What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-05 compared with 2020-08-06 · 160 added, 139 removed, 483 unchanged (38% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data)

(in thousands, except share data) September 30,

2020 December 31,

Cash and cash equivalents $ 202,212 $ 221,781

Investments 54,446 83,206

Accounts receivable, net 76,616 74,132

6 unchanged sentences

Intangible assets, net 287,793 310,391

Goodwill 290,366 290,366

Deferred taxes, net 8,862 15,879

Other assets 39,807 36,849

Total assets $ 3,390,724 $ 3,204,634

Liabilities and Equity

2 unchanged sentences

Dividends payable 8,742 8,915

Debt 218,014 277,839

Other liabilities 35,833 40,507

6 unchanged sentences

Equity attributable to stockholders:

Series D mandatory convertible preferred stock, $0.01 par value, 0 and 1,150,000 shares authorized, issued and outstanding at June 30, 2020 and December 31, 2019, respectively

Series D mandatory convertible preferred stock, $ 0.01 par value, 0 and 1,150,000 shares authorized, issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Common stock, $ 0.01 par value, 1,000,000,000 shares authorized;

11,777,732 shares issued and 7,664,272 shares outstanding at June 30, 2020 and 10,736,887 shares issued and 6,809,280 shares outstanding at December 31, 2019, respectively

11,780,481 shares issued and 7,613,154 shares outstanding at September 30, 2020, respectively, and 10,736,887 shares issued and 6,809,280 shares outstanding at December 31, 2019, respectively

Additional paid-in capital 1,301,735 1,199,205

1 unchanged sentence

Accumulated other comprehensive income (loss) — 9

Treasury stock, at cost, 4,113,460 and 3,927,607 shares at June 30, 2020 and December 31, 2019, respectively

Treasury stock, at cost, 4,167,327 and 3,927,607 shares at September 30, 2020 and December 31, 2019, respectively

( 444,249 ) ( 419,249 )

Total equity attributable to stockholders 679,030 675,699

Noncontrolling interests 8,982 10,558

Total equity 688,012 686,257

Total liabilities and equity $ 3,390,724 $ 3,204,634

3 unchanged sentences

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2020 2019 2020 2019

40 unchanged sentences

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2020 2019 2020 2019

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax of $0 and $4 for the three months ended June 30, 2020 and 2019, respectively, and $9 and $1 for the six months ended June 30, 2020 and 2019, respectively

Foreign currency translation adjustment, net of tax of $( 6 ) and $ 4 for the three months ended September 30, 2020 and 2019, respectively, and $ 3 and $ 5 for the nine months ended September 30, 2020 and 2019, respectively

17 ( 12 ) ( 9 ) ( 14 )

Other comprehensive income (loss) 17 ( 12 ) ( 9 ) ( 14 )

5 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2020 2019

35 unchanged sentences

Repurchases of common shares ( 25,000 ) ( 30,000 )

Proceeds from exercise of stock options

Taxes paid related to net share settlement of restricted stock units ( 5,530 ) ( 5,953 )

14 unchanged sentences

Conversion of preferred stock to common stock $ 115,000 $ —

(in thousands)

(in thousands) September 30,

2020 December 31, 2019

1 unchanged sentence

Cash and cash equivalents $ 202,212 $ 221,781

Cash of CIP 48,228 99,691

Cash pledged or on deposit of CIP 6,007 467

3 unchanged sentences

Condensed Consolidated Statements of Changes in Equity

Permanent Equity

Temporary Equity

Preferred Stock

Retained Earnings (Accumulated

Permanent Equity Temporary Equity

Common Stock Preferred Stock Additional

Capital Retained Earnings (Accumulated

Deficit) Accumulated

Comprehensive

Income (Loss)

Treasury Stock

Income (Loss) Treasury Stock Total

Attributed To

(in thousands, except per share data)

Balances at March 31, 2019

Stockholders Non-

Interests Total

Equity Redeemable

(in thousands, except per share data) Shares Par Value Shares Amount Shares Amount

Balances at June 30, 2019 6,944,892 $ 107 1,150,000 $ 110,843 $ 1,204,033 $ ( 262,193 ) $ ( 7 ) 3,770,913 $ ( 401,748 ) $ 651,035 $ 12,637 $ 663,672 $ 60,502

