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, 1998
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
METRIS RETIREMENT PLAN
METRIS COMPANIES INC.
600 South Highway 169, Suite 1800, St. Louis Park, Minnesota 55426
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, 1998 and 1997.
(b) Exhibit
(1) Consent of Independent Auditors
SIGNATURES
The Plan. 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/Jean C. Benson
Jean C. Benson
on behalf of the Benefits
Committee, as Plan
Administrator
Dated: June 24, 1999
<PAGE>
Metris Retirement Plan
Financial Statements and Supplemental Schedules
December 31, 1998 and 1997
<PAGE>
TABLE OF CONTENTS
Independent Auditors' Report.................................................1
Statement of Net Assets Available for Benefits as of December 31, 1998.......2
Statement of Net Assets Available for Benefits as of December 31, 1997.......3
Statement of Changes in Net Assets Available for Benefits for the Year Ended
December 31, 1998............................................................4
Statement of Changes in Net Assets Available for Benefits for the Year Ended
December 31, 1997............................................................5
Notes to the Financial Statements............................................6
Schedule I - Item 27a - Schedule of Assets Held for Investment Purposes .....9
Schedule II -Item 27d - Schedule of Reportable Transactions.................10
<PAGE>
Independent Auditors' Report
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, 1998
and 1997, 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 generally accepted auditing
standards. 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 as of
December 31, 1998 and 1997, and the changes in net assets available for
benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules (listed
in the accompanying table of contents) are presented for the purpose of
additional analysis and are not a required part of the basic financial
statements but are 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. These supplemental
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 6, 1999
<PAGE>
<TABLE>
Metris Retirement Plan
Statement of Net Assets Available for Benefits
December 31, 1998
Prime Metris Companies Inc.
Loan Balanced Equity Large Cap Obligation I'ntl Mid Cap Common Stock
Account Fund Fund Value Fund Fund Fund Value Fund Fund Total
Investments, at fair value:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mutualfunds of trustee bank .. $ 0 $531,797 $1,257,405 $1,428,823 $476,483 $113,356 $208,865 $145,534 $4,162,263
Metris Companies Inc. ........
Common Stock ................. 0 0 0 0 0 0 0 668,559 668,559
Participant loans ............ 71,955 0 0 0 0 0 0 0 71,955
------ --------- ---------- -------- -------- -------- -------- ---------- ------
Total Investments .......... 71,955 531,797 1,257,405 1,428,823 476,483 113,356 208,865 814,093 4,902,777
Accrued income .................. 0 0 0 0 1,874 0 0 0 1,874
Total assets held by trustee .... 71,955 531,797 1,257,405 1,428,823 478,357 113,356 208,865 814,093 4,904,651
------- --------- ---------- -------- -------- -------- -------- ---------- ------
Contributions receivable:
Employer ................... 0 2,334 4,766 5,636 2,795 689 1,681 3,105 21,006
Employees .................. 0 9,740 20,535 19,773 7,535 4,395 8,348 19,989 90,315
------- --------- ---------- -------- -------- -------- -------- ---------- ------
Net assets available for benefits $71,955 $543,871 $1,282,706 $1,454,232 $488,687 $118,440 $218,894 $837,187 $5,015,972
======= ======== ========== ========== ======== ======== ======== ======== ==========
See Accompanying Notes to the Financial Statements
</TABLE>
<PAGE>
<TABLE>
Metris Retirement Plan
Statement of Net Assets Available for Benefits
December 31, 1997
Equity Prime
Loan Balanced Index Large Cap Obligation
Account Fund Fund Value Fund Fund Total
Investments, at fair value:
<S> <C> <C> <C> <C> <C> <C>
Mutual funds of trustee bank ...... $ 0 $220,449 $390,127 $633,681 $112,903 $1,357,160
Participant loans ................. 1,792 0 0 0 0 1,792
Total Investments ............... 1,792 220,449 390,127 633,681 112,903 1,358,952
----- ------- ------- ------- ------- ---------
Accrued income .................... 0 0 0 0 530 530
----- ------- ------- ------- ------- ---------
Total assets held by trustee .... 1,792 220,449 390,127 633,681 113,433 1,359,482
Contributions receivable:
Employer ........................ 0 1,741 2,913 5,375 1,283 11,312
