UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

—

FORM 10-Q

x¨ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30,December 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 .

Commission file number: 1-6311

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Tidewater Inc.

(Exact name of registrant as specified in its charter)

601 Poydras St., Suite 1900

New Orleans, Louisiana 70130

(Address of principal executive offices, including zip code)

(504) 568-1010

(Registrant’s telephone number, including area code)

N/A

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or of such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No¨

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ Nox

51,539,254There were 51,537,664 shares of Tidewater Inc. common stock, $.10 par value per share, were outstanding on October 17, 2008.January 16, 2009. Registrant has no other class of common stock outstanding.

PART I. FINANCIAL INFORMATION

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 as required by Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (SEC). Results of operations for interim periods are not necessarily indicative of results of operations for the respective full years. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the company’s Annual Report on Form 10-K for the year ended March 31, 2008, filed with the SEC on May 30, 2008.

The consolidated financial statements include the accounts of Tidewater Inc. and its subsidiaries. Significant intercompany balances and transactions are eliminated in consolidation. The company uses the equity method to account for equity investments inover which the company exercises significant influence but does not exercise control and is not the primary beneficiary.

(2) Stockholders’ Equity

Common Stock Repurchase Program

In July 2008, the company’s Board of Directors authorized the company to repurchase up to $200.0 million in shares of its common stock in open-market or privately-negotiated transactions. The company will use its available cash and, when considered advantageous, borrowings under its revolving credit facility or other borrowings, to fund any share repurchases. The repurchase program will end on the earlier of the date that all authorized funds have been expended or June 30, 2009, unless extended by the Board of Directors. No amounts were expended for the quarter ended September 30,December 31, 2008 or from July 1, 2008 to December 31, 2008. At September 30,December 31, 2008, $200.0 million was available to repurchase shares of the company’s common stock pursuant to the July 2008 authorized stock repurchase program. Due to the distress in the capital and liquidity markets, company management is attempting to maximize available liquidity for all investment opportunities. The company will continue to evaluate share repurchase opportunities relative to other investment opportunities and in the context of current conditions in the credit and capital markets.

In July 2007, the company’s Board of Directors authorized the company to repurchase up to $200.0 million in shares of its common stock in open-market or privately-negotiated transactions, which program the Board expanded by an additional $50.0 million on January 31, 2008. The Board of Directors’ authorization for this repurchase program expired on June 30, 2008. From inception of the July 2007 authorized program through its conclusion on June 30, 2008, the company expended the entire $250.0 million authorization to repurchase and cancel 4,502,100 common shares at an average price paid per common share of $55.53. For the quarter ended September 30,December 31, 2007, the company expended $61.1$116.4 million tofor the repurchase and cancel 950,000cancellation of 2,282,200 common shares, at an average price paid per common share of $64.27.$51.00. For the nine-month period ended December 31, 2007, the company expended $291.1 million for the repurchase and cancellation of 4,925,600 common shares, at an average price paid per common share of $59.11.

In July 2006, the company’s Board of Directors authorized the company to repurchase up to $157.9 million in shares of its common stock in open-market or privately-negotiated transactions. The Board of Directors’ authorization for this repurchase program expired on June 30, 2007. From inception of the July 2006 authorized repurchase program through its conclusion on June 30, 2007, the company expended $154.1 million to repurchase and cancel 2,560,500 common shares at an average price paid per common share of $60.17. For the three-month period ended June 30, 2007, the company expended $113.7 million to repurchase and cancel 1,693,400 common shares at an average price paid per common share of $67.13.

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Dividend Program

In May 2008, the company’s Board of Directors authorized the increase of itsthe dividend from $0.15 per share to$0.25 per share, a 67%increase. On July 31,November 13, 2008, the company’s Board of Directors declared a quarterly dividend of $0.25 per share. FutureThe declaration of dividends are subject to declaration byis at the discretion of the company’s Board of Directors.

(3) Income Taxes

The effective tax rate applicable to pre-tax earnings for the quarter and six-month periodsthe nine-month period ended September 30,December 31, 2008 was 18.9%16.1% and 18%17.25%, respectively. The effective tax rate applicable to pre-tax earnings for the quarter and six-month periodsthe nine-month period ended September 30,December 31, 2007 was 18%17.01% and 18.5%18.0%, respectively.

On January 9, 2008, the U.S. District Court for the Eastern District of Louisiana rendered a summary judgment in the company’s favor concerning the disallowance by the IRS of the company’s tax deduction for foreign sales corporation commissions for fiscal years 1999 and 2000. On March 6, 2008, the IRS appealed the district court’s decision to the Fifth Circuit Court of Appeals. Although the ultimate resolution of this matter can not be predicted, it is reasonably possible that the dispute will be resolved within the next twelve months. The company has approximately $28.5$29.0 million of tax liabilities recorded at September 30,December 31, 2008, with respect to this issue, which includes liabilities recorded for similar deductions taken in years subsequent to fiscal 2000 that would be reversed should these deductions ultimately be allowed.

Penalties and interest related to FIN 48 liabilities are recorded as income tax expense for financial statement purposes.

Included in other current liabilities at September 30,December 31, 2008 and March 31, 2008 are taxes payable (primarily income) of $38.3$32.1 million and $22.1 million, respectively.

