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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

For the Quarterly Period Ended September 30, 2004

For the Transition Period From              to             

Commission file number 1-6311

TIDEWATER INC.

(Exact name of registrant as specified in its charter)

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

Former name, former address and former fiscal year, 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 is an accelerated file (as defined in Rule 12b-2 of the Exchange Act).

YES    x        NO    ¨

57,147,336 shares of Tidewater Inc. common stock $.10 par value per share were outstanding on October 8, 2004. Excluded from the calculation of shares outstanding at October 8, 2004 are 3,485,909 shares held by the Registrant’s Grantor Stock Ownership Trust. Registrant has no other class of common stock outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TIDEWATER INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value data)

See Notes to Unaudited Condensed Consolidated Financial Statements.

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TIDEWATER INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except share and per share data)

See Notes to Unaudited Condensed Consolidated Financial Statements.

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TIDEWATER INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

See Notes to Unaudited Condensed Consolidated Financial Statements.

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TIDEWATER INC.

NOTES TO UNAUDITED 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 condensed consolidated balance sheets and the condensed consolidated statements of earnings and cash flows at the dates and for the periods indicated. 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 2004 Annual Report on Form 10-K

Certain previously reported amounts have been reclassified to conform to the quarter and six-month period ended September 30, 2004 financial statement presentation.

(2) Stockholders’ Equity

At September 30, 2004 and March 31, 2004, 3,487,748 and 3,666,694 shares, respectively, of common stock were held in a grantor stock ownership plan trust for the benefit of stock-based employee benefits programs. These shares are not included in common shares outstanding for earnings per share calculations and transactions between the company and the trust, including dividends paid on the company’s common stock, are eliminated in consolidating the accounts of the trust and the company.

(3) Stock-Based Compensation

The company measures compensation expense for its stock-based compensation plan using the intrinsic value recognition and measurement principles prescribed by Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations. The company uses the disclosure provision of Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” which amended the disclosure provision of SFAS No. 123. The following table illustrates the effect on net earnings and earnings per share for the quarters and six-month periods ended September 30 had the company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, “Accounting for Stock-Based Compensation.”

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(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 was 32% for the quarter and six-month periods ended September 30, 2004. The effective tax rate applicable to pre-tax earnings for the quarter and six-month periods ended September 30, 2003 was 33%.

(5) Employee Benefit Plans

A defined benefit pension plan covers certain U.S. citizen employees and employees who are permanent residents of the United States. Benefits are based on years of service and employee compensation. In addition, the company also offers a supplemental retirement plan (supplemental plan) that provides pension benefits to certain employees in excess of those allowed under the company’s tax-qualified pension plan. The company did not make a contribution to the defined benefit pension plan during the quarter and six-month periods ended September 30, 2004 and does not expect to make a contribution during the remainder of the fiscal year.

Qualified retired employees currently are covered by a program that 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.

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:

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduced a prescription drug benefit under Medicare (Medicare Part D), as well as a nontaxable federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In May 2004, the Financial Accounting Standards Board issued Staff Position No. 106-2, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (FSP No. 106-2), which addresses the accounting and disclosure requirements associated with the effects of the Act.

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The company has determined that its postretirement benefit plans providing prescription drug benefits are currently actuarially equivalent to Medicare Part D and has therefore elected to recognize the effects of the Act on its postretirement benefit plans by implementing the provisions of FSP 106-2 as of January 1, 2004. The company has reduced its accumulated postretirement benefit obligation (APBO) for the effect of the subsidy related to benefits attributed to prior service by approximately $4.5 million. This is reflected as an actuarial experience gain and is being amortized over current and future periods. In addition, the subsidy will reduce current period service costs and related interest costs on APBO. The estimated total effect of the subsidy is expected to reduce annual postretirement benefit expense by approximately $1.0 million, of which $500,000 has been recognized during the quarter and six months ended September 30, 2004.

(6) Contingencies

At the conclusion of its examination of the company’s income tax returns covering fiscal years 1999 and 2000, the Internal Revenue Service (IRS) issued an examination report challenging the depreciation methods historically utilized by the company and the entire offshore marine support industry. The IRS position could have resulted in additional income tax due approximating $28.5 million for the years under review. Such additional taxes, if due, would have resulted in a reclassification of a previously recorded noncurrent deferred income tax liability to a current tax payable. Subsequent to the issuance of the examination report, the IRS has verbally informed the company that it intends to withdraw its original challenge to the company’s depreciation methods. The company is awaiting receipt of the amended examination report reflecting that change of position.

