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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the Fiscal Year Ended March 31, 2005

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

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Act). Yes x No ¨

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The aggregate market value of the voting common stock held by non-affiliates of the registrant as of September 30, 2004, was approximately $1,845,203,244 based upon the last sales price reported for such date. Excluded from the calculation of market value are 3,487,748 shares held by the Registrant’s grantor stock ownership trust.

57,518,433 shares of Tidewater Inc. common stock $0.10 par value per share were outstanding on April 8, 2005. Excluded from the calculation of shares outstanding at April 8, 2005 are 3,199,798 shares held by the Registrant’s grantor stock ownership trust. Registrant has no other class of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for Registrant’s 2005 Annual Meeting of Stockholders are incorporated into Part III of this report.

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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 Annual Report on Form 10-K 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 which may make some of our vessels technologically obsolete for certain customer projects or in certain markets; 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 or 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 elsewhere in this Form 10-K. 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.

PART I

General

Tidewater Inc. (the “company”), a Delaware corporation, provides offshore supply vessels and marine support services to the offshore energy industry through the operation of the world’s largest fleet of offshore marine service vessels. The company’s worldwide headquarters and principal executive offices are located at 601 Poydras Street, New Orleans, Louisiana 70130, and its telephone number is (504) 568-1010. The company was incorporated in 1956. Unless otherwise required by the context, the term “company” as used herein refers to Tidewater Inc. and its consolidated subsidiaries.

With a fleet of over 560 vessels, the company operates (either through its consolidated subsidiaries or joint-ventures in which it participates), and has a leading market share, in most of the world’s significant oil and gas exploration and production markets and provides services supporting all phases of offshore exploration, development and production, including: towing of and anchor handling of mobile drilling rigs and equipment; transporting supplies and personnel necessary to sustain drilling, workover and production activities; assisting in offshore construction activities; and a variety of specialized services including pipe laying, cable laying and 3-D seismic work.

Availability of Reports

The company’s Internet website address is http://www.tdw.com. The company makes available free of charge, on or through its website, its annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after they are electronically filed with the Securities and Exchange Commission. Information appearing on the company’s website is not part of any report filed with the Securities and Exchange Commission.

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Business Highlights

On March 14, 2005, the company announced it had entered into a letter of intent to sell up to six of its KMAR 404 type of anchor handling towing supply vessels for a total amount of $202.0 million. The transaction calls for multiple closings throughout calendar year 2005 on five vessels as they end existing charters. The sixth vessel will be sold in 2005 if certain conditions are met. Culmination of the sale, which would result in a reported gain of approximately $80.0 million, is subject to buyer’s inspection of the vessels and securing adequate financing by April 1, 2005. At April 1, 2005, the buyer notified Tidewater that it did not satisfy one of the conditions of the sale, but still intended to continue its efforts to complete the transaction and enter into a definitive agreement at the price and terms previously agreed. Tidewater informed that buyer that it would continue discussing the sale of the six KMAR vessels on a non-exclusive basis but will also evaluate offers from third parties, should any be made.

Certain provisions of the American Jobs Creation Act of 2004 (the Act), effective for the company as of April 1, 2005, afford the company the ability to omit recording deferred tax assets or liabilities on future undistributed earnings of most non-U.S. subsidiaries and business ventures that it considers indefinitely reinvested abroad. The company currently believes this position will apply to earnings of these entities for the foreseeable future. Consistent with that belief, the company has, effective March 31, 2005, reversed all previously recorded deferred tax assets and liabilities related to timing differences, foreign tax credits, or prior undistributed earnings of these entities whose future and prior earnings are now anticipated to be indefinitely reinvested abroad. The result of this reversal of previously recorded deferred tax assets and liabilities was approximately $31.8 million and it was recorded as a reduction of income tax expense in the fourth quarter of fiscal 2005.

Prior to the April 1, 2005 effective date of the Act, the company had provided income taxes at the U.S. statutory rate on generally all profits of the company generated from both U.S. and international operations. Effective April 1, 2005 income taxes on earnings generated in the U.S. will be provided for at the U.S. statutory income tax rate and the company earnings generated from international operations which we expect to be permanently invested abroad will be provided at the tax rates of the respective countries where the profits are generated. Generally, these international tax rates are significantly less than the U.S. statutory income tax rate; therefore, the company’s consolidated effective tax rate should be significantly lower post April 1, 2005 than what the company has historically experienced. The company’s consolidated effective tax rate in the future could be more volatile as a result of changing profit levels from the various countries in which the company operates.

In late March 2004, the company concluded based on mounting extrinsic evidence that low drilling activity levels in the Gulf of Mexico due to a prolonged weakness in the domestic market could possibly persist for a period of time. In March 2004, the company’s management performed a review of the recoverability of the values of its Gulf of Mexico operating assets and recorded a non-cash asset impairment charge of $26.5 million ($17.2 million after tax, or $0.30 per share) relating to 83 older Gulf of Mexico supply vessels that had been “cold stacked” for as long as several years and were viewed as unlikely to return to active service. The impairment charge was taken to adjust the carrying value of these assets to fair value at March 31, 2004. A full discussion of the impairment of long-lived assets is disclosed in “Impairment of Long-lived Assets” section of Item 7 and Note 3 of Notes to Consolidated Financial Statements.

On July 8, 2003, the company completed the issuance and funding of $300 million of senior unsecured notes. The multiple series of notes with maturities ranging from 7 years to 12 years have an average outstanding life to maturity of 9.5 years and can be retired anytime before maturity without penalty. The average interest rate on the notes sold to private institutional investors is 4.35%. The terms of the notes limit the amount of company debt, and the company’s debt to total capitalization ratio cannot exceed 55%. The note proceeds were used to refinance a then-existing $245.0 million debt outstanding, with the balance of the proceeds used to fund capital expenditures.

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On April 1, 2003, the company paid $79.0 million in cash to ENSCO International Incorporated to purchase its 27-vessel Gulf of Mexico-based marine fleet. The mix of vessels the company acquired consists of five anchor handling towing supply vessels, six stretched 220-foot platform supply vessels and 16 supply vessels. In conjunction with this acquisition, it was agreed that, for a period of two years (expiring on April 1, 2005) and subject to satisfactory performance, the company would provide to ENSCO all of its discretionary vessel requirements in the Gulf of Mexico. The day rates charged under the arrangement were based upon predetermined pricing criteria. This original agreement expired on March 31, 2005, but a one year extension under similar terms has been agreed to. The acquisition enhances the competitive posture of the company in providing anchor handling and towing-supply services in the Gulf of Mexico.

