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, 2002
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.
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, 2002 and 2001.
(b) Exhibit
(1) Consent of Independent Public Accountants
(99.1) Certification of Principal Executive Officer Pursuant to
Section 1350 of Chapter 63 of Title 18 of the United States Code
(99.2) Certification of Principal Financial Officer Pursuant to
Section 1350 of Chapter 63 of Title 18 of the United States Code
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/Jon Mendel
-------------------
Jon Mendel
on behalf of the Retirement Benefits
Committee, as Plan
Administrator
Dated: June 27, 2003
Metris Retirement Plan
Financial Statements and Supplemental Schedule
December 31, 2002 and 2001
METRIS RETIREMENT PLAN
TABLE OF CONTENTS
Independent Auditors' Report...................................................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 I - Schedule of Assets (Held at End of Year)..........................8
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, 2002
and 2001, 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 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 the years then ended in conformity with accounting
principles generally accepted in the United States of America.
Our audits were performed 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) 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
June 16, 2003
Metris Retirement Plan
Statements of Net Assets Available for Benefits
December 31,
-------------------------
2002 2001
-------------------------
Assets:
Investments, at fair value:
Mutual funds ................................. $19,636,674 $17,401,801
Metris Companies Inc. common stock ........... 1,279,544 4,672,304
Participant loans ............................ 735,217 619,321
-------------------------
Total investments .............................. 21,651,435 22,693,426
Accrued income ................................. 4,352 4,100
-------------------------
Total assets held by trustee ................... 21,655,787 22,697,526
-------------------------
Contributions receivable:
Employer ..................................... 195,367 53,696
Employees .................................... 417,936 147,934
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Total assets ................................... 22,269,090 22,899,156
Liabilities:
Excess contributions payable ................... 75,063 288,795
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Total liabilities .............................. 75,063 288,795
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Net assets available for benefits .............. $22,194,027 $22,610,361
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See accompanying Notes to the Financial Statements
Metris Retirement Plan
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31,
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2002 2001
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Contributions:
Employer ............................................................ $ 2,747,647 $ 2,016,136
Employee ............................................................ 7,117,278 6,973,179
Rollovers ................................................................ 749,411 943,025
Investment income:
Dividends ........................................................... 184,911 119,780
Interest ............................................................ 222,663 183,236
Net realized and unrealized depreciation in fair value
- Mutual Funds and Other........................................... (3,638,122) (2,525,127)
Net realized and unrealized (depreciation)/appreciation in fair value
- Metris Companies Inc. common stock ............................. (4,787,971) 202,220
---------------------------------------
Total investment income ............................................ (8,018,519) (2,019,891)
Benefits paid to participants ............................................ (3,142,557) (2,266,860)
Change in excess contributions payable ................................... 213,732 (288,795)
Administrative fees ...................................................... (83,326) (41,994)
---------------------------------------
(Decrease)/ Increase in net assets available for benefits ............ (416,334) 5,314,800
Net assets available for benefits:
Beginning of year ................................................... 22,610,361 17,295,561
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End of year ......................................................... $ 22,194,027 $ 22,610,361
============ ============
See accompanying Notes to the Financial Statements
METRIS RETIREMENT PLAN
Notes to the Financial Statements
(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 administered by Metris Companies Inc. and subsidiaries (the
"Company").
(a) Eligibility
The eligibility requirements for Plan participation allow for automatic
enrollment of Company employees at a deferral rate of 2%. Employees
have a 30-day opt-out period from date of hire after which deductions
start as soon as administratively feasible. Participants are eligible
to receive Company matching contributions immediately which vest after
they have worked 1,000 hours. The Plan also allows the Company to use
non-vested Company matching contributions forfeited by terminated
participants to first reduce Plan administrative expenses and then
future employer contributions.
(b) Contributions
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 participant's 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. Any employee who is eligible to
participate in the plan will have credited to their Employer
Contributions Account an amount proportionate to their Recognized
Compensation in comparison 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
completion of 1,000 hours of service, 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.
