	---		---		---		65,028
Shares of common stock repurchased		---		---		---		1,400,500
Average price paid per common share	$	---		---		---		46.43

Dividends

The declaration of dividends is at the discretion of the company’s Board of Directors. The Board of Directors declared the following dividends for the quarters and six-month periods ended September 30:


	Quarter Ended September 30,				Six Months Ended September 30,
(In thousands, except dividend per share)	2013		2012		2013		2012
Dividends declared	$	12,536		12,544		25,035		25,169
Dividend per share		0.25		0.25		0.50		0.50

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive income by component, net of tax for the quarters and six month periods ended September 30, 2013 and 2012 are as follows:


	For the quarter ended September 30, 2013														For the six months ended September 30, 2013
(in thousands)	Balance at 6/30/13			Gains/ (losses) recognized in OCI			Reclasses from OCI to net income		Net period OCI			Remaining balance 9/30/13			Balance at 3/31/13			Gains/ (losses) recognized in OCI			Reclasses from OCI to net income		Net period OCI			Remaining balance 9/30/13
Available for sale securities		(10	)		(237	)		64		(173	)		(183	)		(121	)		(206	)		144		(62	)		(183	)
Currency translation adjustment		(9,811	)		---			---		---			(9,811	)		(9,811	)		---			---		---			(9,811	)
Pension/Post-retirement benefits		(4,353	)		---			---		---			(4,353	)		(4,353	)		---			---		---			(4,353	)
Interest rate swaps		(2,739	)		---			116		116			(2,623	)		(2,856	)		---			233		233			(2,623	)

Total		(16,913	)		(237	)		180		(57	)		(16,970	)		(17,141	)		(206	)		377		171			(16,970	)


	For the quarter ended September 30, 2012														For the six months ended September 30, 2012
(in thousands)	Balance at 6/30/12			Gains/ (losses) recognized in OCI			Reclasses from OCI to net income		Net period OCI			Remaining balance 9/30/12			Balance at 3/31/12			Gains/ (losses) recognized in OCI			Reclasses from OCI to net income		Net period OCI			Remaining balance 9/30/12
Available for sale securities		(373	)		410			9		419			46			251			(351	)		146		(205	)		46
Currency translation adjustment		(9,811	)		---			---		---			(9,811	)		(9,811	)		---			---		---			(9,811	)
Pension/Post-retirement benefits		(6,448	)		---			---		---			(6,448	)		(6,448	)		---			---		---			(6,448	)
Interest rate swaps		(3,206	)		---			117		117			(3,089	)		(3,322	)		---			233		233			(3,089	)

Total		(19,838	)		410			126		536			(19,302	)		(19,330	)		(351	)		379		28			(19,302	)

The following table summarizes the reclassifications from accumulated other comprehensive loss to the condensed consolidated statement of income for the quarters and six month periods ended September 30, 2013 and 2012:


	Quarter Ended September 30,				Six Months Ended September 30,				Affected line item in the condensed consolidated statements of income
(In thousands)	2013		2012		2013		2012
Realized gains on available for-sale securities	$	99		15		222		225	Interest income and other, net
Amortization of interest rate swap		178		180		358		358	Interest and other debt costs

Total pre-tax amounts		277		195		580		583
Tax effect		97		68		203		204

Total gains for the period, net of tax	$	180		127		377		379

(4)

INCOME TAXES

Income tax expense for interim periods is based on estimates of the effective tax rate for the entire fiscal year. The effective tax rate applicable to pre-tax earnings, for the quarters and the six-month periods ended September 30, is as follows:


	Quarter Ended September 30,						Six Months Ended September 30,
	2013			2012			2013			2012
Effective tax rate applicable to pre-tax earnings		22.4	%		24.9	%		23.0	%		24.5	%

The effective tax rates for the six months ended September 30, 2013 and 2012 are lower than the U.S. statutory income tax rate of 35% primarily because the company has not recognized a U.S. deferred tax liability associated with temporary differences related to investments in foreign subsidiaries that are essentially permanent in duration.

The company’s balance sheet at September 30, 2013 reflects the following in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Income Taxes:


(In thousands)	September 30, 2013
Tax liabilities for uncertain tax positions	$	16,304
Income tax payable		32,787

The tax liabilities for uncertain tax positions are attributable to a permanent establishment issue related to a foreign joint venture. Penalties and interest related to income tax liabilities are included in income tax expense. Income tax payable is included in other current liabilities.

Unrecognized tax benefits, which would lower the effective tax rate if realized at September 30, 2013, are as follows:


(In thousands)	September 30, 2013
Unrecognized tax benefit related to state tax issues	$	8,202
Interest receivable on unrecognized tax benefit related to state tax issues		20

With limited exceptions, the company is no longer subject to tax audits by U.S. federal, state, local or foreign taxing authorities for years prior to 2006. The company has ongoing examinations by various U.S. federal, state and foreign tax authorities and does not believe that the results of these examinations will have a material adverse effect on the company’s financial position, results of operations, or cash flows.

(5)

EMPLOYEE BENEFIT PLANS

U.S. Defined Benefit Pension Plan

The company has a defined benefit pension plan (pension plan) that covers certain U.S. citizen employees and other employees who are permanent residents of the United States. In December 2009, the Board of Directors amended the pension plan to discontinue the accrual of benefits once the plan was frozen on December 31, 2010. This change did not affect benefits earned by participants prior to January 1, 2011. The company did not contribute to the defined benefit pension plan during the quarters and six months ended September 30, 2013 and 2012, and does not expect to contribute to the plan during the remaining quarters of fiscal 2014.

Supplemental Executive Retirement Plan

The company also offers a non-contributory, defined benefit supplemental executive retirement plan (supplemental plan) that provides pension benefits to certain employees in excess of those allowed under the company’s tax-qualified pension plan. A Rabbi Trust has been established for the benefit of participants in the supplemental plan. The Rabbi Trust assets, which are invested in a variety of marketable securities (but not Tidewater stock), are recorded at fair value with unrealized gains or losses included in other comprehensive income. Effective March 4, 2010, the supplemental plan was closed to new participation. The supplemental plan is a non-qualified plan and, as such, the company is not required to make contributions to the supplemental plan. The company did not contribute to the supplemental plan during the quarters and six- month periods ended September 30, 2013 and 2012 and does not expect to contribute to the plan during the remaining quarters of fiscal 2014.

Investments held in a Rabbi Trust for the benefit of participants in the supplemental plan are included in other assets at fair value. The following table summarizes the carrying value of the trust assets, including unrealized gains or losses at September 30, 2013 and March 31, 2013:


(In thousands)	September 30, 2013			March 31, 2013
Investments held in Rabbi Trust	$	10,182			10,486
Unrealized gains (losses) in fair value of trust assets		(183	)		(121	)
Unrealized gains (losses) in fair value of trust assets are net of income tax expense of		(98	)		(65	)
Obligations under the supplemental plan		22,260			21,431

The unrealized gains or losses in the fair value of the trust assets, net of income tax expense, are included in accumulated other comprehensive income (other stockholders’ equity). To the extent that trust assets are liquidated to fund benefit payments, gains or losses, if any, will be recognized at that time. The company’s obligations under the supplemental plan are included in ‘accrued expenses’ and ‘other liabilities and deferred credits’ on the consolidated balance sheet.

Postretirement Benefit Plan

Qualified retired employees currently are covered by a program which provides limited health care and life insurance benefits. Costs of the program are based on actuarially determined amounts and are accrued over the period from the date of hire to the full eligibility date of employees who are expected to qualify for these benefits. This plan is funded through payments as benefits are required.

Net Periodic Benefit Costs

The net periodic benefit cost for the company’s U.S. defined benefit pension plan and the supplemental plan (referred to collectively as “Pension Benefits”) and the postretirement health care and life insurance plan (referred to collectively as “Other Benefits”) is comprised of the following components:


	Quarter Ended September 30,						Six Months Ended September 30,
(In thousands)	2013			2012			2013			2012
Pension Benefits:
Service cost	$	198			273			396			546
Interest cost		895			1,072			1,790			2,144
Expected return on plan assets		(718	)		(687	)		(1,436	)		(1,374	)
Amortization of prior service cost		12			12			24			24
Recognized actuarial loss		276			448			552			896

Net periodic benefit cost	$	663			1,118			1,326			2,236

Other Benefits:
Service cost	$	101			119			202			238
Interest cost		262			309			524			618
Amortization of prior service cost		(508	)		(508	)		(1,016	)		(1,016	)
Recognized actuarial (gain) loss		(99	)		---			(198	)		---

Net periodic benefit cost	$	(244	)		(80	)		(488	)		(160	)

(6)

INDEBTEDNESS

Revolving Credit and Term Loan Agreement

In June 2013, the company amended and extended its existing credit facility. The amended credit agreement matures in June 2018 (the “Maturity Date”) and provides for a $900 million, five-year credit facility (“credit facility”) consisting of a (i) $600 million revolving credit facility (the “revolver”) and a (ii) $300 million term loan facility (“term loan”).

Borrowings under the credit facility are unsecured and bear interest at the company’s option at (i) the greater of prime or the federal funds rate plus 0.25 to 1.0%, or (ii) Eurodollar rates plus margins ranging from 1.25 to 2.0%, based on the company’s consolidated funded debt to capitalization ratio. Commitment fees on the unused portion of the facilities range from 0.15 to 0.30% based on the company’s funded debt to total capitalization ratio. The credit facility requires that the company maintain a ratio of consolidated debt to consolidated total capitalization that does not exceed 55%, and maintain a consolidated interest coverage ratio (essentially consolidated earnings before interest, taxes, depreciation and amortization, or EBITDA, for the four prior fiscal quarters to consolidated interest charges, including capitalized interest, for such period) of not less than 3.0 to 1.0. All other terms, including the financial and negative covenants, are customary for facilities of its type and consistent with the prior agreement in all material respects.

The company had $300 million in term loan borrowings, and $180 million in revolver borrowings, outstanding at September 30, 2013 (whose fair value approximates the carrying value because the borrowings bear interest at variable rates), and has $420.0 million of availability for future financing needs at September 30, 2013. The company had $125 million of term loan borrowings and $110.0 million of revolver borrowings outstanding under the previous credit facility at March 31, 2013. These estimated fair values are based on Level 2 inputs.

Senior Debt Notes

The determination of fair value includes an estimated credit spread between our long term debt and treasuries with similar matching expirations. The credit spread is determined based on comparable publicly traded companies in the oilfield service segment with similar credit ratings. These estimated fair values are based on Level 2 inputs.

September 2013 Senior Notes

On September 30, 2013, the company executed a note purchase agreement for $500 million and issued $300 million of senior unsecured notes to a group of institutional investors. In accordance with the note purchase agreement, the company intends to issue the remaining $200 million of senior unsecured notes on November 15, 2013. A summary of these notes outstanding at September 30, 2013, is as follows:


(In thousands, except weighted average data)	September 30, 2013
Aggregate debt outstanding	$	300,000
Weighted average remaining life in years		9.3
Weighted average coupon rate on notes outstanding		4.73	%
Fair value of debt outstanding		307,601

The multiple series of notes totaling $300 million were originally issued with maturities ranging from approximately seven to 12 years. The multiple series of notes totaling $200 million to be issued November 15, 2013 will have original maturities of ten and 12 years, a weighted average life of 10.8 years and a weighted average coupon rate of 5.06%. The notes may be retired before their respective scheduled maturity dates subject only to a customary make-whole provision. The terms of the notes require that the company maintain a ratio of consolidated debt to consolidated total capitalization that does not exceed 55% and maintain a ratio of consolidated EBITDA to consolidated interest charges, including capitalized interest, of not less than 3.0 to 1.0.

August 2011 Senior Notes

On August 15, 2011, the company issued $165 million of senior unsecured notes to a group of institutional investors. A summary of these notes outstanding at September 30, 2013 and March 31, 2013, is as follows:


(In thousands, except weighted average data)	September 30, 2013			March 31, 2013
Aggregate debt outstanding	$	165,000			165,000
Weighted average remaining life in years		7.1			7.6
Weighted average coupon rate on notes outstanding		4.42	%		4.42	%
Fair value of debt outstanding		169,686			179,802

The multiple series of notes were originally issued with maturities ranging from approximately eight to 10 years. The notes may be retired before their respective scheduled maturity dates subject only to a customary make-whole provision. The terms of the notes require that the company maintain a ratio of consolidated debt to consolidated total capitalization that does not exceed 55%.

September 2010 Senior Notes

In fiscal 2011, the company completed the sale of $425 million of senior unsecured notes. A summary of the aggregate amount of these notes outstanding at September 30, 2013 and March 31, 2013, is as follows:


(In thousands, except weighted average data)	September 30, 2013			March 31, 2013
Aggregate debt outstanding	$	425,000			425,000
Weighted average remaining life in years		6.1			6.6
Weighted average coupon rate on notes outstanding		4.25	%		4.25	%
Fair value of debt outstanding		436,530			458,520

The multiple series of these notes were originally issued with maturities ranging from five to 12 years. The notes may be retired before their respective scheduled maturity dates subject only to a customary make-whole provision. The terms of the notes require that the company maintain a ratio of consolidated debt to consolidated total capitalization that does not exceed 55%.

Included in accumulated other comprehensive income at September 30, 2013 and March 31, 2013, is an after-tax loss of $2.6 million ($4.0 million pre-tax), and $2.9 million ($4.4 million pre-tax), respectively, relating to the purchase of interest rate hedges, which are cash flow hedges, in July 2010 in connection with the September 2010 senior notes offering. The interest rate hedges settled in August 2010 concurrent with the pricing of the senior unsecured notes. The hedges met the effectiveness criteria and their acquisition costs are amortized to interest expense over the term of the individual notes matching the term of the hedges.

