period, and the company schedules these drydockings when it is anticipated that the work can be  performed. The company’s net earnings can fluctuate quarter to quarter due to the timing of scheduled  drydockings. The company self-insures a portion of potential hull damage and personal injury claims that may arise in the  normal course of business. The company is exposed to insurance risks related to the company’s  reinsurance contracts with various insurance entities. The reinsurance recoverable amount can vary  depending on the size of a loss. The exact amount of the reinsurance recoverable is not known until all  losses are settled. The company estimates the reinsurance recoverable amount it expects to receive and  also estimates losses for claims that have occurred but have not been reported or not fully developed. The  company also monitors its reinsurance recoverable balances regularly for possible reinsurance exposure  and makes adequate provisions for doubtful reinsurance receivables. It is the company’s opinion that its  accounts and reinsurance receivables have no impairment other than that for which provisions have been  made. The company sponsors a defined benefit pension plan and a supplemental executive retirement plan  covering eligible employees of Tidewater Inc. and participating subsidiaries. The accounting for these plans  is subject to guidance regarding employers' accounting for pensions and employers' accounting for  postretirement benefits other than pensions. Net periodic pension costs and accumulated benefit obligations  are determined using a number of assumptions including the discount rates used to measure future  obligations and expenses, the rate of compensation increases, retirement ages, mortality rates and  expected long-term return on plan assets, health care cost trends, and other assumptions, all of which have  a significant impact on the amounts reported. The company’s pension cost consists of service costs, interest  costs, expected returns on plan assets, amortization of prior service costs or benefits and, in part, on a  market-related valuation of assets. The company considers a number of factors in developing its pension  assumptions, including an evaluation of relevant discount rates, expected long-term returns on plan assets,  plan asset allocations, expected changes in wages and retirement benefits, analyses of current market  conditions and input from actuaries and other consultants.  The company also sponsors a post retirement plan that provides limited health care and life insurance  benefits to qualified retired employees. 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. This plan is not funded. For information regarding the effect of new accounting pronouncements, refer to Note 1 of Notes to  Consolidated Financial Statements included in Item 8 of this report.  Day-to-day operating costs are generally affected by inflation. However, because the energy services  industry requires specialized goods and services, general economic inflationary trends may not affect the  company’s operating costs. The major impact on operating costs is the level of offshore exploration, field  development and production spending by energy exploration and production companies. As spending  increases, prices of goods and services used by the energy industry and the energy services industry will  increase. Future increases in vessel day rates may shield the company from the inflationary effects on  operating costs.  The company’s newer technically sophisticated anchor handling towing supply vessels and platform supply  vessels generally require a greater number of specially trained fleet personnel than the company’s older  smaller vessels. Competition for skilled crews may intensify, particularly in international markets, as new  build vessels currently under construction enter the global fleet. If competition for personnel intensifies, the  market for experienced crews could exert upward pressure on wages, which would likely increase the  company’s crew costs.  -59-  New Accounting Pronouncements  Effects of Inflation  Pension and Other Postretirement Benefits Accrued Property and Liability Losses