UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ____________
Commission file number 1-13926
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
DIAMOND OFFSHORE 401(k) PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
DIAMOND OFFSHORE DRILLING, INC.
15415 KATY FREEWAY
HOUSTON, TEXAS 77094
REQUIRED INFORMATION
Item 4.
The financial statements and schedules of the Diamond Offshore 401(k)
Plan for the fiscal year ended December 31, 2003 (attached)
Exhibits
23.1 Consent of Deloitte & Touche LLP
AUDITED FINANCIAL STATEMENTS AND SCHEDULES
DIAMOND OFFSHORE 401(k) PLAN
Years ended December 31, 2003 and 2002,
Supplemental Schedule for Year ended December 31, 2003
and Report of Independent Registered Public Accounting Firm
DIAMOND OFFSHORE 401(k) PLAN
Audited Financial Statements and Schedules
Years ended December 31, 2003 and 2002
CONTENTS
Page
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Report of Independent Registered Public Accounting Firm ........................ 1
Financial Statements:
Statements of Net Assets Available for Benefits, December 31, 2003 and 2002 .... 2
Statements of Changes in Net Assets Available for Benefits for the Years ended
December 31, 2003 and 2002 ........................................... 3
Notes to Financial Statements .................................................. 4
Supplemental Schedule for the year ended December 31, 2003:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) ................. 7
Note: Schedules other than those listed above are omitted because of the absence
of the conditions under which they are required.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PARTICIPANTS AND ADMINISTRATIVE COMMITTEE
DIAMOND OFFSHORE 401(k) PLAN
HOUSTON, TEXAS
We have audited the accompanying statements of net assets available for benefits
of the Diamond Offshore 401(k) Plan (the "Plan") as of December 31, 2003 and
2002, and the related statements of changes in net assets available for benefits
for each of the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003 and 2002, and the changes in net assets available for benefits
for each of the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets (held
at end of year), December 31, 2003 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements, but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. This schedule is the responsibility of the Plan's
management. Such schedule has been subjected to the auditing procedures applied
in our audit of the basic 2003 financial statements and, in our opinion, is
fairly stated in all material respects when considered in relation to the basic
financial statements taken as a whole.
DELOITTE & TOUCHE LLP
Houston, Texas
June 24, 2004
1
DIAMOND OFFSHORE 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
---------------------------------
2003 2002
-------------- --------------
INVESTMENTS AT FAIR VALUE:
Mutual funds ......................................... $ 117,127,131 $ 89,040,358
Diamond Offshore Drilling, Inc. common stock fund .... 3,087,262 3,074,041
Loans to participants ................................ 7,083,403 6,091,994
-------------- --------------
Total investments .......................... 127,297,796 98,206,393
CONTRIBUTIONS RECEIVABLE:
Employee ............................................. 604,818 593,991
Employer ............................................. 514,788 537,515
-------------- --------------
Total contributions receivable ............. 1,119,606 1,131,506
-------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS .......................... $ 128,417,402 $ 99,337,899
============== ==============
SEE NOTES TO FINANCIAL STATEMENTS.
2
DIAMOND OFFSHORE 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31,
------------------------------------
2003 2002
--------------- ---------------
ADDITIONS:
Investment income (loss):
Dividends and interest ......................................... $ 3,205,778 $ 2,876,882
Net appreciation (depreciation) in fair value of investments ... 15,697,844 (14,966,037)
--------------- ---------------
Total investment gain (loss) ............................. 18,903,622 (12,089,155)
CONTRIBUTIONS:
Employee ....................................................... 9,804,560 9,922,876
Employer ....................................................... 7,014,385 7,074,917
Rollover ....................................................... 75,137 249,903
--------------- ---------------
Total contributions ...................................... 16,894,082 17,247,696
--------------- ---------------
Total additions .......................................... 35,797,704 5,158,541
--------------- ---------------
DEDUCTIONS:
Benefit payments ............................................... (6,684,315) (4,026,745)
Miscellaneous expenses ......................................... (33,886) (28,204)
--------------- ---------------
Total deductions ......................................... (6,718,201) (4,054,949)
--------------- ---------------
INCREASE IN NET ASSETS AVAILABLE
FOR BENEFITS ................................................... 29,079,503 1,103,592
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of period ............................................ 99,337,899 98,234,307
--------------- ---------------
End of period .................................................. $ 128,417,402 $ 99,337,899
=============== ===============
SEE NOTES TO FINANCIAL STATEMENTS.
3
DIAMOND OFFSHORE 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF PLAN
The Diamond Offshore 401(k) Plan (the "Plan") was established effective
July 1, 1989. Diamond Offshore Management Company (the "Company"), a
wholly-owned subsidiary of Diamond Offshore Drilling, Inc. is the Plan's
sponsor. The adoption of the Plan in its entirety is intended to comply with the
provisions of Sections 401(a), 401(k) and 401(m) of the Internal Revenue Code of
1986, as amended (the "IRC"), and applicable regulations thereunder. The Plan is
intended to qualify as a profit-sharing plan in accordance with the requirement
of Section 401(a) (27) of the IRC.
The following description of the Plan provides only general
information. Participants should refer to the Plan agreement for a complete
description of the Plan's provisions.
GENERAL - The Plan is a defined contribution retirement plan for U.S.
employees of the Company and other subsidiaries of Diamond Offshore Drilling,
Inc. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") and the IRC.
ADMINISTRATION - The Plan is administered through an administrative
committee appointed by the Board of Directors of the Company. Fidelity
Management Trust Company ("Fidelity") is the Plan's trustee.
PARTICIPANTS - Effective January 1, 1999, all U.S. employees as of
December 31, 1998 became eligible to participate in the Plan on January 1, 1999.
Employees with an original hire date on or after January 1, 1999, who have been
employed for one year from their date of hire, became or will become a
participant of the Plan.
CONTRIBUTIONS - The Company makes a profit sharing contribution equal
to 3.75% of the employee's qualified yearly earnings and a matching contribution
equal to 25% for every percent the employee contributes up to a maximum of 6%.
Matching contributions to the plan are invested based on the participant's
investment election. If a participant fails to make a designation, his or her
profit sharing contribution shall be invested in the balanced fund then offered
under the Trust that would be applicable to the participant assuming an age-65
retirement. Effective January 1, 2002, each participant may make voluntary
contributions of 1% to 50% of his or her qualified yearly earnings as defined by
the Plan. In addition, employees at least 50 years of age in 2003 are permitted
to contribute additional amounts (catch-up contributions) of 1% to 50% of his or
her qualified yearly earnings up to a maximum of $2,000 in addition to the
pre-tax maximum. The catch-up contribution is not subject to employer match.
INVESTMENT FUNDS - The Plan offers participants a variety of investment
options. These options include mutual funds, the Fidelity Managed Income
Portfolio II, which is a common/commingled trust fund and the Diamond Offshore
Drilling, Inc. Common Stock Fund (the "Stock Fund"). Plan participants, at their
sole discretion, may transfer amounts between the various investment options,
including the Stock Fund, however, allocations to the Stock Fund are limited to
no more than 25% of the participants' allocation election. To the extent any
additional contributions or transfers would cause the value of the account to
the Stock Fund to exceed the 25% limit, such additional contributions may not be
allocated to, and no transfers may be made to, the Stock Fund.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
Company's and the participant's contributions and an allocation of the Plan's
earnings. Allocations are based primarily on account balances at specified dates
as provided under the terms of the Plan.
4
VESTING - Each participant has, at all times, a fully vested and
nonforfeitable interest in his or her contributions, the earnings thereon and
employer contributions made by the Company. Prior to January 1, 1999, matching
contributions made by the Company to participant accounts were vested 100% after
five years of service.
FORFEITURES - Forfeitures resulting from the separation of service of
participants not fully vested in the Plan can be applied to reduce Company
contributions to the Plan. As of December 31, 2003 and 2002, net assets
available for benefits included $7 and $10,358, respectively, of unutilized
forfeitures. For the year ended December 31, 2003, $10,731 were utilized to
reduce contributions. Earnings on the forfeitures accounts for 2003 amounts to
$380.
LOANS - Participants may borrow from his or her account a minimum of
$1,000 up to the lesser of: i) one-half of the vested value of the account or
ii) $50,000. Such loans bear interest of prime + 1.0%, with varying maturity
dates, not exceeding five years.
DISTRIBUTIONS - Upon separation of service, each participant may elect
to receive the entire account balance in a lump-sum payment. At December 31,
2003 and 2002, there were no unpaid amounts allocated to the accounts of persons
who have elected to withdraw from the Plan.
PLAN AMENDMENTS - The Plan was amended effective January 1, 2003 to
include Diamond Offshore Services Limited as a participating employer and to
comply with the new Internal Revenue Service ("IRS") minimum distribution
requirements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - The financial statements of the Plan are prepared
on the accrual basis of accounting.
INVESTMENT VALUATION AND INCOME RECOGNITION - Investments are
reflected at fair value in the financial statements. Fair value of mutual fund
assets is determined using a quoted net assets value. Fair value for the Stock
Fund, which is listed on the New York Stock Exchange, is determined by using the
last recorded sales price. The recorded value of the common/commingled trust
fund is at contract value, which approximates fair value. Loans are valued at
cost which approximates market value. Purchases and sales of securities are
recorded on a trade-date basis. Dividends are recorded on the ex-dividend date.
Interest is recorded as earned. The net (depreciation) appreciation in fair
value ofinvestment securities consists of the net change in unrealized
(depreciation) appreciation in fair value and realized gains (losses) upon the
sale ofinvestments. The net change in unrealized (depreciation) appreciation and
realized gains (losses) upon sale are determined using the fair values as of the
beginning of the year or the purchase price if acquired since that date.
PAYMENT OF BENEFITS - Benefit payments are recorded when paid.
EXPENSES - Administrative expenses of the Plan are paid by the Company,
as provided in the plan document.
USE OF ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires plan management to make estimates and assumptions that affect
the reported amounts of net assets available for benefits and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of the Plan's income and expenses during the reporting
period. Actual results could differ from these estimates.
RISKS AND UNCERTAINTIES - The Plan provides for various investments in
common stock and registered investment companies. Investment securities, in
general, are exposed to various risks, such as interest rate, credit and overall
market volatility risk. Due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the values of
investment securities will occur in the near term.
5
3. INVESTMENTS
The following is a summary of individual Plan assets in excess of 5% of
total Plan assets at December 31, 2003 and 2002:
DESCRIPTION OF INVESTMENT 2003 2002
------------------------------------- ------------ ------------
Fidelity Managed Income Portfolio II* $ 39,081,725 $ 35,685,455
Fidelity Equity Income Fund* 16,879,858 12,238,320
Fidelity Dividend Growth Fund* 13,064,474 9,808,310
Fidelity Growth Company Fund* 19,341,123 12,621,556
Loans to participants* 7,083,403 6,091,994
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*Party-in-interest
4. PLAN TERMINATION
Although the Company has not expressed any intent to do so, it has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. Upon termination of the
Plan by the Company, the trustee will distribute to each participant the amounts
credited to his or her account. No amount will revert to the Company in the
event of the Plan's termination.
5. FEDERAL INCOME TAXES
The Plan obtained a favorable tax determination letter from the IRS
dated October 15, 2002 covering amendments through September 28, 2001. Though
the Plan has been amended since that date, it is the opinion of the plan
administrator that the Plan has met, and continues to meet, all necessary IRS
requirements exempting it from federal income taxes; therefore, no provision for
income taxes has been made.
6. PARTY-IN-INTEREST TRANSACTIONS
Certain Plan investments are shares of mutual funds managed by the
trustee of the Plan. The Stock Fund invests in the common stock of Diamond
Offshore Drilling, Inc. Transactions with the trustee, the Company and Diamond
Offshore Drilling, Inc. qualify as party-in-interest transactions.
6
DIAMOND OFFSHORE 401(k) PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2003
(a) (b) IDENTITY OF ISSUE (c) DESCRIPTION OF INVESTMENT (d) COST (e) CURRENT VALUE
* Fidelity Mid-Cap Stock Fund Mutual Fund (1) $ 3,150,210
* Fidelity Managed Income Portfolio II Common/Commingled (1) 39,081,725
Trust Fund
PIMCO Total Return Admin. Mutual Fund (1) 4,359,342
Managers Special Equity Fund Mutual Fund (1) 772,373
Templeton Growth A Fund Mutual Fund (1) 117,772
* Fidelity Freedom 2020 Fund Mutual Fund (1) 4,606,098
* Fidelity Equity Income Fund Mutual Fund (1) 16,879,858
Spartan U.S. Equity Index Fund Mutual Fund (1) 3,910,863
* Fidelity Dividend Growth Fund Mutual Fund (1) 13,064,474
American Funds - Euro-Pacific Growth A Mutual Fund (1) 5,297,617
LD Abbett Mid-Cap Value P Fund Mutual Fund (1) 482,433
* Fidelity Growth Company Fund Mutual Fund (1) 19,341,123
* Fidelity Low-Priced Stock Fund Mutual Fund (1) 2,746,149
* Fidelity Freedom Income Fund Mutual Fund (1) 186,519
* Fidelity Freedom 2000 Fund Mutual Fund (1) 68,453
* Fidelity Freedom 2010 Fund Mutual Fund (1) 1,034,046
* Fidelity Freedom 2030 Fund Mutual Fund (1) 1,256,018
* Fidelity Freedom 2040 Fund Mutual Fund (1) 772,058
* Diamond Offshore Drilling, Inc. Common Stock, par value $0.01 (1) 3,087,262
* Loans to participants Loans to participants, bearing interest of
prime + 1.0%, with varying maturity dates,
not exceeding five years 7,083,403
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TOTAL $ 127,297,796
=================
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* Party in interest
(1) Cost information has been omitted because all investments are participant-
directed.
7
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Plan administrative committee of the Diamond Offshore
401(k) Plan (the "Plan"), which administers the Plan, has duly caused this
annual report to be signed on its behalf by the undersigned, hereunto duly
authorized.
DIAMOND OFFSHORE 401(k) PLAN
Date: June 28, 2004
By: /s/ Robert L. Charles
-------------------------------------
Name: Robert L. Charles
Title: Administrative Committee Member
8
EXHIBIT INDEX
Exhibit No. Description
----------- --------------------------------------------------------
23.1* Consent of Independent Registered Public Accounting Firm
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* Filed herewith.
9