July 2003 Senior Notes

In July 2003, the company completed the sale of $300 million of senior unsecured notes. A summary of the aggregate amount of remaining senior unsecured notes outstanding at September 30, 2013 and March 31, 2013, is as follows:


(In thousands, except weighted average data)	September 30, 2013			March 31, 2013
Aggregate debt outstanding	$	35,000			175,000
Weighted average remaining life in years		1.8			0.7
Weighted average coupon rate on notes outstanding		4.61	%		4.47	%
Fair value of debt outstanding		36,454			178,227

The multiple series of notes were originally issued with maturities ranging from seven to 12 years. These notes can be retired in whole or in part prior to maturity for a redemption price equal to the principal amount of the notes redeemed plus a customary make-whole premium. The terms of the notes require that the company maintain a ratio of consolidated debt to consolidated total capitalization that does not exceed 55%.

Troms Offshore Debt

During the second quarter of fiscal 2014, the company repaid prior to maturity 500 million Norwegian Kroner (NOK) denominated (approximately $82.1 million) public bonds (plus accrued interest) that had been issued by Troms Offshore in April 2013. The repayment of these bonds, at an average price of approximately 105.0% of par value, resulted in the recognition of a loss on early extinguishment of debt of approximately 26.0 million NOK (or $4.1 million). The bonds, which were due to mature in April 2016, bore interest based on the three month Norwegian Interbank Offered Rate (“NIBOR”) plus 5.40%.

In May 2012, Troms Offshore entered into a 204.4 million NOK denominated borrowing agreement which matures in May 2024. The loan requires semi-annual principal payments of 8.5 million NOK, bears interest at a fixed rate of 6.38% and is secured by certain guarantees and various types of collateral, including a vessel. As of September 30, 2013, 187.4 million NOK (approximately $30.8 million) is outstanding under this agreement.

In May 2012, Troms Offshore entered into a 35.0 million NOK denominated borrowing agreement with a shipyard which matures in May 2015. In June 2013, Troms Offshore entered into a 25.0 million NOK denominated borrowing agreement with a Norwegian bank, which matures in June 2019. These borrowings bear interest based on three month NIBOR plus a credit spread of 2.0% to 3.5%. As of September 30, 2013, 60.0 million NOK (approximately $9.9 million) is outstanding under these agreements.

Troms Offshore had 60.0 million NOK, or approximately $9.9 million, outstanding in floating rate debt at September 30, 2013 (whose fair value approximates the carrying value because the borrowings bear interest at variable NIBOR rates plus a margin). Troms Offshore also had 187.4 million NOK, or $30.8 million, of outstanding fixed rate debt at September 30, 2013 which has an estimated fair value of 196.6 million NOK, or $32.3 million. These estimated fair values are based on Level 2 inputs.

In June 2013, Troms Offshore repaid a 188.9 million NOK loan (approximately $32.5 million), plus accrued interest that was secured with various guarantees and collateral, including a vessel.

Current Maturities of Long Term Debt

Principal repayments of approximately $5.3 million due during the twelve months ending September 30, 2014 are classified as long term debt in the accompanying balance sheet at September 30, 2013 because the company has the ability and intent to fund the repayments with borrowings under the credit facility which matures in June 2018.

Debt Costs

The company capitalizes a portion of its interest costs incurred on borrowed funds used to construct vessels. Interest and debt costs incurred, net of interest capitalized, for the quarters and the six-month periods ended September 30, are as follows:


	Quarter Ended September 30,				Six Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Interest and debt costs incurred, net of interest capitalized	$	9,918		7,148		18,831		14,735
Interest costs capitalized		2,636		2,913		5,598		5,736

Total interest and debt costs	$	12,554		10,061		24,429		20,471

(7)

EARNINGS PER SHARE

The components of basic and diluted earnings per share for the quarters and the six-month periods ended September 30, are as follows:


	Quarter Ended September 30,				Six Months Ended September 30,
(In thousands, except share and per share data)	2013		2012		2013		2012
Net Income available to common shareholders (A)	$	54,172		41,356		84,255		74,212
Weighted average outstanding shares of common stock, basic (B)		49,274,816		49,392,973		49,253,409		49,792,212
Dilutive effect of options and restricted stock awards and units		448,303		232,097		395,983		214,291

Weighted average common stock and equivalents (C)		49,723,119		49,625,070		49,649,392		50,006,503

Earnings per share, basic (A/B)	$	1.10		0.84		1.71		1.49
Earnings per share, diluted (A/C)	$	1.09		0.83		1.70		1.48

Additional information:
Antidilutive incremental options and restricted stock awards and units		2,854		54,694		2,854		51,864

(8)

COMMITMENTS AND CONTINGENCIES

Vessel and Other Commitments

The table below summarizes the company’s various vessel commitments to acquire and construct new vessels, by vessel type, and remotely operated vehicles (ROVs) as of September 30, 2013:


(In thousands, except vessel count)	Number of Vessels/ROVs		Total Cost		Invested Through 9/30/13		Remaining Balance 9/30/13
Vessels under construction:
Deepwater platform supply vessels		22	$	739,794		233,436		506,358
Towing supply/supply vessels		6		113,395		46,506		66,889
Other		2		33,917		28,455		5,462

Total vessels under construction		30		887,106		308,397		578,709

Vessels to be purchased:
Deepwater platform supply vessels		1		46,845		---		46,845

Total vessel commitments		31	$	933,951		308,397		625,554

Total ROV commitments		5	$	26,167		7,850		18,317

Total commitments		36	$	960,118		316,247		643,871

The total cost of the various vessel new-build commitments includes contract costs and other incidental costs. The company has vessels under construction at a number of different shipyards around the world. The deepwater platform supply vessels (PSV) under construction range between 3,000 and 6,360 deadweight tons (DWT) of cargo capacity while the towing-supply/supply vessels under construction have 7,100 brake horsepower (BHP). Scheduled delivery for the new-build vessels began in October 2013, with delivery of the final new-build vessel expected in February 2016. The company also has new-build commitments for five ROVs at September 30, 2013 with delivery dates between October and December of 2013.

With its commitment to modernizing its fleet through its vessel construction and acquisition program over the past decade, the company is replacing its older fleet of vessels with fewer, larger and more efficient vessels, while also enhancing the size and capabilities of the company’s fleet. These efforts are expected to continue, with the company anticipating that it will use some portion of its future operating cash flows and existing borrowing capacity as well as possible new borrowings or lease arrangements in order to fund current and future commitments in connection with the fleet renewal and modernization program. The company continues to evaluate its fleet renewal program, whether through new construction or acquisitions, relative to other investment opportunities and uses of cash, including the current share repurchase authorization, and in the context of current conditions in the credit and capital markets.

Currently the company is experiencing substantial delay with one fast supply boat under construction in Brazil that was originally scheduled to be delivered in September 2009. On April 5, 2011, pursuant to the vessel construction contract, the company sent the subject shipyard a letter initiating arbitration in order to resolve disputes of such matters as the shipyard’s failure to achieve payment milestones, its failure to follow the construction schedule, and its failure to timely deliver the vessel. The company has suspended construction on the vessel and both parties continue to pursue that arbitration. The company has third party credit support in the form of insurance coverage for 90% of the progress payments made on this vessel, or all but approximately $2.4 million of the carrying value of the accumulated costs through September 30, 2013. The company had committed and invested $8.0 million as of September 30, 2013.

In October 2013, the company took delivery of the first of two deepwater PSVs constructed in a U.S. Shipyard. In connection with that delivery, the company and the shipyard agreed to hold $7.8 million in escrow with a financial institution pending resolution of disputes over whether all or a portion of those funds are due to the shipyard as the shipyard has claimed. Monies held in escrow are included in Total Cost and Remaining Balance 9/30/2013 that is summarized above under Vessel and Other Commitments. Some of the disputes may be resolved by high level management meetings between the parties or through a relatively expeditious technical arbitration proceeding involving a third party technical expert. The balance of the claims will need to be resolved through litigation in New York state court. These formal dispute resolution efforts are currently at an early stage.

The company generally requires shipyards to provide third party credit support in the event that vessels are not completed and delivered timely and in accordance with the terms of the shipbuilding contracts. That third party credit support typically guarantees the return of amounts paid by the company and generally takes the form of refundment guarantees or standby letters of credit issued by major financial institutions located in the country of the shipyard. While the company seeks to minimize its shipyard credit risk by requiring these instruments, the ultimate return of amounts paid by the company in the event of shipyard default is still subject to the creditworthiness of the shipyard and the provider of the credit support, as well as the company’s ability to successfully pursue legal action to compel payment of these instruments. When third party credit support is not available or cost effective, the company endeavors to limit its credit risk by minimizing pre-delivery payments and through other contract terms with the shipyard.

Completion of Internal Investigation and Settlements with United States and Nigerian Agencies

The company has previously reported that special counsel engaged by the company’s Audit Committee had completed an internal investigation into certain Foreign Corrupt Practices Act (FCPA) matters and reported its findings to the Audit Committee. The substantive areas of the internal investigation have been reported publicly by the company in prior filings.

Special counsel has reported to the Department of Justice (DOJ) and the Securities and Exchange Commission the results of the investigation, and the company has entered into separate agreements with these two U.S. agencies to resolve the matters reported by special counsel. The company subsequently also entered into an agreement with the Federal Government of Nigeria (FGN) to resolve similar issues with the FGN. The company has previously reported the principal terms of these three agreements. Certain aspects of the agreement with the DOJ are set forth below.

Tidewater Marine International Inc. (“TMII”), a wholly-owned subsidiary of the company organized in the Cayman Islands, and the DOJ entered into a Deferred Prosecution Agreement (“DPA”). Pursuant to the DPA, the DOJ deferred criminal charges against TMII for a period of three years and seven days from the date of judicial approval of the Agreement, in return for: (a) TMII’s acceptance of responsibility for, and agreement not to contest or contradict the truthfulness of, the statement of facts and allegations contained in a three-count criminal information to be filed concurrently with the DPA; (b) TMII’s payment of a $7.35 million fine (which has been paid), (c) TMII’s and Tidewater Inc.’s compliance with certain undertakings relating to compliance with the FCPA and other applicable laws in connection with the company’s operations, and cooperation with domestic and foreign authorities in connection with the matters that are the subject of the DPA; (d) TMII’s and Tidewater Inc.’s agreement to continue to address any deficiencies in the company’s internal controls, policies and procedures relating to compliance with the FCPA and other applicable anti-corruption laws, if and to the extent not already addressed; and (e) Tidewater Inc.’s agreement to report to the DOJ in writing annually for the term of the DPA regarding remediation of the matters that are the subject of the DPA, the implementation of any enhanced internal controls, and any evidence of improper payments the company may have discovered during the term of the DPA. Implementation of the DOJ settlement eliminated a $3.0 million contingent civil penalty in connection with the SEC civil settlement detailed above. Tidewater submitted its first annual report to the DOJ in November 2011, its second annual report in November 2012, and its third annual report in October 2013.

If TMII and Tidewater Inc. comply with the DPA during its term, the DOJ will not bring the charges set out in the information. In the event TMII or Tidewater Inc. breaches the DPA, the DOJ has discretion to extend its term for up to a year, or bring certain criminal charges against TMII as outlined in the DPA. A federal district court accepted the DPA on November 9, 2010.

Merchant Navy Officers Pension Fund

After consultation with its advisers, on July 15, 2013, a subsidiary of the company was placed into administration in the United Kingdom. Joint administrators were appointed to administer and distribute the subsidiary’s assets to the subsidiary’s creditors. The vessels owned by the subsidiary have become aged and are no longer economical to operate, which has caused the subsidiary’s main business to decline in recent years. Only one vessel currently generates revenue and this vessel likely has a limited remaining operating window as an offshore service vessel. As part of the administration, the company agreed to acquire seven vessels and to waive certain intercompany claims. The purchase price valuation for the vessels, all but one of which are stacked, is based on independent, third party appraisals of the vessels.

The company has previously reported that a subsidiary of the company is a participating employer in an industry-wide multi-employer retirement fund in the United Kingdom, known as the Merchant Navy Officers Pension Fund (MNOPF). The subsidiary that participates in the MNOPF is the entity that has been placed into administration in the U.K. MNOPF is that subsidiary’s largest creditor, and has claimed as an unsecured creditor in the administration. The Company believes that the administration is in the best interests of the subsidiary and its principal stakeholders, including the MNOPF. The MNOPF has indicated that it does not object to the insolvency process and that, aside from asserting its claim in the subsidiary’s administration and based on the company’s representations of the financial status and other relevant aspects of the subsidiary, MNOPF will not pursue the subsidiary in connection with any amounts due or which may become due to the Fund. The administration is not expected to be fully complete for more than a year. The company believes that the administration will resolve the subsidiary’s participation in the MNOPF. The company believes that the ultimate resolution of this matter will not have a material effect on the consolidated financial statements.

Sonatide Joint Venture

The company has previously reported that it has been in negotiations with Sonangol regarding a new joint venture agreement for Sonatide, a joint venture between the company and Sonangol that serves the Angolan offshore energy industry. Pending the completion of the new agreement, the joint venture has been operating under a joint venture agreement, extended on several prior occasions, that was last extended through March 31, 2013. Based on the outcome of several meetings that were held during the June and September quarters, the company believes that the substantive issues between the parties have been resolved, and the company has drafted, with Sonangol’s input, a new definitive joint venture agreement that the company believes incorporates those understandings. The new definitive joint venture agreement, which has been executed by the company, is awaiting the signature of Sonangol’s authorized representatives. Accordingly, there is no agreement yet in place. In the interim, Sonatide continues its normal day-to-day operations consistent with the terms of the expired agreement without significant commercial or operational effects resulting from that expiration.

If negotiations relating to the Sonatide joint venture are ultimately unsuccessful, however, the company will work toward an orderly wind up of the joint venture. Based on prior conduct between the parties during this period of uncertainty, we believe that the joint venture would be allowed to honor existing vessel charter agreements through their contract terms. The global market for offshore supply vessels is currently reasonably well balanced, with offshore vessel supply approximately equal to offshore vessel demand; however, there would likely be negative financial impacts associated with the wind up of the existing joint venture and the possible redeployment of vessels to other markets, including mobilization costs and costs to redeploy Tidewater shore-based employees to other areas, in addition to lost revenues associated with potential downtime between vessel contracts. These financial impacts could, individually or in the aggregate, be material to our results of operations and cash flows for the periods when such costs would be incurred. If there is a need to redeploy vessels which are currently deployed in Angola to other international markets, Tidewater believes that there is sufficient demand for a majority of these vessels at prevailing market day rates.