The IRS has begun examinations of the company’s income tax returns covering fiscal years 2001 and 2002. The company also has additional examinations by state and foreign tax authorities. The company does not believe that the results of these examinations will have a materially adverse affect on the company’s financial position or results of operations.

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 materially adverse effect on the company’s financial position or results of operations.

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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 as of September 30, 2004, and the related condensed consolidated statements of earnings and of cash flows for the three-month and six-month periods ended September 30, 2004. These interim financial statements are the responsibility of the Corporation’s management.

We conducted our review in accordance with standards of the Public 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 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 review, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements as of September 30, 2004, and for the three-month and six-month periods then ended for them to be in conformity with accounting principles generally accepted in the United States of America.

The accompanying condensed consolidated financial information as of March 31, 2004, and for the three-month and six-month periods ended September 30, 2003, were not audited or reviewed by us and, accordingly, we do not express an opinion or any other form of assurance on them.

/s/ DELOITTE & TOUCHE LLP

New Orleans, Louisiana

October 18, 2004

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

Forward Looking Information and Cautionary 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 financial performance. Any such forward-looking statements are subject to risks and uncertainties and the company’s future results of operations could differ materially from historical results or current expectations. Some of these risks are discussed in this report, and include, without limitation, fluctuations in oil and gas prices; level of fleet additions by competitors and industry overcapacity; changes in capital spending by customers in the energy industry for exploration, development and production; changing customer demands for different vessel specifications; acts of terrorism; unsettled political conditions, war, civil unrest and governmental actions, especially in higher risk countries of operations; foreign currency fluctuations; and environmental and labor laws.

Forward-looking statements, which can generally be identified by the use of such terminology as “may,” “expect,” “anticipate,” “estimate,” “forecast,” “believe,” “think,” “could,” “will,” “continue,” “intend,” “seek,” “plan,” “should,” “would” and similar expressions contained in this report, are predictions and not guarantees of future performance or events. Any forward-looking statements are based on current industry, financial and economic information, which the company has assessed but which by its nature is dynamic and subject to rapid and possibly abrupt changes. The company’s actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. The forward-looking statements should be considered in the context of the risk factors listed above and discussed in Items 1, 2 and 7 included in the company’s Annual Report on Form 10-K for the year ended March 31, 2004, filed with the Securities and Exchange Commission on April 21, 2004 and elsewhere in this Form 10-Q. Investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. Management disclaims any obligation to update or revise the forward-looking statements contained herein to reflect new information, future events or developments.

Overview

The company provides services to the global offshore energy industry through the operation of a diversified fleet of marine service vessels. Revenues, net earnings and cash flows from operations are dependent upon the activity level of the vessel fleet, which is ultimately dependent upon oil and natural gas prices, which, in turn, are determined by the supply/demand relationship for crude oil and natural gas. 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.

General Market Conditions and Results of Operations

Offshore service vessels provide a diverse range of services and equipment to the energy industry. Fleet size, utilization and vessel day rates primarily determine the amount of revenues and operating profit because operating costs and depreciation do not change proportionally when revenue changes. Operating costs primarily consist of crew costs, repair and maintenance, insurance, fuel, lube oil and supplies. Fleet size and utilization are the major factors that affect crew costs. The timing and amount of repair and maintenance costs are influenced by customer demands, vessel age and scheduled drydockings to satisfy safety and inspection requirements mandated by regulatory agencies. Whenever possible, vessel drydockings are done during seasonally slow periods to minimize any impact on vessel operations and are only done if economically justified, given the vessel’s age and physical condition.

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The following table compares revenues and operating costs (excluding general and administrative expense, depreciation expense and gain on sales of assets) for the company’s vessel fleet for the quarters and six-month periods ended September 30, 2004 and 2003 and for the quarter ended June 30, 2004. Vessel revenues and operating costs relate to vessels owned and operated by the company while other marine services relate to third-party activities of the company’s shipyards, brokered vessels and other miscellaneous marine-related activities.

