Good afternoon. My name is Michelle and I will be your conference operator today. At this time, I would like to welcome everyone to the Fiscal 2009 First Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn the call over to Mr. Dean Taylor, Chairman and President and CEO of Tidewater. You may begin your conference.

Michelle, thank you very much. Good morning everyone and welcome to Tidewater's fiscal 2009 first quarter earnings results conference call for the period ending June 30, 2008. As Michelle said, I am Dean Taylor, Tidewater's Chairman, President and CEO and I'll be hosting the call this morning. With me today are Keith Lousteau, our Executive Vice President and Chief Financial Officer; Joe Bennett, Executive Vice President and Chief Investor Relations Officer; Steve Dick, Executive Vice President in charge of Strategic Relationships, Shipyard Operations, Vessel Acquisitions and Dispositions; Jeff Platt, Executive Vice President, in charge of day-to-day Marine Operations; Bruce Lundstrom, our newly named Executive Vice President, General Counsel and Secretary and Quinn Fanning who will be assuming Keith's CFO role upon his retirement, previously announced to be approximately at the end of September. We'll follow our traditional format this morning. I will start the call with some comments about our earnings results released earlier today. Following my brief remarks, I'll turn the call over to Keith for a detailed review of the numbers as well as status reports on our new-build and vessel replacement program and our stock repurchase activities. I will then return with the discussion of our view of our markets and a review of our strategy. We will then open the call for your questions. At this time, I will ask Keith to read our Safe Harbor statement and then we can get started.

During today's conference call, Dean, I and other Tidewater management may make certain comments and statements which may be considered forward-looking. I know that you understand that there are risks, uncertainties and other factors that may cause the company's actual future performance to be materially different from that stated or implied by any comments that we may make today during this conference call. Dean?

Thanks Keith. Earlier this morning, we reported $1.64 in earnings per share, up $0.09 from last year's comparable quarter and flat with our March 2008 quarter. Reported earnings exceeded the latest First Call consensus estimate of $1.52. We expected and had advised that this was to be a transitional quarter, solid in respects, lumpy in others. As you know, we traditionally report gains on sales of investments since we continually sell older vessels from our fleet that have been or will be replaced through our fleet renewal program. This quarter about $8 million of the $10.4 million of gains we reported was above the normal quarterly rate of about $2.5 million per quarter that we have been realizing in recent years. Excluding these above normal gains, we still beat the Street consensus estimate by a couple of pennies. On the other hand, our revenues rose nicely, industry wide challenges with costs kept this from being an even better quarter. Keith will walk you through all of the numbers. Before he does so, let me make several other points, some of which I will elaborate upon later in the call. First, our safety performance was improved in the quarter as we experienced no lost time accidents. There were no significant incidents in the quarter in contrast to our unsatisfactory experience last year. We're thankful for this safety... this improved safety performance as it is more consistent with our longstanding historical performance of providing the safest possible offshore work environment for our employees and our customers. I commend our management and our crews for a job well done despite daily operational challenges in tough environments. Second, we're happy to report that all 11 of our crew members were recently released unharmed following more than 30 days of captivity in Nigeria. Our vessel…

Good morning everyone. I would like to start off with a little bit of housekeeping comments here. You will notice that in the last 24 hours, we have had press releases covering our earnings release this morning. We've had a press release concerning the declaration of the dividend at the newly improved rate early today. We did have another press release on the addition of our fourth consecutive annual stock buyback program, and you will see a couple of press releases out there yesterday and today on personnel promotions and new personnel welcomed to Tidewater. We are able today to get back to our preferred historical practice of filing our Form 10-Q. Our Form 10-Q should be available through the EDGAR filing services no later than sometimes mid-day today. It's a preferable program and one that we're glad to be able to get back to you of having earnings release and full 10-Q disclosure at the same time. We think this morning's earnings release is one of as advertised in the conference call after the end of the March quarter. We told the investing community that we expected it to be one with a unusually high cost. Unfortunately, the unusually high came in even higher than we anticipated, but revenue numbers also seem to beat the anticipation at about the exact same level. Certainly there is a lot being said today about the unusually high gain on sales that we reported for the quarter. We reported $10.4 million, we acknowledged that that's an unusually high number. I remind those analytical minds looking at it that those are all taxed in the United States, they're taxed at a full 35% tax rate. So I would say that the proper calculation into my way of thinking of calculating the gain on loss…

Thanks Keith. Before we go any further, let me acknowledge that this may be Keith's last conference call as he will soon be retiring. Keith has been a part of the Tidewater family for 31 years and a personal friend for 30 years and our key financial officer for 8 years. We, and I personally, want to thank Keith for his valuable contribution to Tidewater's success through the year. We will all wish him well on his retirement. Let me also officially introduce Quinn Fanning as Tidewater's new Executive Vice President who will assume the CFO title when Keith retires. Keith is joining... excuse me, Quinn is joining Tidewater after having worked for 20 years within the financial services industry, the last 12 of which were with Citigroup where was managing director of Citi's energy investment banking practice. Quinn's responsibilities at Citigroup included leading the execution of a wide variety of M&A, strategic advisory and capital markets transactions for clients across all sectors of the global energy complex. The remainder of our senior financial management team, Joe Bennett, Craig Demarest and Kevin Carr remains in place. We expect this transition to be seamless. Welcome aboard Quinn. The balance of my comments will be brief as I prefer to allow more time for questions as a better way for us to address any thoughts or issues in light of the current turbulence in the market. On the revenue front, our performance in the quarter was solid with vessel revenues advancing, as Steve, said year-over-year by 12%, reflective of the overall strength of the global offshore oil and gas business. Internationally, our vessel revenues increased 15%, driven by a 17% increase in the average fleet dayrate. As Keith pointed out, while our domestic vessel revenues were down year-over-year, they increased 9% over…

[Operator Instructions]. Your first question comes from the line of Jim Randall [ph] of Lehman Brothers.

Good morning Jim.

Good morning. First, congratulations Keith on your retirement and for your outstanding service to Tidewater over the years.

Thank you.

Dean, my first question concerns retirements of vessels. First, maybe I missed it, but how many vessels did you in fact retire during the quarter. And then can you comment as you look at your fleet over what you are seeing in terms of the wear and tear on your vessels as they get older? I know you are still seeing some outstanding increases in dayrates on older vessels, yet you are taking many out of service. Are you finding that as they hit or approach this 30-year mark that you are seeing substantial wear and tear and many or most need to be retired as they approach that age?

Jim,I don't think it's really a question of age. Let me get back to your original question. In terms of our active fleet, we had but one vessel reduction in our active fleet in the quarter. 30-year mark; there is nothing magical about it. We have got vessels now in South America that are over 34 years old and is working quite fine for a nice customer. It depends almost on, and it's an ad hoc decision almost in every case. Every time a vessel comes up for drydocking, what we do is we review the economics of its future prospects. And then if we don't see that the drydocking is going to be paid for in the next 30 months, plus a reasonable return on our capital expenditures, we stack to that. And then if we stack it we... in time we will decide where we're going to look to actively promote selling it or look to move it to another area where we can get the right return on it. 30 years, there are boats in Great Lakes that are 100 years old and working quite nicely. So it's not really a question of age like airplanes, also can work depending upon how much you want to continue to reinvest in them. But trick is to make the reinvestment where you get a return on your capital, where we have a very disciplined process about how we go about that. And so every time a vessel that's older than, say 25 years, comes up for a drydocking, we go through a disciplined process, review it, determine whether it's going to pay out over the next 30 months. And then based on that, we decide whether we'll do it or not. Does that answer your question?

In part. Dean, how about if you looked at all your older vessels, and as they come in, to drydocking, what percentage of them, as they go to drydocking, are you think... do you still need the cut and they'll be retired? Do you think that percentage will grow in coming years because of the wear and tear issue, particularly in international waters?

I don't it will be a wear-and-tear issue, Jim, I think if it does grow, it's going to be a market issue. And we will be provoked... could be proved by an awful lot of new tonnage coming into the market, balancing that we have a lot of new rigs coming into the market FPSO. So it's going to be interesting to see how it plays out. I think you and many other observers on this call have been surprised, we've not necessarily been surprised. But I think there has been many people who have been surprised by the durability of the earnings power of what we call our traditional vessels. People who have been predicting for years now that some of the earnings power of our traditional vessels would be falling off a cliff and they're not doing it. You're not seeing it now, you didn't hear it in Keith's summary of what's happened to our average rate of towing supply, supply fleet in our international segment. It was up $500 over the quarter, quarter-on-quarter. So that's not showing a diminishment in demand for that type of vessel. Now eventually at some point in time, some of these boats will start falling out of the fleet, but, we've got considerable new earnings power coming into the fleet with the vessels that we presently have under construction. And our feeling is that our earnings power is going to be increased rather than decreased through time, as we don't feel that the traditional vessels are going to be falling out as fast as our new ships are going to be coming in and adding earnings power to our revenue base.

Okay. Dean, one other question if I could. Could you, comment whether you think the tightness in global markets has changed at all in the last, two or three quarters? Dayrates are rising faster than I've estimated that they would. Are you seeing an even tighter market? Are you seeing, projects waiting on supply vessels? And if so, or if not, how long do you see this continuing based on what you see now?

Jim, we're pretty optimistic. As we look around, certainly some markets are softer than others. But they're all high. And including on the Gulf of Mexico has slowed down some and here it's come back relatively significantly. And I think if they open up the OCS, even a few states, that's a game changer. They've got a fair number of jack-up rigs coming into the fleet this year that is going to be provoking additional demand. We're not seeing a slowdown in the rate of change of... if you look over our last four quarters and just what has happened to the dayrate of our traditional vessels, it's phenomenal. And, quarter-after-quarter we continue to see that same progression in dayrate increase. Now on the other hand, we've had some challenges with costs. And that's kept us from taking full advantage of those dayrate increases. And as Keith said, we think we're getting these costs under control. We think the next few quarters, we're going to demonstrate that. We've got to prove it, we've got to show that. But our feeling is that we're just about ready to get this tiger by the tail and that the dayrate increases that our sales force and our country managers have been so successful in achieving, are not going to be all passed onto our contractors. If we're going to get, to be able to pass them onto our shareholders. So that's our view.

Okay. That's great. Thank you, Dean.

Thank you.

Your next question comes from line of Judd Bailey, Jefferies & Company.

Hi Judd.

Hi good morning. A question on the cost guidance, you had a pretty decent jump in labor cost, sequentially quarter-to-quarter. And you explained the $2.5 million was basically forced upon you in one country. What are your assumptions or what should we think about as far as further labor cost inflation over the next few quarters?

That's a good one, Judd. When we looked at it from quarter-to-quarter and we took out the extraordinary costs in Venezuela. And then we looked at it from country-to-country there were some regions that had more issues than others. We've said for the last two conference calls, I believe, that we think that the rates have increased in labor cost, factoring out the new vessels that's about 9%, I still think that that's right. Although, there is pressure, I mean there... as new vessels come into the worldwide fleet, there's plenty of pressure. But, I think that we're going to stand by that number for the time being.

Okay. On the vessels and sales you're moving two deepwater vessels out of the Gulf, nice term contracts. Can you comment on other opportunities for those types of vessels? Are you seeing additional ones on top of that? Can you just, maybe, give a little more color on what you're seeing on the deepwater side?

Well, what we're seeing and what we're going to see is pretty... skies are pretty blue. There are, as you well know about 80 deepwater rigs under construction that will be delivered over the course of the next two to four years. And we think that those are going to provoke even more demand for the deepwater vessels. We think some deepwater vessels are going to return to... deepwater rigs will return to the Gulf of Mexico, some will end up in Brazil, you know all about Brazil, you know what's going on in West Africa. You see it in Southeast Asia. So, our view is that the demand for deepwater vessels and many other vessels that we presently have under construction will be specifically targeted for deepwater, our view is very positive.

Okay. And just one last question if I may. Your... the number of newbuilds jumped up to 49 vessels. Can you say if those were all new orders or did you purchase some slots or some that were already under construction by other parties?

Steve's our guy that deals with that day-to-day judgment [ph], let him comment.

Okay.

It's not 49, by the way it's 59...

Yes, it is 59 and it was 49 at the end of fiscal '08 and since then, as of today it's 59. But it's a combination of both, some of them we were taking over construction contracts. Other ones were vessels that were under construction for various operators. And we've entered into agreements with them to finish it and then we will take delivery at the end. So there's a combination of things that we're doing this... acquiring existing and also acquiring after delivery or after satisfactory sea trials. And there's a combination of both of those and we are also ordering what... we've had a design that we liked and gone to shipyards, received quotations back and then maiden would... to be delivered 2010 and 2011 so, there is a combination of all of those.

Great, thank you. I'll turn it back to somebody else.

Your next question comes from the line of Pierre Conner with Capital One.

Good morning, Pierre.

Good morning gentlemen. We got the question on the labor cost side that... just appreciate that. Keith, maybe or where we're on the newbuilds I know that you've previously given us a scheduled deliveries in the press release. I'm assuming that's going to show up in the Q this time,

Yes sir.

And just generally, do you see any delays in the previously 49 newbuilds or they are... will you still be impacted by shipyard delays?

This is Steve Dick here, we have had some delays. I think it's an industry wide problem and there's a couple of yards that have, because of equipment deliveries and also in one instance it was a change in ownership. And some of the management being in a little bit a turmoil, but we think we've got that pretty well under control. And other than those instances, there's been some drag and some delays that other than those few vessels, everything else appears, at least at this point to pretty much be on, be on schedule.

Okay.

There's no... in terms of delays, additional delays from the end of last quarter to this quarter.

Yes

There's been no additional delays.

Okay. That's actually, yes that's what I was looking for, so don't expect that table to be significantly different than the one from the prior time.

No sir.

Except for the addition of the 10 newbuilds.

Correct.

Other just housekeeping, Keith with the two vessels moving from the U.S. to the international, just kind of ballpark for us, some of the steaming time or off-charter time that would be involved or are the customers...

Pierre I wouldn't even financially... I wouldn't be too concerned about it, as it turns out it's probably going to cost us $2 million of other vessel costs, fuel and such you will see financially to get the boats to there. And on the other hand, you are going to see more revenue is going to come through the revenue line, that's almost equal to what the 30 day travel time, $35,000 a day would equate to. We're going to have more of revenue and the cost.

Okay. The last one is more general about the acquisition markets and not to disclose sort of what your exact thinking is. But what do you see in terms of asset prices changing here, are they continuing to rise? What we have experienced obviously, is they've been rising with steel cost, construction cost as well, rates are continuing to improve, but do you see in divergence in that trend?

This is Steve Dick again. I don't see it, the prices are I think pretty healthy. It's a heated market. It continues to be that way. It appears that some of the orders for the shipyards have been slowing down, say in the last six months or so, but the actual level of the cost of the equipment is still pretty high.

But hasn't changed significantly in the last six months or so?

It's gone up in the last six months.

Pierre, the only thing we are seeing a little bit financially is that those, the really highly leveraged real strong speculators who went out inside their 20 25, 25 30 shipyard contracts the financial market. Since the subprime prices started last fall we're starting to see where some of those individuals are starting to have little less available credit. They have got boats that they've paid 20% down, 80% upon delivery and we haven't seen the good deal that we want to do yet, but the brokerage community is starting to show some signs of cracking on some of those real high speculative guys who are going to have to turn their fleets. There's no way they're are going to be able to put financing in place, so that's perhaps some early signs there.

Okay

The other comment I'd make Pierre, is that I do think that the rate of change and increase of asset cost has slowed down. I don't think that it's quite as robust as it was a year ago, or six months ago, the rate of change has slowed down.

Okay and then within the last year, your assumptions as to what you think vessels could get per rate, obviously should have been continuing to improve, given your confidence on the market and the performance?

It has. Of course the trick is to make sure that in an acquisition all the benefits don't transfer to the seller and the buyer get some. So that's where we struggle with, but I think we just feel like that there is going to be some opportunities and we hope to be able to act upon them.

That's very helpful. Keith, all the best to you; thank you. Best wishes, and welcome to Quinn and good luck.

Thanks Pierre.

Your next question comes from the line of Daniel Burke with Johnson Rice.

Hello, Daniel.

Good morning, guys. Just first question, on the cost side, we got the details by line item, but what about on a regional basis. Are there any regions where you're seeing changes or more dramatic escalations than others that are worth pinpointing?

What we saw... we just renewed a labor contract in Brazil. That was one and that was about a 10% increase, I think across the board. So that was one. There's pressure everywhere. The market for crews is almost global in the international side. And the guys know what each other make in various regions where they are working. So, if one area is hot and we respond to pressures to favorable pressures in one area, it's not long before the word gets out to another area. And guys in the other areas are saying, what about us. So, the pressures are there. But I would say that the... I think the indicative of the 10% increase in Brazil which is a damn hot market. We were able to settle at a 10% rate I think is indicative of about what's going on worldwide now. It's going to continue to be a challenge as new vessels come into the worldwide fleet. We are a little bit hedged... more hedged than some other companies, because as we retire some of our older ships we've crews that already trained and we can transfer... sometimes we have to upgrade their training to the newer vessels, without having to go back into the market to get more people. So, we have some advantage in that to that extent. But we had a 10% increase in Brazil, we had the retroactive readjustment in Venezuela. Other regions are relatively, Africa of course is hot, Southeast Asia is hot, I mean it's around the world.

I see. And then as a follow-up, indicating a willingness to invest $1 billion annually seems to be a bit of a step change. So sort of two questions. One, does that decision indicate anything about the speed at which you are interested in selling out of some of the older equipment? And then as a related question, what level of annual CapEx do you think, Dean, you need to deploy to maintain sort of your current earnings power? Because it seems like you're shifting to more of discernible growth mode here.

Just what we had on the order book last quarter. First, let me answer your first question. The answer to the first question is no. We do not think that we're going to be more rapidly shifting out of old vessels. We'll do it on a case-by-case basis as I described earlier in the call. And we'll do it in every case upon a review of the fundamentals of the market in which a boat happens to be and including what it's going to cost to keep it in service. Answer on to your second question is even with our order book as of last quarter with the 49 vessels, those 49 vessels we are going to replace all of the earnings power of our entire traditional fleet, those 49. As Keith pointed out in this call, when we added another 10 in this quarter, our earnings per share, just using today's economics, should go up about $4.75, presuming everything of course that these boats and some are not going to come into the market for a couple of years, two to three years depending upon which vessel, where. But presuming today's economics, we have already replaced the earnings power of our fleet. So if we advance, or accelerate is probably a better word, if we accelerate the rate of the growth in our fleet, in our new fleet, then I would expect that our growth prospects will significantly enhance.

Dan, just a quick mathematical point. We added 12 boats during the quarter. We took delivery of 2. So there was a net gain of 10 in the backlog, but that's the... and those 12 boats have a contracted price of $260 million just to give you an idea of how we are attacking the expansion of that earnings capacity of the company.

Great. Thank you for the answers.

Okay, thank you.

There are no further questions.

Thanks everyone for your participation in our call this morning. Thank you for your interest in our company. God bless you and have a great day. Thanks.

This concludes today's fiscal 2009 first quarter earnings conference call. You may now disconnect.