##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
      þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number:
    001-33206
      
 CAL Dive International,
    Inc.
 (Exact name of registrant as
    specified in its charter)
      Delaware

61-1500501(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification No.)400 North Sam Houston Parkway,
    E.,

77060Suite 1000 Houston,
    Texas

(Zip Code)(Address of Principal Executive
    Offices)   Registrants telephone number, including area code:
 (281) 618-0400
      Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock ($.01 par value)

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
      o þ
  o þ
  o þ
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  o o þ
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 



CAL DIVE
    INTERNATIONAL, INC.
  TABLE OF
    CONTENTS
  
  PagePART
    I


2Item 1.


Business


2Item 1A.


Risk
    Factors


12Item 1B.


Unresolved Staff
    Comments


21Item 2.


Properties


21Item 3.


Legal
    Proceedings


24Item 4.


Submission of
    Matters to a Vote of Security Holders


24PART II


25Item 5.


Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


25Item 6.


Selected Financial
    Data


25Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


27Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


38Item 8.


Financial
    Statements and Supplementary Data


39Item 9.


Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


63Item 9A.


Controls and
    Procedures


63Item 9B.


Other
    Information


63PART
    III


63Item 10.


Directors,
    Executive Officers and Corporate Governance


63Item 11.


Executive
    Compensation


64Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


64Item 13.


Certain
    Relationships and Related Transactions, and Director
    Independence


65Item 14.


Principal
    Accounting Fees and Services


65PART
    IV


65Item 15.


Exhibits, Financial
    Statement Schedules


65SIGNATURES


67EXHIBIT
    INDEX


68Amended and Restated Certificate of IncoporationAmended and Restated BylawsMaster AgreementCorporate Services AgreementRegistration Rights AgreementTax Matters AgreementEmployee Matters Agreement2006 Long Term Incentive PlanForm of Restricted Stock AgreementAmendment No. 1 to Credit AgreementSummary of 2007 Executive Officer Cash CompensationCode of EthicsSubsidiariesConsent of Ernst & Young LLPConsent of Spears & Associates, Inc.Certificaion of CEO Pursuant to Rule 13a-14(a)Certificaion of CFO Pursuant to Rule 13a-14(a)Certification of CEO and CFO Pursuant to Section 1350   1




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PART I  Cautionary
    Statement for Purposes of the Safe Harbor Provisions
    of the Private Securities Litigation Reform Act of
    1995
    Item 1.
    Business    General
     2




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step-up
  Certain
    Definitions
    
    Dive support vessel (DSV):  Specially equipped
    vessel that performs services and acts as an operational base
    for divers, ROVs and specialized equipment.
    Drydock:  The process of docking a vessel so
    that it is fully supported out of the water for the purposes of
    regulatory certification, inspection, maintenance and repair.
    Drydocking allows full work access to the vessel hull.
    Dynamic positioning (DP):  Computer-directed
    thruster systems that use satellite-based positioning and other
    positioning technologies to ensure the proper counteraction to
    wind, current and wave forces, enabling the vessel to maintain
    its position without the use of anchors. Two DP systems (DP-2)
    are necessary to provide the redundancy required to support safe
    deployment of divers, while only a single DP system is necessary
    to support ROV operations.
    EIA:  United States Department of Energy,
    Energy Information Administration.
    4 point mooring:  A mooring system that uses
    four anchors, which are spooled out to the sea floor by
    deck-mounted anchor winches, to secure a vessel in open waters.
    Gulf of Mexico OCS:  The Outer Continental
    Shelf in the Gulf of Mexico, defined as the area in the Gulf of
    Mexico extending from the shoreline to water depths up to
    1,000 feet.
    Hyperbaric rescue chamber (HRC):  An additional
    chamber, connected to the saturation diving system, that acts as
    a floating pressurized lifeboat in the event of a vessel
    emergency.
    Mixed gas diving:  Diving technique used in
    water depths between 170 and 300 feet. The inert nitrogen
    normally found in air is replaced with helium, which provides
    longer bottom times at greater depths and eliminates the
    narcotic effect of nitrogen under pressure.
    MMS:  United States Department of Interior,
    Minerals Management Service.
    Moon pool:  An opening in the bottom center of
    a vessel through which a saturation diving system or ROV may be
    deployed, allowing safer deployment in adverse weather
    conditions.
    Multi-purposesupport vessel (MSV):  A DP DSV
    that is capable of performing coring and well operations in
    addition to working in diving and ROV modes. 3




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
    Pipelay and pipe burial:  Pipelay barges
    provide an offshore work station that allow for the welded
    assembly of multiple sections of pipe on deck. After completing
    nondestructive testing, the barge pulls forward on the anchor
    spread moorings and lays out the pipeline on the seafloor. In
    water depths less than 200 feet, the pipeline is required
    to have a minimum of three feet of burial cover. Burial is
    accomplished by digging and jetting out a trenched ditch from
    under the pipeline.
    Portable saturation diving system:  Saturation
    diving system that is transportable to various offshore
    locations. These systems are typically deployed on barges and
    rigs that do not consistently require deep dive support.
    Qualified turnkey:  Lump-sum bid sent in
    response to a clients request for quote. Our bid response
    contains the following: a defined scope of work, a lump-sum
    price to complete that work, extra work rates for anything
    outside the defined scope of work and a list of clarifications
    and qualifications applicable to the project or contract.
    Remotely operated vehicle (ROV):  Robotic
    vehicles used to complement, support and increase the efficiency
    of diving and subsea operations and for tasks beyond the
    capability of manned diving operations.
    Saturation diving:  Provides for efficient work
    time on the seafloor in water depths between 200 and
    1,000 feet. Divers stay under pressure in a vessel-mounted
    chamber and are transported to the sea floor in a diving bell.
    One-time decompression is conducted after completion of the job
    or a 30-day
    period, whichever is shorter. A split-level saturation diving
    system has an additional chamber that allow extra divers to
    store at a different pressure level, which allows
    the divers to work at different depths.
    Surface diving:  Diving operations conducted in
    shallower waters, typically limited to depths of approximately
    170 feet. At greater depths, bottom times become limited
    and decompression times increase significantly. Compressed air
    and communications are supplied to the diver through a dive
    umbilical tethered to the surface. Based on factors of depth and
    time, divers must decompress after each dive.
    Surface diving system:  Dive equipment
    components required for air or gas surface diving operations,
    which typically includes air compressors, dive hoses,
    communication radios, air/gas manifolds and decompression
    chambers.  Recent
    Acquisitions and Investments
    
    In August 2005, we acquired six vessels and a portable
    saturation diving system from Torch Offshore, Inc., or Torch,
    for an aggregate purchase price of $26.2 million (including
    assets held for sale).
    In late 2005 and early 2006, we acquired all of the diving and
    shallow water pipelay business of Acergy US, Inc. (formerly
    known as Stolt Offshore Inc.), or Acergy, operating in the Gulf
    of Mexico and Trinidad, including nine vessels and one portable
    saturation diving system, for an aggregate purchase price of
    $124.3 million.    
    In July 2005, we obtained a 40% interest in Offshore Technology
    Solutions Limited, or OTSL, a diving services provider in the
    Trinidad market.
    In July 2006, we completed the acquisition of the business of
    Singapore-based Fraser Diving International Limited, or Fraser
    Diving, which includes six portable saturation diving systems
    and 15 surface diving systems operating primarily in the Middle
    East, Southeast Asia and Australia.   4




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Geographic
    Areas
    Year Ended December 31,2006


%


2005


%


2004


%United States

$
439,474



86.2
%

$
190,739



85.0
%

$
106,232



84.5
%International


70,443



13.8
%


33,560



15.0
%


19,554



15.5
%$
509,917



100
%

$
224,299



100
%

$
125,786



100
%     Year Ended December 31,2006


%


2005


%


2004


%United States

$
173,173



77.9
%

$
91,094



80.2
%

$
52,671



69.0
%International


49,074



22.1
%


22,510



19.8
%


23,658



31.0
%$
222,247



100
%

$
113,604



100
%

$
76,329



100
%   Our
    Industry
    Increased capital spending by oil and natural gas
    producers.
  Rising international offshore activity.
  Aging production infrastructure in the Gulf of
    Mexico.
 5




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Significant demand for infrastructure repair
    projects.
  Growing U.S. demand for natural gas.
  Our
    Competitive Strengths
    