Five years have passed since the company embarked on its aggressive deepwater new-build vessel construction and deepwater vessel acquisition program which facilitated the company’s entrance into the deepwater markets of the world. In that time, the company committed $731.4 million for the purchase or construction of 33 large deepwater vessels, of which $717.0 million has been expended through March 31, 2005. Twenty-nine of these deepwater vessels, of which 11 were acquired and 18 were newly-built, have been delivered, crewed and are working under contracts of varied terms while a thirtieth deepwater vessel is currently being modified and outfitted in preparation for a long-term contract, which will begin in August 2005. During fiscal 2002, the company initiated a replacement program for its U.S.-flagged supply boats in tandem with its deepwater vessel program. In fiscal 2004, it expanded this program to include the replacement of International-flagged towing supply vessels, and committed an additional $379.4 million, of which $347.2 million has been expended through March 31, 2005, for the construction of 24 supply vessels and the purchase of seven supply vessels. Three replacement towing supply vessels were delivered to the company during fiscal 2003, nine were delivered in fiscal 2004 and six were delivered in fiscal 2005. Scheduled delivery of the remaining six replacement vessels will begin in May 2005 with the final vessel delivered in January 2006. The six stretched platform supply vessels acquired from ENSCO on April 1, 2003 discussed above helped accelerate the company’s domestic fleet replacement program.

The company is also engaged in a crewboat expansion program that began in fiscal 2002 when the company acquired 11 existing crewboats and committed to the construction of 24 additional crewboats. Eighteen of the newly-built crewboats have been delivered to the market through fiscal 2005. The company committed $138.3 million for the acquisition or construction of these vessels, of which $126.1 million has been expended through March 31, 2005. Scheduled delivery of the remaining six vessels under construction is expected to run from May 2005 through November 2005. Eighteen of the vessels are large traditional crewboats, nine are smaller water jet craft while eight are state-of-the-art, fast, crew/supply vessels. The acquisition and construction of these vessels has allowed the company to meet its customers’ demand for crewboats. Crewboats typically maintain higher utilization rates and have lower maintenance costs than supply vessels. In addition, the crewboat market has fewer competitors as compared to the supply vessel market.

The expansion programs were initiated with the intent of strengthening the company’s leading presence in all major oil and gas producing regions of the world through the replacement of the company’s core fleet with fewer, larger and more efficient vessels. In order to avoid potential overcapacity in our markets that could be created through the addition of the vessels discussed above, the company sold, primarily to buyers who operate outside of our industry, and/or scrapped 69 vessels between April 2002 and March 2005.

To date, the company has funded all of its vessel commitment programs from current cash balances, operating cash flow, and funds provided by its $300 million senior unsecured notes and its revolving credit facility. At March 31, 2005, the company had 15 vessels under construction for a total capital commitment of $203.1 million, of which the company has already expended $147.6 million. A full discussion of each event including capital commitments and scheduled delivery dates is disclosed in the “Vessel Construction Programs and Acquisitions” and “Vessel Dispositions” section of Item 7 and Note 9 of Notes to Consolidated Financial Statements.

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Areas of Operation

The company’s fleet is deployed in the major offshore oil and gas areas of the world. The principal areas of the company’s operations include the U.S. Gulf of Mexico, the North Sea, the Persian Gulf, the Caspian Sea, and areas offshore Australia, Brazil, Egypt, India, Indonesia, Malaysia, Mexico, Trinidad, Venezuela and West Africa. The company conducts its operations through wholly-owned subsidiaries and joint ventures. Information concerning revenues and operating profit derived from domestic and international marine operations and domestic and international total marine assets for each of the fiscal years ended March 31 are summarized below:

Please refer to Item 7 of this report and Note 11 of Notes to Consolidated Financial Statements for further discussion of revenues, operating profit and identifiable assets.

Marine Vessel Fleet

The company’s vessels regularly and routinely move from one operating area to another, often to and from offshore operating areas of different continents. Tables comparing the average size of the company’s marine fleet by class and geographic distribution for the last three fiscal years are included in Item 7 of this report. The company discloses its vessel statistical information, such as utilization and average day rates, by vessel class. Listed below are the company’s five vessel classes along with a description of the type of vessels categorized in each class and the services the respective vessels perform.

Deepwater Vessels. This is the company’s newest class of vessels, which are often referred to as North Sea-type vessels. Included in this class are large platform supply vessels and large, high-horsepower (generally greater than 10,000 horsepower) anchor handling towing supply vessels. This vessel class is chartered to customers for use in transporting supplies and equipment from shore bases to deepwater and intermediate offshore drilling rigs, platforms and other installations. Platform supply vessels, which have large cargo handling capabilities, serve drilling and production facilities and support offshore construction and maintenance work. The anchor handling towing supply vessels are equipped for and are capable of towing drilling rigs and other marine equipment, as well as setting anchors for positioning and mooring drilling rigs.

Towing Supply and Supply Vessels. This is the company’s largest fleet class by number of vessels. Included in this class are anchor handling towing supply vessels and supply vessels with average horsepower below 10,000 BHP, and platform supply vessels that are generally less than 220 feet. The respective vessels in this class perform the same functions and services as their deepwater vessel class counterparts except they are chartered to customers for use in the intermediate and shallow waters.

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Crewboats and Utility Vessels. Crewboats and utility vessels are chartered to customers for use in transporting personnel and small quantities of supplies from shore bases to offshore drilling rigs, platforms and other installations.

Offshore Tugs. Offshore tugs tow floating drilling rigs; dock tankers; tow barges; assist pipe laying, cable laying and construction barges; and are used in a variety of other commercial towing operations, including towing barges carrying a variety of bulk cargoes and containerized cargo.

Other Vessels. The company’s vessels also include inshore tugs; inshore barges; offshore barges; and production, line-handling and various other special purpose vessels. Inshore tugs, which are operated principally within inland waters, tow drilling rigs to and from their locations, and tow barges carrying equipment and materials for use principally in inland waters for drilling and production operations. Barges are either used in conjunction with company tugs or are chartered to others.