(4) Employee Benefit Plans

The company has aA defined benefit pension plan that 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.compensation levels. 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 contributed $0.4 million and $3.1$4.0 million to the defined benefit pension plan during the quarter and six-monththe nine-month period ended September 30,December 31, 2008, respectively, and expects to contribute an additional $0.9$0.4 million to the plan during the remainder of the current fiscal year. The company contributed $0.3 million and $0.7$1.0 million to the defined benefit pension plan during the quarter and six-monththe nine-month period ended September 30,December 31, 2007, respectively. The company contributed $2.8 million to the supplemental plan during the quarter ended December 31, 2007.

Effective December 10, 2008, the supplemental plan was amended to allow participants the option to elect a lump sum benefit in lieu of other payment options currently provided by the plan. As a result of the amendment, certain participants currently receiving monthly benefit payments will receive lump sum distributions in July 2009 in settlement of the supplemental plan obligation. The aggregate payment to those participants electing the lump sum distribution in July 2009 is currently estimated to be $8.4 million. A settlement loss, which is currently estimated to be $3.1 million, will be recorded at the time of the distribution.

Included in other assets at December 31, 2008, is $13.6 million of investments held in a Rabbi Trust for the benefit of participants in the supplemental plan. The trust assets are recorded at fair value as of December 31, 2008, with unrealized gains or losses included in other comprehensive income. The carrying value of the trust assets at December 31, 2008 is after the effect of $2.7 million of after-tax unrealized losses ($4.2 million pre-tax), which are included in accumulated other comprehensive income (other stockholders’ equity). To the extent that trust assets are liquidated to fund benefit payments, gains or losses, if any, will be recognized at that time.

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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.

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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:

(5) Commitments and contingenciesDebt

The company previously indicated that it believed it had sufficient financial capacity to support a $1.0 billion annual investment in acquiring or building new vessels for the intermediate term, assuming customer demand, acquisition and shipyard economics and other considerations justified such an investment. Revolving Credit Agreement

At present, due to the financial market uncertainties, it is unclear whether adequate capital and liquidity will be available to supplement cash generated by the company to fully implement the continuation of its fleet replacement program at this level, or, if available, on terms and pricing as advantageous as the company has enjoyed historically. The company continues to evaluate its fleet renewal program, whether through new construction or acquisitions, relative to other investment opportunities and uses of cash, including the current share repurchase authorization, and in the context of current conditions in the credit and capital markets. At September 30, 2008, the company had approximately $145.0 million of cash and cash equivalents. In addition, at September 30,December 31, 2008, the entire amount of the company’s $300.0 million revolving line of credit facility was available for future financing needs. The company’s revolving credit agreement matures in May 2010.

Senior Debt Notes

At December 31, 2008, the company had outstanding $300.0 million of senior unsecured notes that were issued on July 8, 2003. The multiple series of notes were originally issued with maturities ranging from 7 years to 12 years and an average outstanding life to maturity of 9.5 years. The notes can be retired prior to maturity without penalty. The weighted average interest rate on the notes is 4.35%. The fair value of this debt at December 31, 2008 was estimated to be $279.8 million.

Debt Costs

The company capitalizes a portion of its interest costs incurred on borrowed funds used to construct vessels. Interest and debt costs incurred, net of interest capitalized for the quarter and the nine-month period ended December 31, 2008, were approximately $0.1 million and $0.5 million, respectively. Interest costs capitalized for the quarter and nine-month period ended December 31, 2008, were approximately $3.4 million and $10.3 million, respectively.

Interest and debt costs incurred, net of interest capitalized for the quarter and the nine-month period ended December 31, 2007, were approximately $1.5 million and $5.7 million, respectively. Interest costs capitalized for the quarter and the nine-month period ended December 31, 2007 were approximately $2.9 million and $7.8 million, respectively.

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(6) Commitments and Contingencies

Vessel Commitments

As of September 30,December 31, 2008, the company hashad commitments to build 5756 vessels at a total cost of approximately $1.2$1.1 billion, which includes contract costs and other incidental costs. The company is committed to the construction of 2321 anchor handling towing supply vessels ranging between 6,500 to 13,600 brake horsepower (BHP), 2827 platform supply vessels, 4six crewboats, and 2two offshore tugs. Scheduled delivery of the vessels is expected to begin in October 2008began January 2009 with delivery of the final vessel in July 2012. As of September 30,December 31, 2008, $377.9$419.0 million hashad been expended on these vessels.

The company’s vessel construction program has been designed to replace over time the company’s agingolder fleet of vessels with fewer, larger and more efficient vessels, while also opportunistically revamping the size and capabilities of the company’s fleet. The majority of the company’s older vessels, its supply and towing-supply vessels, were constructed between 1976 and 1983. As such, most vessels of this class exceed 25 years of age and could require replacement within the next several years, depending on the strength of the market during this time frame. In addition to age, market conditions also help determine when a vessel is no longer economically viable. The company anticipates using future operating cash flows, existing borrowing capacity or new borrowings or lease arrangements to fund this fleet renewal and modernization program over the next several years.

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The company has recently experienced some delays, which may continue, in the expected deliveries of equipment for vessels under construction (as has the offshore supply vessel industry in general). Further delays are possible. Certain of the company’s vessels under construction are committed to work under customer contracts that provide for the payment of liquidated damages by the company or its subsidiaries in certain cases of late delivery. Delays in the expected deliveries of any of these vessels could result in penalties being imposed by our customers. In the opinion of management, the amount of ultimate liability, if any, with respect to these penalties, will not have a material adverse effect on the company’s financial position, results of operations, or cash flows.