Net income (loss) — — — — — 24,085 — — — 24,085 ( 68 ) 24,017 1,342

2 unchanged sentences

Cash dividends declared ($ 1.81 per preferred share)

— — — — ( 2,085 ) — — — — ( 2,085 ) — ( 2,085 ) —

Cash dividends declared ($ 0.67 per common share)

— — — — ( 4,972 ) — — — — ( 4,972 ) — ( 4,972 ) —

Repurchases of common shares ( 70,949 ) — — — — — — 70,949 ( 7,501 ) ( 7,501 ) — ( 7,501 ) —

2 unchanged sentences

Stock-based compensation — — — — 4,694 — — — — 4,694 — 4,694 —

Balances at September 30, 2019 6,877,596 $ 107 1,150,000 $ 110,843 $ 1,202,130 $ ( 238,108 ) $ ( 19 ) 3,841,862 $ ( 409,249 ) $ 665,704 $ 11,912 $ 677,616 $ 91,610

Balances at June 30, 2020 7,664,272 $ 118 — $ — $ 1,303,036 $ ( 208,222 ) $ ( 17 ) 4,113,460 $ ( 436,749 ) $ 658,166 $ 8,345 $ 666,511 $ 90,687

Balances at March 31, 2020

Net income (loss) — — — — — 29,648 — — — 29,648 977 30,625 10,309

2 unchanged sentences

Cash dividends declared ($ 0.82 per common share)

— — — — ( 6,695 ) — — — — ( 6,695 ) — ( 6,695 ) —

Repurchases of common shares ( 53,867 ) — — — — — — 53,867 ( 7,500 ) ( 7,500 ) — ( 7,500 ) —

2 unchanged sentences

Stock-based compensation — — — — 5,469 — — — — 5,469 — 5,469 —

Balances at June 30, 2020

Permanent Equity

Temporary Equity

Preferred Stock

Retained Earnings (Accumulated

Balances at September 30, 2020 7,613,154 $ 118 — $ — $ 1,301,735 $ ( 178,574 ) $ — 4,167,327 $ ( 444,249 ) $ 679,030 $ 8,982 $ 688,012 $ 99,277

Permanent Equity Temporary Equity

Common Stock Preferred Stock Additional

Capital Retained Earnings (Accumulated

Deficit) Accumulated

Comprehensive

Income (Loss)

Treasury Stock

Income (Loss) Treasury Stock Total

Attributed To

(in thousands, except per share data)

Stockholders Non-

Interests Total

Equity Redeemable

(in thousands, except per share data) Shares Par Value Shares Amount Shares Amount

Balances at December 31, 2018 6,997,382 $ 106 1,150,000 $ 110,843 $ 1,209,805 $ ( 310,865 ) $ ( 731 ) 3,555,242 $ ( 379,249 ) $ 629,909 $ 13,958 $ 643,867 $ 57,481

4 unchanged sentences

Cash dividends declared ($ 5.44 per preferred share)

— — — — ( 6,253 ) — — — — ( 6,253 ) — ( 6,253 ) —

Cash dividends declared ($ 1.77 per common share)

— — — — ( 13,228 ) — — — — ( 13,228 ) — ( 13,228 ) —

Repurchases of common shares ( 286,620 ) — — — — — — 286,620 ( 30,000 ) ( 30,000 ) — ( 30,000 ) —

2 unchanged sentences

Stock-based compensation — — — — 16,140 — — — — 16,140 — 16,140 —

Balances at June 30, 2019

Balances at September 30, 2019 6,877,596 $ 107 1,150,000 $ 110,843 $ 1,202,130 $ ( 238,108 ) $ ( 19 ) 3,841,862 $ ( 409,249 ) $ 665,704 $ 11,912 $ 677,616 $ 91,610

Balances at December 31, 2019 6,809,280 $ 107 1,150,000 $ 110,843 $ 1,199,205 $ ( 215,216 ) $ 9 3,927,607 $ ( 419,249 ) $ 675,699 $ 10,558 $ 686,257 $ 63,845

4 unchanged sentences

Cash dividends declared ($ 2.16 per common share)