Revenue Contribution of Main Classes of Vessels

Revenues from vessel operations were derived from the main classes of vessels in the following percentages:

Shipyard Operations

Quality Shipyards, LLC, a wholly-owned subsidiary of the company, operates two shipyards in Houma, Louisiana, which construct, modify and repair vessels. While the shipyard performs some work for outside customers, the majority of its business relates to the construction, repair and modification of the company’s own vessels. During the last three calendar years, Quality Shipyards, LLC constructed and delivered seven platform supply vessels and is currently constructing an eighth platform supply vessel for the company. Four of the vessels were large, deepwater platform supply vessels and the remaining four are 220-foot next generation supply vessels. Three of the deepwater vessels were delivered to the market throughout calendar year 2002 while the fourth vessel was delivered in March 2003. Three of the next generation supply vessels were delivered during fiscal 2004 while the fourth vessel is expected to be delivered in fiscal 2006.

International Operations

A significant portion of the company’s operations are conducted in international countries. Revenues from international operations as a percentage of the company’s total revenues were 80%, 78% and 83% during fiscal 2005, 2004 and 2003, respectively. The company’s international marine vessel operations are vulnerable to the usual risks inherent in doing business in countries other than the United States. Such risks include political and economic instability, possible vessel seizures or nationalization of assets and other governmental actions, the ability to recruit and retain management for overseas operations, currency fluctuations and revaluations, and import/export restrictions; all of which are beyond the control of the company.

Insurance

The operation of any marine vessel involves an inherent risk of catastrophic marine disaster, adverse weather conditions, mechanical failure, collisions, and property losses to the vessel and business interruption due to political action in countries other than the United States. Any such event may result in a reduction in revenues or increased costs. The company’s vessels are insured for their estimated market value against damage or loss, including war, terrorism acts, and pollution risks. The company also carries

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workers’ compensation, maritime employer’s liability, directors and officers liability, general liability (including third party pollution) and other insurance customary in the industry.

The continued threat of terrorist activity and other acts of war, or hostility, have significantly increased the risk of political, economic and social instability in some of the geographic areas in which the company operates. It is possible that further acts of terrorism may be directed against the United States domestically or abroad and such acts of terrorism could be directed against properties and personnel of U.S.-owned companies such as ours. The resulting economic, political and social uncertainties, including the potential for future terrorist acts and war, could cause the premiums charged for our insurance coverage to increase. The company currently maintains war risk coverage on its entire fleet. To date, the company has not experienced any property losses as a result of terrorism, political instability or war.

Management believes that the company’s insurance coverage is adequate. The company has not experienced a loss in excess of insurance policy limits; however, there is no assurance that the company’s liability coverage will be adequate to cover all potential claims that may arise nor can the company guarantee that it will be able to maintain adequate insurance in the future at rates considered commercially feasible especially with the current level of uncertainty in the market.

Industry Conditions, Competition and Customers

The company’s operations are materially dependent upon the levels of activity in offshore crude oil and natural gas exploration, development and production throughout the world. Such activity levels are affected by the trends in worldwide crude oil and natural gas prices that are ultimately influenced by the supply and demand relationship for the natural resources. A discussion of current market conditions appears under “General Market Conditions and Results of Operations” in Item 7 of this report.

The principal competitive factors for the offshore vessel service industry are suitability and availability of equipment, price and quality of service. The company has numerous competitors in virtually all areas in which it operates and competition is intense. During the prolonged downturn in the Gulf of Mexico market, which began during calendar year 2001, the company made a strategic decision to attempt to maintain high day rates at the expense of lower utilization. During that time, the majority of the company’s competitors in the Gulf of Mexico elected to charge lower day rates and maintain a higher utilizations level for their vessels. Lower utilization of the company’s Gulf of Mexico supply vessel fleet resulted in the company “cold stacking” approximately 70% of its domestic supply vessel fleet. In March 2004, the company recorded a non-cash asset impairment charge of $26.5 million ($17.2 million after tax, or $0.30 per share) on 83 older supply vessels that were cold stacked as long as several years and viewed as unlikely to return to active service. A full discussion of the impairment of long-lived assets is disclosed in “Impairment of Long-lived Assets” section of Item 7 and Note 3 of Notes to Consolidated Financial Statements. Certain customers of the company own and operate vessels to service certain of their offshore activities.

The company’s diverse, mobile asset base, and the geographic distribution of its assets, enable it to respond to changes in market conditions and provide a broad range of vessel services to its customers throughout the world. Management believes that the company has a significant competitive advantage because of the size, diversity and geographic distribution of its vessel fleet, the company’s financial condition and economies of scale.

The company’s principal customers are major oil and natural gas exploration, development and production companies, foreign government-owned or controlled organizations and companies that explore and produce oil and natural gas, and companies that provide other services to the offshore energy industry. Over the last several years, consolidation of exploration, development and production companies has occurred which has, and will continue to have, an impact on the company’s global operations. Although one customer accounted for 13.2% and a second customer 10.2% of revenues during the year ended March 31, 2005, the five largest customers accounted for approximately 38.6% of its revenues. The company does not consider its operations dependent on any single customer.

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Regulatory Matters

The company is subject to various statutes and regulations governing the operation and maintenance of its vessels. Under the citizenship provisions of the Merchant Marine Act of 1920 and the Shipping Act, 1916, the company would not be permitted to engage in U.S. coastwise trade if more than 25% of the company’s outstanding stock was owned by non-U.S. citizens. The company has a dual stock certificate system to protect against non-U.S. citizens owning more than 25% of its common stock. In addition, the company’s charter provides the company with certain remedies with respect to any transfer or purported transfer of shares of the company’s common stock that would result in the ownership by non-U.S. citizens of more than 24% of its common stock. Based on information supplied to the company by its transfer agent, approximately 5.44% of the company’s outstanding common stock was owned by non-U.S. citizens as of March 31, 2005.

The company’s vessels are subject to various statutes and regulations governing their operation. The laws of the United States provide that once a vessel is registered under a flag other than the United States, it cannot thereafter engage in U.S. coastwise trade. Therefore, the company’s non-U.S. flag vessels must be operated abroad, and if the company is not able to continue to secure charters abroad for such vessels, and work would otherwise have been available for such vessels in the United States, its operations would be adversely affected. Of the total 563 vessels owned or operated by the company at March 31, 2005, 336 were registered under flags other than the United States and 227 were registered under the U.S. flag.