    Leader in the Gulf of Mexico OCS diving services
    market.  We believe the size of our fleet and
    workforce makes us the market leader for diving services on the
    Gulf of Mexico OCS. We currently own and operate a diversified
    fleet of 26 vessels and employ approximately 1,300 diving
    and marine personnel. We believe our size advantage allows us to
    provide the highest quality diving services on the Gulf of
    Mexico OCS and contributes to our leading share of diving
    services contracts in this market. Furthermore, we expect to
    achieve similar leadership in new offshore markets due to our
    superior operating capabilities, international experience,
    existing relationships with globally focused customers and
    proven acquisition expertise.
    High-quality asset base.  Our diverse fleet of
    vessels and diving systems, particularly our saturation diving
    fleet, is among the most technically advanced in the industry.
    Our saturation diving fleet has a combination of modern
    features, including DP, multi-chamber systems for split-level
    operations and moon pool deployment, that allow us to operate
    effectively in challenging offshore environments. The diversity
    of our fleet also enables us to provide a wide range of marine
    contracting services. We possess complementary diving, pipelay
    and pipe burial capabilities that are often required for more
    complex subsea projects. As a result, we can effectively execute
    this higher margin business while enhancing the utilization of
    our diving support vessels.
    Highly skilled workforce.  The quality of our
    workforce has been, and will continue to be, a vital contributor
    to our success. We invest significant resources in training
    programs to ensure that our divers, supervisors and support
    staff have the best technical, operational and safety skills in
    the industry, which allows us to deliver innovative solutions to
    our customers. In addition, our market leadership provides an
    advantage with regards to employee retention, which is a major
    issue in our sector in the current tight labor environment. The
    compensation of our divers is typically determined by their
    logged diving time, so divers and others are strongly
    incentivized to work for us due to our high vessel utilization,
    which is driven by our relationships with the most active Gulf
    of Mexico producers and proven operating history. We believe
    these qualities, along with our commitment to effective training
    and safety, help us to attract and retain skilled employees. 6




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
    Excellent, long-standing customer
    relationships.  We have built a reputation as a
    premier diving services contractor during our more than
    30 years operating in the Gulf of Mexico. We have developed
    a large and stable customer base, which includes virtually all
    of the top 20 energy producers in the Gulf of Mexico, by
    consistently providing superior and comprehensive services on
    schedule while maintaining a strong safety track record.
    Successful acquisition track record.  We have a
    proven track record of identifying and executing acquisitions
    that complement our fleet and workforce and enhance our service
    capabilities. In 2005, we added 13 vessels, including three
    premium saturation diving vessels, and two portable saturation
    diving systems to our fleet. More recently, in July 2006, we
    completed the acquisition of six portable saturation diving
    systems and 15 surface diving systems operating primarily in the
    Middle East, Southeast Asia and Australia from Singapore-based
    Fraser Diving. We attribute much of the growth of our business
    to our success making acquisitions, and we believe that
    acquisitions will remain a key element of our growth strategy.
    Furthermore, we believe that our ability to integrate
    acquisitions efficiently is one of our core organizational
    competencies. We have consistently demonstrated the ability to
    add to our revenue base and retain key personnel from acquired
    businesses, while improving margins by leveraging our existing
    cost structure.
    Proven management team with extensive experience in the
    marine contracting business.  Most of our
    executive officers and senior managers have spent the majority
    of their respective careers in the marine contracting business,
    working at various levels of the industry in the Gulf of Mexico
    and internationally. This senior management team, which has an
    average of 22 years of industry experience, includes
    recognized leaders in diving services and offshore construction.
    Several of these individuals serve in high-ranking positions in
    industry organizations for standards and safety. We believe the
    knowledge and experience of our management team provides a
    valuable competitive advantage.  Our
    Business Strategy
    
    Strengthen leadership position on the Gulf of Mexico
    OCS.  We will seek to expand our leadership
    position in the Gulf of Mexico OCS diving services market by
    enhancing the capabilities of our existing assets, making
    acquisitions of complementary assets or businesses and
    continuing to provide a high level of customer service. Pursuant
    to this strategy, we have increased the crane capacity of the DP
    DSV Kestrel and plan to convert the DSV Midnight Star surface
    diving vessel to a saturation diving vessel in the second or
    third quarter of 2007. We believe these upgrades will increase
    the demand for those assets, and we intend to invest future
    available capital in similar fleet enhancements. As evidence of
    our continued success in this market, in 2006 we entered into a
    new diving services contract with a major oil company, the
    largest such contract in our history based on potential revenues
    of approximately $80 million for work that we expect to
    continue through the end of 2007.
    Expand into high-growth international markets through
    acquisitions.  Several international regions, such
    as the Middle East, Southeast Asia and Australia, offer
    excellent growth potential attributable to the recent and
    planned increases in upstream capital spending and the highly
    fragmented nature of the existing marine contracting markets. We
    are continually evaluating potential acquisition targets that
    can provide us with a more meaningful presence in these markets.
    Our goal is to replicate our Gulf of Mexico OCS leadership in
    the most attractive international offshore regions by leveraging
    our operating capabilities, international experience, customer
    relationships and acquisition expertise. Pursuant to this
    strategy, in July 2006, we completed an acquisition of the
    business of Singapore-based Fraser Diving.
    Continue to attract, develop and retain highly skilled
    personnel.  Our market leadership and future
    growth plans are predicated on our ability to employ the most
    highly-skilled divers, supervisors and support staff in the
    industry. We invest significant resources in developing the
    technical, operational and safety skills of our workforce. We
    will continue to invest significant resources in training and
    development courses that will provide our workforce with
    superior knowledge and skills relevant to diving operations and
    safety, as well as facilitate their long-term career
    development. We will also continue our practice of structuring
    compensation and benefit plans that are competitive with our
    peers and properly incentivize our workforce. 7




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
    Maintain a disciplined cost structure.  We seek
    to contain the costs of our operations and identify new
    opportunities to reduce costs. We believe that our cost
    discipline will enhance our profitability in strong market
    environments and better position us to withstand market
    downturns. Furthermore, the size and diversity of our fleet
    provide meaningful economies of scale and scope advantages,
    which we have realized through the efficient integration of
    recent acquisitions and ongoing cost-savings initiatives.
    Optimize our mix of dayrate and qualified turnkey
    work.  We seek to optimize the allocation of our
    resources between dayrate and qualified turnkey work in order to
    diversify our sources of revenue and enhance overall
    profitability. We believe that this strategy allows us to
    respond effectively to the increasing demand from larger
    customers for integrated solutions while ensuring that a segment
    of our fleet is positioned to capitalize on attractive
    opportunities in the spot market. As business conditions change,
    we will adjust our resource allocation.
    Improve financial flexibility.  We intend to
    improve our financial flexibility in the near term by utilizing
    our strong operating cash flows to reduce the debt incurred by
    us in connection with our initial public offering. As of
    December 31, 2006, we had $201 million of outstanding
    debt and $49 million of borrowing capacity, and as of
    February 23, 2007, we had $175 million of outstanding
    debt and $75 million of borrowing capacity, under our
    revolving credit agreement, which we believe is sufficient to
    support our business. However, we seek to achieve a more
    conservative capital structure over the long term so that we may
    continue to actively pursue value-enhancing growth initiatives
    and mitigate some of the financial risk associated with a market
    downturn.  Our
    History
    1980


Acquired International Oilfield
    Divers, our first acquisition in the Gulf of Mexico market1984


Completed a major conversion of
    the Cal Diver I, introducing the first DSV dedicated
    for use in the Gulf of Mexico1986


Began providing subsea
    construction, maintenance and inspection work on a qualified
    turnkey basis, enabling clients to better control project costs1989


Launched shallow water salvage
    business1994


Acquired our first DP DSV, the
    Witch Queen, improving our abilities to operate in winter
    months and work in deeper waters1996


Acquired and enhanced the Uncle
    John, the first semi-submersible MSV dedicated for use in
    the Gulf of Mexico in heavy construction and saturation mode1997


Acquired Aquatica, Inc.
    (previously known as Acadiana Divers) in Lafayette, Louisiana to
    expand our call out diving support capabilities2001


Acquired Professional Divers of
    New Orleans, adding an additional 4 point surface DSV and three
    utility boats2005


