e11vk
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)
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ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED] |
For the fiscal year ended December 31, 2005
OR
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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. |
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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. |
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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, 2005 (attached)
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| Exhibits |
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23.1
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Consent of Deloitte & Touche LLP |
AUDITED FINANCIAL STATEMENTS AND SCHEDULE
DIAMOND OFFSHORE 401(k) PLAN
Years Ended December 31, 2005 and 2004,
Supplemental Schedule for Year Ended December 31, 2005
and Report of Independent Registered Public Accounting Firm
DIAMOND OFFSHORE 401(k) PLAN
Audited Financial Statements and Schedule
Years Ended December 31, 2005 and 2004
CONTENTS
Note: Schedules other than the one listed above are omitted because of the absence of the
conditions under which they are required.
INDEPENDENT AUDITORS’ REPORT
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, 2005 and 2004, 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, 2005 and 2004, 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,
2005 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 2005 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 29, 2006
1
DIAMOND OFFSHORE 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
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Years Ended December 31, |
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2005 |
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2004 |
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INVESTMENTS AT FAIR VALUE: |
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Mutual funds |
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$ |
156,196,310 |
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$ |
136,697,643 |
|
Diamond Offshore Drilling, Inc. common stock fund |
|
|
9,993,859 |
|
|
|
6,083,624 |
|
Loans to participants |
|
|
8,784,529 |
|
|
|
8,057,237 |
|
|
|
|
|
|
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Total investments |
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174,974,698 |
|
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150,838,504 |
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CONTRIBUTIONS RECEIVABLE: |
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Employee |
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848,639 |
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|
794,431 |
|
Employer |
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728,947 |
|
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|
675,537 |
|
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Total contributions receivable |
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1,577,586 |
|
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1,469,968 |
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NET ASSETS AVAILABLE FOR BENEFITS |
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$ |
176,552,284 |
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$ |
152,308,472 |
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See notes to financial statements.
2
DIAMOND OFFSHORE 401(k) PLAN
STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
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Years Ended December 31, |
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2005 |
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2004 |
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ADDITIONS: |
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Investment income: |
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Dividends and interest |
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$ |
5,312,029 |
|
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$ |
4,071,602 |
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Net appreciation in fair value of investments |
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10,044,858 |
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9,937,432 |
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Total investment income |
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15,356,887 |
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14,009,034 |
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CONTRIBUTIONS: |
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Employee |
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11,283,130 |
|
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10,147,141 |
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Employer |
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7,367,707 |
|
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6,980,651 |
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Rollover |
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182,892 |
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114,819 |
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Total contributions |
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18,833,729 |
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17,242,611 |
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Total additions |
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34,190,616 |
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31,251,645 |
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DEDUCTIONS: |
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Benefit payments |
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(9,914,445 |
) |
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(7,321,029 |
) |
Administrative expenses and other |
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(32,359 |
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(39,546 |
) |
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Total deductions |
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(9,946,804 |
) |
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(7,360,575 |
) |
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INCREASE IN NET ASSETS AVAILABLE
FOR BENEFITS |
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24,243,812 |
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23,891,070 |
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NET ASSETS AVAILABLE FOR BENEFITS: |
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Beginning of period |
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152,308,472 |
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128,417,402 |
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End of period |
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$ |
176,552,284 |
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$ |
152,308,472 |
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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, 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, as defined by the Plan. 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 $14,000 and $13,000 for the years ended December
31, 2005 and 2004, 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 maximum for these catch-up contributions for the years ended December
31, 2005 and 2004 was $4,000 and $3,000, 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.
4
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.
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.
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 during 2005 and 2004. For the years
ended December 31, 2005 and 2004, 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:
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one-half of the vested value of the account or |
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$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 6.25% to 8.0% for the year ended December
31, 2005 and 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. Effective March 28, 2005, a mandatory cash out of a
participant’s account valued from $1,001 to $5,000 will be rolled over to an IRA established with
Fidelity unless the participant directs otherwise.
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, 2005 and 2004:
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| Description of Investment |
|
2005 |
|
2004 |
Fidelity Managed Income Portfolio II* |
|
$ |
49,115,123 |
|
|
$ |
43,819,887 |
|
Dodge & Cox Stock |
|
|
22,647,496 |
|
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|
1,483,481 |
** |
Fidelity Growth Company Fund* |
|
|
21,617,355 |
|
|
|
20,060,823 |
|
Fidelity Equity Income Fund* |
|
|
— |
|
|
|
18,189,749 |
|
Fidelity Dividend Growth Fund* |
|
|
12,264,505 |
|
|
|
12,987,236 |
|
Diamond Offshore Stock Fund* |
|
|
9,993,859 |
|
|
|
6,083,624 |
** |
American Funds Euro-Pacific Growth A |
|
|
9,313,705 |
|
|
|
7,065,274 |
** |
Loans to participants* |
|
|
8,784,529 |
** |
|
|
8,057,237 |
|
|
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|
| * |
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Party-in-interest |
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| ** |
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Investment does not exceed 5% of December 31 and is shown for comparative purposes only. |
During the years ended December 31, 2005 and 2004, 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:
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|
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|
|
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2005 |
|
2004 |
Mutual Funds |
|
$ |
5,690,754 |
|
|
$ |
7,010,426 |
|
Common Stock |
|
|
4,354,104 |
|
|
|
2,927,006 |
|
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Net appreciation of investments |
|
$ |
10,044,858 |
|
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$ |
9,937,432 |
|
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|
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, 2005
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(e) Current |
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| (a) |
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(b) Identity of Issue |
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(c) Description of Investment |
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(d) Cost |
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Value |
|
* |
|
Fidelity Mid-Cap Stock Fund |
|
Mutual Fund |
|
(1) |
|
$ |
3,800,427 |
|
* |
|
Fidelity Managed Income Portfolio II |
|
Common/Commingled Trust Fund |
|
(1) |
|
|
49,115,123 |
|
|
|
PIMCO Total Return Fund |
|
Mutual Fund |
|
(1) |
|
|
5,562,512 |
|
|
|
Managers Special Equity Fund |
|
Mutual Fund |
|
(1) |
|
|
1,091,805 |
|
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Templeton Growth Fund – Class A |
|
Mutual Fund |
|
(1) |
|
|
1,093,698 |
|
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|
Spartan U.S. Equity Index Fund |
|
Mutual Fund |
|
(1) |
|
|
4,467,946 |
|
* |
|
Fidelity Dividend Growth Fund |
|
Mutual Fund |
|
(1) |
|
|
12,264,505 |
|
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|
American Funds – Euro-Pacific Growth Fund – Class A |
|
Mutual Fund |
|
(1) |
|
|
9,313,705 |
|
|
|
American Funds – American Growth Fund – Class R4 |
|
Mutual Fund |
|
(1) |
|
|
1,046,831 |
|
|
|
ABF Small-Cap Value – Class PA |
|
Mutual Fund |
|
(1) |
|
|
1,726,051 |
|
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|
Lord Abbett Mid-Cap Value Fund – Class P |
|
Mutual Fund |
|
(1) |
|
|
2,724,478 |
|
* |
|
Fidelity Growth Company Fund |
|
Mutual Fund |
|
(1) |
|
|
21,617,355 |
|
* |
|
Fidelity Low-Priced Stock Fund |
|
Mutual Fund |
|
(1) |
|
|
6,354,251 |
|
* |
|
Fidelity Freedom Income Fund |
|
Mutual Fund |
|
(1) |
|
|
27,422 |
|
* |
|
Fidelity Freedom 2000 Fund |
|
Mutual Fund |
|
(1) |
|
|
95,043 |
|
* |
|
Fidelity Freedom 2005 Fund |
|
Mutual Fund |
|
(1) |
|
|
32,832 |
|
* |
|
Fidelity Freedom 2010 Fund |
|
Mutual Fund |
|
(1) |
|
|
1,066,370 |
|
* |
|
Fidelity Freedom 2015 Fund |
|
Mutual Fund |
|
(1) |
|
|
1,476,587 |
|
* |
|
Fidelity Freedom 2020 Fund |
|
Mutual Fund |
|
(1) |
|
|
6,261,121 |
|
* |
|
Fidelity Freedom 2025 Fund |
|
Mutual Fund |
|
(1) |
|
|
459,097 |
|
* |
|
Fidelity Freedom 2030 Fund |
|
Mutual Fund |
|
(1) |
|
|
1,837,870 |
|
* |
|
Fidelity Freedom 2035 Fund |
|
Mutual Fund |
|
(1) |
|
|
267,713 |
|
* |
|
Fidelity Freedom 2040 Fund |
|
Mutual Fund |
|
(1) |
|
|
1,846,072 |
|
|
|
Dodge & Cox Stock Fund |
|
Mutual Fund |
|
(1) |
|
|
22,647,496 |
|
* |
|
Diamond Offshore Drilling, Inc. |
|
Common Stock, par value $0.01 |
|
(1) |
|
|
9,993,859 |
|
* |
|
Loans to participants |
|
Loans to participants, bearing interest of prime + 1.0%, with varying maturity dates, typically not exceeding five years |
|
|
|
|
8,784,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
|
|
|
$ |
174,974,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| * |
|
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.
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DIAMOND OFFSHORE 401(k) PLAN |
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Date: June 29, 2006 |
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By:
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/s/ Robert L. Charles |
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Name:
|
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Robert L. Charles |
|
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|
Title:
|
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Administrative Committee Member |
|
|
9
EXHIBIT INDEX
| |
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|
| Exhibit No. |
|
Description |
23.1*
|
|
Consent of Independent Registered Public Accounting Firm |
10