All of the company’s offshore vessels are subject to international safety and classification standards. U.S. flag towing supply and supply vessels are required to undergo periodic inspections and to be recertified under drydock examination at least twice every five years. Vessels registered under flags other than the United States are subject to similar regulations as governed by the laws of the applicable jurisdictions.

Seasonality

The company’s vessel fleet generally has its highest utilization rates in the warmer temperature months when the weather is more favorable for offshore exploration, development and construction work. However, business volume for the company is more dependent on oil and natural gas prices and the global supply and demand conditions for the company’s services than any seasonal variation.

Environmental Compliance

During the ordinary course of business the company’s operations are subject to a wide variety of environmental laws and regulations. The company attempts to comply in all material respects with these laws and regulations in order to avoid costly accidents and related environmental damage. Compliance with existing governmental regulations that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had, nor is expected to have, a material effect on the company. The company is proactive in establishing policies and operating procedures for safeguarding the environment against any environmentally hazardous material aboard its vessels and at shore base locations. Whenever possible, hazardous materials are maintained or transferred in confined areas to ensure containment if accidents occur. In addition, the company has established operating policies that are intended to increase awareness of actions that may harm the environment.

Employees

As of March 31, 2005, the company had approximately 7,150 employees worldwide. The company considers relations with its employees to be satisfactory. The company is not a party to any union contract in the United States but through several subsidiaries is a party to union agreements covering local nationals in several countries other than the United States. For the past few years, the company has been a target of a union organizing campaign for the U.S. Gulf of Mexico employees by maritime labor unions. These union organizing efforts have recently abated, although the threat has not been completely eliminated. If the Gulf employees were to unionize, the company’s flexibility in managing industry changes in the domestic market could be adversely affected.

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The company is not a party to any litigation that, in the opinion of management, is likely to have a material adverse effect on the company’s financial position or results of operations.

There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2005.

There are no family relationships between the directors or executive officers of the company. The company’s officers are elected annually by the Board of Directors and serve for one-year terms or until their successors are elected.

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PART II

The company’s common stock is traded on the New York Stock Exchange and the Pacific Stock Exchange under the symbol TDW. At March 31, 2005, there were approximately 1,463 record holders of the company’s common stock, based upon the record holder list maintained by the company’s stock transfer agent. The following table sets forth the high and low closing sale prices of the company’s common stock as reported on the New York Stock Exchange Composite Tape and the amount of cash dividends per share declared on Tidewater common stock for the periods indicated.

For information regarding shares of common stock authorized for issuance under the company’s equity compensation plans see Item 12 Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth a summary of selected financial data for each of the last five fiscal years. This information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements of the company included in this report.

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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 Annual Report on Form 10-K 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 which may make some of our vessels technologically obsolete for certain customer projects or in certain markets; 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 or 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 elsewhere in this Form 10-K. 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.

Executive Overview

The company provides services and equipment 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 that is ultimately dependent upon oil and natural gas prices that, in turn, are determined by the supply/demand relationship for oil and natural gas. The following discussion should be read in conjunction with the Selected Financial Data and the Consolidated Financial Statements and related disclosures.

Certain provisions of the American Jobs Creation Act of 2004 (the Act), effective for the company as of April 1, 2005, afford the company the ability to omit recording deferred tax assets or liabilities on future undistributed earnings of most non-U.S. subsidiaries and business ventures that it considers indefinitely reinvested abroad. The company currently believes this position will apply to earnings of these entities for the foreseeable future. Consistent with that belief, the company has, effective March 31, 2005, reversed all previously recorded deferred tax assets and liabilities related to timing differences, foreign tax credits, or prior undistributed earnings of these entities whose future and prior earnings are now anticipated to be indefinitely reinvested abroad. The result of this reversal of previously recorded deferred tax assets and liabilities was approximately $31.8 million and it was recorded as a reduction of income tax expense in the fourth quarter of fiscal 2005.

Prior to the April 1, 2005 effective date of the Act, the company had provided income taxes at the U.S. statutory rate on generally all profits of the company generated from both U.S. and international operations. Effective April 1, 2005 income taxes on earnings generated in the U.S. will be provided for at the U.S. statutory income tax rate and the company earnings generated from international operations which we expect to be permanently invested abroad will be provided at the tax rates of the respective countries where the profits are generated. Generally, these international tax rates are significantly less than the U.S. statutory income tax rate; therefore, the company’s consolidated effective tax rate should be

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significantly lower post April 1, 2005 than what the company has historically experienced. The company’s consolidated effective tax rate in the future could be more volatile as a result of changing profit levels from the various countries in which the company operates.

Fiscal 2005 domestic results of operations posted an operating profit for the first time since fiscal 2002. The company’s domestic-based operating profit increased $19.7 million from the prior fiscal year despite earning approximately 6% lower revenues during the current fiscal year due to lower domestic fleet operating costs as the domestic fleet size was reduced through vessel sales and the redeployment of vessels to international markets with better opportunities. Lower operating costs coupled with improved vessel utilization and average dayrates resulted in the increase in operating profits from the prior fiscal year.

The company’s international results of operations are primarily dependent on the demand and supply relationship for crude oil. Although the company’s fiscal 2005 international revenues increased approximately 7% as compared to fiscal 2004, it experienced a slight decline in fiscal 2005 international-based operating profit from fiscal 2004 levels reflecting an increase in vessel operating costs and depreciation expense as the number of vessels operating in the international markets increased.

Fiscal 2005 witnessed the delivery of 12 newly-constructed vessels, which consisted of seven anchor handling towing supply vessels, four crewboats and one platform supply vessel. The company also purchased three anchor handling towing supply vessels and one platform supply vessel during fiscal 2005. Two of the newly constructed anchor handlers are deepwater class vessels. The remaining newly-built anchor handlers and platform supply vessels along with the four purchased supply vessels expanded the company’s core vessel fleet. To date, the company has funded all of its vessel commitment programs from current cash balances, operating cash flow, and funds provided by its $300 million senior unsecured notes and its revolving credit facility.

Vessel Construction Programs and Acquisitions

The company currently has under construction three large anchor handling towing supply vessels that are capable of working in most deepwater markets of the world. A Chinese shipyard is constructing the vessels and scheduled deliveries have been substantially delayed. The shipbuilder has advised the company to expect, and the company expects, the three vessels to be delivered throughout the remainder of calendar year 2005. The total estimated cost for the vessels is approximately $115.6 million, which includes shipyard commitments and other incidental costs such as spare parts, management and supervision, and outfitting costs. The company has fixed cost contracts supported by performance bonds with the shipyard and does not anticipate any cost overruns related to these vessels. As of March 31, 2005, $101.2 million has been expended on the vessels.

