Metris Cos. has been taking some financial lumps, but its chief executive officer has lost no enthusiasm about the longer term.
"We reported record earnings in the third quarter," said Ronald N. Zebeck, who also is president of the company, a St. Louis Park, Minn., spinoff of Fingerhut Cos., that issues credit cards mainly to subprime borrowers. "The fundamentals of the business are solid."
Metris' net income was up 61%, to $17 million.
In October, Metris was slapped with three shareholder lawsuits, and its stock hit an all-time low of $15.50 on Oct. 8. The suits followed the drop in the stock price, which was influenced by an analyst's report saying that Metris could be hurt by a Securities and Exchange Commission rule change.
This week the chief financial officer, Robert W. Oberrender, resigned. But Metris said it had nothing to do with the recent negative events, and Mr. Zebeck said he is not worried that broader difficulties in the low end of the consumer credit market may be hitting home.
Mr. Oberrender left for personal reasons and is joining Sara Lee Corp. in Chicago, Mr. Zebeck said. "I know a lot of people would like to see more to it, but there really isn't more," he said.
For the time being, Paul T. Runice, vice president and treasurer, is serving as chief financial officer.
Metris' stock stumbled 11%, to $32.75, on Nov. 3, on the news of Mr. Oberrender's resignation. "When CFOs resign, it makes people nervous," said PaineWebber analyst Gary Gordon.
Jeffrey K. Evanson, an analyst at Piper Jaffray, said the departure would not hamper Metris' efforts to raise capital for $1 billion of receivables it is buying from PNC Bank Corp.
Analysts said they are not concerned about the lawsuits recently filed against Metris, which they characterized as harassment by plaintiff attorneys. The suits accuse Metris of misleading disclosures that inflated its stock price.
The company said that investors may have been disappointed that the stock fell, but that no irregularities were involved.
Mr. Zebeck called the lawsuits "frivolous" and said the company will "fight vehemently."
At issue are the fee-based membership programs the company sells to credit card customers. These include extended warranties on consumer electronics, jewelry, and furniture, and debt waiver and card registration programs.
The first suit, filed Oct. 6 in federal district court in Minneapolis, alleged that Metris improperly reported revenue from the membership programs. It said that between May 15 and Oct. 2, shareholders bought a stock that was trading at a higher level than was warranted.
The other filings make similar allegations, and all are seeking class- action status.
"You can't sue a company because its stock went down," said William Blair & Co. analyst Joseph LaManna.
"How could the company be misleading when it was following the advice of its accountants?" said Mr. Gordon of PaineWebber. Metris relies on KPMG Peat Marwick.
Metris' stock price has fallen from a high of $80.75 on Aug. 14. But analysts say the company is sound, and they point out that the price has been inching back up. It was trading at $32.0625 midday Thursday.
The lawsuits may have been sparked by controversies surrounding Cendant Corp., which was found to have engaged in fraudulent accounting of revenue from similar membership programs.
In September, the Securities and Exchange Commission responded to the Cendant situation by adopting new rules requiring that such revenues be reported when the refund periods expire.
Previously, Metris had been recognizing a portion of revenues before the expiration dates.
Mr. Zebeck said rumors of another SEC rule change prompted jittery investors to sell Metris shares in October.
As Mr. Zebeck explained it, a report by BT Alex. Brown analyst Mark Alpert suggested the SEC was considering a policy that would require Metris and others to recognize the related advertising expenses at the time they occur, instead of later.
On Oct. 5, Metris announced that if such a rule change took place, the company would have to take a one-time $14.1 million charge against earnings. But the SEC did not implement the new policy, and Metris did not take the charge.
Metris has been advised by its auditors that the SEC is no longer considering such a policy, Mr. Zebeck said. "Metris is still trading less than its peer group because of the confusion over the SEC," he said.
"Metris did lose shareholders over the flap about the SEC rumors," Mr. Evanson said. "Once you have lost a pool of shareholders, it's difficult to win them back."
