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, 2002
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, 2002 (attached)
Exhibits
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23.1 Consent of Deloitte & Touche LLP
99.1 Certification dated June 30, 2003 by Robert L. Charles, on behalf of the
plan administrative committee of the Diamond Offshore 401(k) Plan
pursuant to 18 U.S.C. SS 1350 (as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002)
AUDITED FINANCIAL STATEMENTS AND SCHEDULES
DIAMOND OFFSHORE 401(k) PLAN
Years ended December 31, 2002 and 2001,
Supplemental Schedule for Year ended December 31, 2002
and Independent Auditors' Report
DIAMOND OFFSHORE 401(k) PLAN
Audited Financial Statements and Schedules
Years ended December 31, 2002 and 2001
CONTENTS
Page
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Independent Auditors' Report ........................................................ 1
Financial Statements:
Statements of Net Assets Available for Benefits, December 31, 2002 and 2001 ......... 2
Statements of Changes in Net Assets Available for Benefits for the Years ended
December 31, 2002 and 2001 ................................................ 3
Notes to Financial Statements ....................................................... 4
Supplemental Schedule for the year ended December 31, 2002:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) ...................... 8
Schedules Omitted
Schedules other than those listed above are omitted because of the absence of
the conditions under which they are required.
INDEPENDENT AUDITORS' REPORT
TO THE PARTICIPANTS AND ADMINISTRATIVE COMMITTEE
OF THE 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, 2002 and
2001, and the related statements of changes in net assets available for benefits
for each of the years ended December 31, 2002 and 2001. 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 auditing standards generally accepted
in the United States of America. 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 includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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, 2002 and 2001, and the changes in net assets available for benefits
for each of the years ended December 31, 2002 and 2001 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, 2002 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 2002 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 9, 2003
1
DIAMOND OFFSHORE 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
----------------------------
2002 2001
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INVESTMENTS AT FAIR VALUE:
Mutual funds ............................................. $89,040,358 $88,620,065
Diamond Offshore Drilling, Inc. common stock fund ........ 3,074,041 3,441,761
Loans to participants .................................... 6,091,994 5,051,948
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Total investments .............................. 98,206,393 97,113,774
CONTRIBUTIONS RECEIVABLE:
Employee ................................................. 593,991 586,888
Employer ................................................. 537,515 533,645
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Total contributions receivable ................. 1,131,506 1,120,533
OTHER ASSETS .................................................... -- --
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NET ASSETS AVAILABLE FOR BENEFITS ............................... $99,337,899 $98,234,307
=========== ===========
SEE NOTES TO FINANCIAL STATEMENTS.
2
DIAMOND OFFSHORE 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31,
-------------------------------
2002 2001
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INVESTMENT INCOME (LOSS):
Dividends and interest .............................. $ 2,876,882 $ 3,025,618
Net depreciation in fair value of investments ....... (14,966,037) (14,796,438)
------------ ------------
Total investment loss ......................... (12,089,155) (11,770,820)
CONTRIBUTIONS:
Employee ............................................ 9,922,876 9,858,203
Employer ............................................ 7,074,917 6,912,796
Rollover ............................................ 249,903 98,982
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Total contributions ........................... 17,247,696 16,869,981
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Total additions ............................... 5,158,541 5,099,161
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DEDUCTIONS:
Benefit payments .................................... (4,026,745) (5,344,187)
Miscellaneous expenses .............................. (28,204) (25,142)
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Total deductions .............................. (4,054,949) (5,369,329)
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INCREASE (DECREASE) IN NET ASSETS AVAILABLE
FOR BENEFITS ........................................ 1,103,592 (270,168)
NET ASSETS AVAILABLE FOR BENEFITS:
Beginning of period ................................. 98,234,307 98,504,475
------------ ------------
End of period ....................................... $ 99,337,899 $ 98,234,307
============ ============
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, a wholly-owned subsidiary of
Diamond Offshore Drilling, Inc., (the "Company"), 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 (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 its subsidiaries. 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 by Diamond Offshore Management
Company through an administrative committee appointed by the President 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, from 15% in
previous years, as defined by the Plan. In addition, employees at least 50 years
of age in 2002 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 $1,000 in addition to the pre-tax maximum. The Catch-up Contribution
is not subject to employer match.