— — — — ( 18,371 ) — — — — ( 18,371 ) — ( 18,371 ) —

Repurchases of common shares ( 239,720 ) — — — — — — 239,720 ( 25,000 ) ( 25,000 ) — ( 25,000 ) —

2 unchanged sentences

Stock-based compensation — — — — 15,766 — — — — 15,766 — 15,766 —

Balances at June 30, 2020

Balances at September 30, 2020 7,613,154 $ 118 — $ — $ 1,301,735 $ ( 178,574 ) $ — 4,167,327 $ ( 444,249 ) $ 679,030 $ 8,982 $ 688,012 $ 99,277

The accompanying notes are an integral part of these condensed consolidated financial statements.

15 unchanged sentences

In the opinion of management, these financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial condition and results of operations.

Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 .

Operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 ("2019 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC").

20 unchanged sentences

Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment.

The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements.

The Company has evaluated the impact of adopting this standard and, at this time, does not anticipate it will have a material impact on its condensed consolidated financial statements.

The Company's revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers.

5 unchanged sentences

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2020 2019 2020 2019

13 unchanged sentences

Below is a summary of intangible assets, net:

(in thousands)

June 30, 2020

December 31, 2019

(in thousands) September 30, 2020 December 31, 2019

Definite-lived intangible assets:

5 unchanged sentences

Activity in intangible assets, net was as follows:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands) 2020 2019

1 unchanged sentence

Balance, beginning of period $ 310,391 $ 338,812

Additions — 1,823

Amortization ( 22,598 ) ( 22,711 )

Balance, end of period $ 287,793 $ 317,924

Definite-lived intangible asset amortization for the remainder of fiscal year 2020 and succeeding fiscal years is estimated as follows:

Fiscal Year Amount

(in thousands)

2 unchanged sentences

Investments consist primarily of investments in the Company's sponsored products.

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 15, at June 30, 2020 and December 31, 2019 were as follows:

(in thousands)

June 30, 2020

December 31, 2019

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 15, at September 30, 2020 and December 31, 2019 were as follows:

(in thousands) September 30, 2020 December 31, 2019

Investment securities - fair value $ 31,641 $ 60,990

7 unchanged sentences

The composition of the Company’s investment securities - fair value was as follows:

June 30, 2020

December 31, 2019

(in thousands)

September 30, 2020 December 31, 2019

(in thousands) Cost Fair Value Cost Fair Value

Investment Securities - fair value

3 unchanged sentences

Total investment securities - fair value $ 28,187 $ 31,641 $ 55,882 $ 60,990

For the three and six months ended June 30, 2020 , the Company recognized realized gains of less than $ 0.1 million

and realized losses of $ 0.3 million , respectively, on the sale of its investment securities - fair value.

For the three and six months ended June 30, 2019 , the Company recognized a realized gain of $ 0.2 million and a realized loss of $ 0.6 million , respectively, on the sale of its investment securities - fair value.

For the three and nine months ended September 30, 2020, the Company recognized realized gains of $ 4.5 million and

$ 4.2 million, respectively, on the sale of its investment securities - fair value.

For the three and nine months ended September 30, 2019, the Company recognized realized gains of $ 1.0 million and $ 0.4 million, respectively, on the sale of its investment securities - fair value.

Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 15, as of June 30, 2020 and December 31, 2019 by fair value hierarchy level were as follows:

June 30, 2020

(in thousands)

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 15, as of September 30, 2020 and December 31, 2019 by fair value hierarchy level were as follows:

September 30, 2020

(in thousands) Level 1 Level 2 Level 3 Total

Cash equivalents $ 170,763 $ — $ — $ 170,763

6 unchanged sentences

December 31, 2019

(in thousands)

(in thousands) Level 1 Level 2 Level 3 Total

Cash equivalents $ 187,255 $ — $ — $ 187,255

15 unchanged sentences

Cash, accounts receivable, accounts payable and accrued liabilities equal or approximate fair value based on the short-term nature of these instruments.

The Company had no Level 3 investments for the three and six-month periods ended June 30, 2020.

The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair value for the three and six-months ended June 30, 2019:

Three Months Ended June 30,

Six Months Ended June 30,

The Company had no Level 3 investments for the three- and nine-month periods ended September 30, 2020 and no Level 3 investments for the three months ended September 30, 2019.

