Prudential 2003 Annual Report Download - page 173

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
20. COMMITMENTS AND GUARANTEES, CONTINGENCIES AND LITIGATION (continued)
In November 2003, an action was commenced in the United States Bankruptcy Court for the Southern District of
New York, Enron Corp. v. J.P. Morgan Securities, Inc., et al., against approximately 100 defendants, including the
Company, who invested in Enron’s commercial paper. The complaint alleges that Enron’s October 2001 prepayment of
its commercial paper is a voidable preference under the bankruptcy laws and constitutes a fraudulent conveyance. The
complaint alleges that the Company received prepayments of approximately $100 million. All defendants have moved
to dismiss the complaint.
The Company’s litigation is subject to many uncertainties, and given its complexity and scope, its outcome 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.
21. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly results of operations for the years ended December 31, 2003 and 2002 are summarized in
the table below:
Three months ended
March 31 June 30 September 30 December 31
(in millions, except per share amounts)
2003
Total revenues ....................................................... $6,785 $ 7,304 $ 6,693 $ 7,125
Total benefits and expenses ............................................. 6,471 7,088 6,134 6,256
Income from continuing operations before income taxes ...................... 314 216 559 869
Net income .......................................................... 196 196 297 575
Basicincome fromcontinuing operations pershare—CommonStock(a) ............. 0.42 0.21 0.48 0.96
Dilutedincome fromcontinuing operations pershare—CommonStock(a) ............. 0.42 0.21 0.48 0.95
Basic net income per share—Common Stock(a) ............................. 0.39 0.25 0.44 0.93
Diluted net income per share—Common Stock(a) ........................... 0.39 0.25 0.44 0.92
Basic and diluted net income (loss) per share—Class B Stock .................. (9.50) 30.50 29.00 39.50
2002
Total revenues ....................................................... $6,596 $ 6,540 $ 6,582 $ 6,585
Total benefits and expenses ............................................. 6,342 6,641 6,454 6,786
Income (loss) from continuing operations before income taxes .................. 254 (101) 128 (201)
Net income (loss) ..................................................... 153 (68) 302 (193)
Basic and diluted income from continuing operations per share—Common Stock . . . 0.47 0.20 0.67 0.03
Basic and diluted net income (loss) per share—Common Stock ................. 0.46 0.19 0.70 (0.10)
Basic and diluted net loss per share—Class B Stock .......................... (58.50) (88.50) (49.50) (67.50)
(a) Quarterly earnings per share amounts may not add to the full year amounts due to the averaging of shares.
As discussed in Note 3, on July 1, 2003, the Company completed the combination of its retail securities brokerage
and clearing operations, with that of Wachovia, forming a joint venture in which the Company has a 38% ownership
interest. The Company accounts for its ownership interest under the equity method of accounting; periods prior to
July 1, 2003, continue to reflect the results of the Company’s previously wholly-owned securities brokerage operations
on a fully consolidated basis. Results for the fourth quarter of 2003 include the gain from the receipt by the Company
of a $332 million settlement of an arbitration award, as discussed in Note 20. Results for the second quarter of 2003
include a $455 million loss related to the disposition of the Company’s property and casualty insurance operations, as
discussed in Note 3. Results for the third quarter of 2002 include a $183 million benefit from the favorable resolution
of a tax issue pertaining to the 1995 disposition of a subsidiary.
Prudential Financial 2003 Annual Report 171