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. Contributions that exceed these regulations are
reflected as excess contributions payable in the Statements of Net
Assets Available for Benefits.
(c) Investment Elections
Participants may change investment elections at any time. The
investment options available are 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 all 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 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 MFS 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. Participants are able to
obtain loans up to 50% of their vested 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, 2002 and 2001, the interest rates fluctuated
between 5.25% and 10.5%.
(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.
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 on a
quarterly basis as soon as administratively possible.
(2) Summary of Significant Accounting Policies
The accompanying financial statements have been prepared on the accrual basis in
accordance with accounting principles generally accepted in the United States of
America 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
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 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 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.
(b) Expenses
Plan and trust expenses, except for participant loan fees, investment
management and other mutual fund expenses, are paid by the Company.
The Company is allowed to use non-vested Company matching
contributions forfeited by terminated participants to reduce Plan
administrative expenses.
(c) 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,
2002
------------------------------------------------------------
Scudder Balanced Fund ...................... $2,328,562
Janus Enterprise Fund ...................... 2,216,219
Scudder Stock Index Fund ................... 4,038,035
Scudder Large Company Growth Fund .......... 2,871,450
Scudder Stable Value Fund .................. 4,140,851
Scudder International Fund ................. 1,387,109
PIMCO Total Return Fund .................... 1,980,680
Metris Companies Inc. Common Stock Fund .... 1,279,544
December 31,
2001
-----------------------------------------------------------
Scudder Balanced Fund ...................... $2,247,973
Janus Enterprise Fund ...................... 1,998,141
Scudder Stock Index Fund ................... 4,421,502
Scudder Large Company Growth Fund .......... 3,235,497
Scudder Stable Value Fund .................. 3,054,733
Scudder International Fund ................. 1,276,278
Metris Companies Inc. Common Stock Fund .... 4,672,304
(4) 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, 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.
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 Employee Retirement Income Security Act of 1974
(ERISA) 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 these mutual funds. However, such transactions are exempt under Section
408(b)(8) and are not prohibited by the Act.
(7) Subsequent Event
Effective January 1, 2003, the Plan was amended to be designated as a
"Safe-Harbor Plan" under Internal Revenue Code 401(k)(12). The amendment
eliminated the automatic enrollment feature of the Plan. The Employer matching
contribution was increased to an amount equal to 100% of the contributions to
the Plan made by an employee up to 4% of the employee's gross earnings and the
Employer matching contribution immediately vests. In addition, the discretionary
Employer matching contribution was eliminated from the Plan.
Schedule I
Metris Retirement Plan
Schedule of Assets (Held at End of Year)
December 31, 2002
Shares Fair Value
-----------------------
Scudder Stable Value Fund * ....................... 4,140,851 $4,140,851
Scudder Stock Index Fund * ........................ 158,853 4,038,035
Scudder Large Company Growth Fund * ............... 159,436 2,871,450
Scudder Balanced Fund * ........................... 160,480 2,328,562
Janus Enterprise Fund ............................. 96,567 2,216,219
PIMCO Total Return Fund ........................... 185,631 1,980,680
Scudder International Fund * ...................... 45,689 1,387,109
MFS Value Fund .................................... 22,441 370,720
Strong Opportunity Fund ........................... 10,559 303,048
Metris Companies Inc. Common Stock Fund ........... 578,979 1,279,544
Participant Loans (5.25%-10.5%).................... 735,217
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Total $21,651,435
===========
*Party-in-interest investment.
See accompanying independent auditors' report.
Consent of Independent Certified Public Accountants
The Board of Directors
Metris Companies Inc.:
We consent to the incorporation by reference of our report dated June 16, 2003
in the registration statements (No. 333-42529 and 333-78345) 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,
2002 and 2001, 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, 2002
and the related schedule as of December 31, 2002.
/s/KPMG LLP
Minneapolis, Minnesota
June 18, 2003