During the six months ended September 30, 2013, the Sonatide joint venture entered into six new contracts with customers, all of which extend into 2014. During the twelve months ended September 30, 2013, the company redeployed vessels from its Angolan operations to other markets and also transferred vessels into its Angolan operations from other markets resulting in a net increase in the number of vessels operating in the area.

Tidewater and Sonangol have also continued to evaluate and discuss the impact of a new Foreign Exchange Law for the Angolan Petroleum Sector that became effective as of July 1, 2013. Under the new law, oil companies are required to make all payments for goods and services provided by foreign exchange residents in Angolan Kwanzas into an Angolan bank account. This new requirement could result in the joint venture collecting substantially all of its revenue in Angolan Kwanzas, unless a more efficient structure is agreed to by the joint venture parties. The conversion of Angolan Kwanzas into US Dollars and expatriation of the funds currently involves a lengthy process that results in time delays, currency fluctuation risk and conversion fees as well as possible additional taxes. The joint venture is working to design and implement procedures to conform to the recently enacted law and to develop more efficient cash collection processes; however, the successful

implementation of any such processes depends on the new joint venture agreement becoming effective. As discussed below and under Liquidity, Capital Resources and Other Matters, over the last several quarters, the company has experienced a build-up in working capital that it has funded primarily by additional borrowings.

For the six months ended September 30, 2013, Tidewater’s Angolan operations generated vessel revenues of approximately $167.7 million, or 24%, of its consolidated vessel revenue, from an average of approximately 89 Tidewater-owned vessels that are marketed through the Sonatide joint venture (six of which were stacked on average during the six months ended September 30, 2013), and, for the six months ended September 30, 2012, generated vessel revenues of approximately $134.3 million, or 22%, of consolidated vessel revenue, from an average of approximately 86 Tidewater-owned vessels (11 of which were stacked on average during the six months ended September 30, 2012.

In addition to the company’s Angolan operations, which reflect the results of Tidewater-owned vessels marketed through the Sonatide joint venture (owned 49% by Tidewater), ten vessels and other assets are owned by the Sonatide joint venture. As of September 30, 2013 and March 31, 2013, the carrying value of Tidewater’s investment in the Sonatide joint venture, which is included in “Investments in, at equity, and advances to unconsolidated companies,” is approximately $53 million and $46 million, respectively.

Included in trade and other receivables at September 30, 2013 is approximately $280 million related to Sonatide, including cash received by Sonatide from customers and due to the company, costs paid by Tidewater on behalf of Sonatide and, finally, amounts due from customers which are expected to be remitted to the company through Sonatide after a new joint venture agreement is signed by Sonangol.

Included in accrued expenses at September 30, 2013 is approximately $70 million due to Sonatide for commissions payable (approximately $24 million) and other costs paid by Sonatide on behalf of the company.

Brazilian Customs

In April 2011, two Brazilian subsidiaries of Tidewater were notified by the Customs Office in Macae, Brazil that they were jointly and severally being assessed fines of 155.0 million Brazilian reais (approximately $68.6 million as of September 30, 2013). The assessment of these fines is for the alleged failure of these subsidiaries to obtain import licenses with respect to 17 Tidewater vessels that provided Brazilian offshore vessel services to Petrobras, the Brazilian national oil company, over a three-year period ending December 2009. After consultation with its Brazilian tax advisors, Tidewater and its Brazilian subsidiaries believe that vessels that provide services under contract to the Brazilian offshore oil and gas industry are deemed, under applicable law and regulations, to be temporarily imported into Brazil, and thus exempt from the import license requirement. The Macae Customs Office has, without a change in the underlying applicable law or regulations, taken the position that the temporary importation exemption is only available to new, and not used, goods imported into Brazil and therefore it was improper for the company to deem its vessels as being temporarily imported. The fines have been assessed based on this new interpretation of Brazilian customs law taken by the Macae Customs Office.

After consultation with its Brazilian tax advisors, the company believes that the assessment is without legal justification and that the Macae Customs Office has misinterpreted applicable Brazilian law on duties and customs. The company is vigorously contesting these fines (which it has neither paid nor accrued) and, based on the advice of its Brazilian counsel, believes that it has a high probability of success with respect to the overturn of the entire amount of the fines, either at the administrative appeal level or, if necessary, in Brazilian courts. In December 2011, an administrative board issued a decision that disallowed 149.0 million Brazilian reais (approximately $65.9 million as of September 30, 2013) of the total fines sought by the Macae Customs Office. In two separate proceedings in 2013, a secondary administrative appeals board considered fines totaling 127.0 million Brazilian reais (approximately $56.2 million as of September 30, 2013) and rendered decisions that disallowed all of those fines. The remaining fines totaling 28.0 million Brazilian reais (approximately $12.4 million as of September 30, 2013) are still subject to a secondary administrative appeals board hearing, but the company believes that both decisions will be helpful in that upcoming hearing. The secondary board decisions disallowing the fines totaling 127.0 million Brazilian reais are, however, still subject to the possibility of further administrative appeal by the authorities that imposed the initial fines. The company believes that the ultimate resolution of this matter will not have a material effect on the consolidated financial statements.

Potential for Future Brazilian State Tax Assessment

The company is aware that a Brazilian state in which the company has operations has notified two of the company’s competitors that they are liable for unpaid taxes (and penalties and interest thereon) for failure to pay state import taxes with respect to vessels that such competitors operate within the coastal waters of such state pursuant to charter agreements. The import tax being asserted is equal to a percentage (which could be as high as 16% for vessels entering that state’s waters prior to December 31, 2010 and 3% thereafter) of the affected vessels’ declared values. The company understands that the two companies involved are contesting the assessment through administrative proceedings before the taxing authority.

The company’s two Brazilian subsidiaries have not been similarly notified by the Brazilian state that they have an import tax liability related to their vessel activities imported through that state. Although the company has been advised by its Brazilian tax counsel that substantial defenses would be available if a similar tax claim were asserted against the company, if an import tax claim were to be asserted, it could be for a substantial amount given that the company has had substantial and continuing operations within the territory of the state (although the amount could fluctuate significantly depending on the administrative determination of the taxing authority as to the rate to apply, the vessels subject to the levy and the time periods covered). In addition, under certain circumstances, the company might be required to post a bond or other adequate security in the amount of the assessment (plus any interest and penalties) if it became necessary to challenge the assessment in a Brazilian court. The statute of limitations for the Brazilian state to levy an assessment of the import tax is five years from the date of a vessel’s entry into Brazil. The company has not yet determined the potential tax assessment, and according to the Brazilian tax counsel, chances of defeating a possible claim/notification from the State authorities in court are probable. To obtain legal certainty and predictability for future charter agreements and because the company has imported several vessels to start new charters in Brazil, the company filed several suits in 2011, 2012 and 2013, against the Brazilian state and has deposited (or, in recent cases, is in the process of depositing) the respective state tax for these newly imported vessels. As of September 30, 2013, no accrual has been recorded for any liability associated with any potential future assessment for previous periods based on management’s assessment, after consultation with Brazilian counsel, that a liability for such taxes was not probable.

Nigeria Marketing Agent Litigation

On March 1, 2013, Tidewater filed suit in the London Commercial Court against Tidewater’s Nigerian marketing agent for breach of the agent’s obligations under contractual agreements between the parties. The alleged breach involves actions of the Nigerian marketing agent to discourage various affiliates of TOTAL S.A. from paying approximately $19 million due to the company for vessel services performed in Nigeria. Shortly after the London Commercial Court filing, TOTAL commenced interpleader proceedings in Nigeria naming the Nigerian agent and the company as respondents and seeking an order which would allow TOTAL to deposit those monies with a Nigerian court for the respondents to resolve. On April 25, 2013, Tidewater filed motions in the Nigerian Federal High Court to stop the interpleader proceedings in Nigeria or alternatively stay them until the resolution of the suit filed in London. The company will continue to actively pursue the collection of those monies. On April 30, 2013, the Nigerian marketing agent filed a separate suit in the Nigerian Federal High Court naming Tidewater and certain TOTAL affiliates as defendants. The suit seeks various declarations and orders, including a claim for the monies that are subject to the above interpleader proceedings, and other relief. The company is seeking dismissal of this suit and otherwise intends to vigorously defend against the claims made. The company has not reserved for this receivable and believes that the ultimate resolution of this matter will not have a material effect on the consolidated financial statements.

In October, 2012, Tidewater had notified the Nigerian marketing agent that it was discontinuing its relationship with the Nigerian marketing agent. The company has entered into a new strategic relationship with a different Nigerian counterparty that it believes will better serve the company’s long term interests in Nigeria. This new strategic relationship is currently functioning as the company intended.

Venezuelan Operations

On February 16, 2010, Tidewater and certain of its subsidiaries (collectively, the “Claimants”) filed with the International Centre for Settlement of Investment Disputes (“ICSID”) a Request for Arbitration against the Bolivarian Republic of Venezuela. As previously reported by Tidewater, in May 2009 Petróleos de Venezuela, S.A. (“PDVSA”), the national oil company of Venezuela, took possession and control of (a) eleven of the Claimants’ vessels that were then supporting PDVSA operations in Lake Maracaibo, (b) the Claimants’ shore-based headquarters adjacent to Lake Maracaibo, (c) the Claimants’ operations in Lake Maracaibo, and (d) certain other related assets. The company also previously reported that in July 2009 Petrosucre, S.A., a subsidiary of PDVSA, took possession and control of the Claimants’ four vessels, operations, and related assets in the Gulf of Paria. It is Tidewater’s position that, through those measures, the Republic of Venezuela directly or indirectly expropriated the Claimants’ investments, including the capital stock of the Claimants’ principal operating subsidiary in Venezuela.

The Claimants alleged in the Request for Arbitration that each of the measures taken by the Republic of Venezuela against the Claimants violates the Republic of Venezuela’s obligations under the bilateral investment treaty with Barbados and rules and principles of Venezuelan law and international law. An arbitral tribunal was constituted under the ICSID Convention to resolve the dispute. The tribunal first addressed the Republic of Venezuela’s objections to the tribunal’s jurisdiction over the dispute. After two rounds of briefing by the parties, a hearing on jurisdiction was held in Washington, D.C. on February 29 and March 1, 2012.

On February 8, 2013, the tribunal issued its decision on jurisdiction. The tribunal found that it has jurisdiction over the claims under the Venezuela-Barbados bilateral investment treaty, including the claim for compensation for the expropriation of Tidewater’s principal operating subsidiary, but that it does not have jurisdiction based on Venezuela’s investment law. The practical effect of the tribunal’s decision is to exclude from the case the claims for expropriation of the fifteen vessels described above. The proceeding will now move to the merits, including a determination whether the Republic of Venezuela violated the Venezuela-Barbados bilateral investment treaty and a valuation of Tidewater’s principal operating subsidiary in Venezuela. At the time of the expropriation, the principal operating subsidiary had sizeable accounts receivable from PDVSA and Petrosucre, denominated in both U.S. Dollars and Venezuelan Bolivars. The company expects those accounts receivable to form part of the total valuation of Tidewater’s principal operating subsidiary. As a result of the seizures, the lack of further operations in Venezuela, and the continuing uncertainty about the timing and amount of the compensation the company might collect in the future, the company recorded a $44.8 million provision during the quarter ended June 30, 2009, to fully reserve accounts receivable due from PDVSA and Petrosucre.

While the tribunal determined that it does not have jurisdiction over the claim for the seizure of the fifteen vessels, Tidewater received during fiscal 2011 insurance proceeds for the insured value of those vessels (less an additional premium payment triggered by those proceeds). Tidewater believes that the claims remaining in the case, over which the tribunal upheld jurisdiction, represent the most substantial portion of the overall value lost as a result of the measures taken by the Republic of Venezuela. Tidewater has discussed the nature of the insurance proceeds received for the fifteen vessels in previous quarterly and annual filings.

The tribunal has issued a briefing and hearing schedule to determine the merits of the claims over which the tribunal has jurisdiction. That schedule culminates in a final hearing in mid-2014.

Legal Proceedings

Various legal proceedings and claims are outstanding which arose in the ordinary course of business. In the opinion of management, the amount of ultimate liability, if any, with respect to these actions, will not have a material adverse effect on the company’s financial position, results of operations, or cash flows.

(9)

FAIR VALUE MEASUREMENTS

The company follows the provisions of ASC 820, Fair Value Measurements and Disclosures, for financial assets and liabilities that are measured and reported at fair value on a recurring basis. ASC 820 establishes a hierarchy for inputs used in measuring fair value. Fair value is calculated based on assumptions that market participants would use in pricing assets and liabilities and not on assumptions specific to the entity. The statement requires that each asset and liability carried at fair value be classified into one of the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs that are not corroborated by market data

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The company measures on a recurring basis and records at fair value investments held by participants in a supplemental executive retirement plan. The following table provides the fair value hierarchy for the plan assets measured at fair value as of September 30, 2013:


(In thousands)	Total			Quoted prices in active markets (Level 1)			Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Equity securities:
Common stock	$	4,039			4,039			---		---
Preferred stock		---			---			---		---
Foreign stock		316			316			---		---
American depository receipts		1,697			1,697			---		---
Preferred American depository receipts		13			13			---		---
Real estate investment trusts		---			---			---		---
Debt securities:
Government debt securities		1,786			1,114			672		---
Open ended mutual funds		1,563			1,563			---		---
Cash and cash equivalents		1,032			401			631		---

Total	$	10,446			9,143			1,303		---
Other pending transactions		(264	)		(264	)		---		---

Total fair value of plan assets	$	10,182			8,879			1,303		---

The following table provides the fair value hierarchy for the plan assets measured at fair value as of March 31, 2013:


(In thousands)	Total			Quoted prices in active markets (Level 1)			Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Equity securities:
Common stock	$	4,240			4,240			---		---
Preferred stock		---			---			---		---
Foreign stock		285			285			---		---
American depository receipts		1,811			1,811			---		---
Preferred American depository receipts		16			16			---		---
Real estate investment trusts		---			---			---		---
Debt securities:
Government debt securities		2,007			1,240			767		---
Open ended mutual funds		1,743			1,743			---		---
Cash and cash equivalents		533			93			440		---

Total	$	10,635			9,428			1,207		---
Other pending transactions		(149	)		(149	)		---		---

Total fair value of plan assets	$	10,486			9,279			1,207		---

Other Financial Instruments

The company’s primary financial instruments consist of cash and cash equivalents, trade receivables and trade payables with book values that are considered to be representative of their respective fair values. The company periodically utilizes derivative financial instruments to hedge against foreign currency denominated assets and liabilities, currency commitments, or to lock in desired interest rates. These transactions are generally spot or forward currency contracts or interest rate swaps that are entered into with major financial institutions. Derivative financial instruments are intended to reduce the company’s exposure to foreign currency exchange risk and interest rate risk. The company enters into derivative instruments only to the extent considered necessary to address its risk management objectives and does not use derivative contracts for speculative purposes. The derivative instruments are recorded at fair value using quoted prices and quotes obtainable from the counterparties to the derivative instruments.