Internal Investigation

In its Form 10-K for its fiscal year ended March 31, 2008, the company reported that special counsel which had been previously engaged by the company’s Audit Committee to conduct an internal investigation into certain FCPA matters had substantially completed its investigation and reported its findings to the Audit Committee. The substantive areas of the internal investigation have been reported in earlier periodic filings of the company. The company further reported in its Form 10-K that the company has been diligently responding to special counsel’s observations and recommendations to upgrade its overall compliance posture and implement a more robust company-wide FCPA compliance and training program.

During the course of the investigation, special counsel has been periodically providing the Department of Justice and the Securities and Exchange Commission with informational updates. As part of its continuing cooperation with these agencies, the company entered into an agreement with the Department of Justice effective as of January 10, 2008 to toll certain statutes of limitations for a nine-month period ending on October 10, 2008. The company subsequently entered into a superseding agreement with the Department of Justice (also effective as of January 10, 2008) to reflect the current scope of special counsel’s investigation and to extend the tolling period through June 1, 2009. In addition, the company has entered into a similar agreement with the Securities and Exchange Commission effective as of January 10, 2008 to toll relevant statutes of limitations through June 1, 2009. Both agreements expressly provide that they do not constitute an admission by the company of any facts or of any wrongdoing. The company is unable to predict whether either agency will separately pursue legal or administrative action against the company or any of its employees, what potential remedies or sanctions, if any, these agencies may seek, and what the time frame for resolution of this matter may be. From time to time, these agencies have requested certain documents and information from the company. The company has been voluntarily cooperating with those requests, and special counsel is conducting such further review as may be warranted in connection with those requests. Special counsel expects to have additional meetings with the agencies as the limited remaining investigative work is completed or as otherwise warranted.appropriate. In the meantime, however, after considering the findings reported by special counsel, management is in the process of

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implementing disciplinary measures against employees of the company and its subsidiaries implicated by the findings of the investigation.

Based on the findings of the investigation reported to the company and the Audit Committee to date, the company has not concluded that any potential liability that may result from an investigation or enforcement action by the Department of Justice or the Securities and Exchange Commission is both probable and reasonably estimable, and, thus, no accrual has been recorded as of September 30,December 31, 2008. Should additional information be obtained that any potential liability is probable and reasonably estimable the company will record such liability at that time. While uncertain, ultimate resolution with one or both of these agencies could have a material adverse effect on the company’s results of operations or cash flows.

The company continues to operate approximately 16 vessels in Nigerian offshore waters, either under valid permits, extensions of valid permits, or under temporary arrangements not objected to by the Nigerian government where the underlying permits have expired. Over the past year, theThe company has, from time to time, experienced difficulty in extending the term of previously issued permits or obtaining new permits. Unless a workable permanent solution is developed and implemented,The company anticipates that it may continue to experience similar difficulties in the future. In the event that the company is concerned that the existing arrangements may, from time to time, be difficult to further renew or extend, andexperiences such difficulties, the company may havechoose to removerelocate vessels fromto other countries subject to market conditions (including demand for vessels). However, the company will continue to endeavor to extend existing permits and obtain new permits to operate vessels in Nigerian offshore waters for redeployment elsewhere. The company continues to work diligently with the United States government and the Nigerian authorities in an effort to find a workable solution to these matters andconsistent with its foreign subsidiaries and appropriate third parties to continue to implement its more robust FCPAreinvigorated U.S. Foreign Corrupt Practices (FCPA) compliance and training program in Nigeria. For the quarter and six-month periods ended September 30, 2008, approximately 7% and 7.4%, respectively, of the company’s revenues were generated

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through its Nigerian operations, and the company currently believes that a substantial majority, if not all, of these revenues could be replaced in a reasonable time frame if redeployment of these vessels becomes necessary.program.

Merchant Navy Officers Pension Fund

Certain current and former subsidiaries of the company are, or have been, participating employers in an industry-wide multi-employer retirement fund in the United Kingdom, the Merchant Navy Officers Pension Fund (MNOPF). The company has been informed of a fund deficit that will require contributions from the participating employers. Substantially all of the fund’s deficit allocable to the company relates to current operating subsidiaries. The amount of the company’s share of the fund’s deficit will depend ultimately on a number of factors, including an updated calculation of the total fund deficit, the number of then participating solvent employers, and the final method used in allocating the required contribution among such participating employers. While there were no amounts expensed in fiscal 2008 related to this matter, the company recorded an additional liability of $1.2 million during the quarter ended December 31, 2008. At September 30,December 31, 2008, $4.5$4.9 million remains payable to MNOPF in additional contributions based on current assessments, all of which is fully accrued. In the future the fund’s trustee may claim that the company owes additional amounts for various reasons, including the results of future fund valuation reports and whether other assessed parties have the financial capability to contribute to the respective allocations, failing which, the company and other solvent participating employers could be asked for additional contributions.