The company is also constructing five anchor handling towing supply vessels varying in size from 6,500 brake horsepower (BHP) to 8,000 BHP. Two international shipyards are each constructing two vessels while a third international shipyard is constructing one vessel. Scheduled delivery for the five vessels will begin in May 2005, with the last vessel scheduled for delivery in November 2005. As of March 31, 2005, $40.2 million has been expended on the vessels of the total $64.1 million commitment cost.

The company is committed to the construction of one 220-foot, intermediate size supply vessel for approximately $11.3 million. The company’s shipyard, Quality Shipyard, LLC, is constructing the vessel. Although capable of working in certain deepwater markets, this vessel will replace older supply vessels. Scheduled delivery of the vessel is expected in January 2006. As of March 31, 2005, $3.0 million has been expended on this vessel.

The company is also committed to the construction of one 175-foot, state-of-the-art, fast, crew/supply boat and five water jet crewboats for an approximate total cost of $12.1 million. A U.S. shipyard is constructing the 175-foot crewboat, while a shipyard in Holland is constructing the five water jet crew boats. Scheduled delivery of the 175-foot crewboat is expected in May 2005. The five water jet crewboats are expected to be delivered between May 2005 and November 2005. As of March 31, 2005, $3.3 million has been expended on the six crewboats.

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The table below summarizes the various vessel commitments by vessel class and type as of March 31, 2005:

While the company does not have any other commitments for new-build vessel contracts other than what is discussed above, the company anticipates that over the next several years, it will continue its vessel building and/or new vessel acquisition program in order to replace its aging vessels. The majority of the company’s supply and towing supply vessels were constructed between 1976 and 1983. As such, most of this vessel class exceeds 20 years of age and will need to be replaced within the next several years. In addition to age, market conditions will also help determine when a vessel is no longer economically viable. The company anticipates using future operating cash flows and borrowing capacities to fund over the next few years significant capital expenditures, primarily relating to the continuing replacement of the company’s international anchor handling towing supply vessels. These vessels would replace the company’s core international fleet with fewer, larger and more efficient vessels. The company believes that adequate capital resources will be available to maintain the existing fleet and continue its vessel building and acquisition program.

During fiscal 2005, the company took delivery of two deepwater anchor handling towing supply vessels and five anchor handling towing supply vessels varying in size from 6,500 brake horsepower (BHP) to 8,000 BHP. A shipyard in China constructed the two deepwater anchor handling towing supply vessels, with a BHP in excess of 25,000, for an approximate cost of $68.6 million. The first China built deepwater vessel was delivered during the second quarter of fiscal 2005. The second deepwater anchor handler was delivered in March 2005 and is currently being modified and outfitted by a second shipyard in preparation for a long-term contract which will begin in August 2005. All five of the anchor handling towing supply vessels were built by international shipyards for an approximate total cost of $74.8 million.

The company also took delivery of one platform supply vessels, three 175-foot crewboats and one water jet crewboat during fiscal 2005 for an approximate total cost of $32.4 million. A U.S. shipyard constructed the platform supply vessel while a different U.S. shipyard built the three 175-foot state-of-the-art, fast, crew/supply boats. A shipyard in Holland built the water jet crewboat. The platform supply vessel was built in order to replace older supply vessels and is intermediate in size and technically capable of working in certain deepwater markets. Also during fiscal 2005, the company purchased three 5,500 to 6,500 BHP anchor handling towing supply vessels for approximately $39.6 million and one platform supply vessel for approximately $16.3 million.

On April 1, 2003, the company paid $79.0 million in cash to ENSCO International Incorporated to purchase its 27-vessel Gulf of Mexico-based marine fleet. The mix of vessels the company acquired consisted of five anchor handling towing supply vessels, six stretched 220-foot platform supply vessels and 16 supply vessels. In conjunction with the acquisition of the vessels, it was agreed that, for a two year period and subject to satisfactory performance, the company would provide to ENSCO all of its discretionary vessel requirements in the Gulf of Mexico. The day rates charged under the arrangement were based upon predetermined pricing criteria. This original agreement expired on March 31, 2005, but a one year extension under similar terms has been agreed to. The acquisition enhances the competitive posture of the company in providing anchor handling and towing-supply services in the Gulf of Mexico.

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During fiscal 2004, the company took delivery of two large, platform supply vessels (one constructed by a Brazilian shipyard and the other by a shipyard in the Far East). The company also took delivery of nine next generation supply vessels, ranging in size from 205-foot to 220-foot, for approximately $133.2 million. The company’s shipyard, Quality Shipyard, LLC, constructed three of the next generation supply vessels and two other U.S. shipyards constructed the remaining six vessels. Although the nine vessels are intermediate in size and are technically capable of working in certain deepwater markets they were constructed to replace older supply vessels. Also during fiscal 2004, the company purchased two 5,500 BHP anchor handling towing supply vessel for approximately $24.4 million, purchased one offshore tug for approximately $4.3 million and took delivery of three water jet crewboats that were constructed in Holland for approximately $2.7 million.

During fiscal 2003, the company took delivery of seven large platform supply vessels that were delivered to the market for an approximate total cost of $153.7 million. Three of the platform supply vessels were constructed at Quality Shipyards, LLC and were built to full Jones Act compliance. A shipyard in Singapore constructed two of the large platform supply vessels while a Norwegian shipyard and a Brazilian shipyard each constructed one large platform supply vessel. In addition, during fiscal 2003, the company took delivery of three 220-foot next generation platform supply vessels for approximately $36.8 million.

During fiscal 2003, the company constructed and delivered to the market, for an approximate total cost of $10.3 million, two of four crewboats whose construction contracts the company assumed from Crewboats, Inc., a privately held, leading independent provider of crewboat services in the Gulf of Mexico during fiscal 2002. The remaining two crewboats were delivered during the first and second quarter of fiscal 2004 for an approximate cost of $10.6 million.

Also in fiscal 2003, the company delivered to the market for an approximate total cost of $6.4 million, one of four 175-foot, state-of-the-art, fast, crew/supply boats that blend the speed of a crewboat with the capabilities of a supply vessel for an approximate total cost of $6.4 million. The remaining three 175-foot crewboats were delivered during the first half of fiscal 2004 for an approximate cost of $19.7 million. All four vessels were constructed at a U.S. shipyard that is currently constructing one additional 175-foot, fast, crew/supply boats as discussed above.

The table below summarizes the number of vessels that have been added to the company’s fleet, excluding 27 vessels purchased from ENSCO on April 1, 2003, during fiscal 2005, 2004 and 2003 by vessel class and vessel type:

Vessel Dispositions

On March 14, 2005, the company announced it had entered into a letter of intent to sell up to six of its KMAR 404 type of anchor handling towing supply vessels for a total amount of $202.0 million. The transaction calls for multiple closings throughout calendar year 2005 on five vessels as they end existing charters. The sixth vessel will be sold in 2005 if certain conditions are met. Culmination of the sale, which would result in a reported gain of approximately $80.0 million, is subject to buyer’s inspection of the vessels and securing adequate financing by April 1, 2005. At April 1, 2005, the buyer notified Tidewater that it did not satisfy one of the conditions of the sale, but still intended to continue its efforts to complete the transaction and enter into a definitive agreement at the price and terms previously agreed. Tidewater

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informed that buyer that it would continue discussing the sale of the six KMAR vessels on a non-exclusive basis but will also evaluate offers from third parties, should any be made.

During fiscal 2004, the company sold three crewboats to one of its 49%-owned unconsolidated international joint ventures for $11.8 million. The company financed the sale of all three crewboats. Under the terms of the repayment agreement, the loan is payable in 36 equal installments, which will end in December 2006, plus interest at 90 day LIBOR plus 1.5% adjusted quarterly. The transaction resulted in a fiscal 2004 gain on sale of assets of $0.4 million and increased the investments in, at equity, and advances to unconsolidated companies’ account by $11.4 million.

The company also sold one deepwater platform supply vessel and one crewboat to the same 49%-owned unconsolidated joint venture for $18.8 million during fiscal 2003. The company financed the $16.0 million sale of the deepwater vessel, while the joint venture paid $2.8 million cash for the crewboat. The repayment agreement calls for the loan to be payable in 36 equal installments, which will end in April 2005, plus interest at 90 day LIBOR plus 1.5% adjusted quarterly. The transactions resulted in a fiscal 2003 gain on sale of assets of $1.1 million and increased the investments in, at equity, and advances to unconsolidated companies’ account by $14.9 million.

While the company has been building or acquiring new vessels during the last few years, it also has sold and/or scrapped 69 vessels between April 2002 and March 2005. The mix of vessels disposed of includes 27 towing-supply/supply vessels, 20 crew/utility vessels, 9 offshore tugs and 13 other vessels, primarily barges.

Impairment of Long-lived Assets

During fiscal 2004, numerous marine drilling rigs exited the U.S. Gulf of Mexico despite attractive domestic oil and gas commodity pricing for an extended period of time. These departures, combined with the low activity levels of traditional Gulf of Mexico operators, left the active offshore rig count at its lowest level in ten years. By late fiscal 2004, the company concluded based on mounting extrinsic evidence that low activity levels in the Gulf of Mexico could possibly persist for a period of time. Management reviewed the recoverability of the values of its Gulf of Mexico operating assets and recorded in March 2004 a non-cash asset impairment charge of $26.5 million ($17.2 million after tax, or $0.30 per share) relating to 83 older Gulf of Mexico supply vessels. As a result of the prolonged weakness in the Gulf of Mexico drilling market, the vessels were “cold stacked” for as long as several years and were viewed as unlikely to return to service. Due to the average age of the vessels (23.5 years), outdated specifications (low horsepower and cargo capacities) relative to competing equipment, significant costs to repair and return the vessels to service (average approximately $500,000 per vessel) and an anticipation of low customer demand for the vessels in the future, the company concluded it was unlikely that these vessels would ever return to active service. Based on the determination, and in accordance with Statement of Financial Accounting Standards No. 144, the asset impairment charge noted above was taken to adjust the carrying value of the assets to fair value at March 31, 2004. The fair value of the vessels was determined based upon management’s estimate of liquidation values that could be realized in sales to unrelated purchasers and included an assumption that a significant number of the vessels (as much as 50%) may have to be scrapped. Disposal of the assets may take an extended period of time due to the vessels’ outdated specifications and depressed market conditions in the Gulf of Mexico. One of the impaired vessels was sold during fiscal 2005.

In the fourth quarter of fiscal 2005, the company reviewed, for impairment purposes, all vessels that were currently “cold stacked” and recorded a non-cash impairment charge of $1.7 million ($1.1 million after tax, or $0.02 per share) to reduce the carrying amount of 10 vessels that are unlikely to return to active service.

The company has previously disclosed that it is the subject of an informal inquiry by the Securities and Exchange Commission (SEC) related to the $26.5 million impairment charge that it recorded in its fiscal year ended March 31, 2004 that was related to 83 “cold stacked” vessels that had been used in the Gulf of Mexico. The company is in discussions with the SEC in an effort to resolve the matters raised by the inquiry. At this time, the company is unable to predict the timing or ultimate outcome of these discussions.

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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. The following table compares revenues and operating expenses (excluding general and administrative expenses and depreciation expense) for the company’s vessel fleet for the years ended March 31. 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.

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Marine operating profit (loss) and other components of earnings before income taxes for the years ended March 31 consists of the following:

As a result of the uncertainty of a certain customer to make payment of vessel charter hire, the company has deferred the recognition of approximately $1.6 million of billings as of March 31, 2005, $3.1 million of billings as of March 31, 2004 and $5.6 million of billings as of March 31, 2003 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 resolved.

Comparison of Fiscal 2005 to Fiscal 2004

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 continues to have a negative impact on the company’s domestic results of operations during fiscal 2005; however, prospects for growth in the offshore drilling market in the Gulf of Mexico are showing promise because of several positive developments that occurred during fiscal 2005. In August 2004, the Western Gulf of Mexico lease sale received solid bids. Bids for shallow water tracts were up and high bids for deepwater tracts increased from the previous year’s sale. The Texas State Lease Sale, which was held in January 2005, is reported to have had its best showing in six years and the independent exploration and production (E&P) companies were the dominant bidders at the Central Gulf of Mexico lease sales held in March 2005. Analysts forecast that worldwide E&P expenditures will increase in calendar year 2005 due to continuing strong demand for natural resources despite historically high crude oil prices and lofty natural gas prices. A sizeable portion of the increase in capital spending is expected to be spent in North America. Industry analysts report that many companies plan on increasing their calendar year 2005 E&P budgets on deepwater activities in the Gulf of Mexico. Offshore rig demand has been strong lately and drilling activity is likely to remain high in the coming months. The E&P companies have contracted offshore drilling rigs for longer durations than in past periods due to concerns over rig availability in the domestic market. The market for offshore support vessels tightened during fiscal 2005 as drilling operators discovered that offshore vessels currently in service are in short supply. The Gulf of Mexico supply boat market still has a significant number of vessels stacked that could resume active status, but only after significant expenditures to drydock and re-certify the vessels.

On the other hand, natural gas pricing is a critical factor in E&P companies’ development of capital spending budgets. Weather has been a major driver of natural gas pricing during calendar year 2004. The latter half of calendar 2004 witnessed natural gas inventories exceeding five-year inventory averages due to mild summer and winter weather. Disappointing storage withdrawals due to the mild weather applied downward pressure on natural gas commodity prices. At the present time, the downward pricing trend appears to have reversed as inventories for natural gas began decreasing during the first quarter of calendar year 2005. Given these opposing developments, it is difficult for management to predict how domestic-based vessel demand will be affected during the upcoming quarters but is nonetheless pleased by the developing strength in the offshore drilling market.

The company’s international results of operations for fiscal 2005 benefited from higher 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

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will likely remain strong throughout calendar year 2005 and beyond and expect future crude oil prices to remain at 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. During fiscal 2005, analysts estimated that profitable international offshore markets were more likely to receive notable increases in exploration and production spending in 2005 due to strong demand for crude oil and higher commodity prices for the resource. Management anticipates international vessel demand to improve along with these market conditions.

Domestic-based vessel revenues decreased approximately 6%, or $7.1 million, as compared to fiscal 2004 due to a decrease in the number of vessels operating in the domestic market resulting from the redeployment of vessels to international growth areas, an increase in vessel sales (specifically crewboats and offshore tugs) and lower utilization and average day rates on the company’s offshore tugs. Revenues generated by the towing supply/supply vessel class, the company’s major income producing vessel class in the domestic market, increased approximately 5% compared to fiscal 2004 due to a 26.6% increase in utilization and a 5% increase in average day rates.

International-based vessel revenues for fiscal 2005 increased approximately 7%, or $36.6 million, as compared to fiscal 2004 due to an increase in the number of vessels operating in international markets and due to higher utilization and average day rates on the company’s deepwater class of vessels, which contributed 56% of the increase in revenue growth for fiscal 2005 as compared to fiscal 2004. The company’s towing supply/supply vessels operating in the international markets contributed 42% to fiscal 2005’s international revenue growth as compared to the previous fiscal year.

Other marine service revenues which consist of revenues earned on the company’s shipyard operations, brokered vessel and other marine services lines of business increased approximately 37%, or $9.9 million as compared to fiscal 2004. The company’s shipyard, Quality Shipyards, LLC generated 86% of the increase, or approximately $8.5 million as they performed more third party vessel construction, repair and refurbishments during fiscal 2005 than in the prior fiscal year.

Fiscal 2005’s U.S.-based operating profit increased approximately $19.7 million as compared to fiscal 2004 due to a decrease in vessel operating costs, specifically crew costs and fuel, lube and supplies, and a reduction in depreciation expense primarily related to 83 older domestic-based towing supply/supply vessels that were determined impaired at March 31, 2004. Depreciation expense ceased on these 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 Statement of Financial Accounting Standards No. 144, an asset impairment charge of $26.5 million was recorded to write down the carrying value of these assets to fair value at March 31, 2004. An impairment charge of $1.7 million was recorded in fiscal 2005 to reduce the carrying amount of 10 vessels that are unlikely to return to active service.

International-based vessel operating profit was comparable to fiscal 2004 despite higher revenues due to increases in international vessel operating costs, specifically crew costs, fuel, lube and supplies, and depreciation expense resulting from an increase in the number of vessels (including vessels moved by the company from the Gulf of Mexico) operating in the international market.

Due to the level of vessel activity experienced and to a positive safety performance on a year to date basis, marine results of operations for fiscal 2005 includes $6.7 million of net 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 $10.5 million of premium rebates during fiscal 2004.

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Fiscal 2005’s gain on sales of assets increased approximately 69% compared to fiscal 2004 due to an increase in the number of vessels sold.

Comparison of Fiscal 2004 to Fiscal 2003

Fiscal 2004’s results of operations were lower than the previous fiscal year due to a weak U.S. Gulf of Mexico natural gas drilling market and to lower utilization in certain international markets, particularly West Africa and Southeast Asia. A prolonged weakness in the natural gas drilling market in the Gulf of Mexico continued to impact the company’s domestic results of operations. With the addition of several new-build vessels delivered to the domestic fleet during the fiscal 2004 and the additional vessels acquired from ENSCO on April 1, 2003, domestic-based vessel revenues increased from prior year levels, but utilization rates, especially for the company’s towing supply/supply vessels, remained at a depressed level. Strong natural gas commodity prices and tight inventory levels for the resource for the majority of fiscal 2004 did not stimulate gas drilling in the Gulf of Mexico market. The reasons for the continuing low level of offshore drilling and exploration activity were not fully known. Market analysts expected natural gas commodity prices would increase during calendar year 2004 due to the global economic recovery they believed was underway. Industry pundits predicted for some time that commodity prices for the resource would be sustainable at higher levels, which historically has been a positive indicator for increased drilling activity. Whether sustained higher natural gas prices resulted in increased drilling levels or demand for the company’s vessels in the Gulf of Mexico during the foreseeable future was uncertain.

Although the international offshore marine service industry overall benefited from high crude oil prices and strong worldwide consumer demand for oil, the company’s international results of operations for fiscal 2004 were negatively affected by lower utilization rates, particularly in the West African and Southeast Asian markets because of decreased drilling activity. Industry analysts forecasted that demand for crude oil would remain strong throughout calendar 2004 as a result of the global economic recovery that was underway and expected future crude oil prices to remain at highly attractive levels due to high consumer demand and a reduction in crude oil production output by the Organization of Petroleum Exporting Countries. International capital expenditures by the exploration and production companies for calendar year 2004 were estimated to increase by approximately 6% over calendar year 2003 levels.

Domestic-based vessel revenues increased approximately 21% as compared to fiscal 2003 primarily due to an increased number of company vessels operating in the domestic market resulting from the addition of several new-build vessels during fiscal 2004 and the acquisition of the ENSCO vessels on April 1, 2003. Although the company’s seven deepwater class of vessels operating in the Gulf contributed approximately 42% of the revenue growth for fiscal 2004 as compared to fiscal 2003, it is the company’s towing supply/supply vessel class that is the major income producing vessel class in the domestic market. The higher number of towing supply/supply vessels operating in the domestic market helped generate approximately 23% higher revenue in fiscal 2004 as compared to fiscal 2003. Utilization rates for the towing supply/supply vessels were comparable to fiscal 2003 utilization; however, average day rates declined approximately 3% during fiscal 2004. The company’s average day rates remained at high levels as compared to the average day rates experienced during the last industry downturn. Utilization rates in the U.S. Gulf of Mexico, however, remain at the lowest levels the company has experienced in over a decade due in part to management’s strategic decision to maintain higher average day rates at the expense of lower utilization and in part to a lower demand for vessels in the Gulf of Mexico. Due to the lack of demand at the higher day rate level, the company cold stacked 89 towing supply/supply vessels; all but one vessel required a drydock before returning to service. Faced with the realization that the low level of vessel demand could persist for some time, management reviewed the recoverability of the values of its Gulf of Mexico operating assets and determined that it was unlikely that 83 older supply vessels would ever return to active service due to the vessels’ average age, their outdated specifications relative to competing equipment and significant costs to repair and return these vessels to service and consequently recorded a non-cash asset impairment charge of $26.5 million ($17.2 million after tax, or $0.30 per share) in March 2004. A full discussion of the impairment of long-lived assets is disclosed in “Impairment of Long-lived Assets” section of Item 7 and Note 3 of Notes to Consolidated Financial Statements. Also, the company’s offshore tugs operating in the Gulf experienced a 15% increase in revenues during fiscal 2004 as compared to fiscal 2003 due to higher utilization as a result of an increase in construction activity, ocean barge towing and an increase in rig moving for ENSCO. In conjunction with the acquisition of ENSCO vessels, it was agreed

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that, for a period of two years and subject to satisfactory performance, the company would provide to ENSCO all of their discretionary vessel requirements in the Gulf of Mexico.

International-based vessel revenues declined a modest 4% as compared to fiscal 2003 due to lower utilization rates in certain international markets. Average day rates for fiscal 2004 increased for the entire international-based fleet but were insufficient to mitigate the negative effect lower utilization had on revenues.

In November of 2000 the company purchased seven deepwater vessels that were fulfilling bareboat contractual obligations at the time of purchase. Only one of the original seven bareboat contractual obligations existed by the end of fiscal 2004 as six of the original bareboat charters expired at various times during fiscal 2004. The bareboat charter agreement on the remaining vessel expired in the first quarter of fiscal 2005. In a bareboat charter agreement, the bareboat charterer leases a vessel for a pre-arranged fee and is able to market the vessel and is also responsible for providing the crew and all other operating costs related to the vessel. For the vessel that the company has under bareboat contract, only revenue and depreciation expense are recorded related to the vessel’s activity. As the company incurs no operating costs related to the vessels, the related bareboat day rates are less than comparable vessels operating under normal charter hire arrangements. For fiscal year ended March 31, 2004, the bareboat chartered deepwater vessels experienced 100% utilization and an average day rate of approximately $7,273. The international-based deepwater vessel fleet, excluding the bareboat chartered vessels discussed above, experienced approximately 75.2% utilization and an average day rate of approximately $13,055 for the fiscal year ended March 31, 2004.

Other marine service revenues increased $15.4 million, or approximately 137% as compared to fiscal 2003. The company’s shipyard, Quality Shipyards, LLC generated $9.8 million of the increase. Quality Shipyards, LLC performed more third party vessel construction, repair and refurbishments during fiscal 2004 than in the prior fiscal year. Prior to fiscal 2004, the shipyard was constructing vessels for Tidewater and did not have much excess capacity for third party construction jobs.

U.S.-based operating losses increased approximately $2.3 million as compared to fiscal 2003 due to higher depreciation expense resulting from an increase in the number of vessels operating in the domestic market and due to higher vessel operating costs, primarily crew costs (despite implementing significant cost cutting measures that resulted in the reduction of U.S. shore-based and fleet personnel during the latter part of the second quarter of fiscal 2004), repair and maintenance, and fuel, lube and supplies. Higher vessel operating costs pertained primarily to the new vessels added to the domestic fleet during fiscal 2004. Contributing to fiscal 2004 domestic operating losses was the cost associated with the cold stacked supply vessels, which contributed approximately $8.7 million of costs ($6.7 million of depreciation expense and $2.0 million of vessel operating costs) to the domestic results of operations.

International-based vessel operating profit decreased approximately 31% as compared to fiscal 2003 due to earning lower revenues resulting from reduced vessel utilization and due to higher vessel operating costs driven primarily by greater crew costs related to new vessels added to the fleet since the previous year; higher repair and maintenance costs; and due to increases in fuel, lube and supply costs resulting from furnishing the new vessels and mobilizing them to their areas of operations.

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 vessel withdrawn from active service or joint venture vessels.

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Effective April 1, 2004, the company excludes from its utilization statistics the domestic-based towing supply/supply vessels determined impaired in March 2004 as disclosed in the “Impairment of Long-lived Assets” section of Item 7 and Note 3 of Notes to Consolidated Financial Statements. Had the impaired vessels been included in the company’s utilization statistics for the quarter periods ended June 30, 2004, September 30, 2004, December 31, 2004, and March 31, 2005 domestic-based towing supply/supply utilization would have been 19.8%, 21.0%, 21.5% and 21.4%, respectively. The company’s towing supply/supply vessels utilization for the year ended March 31, 2005 would have been 20.9%. Statistical information is included on two of the impaired supply vessels as these vessels are presently fulfilling short-term charter hire agreements.

The following tables compare day-based utilization percentages and average day rates by vessel class and in total for each of the quarters in the years ended March 31:

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