Discontinued Operations

12 Months Ended

Jun. 30, 2011

Discontinued Operations

Discontinued Operations

NOTE 7. DISCONTINUED OPERATIONS

In November 2009, the Company and Ridge Clearing & Outsourcing Solutions, Inc. ("Ridge") entered into an asset purchase agreement (the "Asset Purchase Agreement") with PWI and Penson Financial Services, Inc., a wholly owned subsidiary of PWI ("PFSI"), to sell substantially all contracts of the securities clearing clients of Ridge to PFSI.

On June 25, 2010, the Company completed the sale of the contracts of substantially all of the securities clearing clients of Ridge to PFSI, for an aggregate purchase price of $35.2 million. The purchase price paid to Broadridge consisted of (i) a five-year subordinated note from PWI in the principal amount of $20.6 million bearing interest at an annual rate equal to the London Inter-Bank Offer Rate ("LIBOR") plus 550 basis points, and (ii) 2,455,627 shares of PWI's common stock (representing 9.5% of PWI's outstanding common stock as of May 31, 2010), at the June 25, 2010 closing price of PWI's common stock of $5.95 per share. The purchase price is subject to certain adjustments post-closing including adjustments to reflect certain correspondent clearing contracts. The Company discontinued its securities clearing services business but continues to provide operations outsourcing solutions aligned with the Securities Processing Solutions business. During the fiscal year ended June 30, 2011 the few Ridge correspondent clients that were not acquired by PWI de-converted off the Ridge processing platform. Ridge no longer performs securities clearing services for correspondent broker-dealers.

The results of the securities clearing services business are included in Loss from discontinued operations, net of tax benefit, for all periods presented. The net assets associated with the securities clearing services business, totaling zero and $24.7 million, have been reclassified to Assets of discontinued operations and Liabilities of discontinued operations as of June 30, 2011 and June 30, 2010, respectively.

For a period of time, the Company will continue to generate cash flows and to report statement of earnings activity in Loss from discontinued operations, net of taxes, associated with the securities clearing services business. The activities that give rise to these cash flows and statement of earnings activities are transitional in nature.

The following summarized financial information related to the securities clearing services business has been segregated from continuing operations and reported as discontinued operations:

	Years ended June 30,
	2011			2010			2009
	($ in millions)
Revenues	$	2.9		$	74.3		$	76.3
Earnings (loss) from discontinued operations, before net loss on disposal	$	—		$	—		$	0.3
Income tax benefit (expense)		—			—			(0.1	)
Net earnings (loss) from discontinued operations, before loss on disposal		—			—			0.2
Loss on disposal of assets of discontinued operations, net of tax benefit for the fiscal years ended June 30, 2011 and 2010 of $1.3 and $20.2, respectively		(2.2	)		(35.1	)		—
(Loss) earnings from discontinued operations, net of tax benefit (expense)	$	(2.2	)	$	(35.1	)	$	0.2

The following assets and liabilities have been segregated and classified as Assets of discontinued operations and Liabilities of discontinued operations, as appropriate, in the Consolidated Balance Sheets as of June 30, 2011 and June 30, 2010, respectively. These assets and liabilities related to the securities clearing services business described above, net to zero and $24.7 million. The amounts presented below were adjusted to exclude intercompany receivables and payables between the business held for sale and the Company, which are to be excluded from the disposition.

	June 30, 2011		June 30, 2010
	($ in millions)
Assets
Cash and securities segregated for regulatory purposes and securities deposited with clearing organizations	$	—	$	67.0
Securities clearing receivables, net of allowance for doubtful accounts of zero and $2.0, respectively		—		52.5
Other assets		—		4.3
Total assets of discontinued operations		—		123.8
Liabilities
Accrued expenses and other current liabilities		—		21.7
Securities clearing payables		—		77.4
Total liabilities of discontinued operations		—		99.1
Net assets of discontinued operations	$	—	$	24.7

Aas of June, 2010, Securities clearing receivables/payables and segregated cash included amount which were converted to cash shortly after the close of the transaction, with any excess cash remaining with the Company.

Regulatory Requirements

As a registered broker-dealer and member of the New York Stock Exchange ("NYSE") and the Financial Industry Regulatory Authority ("FINRA"), Ridge is subject to the Uniform Net Capital Rule 15c3-1 of the Securities Exchange Act of 1934, as amended ("Rule 15c3-1"). Ridge computes its net capital under the alternative method permitted by Rule 15c3-1, which requires Ridge to maintain minimum net capital equal to the greater of $250,000 or 2% of aggregate debit items arising from customer transactions. The NYSE and FINRA may require a member firm to reduce its business if its net capital is less than 4% of aggregate debit items, or may prohibit a member firm from expanding its business or paying cash dividends if resulting net capital would be less than 5% of aggregate debit items. At June 30, 2011, Ridge had net capital of $14.6 million, and exceeded the minimum requirements by $14.3 million.