Legal Proceedings

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

(6)(7) Financial Instruments

On April 1, 2008, the company adopted the provisions of SFAS No. 157, “Fair Value Measurements” (SFAS No. 157), for financial assets and liabilities that are measured and reported at fair value on a recurring basis. SFAS No. 157 establishes a hierarchy for inputs used in measuring fair value that minimizes the use of unobservable inputs by requiring the use of observable market data when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on active market data. Unobservable inputs are inputs that reflect the company’s assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. The adoption of SFAS No. 157 had no impact on the company’s financial position, results of operations or cash flows for the sixnine months ended September 30,December 31, 2008.

The company’s primary financial instruments required to be measured and recorded at fair value consist of investments held by participants in a supplemental executive retirement plan, a deferred supplemental

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savings plan and a multinational savings plan. These investments are valued based on quoted market prices and arewere carried at $28.3$21.6 million at September 30,December 31, 2008.

The company also periodically enters into certain foreign exchange and interest rate derivatives which are recorded at fair value. The derivative instruments are valued using quoted prices and quotes obtainable from the counterparties to the derivative instruments. The company currently has four foreign exchange derivatives outstanding and considers these derivatives to be immaterial to the financial statements at September 30,December 31, 2008.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). This statement provides companies an option to report selected financial assets and liabilities at fair value. SFAS No.159No. 159 became applicable to the company on April 1, 2008. The company has chosen not to adopt the provisions of SFAS No. 159 for its existing financial instruments.

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(7)(8) Accounting Pronouncements

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

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles “ (SFAS No. 162), which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States. The effective date of SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411,November 15, 2008. The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The company does not expect the adoption of SFAS No. 162 todid not change itsthe company’s current practice nor does the company anticipatedid it have an effect on its results of operations or financial position.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an Amendment to FASB Statement No. 133” (SFAS No. 161), which requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit risk related to contingent features in derivative agreements. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. Early adoption has been encouraged by FASB. The company is currently assessing SFAS No. 161.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements –- An Amendment of ARB No. 51” (SFAS No. 160) which establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, SFAS No. 160 requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and interim periods within those fiscal years and will be applied prospectively to all noncontrolling interests, including any that arose before the effective date. Early adoption is prohibited. The company is assessing SFAS No. 160 and has not yet determined the impact that the adoption of SFAS No. 160 will have on its results of operations or financial position.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (SFAS No. 141R), which establishes principles and requirements for the reporting entity in a business combination, including recognition and measurement in the financial statements of the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. This statement also establishes disclosure requirements to enable financial statement users to evaluate the nature and financial effects of the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited.

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(8)(9) Segment and Geographic Distribution of Operations

The company follows SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” and operates in two business segments: United States and International. The following table provides a comparison of revenues, operating profit, depreciation and amortization, and additions to properties and equipment for the quarters and six-monthnine-month periods ended September 30,December 31, 2008 and 2007. Vessel revenues and operating costs relate to vessels owned and operated by the company while other marine services relate to the activities of the company’s shipyards, brokered vessels and other miscellaneous marine-related businesses.

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The following table provides a comparison of total assets at September 30,December 31, 2008 and March 31, 2008:

(9) Debt

Revolving Credit Agreement

At September 30, 2008, the entire amount of the company’s $300.0 million revolving line of credit was available for future financing needs. The company’s revolving credit agreement matures in May 2010.

Senior Debt Notes

At September 30, 2008, the company had $300.0 million of debt outstanding which represents senior unsecured notes that were issued on July 8, 2003. The multiple series of notes were originally issued with maturities ranging from 7 years to 12 years and an average outstanding life to maturity of 9.5 years. The notes can be retired prior to maturity without penalty. The weighted average interest rate on the notes is 4.35%. The fair value of this debt at September 30, 2008 was estimated to be $275.3 million.

Debt Costs

The company is capitalizing a portion of its interest costs incurred on borrowed funds used to construct vessels. Interest and debt costs incurred, net of interest capitalized for the quarter and six-month period ended September 30, 2008, was approximately $0.1 million and $0.4 million, respectively. Interest costs capitalized, for the quarter and six-month period ended September 30, 2008, was approximately $3.5 million and $6.9 million, respectively.

Interest and debt costs incurred, net of interest capitalized for the quarter and six-month period ended September 30, 2007, was approximately $1.3 million and $4.2 million, respectively. Interest costs capitalized for the quarter and six-month period ended September 30, 2007 was approximately $2.8 million and $4.9 million, respectively.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Tidewater Inc.

We have reviewed the accompanying condensed consolidated balance sheet of Tidewater Inc. and subsidiaries (the “Company”) as of September 30,December 31, 2008, and the related condensed consolidated statements of earnings for the three-month and six-monthnine-month periods ended September 30,December 31, 2008 and 2007, and of cash flows for the six-monthnine-month periods ended September 30,December 31, 2008 and 2007. These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the 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 the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Tidewater Inc. and subsidiaries as of March 31, 2008, and the related consolidated statements of earnings, stockholders’ equity and other comprehensive income, and cash flows for the year then ended (not presented herein); and in our report dated May 29, 2008, we expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph regarding the adoption of FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109, in 2008. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2008 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ DELOITTE & TOUCHE LLP

New Orleans, Louisiana

October 24, 2008January 28, 2009

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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 its historical results or current expectations. Some of these risks are discussed in this report and include, without limitation, fluctuations in worldwide energy demand and oil and gas prices; fleet additions by competitors and industry overcapacity; changes in capital spending by customers in the energy industry for offshore exploration, development and production; changing customer demands for different vessel specifications, which may make some of our older vessels technologically obsolete for certain customer projects or in certain markets; instability of global financial markets and lack of available credit;difficulty in accessing credit or capital; acts of terrorism; significant weather conditions; unsettled political conditions, war, civil unrest and governmental actions, especially in higher risk countries of operations; foreign currency fluctuations; and enforcement of laws related to the environment, labor and foreign corrupt practices.