The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair value for the nine months ended September 30, 2019:

Nine Months Ended September 30,

(in thousands)

11 unchanged sentences

Dividends Declared

On May 13, 2020, the Company declared a quarterly cash dividend of $ 0.67 per common share to be paid on August 14, 2020 to stockholders of record at the close of business on July 31, 2020.

On August 19, 2020, the Company declared a quarterly cash dividend of $ 0.82 per common share to be paid on November 13, 2020 to stockholders of record at the close of business on October 30, 2020.

Common Stock Repurchases

During the three and six months ended June 30, 2020 , the Company repurchased 74,897 and 185,853 common shares, respectively, at a weighted average price of $ 100.11 and $ 94.13 per share, respectively, for a total cost, including fees and expenses, of $ 7.5 million and $ 17.5 million , respectively, under its share repurchase program.

In May 2020, the Company's Board of Directors authorized an additional 750,000 shares to be repurchased under the share repurchase program.

As of June 30, 2020 , 816,585 shares remained available for repurchase.

In May 2020, the Company's Board of Directors authorized an additional 750,000 shares to be repurchased under the Company's share repurchase program, bringing the total number of shares authorized to be repurchased under the program since its inception to 4,930,045 shares.

During the three and nine months ended September 30, 2020, the Company repurchased 53,867 and 239,720 common shares, respectively, at a weighted average price of $ 139.20 and $ 104.26 per share, respectively, for a total cost, including fees and expenses, of $ 7.5 million and $ 25.0 million, respectively, under its share repurchase program.

As of September 30, 2020, 762,718 shares remained available for repurchase.

Under the terms of the program, the Company may repurchase shares of its common stock from time to time at its discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price and prevailing market and business conditions.

1 unchanged sentence

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2020 and 2019 were as follows:

(in thousands)

Unrealized Gains (Losses) on

Available-for-Sale

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2020 and 2019 were as follows:

(in thousands) Unrealized Gains (Losses) on

Available-for-Sale Foreign

Balance at December 31, 2019 $ — $ 9

1 unchanged sentence

Net current-period other comprehensive income (loss) — ( 9 )

Balance at June 30, 2020

(in thousands)

Unrealized Gains (Losses) on

Available-for-Sale

Balance at September 30, 2020 $ — $ —

(in thousands) Unrealized Gains (Losses) on

Available-for-Sale Foreign

Balance at December 31, 2018 $ ( 726 ) $ ( 5 )

2 unchanged sentences

Net current-period other comprehensive income (loss) 726 ( 14 )

Balance at June 30, 2019

Balance at September 30, 2019 $ — $ ( 19 )

Stock-Based Compensation

Pursuant to the Company's Omnibus Incentive and Equity Plan (the "Plan"), officers, employees and directors may be granted equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common stock.

At June 30, 2020 , 337,091 shares of common stock remained available for issuance of the 2,820,000 shares that are authorized for issuance under the Plan.

At September 30, 2020, 336,276 shares of common stock remained available for issuance of the 2,820,000 shares that are authorized for issuance under the Plan.

Stock based compensation expense is summarized as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

(in thousands)

2 unchanged sentences

Each RSU entitles the holder to one share of common stock when the restriction expires.

RSUs may be time-vested or performance-contingent (PSUs) and generally vest in one to three years .

RSUs may be time-vested or performance-contingent (PSUs) that convert into RSUs after performance measurement is complete and generally vest in one to three years .

Shares that are issued upon vesting are newly issued shares from the Plan and are not issued from treasury stock.

RSU activity for the six months ended June 30, 2020 is summarized as follows:

Weighted Average

RSU activity, inclusive of PSUs, for the nine months ended September 30, 2020 is summarized as follows:

of Shares Weighted Average

Outstanding at December 31, 2019 528,376 $ 115.74

Outstanding at June 30, 2020

For the six months ended June 30, 2020 and 2019 , a total of 62,899 and 57,411 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 5.5 million and $ 5.8 million for the six months ended June 30, 2020 and 2019 , respectively, in minimum employee tax withholding obligations related to RSUs withheld for net share settlements.

Granted 211,660 $ 86.73

Forfeited ( 3,844 ) $ 118.95

Settled ( 181,091 ) $ 110.79

Outstanding at September 30, 2020 555,101 $ 106.27

For the nine months ended September 30, 2020 and 2019, a total of 63,566 and 58,487 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 5.6 million and $ 5.9 million for the nine months ended September 30, 2020 and 2019, respectively, in minimum employee tax withholding obligations related to RSUs withheld for net share settlements.

These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have been otherwise issued as a result of the vesting.

During the six months ended June 30, 2020 , the Company granted 68,371 PSUs, included in the table above, that contain performance-based metrics in addition to a service condition.

During the nine months ended September 30, 2020, the Company granted 68,371 PSUs that contain performance-based metrics in addition to a service condition.

Compensation expense for PSUs is generally recognized over a three-year service period based upon the value determined using a combination of (i) the intrinsic value method, for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718 and (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718.

Compensation expense for PSU awards that contain a market condition is fixed at the date of grant and will not be adjusted in

future periods based upon the achievement of the market condition.

Compensation expense for

PSU awards that contain a market condition is fixed at the date of grant and will not be adjusted in future periods based upon the achievement of the market condition.

Compensation expense for PSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the end of the performance period.

As of June 30, 2020 , unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 30.0 million , with a weighted-average remaining amortization period of 1.6 years .

As of September 30, 2020, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 27.2 million, with a weighted-average remaining amortization period of 1.4 years.

Earnings (Loss) Per Share

4 unchanged sentences

The computation of basic and diluted EPS is as follows:

Three Months Ended June 30,

Six Months Ended

Three Months Ended September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2020 2019 2020 2019

10 unchanged sentences

The following table details the securities that have been excluded from the above computation of weighted-average number of shares for diluted EPS, because the effect would be anti-dilutive:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands) 2020 2019 2020 2019

4 unchanged sentences

The provision for income taxes reflected U.S.

federal, state and local taxes at an estimated effective tax rate of 50.9 % and 20.5 % for the six months ended June 30, 2020 and 2019 , respectively.

The comparatively higher estimated effective tax rate for the six months ended June 30, 2020 was primarily due to unrealized losses on certain Company investments for which a valuation allowance was recorded.

federal, state and local taxes at an estimated effective tax rate of 33.9 % and 24.0 % for the nine months ended September 30, 2020 and 2019, respectively.

The comparatively higher estimated effective tax rate for the nine months ended September 30, 2020 was primarily due to valuation allowances recorded for the tax effects of unrealized losses on certain Company investments.

C redit Agreement

The Company's credit agreement, as amended (the "Credit Agreement"), is comprised of (i) $ 365.0 million of seven-year term debt (the "Term Loan") expiring in June 2024 and (ii) a $ 100.0 million five-year revolving credit facility (the "Credit Facility") expiring in June 2022.

During the six months ended June 30, 2020 , the Company reduced its Term Loan by $ 45.0 million , including the retirement of $ 10.0 million of principal for $ 8.9 million from certain debt holders in accordance with the prepayment provisions in the Credit Agreement.

At June 30, 2020 , $ 240.7 million was outstanding under the Term Loan, and the Company had no outstanding borrowings under its Credit Facility.

In accordance with ASC 835, Interest, the amounts outstanding under the Company's Term Loan are presented on the Condensed Consolidated Balance Sheet net of related debt issuance costs, which were $ 5.9 million as of June 30, 2020 .

During the nine months ended September 30, 2020, the Company reduced its Term Loan by $ 62.5 million, including the retirement of $ 10.0 million of principal for $ 8.9 million from certain debt holders in accordance with the prepayment provisions in the Credit Agreement.

At September 30, 2020, $ 223.2 million was outstanding under the Term Loan, and the Company had no outstanding borrowings under its Credit Facility.

Commitments and Contingencies

4 unchanged sentences

These matters could result in censures, fines, penalties or other sanctions.

The Company accrues for a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

The Company records a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable.

4 unchanged sentences

Redeemable Noncontrolling Interests

Redeemable noncontrolling interests represent third-party investments in the Company's CIP and minority interests held in a consolidated affiliate.

Minority interests held in an affiliate are subject to holder put rights and Company call rights at established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value.

Redeemable noncontrolling interests represent third-party investments in the Company's CIP and minority interests held in a consolidated majority-owned affiliate.

Minority interests held in the affiliate are subject to holder put rights and Company call rights at established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value.

The rights are exercisable at pre-established intervals (between four and seven years from their issuance) or upon certain conditions such as retirement.

1 unchanged sentence

The Company, in purchasing affiliate equity, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash flow associated with any purchased equity.

Minority interests in an affiliate are recorded at estimated redemption value within redeemable noncontrolling interests on the Company's Condensed Consolidated Balance Sheets, and changes in estimated redemption value of these interests are recorded in the Company’s Condensed Consolidated Statements of Operations within noncontrolling interests.

Redeemable noncontrolling interests for the six months ended June 30, 2020 included the following amounts:

(in thousands)

Affiliate Noncontrolling Interests

Minority interests are recorded at estimated redemption value within redeemable noncontrolling interests on the Company's Condensed Consolidated Balance Sheets, and changes in estimated redemption value of these interests are recorded on the Company’s Condensed Consolidated Statements of Operations within noncontrolling interests.

Redeemable noncontrolling interests for the nine months ended September 30, 2020 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

Balances at December 31, 2019 $ 5,429 $ 58,416 $ 63,845

3 unchanged sentences

Net subscriptions (redemptions) and other 20,074 ( 6,295 ) 13,779

Balances at June 30, 2020

Balances at September 30, 2020 $ 24,651 $ 74,626 $ 99,277

(1) Relates to noncontrolling interests redeemable at other than fair value.

13 unchanged sentences

The Company has no right to the benefits from, and does not bear the risks associated with, these investment products beyond the Company’s investments in, and fees generated from, these products.

The following table presents the balances of CIP that, after intercompany eliminations, were reflected in the Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 :

June 30, 2020

December 31, 2019

(in thousands)

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019:

September 30, 2020 December 31, 2019

(in thousands) VOEs CLOs Other VOEs CLOs Other

Cash and cash equivalents $ 9,128 $ 43,930 $ 1,177 $ 2,665 $ 97,130 $ 363

Investments 46,623 2,231,691 55,371 22,223 1,976,148 31,739

Other assets 2,756 23,821 838 1,563 21,450 599

Notes payable — ( 2,190,937 ) — — ( 1,834,535 ) —

4 unchanged sentences

The majority of the Company's CIP that are VIEs are CLOs.

At June 30, 2020 , the Company consolidated six CLOs.

The financial information of certain CLOs is included in the Company's condensed consolidated financial statements on a one-month lag based upon the availability of the fund financial information.

At September 30, 2020, the Company consolidated six CLOs.

The financial information of certain CLOs is included on the Company's condensed consolidated financial statements on a one-month lag based upon the availability of the fund financial information.

A majority-owned consolidated private fund, whose primary purpose is to invest in CLOs for which the Company serves as the collateral manager, is also included.

Investments of CLOs

The CLOs held investments of $ 2.2 billion at June 30, 2020 consisting of bank loan investments, which comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries.

The CLOs held investments of $ 2.2 billion at September 30, 2020 consisting of bank loan investments, which comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries.

These bank loan investments mature at various dates between 2020 and 2028 and pay interest at LIBOR plus a spread of up to 12.00 %.

1 unchanged sentence

Generally, subsequent prepayments received after the reinvestment period must be used to pay down the note obligations.

At June 30, 2020 , the fair value of the senior bank loans was less than the unpaid principal balance by $ 219.3 million .

At June 30, 2020 , there were no material collateral assets in default.

At September 30, 2020, the fair value of the senior bank loans was less than the unpaid principal balance by $ 135.8 million.

At September 30, 2020, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs held notes payable with a total value, at par, of $ 2.5 billion at March 31, 2020, consisting of senior secured floating rate notes payable with a par value of $ 2.3 billion and subordinated notes with a par value of $ 225.9 million .

The CLOs held notes payable with a total value, at par, of $ 2.5 billion at September 30, 2020, consisting of senior secured floating rate notes payable with a par value of $ 2.2 billion and subordinated notes with a par value of $ 225.9 million.

These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 0.8 % to 8.7 %.