Cash Equivalents. The company’s cash equivalents, which are securities with maturities less than 90 days, are held in money market funds or time deposit accounts with highly rated financial institutions. The carrying value for cash equivalents is considered to be representative of its fair value due to the short duration and conservative nature of the cash equivalent investment portfolio.

Spot Derivatives. Spot derivative financial instruments are short-term in nature and generally settle within two business days. The fair value of spot derivatives approximates the carrying value due to the short-term nature of this instrument, and as a result, no gains or losses are recognized.

The company had no outstanding foreign exchange spot contracts at September 30, 2013 and March 31, 2013.

Forward Derivatives. Forward derivative financial instruments are generally longer-term in nature but generally do not exceed one year. The accounting for gains or losses on forward contracts is dependent on the nature of the risk being hedged and the effectiveness of the hedge. Forward contracts are valued using counterparty quotations, and we validate the information obtained from the counterparties in calculating the ultimate fair values using the market approach and obtaining broker quotations. As such, these derivative contracts are classified as Level 2.

At September 30, 2013, the company had one British pound forward contract outstanding. The forward contract has an expiration date of December 18, 2013. The change in fair value of the forward contract was immaterial and was recorded as a foreign exchange gain during quarter ended September 30, 2013. The forward contract did not qualify as a hedge instrument; therefore, all changes in fair value of the forward contract were recorded in earnings.

At March 31, 2013, the company had three British pound forward contracts outstanding, which were generally intended to hedge the company’s foreign exchange exposure relating to its MNOPF liability as disclosed in Note (8) and elsewhere in this document. The forward contracts expired at various times through December 18, 2013. The combined change in fair value of the forward contracts was immaterial and was recorded as a foreign exchange loss during the fiscal year ended March 31, 2013, because the forward contracts did not qualify as hedge instruments. All changes in fair value of the forward contracts were recorded in earnings.

The following table provides the fair value hierarchy for the company’s other financial instruments measured as of September 30, 2013:


(In thousands)	Total		Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	376		376		---		---
Long-term British pound forward derivative contracts		1,132		---		1,132		---

Total fair value of assets	$	1,508		376		1,132		---

The following table provides the fair value hierarchy for the company’s other financial instruments measured as of March 31, 2013:


(In thousands)	Total		Quoted prices in active markets (Level 1)		Significant observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Cash equivalents	$	949		949		---		---
Long-term British pound forward derivative contracts		4,359		---		4,359		---

Total fair value of assets	$	5,308		949		4,359		---

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Asset Impairments

The company accounts for long-lived assets in accordance with ASC 360-10-35, Impairment or Disposal of Long-Lived Assets. The company reviews the vessels in its active fleet for impairment whenever events occur or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. In such evaluation the estimated future undiscounted cash flows generated by an asset group are compared with the carrying amount of the asset group to determine if a write-down may be required. With respect to vessels that have not been stacked, we group together for impairment testing purposes vessels with similar operating and marketing characteristics. We also subdivide our groupings of assets with similar operating and marketing characteristics between our older vessels and newer vessels.

The company estimates cash flows based upon historical data adjusted for the company’s best estimate of expected future market performance, which, in turn, is based on industry trends. If an asset group fails the undiscounted cash flow test, the company uses the discounted cash flow method to determine the estimated fair value of each asset group and compares such estimated fair value (considered Level 3, as defined by ASC 360) to the carrying value of each asset group in order to determine if impairment exists. If impairment exists, the carrying value of the asset group is reduced to its estimated fair value.

In addition to the periodic review of its active long-lived assets for impairment when circumstances warrant, the company also performs a review of its stacked vessels and vessels withdrawn from service every six months or whenever changes in circumstances indicate that the carrying amount of a vessel may not be recoverable. Management estimates each stacked vessel’s fair value by considering items such as the vessel’s age, length of time stacked, likelihood of a return to active service, actual recent sales of similar vessels, which are unobservable inputs. In certain situations we obtain an estimate of the fair value of the stacked vessel from third-party appraisers or brokers. The company records an impairment charge when the carrying value of a vessel withdrawn from service or a stacked vessel exceeds its estimated fair value. The estimates of fair value of stacked vessels are also subject to significant variability, are sensitive to changes in market conditions, and are reasonably likely to change in the future.

The below table summarizes the combined fair value of the assets that incurred impairments during the quarters and six-month periods ended September 30, 2013 and 2012, along with the amount of impairment. The impairment charges were recorded in gain on asset dispositions, net.


	Quarter Ended September 30,				Six Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Amount of impairment incurred	$	175		790		4,047		3,564
Combined fair value of assets incurring impairment		161		1,192		4,466		8,602

(10)

OTHER ASSETS, ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES AND DEFERRED CREDITS

A summary of other assets at September 30, 2013 and March 31, 2013 is as follows:


(In thousands)	September 30, 2013		March 31, 2013
Recoverable insurance losses	$	9,870		10,833
Deferred income tax assets		82,328		73,105
Deferred finance charges		8,161		5,133
Savings plans and supplemental plan		22,026		23,149
Noncurrent tax receivable		9,106		9,106
Other		17,748		4,951

	$	149,239		126,277

A summary of accrued expenses at September 30, 2013 and March 31, 2013 is as follows:


(In thousands)	September 30, 2013		March 31, 2013
Payroll and related payables	$	21,747		23,453
Commissions payable		31,378		13,866
Accrued vessel expenses		103,098		103,177
Accrued interest expense		5,443		8,096
Other accrued expenses		6,519		10,494

	$	168,185		159,086

A summary of other current liabilities at September 30, 2013 and March 31, 2013 is as follows:


(In thousands)	September 30, 2013		March 31, 2013
Taxes payable	$	38,205		38,100
Deferred credits - current		649		1,374
Dividend payable		480		334

	$	39,334		39,808

A summary of other liabilities and deferred credits at September 30, 2013 and March 31, 2013 is as follows:


(In thousands)	September 30, 2013		March 31, 2013
Postretirement benefits liability	$	26,939		27,681
Pension liabilities		39,332		37,096
Deferred gain on vessel sales		71,544		39,568
Other		36,555		34,729

	$	174,370		139,074

(11)

ACCOUNTING PRONOUNCEMENTS

From time to time new accounting pronouncements are issued by the FASB that are adopted by the company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the company’s consolidated financial statements upon adoption.

In February 2013, the FASB issued ASU 2013-02 Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance requires entities to present changes in accumulated other comprehensive income by component, including the amounts of changes that are due to reclassifications and the amounts that are due to current period other comprehensive income. Entities are also required to present significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The new guidance was effective for us beginning April 1, 2013 and includes disclosure changes only.

(12)

SEGMENT AND GEOGRAPHIC DISTRIBUTION OF OPERATIONS

The company follows the disclosure requirements of ASC 280, Segment Reporting. Operating business segments are defined as a component of an enterprise for which separate financial information is available and is evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing performance. We manage and measure our business performance in four distinct operating segments: Americas, Asia/Pacific, Middle East/North Africa, and Sub-Saharan Africa/Europe. These segments are reflective of how the company’s chief operating decision maker (CODM) reviews operating results for the purposes of allocating resources and assessing performance. The company’s CODM is its Chief Executive Officer.

The following table provides a comparison of revenues, vessel operating profit, depreciation and amortization, and additions to properties and equipment for the quarters and six-month periods ended September 30, 2013 and 2012. Vessel revenues and operating costs relate to vessels owned and operated by the company while other operating revenues relate to the activities of the company’s shipyards, brokered vessels and other miscellaneous marine-related businesses.


	Quarter Ended September 30,						Six Months Ended September 30,
(In thousands)	2013			2012			2013			2012
Revenues:
Vessel revenues:
Americas	$	101,929			82,316			192,173			159,966
Asia/Pacific		37,430			45,738			80,386			97,480
Middle East/N. Africa		45,370			32,051			86,583			64,501
Sub-Saharan Africa/Europe		178,939			149,717			336,156			277,969

		363,668			309,822			695,298			599,916
Other operating revenues		4,269			2,096			6,724			6,450

	$	367,937			311,918			702,022			606,366

Vessel operating profit:
Americas	$	23,675			9,506			43,976			19,698
Asia/Pacific		4,807			7,826			15,096			22,734
Middle East/N. Africa		13,446			6,280			23,569			12,562
Sub-Saharan Africa/Europe		47,261			44,330			64,780			71,426

		89,189			67,942			147,421			126,420
Corporate expenses		(12,891	)		(12,484	)		(29,446	)		(22,951	)
Gain on asset dispositions, net		49			1,833			2,189			2,671
Other operating expense		218			(94	)		(174	)		544

Operating income	$	76,565			57,197			119,990			106,684

Foreign exchange gain (loss)		3,017			529			2,928			(1,222	)
Equity in net earnings of unconsolidated companies		3,781			3,357			8,201			5,720
Interest income and other, net		538			1,128			1,278			1,847
Loss on early extinguishment of debt		(4,144	)		---			(4,144	)		---
Interest and other debt costs		(9,918	)		(7,148	)		(18,831	)		(14,735	)

Earnings before income taxes	$	69,839			55,063			109,422			98,294

Depreciation and amortization:
Americas	$	10,833			10,629			20,945			20,721
Asia/Pacific		4,122			4,833			8,647			9,946
Middle East/N. Africa		5,731			4,388			11,337			8,467
Sub-Saharan Africa/Europe		20,581			15,309			39,736			30,802
Corporate		789			888			1,499			1,895

	$	42,056			36,047			82,164			71,831

Additions to properties and equipment:
Americas	$	8,845			25,118			12,039			41,896
Asia/Pacific		453			5,071			968			5,165
Middle East/N. Africa		770			721			909			1,795
Sub-Saharan Africa/Europe (A)		8,086			36,659			344,557			48,534
Corporate (B)		49,747			44,194			111,597			88,285

	$	67,901			111,763			470,070			185,675

(A)	Included in Sub-Saharan Africa/Europe for the six months ended September 30, 2013 is $245.6 million related to vessels acquired through the acquisition of Troms Offshore.

(B)	Included in Corporate are additions to properties and equipment relating to vessels currently under construction which have not yet been assigned to a non-corporate reporting segment as of the dates presented.

The following table provides a comparison of total assets at September 30, 2013 and March 31, 2013:


(In thousands)	September 30, 2013		March 31, 2013
Total assets:
Americas	$	930,475		885,470
Asia/Pacific		487,850		607,546
Middle East/North Africa		584,805		507,124
Sub-Saharan Africa/Europe		2,214,683		1,706,355

		4,217,813		3,706,495
Investments in, at equity, and advances to unconsolidated companies		52,254		46,047

		4,270,067		3,752,542
Corporate (A)		484,512		415,513

	$	4,754,579		4,168,055

Note A: Included in Corporate are vessels currently under construction which have not yet been assigned to a non-corporate reporting segment. The vessel construction costs will be reported in Corporate until the earlier of the vessels being assigned to a non-corporate reporting segment or the vessels’ delivery. At September 30, 2013 and March 31, 2013, $306.7 million and $229.3 million, respectively, of vessel construction costs are included in Corporate.

The following table discloses the amount of revenue by segment, and in total for the worldwide fleet, along with the respective percentage of total vessel revenue for the quarters and six-month periods ended September 30, 2013 and 2012:


Revenue by vessel class	Quarter Ended September 30,								Six Months Ended September 30,
(In thousands)	2013		%		2012		%		2013		%		2012		%
Americas fleet:
Deepwater vessels	$	61,811		17%		44,747		14%		116,843		17%		81,027		14%
Towing-supply/supply		30,861		8%		31,109		10%		58,531		8%		65,461		11%
Other		9,257		3%		6,460		2%		16,799		3%		13,478		2%
Total	$	101,929		28%		82,316		27%		192,173		28%		159,966		27%
Asia/Pacific fleet:
Deepwater vessels	$	19,923		5%		24,592		8%		44,215		6%		49,929		8%
Towing-supply/supply		16,559		5%		20,229		7%		34,281		5%		45,729		8%
Other		948		<1%		917		<1%		1,890		<1%		1,822		<1%
Total	$	37,430		10%		45,738		15%		80,386		11%		97,480		16%
Middle East/N. Africa fleet:
Deepwater vessels	$	15,732		5%		12,275		4%		31,584		5%		23,559		4%
Towing-supply/supply		28,763		8%		18,859		6%		53,260		8%		38,859		6%
Other		875		<1%		917		<1%		1,739		<1%		2,083		<1%
Total	$	45,370		13%		32,051		10%		86,583		13%		64,501		10%
Sub-Saharan Africa/Europe fleet:
Deepwater vessels	$	106,541		29%		67,696		22%		193,792		28%		130,311		22%
Towing-supply/supply		56,772		16%		63,548		20%		111,632		16%		112,560		20%
Other		15,626		4%		18,473		6%		30,732		4%		35,098		6%
Total	$	178,939		49%		149,717		48%		336,156		48%		277,969		47%
Worldwide fleet:
Deepwater vessels	$	204,007		56%		149,310		48%		386,434		56%		284,826		47%
Towing-supply/supply		132,955		37%		133,745		43%		257,704		37%		262,609		44%
Other		26,706		7%		26,767		9%		51,160		7%		52,481		9%
Total	$	363,668		100%		309,822		100%		695,298		100%		599,916		100%

(13)

GOODWILL

The company tests goodwill for impairment annually at the reporting unit level using carrying amounts as of December 31 or more frequently if events and circumstances indicate that goodwill might be impaired.