Forward-looking statements, which can generally be identified by the use of such terminology as “may,” “expect,” “anticipate,” “estimate,” “forecast,” “believe,” “think,” “could,” “continue,” “intend,” “seek,” “plan,” and similar expressions contained in this report, are predictions and not guarantees of future performance or events. Any forward-looking statements are based on 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. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate especially considering the effects the distress in credit and capital markets will have on our customers and the global economy and the uncertainties surrounding the potential for a prolonged global recession. The forward-looking statements should be considered in the context of the risk factors listed above and discussed in Items 1, 1A, 2 and 7 included in the company’s Annual Report on Form 10-K for the year ended March 31, 2008, filed with the Securities and Exchange Commission (SEC) on May 30, 2008 and elsewhere in the Form 10-Q. Investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements.statements, which speak only as of the date hereof. Management disclaims any obligation to update or revise the forward-looking statements contained herein to reflect new information, future events or developments.

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

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 and vessel day rates, which are, among other things, dependent upon oil and natural gas prices and ultimately 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 and the company’s Annual Report on Form 10-K for the year ended March 31, 2008, filed with the SEC on May 30, 2008.

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General Market Conditions and Results of Operations

The currentDuring the last half of calendar 2008, worldwide demand for oil and gas dropped precipitously and energy prices sharply declined as a result of a global financial crisis, which has contributed, among other things, to significant reductions in available capital and liquidity from banks and other providers of credit, has raised well-publicized concerns that the worldwide economy may enter into a prolonged recessionary period.recession. The company is assessing the impactpossible impacts on its operations and financial condition of various scenarios, and sensitivitiesincluding the financial crisispotential for a prolonged global recession. In particular, the company continues to evaluate how a prolonged global recession might have on the global economy, including

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the demand for crude oil and natural gas, and the resulting impact if any, ondevelopment plans of exploration and production companies in order to determine how the crisis may affect the company and theglobal demand for its vessels in the global offshore vessel industry.vessels. Among other things, the company is also uncertain as to whetherof the currentimpact a prolonged global financial crisisrecession and the related distress in credit and capital markets will adversely affecthave on the ability of shipyards to meet their scheduled deliveries of new vessels or the ability of the company to renew its fleet through new vessel construction or acquisitions. Also unknown is the potential effect that the crisisrecession may have on the company’s more highly-leveraged competitors, including suchthose companies’ abilityabilities to continue to fund their construction commitments. At present, the financial and commodity markets are still too volatileunstable to assess the current situation with a high degree of confidence. For the quarter and the nine-month period ended December 31, 2008, the company did not experience any significant negative effects from the current financial crisis and credit market tightening.

Given the foregoing uncertainties, the company continues to re-assess its stated strategies and investment plans. All statements made herein of the previously stated plans or the “current” plan or expectation of such should be considered in the light of the potential effects discussed in the preceding paragraph. While the magnitude of any change in plans, including investment plans, cannot be predicted at this time, it is likely that some adjustments will be necessary due to the global recession, the recent dramatic reduction in commodity prices, and the lack of liquidity in financial markets.

The company operates in a highly competitive business environment that has many risks. Critical risk factors that affect, or may affect, the company and the offshore marine service industry include the absolute level and volatility of crude oil and natural gas prices, changes in the level of capital spending by the company’s customers, the number of available drilling rigs (as discussed below) and the potential overcapacity in the offshore vessel market. A full discussion onof each of these risk factors (in addition to several other risk factors) is disclosed in Item 1A in the company’s Annual Report on Form 10-K for the year ended March 31, 2008, filed with the Securities and Exchange Commission on May 30, 2008. For the quarter and six-month period ended September 30, 2008, the company did not experience any significant negative effects from the current financial crisis and credit market tightening.

Given the foregoing uncertainties, the company is in the process of re-assessing its stated strategy and investment plans. All statements made herein of the previously stated plans or the “current” plan or expectation of such should be considered in the light of the potential effects discussed in the preceding paragraph. While the magnitude of any change in plans, including investment plans, cannot be predicted at this time, it is likely that some adjustments will be necessary due to an economic slowdown, changes in expectations in regard to commodity prices, or the lack of liquidity in financial markets.

The company’s offshore service vessels provide a diverse range of services and equipment to the energy industry. The company’s revenues and operating profit are driven primarily driven by the company’s fleet size, vessel utilization and day rates because a sizeable portion of the company’s operating costs (including depreciation) do not change proportionally with changes in revenue. Operating costs consist primarily consist of crew costs, repair and maintenance, insurance and loss reserves, fuel, lube oil and supplies and vessel operating lease expense. Fleet size, fleet composition, geographic areas of operation and the supply and demand for marine personnel are the major factors which affect overall crew costs.