INVESTMENT FUNDS - The Plan offers participants 19 investment options.
These options include mutual funds, including the Fidelity Managed Income
Portfolio II which is a stable value fund, and a Company stock fund. Plan
participants, at their sole discretion, may transfer amounts between the various
investment options, including the Diamond Offshore Drilling, Inc. Common Stock
Fund, however, allocations to the Company stock fund are limited to no more than
25% of participants' allocation election. To the extent any additional
contributions or transfers would cause the value of the account to the Company
stock fund to exceed the 25% limit, such additional contributions may not be
allocated to and no transfers may be made to the Company 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. The balance in the available forfeiture account for
future use totaled approximately $10,358 at December 31, 2002.
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, 2002
and 2001, there were no unpaid amounts allocated to the accounts of persons who
have elected to withdraw from the Plan.
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 - The Plan's investment
securities are stated at fair value as determined by quoted market prices. 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. The net (depreciation) appreciation in fair value of
investment securities consist of the net change in unrealized (depreciation)
appreciation in fair value and realized gains (losses) upon the sale of
investments. 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, 2002 and 2001:
DESCRIPTION OF INVESTMENT 2002 2001
Fidelity Managed Income Portfolio II* $35,685,455 $31,081,949
Fidelity Equity Income Fund* 12,238,320 13,867,535
Fidelity Dividend Growth Fund* 9,808,310 11,910,018
Fidelity Growth Company Fund* 12,621,556 17,604,893
Loans to participants* 6,091,994 5,051,948
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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 Internal
Revenue Service ("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 Diamond Offshore Drilling, Inc. Common Stock Fund
invests in the common stock of Diamond Offshore Drilling, Inc. Transactions with
the trustee and the Company 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, 2002
IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT CURRENT VALUE
----------------- ------------------------- -------------
Fidelity Mid-Cap Stock Fund* Mutual Fund $ 1,928,735
Fidelity Managed Income Portfolio II* Mutual Fund 35,685,455
PIMCO Total Return Admin. Mutual Fund 4,511,028
Managers Special Equity Fund Mutual Fund 176,766
Janus Advisor Worldwide Fund Mutual Fund 66,834
Fidelity Freedom 2020 Fund* Mutual Fund 2,819,086
Fidelity Equity Income Fund* Mutual Fund 12,238,320
Spartan U.S. Equity Index Fund Mutual Fund 2,877,154
Fidelity Dividend Growth Fund* Mutual Fund 9,808,310
American Funds - Euro-Pacific Growth A Mutual Fund 3,497,125
Fidelity Growth Company Fund* Mutual Fund 12,621,556
Strong Opportunity Fund Mutual Fund 226,978
Fidelity Low-Priced Stock Fund* Mutual Fund 976,160
Fidelity Freedom Income Fund* Mutual Fund 106,405
Fidelity Freedom 2000 Fund* Mutual Fund 69,204
Fidelity Freedom 2010 Fund* Mutual Fund 441,554
Fidelity Freedom 2030 Fund* Mutual Fund 722,755
Fidelity Freedom 2040 Fund* Mutual Fund 266,933
Diamond Offshore Drilling, Inc.* Common Stock, par value $0.01 3,074,041
Loans to participants* Loans to participants, bearing interest of
prime +1.0%, with varying maturity dates,
not exceeding five years 6,091,994
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TOTAL $98,206,393
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* Party in interest
7
SIGNATURES
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, thereunto duly authorized, on the
30th day of June, 2003.
By: /s/ Robert L. Charles
Name: Robert L. Charles
Title: Administrative Committee Member
8
EXHIBIT INDEX
Exhibit No. Description
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23.1* Consent of Independent Auditors
99.1* Certification dated June 30, 2003 by Robert L. Charles, on behalf of the
plan administrative committee of the Diamond Offshore 401(k) Plan
pursuant to 18 U.S.C. SS 1350 (as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002)
* Filed herewith
9