Marine support services are conducted worldwide with assets that are highly mobile. Revenues are principally derived from offshore service vessels, which regularly and routinely move from one operating area to another, often to and from offshore operating areas in different continents. Because of this asset mobility, revenues and long-lived assets attributable to the company’s international marine operations in any one country are not “material” as that term is defined by SFAS No. 131.

As a result of the uncertainty of an individual customer to make payment of vessel charter hire, the company has deferred the recognition of approximately $1.9 million of billings as of September 30, 2004 ($3.1 million of billings as of March 31, 2004), which would otherwise have been recognized as revenue. The company will recognize the amounts as revenue as cash is collected or at such time as the uncertainty has been significantly reduced.

The company’s domestic results of operations are primarily driven by natural gas exploration and production. Persistent weakness in the natural gas drilling market in the U.S. Gulf of Mexico continued to have a negative impact on the company’s domestic revenues. During the current quarter, commodity prices for natural gas softened on the news that natural gas inventories increased over its five-year inventory averages. The downward pressure on natural gas prices eased during the latter half of September 2004 when damage to Gulf of Mexico offshore production facilities and drilling shut-ins caused by Hurricane Ivan interrupted deliverable capacity. Drilling rigs were mobilized from the Gulf during the quarter ended September 30, 2004 as drilling rig operators continued with plans to relocate excess drilling rig capacity to international growth areas. Growth opportunities in the offshore drilling market in the Gulf appear to be limited; although a few encouraging developments have recently emerged. The Western Gulf of Mexico lease sales were held in August 2004 and analysts reported that bids for lease sales were solid overall. Bids for shallow water tracts were up and total

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high bids for deepwater tracts also increased from the previous year’s lease sale. This recent positive development along with last quarter’s report that drilling plan permits filed by Gulf operators were expected to surpass the number of permits filed in calendar 2003 are both positive indicators for increased drilling activity in the future. Although management recognizes these positive indicators, at present time, it is still unknown how domestic-based vessel demand will be affected by these developments.

The company’s international results of operations for the first half of fiscal 2005 benefited from stable utilization and average day rates and an increase in the number of vessels operating internationally. The company’s international results of operations are primarily dependent on the supply and demand relationship for crude oil. Industry analysts forecast that demand for crude oil will likely remain strong throughout calendar year 2004 as a result of the global economic recovery that is underway and expect future crude oil prices to remain at highly attractive levels due to continuing high consumer demand, a tightening of crude inventory supplies and concerns over possible supply interruptions caused by geopolitical risk in certain members of the Organization of Petroleum Exporting Countries (OPEC) countries. International capital expenditures by the major and national exploration and production companies are estimated to increase at a higher rate than originally forecast earlier in the calendar year. Revised estimates anticipate calendar year 2004 international capital expenditures by exploration and production companies to increase approximately 12% over calendar year 2003 levels. Analysts also increased calendar year 2005 capital expenditure estimates due to strong demand for crude oil and higher commodity prices for the resource.

Marine operating profit (loss) and other components of earnings before income taxes for the quarters and six-month periods ended September 30, 2004 and 2003 and for the quarter ended June 30, 2004 consist of the following:

U.S.-based vessel revenues for the quarter and six-month period ended September 30, 2004 decreased approximately 11% and 10%, respectively, as compared to the same periods in fiscal 2004 due to a decrease in the number of vessels operating in the domestic market as a result of redeploying vessels to international growth areas and due to vessel sales. The company’s major income producing vessel class in the domestic market is its towing supply/supply vessel class. Utilization of the company’s active towing supply/supply vessels in the U.S. Gulf of Mexico for the quarter ended September 30, 2004 increased 30% as compared to the same period in fiscal 2004. Average day rates for the same vessel class decreased 5% in the second quarter of fiscal 2005 as compared to the same quarter in fiscal 2004 but still remain at high levels as compared to the average day rates

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experienced during the last industry downturn.

