11-K 1 w22670e11vk.txt FORM 11-K ADVANTA CORP. EMPLOYEE SAVINGS PLAN ================================================================================ UNITED STATES 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, 2005 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO _____________ COMMISSION FILE NUMBER 0-14120 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: ADVANTA CORP. EMPLOYEE SAVINGS PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: ADVANTA CORP. WELSH AND MCKEAN ROADS P.O. BOX 844 SPRING HOUSE, PA 19477-0844 ================================================================================ SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Committee which administers the Plan has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. Advanta Corp. Employee Savings Plan Dated: June 28, 2006 By: /s/ Philip M. Browne ------------------------------------ Philip M. Browne Member of the Committee Administering the Plan 2 ADVANTA CORP. EMPLOYEE SAVINGS PLAN INDEX TO FINANCIAL STATEMENTS AND SCHEDULE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 4 FINANCIAL STATEMENTS: Statements of Assets Available for Benefits, December 31, 2005 and 2004 5 Statement of Changes in Assets Available for Benefits, Year Ended December 31, 2005 6 Notes to Financial Statements 7 SUPPLEMENTAL SCHEDULE: Schedule H, Item 4i - Schedule of Assets (Held at End of Year) December 31, 2005 12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Advanta Corp. Employee Savings Plan Administrative Committee: We have audited the accompanying statements of assets available for benefits of Advanta Corp. Employee Savings Plan as of December 31, 2005 and 2004, and the related statement of changes in assets available for benefits for the year ended December 31, 2005. 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 audits 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 assets available for benefits of the Plan as of December 31, 2005 and 2004, and the changes in its assets available for benefits for the year ended December 31, 2005, in conformity with U.S. 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 schedule listed in the accompanying index 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 Philadelphia, PA June 27, 2006 ADVANTA CORP. EMPLOYEE SAVINGS PLAN STATEMENTS OF ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, ------------------------- 2005 2004 ----------- ----------- ASSETS Investments $48,772,291 $42,756,353 Employer contribution receivable 958,614 911,445 Participant loans receivable 515,011 484,414 Cash and cash equivalents 20,267 39,621 ----------- ----------- TOTAL ASSETS AVAILABLE FOR BENEFITS $50,266,183 $44,191,833 =========== ===========
See notes to financial statements. 5 ADVANTA CORP. EMPLOYEE SAVINGS PLAN STATEMENT OF CHANGES IN ASSETS AVAILABLE FOR BENEFITS YEAR ENDED DECEMBER 31, 2005 INCREASES: Net increase in fair value of investments $ 3,178,261 Interest and dividend income 1,521,554 Employee contributions 3,195,413 Employer contributions 1,874,673 Rollovers 639,249 ----------- Total increases 10,409,150 DECREASES: Distributions to participants (4,334,800) ----------- Total decreases (4,334,800) ----------- NET INCREASE IN ASSETS AVAILABLE FOR BENEFITS 6,074,350 ASSETS AVAILABLE FOR BENEFITS, BEGINNING OF YEAR 44,191,833 ----------- ASSETS AVAILABLE FOR BENEFITS, END OF YEAR $50,266,183 ===========
See notes to financial statements. 6 ADVANTA CORP. EMPLOYEE SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 AND 2004 NOTE 1) DESCRIPTION OF PLAN The Advanta Corp. Employee Savings Plan (the "Plan"), as amended, was adopted effective July 1, 1983 and is a defined contribution plan available to all employees of Advanta Corp. and its subsidiaries ("Advanta") who have reached age 21 with six months of service. Prior to January 1, 2005, employees who reached age 21 with one year of service were eligible for the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The following description of the Plan as of December 31, 2005 provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. Participants may elect to defer a portion of their compensation before certain taxes are deducted. Advanta may elect to limit the maximum percentage a participant may contribute to the extent it determines that such limitation is necessary in order to comply with the rules for plan qualification under Sections 401(a) and (k) of the Internal Revenue Code. Eligible participants may elect to contribute up to 25% of their salary subject to the limits under Section 401 of the Internal Revenue Code. Advanta also makes matching contributions to the Plan, a portion of which is made on a per pay period basis. Such employer contributions are equal to 50% of each employee's contributions to the Plan up to 5% of the employee's compensation (so that the initial maximum matching contribution by Advanta would be 2.5% of an employee's compensation) subject to certain limitations on matching contributions to highly compensated employees under applicable provisions of the Internal Revenue Code. Advanta may make an