Ameriprise 2006 Annual Report Download - page 89

FMR Corp. or its affiliates (“FMR”) owned approximately 7%
and 6% of the Company’s common stock at December 31,
2006 and 2005, respectively. In the ordinary course of
business, the Company pays fees to FMR for distribution
services of RiverSource Funds to FMR’s clients and FMR pays
fees to the Company for distribution services of FMR’s
investment products to the Company’s clients.
The Company’s executive officers and directors may have
transactions with the Company or its subsidiaries involving
financial products and insurance services. All obligations
arising from these transactions are in the ordinary course of
the Company’s business and are on the same terms in effect
for comparable transactions with the general public. Such
obligations involve normal risks of collection and do not have
features or terms that are unfavorable to the Company’s
subsidiaries.
The Company has entered into various transactions with
American Express in the normal course of business. The
Company earned approximately $10 million and $11 million
during the nine months ended September 30, 2005 and the
year ended December 31, 2004, respectively, in revenues from
American Express. The Company received approximately
$26 million and $70 million for the nine months ended
September 30, 2005 and the year ended December 31, 2004,
respectively, of reimbursements from American Express for the
Company’s participation in certain corporate initiatives. As a
result of the Separation, the Company determined it appropri-
ate to reflect certain reimbursements previously received from
American Express for costs incurred related to certain
American Express corporate initiatives as capital contributions
rather than reductions to expense amounts. These amounts
were approximately $26 million and $41 million for the
nine months ended September 30, 2005 and the year ended
December 31, 2004, respectively.
17. Share-Based Compensation
The Company’s share-based compensation plans consist of
the Ameriprise Financial 2005 Incentive Compensation Plan
and the Deferred Equity Program for Independent Financial
Advisors.
In accordance with the Employee Benefits Agreement (“EBA”)
entered into between the Company and American Express as
part of the Distribution, all American Express stock options
and restricted stock awards held by the Company’s employees
which had not vested on or before December 31, 2005 were
substituted with a stock option or restricted stock award
issued under the Ameriprise Financial 2005 Incentive
Compensation Plan. All American Express stock options and
restricted stock awards held by the Company’s employees that
vested on or before December 31, 2005 remained
American Express stock options or restricted stock awards.
Cash payments for income taxes in 2006 were reduced by
$35 million for tax benefits related to the American Express
awards that vested on or before December 31, 2005.
The components of the Company’s share-based compensation
expense, net of forfeitures, were as follows:
Years Ended December 31,
2006 2005 2004
(in millions)
Stock options $35 $22 $16
Restricted stock awards 46 33 22
Restricted stock units 32 ——
Total $ 113 $55 $38
For the years ended December 31, 2006, 2005, and 2004,
the total income tax benefit recognized by the Company
related to the share-based compensation expense was
$39 million, $19 million and $13 million, respectively.
As of December 31, 2006, there was $178 million of total
unrecognized compensation cost related to non-vested awards
under the Company’s share-based compensation plans. That
cost is expected to be recognized over a weighted-average
period of 3.0 years.
Ameriprise Financial 2005 Incentive Compensation Plan
The Ameriprise Financial 2005 Incentive Compensation Plan
(“2005 ICP”), adopted as of September 30, 2005, allows for
the grant of stock and cash incentive awards 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, 37.9 million shares of the Company’s
common stock have been approved for issuance.
Stock Options
Stock options granted under the 2005 ICP have an exercise
price not less than 100% of the current fair market value of a
share of common stock on the grant date and a maximum
term of 10 years. The stock options granted generally vest
ratably at 25% per year over four years. The Plan provides
for accelerated vesting of option awards based on age and
length of service. Stock options granted are expensed on a
straight-line basis over the option vesting period based on the
estimated fair value of the awards on the date of grant using
a Black-Scholes option-pricing model.
The following weighted average assumptions were used for
stock option grants in 2006:
Dividend yield 1.0%
Expected volatility 27%
Risk-free interest rate 4.5%
Expected life of stock option (years) 4.5
The dividend yield assumption assumes the Company’s dividend
payout would continue with no changes. The expected volatility
was based on historical and implied volatilities experienced by a
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Ameriprise Financial, Inc. 2006 Annual Report