U.S.-based operating profit for the quarter and six-month period ended September 30, 2004 increased approximately $7.3 million and $11.5 million, respectively, as compared to the same periods in fiscal 2004 due to a decrease in vessel operating costs and a reduction in depreciation expense primarily related to 83 older domestic-based towing supply/supply vessels that were determined impaired in March 2004. Depreciation expense ceased on 83 vessels when the carrying values of the vessels were written down to estimated current fair market value. The 83 vessels were determined impaired as a result of the prolonged weakness in the Gulf of Mexico drilling market and due to the vessels’ average age (23.5 years), their outdated specifications (low horsepower and cargo capacities) relative to competing equipment, the significant costs to repair and return these vessels to service (average approximately $500,000 per vessel), the anticipation of lower customer demand for the vessels in the future, and management’s conclusion that it was unlikely that the vessels would return to active service. Based on this determination, and in accordance with SFAS No. 144, an asset impairment charge of $26.5 million was recorded to write down the carrying value of these assets to fair market value at March 31, 2004.

Due to the level of vessel activity experienced and to a positive safety performance on a year to date basis, the current quarter ended September 30, 2004 marine results of operations includes $3.5 million of insurance premium rebates as provided for in our insurance program. The company has an opportunity to obtain additional insurance premium rebates in the future should the positive safety performance continue. The company recorded $1.5 million of premium rebates during the second quarter of fiscal 2004.

Current quarter U.S.-based vessel revenues increased approximately 6% as compared to the previous quarter due primarily to higher utilization rates for all vessel classes and an increase in average day rates for the towing supply/supply vessels, offshore tugs and crewboats.

U.S.-based operating profit for the current quarter increased approximately $6.8 million as compared to the previous quarter due to earning higher revenues, a reduction in vessel operating costs (primarily vessel insurance and fuel, lube and supplies) and a reduction of depreciation expense due to redeploying some domestic-based vessels to international areas of operations.

International-based vessel revenues for the quarter ended September 30, 2004 increased approximately 5% as compared to the same period in fiscal 2004 due to an increase in the number of vessels operating in international markets and due to higher utilization on the deepwater class of vessels. International-based vessel revenues for the six-month period ended September 30, 2004 decreased a modest 1% as compared to the same period in fiscal 2004.

International-based vessel operating profit for the quarter ended September 30, 2004 was comparable to the same period in fiscal 2004. Higher international-based revenues earned during the current quarter were offset by increases in vessel operating costs, primarily crew costs, and depreciation expense resulting from an increase in the number of vessels operating in the international market. International-based vessel operating profit for the six-month period ended September 30, 2004 decreased 28% as compared to the same period in fiscal 2004 due to increases in international crew costs and fuel, lube and supplies, and depreciation expense.

Current quarter international-based vessel revenues increased approximately 8% as compared to the previous quarter due to higher utilization and average day rates and an increase in the number of deepwater vessels, towing supply/supply vessels and offshore tugs operating internationally. International-based vessel operating profit for the current quarter increased 21% as compared to the previous quarter due to higher revenues resulting from increased utilization and average day rates.

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Gain on sales of assets for the first half of fiscal 2005 increased approximately 67% as compared to the same period in fiscal 2004 due to an increase in the number of vessels sold.

Vessel Class Statistics

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 through the level of offshore exploration, development and production spending by energy companies relative to the supply of offshore service vessels. Suitability of equipment and the degree of service provided 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. 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 active vessels only and, as such, do not include vessels withdrawn from active service or joint venture vessels. The following tables compare day-based utilization percentages and average day rates by vessel class and in total for the quarter and six months ended September 30, 2004 and 2003 and the quarter ended June 30, 2004:

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The following table compares the average number of vessels by class and geographic distribution for the quarters and six-month periods ended September 30, 2004 and 2003 and for the quarter ended June 30, 2004:

During the first half of fiscal 2005, the company purchased three anchor handling towing supply vessels and took delivery of one platform supply vessel and two crewboats. Also during the first half of fiscal 2005, the company sold and/or scrapped two anchor handling towing supply vessels, two offshore tugs, eight crewboats and one other type vessel.

During the entire fiscal 2004, the company took delivery of two large deepwater platform supply vessels, nine platform supply vessels, two anchor handling towing supply vessels, eight crewboats and one offshore tug. Excluding the three crewboats sold to one of the company’s 49%-owned unconsolidated international joint venture, the company sold and/or scrapped seven towing-supply/supply vessels, two crewboats, three offshore tugs and seven other type vessels during fiscal 2004.

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General and Administrative Expenses

Consolidated general and administrative expenses for the quarters and six-month periods ended September 30, 2004 and 2003 and for the quarter ended June 30, 2004 were as follows: