Business Combination: On July 16, 2018, Tidewater entered into the merger agreement. Under the terms of the merger agreement, Merger Sub 1 merged with and into GulfMark to become a wholly-owned subsidiary of Tidewater. Immediately after this merger, Tidewater caused GulfMark to merge into Merger Sub 2, with Merger Sub 2 continuing as a wholly-owned subsidiary of Tidewater. The business combination closed on November 15, 2018. Refer to Note 2 of the unaudited pro forma condensed combined consolidated financial statements for the terms and purchase price consideration provided in connection with the business combination.

Tidewater Reorganization: On July 31, 2017, Tidewater successfully completed the terms and conditions of its plan of reorganization and emerged from bankruptcy reorganization under chapter 11 of the United States Bankruptcy Code. Refer to Note 4 for pro forma adjustments related to twelve months ended December 31, 2017 related to the Tidewater’s reorganization (“Tidewater Reorganization”).¹

GulfMark Reorganization: On November 14, 2017, GulfMark successfully completed the terms and conditions of its plan of reorganization and emerged from bankruptcy reorganization under chapter 11 of the United States Bankruptcy Code. Refer to Note 5 for pro forma adjustments related to year ended December 31, 2017 related to the GulfMark’s reorganization (“GulfMark Reorganization”).

Tidewater filed a transition report Form 10-K for the transition period from April 1, 2017 to December 31, 2017. The twelve month period ended December 31, 2017 represents the three months ended March 31, 2017 plus the nine month transition period ended December 31, 2017. The three month period ended March 31, 2017 is produced by reference to the comparative Form 10-Q for the period ended March 31, 2018, which was filed on May 15, 2018.

Tidewater’s Form 10-Q for the unaudited interim financial statements for the nine months ended September 30, 2018 filed on November 13, 2018.

Tidewater’s audited financial statements for the transition period from April 1, 2017 to December 31, 2017, which have been updated to reflect the realignment of its segments, filed on Form 8-K on August 30, 2018.

GulfMark’s Form 10-Q for the unaudited quarterly period ended September 30, 2018 filed on November 13, 2018.

GulfMark’s Form 10-K for the annual period ended December 31, 2017 filed on April 2, 2018.

Revenues:

Vessel revenues

Other operating revenues

Costs and expenses:

Vessel operating costs

Costs of other operating revenues

General and administrative

Depreciation and amortization

(Gain) loss on asset dispositions, net

Asset impairments

Operating loss

Other income (expenses):

Foreign exchange loss

Equity in net earnings (loss) of unconsolidated companies

Interest income and other, net

Reorganization items

Interest and other debt costs, net

Loss before income taxes

Income tax (benefit) expense

Net income (loss)

Less: Net income attributable to noncontrolling interests

Net loss attributable to Tidewater Inc.

Basic loss per common share

Diluted loss per common share

Weighted average common shares outstanding - Basic & Diluted

Revenues:

Vessel revenues

Other operating revenues

Costs and expenses:

Vessel operating costs

Costs of other operating revenues

General and administrative

Vessel operating leases

Depreciation and amortization

(Gain) loss on asset dispositions, net

Asset impairments

Operating loss

Other income (expenses):

Foreign exchange loss

Equity in net earnings of unconsolidated companies

Interest income and other, net

Interest and other debt costs, net

Loss before income taxes

Income tax (benefit) expense

Net income (loss)

Less: Net income attributable to noncontrolling interests

Net loss attributable to Tidewater Inc.

Basic loss per common share

Diluted loss per common share

Weighted average common shares outstanding - Basic & Diluted

ASSETS

Current assets:

Cash and cash equivalents

Restricted cash

Trade and other receivables, less allowance for doubtful accounts

Due from affiliate

Marine operating supplies

Other current assets

Total current assets

Investments in, at equity, and advances to unconsolidated companies

Net properties and equipment

Deferred drydocking and survey costs

Other assets

Total assets

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Due to affiliate

Accrued property and liability losses

Current portion of long-term debt

Other current liabilities

Total current liabilities

Long-term debt

Deferred income taxes

Accrued property and liability losses

Other liabilities

Total liabilities

Commitments and Contingencies

Equity:

Common stock

Additional paid-in capital

Retained (deficit) earnings

Accumulated other comprehensive loss

Total stockholders’ equity

Non-controlling interests

Total equity

Total liabilities and shareholders’ equity

The unaudited pro forma condensed combined consolidated balance sheet of Tidewater as of September 30, 2018 includes the effects of the business combination as if it had occurred on September 30, 2018. No pro forma adjustments were made for the Tidewater Reorganization or the GulfMark Reorganization because both of these transactions were fully reflected in the historical balance sheets of Tidewater and GulfMark, respectively, as of September 30, 2018.

The unaudited pro forma condensed combined consolidated statement of operations of Tidewater for the nine months ended September 30, 2018 includes the effects of the business combination as if it had occurred on January 1, 2017. No pro forma adjustments were made for the Tidewater Reorganization or the GulfMark Reorganization because both of these transactions were fully reflected in the historical statements of operations of Tidewater and GulfMark, respectively, for the nine month period ended September 30, 2018.

The unaudited pro forma condensed combined consolidated statement of operations of Tidewater for the twelve months ended December 31, 2017 includes the effects of the business combination, Tidewater Reorganization, and GulfMark Reorganization as if they had occurred on January 1, 2017.

Refer to Note 4 that presents the standalone pro forma effects of Tidewater as if the Tidewater Reorganization occurred on January 1, 2017. The results of which are included on an as-adjusted basis in the unaudited pro forma condensed combined consolidated statement of operations for the twelve months ended December 31, 2017.

Refer to Note 5 that presents the standalone pro forma effects of GulfMark as if the GulfMark Reorganization occurred on January 1, 2017. The results of which are included on an as-adjusted basis in the unaudited pro forma condensed combined consolidated statement of operations for the twelve months ended December 31, 2017.

GulfMark common stock outstanding

GLF Creditor Warrants outstanding

Total

Plus: GLF Equity Warrants outstanding

Plus: GulfMark RSUs outstanding

Less: Portion of GulfMark RSUs attributed to post-combination compensation expense (3)

Plus: assumption GulfMark’s term loan
facility (4)

Total preliminary purchase price consideration

GulfMark units outstanding is inclusive of outstanding common stock, GLF Creditor Warrants, GLF Equity Warrants, and GulfMark RSUs as of November 15, 2018, the closing date of the business combination.

Reflects the closing share price of Tidewater common stock as of November 15, 2018. The Tidewater share price applied to the GLF Creditor Warrants price has been reduced by $0.01 to account for the strike price of the warrants. The Tidewater share price applied to the GLF Equity Warrants price reflects the actual closing share price on November 15, 2018 for Tidewater Warrants with substantially the same terms and conditions as provided in the warrant agreement governing the GLF Equity Warrants prior to the conversion. The per unit price applied to the GulfMark RSUs reflects the unrestricted share price of Tidewater’s common stock.

The portion of the GulfMark RSUs attributed to post-combination compensation expense reflects the value of the replacement RSUs that remain unvested as of the business combination closing date. Only the replacement RSUs granted to employees have unvested service periods. As of the date of the business combination, there were 88,482 replacement RSUs issued to employees and 39,853 replacement RSUs issued to non-employee directors.

The assumed GulfMark term loan facility is at a face value. The carrying value of $93.6 million on GulfMark’s historical balance sheet was reduced by an unamortized debt issuance costs of $6.4 million.

Total current assets

Net properties and equipment

Other noncurrent assets

Total assets acquired

Total current liabilities

Deferred income taxes

Other liabilities

Long-term debt

Total liabilities assumed

Net assets acquired

Reflects the removal of $4.6 million and $2.6 million of legal and professional transaction costs incurred for the nine month period ended September 30, 2018 by Tidewater and GulfMark, respectively, in connection with the GulfMark Merger.

Reflects the incremental depreciation expense based on the estimated fair value of GulfMark’s Net properties and equipment, which contains vessels and other properties & equipment. The average estimated economic useful lives of the vessels and properties & equipment were approximately 9.5 years and 6.0 years, respectively. This estimate is based on GulfMark’s assessment of economic useful lives of these tangible assets at its emergence from chapter 11 bankruptcy reorganization on November 14, 2017. As of the date of this Form 8-K, Tidewater has not evaluated the economic useful lives in sufficient detail to determine if such estimated lives should be adjusted. Therefore, the economic useful life of each asset determined by GulfMark is used for the purposes of these unaudited pro forma financial statements. The pro forma adjustment to Depreciation and amortization reflects a decrease to the unaudited statements of operations. Note that no adjustments were made to amortize the cost of capitalizing drydock costs in connection with the business combination because (i) GulfMark’s historical statement of operations already reflected the amortization of capitalized drydock costs for the nine months ended September 30, 2018, and (ii) the impact of annualizing drydock amortization for the twelve months ended December 31, 2017 is already reflected through the GulfMark Reorganization pro forma adjustments, which are summarized in Note 5.

Reflects the removal of Reorganization items, which are expenses directly related to the GulfMark Reorganization.

Represents the elimination of historical interest expense of GulfMark related to the redemption of GulfMark’s term loan and the termination of GulfMark’s undrawn revolving credit facility at the closing of the business combination. Interest expense related to GulfMark’s pension liability is not eliminated as part of the pro forma adjustment.

The Pro forma weighted average shares are calculated as follows:

Basic:

Tidewater historical weighted average shares

Tidewater incremental shares issued for business combination (1)

Pro forma weighted average shares

Diluted:

Tidewater historical weighted average shares

Tidewater incremental shares issued for business combination

Dilutive effect of issuance of Tidewater shares in exchange for GulfMark RSUs and GLF Equity Warrants (2)

Pro forma weighted average shares

The incremental shares issued includes 7,281,344 and 7,041,406 GulfMark weighted average shares outstanding (which excludes any GLF Creditor Warrants outstanding) for the nine months ended September 30, 2018 and twelve months ended December 31, 2017, respectively. Upon conversion to Tidewater shares, the issued shares is 8,009,478 and 7,745,547 for the nine months ended September 30, 2018 and twelve months ended December 31, 2017, respectively. The GLF Creditor Warrants that were considered issuable upon exercise because they were held by United States citizens totaled 90,682. Upon conversion, the GLF Creditor Warrants equate to 99,750 shares of Tidewater common stock.

Common stock equivalents (restricted stock units) and out-of-the-money equity warrants were not included in the computation of diluted pro forma weighted average shares because the effect would have been antidilutive due to the net loss.

The adjustment to cash and cash equivalents reflects: (i) the estimated transaction costs for legal, professional and success-based fees to be paid in connection with the GulfMark Merger for $8.6 million, and (ii) $109.7 million paid in connection with the redemption of GulfMark’s term notes which includes payment for the terms notes’ make whole premium. Further analysis of the make whole premium is described below in greater detail.

Represents the preliminary fair value adjustment to Net properties and equipment to increase the value of GulfMark’s vessels, which is the primary asset base that is absorbing the increase of fair value above GulfMark’s historical carrying value.

Reflects the write-off of debt issuance costs related to GulfMark’s revolving credit facility because the asset has no economic value.

Reflects the payment of accrued interest of $0.4 million that was included as part of the cash payment of $109.7 million to redeem GulfMark’s term notes.

The adjustment to long-term debt reflects (i) the write-off of debt issuance costs of $6.4 million related to GulfMark’s term notes, and (ii) the redemption by Tidewater of GulfMark’s long-term debt of $100.0 million. The net of these adjustments is approximately $93.6 million.

The following adjustments were made to Tidewater’s equity accounts based on the GulfMark Merger transaction:

Common stock:

Remove GulfMark balance

Add: Tidewater converted shares (at par of $0.001)

Pro forma adjustment

Additional paid-in capital:

Remove GulfMark balance

Add: Tidewater shares issued (less par value) and creditor warrants to acquire Tidewater stock

Add: GLF Equity Warrants value

Add: Replacement RSU value attributed to purchase price consideration (1)

Pro forma adjustment

Retained (deficit) earnings:

Remove GulfMark balance

Subtract: estimated transaction costs for GulfMark Merger

Subtract: loss on redemption of GulfMark term notes (2)

Pro forma adjustment

Accumulated other comprehensive loss:

Remove GulfMark balance

The replacement RSU value attributed to purchase price consideration reflects the value of GulfMark RSUs that relate to pre-combination service periods for employees and for the value of the GulfMark RSUs that were issued to non-employee directors of GulfMark. Refer to Note 2 for further descriptions of the attribution of replacement RSU value to post-combination compensation expense and purchase price consideration of the business combination.

The loss on redemption of GulfMark’s term notes reflects the payment of the make whole premium, which is a condition of redemption of the term notes for any early redemption payments. The cash payment to redeem the GulfMark term notes is $109.7 million. The carrying value of the term notes at September 30, 2018 is $100.0 after making a fair value adjustment for the acquisition method of accounting, and the related accrued interest balance of the term notes at September 30, 2018 of $0.4 million. The difference between cash paid and the carrying value of the term notes plus accrued interest results in a redemption loss of $9.3 million. The loss is non-recurring and presented as an adjustment to Tidewater’s Retained (deficit) earnings, and it is not included in Tidewater’s unaudited pro forma statement of operations.

Revenues:

Vessel revenues

Other operating revenues

Costs and expenses:

Vessel operating costs

Costs of other operating revenues

General and administrative

Vessel operating leases

Depreciation and amortization

Gain on asset dispositions, net

Asset impairments

Operating loss

Other income (expenses):

Foreign exchange gain (loss)

Equity in net earnings of unconsolidated companies

Interest income and other, net

Reorganization items

Interest and other debt costs, net

Loss before income taxes

Income tax (benefit) expense

Net loss

Less: Net income attributable to noncontrolling interests

Net loss attributable to Tidewater Inc.

Basic loss per common share

Diluted loss per common share

Weighted average common shares outstanding

Diluted weighted average common shares

Reflects the recognition of a change in accounting policy of the successor entity (i.e., Tidewater) following its emergence from chapter 11 bankruptcy reorganization. Under the new policy, Tidewater began capitalizing drydock costs and amortizing the costs over 30 months. The previous accounting policy was to expense these costs as incurred. This adjustment reflects the new policy as of January 1, 2017, and adjusts Tidewater’s predecessor period by removing these drydocking costs. Refer to pro forma adjustment (cc) for Depreciation and amortization for the incremental amortization expense resulting from the change in accounting policy.

Reflects the removal of Reorganization items and pre-petition legal and professional fees that are classified within General and administrative within the predecessor period of Tidewater. All expenses are directly related to the Tidewater Reorganization and are non-recurring. Also reflected in this pro forma adjustment is an adjustment for seven months of amortization income from intangible liabilities that were recorded as a result of the application of fresh start accounting.

Reflects the adjustment to Depreciation and amortization expense for the predecessor entity of Tidewater based on the application of fresh start accounting as of January 1, 2017. The adjustment includes the removal of predecessor entity Depreciation and amortization on the depreciable assets (i.e., properties and equipment) that were valued as part of fresh start accounting, and the addition of seven months of depreciation based on Tidewater’s depreciable assets that were valued as part of fresh start accounting fair values. Depreciation is based on the fair value of depreciable assets and the estimated economic useful at the time of emergence (July 31, 2017). The approximate average economic useful life of the vessels was 12.0 years and the average economic useful life of other properties and equipment was 5.0 years. This adjustment also includes amortization of drydock costs for the change in accounting policy adopted by Tidewater at emergence, as described above in pro forma adjustment (aa). The drydock costs reflect the amortization from the time a cost was incurred to the point of Tidewater’s emergence using a 30 month amortization base period.

Pro forma adjustment to Depreciation and amortization:

Remove Predecessor Tidewater depreciation on properties and equipment valued at fresh start

Add: Depreciation on properties and equipment valued at fresh start for seven month Predecessor period

Add: Amortization of capitalized drydock expenses

Pro forma adjustment

Reflects the amortization of the equity method basis difference between Tidewater’s fair value investment in unconsolidated companies and the carrying value of its share of net assets in unconsolidated companies. The basis difference to amortize was approximately $10.2 million and is amortized over ten years. Because the basis difference was negative as a result the carrying value of net assets exceeding the fair value of Tidewater’s investment, this adjustment reflects seven months of amortized income to Equity in net earnings of unconsolidated companies.

Reflects the elimination of previously recorded interest expense of the predecessor entity of Tidewater and the addition of pro forma interest expense based on the terms of Tidewater’s debt facilities that included New secured notes and four tranches of Troms Offshore borrowings. The pro forma interest expense also includes the amortization of discounts and premiums on these debt instruments using the effective interest method of amortization.

Pro forma adjustment to Interest and other debt costs, net:

Remove Predecessor Interest and other debt costs, net (April 1 through July 31)

Remove Predecessor Interest and other debt costs, net (January 1 through March 31)

Add: Successor pro forma Interest and other debt costs, net (January 1 through July 31)

Pro forma adjustment

Revenues:

Vessel revenues

Other operating revenues

Costs and expenses:

Vessel operating costs

Costs of other operating revenues

General and administrative

Vessel operating leases

Depreciation and amortization

(Gain) loss on asset dispositions, net

Asset impairments

Operating loss

Other income (expenses):

Foreign exchange gain (loss)

Interest income and other, net

Reorganization items

Interest and other debt costs, net

Loss before income taxes

Income tax (benefit) expense

Net income (loss)

Basic loss per common share

Diluted loss per common share

Weighted average common shares outstanding

Diluted weighted average common shares

Reflects the recognition of a change in accounting policy of the successor entity of GulfMark following its emergence from chapter 11 bankruptcy reorganization. Under the new policy, GulfMark began capitalizing drydock costs and amortizing the costs over 30 months. The previous accounting policy was to expense these costs as incurred. This adjustment reflects the new policy as of January 1, 2017, and adjusts GulfMark predecessor period by removing these drydocking costs. Refer below to pro forma adjustment (xx) for Depreciation and amortization for the incremental amortization expense resulting from the change in accounting policy.

Reflects the removal of Reorganization items and pre-petition legal and professional fees that are classified within General and administrative within the predecessor period of GulfMark. All expenses are directly related to the GulfMark Reorganization and are non-recurring.

Reflects the adjustment to Depreciation and amortization expense for the predecessor entity of GulfMark based on the application of fresh start accounting as of January 1, 2017. The adjustment includes the removal of predecessor entity depreciation and amortization and includes approximately 10.5 months of depreciation based on GulfMark’s depreciable assets (i.e., properties and equipment). Depreciation is based on the fair value of depreciable assets and the estimated economic useful at the time of emergence (November 14, 2017). The average economic useful life of the vessels was 9.5 years and the average economic useful life of other properties and equipment was 6.0 years. The pro forma depreciation adjustment for the predecessor entity of GulfMark resulted in a reduction of approximately $17.8 million.

Pro forma adjustment to Depreciation and amortization:

Remove Predecessor GulfMark depreciation on properties and equipment valued at fresh start

Add: Depreciation on properties and equipment valued at fresh start for Predecessor period

Add: Amortization of capitalized drydock expenses

Pro forma adjustment

Reflects the elimination of interest expense recorded at the predecessor entity of GulfMark which was associated with GulfMark’s former senior notes that were converted into equity instruments of the successor entity (i.e., GulfMark) upon emergence from chapter 11 bankruptcy reorganization. Other bank facilities of the predecessor entity were repaid in full in accordance with the terms of the bankruptcy. This adjustments also reflects recording pro forma interest expense based on the terms of GulfMark’s financing facility and the borrowing of $100 million term loan as of January 1, 2017. Interest includes amortization of issuance costs related to the entire financing facility plus the unused capacity fee related to the $25 million revolving credit component of the financing facility. For purposes of these unaudited pro forma financial statements, the revolving credit facility is assumed to remain unused during the periods presented in these statements of operations.

Pro forma adjustment to Interest and other debt costs, net:

Remove Predecessor Interest and other debt costs, net

Add: Successor pro forma Interest and other debt costs, net

Pro forma adjustment

Reflects the current period tax effects from the fresh start adjustments that relate primarily to the U.S vessels.

Financial Statement Line Item

Revenue

Other operating revenues

Revenue

Vessel operating costs

Direct operating expenses

Vessel operating costs

Financial Statement Line Item

Revenue (Predecessor)

Other operating revenues (Predecessor)

Revenue (Successor)

Other operating revenues (Successor)

Revenue (Predecessor)

Vessel operating costs (Predecessor)

Revenue (Successor)

Vessel operating costs (Successor)

Pre-petition restructuring charges (Predecessor)

General and administrative (Predecessor)

Pre-petition restructuring charges (Successor)

General and administrative (Successor)

Direct operating expenses (Predecessor)

Vessel operating costs (Predecessor)

Direct operating expenses (Successor)

Vessel operating costs (Successor)

Financial Statement Line Item

Inventory

Marine operating supplies

Prepaid expenses

Other current assets

Other accounts receivable

Other current assets

Construction in progress

Net properties and equipment

Accrued personnel costs