The timing and amount of repair and maintenance costs are influenced by customer demands, vessel age and drydockings to satisfy safety and inspection requirements mandated by regulatory agencies. A certain number of drydockings are required over a given period to meet regulatory requirements. Drydocking costs are incurred only if economically justified, taking into consideration the vessel’s age, physical condition and future marketability. If a required drydocking is not performed, the company will either stack or sell the vessel as it is not permitted to work without the proper certifications. When the company takes a productive vessel out of service for drydocking, the company incurs not only incurs the drydocking cost but also continues to incur operating costs and depreciation on the vessel and loses revenue from that vessel during the drydock period. In any given period, downtime associated with drydockings and major repairs and maintenance can have a significant effect on the company’s revenues. In the current environment of record dayrates in international markets, drydockings have taken on an increasing importance to the company and its financial performance. OurThe company’s older vessels, for which demand remains relatively strong, require more frequent repair and drydockings, while some of the newer vessels built over the last eight years are now experiencing their first and second required regulatory drydockings. The combination of these factors has led to increased levels of expenditures for drydockings and incremental volatility in operating revenues, thus making period-to-period comparisons more difficult. Although the company attempts to efficiently manage its fleet drydocking schedule to minimize the disruptive effect, recent inflationinflationary pressures in shipyard pricing experienced in recent years and the heavy workloads at the shipyards are resultingresulted in increased drydocking costs, increased days off hire at shipyards,

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and therefore, increased loss of revenue. The company does not seeDue to the global recession, it is unknown if the shipyard situation improvingwill improve in the foreseeable future andfuture. Should no improvement occur, the company expects that the timing of drydockings in the future will result in continued quarterly volatility in repair and maintenance costs and loss in revenue. Fuel and lube costs can also fluctuate in any given period depending on the number of vessel mobilizations that occur in any given period.occur.

The company also incurs vessel operating costs which are aggregated under the “other” vessel operating cost heading. These costs consist of brokers’ commissions, training costs and other type costs. Brokers’

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commission costs are incurred primarily incurred in the company’s international operations where brokers assist in obtaining work for the company’s vessels. Brokers are paid a percentage of day rates and, accordingly, as revenues increase so do commissions paid to brokers. Other type costs include, but are not limited to, satellite communication fees, agent fees, port fees, canal transit fees, vessel certification fees and temporary vessel importation fees.

The following table compares revenues and operating expenses (excluding general and administrative expense, depreciation expense and gain on sales of assets) for the company’s vessel fleet and the related percentage of total revenue for the quarters and six-monththe nine-month periods ended September 30,December 31, 2008 and 2007 and for the quarter ended JuneSeptember 30, 2008. Vessel revenues and operating costs relate to vessels owned and operated by the company, while other marine revenuesservices relate to third-party activities of the company’s shipyards, brokered vessels and other miscellaneous marine-related activities.

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The following table subdivides vessel operating costs presented above by the company’s United States and International segments for the quarters and the nine-month periods ended December 31, 2008 and 2007 and for the quarter ended September 30, 2008.

As a result of the uncertainty of a certain customer to make timely payments onpayment of vessel charter hire, the company has deferred the recognition of approximately $6.0$5.6 million of billings as of September 30,December 31, 2008 ($5.7 million of billings as of March 31, 2008), which would otherwise have been recognized as revenue. The

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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 consolidated net earnings for the first half of fiscal 2009nine months ended December 31, 2008 increased approximately 4%13%, or $6.2$33.8 million, compared to the net earnings achieved during the first half ofsame period in fiscal 2008 primarily due to higher average day rates. The company’s United States (U.S.) revenues decreased approximately 7%5%, or $6.2$5.7 million, during the first half of fiscal 2009,nine months ended December 31, 2008, as compared to the same period in fiscal 2008, while the company’s international revenues increased $88.9$127.0 million, or approximately 18%16%, during the same comparative period. Domestic-based vessel operating costs decreased approximately 9%15%, or $4.5$11.4 million, during the first half of fiscal 2009,nine months ended December 31, 2008, as compared to the same period in fiscal 2008, while the company’s international-based vessel operating costs increased approximately 33%27%, or $75.8$95.2 million, during the same comparative period. A significant portion of the company’s operations are conducted internationally. For the first half of fiscal 2009,nine months ended December 31, 2008, revenues generated from international operations as a percentage of the company’s total revenues were 87%.

The company’s U.S.-based revenues fordecreased approximately 5% during the first half of fiscal 2009 decreasednine months ended December 31, 2008, as compared to the same period in fiscal 2008, primarily due to a decrease in the number of vessels operating in the U.S.-based portion of the Gulf of Mexico (GOM) and to lower utilization on the remaining U.S.-based vessels resulting from lower demand for the company’s vessels in the GOM offshore vessel market as compared to the first half of fiscal 2008, despite increasesan approximate 11% increase in average day rates. Demand for vessels in the shallow water GOM offshore vessel market diminished as repair work on the offshore energy infrastructure that was damaged by Hurricane Ivan in 2004 and Hurricanes Katrina and Rita in August and September 2005, respectively, was completed and numerous drilling rigs have relocated to international areas. During the quarter ended September 30, 2008, vessel day rates trended higher as the supply/demand fundamentals in the GOM offshore vessel market tightened due to an increase in exploration and production (E&P) drilling activity in the GOM resulting from high natural gas prices, which reached the $13.00 per Mcf range in July 2008 and which have since deflated to the $7.00 per Mcf range. In September 2008, Hurricanes Gustav and Ike hit the Louisiana and Texas coasts. The U.S. Minerals Management Service reported that the damage caused by the two storms to the energy industry infrastructure in the U.S. GOM and along the U.S. Gulf Coast was not as extensive as the damage caused by Hurricane’s Katrina and Rita in calendar year 2005 and indicated that the damage that was sustained would take several months to repair. The market for offshore support vessels was already tight prior to the two storms and drilling operators discovered a shortage in available-for-work offshore vessels currently in the U.S. GOM. The GOM supply boat market has a significant number of vessels stacked that could resume active status, but only after expenditures to drydock and re-certify the vessels. Prior to the storms, all of the company’s available-for-work U.S.-based vessels were working at relatively full utilization and, since the storms, two of the company’s stacked vessels are each undergoing a drydock and recertification in order to meet increased post-hurricane market demand.

While the repair work in the Gulf of Mexico is expected to keep U.S-based vessel demand high for the near term, the number of operating drilling rigs in the U.S. offshore market is generally the primary driver of the company’s expected activity levels and future profitability in the U.S. market. At present, the offshore rig count in the GOM remains at historically low levels. The strength of the international drilling market has attracted offshore rigs from the U.S. market over the past few years. Over the longer term, the company’s U.S.-based fleet should be affected more by the active offshore rig count in the United States than by any other single outside influence. In addition, consolidation could result in the absorption of an oil and gas company with which the company has a strong commercial relationship into another company with which the company does not have such a relationship.

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During the summer of 2008, vessel day rates trended higher as the supply/demand fundamentals in the GOM offshore vessel market tightened due to an increase in exploration and production (E&P) drilling activity resulting from high natural gas prices, which reached the $13.00 per Mcf range in July 2008 and which have since deflated to the $5.00 to $6.00 per Mcf range. In September 2008, Hurricanes Gustav and Ike hit the Louisiana and Texas coasts. The U.S. Minerals Management Service reported that the damage caused by the two storms to the energy industry infrastructure in the U.S. GOM and along the U.S. Gulf Coast was not as extensive as the damage caused by Hurricanes Katrina and Rita in calendar year 2005 and indicated that the damage that was sustained would take several months to repair. The market for offshore support vessels was tight prior to the two storms, and drilling operators discovered shortages in available-for-work offshore vessels operating in the U.S. GOM. The GOM supply boat market had a significant number of vessels stacked that could resume active status, but only after expenditures to drydock and re-certify the vessels. Prior to the storms, all of the company’s available-for-work U.S.-based vessels were working at relatively full utilization and, since the storms, two of the company’s stacked vessels underwent a drydock and recertification in order to meet increased post-hurricane market demand. Demand for the company’s vessels was brisk for the majority of the quarter ended December 31, 2008, but demand has waned in the last weeks of the quarter due to normal winter slowdowns and the winding down of repair work on the offshore energy infrastructure.

During the quarter ended September 30, 2008, both the current U.S. President Bush and the U.S. Congress allowed the moratorium on offshore drilling in federal waters along the U.S. Pacific and Atlantic coasts to expire effective October 1, 2008. Although the lifting of the moratorium will not result in immediate drilling, the prospects for the future of offshore drilling in the new regions of the U.S. could be promising; however, in January 2009, a new U.S. President will takeObama took office, and it is not known at this time how currentyet clear what the energy policies in the U.S.policy of his administration will be affected by the new leadership and ultimately how current commodity prices and new energy policies, if any,or what impact such policy will impacthave on the offshore energy industry.

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The deepwater offshore energy market is a growing segment of the energy market. Worldwide rig construction continuesescalated in the past few years as rig owners capitalizecapitalized on the high worldwide demand for drilling. Reports published during the most recently completed quarter suggest that over the next four years, the worldwide moveable drilling rig count will increase as new-build rigs currently on order and under construction stand at approximately 190175 rigs, which will supplement the current approximate 725740 movable rigs worldwide. In addition, investment is also being made in the floating production market where approximately 8068 new floating production units are currently under construction and are expected to be delivered over the next fivefour years to supplement the current approximate 300308 floating production units worldwide.

Approximately 740700 new-build vessels (platform supply vessels and anchor handlers only) are currently under construction and are expected to be delivered to the worldwide offshore vessel market over the next four years as reported by ODS-Petrodata. The current worldwide fleet of these classes of vessels approximates 2,000 vessels. An increase in vessel capacity could result in increased competition in the company’s industry which may have the effect of lowering charter rates. However, the worldwide offshore marine vessel industry has a large number of aging vessels that are nearing or exceeding original expectations of estimated economic lives. These older vessels could potentially retire from the market within the next few years if the cost of extending the vessels’ lives is not economically justifiable. Although the future attrition rate of these aging vessels cannot be accurately predicted, the company believes that the retirement of a portion of these aging vessels may offset, or at least in part,would likely mitigate the potential effects of new-build vessels being delivered into the market. Additional vessel demand should be created with the addition of new drilling rigs and floating production units over the next few years, which should help minimize the effects of 740700 new-build vessels (platform supply vessels and anchor handlers only) being added to the offshore support vessel fleet. ItHowever, it is unknown at this time how the global financial crisisrecession will influence the utilization of equipment currently in existence and ultimate delivery of new drilling rigs, floating production units and vessels currently under construction.

Commodity prices, and particularly the price of crude oil and natural gas, are critical factors in E&P companies’ decisions to retain their drilling rigs in the U.S. Gulf of MexicoGOM market or mobilize the rigs to more profitable international markets. CrudePrices for crude oil and natural gas markets witnessed positive record breaking pricing in mid-July 2008. Even before the current financial crisis caused extreme uncertainty in the market, prices for these two commodities hadhave fallen dramatically from their respective peaks earlierachieved in thecalendar year 2008 due to a U.S. economic slowdown, which had begun to reduceglobal recession that resulted in a marked decline in worldwide demand for oil and gas. Inventory levels for natural gas have risenrose higher than expected duringover the summer injection season and are expected to approachwere near full capacity at the end of the season as was the case during calendar years 2006 and 2007. Production shut-ins in the offshore drilling market caused by Hurricanes Gustav and Ike eased some of the production growth in natural gas but were insufficient to offset strong land-based natural gas drilling. Analysts estimate

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that inventory levels for natural gas will remain high even during the winter drawdown season due to the strong supply growth and declining demand resulting from the economic recession. High inventory levels for natural gas generallyand low demand do not bode well for future increases in natural gas pricing. TheGiven the historical strong correlation between commodity prices, drilling and exploration activity and demand for the company’s U.S. results of operations are primarily driven by naturalvessels in the GOM, if gas explorationprices remain weak during calendar year 2009, the company would expect that its ability to maintain the utilization rates and production and, given the relative uncertainty of naturalday rates for its vessels in that market will be under stress. However, because gas pricing itand gas demand have been extremely volatile, as evidenced by the sharp increases and declines experienced during calendar year 2008, management is unknown how U.S.-based vessel demandunable to predict with confidence what the company’s actual experience will be affected after the post-hurricane offshore vessel demand surge wanes.in calendar year 2009.

While all of these factors create uncertainty as to the immediate future activity level of the U.S. vessel market, theThe company’s assets are highly mobile. Should the U.S. market weaken, the company has the ability to redeploy some of its vessels to international markets where, market conditions permitting, the vessels may benefit from stronger average day rates and statutory income tax rates that are typically lower than in the United States. The company will continue to assess the demand for vessels in the Gulf of Mexico and in the various international markets and consider relocating additional vessels to international areas.areas, although the ability of the company to continue to mobilize vessels among international markets will be subject to global market demand. The cost of mobilizing vessels to a different market are sometimes for the account of the company and sometimes for the account of a contracting customer.

Oil and gas industry analysts are reporting in their 2009 E&P expenditures (both land-based and offshore) surveys that global capital expenditures budgets for E&P are forecast to decrease by approximately 12% over calendar year 2008 levels. The surveys forecast that international capital spending budgets will decline a modest 6% while North American capital spending budgets are forecast to decrease approximately 26% due to the uncertainty in commodity pricing, tight credit markets and the global recession. These budgets were based on an approximate $58 average price per barrel of oil and an approximate $6.35 per mcf average natural gas price for calendar 2009. Additionally, the International Energy Agency announced in January 2009 that it decreased its forecast of oil demand by 11.7% from its October 2008 forecast.

The strength in the company’s international-based revenues during the first half of fiscal 2009nine months ended December 31, 2008 can be attributed to higher average day rates and an increase in the number of vessels operating internationally.rates. Average day rates for the total international-based fleet increased approximately 20% during the first half of fiscal 2009nine months ended December 31, 2008 as compared to the same period in fiscal 2008. The company’s international results of operations are primarily dependent on the supply and demand relationship of crude oil. Even before the financial crisis caused extreme uncertainty in the market, crude oil prices were already retreating tofrom the $90 per barrel and below range after reaching an all time closing high of approximately $147 per barrel in mid-July 2008. FallingIn the past four months, falling oil prices prompted the Organization of Petroleum Exporting Countries (OPEC) to announce in September 2008 that it would cutthree oil production by one half million barrels per daycuts in an attempt to stabilize oil prices. The most recent announcement stated that OPEC will cut production by 2.2 million barrels per day effective January 1, 2009, which would reduce oil production by 4.2 million barrels per day (nearly 5% cut in global oil supplies) when all previously announced production cuts are included. At

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present, it is unknown whether crude oil prices will stabilize at levels that will continue to support significant levels of exploration and production spending by oil and gas companies. In addition, even if priceprices stabilize at levels that do support high levels of spending, it is uncertain if E&P companies will be able to increasesustain their level of capital expenditures because of recent reductions in available capital and liquidity. Given the current level of uncertaintyhistorical strong correlation between commodity prices, drilling and exploration activity and demand for the company’s vessels in the energyvarious international markets, it is unknown how international-based vessel demandif crude oil prices remain weak during calendar year 2009, the company would expect that its ability to maintain the utilization rates and day rates for its vessels in that market will be affected.under stress. However, because oil pricing and oil demand have been extremely volatile, as evidenced by the sharp increases and declines experienced during calendar year 2008, management is unable to predict with confidence what the company’s actual experience will be in calendar year 2009.

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Marine operating profit and other components of earnings before income taxes and its related percentage of total revenue for the quarters and six-monththe nine-month periods ended September 30,December 31, 2008 and 2007 and for the quarter ended JuneSeptember 30, 2008 consist of the following: