Prudential 2002 Annual Report Download - page 154
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Please find page 154 of the 2002 Prudential annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
22. COMMITMENTS AND GUARANTEES, CONTINGENCIES AND LITIGATION (continued)
was denied. A motion to dismiss the amended complaint in the provider action remains pending. In September
2002, the court denied plaintiffs’ motion for class certification in the subscriber action and granted plaintiffs’
motion for certification of a nationwide class of providers. The Company has appealed the certification of the
provider class to the United States Court of Appeals for the Eleventh Circuit.
A joint venture in which an affiliate of Prudential Securities Group Inc. is a participant brought an arbitration
claim against Kyocera Corporation in 1986 alleging, among other things, claims of breach of contract relating to
the manufacture and distribution of computer disk drives. The arbitration panel decided in favor of the claimants.
The United States District Court for the Northern District of California has confirmed the award and entered
judgment in favor of the claimants. In July 2002, the United States Court of Appeals for the Ninth Circuit
affirmed the judgment in favor of the claimants. Kyocera filed a motion for a rehearing en banc, which has been
granted by the Ninth Circuit with oral argument scheduled in March 2003. If the award is ultimately confirmed,
the Company’s share of damages, with interest, would exceed $300 million and would be recorded as revenue.
In 1999, a class action lawsuit was filed in the Marion County, Ohio Court of Common Pleas against Jeffrey
Pickett (a former Prudential Securities financial advisor) and Prudential Securities alleging that Pickett
transferred, without authorization, his clients’ equity mutual funds into fixed income mutual funds in October
1998. The claims were based on theories of conversion, breach of contract, breach of fiduciary duty and negligent
supervision. Compensatory and punitive damages in unspecified amounts were sought by plaintiffs. In October
2002, the case was tried and the jury returned a verdict against Prudential Securities and Pickett for $11.7 million
in compensatory damages and against Prudential Securities for $250 million in punitive damages. The Company
will try to have the verdict set aside and, failing that, appeal.
The Company’s litigation is subject to many uncertainties, and given the complexity and scope, the outcomes
cannot be predicted. It is possible that the results of operations or the cash flow of the Company in a particular
quarterly or annual period could be materially affected by an ultimate unfavorable resolution of pending litigation
and regulatory matters depending, in part, upon the results of operations or cash flow for such period.
Management believes, however, that the ultimate outcome of all pending litigation and regulatory matters, after
consideration of applicable reserves, should not have a material adverse effect on the Company’s financial
position.
23. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly results of operations for the years ended December 31, 2002 and 2001 are
summarized in the table below:
Three months ended
March 31 June 30 September 30 December 31
(in millions, except per share amounts)
2002
Totalrevenues....................................................... $6,684 $6,637 $6,679 $6,675
Total benefits and expenses ............................................ 6,431 6,735 6,542 6,903
Income (loss) from continuing operations before income taxes ................. 253 (98) 137 (228)
Netincome(loss) .................................................... 153 (68) 302 (193)
Basic and diluted income from continuing operations per share—Common Stock(a) 0.47 0.20 0.68 —
Basic and diluted net income per share—Common Stock(a) ................... 0.46 0.19 0.70 (0.10)
Basic and diluted net income per share—Class B Stock ...................... (58.50) (88.50) (49.50) (67.50)
Prudential Financial 2002 Annual Report 153