Employees ....................... 0 4,353 7,677 13,795 3,081 28,906
----- ------- ------- ------- ------- ---------
Net assets available for benefits $1,792 $226,543 $400,717 $652,851 $117,797 $1,399,700
====== ======== ======== ======== ======== ==========
See Accompanying Notes to the Financial Statements
</TABLE>
<PAGE>
<TABLE>
Metris Retirement Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1998
Prime
Loan Balanced Equity Index Large Cap Obligation International
Account Fund Fund Value Fund Fund Fund
Contributions:
<S> <C> <C> <C> <C> <C> <C>
Employer ............................. $ 0 $ 97,434 $ 180,200 $ 292,952 $ 143,132 $ 7,759
Employees ............................ 0 164,247 358,762 444,220 145,004 60,429
Rollovers ................................. 0 114,858 288,253 231,565 225,737 54,095
Loan repayments ........................... (18,725) 2,635 1,873 9,776 3,698 213
Investment income:
Dividends ............................ 0 11,711 10,257 13,987 0 626
Interest ............................. 2,479 0 0 0 16,206 0
Net appreciation
(depreciation) in fair value ..... 0 27,913 196,586 80,230 0 7,468
----- ------ ------- ------ ------ -----
Total investment income ... 2,479 39,624 206,843 94,217 16,206 8,094
Benefits paid to participants ............. (8,191) (67,492) (127,853) (157,111) (52,034) (7,421)
New loans ................................. 94,600 (15,345) (17,947) (27,257) (25,385) (3,846)
Transfers between funds, net .............. 0 (18,633) (8,142) (86,981) (85,468) (883)
----- ------ ------- ------ ------ -----
Increase in net assets
available for benefits...... 70,163 317,328 881,989 801,381 370,890 118,440
Net assets available for
benefits:
Beginning of year .................... 1,792 226,543 400,717 652,851 117,797 0
----- ------ ------- ------ ------ -----
End of year .......................... $ 71,955 $ 543,871 $ 1,282,706 $ 1,454,232 $ 488,687 $ 118,440
========= ========= =========== =========== ========= =========
Mid Cap Metris Companies Inc.
Value Fund Common Stock Fund Total
Contributions:
Employer ............................. $ 21,570 $ 34,406 $ 777,453
Employees ............................ 139,251 231,189 1,543,102
Rollovers ................................. 87,338 281,976 1,283,822
Loan repayments ........................... 41 489 0
Investment income:
Dividends ............................ 604 0 37,185
Interest ............................. 0 0 18,685
Net appreciation (15,318) 113,560 410,439
(depreciation) in fair value ..... (14,714) 113,560 466,309
------- ------- -------
Total investment income ... (10,828) (23,484) (454,414)
Benefits paid to participants ............. (1,798) (3,022) 0
New loans .................................
Transfers between funds, net .............. (1,966) 202,073 0
------- ------- -------
Increase in net assets
available for benefits...... 218,894 837,187 3,616,272
Net assets available for benefits:
Beginning of year .................... 0 0 1,399,700
------- ------- -------
End of year .......................... $ 218,894 $837,187 $ 5,015,97
========= ======== ============
See Accompanying Notes to the Financial Statements
</TABLE>
<PAGE>
<TABLE>
Metris Retirement Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 1997
Prime
Loan Balanced Equity Index Large Cap Obligation
Account Fund Fund Value Fund Fund Total
Contributions:
<S> <C> <C> <C> <C> <C> <C>
Employer ............................... $ 0 $ 46,811 $ 83,067 $ 151,267 $ 30,167 $ 311,312
Employees .............................. 0 113,989 210,508 387,148 71,260 782,905
Rollovers ................................... 2,584 58,921 60,682 74,151 33,230 229,568
Loan repayments ............................. (792) 0 0 416 376 0
Investment income:
Dividends .............................. 0 3,852 3,696 4,835 0 12,383
Interest ............................... 0 14,403 25,872 77,309 3,423 121,007
Net appreciation
(depreciation) in fair value ......... 0 971 24,079 (21,013) 0 4,037
----- ------- ------- ------- ------- ---------
Total investment income ...... 0 19,226 53,647 61,131 3,423 137,427
Benefits paid to participants ............... 0 (9,669) (14,184) (27,397) (10,262) (61,512)
New loans ................................... 0 0 0 0 0 0
Transfers between funds, net ................ 0 (2,735) 6,997 6,135 (10,397) 0
----- ------- ------- ------- ------- ---------
Increase in net assets available ......
for benefits 1,792 226,543 400,717 652,851 117,797 1,399,700
Net assets available for benefits: ..........
Beginning of year 0 0 0 0 0 0
----- ------- ------- ------- ------- ---------
End of year ............................ $1,792 $ 226,543 $ 400,717 $ 652,851 $ 117,797 $ 1,399,700
====== ========= ========= ========= ========= ===========
See Accompanying Notes to the Financial Statements
</TABLE>
<PAGE>
METRIS RETIREMENT PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(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 profit sharing plan
sponsored and administrated by Metris Companies Inc. and subsidiaries (the
"Company").
The Plan was modified as of January 1, 1998, to allow participants to obtain
loans equal to 50% of their vested account balance. The minimum loan amount is
$1,000. Two new investment fund options were also added to the Plan, as well as
the Metris Companies Inc. Common Stock Fund. The eligibility requirements for
Plan participation were amended to allow Company employees to enroll in the Plan
on the first day of the month following employment. Previously participants were
eligible to receive Company matching contributions after 12 months of service in
which they have worked 1,000 hours. The Plan was also amended to allow the
Company to use non-vested Company matching contributions forfeited by terminated
participants to first reduce Plan administrative expenses and then future
employer contributions. Prior to the modification of the agreement, an employee
was not able to participate in the Plan until after completing 12 months of
service in which the employee had worked 1,000 hours.
Employees may contribute from one to fifteen percent of their compensation
before federal income taxes to the Plan through payroll deductions. For each
plan year, the Company is required to make a matching contribution equal to 50%
of an employees contribution up to 6% of their Recognized Compensation. The
Employer matching contribution will be credited to the participants Employer
Matching Account. The Company may also elect to make discretionary matching
contributions and discretionary profit sharing contributions to the Plan. The
discretionary matching contribution will equal a percentage, as determined by
its Board of Directors, of the participants retirement savings contributions for
the Plan year and will be credited to the Employer Contribution Account. The
Company may elect to make a discretionary profit sharing contribution to the
Plan, in an amount determined by its Board of Directors. Any employee who is
eligible to participate in the plan, will have credited to their Employer
Contributions Account, an amount in the proportion which their Recognized
Compensation bears to the total Recognized Compensation of all those who are
eligible to participate in the Plan. Amounts credited to the participant's
Employer Matching Account will be 100% vested upon contribution, while those
amounts credited to the participant's Employer Contributions Account will vest
ratably over three years of service. In the event of a participant's death,
disability, or retirement, all Company contributions are 100% vested.
Participants may change investment elections on any day during the month. The
investment options available are the First American Balanced Fund, First
American Equity Index Fund, First American Large Cap Value Fund, First American
Prime Obligation Fund, First American International Fund, First American Mid Cap
Value Fund and the Metris Companies Inc. Common Stock Fund. The last three
investment options were added to the Plan during 1998.
Participants in the modified Metris Retirement Plan have the option of borrowing
against their account balances. Prior to this modification, participants in the
Direct Merchants Credit Card Bank 401K Retirement Plan ("DMCCB Plan") had the
option of borrowing against their vested account balances in amounts and under
terms provided in the DMCCB Plan. This plan was rolled over into the Metris
Retirement Plan during the 1997 plan year, with amounts borrowed from the DMCCB
Plan reflected as loans receivable in the Loan Account in the financial
statements of the Metris Retirement Plan for the year ended December 31, 1997.
Benefits may be distributed as follow:
Withdrawals during employment from employee and vested Company matching
contributions 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 Internal
Revenue Service (IRS).
The participants can choose when their vested benefits are distributed
after employment terminates or the age of 59 1/2 is attained. If the
amount of vested benefits is $5,000 or less, payment will be made as of
the first valuation date following the date employment ended.
<PAGE>
METRIS RETIREMENT PLAN
(2) Summary of Significant Accounting Policies
The accompanying financial statements have been prepared on the accrual basis
and include the following significant accounting policies:
Investments
Under the terms of the trust agreement, the trustee manages the investments on
behalf of the Plan. The trustee has been granted discretionary authority
concerning purchases and sales of investments in the funds and custodial
responsibility for most of the Plan's assets.
The fair value of investments held is based on published market quotations on
the last business day of the year. Participant loans are valued at cost, which
approximates fair value. Dividend and interest income from trustee-managed
investment funds is recorded as accrued. Realized investment gains and losses
are determined using the specific-identification method. Purchases and sales of
securities are recorded on a trade-date basis.
Expenses
All Plan and trust expenses, except for investment management fees and brokerage
commissions of the mutual funds, are paid by the Company.
Use of Estimates
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of net assets available for
plan benefits and disclosure of contingent assets and liabilities as of the date
of the financial statements and changes in net assets available for plan
benefits for the reporting period. Actual results could differ significantly
from those estimates.
(3) Investments
The following investments, stated at fair value, exceeded 5% of the Plan's end
of year net assets:
December 31,
1998 1997
First American Balanced Fund .......... $ 531,797 $220,449
First American Equity Index Fund ...... 1,257,405 390,127
First American Large Cap Value Fund ... 1,428,823 633,681
First American Prime Obligation Fund .. 476,483 112,903
Metris Companies Inc. Common Stock Fund 814,093 --
(4) Tax Status
The IRS has determined and informed the Company by a letter dated October 20,
1998 that the Plan is qualified and the trust established under the Plan is
tax-exempt, under the appropriate sections of the Internal Revenue Code.
(5) 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. In the event that the Plan is terminated, all participants
will be fully vested.
METRIS RETIREMENT PLAN
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.
(6) Party-in-interest Transactions
Transactions resulting in plan assets being transferred to or used by a related
party are prohibited under the Pension Reform Act (the Act) unless a specific
exemption applies. US Bank Trust National Association is a party-in-interest as
defined by the Act as a result of its investing plan assets in its mutual fund.
However, such transactions are exempt under Section 408(b)(8) and are not
prohibited by the Act.
<PAGE>
Schedule I
METRIS RETIREMENT PLAN
Item 27a-Schedule of Assets Held for Investment Purposes
December 31, 1998
Shares Cost Fair Value
Loan Account (8.75% to 9.5%) ............ $ 71,955 $ 71,955
First American Balanced Fund * .......... 39,218 559,809 531,797
First American Equity Index Fund * ...... 51,428 1,079,049 1,257,405
First American Large Cap Value Fund * ... 64,130 1,555,499 1,428,823
First American Prime Obligation Fund * .. 476,485 476,483 476,483
First American International Fund * ..... 8,220 109,995 113,356
First American Mid Cap Value Fund * ..... 14,876 252,487 208,865
Metris Companies Inc. Common Stock Fund * 57,411 694,466 814,093
------- -------
Total ................................... $4,799,743 $4,902,777
========== ==========
*Party-in-interest investment.
See accompanying independent auditors' report.
<PAGE>
<TABLE>
Schedule II
METRIS RETIREMENT PLAN
Item 27d-Schedule of Reportable Transactions
Year Ended December 31, 1998
Number of
Identity of party Description of Asset Purchases Sales Purchases Sales Net Gain (Loss)
US Bank Trust National Association*
<S> <C> <C> <C> <C> <C>
First American
Balanced Fund ........ 82 68 $ 458,674 $ 121,094 $ 2,283
First American Equity
Index Fund .......... 106 101 926,942 235,238 19,746
First American
Large Cap Value Fund 99 104 1,254,075 341,355 (13,655)
First American Prime
Obligation Fund ..... 102 92 546,351 182,769 0
First American
International Fund . 68 44 137,705 27,202 (507)
First American Mid Cap
Value Fund .......... 83 51 319,778 60,946 (6,345)
Metris Companies Inc. Common Stock Fund * 106 44 828,995 119,477 (15,052)
--- -- ------- ------- -------
Total ................................... 646 504 $4,472,520 $ 1,088,081 $ (13,530)
=== === ========== ============= ==========
</TABLE>
*Party-in-interest transaction.
See accompanying independent auditors' report.
Exhibit 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors
Metris Companies Inc.:
We consent to the incorporation by reference of our report dated June 6, 1999
in the registration statement (No. 333-42529) on Form S-8 of Metris Companies
Inc. and the use of such report in the annual report on Form 11-K of Metris
Companies Inc. Such report relates to the statements of net assets available
for benefits of the Metris Retirement Plan as of December 31, 1998 and 1997,
and the related statements of changes in net assets available for benefits for
each of the years in the two-year period ended December 31, 1998 and the related
schedules as of and for the year ended December 31, 1998.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 24, 1999