2 unchanged sentences

The secured notes of the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as financial liabilities.

Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13") results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at June 30, 2020 , as shown in the table below:

(in thousands)

2 unchanged sentences

Total beneficial interests $ 62,145

The following table represents income and expenses of the consolidated CLOs included in the Company’s Condensed Consolidated Statements of Operations for the period indicated:

(in thousands)

Six Months Ended June 30, 2020

The following table represents income and expenses of the consolidated CLOs included on the Company’s Condensed Consolidated Statements of Operations for the period indicated:

(in thousands) Nine Months Ended September 30, 2020

Realized and unrealized gain (loss), net $ ( 9,648 )

Interest income 81,846

Total income 72,198

Other operating expenses 9,535

3 unchanged sentences

Net Income (loss) attributable to CIP $ ( 7,449 )

As summarized in the table below, the application of the measurement alternative as prescribed by ASU 2014-13 results in the consolidated net income summarized above to be equivalent to the Company’s own economic interests in the consolidated CLOs, which are eliminated upon consolidation:

(in thousands)

Six Months Ended June 30, 2020

consolidated CLOs, which are eliminated upon consolidation:

(in thousands) Nine Months Ended September 30, 2020

Distributions received and unrealized gains (losses) on the subordinated notes held by the Company $ ( 13,941 )

2 unchanged sentences

Fair Value Measurements of CIP

The assets and liabilities of CIP measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 by fair value hierarchy level were as follows:

As of June 30, 2020

(in thousands)

The assets and liabilities of CIP measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 by fair value hierarchy level were as follows:

As of September 30, 2020

(in thousands) Level 1 Level 2 Level 3 Total

Cash equivalents $ 43,930 $ — $ — $ 43,930

1 unchanged sentence

Equity investments 27,092 1,349 1,836 30,277

Derivatives 586 845 — 1,431

Total assets measured at fair value $ 86,080 $ 2,277,804 $ 15,162 $ 2,379,046

Notes payable $ — $ 2,190,937 $ — $ 2,190,937

Derivatives 539 433 — 972

Short sales 472 — — 472

Total liabilities measured at fair value $ 1,011 $ 2,191,370 $ — $ 2,192,381

As of December 31, 2019

(in thousands)

(in thousands) Level 1 Level 2 Level 3 Total

Cash equivalents $ 97,130 $ — $ — $ 97,130

3 unchanged sentences

Notes payable $ — $ 1,834,535 $ — $ 1,834,535

Short sales 430 — — 430

Total liabilities measured at fair value $ 430 $ 1,834,535 $ — $ 1,834,965

5 unchanged sentences

Level 2 investments represent most debt securities, including bank loans and certain equity securities (including non-U.S.

securities), for which closing prices are not readily available or are deemed to not reflect readily available market prices,

and are valued using an independent pricing service.

securities), for which closing prices are not readily available or are deemed to not reflect readily available market prices, and are valued using an independent pricing service.

Debt investments are valued based on quotations received from independent pricing services or from dealers who make markets in such securities.

Bank loan investments, which are included as debt investments, are generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service.

Bank loan investments, which are included

as debt investments, are generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service.

Fair value may also be based upon valuations obtained from independent third-party brokers or dealers utilizing matrix pricing models that consider information regarding securities with similar characteristics.

3 unchanged sentences

Derivative assets and liabilities represent futures contracts, swaps contracts, option contracts and forward contracts held in CIP.

Derivative instruments in an asset position are classified as other assets of CIP in the Condensed Consolidated Balance Sheets.

Derivative instruments in an asset position are classified as other assets of CIP on the Condensed Consolidated Balance Sheets.

Derivative instruments in a liability position are classified as liabilities of CIP within the Condensed Consolidated Balance Sheets.

The change in fair value of such derivatives is recorded in realized and unrealized gain (loss) on investments of CIP, net, in the Condensed Consolidated Statements of Operations.

The change in fair value of such derivatives is recorded in realized and unrealized gain (loss) on investments of CIP, net, on the Condensed Consolidated Statements of Operations.

Depending on the nature of the inputs, these derivative assets and liabilities are classified as Level 1, 2 or 3 within the fair value measurement hierarchy.

In connection with entering into these derivative contracts, these CIP may be required to pledge an amount of cash equal to the appropriate “initial margin” requirements.

The cash pledged or on deposit is recorded in the Condensed Consolidated Balance Sheets of the Company as Cash pledged or on deposit of CIP.

The fair value of such derivatives at June 30, 2020 was immaterial.

The cash pledged or on deposit is recorded on the Condensed Consolidated Balance Sheets of the Company as Cash pledged or on deposit of CIP.

The fair value of such derivatives at September 30, 2020 was immaterial.

Notes payable represent notes issued by CIP CLOs and are measured using the measurement alternative in ASU 2014-13.

2 unchanged sentences

Short sales are transactions in which a security is sold that is not owned or is owned but there is no intention to deliver, in anticipation that the price of the security will decline.

Short sales are recorded in the Condensed Consolidated Balance Sheets within other liabilities of CIP and are classified as Level 1 based on the underlying equity security.

The securities purchase payable at June 30, 2020 and December 31, 2019 approximated fair value due to the short-term nature of the instruments.

Short sales are recorded on the Condensed Consolidated Balance Sheets within other liabilities of CIP and are classified as Level 1 based on the underlying equity security.

The securities purchase payable at September 30, 2020 and December 31, 2019 approximated fair value due to the short-term nature of the instruments.

The following table is a reconciliation of assets of CIP for Level 3 investments for which significant unobservable inputs were used to determine fair value:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

3 unchanged sentences

Change in unrealized gains (losses), net ( 335 ) 310

Purchases 1,137 2,157

Amortization 9 ( 16 )

Sales ( 1,256 ) ( 5,414 )

Transfers to Level 2 ( 50,463 ) ( 42,232 )

5 unchanged sentences

The Company serves as the collateral manager for other collateralized loan and collateralized bond obligations (collectively, "CDOs") that are not consolidated.

The assets and liabilities of these CDOs reside in bankruptcy remote, special

purpose entities in which the Company has no ownership of, nor holds any notes issued by, the CDOs, and provides neither recourse nor guarantees.

The Company has determined that the investment management fees it receives for serving as collateral manager for these CDOs did not represent a variable interest since (i) the fees the Company earns are compensation for services provided and are commensurate with the level of effort required to provide the investment management services, (ii) the Company does not hold other interests in the CDOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CDOs' expected losses or receive more than an insignificant amount of the CDOs' expected residual return, and (iii) the investment management arrangement only includes terms, conditions and amounts that are customarily present in arrangements for similar services negotiated at arm's length.

The Company has interests in certain other entities that are VIEs that the Company does not consolidate as it is not the primary beneficiary of those entities.

The Company is not the primary beneficiary as its interest in these entities does not provide the Company with the power to direct the activities that most significantly impact the entities' economic performance.

At June 30, 2020 , the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 14.6 million .

Subsequent Events

On July 4, 2020, two wholly-owned subsidiaries of the Company entered into an agreement with Allianz Global Investors U.S.

LLC and Allianz Global Investors Distributors LLC (collectively, "AllianzGI") allowing the Company to be the investment adviser, distributor and/or administrator of certain AllianzGI's open-end, closed-end and retail separate account assets.

The agreement is subject to the approval of the AllianceGI U.S.

Funds Board and fund shareholders and is expected to close near year-end 2020.

The assets and liabilities of these CDOs reside in bankruptcy remote, special purpose entities in which the Company has no ownership of, nor holds any notes issued by, the CDOs, and provides neither recourse nor guarantees.

The Company has determined that the investment management fees it receives for serving as collateral

manager for these CDOs did not represent a variable interest since (i) the fees the Company earns are compensation for services provided and are commensurate with the level of effort required to provide the investment management services, (ii) the Company does not hold other interests in the CDOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CDOs' expected losses or receive more than an insignificant amount of the CDOs' expected residual return, and (iii) the investment management arrangement only includes terms, conditions and amounts that are customarily present in arrangements for similar services negotiated at arm's length.

The Company has interests in certain other VIEs that the Company does not consolidate as it is not the primary beneficiary since its interest in these entities does not provide the Company with the power to direct the activities that most significantly impact the entities' economic performance.

At September 30, 2020, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 26.2 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements