UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
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, 2004
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, 2004 (attached)
Exhibits
23.1 Consent of Deloitte & Touche LLP
AUDITED FINANCIAL STATEMENTS AND SCHEDULES
DIAMOND OFFSHORE 401(k) PLAN
Years ended December 31, 2004 and 2003,
Supplemental Schedule for Year ended December 31, 2004
and Report of Independent Registered Public Accounting Firm
DIAMOND OFFSHORE 401(K) PLAN
Audited Financial Statements and Schedules
Years ended December 31, 2004 and 2003
CONTENTS
Report of Independent Registered Public Accounting Firm.......................................... 1
Financial Statements:
Statements of Net Assets Available for Benefits, December 31, 2004 and 2003...................... 2
Statements of Changes in Net Assets Available for Benefits for the Years Ended
December 31, 2004 and 2003............................................................. 3
Notes to Financial Statements.................................................................... 4
Supplemental Schedule for the Year Ended December 31, 2004:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)................................... 8
Note: Schedules other than the one 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, 2004 and
2003, 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. The Plan is not required to have,
nor were we engaged to perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Plan's internal control over financial reporting.
Accordingly, we express no such opinion. 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, 2004 and 2003, 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) as of December 31, 2004 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 2004 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 28, 2005
1
DIAMOND OFFSHORE 401(K) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
-----------------------------------
2004 2003
---------------- ----------------
INVESTMENTS AT FAIR VALUE:
Mutual funds.................................................. $ 136,697,643 $ 117,127,131
Diamond Offshore Drilling, Inc. common stock fund............. 6,083,624 3,087,262
Loans to participants......................................... 8,057,237 7,083,403
-------------- --------------
Total investments................................... 150,838,504 127,297,796
CONTRIBUTIONS RECEIVABLE:
Employee...................................................... 794,431 604,818
Employer...................................................... 675,537 514,788
-------------- --------------
Total contributions receivable...................... 1,469,968 1,119,606
-------------- --------------
NET ASSETS AVAILABLE FOR BENEFITS................................. $ 152,308,472 $ 128,417,402
============== ==============
SEE NOTES TO FINANCIAL STATEMENTS.
2
DIAMOND OFFSHORE 401(K) PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31,
------------------------------
2004 2003
------------ -----------
ADDITIONS:
Investment income:
Dividends and interest..................................... $ 4,071,602 $ 3,205,778
Net appreciation in fair value of investments.............. 9,937,432 15,697,844
------------ ------------
Total investment income.............................. 14,009,034 18,903,622
CONTRIBUTIONS:
Employee................................................... 10,147,141 9,804,560
Employer................................................... 6,980,651 7,014,385
Rollover................................................... 114,819 75,137
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Total contributions.................................. 17,242,611 16,894,082
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Total additions...................................... 31,251,645 35,797,704
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DEDUCTIONS:
Benefit payments........................................... (7,321,029) (6,684,315)
Administrative expenses and other ......................... (39,546) (33,886)
------------ ------------
Total deductions..................................... (7,360,575) (6,718,201)
------------ ------------
INCREASE IN NET ASSETS AVAILABLE
FOR BENEFITS............................................... 23,891,070 29,079,503
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of period........................................ 128,417,402 99,337,899
------------ ------------
End of period.............................................. $152,308,472 $128,417,402
============ =============
SEE NOTES TO FINANCIAL STATEMENTS.
3
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, which we refer to as "we,"
"us" or "our," is the Plan's sponsor and a wholly-owned subsidiary of Diamond
Offshore Drilling, Inc., or Diamond Offshore. 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, or 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 our
U.S. employees and other subsidiaries of Diamond Offshore Drilling, Inc.,
collectively, the Participating Employers, and is subject to the provisions of
the Employee Retirement Income Security Act of 1974, or ERISA, and the IRC.
ADMINISTRATION - The Plan is administered through an administrative
committee appointed by our Board of Directors. Fidelity Management Trust
Company, or Fidelity, is the Plan's trustee.
PARTICIPANTS - Employees of the Participating Employers become
participants of the Plan after the lapse of one year from their original hire
date without regard to continuous service.
CONTRIBUTIONS - We make a profit sharing contribution equal to 3.75% of
each eligible employee's qualified yearly earnings. The Participating Employers
also make matching contributions equal to 25% for every percent the employee
contributes on a before-tax basis 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 by the Plan that would be
applicable to the participant assuming an age-65 retirement. Each participant
may make voluntary before-tax contributions of 1% to 50% of his or her qualified
yearly earnings as defined by the Plan, subject to federally mandated
limitations of $13,000 and $12,000 for the years ended December 31, 2004 and
2003, respectively. In addition, each participant may make voluntary after-tax
contributions in an amount which, when added to the participant's before-tax
contributions, does not exceed 50% of his or her qualified yearly earnings as
defined by the Plan. Employees at least 50 years of age are permitted to
contribute additional amounts, or catch-up contributions of his or her qualified
yearly earnings up to a prescribed maximum in addition to the voluntary
before-tax and after-tax maximums. The maximums for these catch-up contributions
for the years ended December 31, 2004 and 2003 were $3,000 and $2,000,
respectively. The catch-up contribution is not subject to employer match.
INVESTMENT FUNDS - The Plan is intended to be a plan described in
Section 404(c) of ERISA and as a result it 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, or the Stock Fund. Investment
elections to the Stock Fund are limited to no more than 25% of a participants'
total election.
Plan participants, at their sole discretion, may transfer amounts
between the various investment options, including the Stock Fund. Effective
January 1, 2004, any transfers that would cause the value of the Stock Fund
account to exceed the 25% limit are disregarded and such amounts remain invested
in the original investment fund. Current investment allocations to the Stock
Fund are not affected by the 25% limitation.
PARTICIPANT ACCOUNTS - Each participant's account is credited with the
Participating Employers' and the participant's contributions, as well as 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, earnings and employer
contributions made by the Participating Employers. Prior to January 1, 1999,
matching contributions made by the Participating Employers 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 the
Participating Employers contributions to the Plan. No forfeitures were utilized
to reduce matching contributions for the year ended December 31, 2004. For the
year ended December 31, 2003, $10,731 was utilized to reduce matching
contributions. For the years ended December 31, 2004 and 2003, forfeiture
balances available to reduce future contributions to the Plan and any related
earned investment income were not significant.
LOANS - Participants may borrow from his or her account a minimum of
$1,000 up to the lesser of:
- one-half of the vested value of the account or
- $50,000.
Such loans bear interest of prime + 1.0%, with varying maturity dates, typically
not exceeding five years. Interest rates on participant loans ranged from 5% to
10.5% for the year ended December 31, 2004.
DISTRIBUTIONS - Upon separation of service, each participant may elect
to receive their entire account balance in a lump-sum cash payment, except that,
to the extent a participant's accounts are invested in Diamond Offshore's common
stock, the participant may elect payment of whole shares of such stock with any
balance paid in cash.
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, or 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 is
determined by using the last recorded sales price of Diamond Offshore common
stock. 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, and interest is recorded as
earned. The net appreciation in fair value of investment securities consists of
the net change in unrealized appreciation in fair value and realized gains upon
the sale of investments, which are determined using the fair values of the
investment securities as of the beginning of the year or the purchase price if
acquired since that date.
5
PAYMENT OF BENEFITS - Benefit payments are recorded when paid.
EXPENSES - We pay certain administrative expenses of the Plan, as
provided in the plan document.
USE OF ESTIMATES - Financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America. We are
required 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 these
investment securities, it is reasonably likely that changes in the values of
investment securities will occur in the near term.
3. INVESTMENTS
The following is a summary of individual Plan assets in excess of 5% of
total Plan assets at December 31, 2004 and 2003:
DESCRIPTION OF INVESTMENT 2004 2003
------------------------- ------------ ------------
Fidelity Managed Income Portfolio II* $ 43,819,887 $ 39,081,725
Fidelity Equity Income Fund* 18,189,749 16,879,858
Fidelity Dividend Growth Fund* 12,987,236 13,064,474
Fidelity Growth Company Fund* 20,060,823 19,341,123
Loans to participants* 8,057,237 7,083,403
* Party-in-interest
During the year ended December 31, 2004 and 2003, the Plan's
investments (including gains and losses on investments bought and sold, as well
as held during the year) appreciated in value as follows:
2004 2003
------------ ------------
Mutual Funds $ 7,010,426 $ 15,810,339
Common Stock 2,927,006 (112,495)
------------ ------------
Net appreciation of investments $ 9,937,432 $ 15,697,844
============ ============
4. PLAN TERMINATION
Although we do not expect to do so, we have the right under the Plan to
discontinue contributions by the Participating Employers at any time and to
terminate the Plan subject to the provisions of ERISA. Upon our termination of
the Plan, the trustee will distribute to each participant the amounts credited
to his or her account. No amount will revert to us 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. Although
the Plan has been amended since that date, it is the opinion of the Plan's
administrative committee 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
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. Transactions with the trustee, the Participating Employers and Diamond
Offshore qualify as party-in-interest transactions.
7
DIAMOND OFFSHORE 401(K) PLAN
SCHEDULE H, LINE 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2004
(A) (B) IDENTITY OF ISSUE (C) DESCRIPTION OF INVESTMENT (D) COST (E) CURRENT
VALUE
* Fidelity Mid-Cap Stock Fund Mutual Fund (1) $ 2,988,059
* Fidelity Managed Income Portfolio II Common/Commingled Trust Fund (1) 43,819,887
PIMCO Total Return Fund Mutual Fund (1) 4,946,756
Managers Special Equity Fund Mutual Fund (1) 959,666
Templeton Growth Fund - Class A Mutual Fund (1) 657,237
* Fidelity Equity Income Fund Mutual Fund (1) 18,189,749
Spartan U.S. Equity Index Fund Mutual Fund (1) 4,306,600
* Fidelity Dividend Growth Fund Mutual Fund (1) 12,987,236
American Funds - Euro-Pacific Growth Fund - Mutual Fund
Class A (1) 7,065,274
American Funds - American Growth Fund - Mutual Fund
Class R4 (1) 223,933
American Aadvantage Mutual Fund (1) 1,125,435
Lord Abbett Mid-Cap Value Fund - Class P Mutual Fund (1) 1,497,896
* Fidelity Growth Company Fund Mutual Fund (1) 20,060,823
* Fidelity Low-Priced Stock Fund Mutual Fund (1) 5,678,806
* Fidelity Freedom Income Fund Mutual Fund (1) 99,327
* Fidelity Freedom 2000 Fund Mutual Fund (1) 90,565
* Fidelity Freedom 2005 Fund Mutual Fund (1) 25,541
* Fidelity Freedom 2010 Fund Mutual Fund (1) 1,125,491
* Fidelity Freedom 2015 Fund Mutual Fund (1) 815,816
* Fidelity Freedom 2020 Fund Mutual Fund (1) 5,549,779
* Fidelity Freedom 2025 Fund Mutual Fund (1) 121,605
* Fidelity Freedom 2030 Fund Mutual Fund (1) 1,511,480
* Fidelity Freedom 2035 Fund Mutual Fund (1) 167,991
* Fidelity Freedom 2040 Fund Mutual Fund (1) 1,199,210
Dodge & Cox Stock Fund Mutual Fund (1) 1,483,481
* Diamond Offshore Drilling, Inc. Common Stock, par value $0.01 (1) 6,083,624
* Loans to participants Loans to participants, bearing interest of
prime + 1.0%, with varying maturity dates,
typically not exceeding five years 8,057,237
-------------
TOTAL $ 150,838,504
=============
* Party in interest
(1) Cost information has been omitted because all investments are
participant - directed.
8
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, has caused this annual report to be signed on its behalf by the
undersigned.
DIAMOND OFFSHORE 401(k) PLAN
Date: June 29, 2005
By: /s/ Robert L. Charles
---------------------------------
Name: Robert L. Charles
Title: Administrative Committee Member
9
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
23.1* Consent of Independent Registered Public Accounting Firm
* Filed herewith.
10