Ameriprise 2005 Annual Report Download - page 83

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Ameriprise Financial, Inc. |
The Company has entered into various transactions with
American Express in the normal course of business. The
Company earned approximately $10 million, $11 million and
$13 million during the nine months ended September 30,
2005 and the years ended December 31, 2004 and 2003,
respectively, in revenues from American Express. The Company
received approximately $26 million, $70 million and $82
million for the nine months ended September 30, 2005 and
the years ended December 31, 2004 and 2003, respectively,
of reimbursements from American Express for the Company’s
participation in certain corporate initiatives. As a result of the
Separation from American Express, the Company determined it
appropriate to reflect certain reimbursements previously
received from American Express for costs incurred related to
certain American Express-related corporate initiatives, as capi-
tal contributions rather than reductions to expense amounts.
These amounts were approximately $26 million, $41 million
and $36 million for the nine months ended September 30,
2005 and the years ended December 31, 2004 and 2003,
respectively.
10. Share-Based Compensation
The Ameriprise Financial 2005 Incentive Compensation Plan
(2005 ICP) was approved as of September 30, 2005. Under
the 2005 ICP, stock and cash incentive awards may be granted
to employees, directors and independent contractors including
stock options, restricted stock awards, restricted stock units,
performance shares and similar awards designed to comply
with the applicable federal regulations and laws of jurisdiction.
Under the 2005 ICP, the maximum number of shares of com-
mon stock that may be covered by the stock-based awards
shall generally not exceed 37.9 million shares.
At September 30, 2005, the Company also entered into an
Employee Benefits Agreement (EBA) with American Express as
part of the Distribution. In accordance with the EBA, all
American Express stock options and restricted stock awards
held by the Company’s employees and vesting on or before
December 31, 2005 will remain American Express stock
options or restricted stock awards. However, all American
Express stock options and restricted stock awards held by the
Company’s employees and not vesting on or before
December 31, 2005, will be substituted by a stock option or
restricted stock award issued under the 2005 ICP and subject
to the terms and conditions after the Distribution that are
substantially similar to the terms and conditions applicable to
the original American Express stock options and restricted
stock awards.
Stock options granted under the 2005 ICP must have an exer-
cise price not less than 100% of the current fair market value
of a share of common stock on the grant date and a term of
no more than ten years. Options substituted pursuant to the
EBA on September 30, 2005 resulted from converting the
number of American Express options and strike prices to a
number of the Company’s stock options and strike prices in
order to maintain the same intrinsic value to the employee.
The conversion was based on the pre-distribution American
Express closing price relative to the post-distribution
Ameriprise Financial closing price on September 30, 2005.
The stock options substituted maintain a vesting schedule
which is the same as the American Express stock options.
Generally, these stock options had an original vesting schedule
of four years and vested ratably at 25 percent per year. A simi-
lar conversion process was completed to determine the
number of the Company’s restricted stock awards granted on
September 30, 2005 to replace American Express restricted
stock awards. The restricted stock awards also maintain a
vesting schedule which is the same as the American Express
restricted stock awards and generally have an original vesting
schedule of four years with 25 percent ratable vesting per
year.
A summary of the conversion of American Express stock
options to the Company’s stock options under the EBA as of
September 30, 2005 is presented below (shares in millions):
Weighted
Average
Exercise
Shares Price
American Express non-vested
options outstanding 4.1 $46.45
Conversion factor(a) 1.6045 .6233
Ameriprise Financial non-vested
options outstanding 6.6 $28.95
(a) Conversion factor for number of shares is the ratio of the American
Express pre-distribution closing stock price ($57.44) to the Company’s
post-distribution stock price ($35.80). Conversion factor for the strike
price is the ratio of the Company’s post-distribution stock price ($35.80)
to the American Express pre-distribution closing stock price ($57.44).
A summary of the Company’s stock option plans as of
December 31, 2005 and changes during the period then ended
is presented below (shares and intrinsic value in millions):
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Shares Price Term Value
Outstanding at
beginning of year – $ –
Converted American
Express shares 6.6 28.95
Granted 4.9 35.05
Exercised – –
Forfeited (.2) 29.16
Outstanding at
end of year 11.3 $31.60 8.8 years $ 81.4
Options exercisable
at end of year – – – –
The weighted average grant date fair value for options granted
during 2005 was $9.61. The fair value of each option granted
during 2005 was estimated on the date of grant using a Black-
Scholes option-pricing model with the assumptions detailed