Discontinued Operations

3 Months Ended

Sep. 30, 2011

Discontinued Operations [Abstract]

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 consists of (i) a five-year subordinated note from PWI (the "Seller Note") 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 Company will discontinue its securities clearing services business but will continue to provide operations outsourcing solutions aligned with the Securities Processing Solutions business.

Concurrent with entering into the Asset Purchase Agreement, we entered into a master services agreement with PWI (the "Outsourcing Services Agreement"). Under the Outsourcing Services Agreement, Ridge provides securities processing and back-office support services to PFSI, including services for the clients acquired from Ridge. On October 11, 2011, Broadridge entered into an amendment agreement with PWI (the "Amendment Agreement") to expand the scope of outsourcing support services that Ridge provides to PWI under the Outsourcing Services Agreement. The expanded services are expected to result in additional annual revenues to Broadridge of $8.0 million over the remaining ten year term of the Outsourcing Services Agreement. We expect to commence providing the expanded services to PWI at various dates beginning on February 1, 2012, and expect these services to be completely transitioned by July 1, 2013. Under the Amendment Agreement, in October 2011, Broadridge provided PWI with $7.0 million in consideration of the additional services and other amendments contemplated by the Amendment Agreement, and to defray the costs of PWI associated with the conversion to the Broadridge platform. To the extent that the expanded services provide less than $8.0 million of annualized fees to Broadridge by July 1, 2013, PWI will be obligated to pay Broadridge an amount equal to the shortfall of such fees below $7.0 million by August 1, 2013. In addition, on October 11, 2011, PWI and Broadridge entered into an Amended and Restated Seller Note which converted the quarterly interest payment terms under the original Seller Note to the payment of interest on the maturity date of the Seller Note effective July 1, 2011. This change in interest payment terms results in a $0.4 million reduction in the present value of cash flows from the Seller Note which will be expensed in the quarter ended December 31, 2011.

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

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

	Three Months Ended September 30,
	2011		2010
	($ in millions)
Revenues	$	—	$	0.6
Loss from discontinued operations, before net loss on disposal	$	—	$	—
Income tax benefit		—		—
Net loss from discontinued operations, before loss on disposal		—		—
Net loss on disposal of assets of discontinued operations		—		—
Loss from discontinued operations, net of tax benefit	$	—	$	—

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 September 30, 2011, Ridge had net capital of $9.1 million, and exceeded the minimum requirements by $8.8 million.