Acquired six DSVs and a portable
    saturation diving system from TorchAcquired all of the diving and
    shallow water pipelay business of Acergy operating in the Gulf
    of Mexico and Trinidad, including nine vessels and one portable
    saturation diving system 8




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2006


Acquired the business of
    Singapore-based Fraser Diving and its six portable saturation
    diving systems and 15 surface diving systems operating primarily
    in the Middle East, Southeast Asia and AustraliaEntered into a new diving services
    contract with a major oil company, the largest such contract in
    our history based on potential revenues of approximately
    $80 million, for work that we expect to continue through
    the end of 2007.     Seasonality
    Customers
    Contracting
    and Tendering
       9




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Competitors
    Employees
  non-U.S. citizens
  Training
    and Safety
    Government
    Regulation
   10




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Environmental
    Regulation
           11




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Available
    Information
  Form 10-K, Form 10-Q, Form 8-K www.caldive.com
  Item 1A.
    Risk
    Factors  Stockholders should carefully consider the risk factors
    described below in addition to the other information contained
    in this annual report. You should be aware that the occurrence
    of the events described in these risk factors and elsewhere in
    this annual report could have a material adverse effect on our
    business, financial condition or results of operations.
  Risks
    Related to Our Business
  Our
    business largely depends on offshore exploration, development
    and production activity in the oil and natural gas industry,
    which is currently at a historically high level and could
    decline in the future.
    
    changes in United States and international economic conditions;
    demand for oil and natural gas, especially in the United States,
    China and India; 12




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
    worldwide political conditions, particularly in significant
    oil-producing regions such as the Middle East, West Africa and
    Latin America;
    actions taken by the Organization of Petroleum Exporting
    Countries, or OPEC;
    the availability and discovery rate of new oil and natural gas
    reserves in offshore areas;
    the cost of offshore exploration for, and production and
    transportation of, oil and natural gas;
    the ability of oil and natural gas companies to generate funds
    or otherwise obtain external capital for exploration,
    development and production operations;
    the sale and expiration dates of offshore leases in the United
    States and overseas;
    technological advances affecting energy exploration, production,
    transportation and consumption;
    weather conditions;
    environmental or other government regulations; and
    tax policies.    Market
    conditions in the marine contracting industry are highly
    cyclical and subject to rapid change. Due to the short-term
    nature of most of our contracts, adverse changes in market
    conditions can have an immediate impact on our results of
    operations.
    Our
    business is concentrated on the Gulf of Mexico OCS, and the
    mature nature of this region could result in less exploration,
    development and production activities in the area, thereby
    reducing demand for our services.
    Intense
    competition in our industry may reduce our profitability and
    weaken our financial condition.
   13




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If we
    fail to manage our growth effectively, our results of operations
    could be harmed.
      
    incorrect assumptions regarding the future results of acquired
    operations or assets or expected cost reductions or other
    synergies expected to be realized as a result of acquiring
    operations or assets;
    failure to integrate the operations or management of any
    acquired operations or assets successfully and timely;
    diversion of managements attention from existing
    operations or other priorities; and
    our inability to secure, on terms we find acceptable, sufficient
    financing that may be required for any such acquisition or
    investment.    Our
    operations outside of the United States are subject to
    additional political, economic, and other uncertainties that
    could adversely affect our business, financial condition or
    results of operations, and our exposure to such risks will
    increase as we expand our international
    operations.
    
    political, social and economic instability;
    the loss of revenue, property and equipment from hazards such as
    expropriation, nationalization, war, insurrection, acts of
    terrorism and other political risks;
    increased operating costs;
    increases in taxes and governmental royalties;
    renegotiation or abrogation of contracts with governmental
    entities;
    changes in laws and policies governing operations of
    foreign-based companies;
    import-export quotas;
    currency restrictions and exchange rate fluctuations;
    world economic cycles; 14




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
    limited market access; and
    other uncertainties arising out of foreign government
    sovereignty over our international operations.      We are
    the subject of an agreed final judgment that prevents us from
    making acquisitions of certain saturation diving systems without
    the consent of the U.S. Department of Justice, which could
    adversely affect our ability to make strategic acquisitions and
    increase our revenues and profitability.
    The
    loss of the services of one or more of our key employees, or our
    failure to attract and retain other highly qualified personnel
    in the future, could disrupt our operations and adversely affect
    our financial results.
    The
    operation of marine vessels is risky, and we may incur losses or
    other liabilities that are not covered by insurance and could
    have a material adverse effect on our financial condition and
    results of operations.
   15




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We
    have substantial debt obligations that could restrict our
    operations and impair our financial condition.
      
    increasing our vulnerability to adverse economic, regulatory and
    industry conditions;
    limiting our ability to compete and our flexibility in planning
    for, or reacting to, changes in our business and the industry;
    limiting our ability to borrow additional funds; and
    requiring us to dedicate a substantial portion of our cash flow
    from operations to payments on our debt, thereby reducing funds
    available for working capital, capital expenditures,
    acquisitions and other purposes.    Our
    contracting business declines in winter, and adverse weather
    conditions in the Gulf of Mexico can adversely affect our
    revenues.
    Our
    original estimates of the costs associated with our qualified
    turnkey projects and capital projects may be incorrect and
    result in reduced profitability, losses or cost over-runs on
    those projects.
    We are
    subject to extensive federal, state, local and other laws and
    regulations that could adversely affect the cost, manner or
    feasibility of conducting our operations.
   16




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We may
    incur substantial costs and liabilities with respect to
    environmental, health and safety laws and
    regulations.
      Risks
    Related to Our Relationship with Helix and to our Common
    Stock
  We
    have no operating history as an independent company and our
    historical financial information is not necessarily
    representative of the results we would have achieved as an
    independent publicly traded company and may not be a reliable
    indicator of our future results.
    
    Our historical financial results reflect allocations of
    corporate expenses from Helix. Those allocations may be
    different from the comparable expenses we would have incurred
    had we operated as an independent publicly traded company.
    Our working capital requirements and funding for maintenance
    capital expenditures, strategic investments and acquisitions
    have historically been part of the corporate-wide cash
    management program of Helix. Following our initial public
    offering, we are solely responsible for the provision of funds
    to finance our working capital and other cash requirements.
    Without the opportunity to obtain financing from Helix, we may
    in the future need to obtain additional financing from banks, or
    through public offerings or private 17




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##### Table of Contents



placements of debt or equity securities, strategic relationships
    or other arrangements. We may incur debt on terms and at
    interest rates that will not be as favorable as those generally
    enjoyed by Helix.  
    Significant changes may occur in our cost structure, management,
    financing and business operations as a result of our operating
    as an independent public subsidiary of Helix. These changes
    could result in increased costs associated with reduced
    economies of scale, standalone costs for services currently
    provided by Helix, the need for additional personnel to perform
    services currently provided by Helix and the legal, accounting,
    compliance and other costs associated with being a public
    company with equity securities listed on a national stock
    exchange. We are obligated to continue to use the services of
    Helix under our Corporate Services Agreement until such time as
    Helix owns less than 50% of the total voting power of our common
    stock, or longer for certain information technology services,
    and, in the event our Corporate Services Agreement with Helix
    terminates, we may not be able to replace the services that
    Helix provides us until such time or in a timely manner or on
    comparable terms.  Helix
    owns a controlling interest in our company. The interests of
    Helix may conflict with those of our other stockholders, and
    other stockholders voting power may be
    limited.
      Conflicts
    of interest may arise between Helix and us that could be
    resolved in a manner unfavorable to us.
   18




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##### Table of Contents




    Cross officerships, directorships and stock
    ownership.  The ownership interests of our
    directors or executive officers in the common stock of Helix or
    service as a director or officer of both Helix and us could
    create, or appear to create, conflicts of interest when
    directors and executive officers are faced with decisions that
    could have different implications for the two companies. For
    example, these decisions could relate to (i) the nature,
    quality and cost of services rendered to us by Helix,
    (ii) disagreement over the desirability of a potential
    acquisition or other corporate opportunity, (iii) employee
    retention or recruiting or (iv) our dividend policy.
    Intercompany transactions.  From time to time,
    Helix or its affiliates may enter into transactions with us or
    our subsidiaries or other affiliates. Although the terms of any
    such transactions will be established based upon negotiations
    between employees of Helix and us and, when appropriate, subject
    to the approval of the independent directors on our board or a
    committee of disinterested directors, the terms of any such
    transactions may not be as favorable to us or our subsidiaries
    or affiliates as may otherwise be obtained in arms length
    negotiations. Under the Master Agreement, at Helixs
    request, we will continue to contract vessels and related
    equipment owned by us to Helix, at prevailing market rates.
    Intercompany agreements.  We have entered into
    certain agreements with Helix pursuant to which Helix has agreed
    to provide us with certain accounting, tax and other services
    and we have agreed to provide Helix with certain training,
    supply chain, operational facilities and operational human
    resources services. Payments for these services will allow Helix
    and us to fully recover the allocated direct costs of providing
    the services, plus all
    out-of-pocket
    costs and expenses. In addition, we have entered into a number
    of intercompany agreements covering matters such as tax sharing
    and our responsibility for certain liabilities previously
    undertaken by Helix for certain of our businesses. We negotiated
    the terms of these agreements with Helix in the context of a
    parent-subsidiary relationship. The terms were not the result of
    arms length negotiations. In addition, conflicts could
    arise in the interpretations of any extension or renegotiation
    of these agreements in the future.  If
    Helix engages in the same type of business we conduct or takes
    advantage of business opportunities that might be attractive to
    us, our ability to operate successfully and expand our business
    may be hampered.
    
    engaging in the same or similar business activities or lines of
    business as us, or
    doing business with any of our clients, customers or vendors.     19




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##### Table of Contents



Future
    sales or distributions of our shares by Helix could depress the
    market price for shares of our common stock.
  180-day
  We may
    be unable to replace the corporate services Helix provides us in
    a timely manner or on comparable terms.
      We
    will not have control over certain tax decisions and could be
    liable for income taxes owed by Helix.
      We
    could be responsible for taxes resulting from the transfer of
    assets to us by Helix.
   20




---



##### Table of Contents



Our
    stock ownership by Helix, provisions in our agreements with
    Helix and our corporate governance documents and Delaware law
    may delay or prevent an acquisition of us that our other
    stockholders may consider favorable.
    Conflicts
    of interest may arise due to the vesting schedule of grants of
    restricted stock to our executive officers.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  Our
    Vessels
   21




---



##### Table of Contents



Placed inService by








DP or AnchorFlag State

Cal Dive(1)


Length (Feet)


Berths


MooredSaturation DivingDP DSV Eclipse

Bahamas


3/2002



367



109


DPDP DSV Mystic Viking

Bahamas


6/2001



253



60


DPDP DSV Kestrel(2)

Vanuatu


9/2006



323



80


DPDP MSV Uncle John

Bahamas


11/1996



254



102


DPDSV American Constitution

Panama


11/2005



200



46


4 pointDSV Cal Diver I

U.S.


7/1984



196



40


4 pointDSV Cal Diver II

U.S.


6/1985



166



32


4 pointDSV Midnight Star(3)

Vanuatu


6/2006



197



42


4 pointSurface DivingAmerican Diver

U.S.


11/2005



105



22


American Liberty

U.S.


11/2005



110



22


Cal Diver IV

U.S.


3/2001



120



24


DSV American Star

U.S.


11/2005



165



30


4 pointDSV American Triumph

U.S.


11/2005



164



32


4 pointDSV American Victory

U.S.


11/2005



165



34


4 pointDSV Cal Diver V

U.S.


9/1991



166



34


4 pointDSV Dancer

U.S.


3/2006



173



34


4 pointDSV Mr. Fred

U.S.


3/2000



166



36


4 pointFox

U.S.


10/2005



130



42


Mr. Jack

U.S.


1/1998



120



22


Mr. Jim

U.S.


2/1998



110



19


Polo Pony

U.S.


3/2001



110



25


Sterling Pony

U.S.


3/2001



110



25


White Pony

U.S.


3/2001



116



25


PipelayBrave

U.S.


11/2005



275



80


AnchorRider

U.S.


11/2005



275



80


AnchorDLB801(4)

Panama


1/2006



351



230


Anchor     (1)
    
    Represents the date Cal Dive placed the vessel in service
    and not its date of commissioning.(2)
    
    We acquired the DP DSV Kestrel, formerly known as the DP DSV
    Seaway Kestrel, in March 2006 from Acergy.(3)
    
    Expected to be converted in the second or third quarter of 2007
    to full saturation diving capabilities.(4)
    
    The DLB801 was purchased in January 2006 and a 50% interest in
    the vessel was subsequently sold to an unaffiliated purchaser
    that same month. The vessel is now under a
    10-year
    charter lease agreement with the purchaser of the 50% interest.
    The charter lease agreement includes an option by the other
    holder to purchase our 50% interest in the vessel beginning in
    January 2009.    Midnight Carrier Seaway Defender Seaway Defender
 22




---



##### Table of Contents



Midnight
    Carrier Midnight Carrier
  Rider Kestrel Eclipse Mystic
    Viking Uncle John
      2006


2005


2004Number





Number





Numberof Vessels


Utilization


of Vessels


Utilization


of Vessels


Utilization(1)


(2)


(1)


(2)


(1)


(2)Saturation Diving


8



92
%


6



91
%


5



86
%Surface and Mixed Gas Diving


15



90
%


14



72
%


8



49
%Shallow Water Pipelay


2



87
%


2



92
%(3)






Entire Fleet


25



91
%


22



79
%


13



63
%     (1)
    
    As of the end of the period and excluding acquired vessels prior
    to their in-service dates, vessels taken out of service prior to
    their disposition and vessels jointly owned by a third party.(2)
    
    Average vessel utilization is calculated by dividing the total
    number of days the vessels generated revenues by the total
    number of days the vessels were available for operation in each
    quarter and does not reflect acquired vessels prior to their
    in-service dates, vessels in drydocking, vessels taken out of
    service for upgrades or prior to their disposition and vessels
    jointly owned by a third party.(3)
    
    Includes activity for only November and December 2005.  Our
    Facilities
  1 2
  23




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##### Table of Contents



Location

Function

SizeHouston, Texas

Corporate Headquarters, Project
    Management and Sales Office

20,000 square feetPort of Iberia, Louisiana

Operations, Offices and Warehouse

23 acres (Buildings: 68,602
    sq. feet)Fourchon, Louisiana

Marine, Operations, Living Quarters

10 acres (Buildings: 2,300
    sq. feet)New Orleans, Louisiana

Sales Office

2,724 square feetSingapore

Marine, Operations, Offices,
    Project Management and Warehouse

29,772 square feetDubai, United Arab Emirates

Sales Office and Warehouse

12,916 square feetPerth, Australia

Operations, Offices and Project
    Management

28,738 square feet   Item 3.
    Legal
    Proceedings  Insurance
    and Legal Proceedings
      Item 4.
    Submission
    of Matters to a Vote of Security Holders   24




---



##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities    Common StockPriceHigh


LowFiscal Year 2006Fourth Quarter (from December 14)

$
12.75


$
12.07Fiscal Year 2007First Quarter (through February 23)

$
12.66


$
11.83     Dividend
    Policy
    Use of
    Proceeds
  Form S-1 No. 333-134609),
    Underwriting discounts and
    commissions

$
18,736,185Other expenses


5,111,669Total

$
23,847,854   Item 6.
    Selected
    Financial Data   25




---



##### Table of Contents



Year Ended December 31,2006


2005


2004


2003


2002(Unaudited)(In thousands, except per share and marine contracting
    activity data)Results of Operations
    Data:Net revenues

$
509,917


$
224,299


$
125,786


$
135,488


$
139,887Cost of sales


287,387



152,586



101,583



108,479



116,167Gross profit


222,530



71,713



24,203



27,009



23,720Gain on sale of assets


349



270











Selling and administrative expenses


37,431



16,730



12,318



10,337



8,055Income from operations


185,448



55,253



11,885



16,672



15,665Equity in earnings (losses) of
    investment


(487
)


2,817











Net interest income


163



45











Income before income taxes


185,124



58,115



11,885



16,672



15,665Provision for income taxes


65,710



20,385



4,211



5,870



5,510Net income

$
119,414


$
37,730


$
7,674


$
10,802


$
10,155Net income per common share
    (unaudited):Basic and diluted

$
1.91


$
0.61
(1)

$
0.12
(1)

$
0.18
(1)

$
0.17
(1)Other Financial Data:Depreciation and amortization


24,515



15,308



15,510



15,209



14,193Capital expenditures


38,086



36,407



2,912



2,784



12,980Acquisition of businesses


100,128



42,917











 26




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##### Table of Contents



Year Ended December 31,2006


2005


2004


2003


2002(Unaudited)(In thousands, except per share and marine contracting
    activity data)Cash Flow Data(2):Cash flows provided by (used in):Operating activities

$
86,439


$
32,228


$
28,610


$
26,370


$
15,691Investing activities


(121,157
)


(79,547
)


(2,912
)


(2,584
)


(4,310
)Financing activities


57,373



47,319



(25,698
)


(23,786
)


(11,381
)Marine Contracting Activity
    Data (unaudited):Number of vessels(3)


25



22



13



13



13Utilization(4)


91
%


79
%


63
%


68
%


61
%   December 31,2006


2005


2004


2003


2002(Unaudited)


(Unaudited)(In thousands)Balance Sheet Data:Total current assets

$
168,747


$
110,484


$
46,565


$
43,270


$
52,556Net property and equipment


222,247



113,604



76,329



91,533



100,605Total assets


452,153



277,884



144,817



156,280



172,904Total current liabilities


58,814



73,869



27,438



21,165



28,431Total liabilities


294,392



100,101



52,309



45,748



49,388Long-term debt


201,000















Total stockholders equity


157,761



177,783



92,508



110,532



123,516     (1)
    
    Basic and diluted net income per share for these periods are
    based upon 61,506,691 shares, reflecting a 61,506.691 to 1
    stock split effected immediately prior to our initial public
    offering.(2)
    
    For all periods through December 14, 2006: (i) cash
    flows from financing activities have been reflected as
    (a) cash transfers from us to Helix equal to substantially
    all cash provided by operating activities and (b) cash
    transfers from Helix to us equal to the amount of cash used in
    investing activities, (ii) substantially all excess cash
    has been transferred to our owner, and (iii) these cash
    transfers have been reflected as changes in total
    stockholders equity.(3)
    
    As of the end of the period and excluding acquired vessels prior
    to their in-service dates, vessels taken out of service prior to
    their disposition and vessels jointly owned by a third party.(4)
    
    Average vessel utilization is calculated by dividing the total
    number of days the vessels generated revenues by the total
    number of days the vessels were available for operation in each
    period and does not reflect acquired vessels prior to their
    in-service dates, vessels in drydocking, vessels taken out of
    service for upgrades or prior to their disposition and vessels
    jointly owned by a third party.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following management discussion and analysis should be
    read in conjunction with our historical consolidated and
    combined financial statements and their notes included elsewhere
    in this report. This discussion contains forward-looking
    statements that reflect our current views with respect to future
    events and financial performance. Our actual results may differ
    materially from those anticipated in these forward-looking
    statements as a result of certain factors, such as those set
    forth under Item 1A Risk Factors and elsewhere
    in this report.
 27




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##### Table of Contents



Our
    Business
    Major
    Influences on Results of Operations
    
    changes in United States and international economic conditions;
    demand for oil and natural gas, especially in the United States,
    China and India;
    worldwide political conditions, particularly in significant
    oil-producing regions such as the Middle East, West Africa and
    Latin America;
    actions taken by OPEC;
    the availability and discovery rate of new oil and natural gas
    reserves in offshore areas;
    the cost of offshore exploration for, and production and
    transportation of, oil and natural gas;
    the ability of oil and natural gas companies to generate funds
    or otherwise obtain external capital for exploration,
    development and production operations;
    the sale and expiration dates of offshore leases in the United
    States and overseas;
    technological advances affecting energy exploration, production,
    transportation and consumption;
    weather conditions;
    environmental or other government regulations; and
    tax policies.   28




---



##### Table of Contents



2004


2005


2006Q1


Q2


Q3


Q4


Q1


Q2


Q3


Q4


Q1


Q2


Q3


Q4U.S. natural gas prices(1)

$
5.61


$
6.08


$
5.44


$
6.26


$
6.39


$
6.94


$
9.74


$
12.31


$
7.75


$
6.53


$
6.08


$
6.60NYMEX oil prices(2)

$
35.15


$
38.32


$
43.88


$
48.28


$
49.84


$
53.17


$
63.19


$
60.03


$
63.48


$
70.70


$
70.48


$
60.21Gulf of Mexico rigs(3)


117



115



118



122



130



132



130



127



131



132



125



116Platform installations(4)


25



29



37



28



36



23



19



15



20



30



19



15Platform removals(4)


23



51



77



39



11



50



44



9



3



14



49



10Number of our vessels(5)


13



13



13



13



13



13



13



22



23



24



25



25Our average utilization rate(6)


54
%


57
%


62
%


77
%


65
%


72
%


77
%


94
%


96
%


98
%


91
%


80
%     (1)
    
    Quarterly average of the Henry Hub natural gas daily average
    spot price (the midpoint index price per Mmbtu for deliveries
    into a specific pipeline for the applicable calendar day as
    reported by Platts Gas Daily in the Daily Price
    Survey table).(2)
    
    Quarterly average of NYMEX West Texas Intermediate near month
    crude oil daily average contract price.(3)
    
    Average monthly number of rigs contracted, as reported by
    ODS-Petrodata  Offshore Rig Locator.(4)
    
    Source: Minerals Management Service; installation and removal of
    platforms in the Gulf of Mexico.(5)
    
    As of the end of the period and excluding acquired vessels prior
    to their in-service dates, vessels taken out of service prior to
    their disposition and vessels jointly owned by a third party.(6)
    
    Average vessel utilization is calculated by dividing the total
    number of days the vessels generated revenues by the total
    number of days the vessels were available for operation in each
    quarter and does not reflect acquired 29




---



##### Table of Contents



vessels prior to their in-service dates, vessels in drydocking,
    vessels taken out of service for upgrades or prior to their
    disposition and vessels jointly owned by a third party.  Factors
    Impacting Comparability of Our Financial Results
    Recent
    Acquisitions
  DLB801 10-year Kestrel
    Our
    Relationship with Helix
     30




---



##### Table of Contents



Critical
    Accounting Estimates and Policies
    Revenue
    Recognition
      percentage-of-completion percentage-of-completion
  
    the customer provides specifications for the construction of
    facilities or for the provision of related services;
    we can reasonably estimate our progress towards completion and
    our costs;
    the contract includes provisions as to the enforceable rights
    regarding the goods or services to be provided, consideration to
    be received and the manner and terms of payment;
    the customer can be expected to satisfy its obligations under
    the contract; and
    we can be expected to perform our contractual obligations.  percentage-of-completion
   31




---



##### Table of Contents



Accounts
    Receivable and Allowance for Uncollectible
    Accounts
    Related
    Party Cost Allocations
      Property
    and Equipment
    vessel-by-vessel
  12-month
  Recertification
    Costs and Deferred Drydock Charges
   32




---



##### Table of Contents



30-month
  ,
  Goodwill
    Equity
    Investment
  Witch Queen.
  Earnings
    per Share
    Income
    Taxes
   33




---



##### Table of Contents



Workers
    Compensation Claims
    Stock-Based
    Compensation Plans
      Major
    Customers and Concentration of Credit Risk
    Recently
    Issued Accounting Principles
   34




---



##### Table of Contents



Accounting for Uncertainty in Income Taxes 
    an Interpretation of FASB Statement No. 109 Accounting for Income
    Taxes
  Fair Value Measurements.
  Results
    of Operations
  Comparison
    of Years Ended 2006 and 2005
  Revenues.
  Gross profit.
  Selling and administrative expenses.
  Income taxes.
  Net Income.
  Comparison
    of Years Ended 2005 and 2004
  Revenues.
 35




---



##### Table of Contents



Gross profit.
  Selling and administrative expenses.
  Income taxes.
  Net Income.
  Liquidity
    and Capital Resources
        Cash
    Flows
  Operating activities.
   36




---



##### Table of Contents



Investing Activities.
  DLB801 Kestrel
    Financing activities.
  Capital
    Expenditures
  Kestrel DLB801.
  Revolving
    Credit Facility
     37




---



##### Table of Contents



Contractual
    and Other Obligations
       Payments Due by PeriodLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 Years(In thousands)Payable to Helix

$
11,349


$
321


$
7,112


$
2,225


$
1,691Noncancelable operating leases and
    charters


19,884



16,030



1,810



707



1,337Long-term debt


201,000











201,000



Total cash obligations

$
232,233


$
16,351


$
8,922


$
203,932


$
3,028   Off-Balance
    Sheet Arrangements
  ,
   Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Market
    Risk Management
   38




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  INDEX TO
    FINANCIAL STATEMENTS
  PageCal Dive International, Inc.
    and SubsidiariesReport of
    Independent Registered Public Accounting Firm


40Consolidated and
    Combined Balance Sheets as of December 31, 2006 and
    2005


41Consolidated and
    Combined Statements of Operations for the three years ended
    December 31, 2006


42Consolidated and
    Combined Statements of Changes in Stockholders Equity for
    the three years ended December 31, 2006


43Consolidated and
    Combined Statements of Cash Flows for the three years ended
    December 31, 2006


44Notes to
    Consolidated and Combined Financial Statements


45  39




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM             
    40




---



##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  CONSOLIDATED AND COMBINED BALANCE SHEETS
 (in thousands)
  December 31,2006


2005ASSETSCurrent assets:Cash and cash equivalents

$
22,655


$
Accounts receivable Trade, net of allowance for
    doubtful accounts $169 and $26, respectively


93,748



75,713Unbilled revenue


33,869



13,608Net receivable from Helix


1,626



Deferred income taxes


1,869



1,939Assets held for sale


698



7,936Notes receivable


3,008



1,500Other current assets


11,274



9,788Total current assets


168,747



110,484Property and equipment


293,929



173,841Less  Accumulated
    depreciation


(71,682
)


(60,237
)222,247



113,604Other assets:Equity investment


10,871



11,513Goodwill


26,666



27,814Other assets, net


23,622



14,469Total assets

$
452,153


$
277,884LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
39,810


$
32,034Accrued liabilities


19,004



41,835Total current liabilities


58,814



73,869Long-term debt


201,000



Long-term payable to Helix


11,028



Deferred income taxes


20,824



22,621Other long term liabilities


2,726



3,611Total liabilities


294,392



100,101Commitments and contingencies






Stockholders equity:Common stock, 240,000 shares
    authorized, $0.01 par value,Issued and outstanding:
    84,298 shares in 2006, no shares issued in 2005


843



Capital in excess of par value of
    common stock


154,898



Helixs net investment






179,681Retained earnings


2,020



Unearned compensation






(1,898
)Total stockholders equity


157,761



177,783Total liabilities and
    stockholders equity

$
452,153


$
277,884    41




---



##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  CONSOLIDATED AND COMBINED STATEMENTS OF
    OPERATIONS
 (in thousands, except per share amounts)
  Year Ended December 31,2006


2005


2004Net revenues

$
509,917


$
224,299


$
125,786Cost of sales


287,387



152,586



101,583Gross profit


222,530



71,713



24,203Gain on sale of assets


349



270



Selling and administrative expenses


37,431



16,730



12,318Income from operations


185,448



55,253



11,885Equity in earnings (losses) of
    investment


(487
)


2,817



Net interest income


163



45



Income before income taxes


185,124



58,115



11,885Provision for income taxes


65,710



20,385



4,211Net Income

$
119,414


$
37,730


$
7,674Net income per common share:Basic and diluted net income per
    share

$
1.91


$
0.61


$
0.12Weighted average basic and diluted
    shares outstanding


62,600



61,507



61,507    42




---



##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES
    IN STOCKHOLDERS EQUITY
 (in thousands)
  CommonHelixs


Stock,


Capital








TotalNet


$.01 Par


in Excess


Retained


Unearned


StockholdersInvestment


Value


of Par


Earnings


Compensation


EquityBalances at December 31, 2003

$
110,532














$



$
110,532Net income


7,674



















7,674Capital contributions by Helix


2,912



















2,912Cash transfers to Helix


(28,610
)


















(28,610
)Balances at December 31, 2004

$
92,508














$



$
92,508Net income


37,730



















37,730Stock grants in Helixs stock
    plan


2,124















(2,124
)


Amortization of stock grants in
    Helixs stock plan


















226



226Capital contributions by Helix


79,547



















79,547Cash transfers to Helix


(32,228
)


















(32,228
)Balances at December 31, 2005

$
179,681














$
(1,898
)

$
177,783Reversal of unearned compensation


(1,898
)














1,898



Amortization of stock grants in
    Helixs stock plan


2,930



















2,930Net income prior to IPO


117,394



















117,394Capital contributions by Helix
    prior to IPO


121,157



















121,157Cash transfers to Helix prior to
    IPO


(64,784
)


















(64,784
)Contributed capital related to
    Helix deferred tax asset


1,261



















1,261Dividends to Helix


(464,401
)


















(464,401
)Capitalization of Cal Dive
    International, Inc.


108,660



615



(109,275
)










Restricted share grants






6



(6
)










Net proceeds from initial public
    offering






222



264,179











264,401Net income subsequent to IPO














2,020







2,020Balances at December 31, 2006

$



$
843


$
154,898


$
2,020


$



$
157,761    43




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  CONSOLIDATED AND COMBINED STATEMENTS OF CASH
    FLOWS
 (in thousands)
  Year Ended December 31,2006


2005


2004Cash Flows From Operating
    Activities:Net income

$
119,414


$
37,730


$
7,674Adjustments to reconcile net
    income to net cash provided by operating activities:Depreciation and amortization


24,515



15,308



15,510Asset impairment charges






790



3,900Equity in (earnings) loss of
    investment


487



(2,817
)Stock compensation expense


2,930



226Deferred income taxes


11,737



11



(970
)Gain on sale of assets


(349
)


(270
)Changes in operating assets and
    liabilities:Accounts receivable, net


(38,105
)


(55,305
)


54Other current assets


(5,281
)


(3,494
)


258Accounts payable and accrued
    liabilities


(10,081
)


46,431



6,272Other noncurrent, net


(18,828
)


(6,382
)


(4,088
)Net cash provided by operating
    activities:


86,439



32,228



28,610Cash Flows From Investing
    Activities:Capital expenditures


(38,086
)


(36,407
)


(2,912
)Acquisition of businesses


(100,128
)


(42,917
)Equity investment


155



(1,696
)Loan to Offshore Technology
    Solutions Limited






(1,500
)Proceeds from sales of property


16,902



2,973Net cash used in investing
    activities:


(121,157
)


(79,547
)


(2,912
)Cash Flows From Financing
    Activities:Draws on credit facility


201,000Proceeds from initial public
    offering


264,401Dividends paid to Helix


(464,401
)Cash transfers from Helix for
    investing activities


121,157



79,547



2,912Cash transfers to Helix from
    operating activities


(64,784
)


(32,228
)


(28,610
)Net cash provided by (used in)
    financing activities


57,373



47,319



(25,698
)Net increase in cash and cash
    equivalents


22,655







Cash and cash equivalents:Balance, beginning of year










Balance, end of year

$
22,655


$



$
    44




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS
  1.
    Organization
    and Basis of Presentation              2.
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation and Combination
   45




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
   Use of
    Estimates
    Revenue
    Recognition
      percentage-of-completion percentage-of-completion
  
    the customer provides specifications for the construction of
    facilities or for the provision of related services;
    we can reasonably estimate our progress towards completion and
    our costs;
    the contract includes provisions as to the enforceable rights
    regarding the goods or services to be provided, consideration to
    be received and the manner and terms of payment;
    the customer can be expected to satisfy its obligations under
    the contract; and
    the Company can be expected to perform its contractual
    obligations.  percentage-of-completion
 46




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      Accounts
    Receivable and Allowance for Uncollectible
    Accounts
    Property
    and Equipment
    Estimated


December 31,Useful Life


2006


2005Vessels


15 to 20 years


$
232,678


$
142,036Portable saturation diving
    systems, machinery and equipment


5 to 10 years



55,798



25,749Buildings and leasehold
    improvements


4 to 20 years



5,453



6,056Total property and equipment





$
293,929


$
173,841       12-month
 47




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
   Recertification
    Costs and Deferred Drydock Charges
  30-month
    Goodwill
    Equity
    Investment
    Income
    Taxes
   48




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    Earnings
    per Share
    Stock-Based
    Compensation Plans
    Accounting for
    Stock-Based Compensation
  Year Ended December 31,2005


2004Net income as reported

$
37,730


$
7,674Plus: Stock-based employee
    compensation cost included in reported net income


226



Less: Total stock-based
    compensation costs determined under the fair value method


(576
)


(1,087
)Pro forma net income

$
37,380


$
6,587Basic and diluted net income per
    share:As reported

$
0.61


$
0.12Pro forma

$
0.61


$
0.11    49




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  Share-Based Payment
  Major
    Customers and Concentration of Credit Risk
    Statement
    of Cash Flow Information
    Recently
    Issued Accounting Principles
  Accounting for Stock Issued to Employees. Statement of Cash Flows.
  Accounting for Uncertainty in Income Taxes 
    an Interpretation of FASB Statement No. 109 Accounting for Income
    Taxes
  Fair Value Measurements
 50




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    3.
    Related
    Party Transactions               51




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
          step-up
  4.
    Acquisition
    of Torch Offshore, Inc. Assets    5.
    Acquisition
    of Acergy (formerly known as Stolt Offshore) Business  Kestrel DLB801
 52




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
  DLB801 Kestrel
  DLB801 Kestrel
    Vessels

$
94,484Goodwill


11,693Portable saturation system and
    diving equipment


9,494Facilities, land and leasehold
    improvements


4,314Customer relationship intangible
    asset


3,698Materials and supplies


631Total

$
124,314     DLB801 10-year DLB801 DLB801
  DLB801 10-year
 53




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31,2005


2004Net revenues

$
464,543


$
287,717Income (loss) before income taxes

$
64,136


$
(24,645
)Net income (loss)

$
41,644


$
(16,071
)   6.
    Acquisition
    of Fraser Diving International Ltd (FDI)
    Business    Portable saturation diving systems
    and surface diving systems

$
23,685Diving support equipment, support
    facilities and other equipment


3,004Cash and cash equivalents


2,332Accounts receivable


1,817Prepaid expenses and deposits


691Total assets acquired


31,529Accounts payable and accrued
    liabilities


(2,243
)Net assets acquired

$
29,286     7.
    Equity
    Investment  Witch Queen. Consolidation of Variable Interest Entities,
 54




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
      Witch Queen
      8.
    Accrued
    Liabilities    Year EndedDecember 31,2006


2005Accrued payroll and related
    benefits

$
7,500


$
5,370Accrued insurance


3,367



3,172Insurance claims to be reimbursed


1,870



2,678Accrued income taxes payable


1,201



20,374Deposits






10,000Other


5,066



241Total accrued liabilities

$
19,004


$
41,835   9.
    Long-term
    Debt   55




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
        10.
    Income
    Taxes      Year Ended December 31,2006


2005


2004Current

$
53,973


$
20,374


$
5,181Deferred


11,737



11



(970
)$
65,710


$
20,385


$
4,211       Year Ended December 31,2006


2005


2004Statutory rate


35.0
%


35.0
%


35.0
%Other


0.5



0.1



0.4Effective rate


35.5
%


35.1
%


35.4
%  56




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2006


2005Deferred tax liabilities:Depreciation

$
20,770


$
19,506Deferred drydock costs


7,024



2,894Prepaid and other


831



1,555Total deferred tax liabilities

$
28,625


$
23,955Deferred tax assets:Allowance for doubtful accounts

$
(292
)

$
(646
)Reserves, accrued liabilities and
    other


(9,378
)


(2,627
)Total deferred tax assets

$
(9,670
)

$
(3,273
)Net deferred tax liability

$
18,955


$
20,682       
    Liability for Taxes.  Each party has agreed to
    indemnify the other in respect of all taxes for which it is
    responsible under the Tax Matters Agreement. Helix is generally
    responsible for all federal, state, local and foreign income
    taxes that are imposed on or are attributable to the Company or
    any of its subsidiaries for all tax periods (or portions
    thereof) ending on or before the Companys initial public
    offering (or December 14, 2006). The Company is generally
    responsible for all federal, state, local and foreign income
    taxes that are imposed on or are attributable to the Company or
    any of its subsidiaries for all tax periods (or portions
    thereof) beginning after its initial public offering (or
    December 14, 2006). The Company is also responsible for all
    taxes other than income taxes imposed on or attributable to the
    Company or any of its subsidiaries for all tax periods.
    Tax Benefit Payments.  As a result of certain
    taxable income recognition by Helix in conjunction with the
    Companys initial public offering, the Company will become
    entitled to certain tax benefits that are expected to be
    realized by the Company in the ordinary course of its business
    and otherwise would not have been available to the Company.
    These benefits are generally attributable to increased tax
    deductions for amortization of tangible and intangible assets
    and to increased tax basis in nonamortizable assets. Under the
    Tax Matters Agreement, for the next ten years, the Company will
    be required to make annual payments to Helix equal to 90% of the
    amount of taxes which the Company saves for each tax period as a
    result of these increased tax benefits. The timing of the
    Companys payments to Helix under the Tax Matters Agreement
    will be determined with reference to when the Company actually
    realizes the projected tax savings. This timing will depend
    upon, among other things, the amount of our taxable income and
    the timing at which certain assets are sold or disposed. At
    December 31, 2006, this tax benefit is $12.6 million
    and is included as a component of non-current deferred income
    taxes. At December 31, 2006, a corresponding current
    payable and long-term payable of $0.3 million and
    $11.0 million, respectively, to Helix is reflected in these
    consolidated and combined financial statements. 57




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
   
    Preparation and Filing of Tax Returns.  Helix
    will prepare and file all income tax returns that include the
    Company or any of its subsidiaries if Helix is responsible for
    any portion of the taxes reported on such tax returns. The Tax
    Matters Agreement also provides that Helix will have the sole
    authority to respond to and conduct all tax proceedings
    (including tax audits) relating to such income tax returns.  11.
    Commitments
    and Contingencies  Lease
    Commitments
      Insurance
      Litigation
    and Claims
   58




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
   12.
    Employee
    Benefit Plans  Defined
    Contribution Plan
    Stock-Based
    Compensation Plans
  Helix
    Plans
       59




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
             Cal Dive
    Plans
     60




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
    2006Shares


Fair Value(1)Restricted shares outstanding at
    beginning of year






Granted


618,321


$
13.00Vested






Forfeited






Balance at end of year,


618,321


$
13.00     (1)
    
    Represents the average grant date market value.      13.
    Allowance
    for Uncollectible Accounts    Year Ended December 31,2006


2005


2004Beginning balance

$
26


$
4,641


$
5,087Additions


603



411



1,225Deductions


(460
)


(5,026
)


(1,671
)Ending balance

$
169


$
26


$
4,641     14.
    Business
    Segment Information   61




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##### Table of Contents



CAL DIVE
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Quarterly
    Financial Information (Unaudited)    Quarter EndedMarch 31


June 30


September 30


December 31(In thousands, except per share data)Fiscal 2006 Revenues

$
119,790


$
124,765


$
128,363


$
136,999Gross profit


50,206



60,944



57,737



53,643Net income applicable to common
    shareholders

$
30,774


$
33,420


$
29,051


$
26,169Weighted Avg.
    Shares Outstanding:Basic and diluted


61,507



61,507



61,507



65,845Earnings per common share:Basic and diluted

$
0.50


$
0.54


$
0.47


$
0.40Fiscal 2005 Revenues

$
37,292


$
40,699


$
49,246


$
97,062Gross profit


12,406



8,794



17,667



32,846Net income applicable to common
    shareholders

$
6,245


$
3,733


$
10,120


$
17,632Weighted Avg.
    Shares Outstanding:Basic and diluted


61,507



61,507



61,507



61,507Earnings per common share:Basic and diluted

$
0.10


$
0.06


$
0.16


$
0.29  62




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures    Disclosure
    Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Changes
    in Internal Control Over Financial Reporting
    Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Code
    of Ethics
  www.caldive.com
  Material
    Changes to our Stockholder Nomination Procedures
   63




---



##### Table of Contents



Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.   64




---



##### Table of Contents



Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accounting Fees and Services   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules  Financial Statements
    Cal Dive and Subsidiaries
  
    Report of Independent Registered Public Accounting Firm
    Consolidated and Combined Balance Sheets as of December 31,
    2006 and 2005
    Consolidated and Combined Statements of Operations for the three
    years Ended December 31, 2006
    Consolidated and Combined Statements of Changes in
    Stockholders Equity for the three years Ended
    December 31, 2006
    Consolidated and Combined Statements of Cash Flows for the three
    years Ended December 31, 2006
    Notes to Consolidated and Combined Financial Statements  Financial Statement Schedules.
    Exhibits.
    ExhibitNumber

Exhibit Title3
.1

Amended and Restated Certificate
    of Incorporation of Cal Dive International, Inc.3
.2

Amended and Restated Bylaws of
    Cal Dive International, Inc.4
.1

Specimen Common Stock certificate
    of Cal Dive International, Inc.(1)10
.1

Master Agreement between
    Cal Dive International, Inc. and Helix Energy Solutions
    Group, Inc.10
.2

Corporate Services Agreement
    between Cal Dive International, Inc. and Helix Energy
    Solutions Group, Inc.10
.3

Registration Rights Agreement
    between Cal Dive International, Inc. and Helix Energy
    Solutions Group, Inc.10
.4

Tax Matters Agreement between
    Cal Dive International, Inc. and Helix Energy Solutions
    Group, Inc.10
.5

Employee Matters Agreement between
    Cal Dive International, Inc. and Helix Energy Solutions
    Group, Inc.10
.6

Cal Dive International, Inc.
    2006 Long Term Incentive Plan(2)10
.7

Form of Restricted Stock Agreement
    for 2006 Grants to Quinn J. Hébert, Scott T. Naughton,
    G. Kregg Lunsford, and Lisa M. Buchanan(2) 65




---



##### Table of Contents



ExhibitNumber

Exhibit Title10
.8

Employment Agreement dated
    November 1, 2005, between Cal Dive International, Inc.
    (predecessor to Helix Energy Solutions Group, Inc.) and Quinn J.
    Hébert(1),(2)10
.9

Amended and Restated Employment
    Agreement dated February 15, 1999, between Cal Dive
    International, Inc. (predecessor to Helix Energy Solutions
    Group, Inc.) and Scott T. Naughton(1),(2)10
.10

Employment Agreement dated
    February 1, 2003, between Cal Dive International, Inc.
    (predecessor to Helix Energy Solutions Group, Inc.) and G. Kregg
    Lunsford(1),(2)10
.11

Credit Agreement dated
    November 20, 2006, among CDI Vessel Holdings LLC,
    Cal Dive International, Inc., Bank of America, N.A., as
    Administrative Agent, Amegy Bank National Association, as
    Documentation Agent, Banc of America Securities LLC and
    J.P. Morgan Securities, Inc., as Joint Lead Arrangers and
    Joint Book Runners, and the lenders from time to time party
    thereto(1)10
.12

Amendment No. 1 to Credit
    Agreement dated as of December 15, 2006, by and among CDI
    Vessel Holdings LLC, Cal Dive International, Inc. and Bank
    of America, N.A., as Administrative Agent, and the lenders from
    time to time party thereto10
.13

Summary of 2007 Executive Officer
    Cash Compensation(2)14
.1

Code of Ethics21
.1

Subsidiaries of Cal Dive
    International, Inc.23
.1

Consent of Ernst & Young
    LLP23
.2

Consent of Spears &
    Associates, Inc.31
.1

Certification Pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934 by Quinn J.
    Hébert, Chief Executive Officer31
.2

Certification Pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934 by G. Kregg Lunsford,
    Chief Financial Officer32
.1

Section 1350 Certification by
    Chief Executive Officer and Chief Financial Officer     (1)
    
    Incorporated by reference from the Companys Registration
    Statement on
    Form S-1
    (Registration
    No. 333-134609)
    initially filed with the Commission on May 31, 2006, as
    amended.(2)
    
    Management contract or compensatory plan or arrangement. 66




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##### Table of Contents



SIGNATURES    CAL DIVE INTERNATIONAL, INC.
  By:
    /s/  G.
    KREGG LUNSFORD   Executive Vice President,
 Chief Financial Officer and Treasurer
    Signature

Title

Date/s/  TODD
    A. DITTMANNTodd
    A. Dittmann

Director

February 28, 2007/s/  DAVID
    E. PRENGDavid
    E. Preng

Director

February 28, 2007/s/  WILLIAM
    L. TRANSIERWilliam
    L. Transier

Director

February 28, 2007/s/  OWEN
    E. KRATZOwen
    E. Kratz

Director

February 28, 2007/s/  MARTIN
    R. FERRONMartin
    R. Ferron

Director

February 28, 2007/s/  QUINN
    J.
    HÉBERTQuinn
    J. Hébert

President, Chief Executive
    Officer
    and Director
    (Principal Executive Officer)

February 28, 2007/s/  G.
    KREGG
    LUNSFORDG.
    Kregg Lunsford

Executive Vice President, Chief
    Financial Officer and Treasurer
    (Principal Financial and
    Accounting Officer)

February 28, 2007  67




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##### Table of Contents



EXHIBIT INDEX  ExhibitNumber

Exhibit Title3
.1

Amended and Restated Certificate
    of Incorporation of Cal Dive International, Inc.3
.2

Amended and Restated Bylaws of
    Cal Dive International, Inc.4
.1

Specimen Common Stock certificate
    of Cal Dive International, Inc.(1)10
.1

Master Agreement between
    Cal Dive International, Inc. and Helix Energy Solutions
    Group, Inc.10
.2

Corporate Services Agreement
    between Cal Dive International, Inc. and Helix Energy
    Solutions Group, Inc.10
.3

Registration Rights Agreement
    between Cal Dive International, Inc. and Helix Energy
    Solutions Group, Inc.10
.4

Tax Matters Agreement between
    Cal Dive International, Inc. and Helix Energy Solutions
    Group, Inc.10
.5

Employee Matters Agreement between
    Cal Dive International, Inc. and Helix Energy Solutions
    Group, Inc.10
.6

Cal Dive International, Inc.
    2006 Long Term Incentive Plan(2)10
.7

Form of Restricted Stock Agreement
    for 2006 Grants to Quinn J. Hébert, Scott T. Naughton, G.
    Kregg Lunsford, and Lisa M. Buchanan(2)10
.8

Employment Agreement dated
    November 1, 2005, between Cal Dive International, Inc.
    (predecessor to Helix Energy Solutions Group, Inc.) and Quinn J.
    Hébert(1),(2)10
.9

Amended and Restated Employment
    Agreement dated February 15, 1999, between Cal Dive
    International, Inc. (predecessor to Helix Energy Solutions
    Group, Inc.) and Scott T. Naughton(1),(2)10
.10

Employment Agreement dated
    February 1, 2003, between Cal Dive International, Inc.
    (predecessor to Helix Energy Solutions Group, Inc.) and G. Kregg
    Lunsford(1),(2)10
.11

Credit Agreement dated
    November 20, 2006, among CDI Vessel Holdings LLC,
    Cal Dive International, Inc., Bank of America, N.A., as
    Administrative Agent, Amegy Bank National Association, as
    Documentation Agent, Banc of America Securities LLC and
    J.P. Morgan Securities, Inc., as Joint Lead Arrangers and
    Joint Book Runners, and the lenders from time to time party
    thereto(1)10
.12

Amendment No. 1 to Credit
    Agreement dated as of December 15, 2006, by and among CDI
    Vessel Holdings LLC, Cal Dive International, Inc. and Bank
    of America, N.A., as Administrative Agent, and the lenders from
    time to time party thereto10
.13

Summary of 2007 Executive Officer
    Cash Compensation(2)14
.1

Code of Ethics21
.1

Subsidiaries of Cal Dive
    International, Inc.23
.1

Consent of Ernst & Young
    LLP23
.2

Consent of Spears &
    Associates, Inc.31
.1

Certification Pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934 by Quinn J.
    Hébert, Chief Executive Officer31
.2

Certification Pursuant to
    Rule 13a-14(a)
    under the Securities Exchange Act of 1934 by G. Kregg Lunsford,
    Chief Financial Officer32
.1

Section 1350 Certification by
    Chief Executive Officer and Chief Financial Officer     (1)
    
    Incorporated by reference from the Companys Registration
    Statement on
    Form S-1
    (Registration
    No. 333-134609)
    initially filed with the Commission on May 31, 2006, as
    amended.(2)
    
    Management contract or compensatory plan or arrangement. 68