SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 11-K
(Mark One)
[X] Annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934.
For the fiscal year ended December 31, 2004
or
[ ] Transition Report Pursuant to Section 15(d) of the Securities Exchange Act
of 1934
For the transition period from to
Commission file number: 001-12351
Full title of the Plan and address of the Plan, if different from that of the
issuer noted below:
METRIS RETIREMENT PLAN
Name of the issuer of the securities held pursuant to the Plan and the address
of its principal executive office:
METRIS COMPANIES INC.
10900 Wayzata Boulevard, Minnetonka, Minnesota 55305-1534
Financial Statements and Exhibits
(a) Financial Statements
The Metris Retirement Plan (the "Plan") became effective as of January
1, 1997. Filed as a part of this report on Form 11-K are the audited
financial statements of the Plan as of and for the years ended December
31, 2004 and 2003.
(b) Exhibits
(23) Consent of Independent Registered Public Accounting Firm
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
thereunto duly authorized.
Metris Retirement Plan
(Name of Plan)
By:/s/Richard G. Evans
Richard G. Evans
on behalf of the 401(k) Committee
(f/k/a Retirement Benefits Committee),
as Plan Administrator
Dated: June 28, 2005
Metris Retirement Plan
Financial Statements and Supplemental Schedule
December 31, 2004 and 2003
METRIS RETIREMENT PLAN
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm........................1
Statements of Net Assets Available for Benefits................................2
Statements of Changes in Net Assets Available for Benefits.....................3
Notes to the Financial Statements..............................................4
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)................11
Consent of Independent Registered Public Accounting Firm......................12
Report of Independent Registered Public Accounting Firm
The Plan Administrator
Metris Retirement Plan:
We have audited the accompanying statements of net assets available for benefits
of the Metris Retirement Plan (the Plan) as of December 31, 2004 and 2003, and
the related statements of changes in net assets available for benefits for 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 the 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 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, 2004 and 2003, and the changes in net assets available for benefits
for the years then ended in conformity with U.S. generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedule H, Line 4i -
Schedule of Assets (held at end of year) 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 supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ KPMG LLP
Minneapolis, Minnesota
June 28, 2005
Metris Retirement Plan
Statements of Net Assets Available for Benefits
December 31,
2004 2003
Assets: ----------- -----------
Investments, at fair value:
Mutual funds $ 30,193,745 $ 25,800,084
Metris Companies Inc. common stock 6,029,672 2,705,625
Participant loans 1,202,796 928,276
----------- -----------
Total investments held by trustee 37,426,213 29,433,985
Accrued investment income 5,730 3,555
Contribution receivable:
Employer 73,981 76,917
Employees 126,410 140,717
----------- -----------
Net assets available for benefits $ 37,632,334 $ 29,655,174
=========== ===========
See accompanying Notes to the Financial Statements.
Metris Retirement Plan
Statements of Changes in Net Assets Available for Benefits
Year Ended
December 31,
2004 2003
------------ ------------
Contributions:
Employer $ 2,457,457 $ 3,284,028
Employee 4,457,640 5,732,904
Rollovers 181,967 322,789
Investment income:
Dividends 215,216 171,625
Interest 238,507 243,861
Net realized and unrealized appreciation in fair value - Mutual Funds 2,221,888 3,937,009
Net realized and unrealized appreciation in fair value - Metris Companies Inc.
common stock 4,120,438 1,539,601
------------ ------------
Total investment income 6,796,049 5,892,096
Benefits paid to participants (5,891,383) (5,051,016)
Transfers-out (2,061) (2,726,545)
Change in excess contributions payable -- 75,063
Administrative fees (22,509) (68,172)
------------ ------------
Increase in net assets available for benefits 7,977,160 7,461,147
Net assets available for benefits:
Beginning of year 29,655,174 22,194,027
------------ ------------
End of year $ 37,632,334 $ 29,655,174
============ ============
See accompanying Notes to the Financial Statements.
Metris Retirement Plan
Notes to the Financial Statements
December 31, 2004 and 2003
(1) Summary Description of the Plan
The following description of the Metris Retirement Plan (the "Plan") provides
only general information. Participants should refer to the Plan agreement for a
more complete description of the Plan's provisions. The Plan, which commenced
activity on January 1, 1997, is a defined contribution plan sponsored and
administered by Metris Companies Inc. and subsidiaries (the "Company").
(a) Eligibility
Employees may enroll in the Plan as of their hire date, or anytime
thereafter. Payroll deductions begin as soon as administratively
feasible subsequent to enrollment. Participants are eligible to receive
Company matching contributions immediately following enrollment.
(b) Contributions
For the Plan years ended December 31, 2004 and 2003, employees could
contribute from one to fifteen percent of their compensation before
federal income taxes to the Plan through payroll deductions. The
Company is required to make a matching cash contribution equal to 100%
of an employee's contribution up to 4% of the match-eligible
contribution, as defined in the Plan agreement. Company matching
contributions vest immediately.
Employees are limited by Internal Revenue Service ("IRS") regulations
as to the amount they can invest into tax-deferred plans, including the
Metris Retirement Plan. For the Plan years ended December 31, 2004 and
2003, employee contributions were limited to $13,000 and $12,000,
respectively. Employees who reached the age of 50 by December 31 were
eligible to make additional catch-up contributions of $3,000 and $2,000
for the Plan years ended December 31, 2004 and 2003, respectively.
Payroll deductions are suspended when an employee's contributions meet
these IRS limitations. Contributions made by highly compensated
employees, as defined by the IRS, are also limited by IRS regulations.
However, with the adoption of the "Safe-Harbor Plan Amendment"
effective January 1, 2003, these limits no longer apply. As a result,
there are no excess contributions payable in the Statements of Net
Assets Available for Benefits at December 31, 2004 and 2003, and for
the Plan year ended December 31, 2004, there was no change in excess
contributions payable on the Statements of Changes in Net Assets
Available for Benefits.
(c) Investment Elections
Participants may change their investment elections at any time. The
investment options available as of December 31, 2004 were as follows:
Scudder Balanced Fund - The Scudder Balanced Fund generally
maintains a 50%-75% weighting in common stocks, with the remaining
percentage in investment-grade bonds and other fixed-income
investments.
Scudder Stock Index Fund - The Scudder Stock Index Fund invests in
stocks within the Standard & Poor's ("S&P") 500 Stock Index or
in other mutual funds that appropriately mirror the S&P 500 Stock
Index in their risk weightings.
Scudder Large Company Growth Fund - The Scudder Large Company
Growth Fund invests primarily in the stocks of medium to
large-sized U.S. companies with prospects for maintaining
greater-than-average earnings, strong financial positions and
relatively little debt over time.
Scudder Stable Value Fund - The Scudder Stable Value Fund invests
in high-quality instruments, including guaranteed investment
contracts, bank investment contracts, money market instruments and
synthetic contracts.
Scudder International Fund - The Scudder International Fund
invests primarily in foreign companies with strong earnings growth
and attractively priced shares.
Janus Enterprise Fund - The Janus Enterprise Fund normally invests
50% of its equity assets in securities issued by companies whose
market capitalizations fall within the range of companies making
up the S&P Mid-Cap 400 Index.
PIMCO Total Return Fund - The PIMCO Total Return Fund invests in
fixed income securities and can include U.S. government and
corporate debt securities, mortgage and other asset-backed
securities, U.S. dollar and foreign currency-denominated
securities of foreign issuers and money market instruments.
MFS Value Fund - The MFS Value Fund invests, under normal market
conditions, at least 65% of its total assets in income-producing
equity securities that management believes are undervalued
relative to their long-term potential. The MFS Value Fund may also
invest up to 35% of its total assets in fixed-income securities.
Strong Opportunity Fund - The Strong Opportunity Fund invests at
least 70% of its net assets in equity securities.
Metris Companies Inc. Common Stock Fund - The Metris Companies
Inc. Common Stock Fund invests in the common stock of Metris
Companies Inc.
(d) Loans
Participants in the Metris Retirement Plan have the option of borrowing
against their account balances as defined in the Plan agreement.
Participants are able to obtain loans up to 50% of their account
balance, not less than $1,000 or in excess of $50,000. The interest
rate charged on the outstanding loan principal is based on the Prime
Rate. For the years ended December 31, 2004 and 2003, the interest
rates fluctuated between 5% and 6%.
(e) Distributions
Withdrawals during employment are permitted only if financial hardship
is demonstrated and other financial resources are not available.
Hardship withdrawals are made in compliance with provisions established
by the IRS.
Participants can choose when their benefits are distributed after
employment terminates or at age 59 1/2. If the amount
of benefits is $5,000 or less, payment will be made on a quarterly
basis as soon as administratively possible.
During the third quarter of 2003, the Company sold its membership club
and warranty business to CPP Group, a privately-owned leading provider
of assistance products and services throughout Europe. As a result of
the sale, the assets of former participants of the Plan were
transferred to CPP's plan, under the same administrator. The transfer
is presented in the Statements of Changes in Net Assets Available for
Benefits as "Transfers-out."
(2) Summary of Significant Accounting Policies
The accompanying financial statements have been prepared using the accrual basis
of accounting in accordance with U.S. generally accepted accounting principles
and include the following significant accounting policies:
(a) Investments
Under the terms of the trust agreement, the trustee manages the
investments on behalf of the Plan. The trustee has been granted
authority to transact purchases and sales of investments in the funds,
based upon the participant's discretion, and custodial responsibility
for most of the Plan's assets.
The fair value of investments is based on published market quotations
on the last business day of the year. Participant loans are valued at
cost, which approximates fair value. Interest and dividend income from
trustee-managed investment funds is accrued and recorded as earned.
Realized gains or losses on the sales of investments and the change in
unrealized appreciation or depreciation in the market value of
investments are presented in total in the Statements of Changes in Net
Assets Available for Benefits. Realized investment gains and losses are
determined using the specific-identification method. Purchases and
sales of securities are recorded on a trade-date basis.
(b) Expenses
Plan and trust expenses, except for participant loan fees, investment
management and other mutual fund expenses, are paid by the Company.
Participant loan fees, investment management and other mutual fund
expenses are included in the Statement of Changes in Net Assets
Available for Benefits as "Administrative fees."
(c) Use of Estimates
The preparation of the Plan's financial statements in conformity with
U.S. generally accepted accounting principles requires the Plan
administrator to make significant estimates and assumptions that affect
the reported amounts of assets available for benefits at the date of
the financial statements and the changes in net assets available for
benefits during the reporting period and, when applicable, disclosures
of contingent assets and liabilities at the date of the financial
statements. Actual results could differ significantly from those
estimates.
(d) Benefits
Benefits are recorded when paid.
(e) Concentrations of Market Risk
At December 31, 2004 and 2003, approximately 16% and 9%, respectively,
of the Plan's net assets available for benefits were invested in the
common stock of Metris Companies Inc. The underlying value of the
Metris Companies Inc. Common Stock Fund is entirely dependent upon the
performance of Metris Companies Inc. and the market's evaluation of
such performance. It is at least reasonably possible that changes in
the fair value of the Metris Companies Inc. Common Stock Fund in the
near term could materially affect participant's account balances and
the amounts reported in the Statement of Net Assets Available for
Benefits and the Statement of Changes in Net Assets Available for
Benefits.
(3) Investments
The following investments, stated at fair value, exceeded 5% of the Plan's end
of year net assets.
December 31,
2004
---------------
Scudder Balanced Fund $ 3,061,224
Janus Enterprise Fund 4,144,153
Scudder Stock Index Fund 6,357,336
Scudder Large Company Growth Fund 4,390,740
Scudder Stable Value Fund 4,920,182
Scudder International Fund 2,438,313
PIMCO Total Return Fund 2,330,142
Metris Companies Inc. Common Stock Fund 6,029,672
December 31,
2003
---------------
Scudder Balanced Fund $ 2,830,166
Janus Enterprise Fund 3,281,004
Scudder Stock Index Fund 5,415,872
Scudder Large Company Growth Fund 4,036,619
Scudder Stable Value Fund 4,527,045
Scudder International Fund 1,823,594
PIMCO Total Return Fund 2,093,204
Metris Companies Inc. Common Stock Fund 2,705,625
(4) Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value.
(a) Mutual funds are based on published market quotations.
(b) Common stock of the Company is based on published market prices.
(c) Participant loans are valued at cost, which approximates fair value.
The carrying amounts and estimated fair values of the Plan's financial
instruments at December 31 are as follows:
2004 2003
----------------------------------- -----------------------------------
Carrying Amount Fair Value Carrying Amount Fair Value
--------------- ------------- --------------- -------------
Mutual Funds $ 30,193,745 $ 30,193,745 $ 25,800,084 $ 25,800,084
Metris Companies Inc. Common Stock 6,029,672 6,029,672 2,705,625 2,705,625
Participant Loans 1,202,796 1,202,796 928,276 928,276
Total Investments 37,426,213 37,426,213 29,433,985 29,433,985
(5) Tax Status
The IRS has determined and informed the Company by a letter dated December 9,
2002, that the Plan is qualified and the trust established under the Plan is
tax-exempt, as defined by the appropriate sections of the Internal Revenue Code
("IRC"). The Plan administrator believes the Plan is designed and is currently
being operated in compliance with the applicable provisions of the IRC.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
(6) Plan Termination and Obligation for Retirement Benefits
Although the Company has not expressed any intent to terminate the Plan
agreement, it may do so at any time, subject to such provisions of the law as
may be applicable.
The Company's contributions are designed to accumulate funds needed to provide
retirement benefits to its employees. The Plan does not provide for a
predetermined retirement income.
(7) Party-in-interest Transactions
Transactions resulting in Plan assets being transferred to or used by a related
party are prohibited under the Employee Retirement Income Security Act of 1974
("ERISA" or the "Act") unless a specific exemption applies. Scudder Trust
Company is a party-in-interest as defined by the Act as a result of its
investing Plan assets in Scudder mutual funds. The Plan also engages in
transactions involving the acquisition or disposition of units of participation
in common stock of the Company, a party-in -interest with respect to the Plan.
These transactions are covered by an exemption from the "prohibited
transactions" provisions of ERISA and the IRC.
(8) Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the Statements of Net
Assets Available for Benefits.
(9) Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of employer contributions and participant
contributions in the Statements of Changes in Net Assets Available for Benefits
to the Form 5500:
Year Ended
December 31, 2004
-----------------
Total employer contributions in the Statements of Changes
in Net Assets Available for Benefits $ 2,457,457
Plus: Employer contributions receivable for 2003 76,917
Less: Employer contributions receivable for 2004 (73,981)
-----------------
Total employer contributions in the Form 5500 $ 2,460,393
-----------------
Total participant contributions in the Statements of Changes
in Net Assets Available for Benefits $ 4,457,640
Plus: Participant contributions receivable for 2003 140,717
Less: Participant contributions receivable for 2004 (126,410)
-----------------
Total participant contributions in the Form 5500 $ 4,471,947
-----------------
Employer and participant contribution receivables are not included in the Form
5500 as the Form 5500 is prepared on a cash basis.
(10) Subsequent Events
Subsequent to December 31, 2004, the Company amended the Plan as follows:
- Effective March 10, 2005, the Scudder Pathway(R) Moderate Portfolio
replaced the Scudder Balanced Fund as an investment option for Plan
participants. Scudder Pathway(R) Moderate Portfolio seeks to provide
investors with a balance of growth and income by investing in a mix of
Scudder money market, bond and equity mutual funds.
- Effective March 28, 2005, if a participant terminates employment with a
vested account balance less than $1,000, the account balance is
automatically distributed.
- Effective May 2, 2005, participants can contribute up to 25% of their
compensation before federal income taxes. These contributions continue to
be limited in total dollars on an annual basis by the applicable IRS
regulations as discussed in Note 1, Item b of this report.
- Effective May 2, 2005, participants were offered eleven new investment
options. These options are:
American Century Equity Income Fund, Inv. Class - The fund seeks
current income with capital appreciation as a secondary objective.
American Century Ultra Fund, Inv. Class - The fund seeks long-term
capital growth by investing in common stocks considered by management
to be better-than-average prospects for appreciation.
T. Rowe Price Mid-Cap Value Fund, Adv. Class - The fund seeks long-term
capital appreciation by using a value-oriented approach. The fund
invests in common stocks of medium sized companies believed to be
undervalued in the marketplace.
American Century Vista Fund, Inv. Class - The fund seeks capital growth
by investing primarily in common stocks that are considered by
management to have better-than-average prospects for appreciation.
Scudder-Dreman High Return Equity Fund - The fund seeks a high total
rate of return by investing primarily in large-capitalization stocks
($1 billion and greater) in undervalued sectors of the market.
Scudder-Dreman Small Cap Value Fund - The fund seeks long-term capital
appreciation by investing primarily in undervalued,
small-capitalization U.S. stocks that are similar in market value to
those in the Russell 2000 index.
Barron Growth Fund - The fund seeks to invest in small-cap growth
companies that management believes have long-term, sustainable
competitive advantage that can be purchased at attractive prices.
Scudder International Select Equity Fund - The fund seeks capital
appreciation by investing primarily in stocks that make up the MSCI
EAFE(R) Index.
Scudder Pathway(R) Conservative Portfolio - The fund seeks current
income and, as a secondary objective, growth of capital.
Scudder Pathway(R) Growth Portfolio - The fund seeks long-term growth
of capital and, as a secondary objective, current income.
Personal Access Account SM - This fund is a self-directed brokerage
account maintained through State Street Global Markets LLC, that allows
participants to select investments from approximately 5,000 mutual
funds along with individual securities, such as stocks and bonds, in
addition to those funds that comprise the core investment options
offered by the Plan.
- Effective May 2, 2005, the Metris Companies Inc. Common Stock Fund was
closed to new contributions and transfers. Employees are able to transfer
out any existing balances in this fund to other investment options in the
Plan.
- Effective May 2, 2005, the MFS Value Fund, Scudder Large Company Growth
Fund, Strong Opportunity Fund, Janus Enterprise Fund and Scudder
International Fund became unavailable to participants. Unless otherwise
directed by the affected participants, participant balances in these funds
were transferred to available investment options with similar risk
weightings.
Metris Retirement Plan
Schedule H, Line 4i - Schedule of Assets (held at end of year)
As of December 31, 2004
Shares Current Value
--------------------------------
Scudder Stable Value Fund * 4,920,182 $ 4,920,182
Scudder Stock Index Fund * 176,055 6,357,336
Scudder Large Company Growth Fund * 186,681 4,390,740
Scudder Balanced Fund * 175,027 3,061,224
Janus Enterprise Fund 110,158 4,144,153
PIMCO Total Return Fund 218,383 2,330,142
Scudder International Fund * 55,103 2,438,313
MFS Value Fund 48,624 1,125,170
Strong Opportunity Fund 30,743 1,426,485
Metris Companies Inc. Common Stock Fund 617,162 6,029,672
Participant Loans (5.0% - 6.0%) 1,202,796
-----------
Total $ 37,426,213
===========
*Party-in-interest investment.
See accompanying Report of Independent Registered Public Accounting Firm.