FS KKR Capital Corp 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (in millions, except share and per share amounts) The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us,” “our” and the “Company” refer to FS KKR Capital Corp. and the "Advisor" refers to FS/KKR Advisor, LLC. Forward-Looking Statements Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to: • our future operating results; • our business prospects and the prospects of the companies in which we may invest, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic; • the impact of the investments that we expect to make; • the ability of our portfolio companies to achieve their objectives; • our current and expected financings and investments; • receiving and maintaining corporate credit ratings and changes in the general interest rate environment; • the adequacy of our cash resources, financing sources and working capital; • the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies; • our contractual arrangements and relationships with third parties; • actual and potential conflicts of interest with the other funds managed by the Advisor, FS Investments, KKR Credit or any of their respective affiliates; • the dependence of our future success on the general economy and its effect on the industries in which we may invest; • general economic and political trends and other external factors, including the current COVID-19 pandemic and related disruptions caused thereby; • our use of financial leverage; • the ability of the Advisor to locate suitable investments for us and to monitor and administer our investments; • the ability of the Advisor or its affiliates to attract and retain highly talented professionals; • our ability to maintain our qualification as a RIC and as a BDC; • the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, and the rules and regulations issued thereunder; • the effect of changes to tax legislation on us and the portfolio companies in which we may invest and our and their tax position; and • the tax status of the enterprises in which we may invest. In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include: • changes in the economy; • geo-political risks; 84 • risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or pandemics; • future changes in laws or regulations and conditions in our operating areas; and • the price at which shares of our common stock may trade on the New York Stock Exchange, or NYSE. We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act. Overview We were incorporated under the general corporation laws of the State of Maryland on December 21, 2007 and formally commenced investment operations on January 2, 2009. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. We are externally managed by the Advisor pursuant to an investment advisory agreement, or the investment advisory agreement, and supervised by our board of directors, a majority of whom are independent. Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We seek to meet our investment objectives by: • utilizing the experience and expertise of the management team of the Advisor; • employing a defensive investment approach focused on long-term credit performance and principal protection; • focusing primarily on debt investments in a broad array of private U.S. companies, including middle-market companies, which we define as companies with annual EBITDA of $25 million to $100 million at the time of investment; • investing primarily in established, stable enterprises with positive cash flows; and • maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio, such as an event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company. We pursue our investment objective by investing primarily in the debt of middle market U.S. companies with a focus on originated transactions sourced through the network of the Advisor and its affiliates. We define direct originations as any investment where the Company's investment adviser, sub-adviser or their affiliates had negotiated the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These directly originated transactions include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions. These direct originations include investments originated by our former investment adviser, our former investment sub-adviser or their affiliates. Our portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans and certain asset-based financing loans of private U.S. companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter” market or directly from our target companies as primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration. We may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, including through a co-investment with a financial sponsor or possibly the restructuring of an investment. In addition, a portion of our portfolio may be comprised of corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps. The Advisor will seek to tailor our investment focus as market conditions evolve. Depending on market conditions, we may increase or decrease our exposure to less senior portions of the capital structures of our portfolio companies or otherwise make opportunistic investments, such as where the market price of loans, bonds or other securities reflects a lower value than deemed warranted by the Advisor's 85 fundamental analysis. Such investment opportunities may occur due to general dislocations in the markets, a misunderstanding by the market of a particular company or an industry being out of favor with the broader investment community and may include event driven investments, anchor orders and structured products. The senior secured loans, second lien secured loans and senior secured bonds in which we invest generally have stated terms of three to seven years and subordinated debt investments that we make generally have stated terms of up to ten years, but the expected average life of such securities is generally three to four years. However, we may invest in loans and securities with any maturity or duration. Our debt investments may be rated by a NRSRO and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s or lower than “BBB-” by S&P). We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by a NRSRO. Acquisition of FSKR On June 16, 2021, we completed the 2021 Merger. Pursuant to the 2020 Merger Agreement, Merger Sub merged with and into FSKR, with FSKR continuing as the surviving company and as a wholly-owned subsidiary of the Company, or the First Merger, and, immediately thereafter, FSKR merged with and into the Company, with the Company continuing as the surviving company. In accordance with the terms of the 2020 Merger Agreement, (i) each outstanding share of FSKR common stock was converted into the right to receive 0.9498 shares of the Company’s common stock. This exchange ratio was determined based on the closing net asset value, or NAV, per share of $26.77 and $25.42 for the Company and FSKR, respectively, as of June 14, 2021, to ensure that the NAV of shares investors will own in FSK is equal to the NAV of the shares they held in FSKR. As a result, the Company issued an aggregate of approximately 161,374,028 shares of its common stock to former FSKR stockholders. Following the consummation of the 2021 Merger, we entered into the investment advisory agreement, which replaced the prior investment advisory agreement. Revenues The principal measure of our financial performance is net increase in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on foreign currency, net unrealized appreciation or depreciation on investments and net unrealized gain or loss on foreign currency. Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for those foreign denominated investment transactions. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. Net unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations. We principally generate revenues in the form of interest income on the debt investments we hold. In addition, we generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. We may also generate revenues in the form of dividends and other distributions on the equity or other securities we hold. Expenses Our primary operating expenses include the payment of management and incentive fees and other expenses under the investment advisory agreement and the administration agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate the Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments. The Advisor oversees our day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Advisor also performs, or oversees the performance of, our corporate operations and required administrative services, which includes being responsible for the financial records that we are required to maintain and preparing reports for our stockholders and reports filed with the SEC. In addition, the Advisor assists us in calculating our net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our stockholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. Pursuant to the administration agreement, we reimburse the Advisor for expenses necessary to perform services related to our administration and operations, including the Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of the Advisor. We reimburse the Advisor no less than quarterly for all costs and expenses incurred by the Advisor in performing its obligations and providing personnel and facilities under the administration agreement. The Advisor allocates the cost of such services to us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of directors reviews the methodology employed in determining 86 how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of the Advisor. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directors compares the total amount paid to the Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs. We bear all other expenses of our operations and transactions, including all other expenses incurred by the Advisor or us in connection with administering our business, including expenses incurred by the Advisor in performing administrative services for us and administrative personnel paid by the Advisor, to the extent they are not controlling persons of the Advisor or any of its affiliates, subject to the limitations included in the investment advisory agreement and the administration agreement. In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by the Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance. COVID-19 Developments The rapid spread of the COVID-19 pandemic, and associated impacts on the U.S. and global economies, has negatively impacted, and is likely to continue to negatively impact, the business operations of some of our portfolio companies. We cannot at this time fully predict the continued impact of COVID-19 and its variants on our business or the business of our portfolio companies, its duration or magnitude or the extent to which it will negatively impact our portfolio companies’ operating results or our own results of operations or financial condition. We expect that certain of our portfolio companies may continue to experience economic distress for the foreseeable future and may significantly limit business operations if subjected to prolonged economic distress. These developments could result in a decrease in the value of our investments. COVID-19 has previously had adverse effects on our investment income and we expect that such adverse effects may continue for some time. These adverse effects may require us to restructure certain of our investments, which could result in further reductions to our investment income or in impairments on our investments. In addition, disruptions in the capital markets have resulted in illiquidity in certain market areas. These market disruptions and illiquidity may have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions caused by COVID-19 and its variants may increase our funding costs and limit our access to the capital markets. These events have previously limited our investment originations and have also previously had a material negative impact on our operating results for a period of time. We will continue to carefully monitor the impact of the COVID-19 pandemic on our business and the business of our portfolio companies. Because the full effects of the COVID-19 pandemic are not capable of being known at this time, we cannot estimate the impacts of COVID-19 and its variants on our future financial condition, results of operations or cash flows. We do, however, expect that it may continue to have a negative impact on our business and the financial condition of certain of our portfolio companies. Portfolio Investment Activity for the Three and Six Months Ended June 30, 2022 and for the Year Ended December 31, 2021 Total Portfolio Activity The following tables present certain selected information regarding our portfolio investment activity for the three and six months ended June 30, 2022 and the year ended December 31, 2021: For the Three Months Ended For the Six Months Ended Net Investment Activity June 30, 2022 June 30, 2022 Purchases $ 804 $ 2,872 Sales and Repayments (906) (2,579) Net Portfolio Activity $ (102) $ 293 87 For the Three Months Ended For the Six Months Ended June 30, 2022 June 30, 2022 New Investment Activity by Asset Class Purchases Percentage Sales and Repayments Percentage Purchases Percentage Sales and Repayments Percentage Senior Secured Loans—First Lien $ 555 69 % $ 349 39 % $ 1,699 59 % $ 1,325 51 % Senior Secured Loans—Second Lien 4 1 % 101 11 % 43 2 % 204 8 % Other Senior Secured Debt — — — — — — — — Subordinated Debt 1 0 % 37 4 % 7 0 % 37 1 % Asset Based Finance (1) 156 19 % 171 19 % 577 20 % 664 26 % Credit Opportunities Partners JV, LLC 88 11 % — — 175 6 % — — Equity/Other (1) — — 248 27 % 371 13 % 349 14 % Total $ 804 100 % $ 906 100 % $ 2,872 100 % $ 2,579 100 % (1) Equity/Other includes investments in preferred equity investments. During the three and six months ended June 30, 2022, purchases of preferred equity investments were $0 and $323, respectively and sales and repayments of preferred equity investments were $68 and $109, respectively. The following table summarizes the composition of our investment portfolio at cost and fair value as of June 30, 2022 and December 31, 2021: June 30, 2022 (Unaudited) December 31, 2021 Amortized Cost (1) Fair Value Percentage of Portfolio Amortized Cost (1) Fair Value Percentage of Portfolio Senior Secured Loans—First Lien $ 10,106 $ 10,022 61.9 % $ 9,695 $ 9,765 60.7 % Senior Secured Loans—Second Lien 1,334 1,296 8.0 % 1,564 1,557 9.7 % Other Senior Secured Debt 150 110 0.7 % 149 120 0.7 % Subordinated Debt 196 80 0.5 % 188 111 0.7 % Asset Based Finance (2) 2,118 2,113 13.1 % 2,132 2,245 13.9 % Credit Opportunities Partners JV, LLC 1,572 1,512 9.3 % 1,397 1,396 8.7 % Equity/Other (2) 1,137 1,045 6.5 % 932 907 5.6 % Total $ 16,613 $ 16,178 100.0 % $ 16,057 $ 16,101 100.0 % (1) Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments. (2) As of June 30, 2022, Equity/Other included $634 of preferred equity investments. The following table presents certain selected information regarding the composition of our investment portfolio as of June 30, 2022 and December 31, 2021: June 30, 2022 December 31, 2021 Number of Portfolio Companies 192 189 % Variable Rate Debt Investments (based on fair value) (1)(2) 68.4% 69.7% % Fixed Rate Debt Investments (based on fair value) (1)(2) 9.9% 10.2% % Other Income Producing Investments (based on fair value) (3) 14.4% 13.1% % Non-Income Producing Investments (based on fair value) (2) 4.4% 5.1% % of Investments on Non-Accrual (based on fair value) 2.9% 1.9% Weighted Average Annual Yield on Accruing Debt Investments (2)(4) 9.9% 9.2% Weighted Average Annual Yield on All Debt Investments (5) 9.3% 8.7% _____________________ (1) "Debt Investments" means investments that pay or are expected to pay a stated interest rate, stated dividend rate or other similar stated return. (2) Does not include investments on non-accrual status. 88 (3) "Other Income Producing Investments" means investments that pay or are expected to pay interest, dividends or other income to the Company on an ongoing basis but do not have a stated interest rate, stated dividend rate or other similar stated return. (4) The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of June 30, 2022, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of June 30, 2022. (5) The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of June 30, 2022, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of June 30, 2022. For the six months ended June 30, 2022, our total return based on net asset value was 2.02% and our total return based on market value was (1.57)%. For the year ended December 31, 2021, our total return based on net asset value was 18.47% and our total return based on market value was 41.45%. See footnotes 7 and 8 to the table included in Note 11 to our unaudited consolidated financial statements included herein for information regarding the calculation of our total return based on net asset value and total return based on market value, respectively. Direct Originations The following table presents certain selected information regarding our Direct Originations as of June 30, 2022 and December 31, 2021: Characteristics of All Direct Originations held in Portfolio June 30, 2022 December 31, 2021 Number of Portfolio Companies 169 167 % of Investments on Non-Accrual (based on fair value) 3.0% 1.9% Total Cost of Direct Originations $15,873.1 $15,341.3 Total Fair Value of Direct Originations $15,578.2 $15,433.3 % of Total Investments, at Fair Value 96.3% 95.9% Weighted Average Annual Yield on Accruing Debt Investments (1) 9.7% 8.9% Weighted Average Annual Yield on All Debt Investments (2) 9.1% 8.5% _____________________ (1) The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Does not include Debt Investments on non-accrual status. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of June 30, 2022, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of June 30, 2022. (2) The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period. Stated annual interest rate for floating rate Debt Investments assumes the greater of (a) the respective base rate in effect as of June 30, 2022, and (b) the stated base rate floor. The base rate utilized in this calculation may not be indicative of the base rates for specific contracts as of June 30, 2022. 89 Portfolio Composition by Industry Classification The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of June 30, 2022 and December 31, 2021: June 30, 2022 (Unaudited) December 31, 2021 Industry Classification Fair Value Percentage of Portfolio Fair Value Percentage of Portfolio Automobiles & Components $ 83 0.5 % $ 89 0.5 % Banks — — 15 0.1 % Capital Goods 2,172 13.4 % 2,281 14.2 % Commercial & Professional Services 1,615 10.0 % 1,615 10.0 % Consumer Durables & Apparel 340 2.1 % 551 3.4 % Consumer Services 324 2.0 % 393 2.4 % Credit Opportunities Partners JV, LLC 1,512 9.3 % 1,396 8.7 % Diversified Financials 602 3.7 % 672 4.2 % Energy 339 2.1 % 241 1.5 % Food & Staples Retailing 270 1.7 % 296 1.8 % Food, Beverage & Tobacco 191 1.2 % 256 1.6 % Health Care Equipment & Services 2,066 12.8 % 1,613 10.0 % Household & Personal Products 307 1.9 % 227 1.4 % Insurance 938 5.8 % 898 5.6 % Materials 209 1.3 % 211 1.3 % Media & Entertainment 456 2.8 % 720 4.5 % Pharmaceuticals, Biotechnology & Life Sciences 216 1.3 % 235 1.5 % Real Estate 1,024 6.3 % 876 5.4 % Retailing 310 1.9 % 288 1.8 % Software & Services 2,705 16.7 % 2,698 16.8 % Technology Hardware & Equipment 40 0.3 % 42 0.3 % Telecommunication Services 107 0.7 % 128 0.8 % Transportation 352 2.2 % 360 2.2 % Total $ 16,178 100.0 % $ 16,101 100.0 % Portfolio Asset Quality In addition to various risk management and monitoring tools, the Advisor uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. The Advisor uses an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating: Investment Rating Summary Description 1 Performing investment—generally executing in accordance with plan and there are no concerns about the portfolio company’s performance or ability to meet covenant requirements. 2 Performing investment—no concern about repayment of both interest and our cost basis but company’s recent performance or trends in the industry require closer monitoring. 3 Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment. 4 Underperforming investment—concerns about the recoverability of principal or interest. 90 The following table shows the distribution of our investments on the 1 to 4 investment rating scale at fair value as of June 30, 2022 and December 31, 2021: June 30, 2022 December 31, 2021 Investment Rating Fair Value Percentage of Portfolio Fair Value Percentage of Portfolio 1 $ 12,451 77 % $ 12,602 78 % 2 3,039 19 % 2,468 15 % 3 300 2 % 748 5 % 4 388 2 % 283 2 % Total $ 16,178 100 % $ 16,101 100 % The amount of the portfolio in each grading category may vary substantially from period to period resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in investment values. Results of Operations Comparison of the Three and Six Months Ended June 30, 2022 and June 30, 2021 Revenues Our investment income for the three and six months ended June 30, 2022 and 2021 was as follows: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Amount Percentage of Total Income Amount Percentage of Total Income Amount Percentage of Total Income Amount Percentage of Total Income Interest income $ 247 65.2 % $ 111 53.9 % $ 508 65.6 % $ 203 56.9 % Paid-in-kind interest income 40 10.6 % 18 8.7 % 83 10.7 % 35 9.8 % Fee income 13 3.4 % 23 11.2 % 42 5.4 % 34 9.5 % Dividend income 79 20.8 % 54 26.2 % 142 18.3 % 85 23.8 % Total investment income (1) $ 379 100.0 % $ 206 100.0 % $ 775 100.0 % $ 357 100.0 % ___________ (1) Such revenues represent $320 and $181 of cash income earned as well as $59 and $25 in non-cash portions relating to accretion of discount and PIK interest for the three months ended June 30, 2022 and 2021, respectively, and represent $652 and $312 of cash income earned as well as $123 and $45 in non-cash portions relating to accretion of discount and PIK interest for the six months ended June 30, 2022 and 2021, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized. The level of interest income we receive is generally related to the balance of income-producing investments, multiplied by the weighted average yield of our investments. Fee income is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees and other non-recurring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees. The increase in interest income during the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 can primarily be attributed to the increase in assets resulting from the 2021 Merger. The decrease in fee income for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 can primarily be attributed to reduced structuring activity during the three months ended June 30, 2022. The increase in fee income for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 can primarily be attributed to structuring fees and prepayment fees received in connection with increased investment and repayment activity during the three months ended March 31, 2022. The increase in dividend income during the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 can primarily be attributed to the increase in dividends paid in respect to our investment in Credit Opportunities Partners JV, LLC. 91 Expenses Our operating expenses for the three and six months ended June 30, 2022 and 2021 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Management fees $ 63 $ 30 $ 125 $ 55 Subordinated income incentive fees 37 8 77 8 Administrative services expenses 4 2 8 4 Accounting and administrative fees 1 0 2 1 Interest expense 83 46 160 88 Other expenses 3 4 10 7 Total operating expenses $ 191 $ 90 $ 382 $ 163 Incentive fee waiver (15) — (30) — Total net expenses $ 176 $ 90 $ 352 $ 163 The following table reflects selected expense ratios as a percent of average net assets for the three and six months ended June 30, 2022 and 2021: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Ratio of operating expenses to average net assets 2.46 % 2.30 % 4.92 % 4.64 % Ratio of incentive fee waiver to average net assets (1) (0.19) % — (0.39) % — Ratio of net operating expenses to average net assets 2.27 % 2.30 % 4.53 % 4.64 % Ratio of net incentive fees and interest expense to average net assets (1) 1.36 % 1.38 % 2.66 % 2.73 % Ratio of net operating expenses, excluding certain expenses, to average net assets 0.91 % 0.92 % 1.87 % 1.91 % __________ (1) Ratio data may be rounded in order to recompute the ending ratio of net operating expenses to average net assets or net operating expenses, excluding certain expenses, to average net assets. The increase in expenses during the three and six months ended June 30, 2022 compared to the three and six months ended June 30, 2021 can primarily be attributed to the increased management fee as a result of the higher asset base from the 2021 Merger, the increased subordinated income incentive fee pursuant to the terms of the investment advisory agreement following the 2021 Merger and increased interest expense resulting from the higher debt outstanding due to the 2021 Merger. Incentive fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance and changes in amounts outstanding under our financing arrangements and benchmark interest rates such as LIBOR, among other factors. Net Investment Income Our net investment income totaled $203 ($0.71 per share) and $116 ($0.77 per share) for the three months ended June 30, 2022 and 2021, respectively. The increase in net investment income during the three months ended June 30, 2022 compared to the three months ended June 30, 2021 can primarily be attributed to higher investment income during the three months ended June 30, 2022 as discussed above. Our net investment income totaled $423 ($1.49 per share) and $194 ($1.41 per share) for the six months ended June 30, 2022 and 2021, respectively. The increase in net investment income during the six months ended June 30, 2022 compared to the six months ended June 30, 2021 can primarily be attributed to higher investment income during the three months ended June 30, 2022 as discussed above. 92 Net Realized Gains or Losses Our net realized gains (losses) on investments, foreign currency forward contracts and foreign currency for the three and six months ended June 30, 2022 and 2021 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net realized gain (loss) on investments (1) $ 183 $ 52 $ 151 $ (74) Net realized gain (loss) on foreign currency forward contracts 2 — 7 — Net realized gain (loss) on foreign currency 6 (1) 7 (3) Total net realized gain (loss) $ 191 $ 51 $ 165 $ (77) ______________ (1) We sold investments and received principal repayments, respectively, of $242 and $664 during the three months ended June 30, 2022 and $185 and $852 during the three months ended June 30, 2021. We sold investments and received principal repayments, respectively, of $1,236 and $1,343 during the six months ended June 30, 2022 and $433 and $1,481 during the six months ended June 30, 2021. Provision for Taxes on Realized Gains on Investments We recorded a provision for taxes on realized gains with respect to one of our equity investments of $(3) and $0 during the three months ended June 30, 2022 and 2021, and $(3) and $0 during the six months ended June 30, 2022 and 2021, respectively. Net Change in Unrealized Appreciation (Depreciation) Our net change in unrealized appreciation (depreciation) on investments, foreign forward currency forward contracts and unrealized gain (loss) on foreign currency for the three and six months ended June 30, 2022 and 2021 were as follows: Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Net change in unrealized appreciation (depreciation) on investments $ (506) $ 684 $ (479) $ 926 Net change in unrealized appreciation (depreciation) on foreign currency forward contracts 15 2 16 3 Net change in unrealized gain (loss) on foreign currency 27 12 30 18 Total net change in unrealized appreciation (depreciation) $ (464) $ 698 $ (433) $ 947 The net change in unrealized appreciation (depreciation) during the three and six months ended June 30, 2022 was driven primarily by a general widening of credit spreads. The net change in unrealized appreciation (depreciation) during the three and six months ended June 30, 2021 was driven primarily by $628 of appreciation resulting from the merger accounting associated with the 2021 Merger, as well as strong performance of one portfolio company during the quarter. Net Increase (Decrease) in Net Assets Resulting from Operations For the three months ended June 30, 2022, the net decrease in net assets resulting from operations was $(73) ($(0.26) per share) compared to a net increase in net assets resulting from operations of $865 ($5.75 per share) during the three months ended June 30, 2021. For the six months ended June 30, 2022, the net increase in net assets resulting from operations was $152 ($0.53 per share) compared to a net increase in net assets resulting from operations of $1,064 ($7.76 per share) during the six months ended June 30, 2021. This "Results of Operations" section should be read in conjunction with "COVID-19 Developments" above. Financial Condition, Liquidity and Capital Resources Overview As of June 30, 2022, we had $269 in cash and foreign currency, which we or our wholly-owned financing subsidiaries held in custodial accounts, and $1,943 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of June 30, 2022, we also held broadly syndicated investments and opportunistic investments that we believe could be sold to create additional liquidity. As of June 30, 2022, we had unfunded debt investments with aggregate unfunded commitments of 93 $1,207.2, unfunded equity/other commitments of $322.6 and unfunded commitments of $560.2 of Credit Opportunities Partners JV, LLC. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise. We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments, as well as principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of the Advisor, but in no event will leverage employed exceed the maximum amount permitted by the 1940 Act. Prior to June 14, 2019, in accordance with the 1940 Act, we were allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, our asset coverage requirement applicable to senior securities was reduced from 200% to 150%. As of June 30, 2022, the aggregate amount outstanding of the senior securities issued by us was $9.3 billion. As of June 30, 2022, our asset coverage was 180%. See “ — Financing Arrangements.” Prior to investing in securities of portfolio companies, we invest the cash received from fees, interest and dividends earned from our investments and principal repayments and proceeds from sales of our investments primarily in cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC. This "Financial Condition, Liquidity and Capital Resources" section should be read in conjunction with "COVID-19 Developments" above. Financing Arrangements The following table presents summary information with respect to our outstanding financing arrangements as of June 30, 2022: As of June 30, 2022 (Unaudited) Arrangement Type of Arrangement Rate Amount Outstanding Amount Available Maturity Date Ambler Credit Facility (2)(9) Revolving Credit Facility SOFR+2.15% (1) $ 156 $ 44 November 22, 2025 Burholme Prime Brokerage Facility (2)(9) Prime Brokerage Facility L+1.25% (1) — — December 26, 2022 CCT Tokyo Funding Credit Facility (2) Revolving Credit Facility L+1.75% - 2.00% (1)(3) 292 8 June 2, 2025 Darby Creek Credit Facility (2)(9) Revolving Credit Facility L+1.85% (1) 247 3 February 26, 2025 Dunlap Credit Facility (2)(9) Revolving Credit Facility L+1.85% (1) 484 16 February 26, 2025 Meadowbrook Run Credit Facility (2)(9) Revolving Credit Facility SOFR+2.05% (1) 262 38 November 22, 2024 Senior Secured Revolving Credit Facility (2) Revolving Credit Facility SOFR+1.75% - 1.875% (1)(4) 2,809 (5) 1,834 (6) May 17, 2027 4.625% Notes due 2024 (7) Unsecured Notes 4.63% 400 — July 15, 2024 1.650% Notes due 2024 (7) Unsecured Notes 1.65% 500 — October 12, 2024 4.125% Notes due 2025 (7) Unsecured Notes 4.13% 470 — February 1, 2025 4.250% Notes due 2025 (7)(9) Unsecured Notes 4.25% 475 — February 14, 2025 8.625% Notes due 2025 (7) Unsecured Notes 8.63% 250 — May 15, 2025 3.400% Notes due 2026 (7) Unsecured Notes 3.40% 1,000 — January 15, 2026 2.625% Notes due 2027 (7) Unsecured Notes 2.63% 400 — January 15, 2027 3.250% Notes due 2027 (7) Unsecured Notes 3.25% 500 — July 15, 2027 3.125% Notes due 2028 (7) Unsecured Notes 3.13% 750 — October 12, 2028 CLO-1 Notes (2)(8) Collateralized Loan Obligation L+1.85% - 3.01% (1) 352 — January 15, 2031 Total $ 9,347 $ 1,943 ___________ (1) The benchmark rate is subject to a 0% floor. (2) The carrying amount outstanding under the facility approximates its fair value. (3) The spread over the benchmark rate is determined by reference to the amount outstanding under the facility. (4) The spread over the benchmark rate is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company. In addition to the spread over the benchmark rate, a credit spread adjustment of 0.10% and 0.0326% is applicable to borrowings in U.S. dollars and pounds sterling, respectively. (5) Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €201 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.05 as of June 30, 2022 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD36 has been converted to U.S dollars at an exchange rate of CAD1.00 to $0.78 as of June 30, 2022 to reflect total amount outstanding in U.S. dollars. 94 Pounds sterling balance outstanding of £86 has been converted to U.S dollars at an exchange rate of £1.00 to $1.22 as of June 30, 2022 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of AUD118 has been converted to U.S dollars at an exchange rate of AUD1.00 to $0.69 as of June 30, 2022 to reflect total amount outstanding in U.S. dollars. (6) The amount available for borrowing under the Senior Secured Revolving Credit Facility is reduced by any standby letters of credit issued under the Senior Secured Revolving Credit Facility. As of June 30, 2022, $12 of such letters of credit have been issued. (7) As of June 30, 2022, the fair value of the 4.625% notes, the 1.650% notes, the 4.125% notes, the 4.250% notes, the 8.625% notes, the 3.400% notes, the 2.625% notes, the 3.250% notes and the 3.125% notes was approximately $393, $445, $446, $448, $260, $889, $337, $426 and $599, respectively. These valuations are considered Level 2 valuations within the fair value hierarchy. (8) As of June 30, 2022, there were $281.4 of Class A-1R notes outstanding at L+1.85%, $20.5 of Class A-2R notes outstanding at L+2.25%, $32.4 of Class B-1R notes outstanding at L+2.60% and $17.4 of Class B-2R notes outstanding at 3.011%. (9) As of June 16, 2021, the Company assumed all of FSKR's obligations under its notes, credit facilities, and FSKR's wholly-owned special purpose financing subsidiaries became wholly-owned special purpose financing subsidiaries of the Company, in each case, as a result of the consummation of the 2021 Merger. See Note 9 to our unaudited consolidated financial statements included herein for additional information regarding our financing arrangements. RIC Status and Distributions We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make distributions of an amount at least equal to 90% of our investment company taxable income, determined without regard to any deduction for distributions paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the tenth month following the close of a tax year or the due date of the tax return for such tax year, including extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our stockholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise tax on certain undistributed income unless we make distributions in a timely manner to our stockholders generally of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “ capital gain net income ” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions. If we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings . Subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to authorize, declare and pay regular cash distributions on a quarterly basis. We will calculate each stockholder’s specific distribution amount for the period using record and declaration dates and each stockholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may als o pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors. During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our stockholders. No portion of the distributions paid during the six months ended June 30, 2022 or 2021 represented a return of capital. We intend to continue to make our regular distributions in the form of cash, out of assets legally available for distribution, except for those stockholders who receive their distributions in the form of shares of our common stock under the DRP. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder. The following table reflects the cash distributions per share that we have declared on our common stock during the six months ended June 30, 2022 and 2021: 95 Distribution For the Three Months Ended Per Share Amount Fiscal 2021 March 31, 2021 $ 0.60 $ 74 June 30, 2021 0.60 75 Total $ 1.20 $ 149 Fiscal 2022 March 31, 2022 $ 0.63 $ 179 June 30, 2022 0.68 193 Total $ 1.31 $ 372 See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distribu tions. Recent Developments None. Critical Accounting Policies and Estimates Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming the estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 2. Summary of Significant Accounting Policies” in our consolidated financial statements. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We have identified one of our accounting policies, valuation of portfolio investments, specifically the valuation of Level 3 investments, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below. Valuation of Portfolio Investments We determine the net asset value of our investment portfolio each quarter. Securities are valued at fair value as determined in good faith by our board of directors. In connection with that determination, the Advisor provides our board of directors with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services. Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure , or ASC Topic 820, issued by the FASB clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions. 96 With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below: • our quarterly fair valuation process begins by the Advisor providing financial and operating information with respect to each portfolio company or investment to our independent third-party valuation service providers; • our independent third-party valuation service providers review this information, along with other public and private information, and provide the Advisor with a valuation range for each portfolio company or investment; • the Advisor then discusses the independent third-party valuation service providers’ valuation ranges and provides the valuation committee of the board of directors, or the valuation committee, with a valuation recommendation for each investment, along with supporting materials; • preliminary valuations are then discussed with the valuation committee; • our valuation committee reviews the preliminary valuations and the Advisor, together with our independent third-party valuation service providers and, if applicable, supplements the preliminary valuations to reflect any comments provided by the valuation committee; • following the completion of its review, our valuation committee recommends that our board of directors approves the fair valuations determined by the valuation committee; and • our board of directors discusses the valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of the Advisor, the valuation committee and our independent third-party valuation service providers. Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of directors may use any approved independent third-party pricing or valuation services. However, our board of directors is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information obtained from the Advisor or any approved independent third-party valuation or pricing service that our board of directors deems to be reliable in determining fair value under the circumstances. Below is a description of factors that the Advisor, any approved independent third-party valuation services and our board of directors may consider when determining the fair value of our investments. Valuation of fixed income investments, such as loans and debt securities, depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, we may incorporate these factors into discounted cash flow models to arrive at fair value. Other factors that may be considered include the borrower’s ability to adequately service its debt, the fair market value of the borrower in relation to the face amount of its outstanding debt and the quality of collateral securing our debt investments. For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used. Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Our board of directors, in its determination of fair value, may consider various factors, such as multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or our actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items. The Advisor, any approved independent third-party valuation services and our board of directors may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. The Advisor, any approved independent third-party valuation services and our board of directors may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the smaller size of portfolio companies relative to comparable firms, as well as such other factors as our board of directors, in consultation with the Advisor and any approved independent third-party valuation services, if applicable, may consider relevant in assessing fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security. 97 When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of directors subsequently values these warrants or other equity securities received at their fair value. The fair values of our investments are determined in good faith by our board of directors. Our board of directors is responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process. Our board of directors has delegated day-to-day responsibility for implementing our valuation policy to the Advisor, and has authorized the Advisor to utilize independent third-party valuation and pricing services that have been approved by our board of directors. The valuation committee is responsible for overseeing the Advisor’s implementation of the valuation process. See Note 8 to our unaudited consolidated financial statements included herein for additional information regarding the fair value of our financial instruments. Contractual Obligations We have entered into agreements with the Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the investment advisory agreement are equal to (a) an annual base management fee based on the average weekly value of our gross assets (excluding cash and cash equivalents) and (b) an incentive fee based on our performance. The Advisor is reimbursed for administrative expenses incurred on our behalf. See Note 4 to our unaudited consolidated financial statements included herein for a discussion of these agreements and for the amount of fees and expenses accrued under these agreements during the six months ended June 30, 2022 and 2021. Off-Balance Sheet Arrangements We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.