The company performed its annual goodwill impairment assessment during the quarter ended December 31, 2012 and determined there was no goodwill impairment.

During the first six months ended September 30, 2013, $42.2 million of goodwill related to the acquisition of Troms Offshore was allocated to the Sub-Saharan Africa/Europe segment.

Goodwill by reportable segment at September 30, 2013 and at March 31, 2013 is as follows:


(In thousands)	September 30, 2013		March 31, 2013
Americas	$	114,237		114,237
Asia/Pacific		56,283		56,283
Sub-Saharan Africa/Europe		169,462		127,302

	$	339,982		297,822

(14)

SALE/LEASEBACK ARRANGEMENTS

In September 2013, the company sold two vessels to an unrelated third party, and simultaneously entered into bareboat charter agreements with the purchaser. The sale/leaseback transactions resulted in proceeds to the company of $65.6 million and a deferred gain of $31.3 million. The aggregate carrying value of the two vessels was $34.3 million at the dates of sale. The leases on the vessels will expire on September 30, 2020 and the company has the option to extend each respective bareboat charter agreement for a period of 24 months.

The company is accounting for the transactions as sale/leaseback transactions with operating lease treatment and expenses lease payments over the seven year lease terms. The deferred gains will be amortized to gain on asset dispositions, net ratably over the lease term.

Under each sale/leaseback agreement, the company has the right to either re-acquire the two vessels at approximately 55% of the original sales price at the end of the sixth year, deliver the vessel to the owner at the end of the lease term, or extend the lease for 24 months at mutually agreeable lease rates. Any deferred gain balance remaining upon the repurchase of the vessel will reduce the vessels’ stated cost after exercising the purchase option.

As of September 30, 2013, the future minimum lease payments for these two vessels under the operating lease terms are as follows:


Fiscal year ending	Amount (In thousands)
Remaining six-months of 2014	$	2,794
2015		5,588
2016		5,589
2017		5,589
2018		6,830
Thereafter		17,076

Total future lease payments	$	43,466

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Tidewater Inc.

New Orleans, Louisiana

We have reviewed the accompanying condensed consolidated balance sheet of Tidewater Inc. and subsidiaries (the “Company”) as of September 30, 2013, and the related condensed consolidated statements of earnings, comprehensive income, and stockholders’ equity for the three month and six-month periods ended September 30, 2013 and 2012, and of cash flows for the six-month periods ended September 30, 2013 and 2012. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Pubic Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Tidewater Inc. and subsidiaries as of March 31, 2013, and the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated May 21, 2013, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2013 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

New Orleans, Louisiana

November 5, 2013

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

FORWARD-LOOKING STATEMENT

In accordance with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the company notes that this Quarterly Report on Form 10-Q and the information incorporated herein by reference contain certain forward-looking statements which reflect the company’s current view with respect to future events and future financial performance. All such forward-looking statements are subject to risks and uncertainties, and the company’s future results of operations could differ materially from its historical results or current expectations reflected by such forward-looking statements. Some of these risks are discussed in this report and include, without limitation, volatility in worldwide energy demand and oil and gas prices; fleet additions by competitors and industry overcapacity; changes in capital spending by customers in the energy industry for offshore exploration, field development and production; changing customer demands for vessel specifications, which may make some of our older vessels technologically obsolete for certain customer projects or in certain markets; uncertainty of global financial market conditions and difficulty in accessing credit or capital; acts of terrorism and piracy; significant weather conditions; unsettled political conditions, war, civil unrest and governmental actions, such as expropriation or enforcement of customs or other laws that are not well-developed or consistently enforced, especially in higher political risk countries where we operate; foreign currency fluctuations; labor changes proposed by international conventions; increased regulatory burdens and oversight; and enforcement of laws related to the environment, labor and foreign corrupt practices.

Forward-looking statements, which can generally be identified by the use of such terminology as “may,” “expect,” “anticipate,” “estimate,” “forecast,” “believe,” “think,” “could,” “continue,” “intend,” “seek,” “plan,” and similar expressions contained in this report, are predictions and not guarantees of future performance or events. Any forward-looking statements are based on the company’s assessment of current industry, financial and economic information, which by its nature is dynamic and subject to rapid and possibly abrupt changes. The company’s actual results may differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. While management believes that these forward-looking statements are reasonable when made, there can be no assurance that future developments that affect us will be those that we anticipate and have identified. The forward-looking statements should be considered in the context of the risk factors listed above and discussed in Items 1, 1A, 2 and 7 included in the company’s Annual Report on Form 10-K for the year ended March 31, 2013, filed with the Securities and Exchange Commission (SEC) on May 21, 2013, and elsewhere in the Form 10-Q. Investors and prospective investors are cautioned not to rely unduly on such forward-looking statements, which speak only as of the date hereof. Management disclaims any obligation to update or revise any forward-looking statements contained herein to reflect new information, future events or developments.

In certain places in this report, we may refer to reports published by third parties that purport to describe trends or developments in energy production and drilling and exploration activity. The company does so for the convenience of our investors and potential investors and in an effort to provide information available in the market that will lead to a better understanding of the market environment in which the company operates. The company specifically disclaims any responsibility for the accuracy and completeness of such information and undertakes no obligation to update such information.

The following information contained in this Form 10-Q should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report and related disclosures and the company’s Annual Report on Form 10-K for the year ended March 31, 2013, filed with the SEC on May 21, 2013.

About Tidewater

We provide offshore service vessels and marine support services to the global offshore energy industry through the operation of a diversified fleet of marine service vessels. Tidewater manages and measures its business performance in four distinct operating segments: Americas, Asia/Pacific, Middle East/North Africa, and Sub-Saharan Africa/Europe, and has one of the broadest global operating footprints in the offshore energy industry. We operate vessels in most of the world’s significant offshore crude oil and natural gas exploration and production regions. The company is also one of the most experienced international operators in the offshore

energy industry having operated in many countries throughout the world over the last six decades. At September 30, 2013, the company had 315 vessels (of which 10 were owned by joint ventures, 37 were stacked and one was withdrawn from service) available to serve the global energy industry. The size and composition of the company’s offshore service vessel fleet includes vessels that are operated under joint ventures, as well as vessels that have been stacked or withdrawn from service. The company provides offshore vessel services in support of all phases of offshore exploration, field development and production, including towing of, and anchor handling for, mobile offshore drilling units; transporting supplies and personnel necessary to sustain drilling, workover and production activities; offshore construction, remotely operated vehicle (ROV) operations, and seismic and subsea support; and a variety of specialized services such as pipe and cable laying.

Until their recent sale, the company also operated two shipyards that constructed, upgraded and repaired vessels. The shipyards performed repair work and new construction work for third-party customers, as well as the construction, repair and modification of the company’s own vessels. One of the two shipyards was sold during fiscal 2013 and the remaining shipyard was sold during the first quarter of fiscal 2014.

Principal Factors That Drive Our Revenues

The company’s revenues, net earnings and cash flows from operations are largely dependent upon the activity level of its offshore marine vessel fleet. As is the case with many others in our industry, our business activity is largely dependent on the level of drilling and exploration activity of our customers. Our customers’ business activity, in turn, is dependent on crude oil and natural gas prices, which fluctuate depending on expected future levels of supply and demand for crude oil and natural gas, and on estimates of the cost to find, develop and produce reserves.

The company’s revenues in all segments are driven primarily by the company’s fleet size, vessel utilization and day rates. Because a sizeable portion of the company’s operating costs and depreciation expense does not change proportionally with changes in revenue, the company’s operating profit is largely dependent on revenue levels.

Principal Factors That Drive Our Operating Costs

Operating costs consist primarily of crew costs, repair and maintenance, insurance and loss reserves and fuel, lube oil and supplies.

Fleet size, fleet composition, geographic areas of operation, supply and demand for marine personnel, and local labor requirements are the major factors which affect overall crew costs in all segments. In addition, the company’s newer, more technologically sophisticated anchor handling towing supply vessels (AHTS) and platform supply vessels (PSVs) generally require specially trained, more highly compensated fleet personnel than the company’s older, smaller and less sophisticated vessels. Competition for skilled crew personnel has intensified as new-build support vessels currently under construction increase the number of technologically sophisticated offshore vessels operating worldwide. It is expected that crew costs will likely increase as competition for skilled personnel intensifies.

The timing and amount of repair and maintenance costs are influenced by expectations of future customer demand for our vessels, as well as vessel age and drydockings mandated by regulatory agencies. A certain number of periodic drydockings are required to meet regulatory requirements. The company will generally incur drydocking costs only if economically justified, taking into consideration the vessel’s age, physical condition, contractual obligations, current customer requirements and future marketability. When the company elects to forego a required drydocking, it stacks and, in recent years, frequently sells the vessel because it is not permitted to work without regulatory certifications that are current. When the company drydocks an active vessel, the company not only foregoes vessel revenues and incurs drydocking costs, but also continues to incur vessel operating and depreciation costs. In any given period, vessel downtime associated with drydockings and major repairs and maintenance can have a significant effect on the company’s revenues and operating costs.

At times, vessel drydockings take on an increased significance to the company and its financial performance. Older vessels may require more frequent and more comprehensive repairs and drydockings, which can be expensive. Newer vessels (generally those built after 2000), which now account for a majority of the company’s revenues and vessel margin (vessel revenues less vessel operating costs), can also require expensive drydockings, even in the early years of a vessel’s useful life, due to the greater relative size and complexity of these vessels. Conversely, when the company stacks vessels, the number of drydockings in any period could decline. The combination of these factors can create volatility in period to period drydock costs, which are primarily included in repair and maintenance expense, and incrementally increase the volatility of the company’s revenues and operating income, making period-to-period comparisons of financial results more difficult.

Although the company attempts to efficiently manage its fleet drydocking schedule, changes in the demand for (and supply of) shipyard services can result in heavy workloads at shipyards and inflationary pressure on shipyard pricing. In recent years, increases in drydocking costs and days off hire (due to vessels being drydocked) have contributed to volatility in repair and maintenance costs and vessel revenue. In addition, a number of our more recently constructed vessels are now experiencing their first or second required regulatory drydockings.

Insurance and loss reserves costs are dependent on a variety of factors, including the company’s safety record and pricing in the insurance markets, and can fluctuate over time. The company’s vessels are generally insured for up to their estimated fair market value in order to cover damage or loss resulting from marine casualties, adverse weather conditions, mechanical failure, collisions, and property losses to the vessel. The company also purchases coverage for potential liabilities stemming from third-party losses with limits that it believes are reasonable for its operations. Insurance limits are reviewed annually and third-party coverage is purchased based on the expected scope of ongoing operations and the cost of third-party coverage.

Fuel and lube costs can also fluctuate in any given period depending on the number and distance of vessel mobilizations, the number of active vessels off charter, drydockings, and changes in fuel prices.

The company also incurs vessel operating costs that are aggregated as “other” vessel operating costs. These costs consist of commissions, training costs and other miscellaneous costs. Commissions are incurred primarily in the company’s non-United States operations where brokers and other intermediaries sometimes assist in obtaining work for the company’s vessels. Commissions paid are generally based on a percentage of the day rates earned on a vessel or vessels and, accordingly, commissions paid to brokers generally fluctuate in accordance with vessel revenue. Other costs include, but are not limited to, satellite communication fees, agent fees, port fees, canal transit fees, vessel certification fees, temporary vessel importation fees and any fines or penalties.

Challenges We Confront as a Global Offshore Vessel Company

We operate in many challenging operating environments around the world that present varying degrees of political, social, economic and other uncertainties. We operate in markets where risks of expropriation, confiscation or nationalization of our vessels or other assets, terrorism, piracy, civil unrest, changing foreign currency exchange rates and controls, and changing political conditions, may adversely affect our operations. Although the company takes what it believes to be prudent measures to safeguard its property, personnel and financial condition against these risks, it cannot eliminate entirely the foregoing risks, though the wide geographic dispersal of the company’s vessels helps reduce the potential impact of these risks. In addition, immigration, customs, tax and other regulations (and administrative and judicial interpretations thereof) can have a material impact on our ability to work in certain countries and on our operating costs.

In some international operating environments, local customs or laws may require the company to form joint ventures with local owners or use local agents. The company is dedicated to carrying out its international operations in compliance with the rules and regulations of the Office of Foreign Assets Control (OFAC), the Trading with the Enemy Act, the Foreign Corrupt Practices Act (FCPA), and other applicable laws and regulations. The company has adopted policies and procedures to mitigate the risks of violating these rules and regulations.

Sonatide Joint Venture

For the six months ended September 30, 2013, Tidewater’s Angolan operations generated vessel revenues of approximately $167.7 million, or 24%, of its consolidated vessel revenue, from an average of approximately 88 Tidewater-owned vessels that are marketed through the Sonatide joint venture (six of which were stacked on average during the six months ended September 30, 2013), and, for the six months ended September 30, 2012, generated vessel revenues of approximately $134.3 million, or 22%, of consolidated vessel revenue, from an average of approximately 86 Tidewater-owned vessels (11 of which were stacked on average during the six months ended September 30, 2012.

As of September 30, 2013 and March 31, 2013, the carrying value of Tidewater’s investment in the Sonatide joint venture, which is included in “Investments in, at equity, and advances to unconsolidated companies,” is approximately $53 million and $46 million, respectively.

International Labour Organization’s Maritime Labour Convention

The International Labour Organization’s Maritime Labour Convention, 2006 (the “Convention”) seeks to mandate globally, among other things, seafarer working conditions, ship accommodations, wages, conditions of employment, health and other benefits for all ships (and the seafarers on those ships) that are engaged in commercial activities.

As of August 20, 2012, more than 50% of the world’s vessel tonnage ratified the Convention, meeting the requisites for the Convention to become law effective August 20, 2013 for the first 30 countries that ratified as of August 2012. Since then, additional countries have ratified the Convention and their effective dates for enforcement will be one year from their respective dates of ratification.

Presently, the 51 countries that have ratified are: Antigua and Barbuda, Australia, Bahamas, Barbados, Belgium, Benin, Bosnia and Herzegovina, Bulgaria, Canada, Croatia, Cyprus, Denmark, Fiji, Finland, France, Gabon, Germany, Ghana, Greece, Hungary, Japan, Kiribati, Latvia, Lebanon, Liberia, Lithuania, Luxembourg, Malaysia, Malta, Marshall Islands, Morocco, Netherlands, Nigeria, Norway, Palau, Panama, Philippines, Poland, Russian Federation, Saint Kitts and Nevis, St. Vincent and the Grenadines, Serbia, Singapore, South Africa, Spain, Sweden, Switzerland, Togo, Tuvalu, United Kingdom, and Vietnam. Notably, although Fiji, Gabon, Hungary and Lebanon have submitted instruments of ratification, their respective registrations for Member state social protection benefits are still pending.

Because the company has steadfastly maintained that this Convention is unnecessary in light of existing international labor laws that offer substantial equivalency to the labor provisions of the Convention, the company actively worked with its flag states and industry representatives to seek substantial equivalencies to comparable national and industry laws that meet the intent of the Convention. The company is presently undergoing Convention certification on its vessels on an “as needed” priority basis linked to dates of enforcement by countries, drydock transits, or ocean voyages.

The company continues to assess its global seafarer labor relationships and to review its fleet operational practices in light of the Convention requirements. Where the Convention applies, the company and its customers’ operations may be negatively affected by future compliance costs which cannot be reasonably estimated at this time.

Macroeconomic Environment and Outlook

The primary driver of our business (and revenues) is the level of our customers’ capital and operating expenditures for oil and natural gas exploration, field development and production. These expenditures, in turn, generally reflect our customers’ expectations for future oil and natural gas prices, economic growth, hydrocarbon demand and estimates of current and future oil and natural gas production. The prices of crude oil and natural gas are critical factors in exploration and production (E&P) companies’ decisions to contract drilling rigs and offshore service vessels in the various international markets or the U.S. GOM, with the various international markets being largely driven by supply and demand for crude oil, and the U.S. GOM being influenced both by the supply and demand for natural gas (primarily in regards to shallow water activity) and the supply and demand for crude oil (primarily in regards to deepwater activity).

The price of crude oil decreased slightly during the beginning of our fiscal year due to lower than expected worldwide demand during the first half of 2013 but has rebounded during the current quarter. This rebound is due to intermittent recovery in European markets and improvements in the U.S. economy, and, as a result, analysts believe that this will result in modest growth in emerging markets such as China and Brazil. It should be noted, however, that improvements in the U.S. economy are fragile and are hinged upon debt ceiling negotiations and decisions made by the Federal Reserve Board in regards to monetary policy. Overall crude demand is expected to increase during the remaining months of calendar year 2013 and into 2014 as a consequence of these worldwide economic improvements.

Tidewater anticipates that its longer-term utilization and day rate trends for its vessels will be correlated with demand for and the price of crude oil, which in early October 2013, was trading around $103 per barrel for West Texas Intermediate (WTI) crude and around $110 per barrel for Intercontinental Exchange (ICE) Brent crude. These elevated crude oil prices generally bode well for increases in drilling and exploration activity, which would support increases in demand for the company’s vessels, both in the various global markets and the deepwater sectors of the U.S. GOM.

During fiscal 2014, natural gas prices have trended lower primarily due to increased supply, which has resulted in increases in natural gas inventories. Causes of the lower demand in natural gas include milder weather patterns and a reduction in the number of nuclear power plant outages. In particular, the continuing rise in production of unconventional gas resources in North America (in part due to increases in onshore shale production resulting from technological advancements in horizontal drilling and hydraulic fracturing) and the commissioning of a number of new, large, Liquefied Natural Gas (LNG) exporting facilities around the world have contributed to an oversupplied natural gas market. As of the beginning of October 2013, natural gas was trading in the U.S. at approximately $3.70 per Mcf which is down from approximately $4.00 per Mcf in March 2013. Oversupplied natural gas inventories in the U.S. continue to exert downward pricing pressures on natural gas prices in the U.S. Prolonged periods of oversupply of natural gas (whether from conventional or unconventional natural gas production or gas produced as a byproduct of crude oil production) will likely continue to suppress prices for natural gas, although over the longer term, relatively low natural gas prices may also lead to increased demand for the resource. High onshore gas production along with a prolonged downturn in natural gas prices can negatively impact the offshore exploration and development plans of E&P companies, which in turn, would suppress demand for offshore support vessel services, primarily in the Americas segment (specifically our U.S. operations where natural gas is a more prevalent, exploitable hydrocarbon resource).

Certain oil and gas industry analysts are reporting in their 2013 E&P expenditures (both land-based and offshore) surveys that global capital expenditure budgets for E&P companies are forecast to increase by at least 7% over calendar year 2012 levels. The surveys forecast that international capital spending budgets will increase approximately 9% while North American capital spending budgets are forecast to increase less than 1% as compared to prior year. It is anticipated by these analysts that the North American capital budget increases will primarily be spent onshore rather than offshore, while international E&P spending is expected to be largely offshore, with the strongest markets expected to include Latin America, the Middle East, Russia, Europe and Asia. Capital expenditure budgets incorporated into the spending surveys were based on an approximate $85 WTI and $98 Brent average prices per barrel of oil. E&P companies are estimated to be using an approximate $3.47 per Mcf average natural gas price for their 2013 capital budgets and natural gas directed drilling is forecast to decline in 2013.

Deepwater activity continues to be a significant segment of the global offshore crude oil and natural gas markets, and it is also a source of potential growth for the company. Deepwater oil and gas development typically involves significant capital investment and multi-year development plans. Such projects are generally underwritten by the participating exploration, field development and production companies using relatively conservative assumptions relating to crude oil and natural gas prices. These projects are, therefore, considered less susceptible to short-term fluctuations in the price of crude oil and natural gas. During the past few years, worldwide rig construction increased as rig owners capitalized on the high worldwide demand for drilling and low shipyard and financing costs. Reports published by IHS-Petrodata at the beginning of October 2013 indicate that the worldwide movable offshore drilling rig count, estimated at approximately 900 rigs, approximately 34% of which are designed to operate in deeper waters, will increase with the delivery within the next several years of approximately 230 new-build offshore rigs that are on order

and under construction. Of the estimated 900 movable offshore rigs worldwide, approximately 700 are working as of September 30, 2013, approximately 36% of which are designed to operate in deeper waters. It is further estimated that approximately 45% of the new-build rigs are being built to operate in deeper waters, suggesting that the total population of deepwater working rigs could grow to 38% of the working rig population if all new-build rigs are incremental working rigs. Investment is also being made in the floating production unit market, with approximately 52 new floating production units under construction and expected to be delivered primarily over the next three years to supplement the approximately 365 floating production units already in existence worldwide.

In addition to the increase in deepwater drilling activity, shallow-water exploration and production activity has also increased during the last 12 months. According to IHS-Petrodata, at approximately 397 working jack-up rigs as of October 2013, the number of working jack-up rigs in recent weeks represents an increase of approximately 12% from the number of jack-ups working a year ago. Orders for new jack-up rigs have also increased approximately 30% over the last 12 months to approximately 120 jack-up rigs, nearly all of which are scheduled for delivery in the next three years.

According to IHS-Petrodata, there were 430 new-build offshore support vessels (deepwater platform supply vessels, deepwater AHTS vessels and towing-supply vessels only) under construction as of October 2013, most of which are expected to be delivered to the worldwide offshore vessel market within the next two years. Also as of October 2013, the worldwide fleet of these classes of vessels is estimated at approximately 3,000 vessels, of which Tidewater estimates more than 10% are currently stacked.

An increase in worldwide vessel capacity would tend to have the effect of lowering charter rates, particularly when there are lower levels of exploration, field development and production activity. The worldwide offshore marine vessel industry, however, also has a large number of aged vessels, including approximately 730 vessels, or 25%, of the worldwide offshore fleet, that are at least 25 years old and nearing or exceeding original expectations of their estimated economic lives. These older vessels, approximately 40% of which Tidewater estimates are already stacked, could potentially be removed from the market within the next few years if the cost of extending the vessels’ lives is not economically justifiable. Although the future attrition rate of these aging vessels cannot be determined with certainty, the company believes that the retirement of a sizeable portion of these aged vessels could mitigate the potential negative effects of new-build vessels on vessel utilization and vessel pricing. Additional vessel demand could also be created by the addition of new drilling rigs and floating production units that are expected to be delivered and become operational over the next few years, which should help minimize the possible negative effects of the new-build offshore support vessels being added to the offshore support vessel fleet.

Fiscal 2014 Second Quarter Business Highlights

During the first half of fiscal 2014, the company continued its focus on maintaining its competitive advantages and its market share in markets where it operates and continued to modernize its vessel fleet to increase future earnings capacity while removing from active service certain older vessels that currently have fewer market opportunities. Key elements of the company’s strategy continue to be the preservation of its strong financial position and the maintenance of adequate liquidity to fund the expansion of its fleet of newer vessels. Operating management focused on safe operations, minimizing unscheduled vessel downtime, and maintaining disciplined cost control.

On June 4, 2013, the company, through a subsidiary, acquired Troms Offshore Supply AS, a Norwegian company (Troms Offshore). At the time of the acquisition, Troms Offshore owned four deepwater PSVs, and had two additional deepwater PSVs under construction, one of which was delivered shortly after the acquisition. The purchase price (not including transaction costs) included a $150.0 million cash payment to the shareholders of Troms Offshore and the assumption of approximately $261.3 million of combined Troms Offshore obligations, comprised of net interest-bearing debt and the remaining installment payments due on vessels under construction. The company has performed a fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in $42.2 million of goodwill, all of which was allocated to our Sub-Saharan Africa/Europe segment. The allocation is preliminary and based on estimates and assumptions that as subject to change within the purchase price allocation period (generally one year from the acquisition date).

At September 30, 2013, the company had 304 owned or chartered vessels (excluding joint-venture vessels and vessels withdrawn from service) in its fleet with an average age of 11.0 years.

The company’s consolidated net earnings for the first six months of fiscal 2014 increased 14%, or $10.0 million, as compared to the same period in fiscal 2013, primarily due to an approximate 16% increase in total revenues, which was partially offset by a 17%, or $57.5 million, increase in vessel operating costs, a 14%, or $10.3 million, increase in depreciation expense and a 17%, or $14.0 million, increase in general and administrative expenses. The company recorded $702.0 million in revenues during the first six months of fiscal 2014, which is an increase of $95.7 million over the revenue earned during the same period of fiscal 2013, primarily due to a 17% increase in our total worldwide fleet average day rates attributable to the operation of newer and more sophisticated vessels in a generally improving market environment and $24.1 million in revenues contributed from Troms Offshore, which was acquired in June of 2013.

Vessel revenues generated by the company’s Americas segment increased approximately 20%, or $32.2 million, during the first six months of fiscal 2014 as compared to the revenues earned during the same period in fiscal 2013, primarily due to a $35.8 million and $3.3 million increase in revenues earned on the deepwater and other class of vessels, respectively. These increases in revenue were partially offset by a $6.9 million decrease in revenue generated by the towing-supply/supply class of vessels during the same comparable periods. Americas-based vessel operating costs increased 7%, or $7.2 million, during the first six months of fiscal 2014 as compared to the same period in fiscal 2013.

Vessel revenues generated by our Asia/Pacific segment decreased 18%, or $17.1 million, during the first six months of fiscal 2014 as compared to the revenues earned during the same period in fiscal 2013, primarily due to a decrease in the number of towing-supply/supply vessels operating in this segment because of vessels transferring to other segments and because of vessel sales. Vessel operating costs for the Asia/Pacific segment decreased 14%, or $7.7 million, during the same comparative periods.

Vessel revenues generated by our Middle East/North Africa segment increased 34%, or $22.1 million, during the first six months of fiscal 2014 as compared to the revenues earned during the same period in fiscal 2013, primarily due to deepwater and towing-supply/supply vessels mobilizing to the area. Vessel operating costs for the Middle East/North Africa segment increased 21%, or $7.5 million, during the same comparative periods.

Vessel revenues generated by our Sub-Saharan Africa/Europe segment increased 21%, or $58.2 million, during the first six months of fiscal 2014 as compared to the revenues earned during the same period in fiscal 2013, primarily due to a 20% increase in average day rates and an increase in the number of vessels mobilizing to the area. Vessel operating costs for the Sub-Saharan Africa/Europe segment increased 35%, or $50.5 million, during the same comparative periods, primarily due to increased repair and maintenance expense and an increase in the number of vessels operating in the segment.

A more complete discussion of each of the above segment highlights is included in the “Results of Operations” section below.

Results of Operations

We manage and measure our business performance in four distinct operating segments which are based on our geographical organization: Americas, Asia/Pacific, Middle East/North Africa, and Sub-Saharan Africa/Europe. The following table compares vessel revenues and vessel operating costs (excluding general and administrative expenses, depreciation expense, and gains on asset dispositions, net) for the company’s owned and operated vessel fleet and the related percentage of vessel revenue for the quarters and six-month periods ended September 30, 2013 and 2012 and for the quarter ended June 30, 2013:


	Quarter Ended September 30,								Six Months Ended September 30,								Quarter Ended June 30,
(In thousands)	2013		%		2012		%		2013		%		2012		%		2013		%
Vessel revenues:
Americas	$	101,929		28%		82,316		27%		192,173		28%		159,966		27%		90,244		27%
Asia/Pacific		37,430		10%		45,738		15%		80,386		12%		97,480		16%		42,956		13%
Middle East/N. Africa		45,370		13%		32,051		10%		86,583		12%		64,501		11%		41,213		13%
Sub-Saharan Africa/Europe		178,939		49%		149,717		48%		336,156		48%		277,969		46%		157,217		47%

	$	363,668		100%		309,822		100%		695,298		100%		599,916		100%		331,630		100%

Vessel operating costs:
Crew costs	$	100,767		28%		90,811		29%		193,999		28%		178,115		30%		93,232		28%
Repair and maintenance		38,996		11%		32,754		11%		87,089		13%		59,978		10%		48,093		14%
Insurance and loss reserves		3,926		1%		3,810		1%		9,946		1%		9,161		2%		6,020		2%
Fuel, lube and supplies		19,354		5%		19,269		6%		38,159		5%		37,012		6%		18,805		6%
Other		32,273		9%		26,008		9%		62,284		9%		49,722		8%		30,011		9%

	$	195,316		54%		172,652		56%		391,477		56%		333,988		56%		196,161		59%

The following table compares other operating revenues and costs related to third-party activities of the company’s shipyards (the remainder of which the company disposed of in the quarter ended June 30, 2013), brokered vessels and other miscellaneous marine-related activities for the quarters and the six-month periods ended September 30, 2013 and 2012 and for the quarter ended June 30, 2013:


	Quarter Ended September 30,				Six Months Ended September 30,				Quarter Ended June 30,
(In thousands)	2013		2012		2013		2012		2013
Other operating revenues	$	4,269		2,096		6,724		6,450		2,455
Costs of other operating revenues		4,040		1,585		6,060		5,108		2,020

The following table presents vessel operating costs by the company’s segments, the related segment vessel operating costs as a percentage of segment vessel revenues, total vessel operating costs and the related total vessel operating costs as a percentage of total vessel revenues for the quarters and six-month periods ended September 30, 2013 and 2012 and for the quarter ended June 30, 2013.


	Quarter Ended September 30,								Six Months Ended September 30,								Quarter Ended June 30,
(In thousands)	2013		%		2012		%		2013		%		2012		%		2013		%
Vessel operating costs:
Americas:
Crew costs	$	31,389		31%		29,610		36%		59,230		31%		57,357		36%		27,841		31%
Repair and maintenance		11,750		11%		10,725		13%		20,608		11%		18,837		12%		8,858		10%
Insurance and loss reserves		597		1%		761		1%		2,498		1%		2,189		1%		1,901		2%
Fuel, lube and supplies		5,901		6%		5,108		6%		9,454		5%		10,320		6%		3,553		4%
Other		7,203		7%		6,008		7%		13,673		7%		9,551		6%		6,470		7%

		56,840		56%		52,212		63%		105,463		55%		98,254		61%		48,623		54%
Asia/Pacific:
Crew costs	$	14,567		39%		19,793		43%		30,221		38%		38,322		39%		15,654		36%
Repair and maintenance		3,910		10%		3,019		7%		6,022		8%		5,627		6%		2,112		5%
Insurance and loss reserves		350		1%		425		1%		1,000		1%		527		1%		650		2%
Fuel, lube and supplies		2,410		6%		3,274		7%		5,129		6%		6,447		7%		2,719		6%
Other		3,211		9%		2,289		5%		5,565		7%		4,743		5%		2,354		6%

		24,448		65%		28,800		63%		47,937		60%		55,666		58%		23,489		55%
Middle East/N. Africa:
Crew costs	$	11,545		25%		9,241		29%		22,009		26%		18,901		29%		10,464		25%
Repair and maintenance		3,638		8%		2,911		9%		6,926		8%		5,470		8%		3,288		8%
Insurance and loss reserves		1,216		3%		625		2%		2,018		2%		1,531		2%		802		2%
Fuel, lube and supplies		2,372		5%		2,925		9%		6,240		7%		5,027		8%		3,868		9%
Other		3,082		7%		1,690		5%		5,799		7%		4,522		7%		2,717		7%

		21,853		48%		17,392		54%		42,992		50%		35,451		54%		21,139		51%
Sub-Saharan Africa/Europe:
Crew costs	$	43,266		24%		32,167		21%		82,539		25%		63,535		23%		39,273		25%
Repair and maintenance		19,698		11%		16,099		11%		53,533		16%		30,044		11%		33,835		22%
Insurance and loss reserves		1,763		1%		1,999		1%		4,430		1%		4,914		2%		2,667		2%
Fuel, lube and supplies		8,671		5%		7,962		5%		17,336		5%		15,218		5%		8,665		5%
Other		18,777		11%		16,021		11%		37,247		11%		30,906		11%		18,470		12%

		92,175		52%		74,248		49%		195,085		58%		144,617		52%		102,910		66%

Total operating costs	$	195,316		54%		172,652		56%		391,477		56%		333,988		56%		196,161		59%

The following table compares operating income and other components of earnings before income taxes and its related percentage of total revenue for the quarters and six-month periods ended September 30, 2013 and 2012 and the quarter ended June 30, 2013:


	Quarter Ended September 30,												Six Months Ended September 30,												Quarter Ended June 30,
(In thousands)	2013			%			2012			%			2013			%			2012			%			2013			%
Vessel operating profit:
Americas	$	23,675			6%			9,506			3%			43,976			6%			19,698			3%			20,301			6%
Asia/Pacific		4,807			1%			7,826			3%			15,096			2%			22,734			4%			10,289			3%
Middle East/N. Africa		13,446			4%			6,280			2%			23,569			4%			12,562			2%			10,123			3%
Sub-Saharan Africa/Europe		47,261			13%			44,330			14%			64,780			9%			71,426			12%			17,519			5%

		89,189			24%			67,942			22%			147,421			21%			126,420			21%			58,232			17%
Corporate expenses		(12,891	)		(4%	)		(12,484	)		(4%	)		(29,446	)		(4%	)		(22,951	)		(4%	)		(16,555	)		(5%	)
Gain on asset dispositions, net		49			<1%			1,833			1%			2,189			<1%			2,671			<1%			2,140			1%
Other operating expenses		218			<1%			(94	)		(<1%	)		(174	)		(<1%	)		544			<1%			(392	)		(<1%	)

Operating income		76,565			21%			57,197			18%			119,990			17%			106,684			17%			43,425			13%

Foreign exchange gain (loss)		3,017			1%			529			<1%			2,928			<1%			(1,222	)		(<1%	)		(89	)		(<1%	)
Equity in net earnings of unconsolidated companies		3,781			1%			3,357			1%			8,201			1%			5,720			1%			4,420			1%
Interest income and other, net		538			<1%			1,128			<1%			1,278			<1%			1,847			<1%			740			<1%
Loss on early extinguishment of debt		(4,144	)		(1%	)		---			---			(4,144	)		(<1%	)		---			---			---			---
Interest and other debt costs		(9,918	)		(3%	)		(7,148	)		(2%	)		(18,831	)		(3%	)		(14,735	)		(2%	)		(8,913	)		(3%	)

Earnings before income taxes	$	69,839			19%			55,063			18%			109,422			16%			98,294			16%			39,583			12%

Americas Segment Operations. Americas-based vessel revenues increased 24%, or $19.6 million and 20%, or $32.2 million, respectively, during the quarter and six month periods ended September, 30 2013, respectively, as compared to the same periods of the prior fiscal year, due primarily to revenues earned on deepwater vessels which increased $17.1 million, or 38%, and $35.8 million, or 44%, respectively. The increase in deepwater revenues during the quarter and six month periods ended September 30, 2013 as compared to the same periods in fiscal 2013 is the result of a 12% and 14% increase in average day rates, respectively, and an increase in the number of vessels operating in the Americas segment which were transferred from other segments because of the increased demand for deepwater drilling services in Brazil and the U.S. Gulf of Mexico during the current fiscal year. Revenues earned on the other vessel class increased 43%, or $2.8 million during the quarter ended September 30, 2013 and 25%, or $3.3 million, during the six month period ended September 30, 2013, as compared to the same periods in the prior fiscal year, due to increase in average day rates of 29% and 23%, respectively, as well as increases in utilization rates of 19 and 10 percentage points, respectively. Revenues from towing-supply/supply vessels during the quarters ended September 30, 2013 and 2012 were comparable, however, revenues from towing-supply/supply vessels for the first six months of fiscal 2014 decreased 11%, or $6.9 million, as compared to the first six months of fiscal 2013 due to a five percentage point decrease in utilization rates.

At the beginning of fiscal 2014, the company had 26 Americas-based stacked vessels. During the first six months of fiscal 2014, the company stacked three additional vessels, returned one vessel to service from the previously stacked vessel fleet and sold six vessels from the previously stacked vessel fleet, resulting in a total of 22 stacked Americas-based vessels as of September 30, 2013.

Operating profit for Americas-based vessels increased 149%, or $14.2 million, and 123%, or $24.3 million, respectively, during the quarter and six-month periods ended September 30, 2013, respectively, as compared to the same periods in fiscal 2013, primarily due to higher revenues, which were partially offset by a 9% or $4.6 million and 7%, or $7.2 million, respectively, increase in vessel operating costs (primarily crew costs, repairs and maintenance costs and other vessel costs).

Crew costs increased 6%, or $1.8 million and 3%, or $1.9 million, respectively, during the quarter and six-month period ended September 30, 2013, as compared to the same periods during fiscal 2013, due to an increase in the number of deepwater vessels operating in the segment. Repair and maintenance costs increased 10% or $1.0 million, and 10%, or $1.8 million, respectively, during the quarter and six-month period ended September 30, 2013, as compared to the same periods during fiscal 2013, due to a greater number of drydockings being performed during the current periods.

Other vessel costs increased 20% and 43%, or $1.2 million and $4.1 million, respectively, during the quarter and six-month period ended September 30, 2013, as compared to the same periods during fiscal 2013, due primarily attributable to vessels deliveries into the segment during the current period.

Americas-based vessel revenues increased 13%, or $11.7 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, primarily due to higher revenues earned on the deepwater and towing-supply/supply vessels. Revenues from the deepwater increased 12%, or $6.8 million, during the same comparative periods, primarily due to an increased number of deepwater vessels operating in the segment which were transferred in from other segments because of the increasing demand for deepwater drilling services in Brazil and the U.S. Gulf of Mexico. In addition, revenues from towing-supply/supply vessels increased 12%, or $3.2 million, during the same comparative periods, due to a six percentage point increase in utilization rates.

Operating profit for the Americas-based vessels increased 17%, or $3.4 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, primarily due to higher revenues, partially offset by a 17%, or $8.2 million, increase in vessel operating costs (primarily crew costs, repairs and maintenance costs and fuel, lube and supplies costs).

Crew costs increased 13%, or $3.5 million, during the same comparative periods, due to an increase in the number of vessels operating in the segment. Repair and maintenance costs increased 33%, or $2.9 million, during the same comparative periods, due to a greater number of drydockings performed during the current period and to prepare vessels that had been transferred in from other segments for new contracts. Fuel, lube and supplies costs increased 66%, or $2.3 million, during the same comparative periods, due to a higher number of vessels mobilizing into the segment.

Asia/Pacific Segment Operations. Asia/Pacific-based vessel revenues decreased 18%, or $8.3 million, and 18%, or $17.1 million, respectively, during the quarter and six months ended September 30, 2013, as compared to the quarter and six months ended September 30, 2012, primarily due to lower revenues from both the towing-supply/supply and deepwater vessel classes. Revenues from towing-supply/supply vessels decreased 18%, or $3.7 million, and 25%, or $11.4 million, respectively, during the quarter and six months ended September 30, 2013 as compared to the same comparative periods of fiscal 2013. Revenues from deepwater vessels also decreased 19%, or $4.7 million and 11%, or $5.7 million, respectively, during the same respective comparative periods. Decreases among both vessel classes are attributable to vessel transferring to other segments where market opportunities are currently more robust.

At the beginning of fiscal 2014, the company had nine Asia/Pacific-based stacked vessels. During the first six months of fiscal 2014, the company sold five vessels from the previously stacked vessel fleet and stacked no additional vessels, resulting in a total of four stacked Asia/Pacific-based vessels as of September 30, 2013.

Operating profit for the Asia/Pacific-based vessels decreased 39%, or $3.0 million and 34%, or $7.6 million, respectively, during the quarter and six-month periods ended September 30, 2013, as compared to the same periods in fiscal 2013. Decreased vessel revenues were partially offset by a 15%, or $4.4 million and 14%, or $7.7 million, respectively, decrease in vessel operating costs (primarily crew costs) and a decrease in depreciation expense during the same quarter and six-month comparative periods.

Crew costs decreased 26%, or $5.2 million, and 21%, or $8.1 million, respectively, during the quarter and six-month periods ended September 30, 2013, as compared to same periods during fiscal 2013, and depreciation expense decreased 15%, or $0.7 million, and 13%, or $1.3 million, respectively, during the same quarter and six-month comparative periods due to fewer vessels operating in the segment as a result of vessels transferring into other segments.

Asia/Pacific-based vessel revenues decreased 13%, or $5.5 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, primarily due to a decrease in revenues earned on the deepwater vessels. Deepwater vessel revenue decreased 18%, or $4.4 million, during the same comparative period, due to a 13 percentage point decrease in utilization rates.

Operating profit for the Asia/Pacific-based vessels decreased 53%, or $5.5 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, and is primarily attributable to lower revenues and a 4%, or $1.0 million, increase in vessel operating costs (primarily repairs and maintenance costs). Repairs and maintenance costs increased 85%, or $1.8 million, during the same comparative periods, due to an increase in the number of drydockings during the second quarter.

Middle East/North Africa Segment Operations. Middle East/North Africa-based vessel revenues increased 42% or $13.3 million and 34%, or $22.1 million, respectively, during the quarter and six-month periods ended September 30, 2013, as compared to the same periods during fiscal 2013, due to increased revenues on the towing-supply/supply and deepwater vessels. Towing-supply/supply vessel revenue increased 53% or $9.9 million and 37%, or $14.4 million, respectively, during the quarter and six-month periods ended September 30, 2013, as compared to the same periods during fiscal 2013, due to a 26% and 27% respective increase in average day rates, a 15 and five respective percentage point increases in utilization rates, as well as an increase in the number of vessels operating in the segment. Deepwater vessel revenue increased 28% or $3.5 million, and 34%, or $8.0 million, respectively, during the quarter and six month periods ended September 30, 2013, due to a 21% and 16% respective increase in average day rates as well as an increase in the number of vessels operating in the segment during the comparative periods. Increases in dayrates and overall utilization in Middle East/North Africa segment is primarily the result of increased operations in the Mediterranean Sea and offshore Saudi Arabia since the prior fiscal year.

At the beginning of fiscal 2014, the company had six Middle East/North Africa-based stacked vessels. During the first six months of fiscal 2014, the company sold all six of these vessels and stacked no additional vessels.

Middle East/North Africa-based vessel operating profit increased 114%, or $7.2 million and 88%, or $11.0 million, respectively, during the quarter and six-month periods ended September 30, 2013, as compared to the same periods during fiscal 2013, primarily due to higher revenues, which were partially offset by a 26% or $4.5 million, and 21%, or $7.5 million, respective increase in vessel operating costs (primarily crew costs and other vessel costs) and an increase in depreciation expense during the same comparative periods.

Crew costs increased 25%, or $2.3 million and 16%, or $3.1 million, respectively, during the quarter and six-month periods ended September 30, 2013, as compared to the same periods during fiscal 2013, primarily due to an increase number of vessels operating in the segment which was the result of the transfer of vessels from other segments. Other vessel costs increased 82%, or $1.4 million and 28%, or $1.3 million, respectively, during the same comparative periods, as a result of an increase in provisioning and similar costs related to an increase in the number of vessels operating in the segment. Depreciation expense increased 31% or $1.3 million, and 34%, or $2.9 million, respectively, during the same comparative periods, also due to an increase in the number of vessels operating in the segment.

Middle East/North Africa-based vessel revenues increased 10% or $4.2 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, primarily due to higher revenues earned on the towing-supply/supply vessels. Revenues earned on the towing-supply/supply vessels increased 17%, or $4.3 million, during the same comparative periods, due to a 14 percentage point increase in utilization rates as a result of ships working during the second quarter of fiscal 2014 which were offhire and/or in drydock for a portion of the previous quarter.

Operating profit for the Middle East/North Africa-based vessels increased 33%, or $3.3 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, primarily due to higher revenues, partially offset by a 3%, or $0.7 million, increase in vessel operating costs (primarily crew costs). Crew costs increased 10%, or $1.1 million during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, due to an increase number of vessels operating in the segment which was the result of the transfer of vessels from other segments.

Sub-Saharan Africa/Europe Segment Operations. Sub-Saharan Africa/Europe-based vessel revenues increased 20%, or $29.2 million, during the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013, primarily due to higher revenues earned on the deepwater vessels. Revenues from deepwater vessels increased 57%, or $38.8 million, during the same comparative period, due to a 20% increase in average day rates due to the use of newer, higher spec equipment which has been moved into the area to

meet customer needs as older vessels were transferred to other segments or stacked. Revenues from deepwater vessels during the quarter ended September 30, 2013 also included $20.7 million from vessels related to the June 2013 acquisition of Troms Offshore. Revenues from the towing-supply/supply vessels decreased 11%, or $6.8 million, during the same comparative periods, due to retroactive rate increases on certain vessel charter agreements that were recorded as vessel revenue in the second quarter of fiscal 2013. Revenues from the other class of vessels decreased 15%, or $2.8 million, during the same comparative period, due to a 9% decrease in average day rates and a seven percentage point decrease in utilization rates.

Sub-Saharan Africa/Europe-based vessel revenues increased 21%, or $58.2 million, during the six-month period ended September 30, 2013 as compared to the six-month period ended September 30, 2012, primarily due to higher revenues earned on the deepwater vessels. Revenues earned on the deepwater vessels increased 49%, or $63.5 million, during the same comparative periods, due to a 21% increase in average day rates attributable to the use of newer, higher spec equipment which has been moved into the area to meet customer needs as older vessels were transferred to other segments or stacked. Revenues from deepwater vessels for the first half of fiscal 2014 also included $24.1 million from vessels related to the June 2013 acquisition of Troms Offshore. Revenues earned on the other class of vessels decreased 12%, or $4.4 million, during the same comparative periods, due to a 5% decrease in average day rates and a seven percentage point decrease in utilization rates.

At the beginning of fiscal 2014, the company had 10 Sub-Saharan Africa/Europe-based stacked vessels. During the first half of fiscal 2014, the company stacked three additional vessels, sold one previously stacked vessel and returned to service one vessel from the previously stacked vessel fleet, resulting in a total of 11 stacked Sub-Saharan Africa/Europe-based vessels as of September 30, 2013.

Sub-Saharan Africa/Europe-based vessel operating profit increased 7%, or $2.9 million, during the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013, primarily due to higher revenues which were partially offset by a 24%, or $17.9 million, increase in vessel operating costs (crew costs, repair and maintenance costs and other vessel costs), an increase in depreciation expense and an increase in general and administrative expenses.

Crew costs increased 35%, or $11.1 million, during the second quarter of fiscal 2014 as compared to the second quarter of fiscal 2013, due to a greater number of crew personnel assigned to this segment related to an increase in the number of deepwater vessels and towing-supply/supply vessels operating in the segment. Repair and maintenance costs increased 22%, or $3.6 million, during the same comparative periods, due to a greater number of drydockings and major repairs during the current period. Other vessel costs increased 17%, or $2.8 million, during the same comparative periods, due to an increase in brokers’ commissions because of the increased number of vessels in the segment. Depreciation expense increased 34%, or $5.3 million, during the same comparative periods, due to an increase in the number of vessels operating in this segment including vessels from the Troms Offshore acquisition. General and administrative expenses increased 27%, or $3.5 million, during the same comparative periods, due to increases in administrative payroll (in part related to the acquisition of Troms Offshore).

Sub-Saharan Africa/Europe-based vessel operating profit decreased 9%, or $6.6 million, during the six-month period ended September 30, 2013 as compared to the six-month period ended September 30, 2012, primarily due to a 35%, or $50.5 million, increase in vessel operating costs (primarily crew costs, repairs and maintenance costs and other vessel costs), an increase in depreciation expense and an increase in general and administrative expenses, partially offset by higher revenues.

Crew costs increased 30%, or $19.0 million, during the six-month period ended September 30, 2013 as compared to the six-month period ended September 30, 2012, primarily due to a greater number of crew personnel assigned to this segment related to an increase in the number of both deepwater vessels and towing-supply/supply vessels operating in the segment. Repair and maintenance costs increased 78%, or $23.5 million, during the same comparative periods, due to a greater number of drydockings and major repairs during the current period. Other vessel costs increased 21%, or $6.3 million, during the same comparative periods, due to an increase in brokers’ commissions related to the increased number of vessels in the segment. Depreciation expense increased 29%, or $8.9 million, during the same comparative periods, due to an increase in the number of vessels operating in this segment including vessels from the Troms Offshore acquisition. General and administrative expenses increased 25%, or $6.2 million, during the same comparative periods, due to increases in administrative payroll (in part related to the acquisition of Troms Offshore).

Sub-Saharan Africa/Europe-based vessel revenues increased 14%, or $21.7 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, primarily due to higher revenues earned on the deepwater vessels. Revenue earned on the deepwater vessels increased 22%, or $19.3 million, during the same comparative periods, due the inclusion of a full quarter of revenues related to the acquired Troms Offshore vessels, a 10% increase in average day rates and a ten percentage point increase in utilization rates attributable to the higher than is typical number of large vessels in dry dock in the first quarter of fiscal 2014.

Sub-Saharan Africa/Europe-based vessel operating profit increased 170%, or $29.7 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, due to higher revenues and a 10%, or $10.7 million, decrease in vessel operating costs (primarily repair and maintenance costs), partially offset by an increase in depreciation expense.

Repair and maintenance costs decreased 42%, or $14.1 million, during the second quarter of fiscal 2014 as compared to the first quarter of fiscal 2014, primarily due to a fewer number of drydockings performed during the current period. Depreciation expense increased 8%, or $1.4 million, during the same comparative periods, due to an increase in the number of vessels operating in the segment.

Other Items. Insurance and loss reserves expense were comparable during the quarter and six-month periods ended September 30, 2013, as compared to the same periods during fiscal 2013. Insurance and loss reserves expense decreased $2.1 million, or 35%, during the quarter ended September 30, 2013 as compared to the first quarter of fiscal 2014 primarily due to downward adjustments to case-based and other reserves.

Gain on asset dispositions, net for the first half of fiscal 2014 decreased $0.5 million, or 18%, as compared to the same period in fiscal 2013. A comparable amount of gains on vessel sales were recognized during the comparative periods; however, the company recorded an additional $0.5 million in asset impairments during the six months ended September 30, 2013.

Gain on asset dispositions, net for the second quarter of fiscal 2014 decreased $1.8 million, or 97%, as compared to the same period in fiscal 2013, primarily due to a higher number of vessel sales during the second quarter of fiscal 2013 as compared to the second quarter of fiscal 2014.

Gain on asset dispositions, net, for the second quarter of fiscal 2014 was $2.1 million, or 98%, lower in the than the first quarter of fiscal 2014, due to a greater number of vessels sold during the first quarter of fiscal 2014. In addition, a gain related to the sale of a shipyard was also recognized in the first quarter of fiscal 2014.


	Quarter Ended September 30,				Six Months Ended September 30,
(In thousands)	2013		2012		2013		2012
Amount of impairment incurred	$	175		790		4,047		3,564
Combined fair value of assets incurring impairment		161		1,192		4,466		8,602

Vessel Class Revenue and Statistics by Segment

Vessel utilization is determined primarily by market conditions and to a lesser extent by drydocking requirements. Vessel day rates are determined by the demand created largely through the level of offshore exploration, field development and production spending by energy companies relative to the supply of offshore service vessels. Suitability of equipment and the degree of service provided may also influence vessel day rates. Vessel utilization rates are calculated by dividing the number of days a vessel works during a reporting period by the number of days the vessel is available to work in the reporting period. Stacked vessels depress utilization rates because stacked vessels are considered available to work, and as such, are included in the calculation of utilization rates. Average day rates are calculated by dividing the revenue a vessel earns during a reporting period by the number of days the vessel worked in the reporting period.

Vessel utilization and average day rates are calculated on all vessels in service (which includes stacked vessels and vessels in drydock) but do not include vessels withdrawn from service (one vessel at September 30, 2013) or vessels owned by joint ventures (10 vessels at September 30, 2013).

The following tables compare revenues, day-based vessel utilization percentages and average day rates by vessel class and in total for the quarters and six-month periods ended September 30, 2013 and 2012 and the quarter ended June 30, 2013:


	Quarter Ended September 30,					Six Months Ended September 30,				Quarter Ended June 30,
	2013			2012		2013		2012		2013
REVENUES BY VESSEL CLASS (In thousands):
Americas fleet:
Deepwater vessels	$	61,811			44,747		116,843		81,027		55,032
Towing-supply/supply		30,861			31,109		58,531		65,461		27,670
Other		9,257			6,460		16,799		13,478		7,542
Total	$	101,929			82,316		192,173		159,966		90,244
Asia/Pacific fleet:
Deepwater vessels	$	19,923			24,592		44,215		49,929		24,292
Towing-supply/supply		16,559			20,229		34,281		45,729		17,722
Other		948			917		1,890		1,822		942
Total	$	37,430			45,738		80,386		97,480		42,956
Middle East/N. Africa fleet:
Deepwater vessels	$	15,732			12,275		31,584		23,559		15,852
Towing-supply/supply		28,763			18,859		53,260		38,859		24,497
Other		875			917		1,739		2,083		864
Total	$	45,370			32,051		86,583		64,501		41,213
Sub-Saharan Africa/Europe fleet:
Deepwater vessels	$	106,541			67,696		193,792		130,311		87,251
Towing-supply/supply		56,772			63,548		111,632		112,560		54,860
Other		15,626			18,473		30,732		35,098		15,106
Total	$	178,939			149,717		336,156		277,969		157,217
Worldwide fleet:
Deepwater vessels	$	204,007			149,310		386,434		284,826		182,427
Towing-supply/supply		132,955			133,745		257,704		262,609		124,749
Other		26,706			26,767		51,160		52,481		24,454
Total	$	363,668			309,822		695,298		599,916		331,630

UTILIZATION:
Americas fleet:
Deepwater vessels		72.3	%		70.7		74.9		72.1		77.8
Towing-supply/supply		49.5			48.2		46.3		50.8		43.3
Other		91.6			72.5		86.8		76.5		82.2
Total		63.9	%		58.6		62.0		60.9		60.1
Asia/Pacific fleet:
Deepwater vessels		80.1	%		81.2		86.4		87.4		92.7
Towing-supply/supply		73.0			52.2		68.5		53.6		64.5
Other		100.0			100.0		100.0		74.1		100.0
Total		75.8	%		58.7		73.9		60.7		72.2
Middle East/N. Africa fleet:
Deepwater vessels		81.2	%		91.8		86.1		92.7		91.3
Towing-supply/supply		86.1			71.2		79.1		74.2		72.1
Other		81.8			34.5		57.9		38.4		44.7
Total		84.7	%		69.9		78.9		72.4		73.3
Sub-Saharan Africa/Europe fleet:
Deepwater vessels		88.8	%		83.0		84.0		83.6		79.3
Towing-supply/supply		66.8			67.8		67.2		64.1		67.6
Other		72.5			79.9		71.4		78.2		70.2
Total		75.0	%		75.4		73.4		73.3		71.8
Worldwide fleet:
Deepwater vessels		81.9	%		79.8		81.6		81.4		81.2
Towing-supply/supply		66.3			59.9		63.5		60.0		60.8
Other		77.3			74.7		74.4		74.4		71.5
Total		73.2	%		67.8		71.0		68.1		68.8


	Quarter Ended September 30,		Six Months Ended September 30,		Quarter Ended June 30,
	2013	2012	2013	2012	2013
AVERAGE VESSEL DAY RATES:
Americas fleet: