Condensed Consolidated Guarantor and Non-Guarantor Financial Information

6 Months Ended

Jun. 30, 2011

Condensed Consolidated Guarantor and Non-Guarantor Financial Information

Condensed Consolidated Guarantor and Non-Guarantor Financial Information

Note 17 – Condensed Consolidated Guarantor and Non-Guarantor Financial Information

The payment of our obligations under the Senior Unsecured Notes is guaranteed by all of our restricted domestic subsidiaries ("Subsidiary Guarantors") except for Cal Dive I-Title XI, Inc.  Each of these Subsidiary Guarantors is included in our consolidated financial statements and has fully and unconditionally guaranteed the Senior Unsecured Notes on a joint and several basis.  As a result of these guaranty arrangements, we are required to present the following condensed consolidating financial information.  The accompanying guarantor financial information is presented on the equity method of accounting for all periods presented.  Under this method, investments in subsidiaries are recorded at cost and adjusted for our share in the subsidiaries' cumulative results of operations, capital contributions and distributions and other changes in equity.  Elimination entries related primarily to the elimination of investments in subsidiaries and associated intercompany balances and transactions.

HELIX ENERGY SOLUTIONS GROUP, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)

(Unaudited)

	As of June 30, 2011
		Helix		Guarantors		Non-Guarantors			Consolidating Entries			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	387,772	$	2,413	$	24,004		$	0		$	414,189
Accounts receivable, net		54,325		106,506		51,575			0			212,406
Unbilled revenue		2,219		0		18,084			0			20,303
Income taxes receivable		63,514		0		13,075			(67,530	)		9,059
Other current assets		47,610		42,191		12,712			(1,238	)		101,275
Total current assets		555,440		151,110		119,450			(68,768	)		757,232
Intercompany		1,294		294,433		(212,007	)		(83,720	)		0
Property and equipment, net		221,300		1,554,186		704,756			(4,932	)		2,475,310
Other assets:
Equity investments in unconsolidated affiliates		0		0		188,772			0			188,772
Equity investments in affiliates		1,947,501		28,432		0			(1,975,933	)		0
Goodwill, net		0		45,107		17,795			0			62,902
Other assets, net		48,499		38,119		19,639			(29,836	)		76,421
Due from subsidiaries/parent		90,965		275,900		0			(366,865	)		0
	$	2,864,999	$	2,387,287	$	838,405		$	(2,530,054	)	$	3,560,637
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	41,121	$	82,403	$	24,618		$	0		$	148,142
Accrued liabilities		58,787		96,184		35,255			0			190,226
Income taxes payable		0		84,684		0			(84,684	)		0
Current maturities of long-term debt		3,000		0		4,759			0			7,759
Total current liabilities		102,908		263,271		64,632			(84,684	)		346,127
Long-term debt		1,132,136		0		107,757			0			1,239,893
Deferred income taxes		213,232		126,992		97,650			(6,053	)		431,821
Asset retirement obligations		0		166,458		0			0			166,458
Other long-term liabilities		1,335		3,480		617			0			5,432
Due to parent		0		0		116,451			(116,451	)		0
Total liabilities		1,449,611		560,201		387,107			(207,188	)		2,189,731
Convertible preferred stock		1,000		0		0			0			1,000
Total equity		1,414,388		1,827,086		451,298			(2,322,866	)		1,369,906
	$	2,864,999	$	2,387,287	$	838,405		$	(2,530,054	)	$	3,560,637

HELIX ENERGY SOLUTIONS GROUP, INC.

CONDENSED CONSOLIDATING BALANCE SHEETS

(in thousands)

	As of December 31, 2010
		Helix		Guarantors		Non-Guarantors			Consolidating Entries			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	376,434	$	3,294	$	11,357		$	0		$	391,085
Accounts receivable, net		61,846		91,659		23,788			0			177,293
Unbilled revenue		11,990		0		37,421			0			49,411
Income taxes receivable		19,334		0		7,195			(20,430	)		6,099
Other current assets		63,306		49,557		12,889			(8,786	)		116,966
Total current assets		532,910		144,510		92,650			(29,216	)		740,854
Intercompany		1,906		263,920		(171,513	)		(94,313	)		0
Property and equipment, net		217,153		1,605,906		709,082			(5,061	)		2,527,080
Other assets:
Equity investments in unconsolidated affiliates		0		0		187,031			0			187,031
Equity investments in affiliates		1,998,289		29,899		0			(2,028,188	)		0
Goodwill, net		0		45,107		17,387			0			62,494
Other assets, net		43,971		38,324		21,900			(29,634	)		74,561
Due from subsidiaries/parent		95,398		105,434		0			(200,832	)		0
	$	2,889,627	$	2,233,100	$	856,537		$	(2,387,244	)	$	3,592,020
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	60,308	$	56,107	$	42,966		$	0		$	159,381
Accrued liabilities		58,074		107,874		32,289			0			198,237
Income taxes payable		0		36,678		0			(36,678	)		0
Current maturities of long-term debt		4,326		0		14,301			(8,448	)		10,179
Total current liabilities		122,708		200,659		89,556			(45,126	)		367,797
Long-term debt		1,237,587		0		110,166			0			1,347,753
Deferred income taxes		185,453		135,101		98,968			(5,883	)		413,639
Asset retirement obligations		0		170,410		0			0			170,410
Other long-term liabilities		1,421		3,691		665			0			5,777
Due to parent		0		0		120,884			(120,884	)		0
Total liabilities		1,547,169		509,861		420,239			(171,893	)		2,305,376
Convertible preferred stock		1,000		0		0			0			1,000
Total equity		1,341,458		1,723,239		436,298			(2,215,351	)		1,285,644
	$	2,889,627	$	2,233,100	$	856,537		$	(2,387,244	)	$	3,592,020

HELIX ENERGY SOLUTIONS GROUP, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)

(Unaudited)

	Three Months Ended June 30, 2011
		Helix			Guarantors			Non-Guarantors			Consolidating Entries			Consolidated
Net revenues	$	20,545		$	247,855		$	92,926		$	(23,007	)	$	338,319
Cost of sales		15,123			173,897			71,730			(22,629	)		238,121
Gross profit (loss)		5,422			73,958			21,196			(378	)		100,198
Gain on oil & gas derivative contracts		0			0			0			0			0
Gain (loss) on sale or acquisition of assets		(22	)		0			0			0			(22	)
Selling, general and administrative expenses...		(9,574	)		(9,915	)		(4,658	)		389			(23,758	)
Income (loss) from operations		(4,174	)		64,043			16,538			11			76,418
Equity in earnings of investments		58,929			4,194			5,887			(63,123	)		5,887
Net interest expense and other		(18,243	)		(5,890	)		108			0			(24,025	)
Income (loss) before income taxes		36,512			62,347			22,533			(63,112	)		58,280
Provision (benefit) for income taxes		(4,790	)		20,319			637			5			16,171
Net income (loss), including noncontrolling interests		41,302			42,028			21,896			(63,117	)		42,109
Less net income applicable to noncontrolling interests		0			0			0			(786	)		(786	)
Preferred stock dividends		(10	)		0			0			0			(10	)
Net income (loss) applicable to Helix common shareholders	$	41,292		$	42,028		$	21,896		$	(63,903	)	$	41,313

	Three Months Ended June 30, 2010
		Helix			Guarantors			Non-Guarantors			Consolidating Entries			Consolidated
Net revenues	$	33,670		$	186,247		$	100,086		$	(20,741	)	$	299,262
Cost of sales		18,158			317,157			72,345			(13,580	)		394,080
Gross profit (loss)		15,512			(130,910	)		27,741			(7,161	)		(94,818	)
Gain on oil & gas derivative contracts		0			2,482			0			0			2,482
Gain (loss) on sale or acquisition of assets		0			0			(14	)		0			(14	)
Selling, general and administrative expenses...		(13,583	)		(7,834	)		(3,531	)		402			(24,546	)
Income (loss) from operations		1,929			(136,262	)		24,196			(6,759	)		(116,896	)
Equity in earnings of investments		(69,604	)		3,612			1,656			65,992			1,656
Net interest expense and other		(15,319	)		(5,002	)		(1,878	)		0			(22,199	)
Income (loss) before income taxes		(82,994	)		(137,652	)		23,974			59,233			(137,439	)
Provision (benefit) for income taxes		(1,872	)		(49,351	)		1,221			(2,364	)		(52,366	)
Net income (loss), including noncontrolling interests		(81,122	)		(88,301	)		22,753			61,597			(85,073	)
Less net income applicable to noncontrolling interests		0			0			0			(444	)		(444	)
Preferred stock dividends		(34	)		0			0			0			(34	)
Net income (loss) applicable to Helix common shareholders	$	(81,156	)	$	(88,301	)	$	22,753		$	61,153		$	(85,551	)

HELIX ENERGY SOLUTIONS GROUP, INC.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

(in thousands)

(Unaudited)

	Six Months Ended June 30, 2011
		Helix			Guarantors			Non-Guarantors			Consolidating Entries			Consolidated
Net revenues	$	36,127		$	489,897		$	150,802		$	(46,900	)	$	629,926
Cost of sales		31,716			339,128			128,008			(46,200	)		452,652
Gross profit (loss)		4,411			150,769			22,794			(700	)		177,274
Gain on oil & gas derivative contracts		0			0			0			0			0
Gain (loss) on sale or acquisition of assets		(6	)		0			0			0			(6	)
Selling, general and administrative expenses...		(20,760	)		(19,951	)		(8,812	)		784			(48,739	)
Income (loss) from operations		(16,355	)		130,818			13,982			84			128,529
Equity in earnings of investments		107,036			(1,468	)		11,537			(105,568	)		11,537
Net interest expense and other		(35,527	)		(10,599	)		525			0			(45,601	)
Income (loss) before income taxes		55,154			118,751			26,044			(105,484	)		94,465
Provision (benefit) for income taxes		(11,963	)		42,060			(4,404	)		28			25,721
Net income (loss), including noncontrolling interests		67,117			76,691			30,448			(105,512	)		68,744
Less net income applicable to noncontrolling interests		0			0			0			(1,554	)		(1,554	)
Preferred stock dividends		(20	)		0			0			0			(20	)
Net income (loss) applicable to Helix common shareholders	$	67,097		$	76,691		$	30,448		$	(107,066	)	$	67,170

	Six Months Ended June 30, 2010
		Helix			Guarantors			Non-Guarantors			Consolidating Entries			Consolidated
Net revenues	$	54,692		$	355,970		$	145,058		$	(54,888	)	$	500,832
Cost of sales		31,492			457,199			122,302			(41,199	)		569,794
Gross profit (loss)		23,200			(101,229	)		22,756			(13,689	)		(68,962	)
Gain on oil & gas derivative contracts		0			2,482			0			0			2,482
Gain (loss) on sale or acquisition of assets		0			287			5,946			0			6,233
Selling, general and administrative expenses...		(37,458	)		(17,915	)		(10,576	)		902			(65,047	)
Income (loss) from operations		(14,258	)		(116,375	)		18,126			(12,787	)		(125,294	)
Equity in earnings of investments		(64,736	)		3,105			6,711			61,631			6,711
Net interest expense and other		(22,708	)		(12,568	)		(8,143	)		0			(43,419	)
Income (loss) before income taxes		(101,702	)		(125,838	)		16,694			48,844			(162,002	)
Provision (benefit) for income taxes		(6,668	)		(45,136	)		(3,650	)		(4,473	)		(59,927	)
Net income (loss), including noncontrolling interests		(95,034	)		(80,702	)		20,344			53,317			(102,075	)
Less net income applicable to noncontrolling interests		0			0			0			(1,273	)		(1,273	)
Preferred stock dividends		(94	)		0			0			0			(94	)
Net income (loss) applicable to Helix common shareholders	$	(95,128	)	$	(80,702	)	$	20,344		$	52,044		$	(103,442	)

HELIX ENERGY SOLUTIONS GROUP, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Six Months Ended June 30, 2011
			Helix			Guarantors			Non-Guarantors			Consolidating Entries			Consolidated
Cash flow from operating activities:
Net income (loss), including noncontrolling interests		$	67,117		$	76,691		$	30,448		$	(105,512	)	$	68,744
Adjustments to reconcile net income (loss), including noncontrolling interests to net cash provided by (used in) operating activities:
Equity in earnings of affiliates			(107,036	)		1,468			0			105,568			0
Other adjustments			21,261			180,193			(14,149	)		(5,476	)		181,829
Net cash provided by (used in) operating
activities			(18,658	)		258,352			16,299			(5,420	)		250,573
Cash flows from investing activities:
Capital expenditures			(15,699	)		(76,331	)		(14,092	)		0			(106,122	)
Investments in equity investments			0			0			(2,699	)		0			(2,699	)
Distributions from equity investments, net			0			0			1,593			0			1,593
Proceeds from sale of Cal Dive common stock			3,588			0			0			0			3,588
Decrease (increase) in restricted cash			0			863			0			0			863
Net cash used in investing activities			(12,111	)		(75,468	)		(15,198	)		0			(102,777	)
Cash flows from financing activities:
Repayments of debt			(111,191	)		0			(3,507	)		0			(114,698	)
Deferred financing costs			(9,014	)		0			0			0			(9,014	)
Preferred stock dividends paid			(20	)		0			0			0			(20	)
Repurchase of common stock			(1,012	)		0			0			0			(1,012	)
Excess tax benefit from stock-based  compensation			(1,196	)		0			0			0			(1,196	)
Exercise of stock options, net			1,672			0			0			0			1,672
Intercompany financing			162,868			(183,765	)		15,477			5,420			0
Net cash provided by (used in) financing activities			42,107			(183,765	)		11,970			5,420			(124,268	)
Effect of exchange rate changes on cash and cash equivalents			0			0			(424	)		0			(424	)
Net increase (decrease) in cash and cash equivalents			11,338			(881	)		12,647			0			23,104
Cash and cash equivalents:
Balance, beginning of year			376,434			3,294			11,357			0			391,085
Balance, end of period		$	387,772		$	2,413		$	24,004		$	0		$	414,189

HELIX ENERGY SOLUTIONS GROUP, INC.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

(in thousands)

	Six Months Ended June 30, 2010
			Helix			Guarantors			Non-Guarantors			Consolidating Entries			Consolidated
Cash flow from operating activities:
Net income (loss), including noncontrolling interests		$	(95,034	)	$	(80,702	)	$	20,344		$	53,317		$	(102,075	)
Adjustments to reconcile net income (loss), including noncontrolling interests to net cash provided by (used in) operating activities:
Equity in earnings of affiliates			64,736			(3,105	)		0			(61,631	)		0
Other adjustments			17,776			243,919			(13,101	)		(10,119	)		238,475
Net cash provided by (used in) operating
activities			(12,522	)		160,112			7,243			(18,433	)		136,400
Cash flows from investing activities:
Capital expenditures			(47,963	)		(80,203	)		(7,446	)		0			(135,612	)
Investments in equity investments			0			0			(6,307	)		0			(6,307	)
Distributions from equity investments, net			0			0			8,132			0			8,132
Insurance recovery			7,020			9,086			0			0			16,106
Decrease (increase) in restricted cash			0			109			0			0			109
Net cash used in investing activities			(40,943	)		(71,008	)		(5,621	)		0			(117,572	)
Cash flows from financing activities:
Repayments of debt			(2,163	)		0			(3,570	)		0			(5,733	)
Deferred financing costs			(2,792	)		0			0			0			(2,792	)
Preferred stock dividends paid			(94	)		0			0			0			(94	)
Repurchases of common stock			(9,127	)		0			0			0			(9,127	)
Excess tax benefit from stock-based  compensation			(2,163	)		0			0			0			(2,163	)
Exercise of stock options, net			163			0			0			0			163
Intercompany financing			62,654			(86,591	)		5,504			18,433			0
Net cash provided by (used in) financing activities			46,478			(86,591	)		1,934			18,433			(19,746	)
Effect of exchange rate changes on cash and cash equivalents			0			0			246			0			246
Net increase (decrease) in cash and cash equivalents			(6,987	)		2,513			3,802			0			(672	)
Cash and cash equivalents:
Balance, beginning of year			258,742			2,522			9,409			0			270,673
Balance, end of period		$	251,755		$	5,035		$	13,211		$	0		$	270,001