additional matching contribution as of the end of the Plan year for the benefit of participants who are employed as of the last day of the Plan year. Total employer contributions in 2005 and 2004 were 100% of the first 5% of employees' compensation contributed to the Plan, subject to the above-referenced limitations. Eligible participants aged 50 or over may also elect to make additional catch-up contributions subject to the dollar limits in the Economic Growth and Tax Relief Reconciliation Act of 2001. These catch-up contributions are not eligible for employer matching contributions. The Plan is subject to certain non-discrimination standards under Section 401(k) of the Internal Revenue Code. In order to comply with these standards, certain participants who are highly compensated employees (as defined in the Internal Revenue Code) may have a portion of their contributions refunded to them after the end of the Plan year or their contributions may be limited during the year. Further, the Plan also permits Advanta to make qualified non-elective contributions. 7 ADVANTA CORP. EMPLOYEE SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 AND 2004 Because contributions made under Section 401 cannot be included in the income of participants when made, they are fully taxable when distributed unless rolled over into another qualified plan or individual retirement account. Participants are fully vested as to employer and employee contribution accounts at all times. Plan participants may invest their contributions in one or more investment funds and in shares of Advanta's Class B Common Stock. The Plan invests cash related to pending trades in a short-term money market fund. Six new investment options were made available to participants in December 2004. In March 2005, the John Hancock Small Cap Growth Fund and Putnam New Opportunities Fund investment options were replaced by two of the new investment options, the Managers Special Equity Fund and American Funds - The Growth Fund of America, respectively, and all related balances and related remaining future contributions were automatically invested in the two new investment options. As provided for in the Plan document, loans are available to participants under certain specified conditions. The principal amount of a Plan loan to a participant may not exceed the lesser of $50,000 (reduced by the maximum amount of any Plan loans outstanding anytime during the preceding year) or 50% of a participant's accrued equity in the Plan. Plan loans are generally limited to a term of five years (or, in the case of a loan used to finance the acquisition of a principal residence, fifteen years) and currently bear an interest rate of the prime rate as published in the Wall Street Journal as of the date the loan is requested plus 1%. Plan loans are collateralized by the participant's accrued benefit in the Plan. While it is Advanta's intention to continue the Plan in operation indefinitely, any termination of the Plan or discontinuance of contributions, subject to the provisions of ERISA, will not result in the use or diversion of Plan assets for any purposes other than the exclusive benefit of Plan participants and their beneficiaries. NOTE 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The accompanying financial statements have been prepared using the accrual basis of accounting. USE OF ESTIMATES The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets available for benefits and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. 8 ADVANTA CORP. EMPLOYEE SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 AND 2004 INVESTMENT VALUATION AND INCOME RECOGNITION Investments are stated at estimated fair value on the statements of assets available for benefits. The fair value of the T. Rowe Price Stable Value Common Trust Fund (the "Stable Value Fund") is estimated based on the Stable Value Fund's audited financial statements that state, "In accordance with the Declaration of Trust, fair value for an investment contract is generally book value unless the trustee determines that book value does not represent the fair value of the contract. Book value (also known as contract value) is cost plus accrued income minus redemptions. In determining fair value, the trustee primarily considers factors such as the benefit responsiveness of the investment contract and the ability of the parties to the investment contract to perform in accordance with the terms of the agreement. In the sole discretion of the trustee, and under circumstances that the trustee deems appropriate, the fair value of an investment contract may be more or less than book value." The average yield and crediting interest rate for the Stable Value Fund was 4.33% for the year ended December 31, 2005 and 4.32% for 2004. Fair value for the investments, other than the Stable Value Fund, is based on quoted market prices. Purchases and sales of securities are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date. PARTICIPANT ACCOUNTS Plan participants may invest their contributions and employer contributions in one or more of the investment options offered by the Plan. Wilmington Trust Company is the Trustee of the Plan. Investment income, representing interest and dividends, and changes in the fair value of investments, are credited to each participant on a daily basis based upon individual investment options selected. ADMINISTRATIVE EXPENSES All administrative expenses of the Plan and other fees incident to the management of the Plan are paid for by Advanta, except for brokerage commissions, investment advisory fees and transfer taxes, if any. DISTRIBUTIONS TO PARTICIPANTS Distributions to participants are recorded when paid. 9 ADVANTA CORP. EMPLOYEE SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 AND 2004 NOTE 3) INVESTMENTS The carrying values of individual investments that represent more than 5% of the Plan's assets available for benefits were as follows as of December 31:
2005 2004 ----------- ----------- T. Rowe Price Stable Value Common Trust Fund $ 4,125,844 $ 4,067,104 Vanguard 500 Index Fund -Institutional Class Shares 10,353,846 -- Vanguard 500 Index Fund -Admiral Class Shares -- 10,468,706 Dodge & Cox Stock Fund 9,045,667 8,010,157 Dodge & Cox Balanced Fund 6,302,969 5,652,869 Vanguard International Growth Fund - Admiral Class Shares 3,634,835 2,896,859 American Funds - The Growth Fund of America - Class R-5 Shares 2,850,071 -- Putnam New Opportunities Fund - Class A Shares -- 2,784,419 Advanta Corp.* Class B Common Stock 6,639,791 4,912,678
* Party-in-interest to the Plan The net increase in fair value of investments, including gains and losses on investments bought and sold, as well as held during the year, was comprised of the following for the year ended December 31, 2005: Dodge & Cox Stock Fund $ 468,044 American Funds - The Growth Fund of America - Class R-5 Shares 378,844 Vanguard International Growth Fund - Admiral Class Shares 347,510 Vanguard 500 Index Fund - Institutional Class Shares 320,839 Dodge & Cox Balanced Fund 155,897 John Hancock Small Cap Growth Fund - Class I Shares (104,784) Putnam New Opportunities Fund - Class A Shares (64,895) Western Asset Core Bond Portfolio - Institutional Class Shares (30,727) JP Morgan Mid Cap Value Fund - Class A Shares 23,706 American Beacon Funds Small-Cap Value Fund - Planahead Class Shares 14,452 PIMCO Real Return Fund - Institutional Class Shares (11,808) Managers Special Equity Fund - I Class Shares (6,118) Goldman Sachs Growth Opportunities Fund - Class A Shares 4,446 Advanta Corp. Class A Common Stock 58,265 Advanta Corp. Class B Common Stock 1,624,590 ---------- TOTAL $3,178,261 ==========
10 ADVANTA CORP. EMPLOYEE SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2005 AND 2004 NOTE 4) FEDERAL INCOME TAXES The Internal Revenue Service issued a favorable determination letter dated December 1, 2003, concerning the Plan as qualifying under applicable provisions of the Internal Revenue Code. The favorable determination letter was issued subject to the adoption of a technical amendment to the Plan. The technical amendment was adopted by the Plan on February 19, 2004. Although the Plan has been amended, including the technical amendment, since receiving the determination letter, the Plan administrator and management believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, they believe that the Plan was qualified and the related trust was tax-exempt for the year ended December 31, 2005. Accordingly, no provision for income taxes is shown in the accompanying financial statements. 11 ADVANTA CORP. EMPLOYEE SAVINGS PLAN EIN 23-1462070 SCHEDULE H, ITEM 4I - SCHEDULE OF ASSETS (HELD AT END OF YEAR) DECEMBER 31, 2005
CURRENT DESCRIPTION COST** VALUE ----------------- ------ ----------- T. Rowe Price Stable Value Common Trust Fund Common Trust Fund $ 4,125,844 Vanguard 500 Index Fund - Institutional Class Shares Mutual Fund 10,353,846 Dodge & Cox Stock Fund Mutual Fund 9,045,667 Dodge & Cox Balanced Fund Mutual Fund 6,302,969 Vanguard International Growth Fund - Admiral Class Shares Mutual Fund 3,634,835 American Funds - The Growth Fund of America - Class R-5 Shares Mutual Fund 2,850,071 Managers Special Equity Fund - I Class Shares Mutual Fund 1,849,684 Western Asset Core Bond Portfolio - Institutional Class Shares Mutual Fund 1,405,062 American Beacon Funds Small-Cap Value Fund - Planahead Class Shares Mutual Fund 963,654 JP Morgan Mid Cap Value Fund - Class A Shares Mutual Fund 764,852 PIMCO Real Return Fund - Institutional Class Shares Mutual Fund 336,427 Goldman Sachs Growth Opportunities Fund - Class A Shares Mutual Fund 264,742 Advanta Corp.* Class A Common Stock Common Stock 234,847 Advanta Corp.* Class B Common Stock Common Stock 6,639,791 Participant loans receivable*, bearing interest from 5.00% to 9.75% 515,011 Cash and cash equivalents 20,267 ----------- $49,307,569 ===========
* Party-in-interest to the Plan ** Cost information is not required as investments are participant-directed. See Report of Independent Registered Public Accounting Firm. 12 EXHIBIT INDEX
EXHIBIT DESCRIPTION ------- ----------- 23.1 Consent of Independent Registered Public Accounting Firm