What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-09 compared with 2021-08-06 · 118 added, 94 removed, 526 unchanged (29% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data) June 30,

(in thousands, except share data) September 30,

2021 December 31,

26 unchanged sentences

Redeemable noncontrolling interests 131,669 115,513

Equity attributable to stockholders:

Equity attributable to Virtus Investment Partners, Inc.:

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

11,905,842 shares issued and 7,651,606 shares outstanding at June 30, 2021, respectively, and 11,790,869 shares issued and 7,583,466 shares outstanding at December 31, 2020, respectively

11,906,487 shares issued and 7,587,757 shares outstanding at September 30, 2021;

and 11,790,869 shares issued and 7,583,466 shares outstanding at December 31, 2020

Additional paid-in capital 1,273,376 1,298,002

1 unchanged sentence

Accumulated other comprehensive income (loss) 18 29

Treasury stock, at cost, 4,254,236 and 4,207,403 shares at June 30, 2021 and December 31, 2020, respectively

Treasury stock, at cost, 4,318,730 and 4,207,403 shares at September 30, 2021 and December 31, 2020, respectively

( 484,248 ) ( 451,749 )

Total equity attributable to stockholders 780,869 711,141

Total equity attributable to Virtus Investment Partners, Inc.

812,297 711,141

Noncontrolling interests 8,813 9,799

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2021 2020 2021 2020

39 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2021 2020 2021 2020

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax of $( 2 ) and $ 0 for the three months ended June 30, 2021 and 2020, respectively, and $( 2 ) and $ 9 for the six months ended June 30, 2021 and 2020, respectively

Foreign currency translation adjustment, net of tax of $ 6 and $( 6 ) for the three months ended September 30, 2021 and 2020, respectively, and $ 4 and $ 3 for the nine months ended September 30, 2021 and 2020, respectively

( 17 ) 17 ( 11 ) ( 9 )

7 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2021 2020

30 unchanged sentences

Cash Flows from Financing Activities:

Refinancing of credit agreement 81,155 —

Payment of long term debt ( 11,826 ) ( 61,573 )

Payment of deferred financing costs ( 7,039 ) —

Common stock dividends paid ( 20,030 ) ( 16,460 )

1 unchanged sentence

Repurchases of common shares ( 32,499 ) ( 25,000 )

Stock options exercised 66 114

Taxes paid related to net share settlement of restricted stock units ( 19,362 ) ( 5,530 )

Net subscriptions received from (redemptions/distributions paid to) noncontrolling interests ( 6,636 ) ( 3,951 )

Net contributions from (distributions to) noncontrolling interests 552 ( 5,935 )

Financing activities of CIP:

6 unchanged sentences

Non-Cash Investing Activities:

Change in accrual for capital expenditures $ ( 47 ) $ ( 21 )

Contingent consideration $ 137,664 $ —

3 unchanged sentences

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

(in thousands) June 30,

(in thousands) September 30,

2021 December 31, 2020

14 unchanged sentences

Attributed To

Stockholders Non-

Virtus Investment Partners, Inc.

Interests Total

1 unchanged sentence

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

Balances at March 31, 2020 7,695,413 $ 117 $ 1,304,868 $ ( 219,501 ) $ ( 16 ) 4,038,563 $ ( 429,249 ) $ 656,219 $ 10,247 $ 666,466 $ 87,115

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

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

7 unchanged sentences

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

Balances at September 30, 2020 7,613,154 $ 118 $ 1,301,735 $ ( 178,574 ) $ 0 4,167,327 $ ( 444,249 ) $ 679,030 $ 8,982 $ 688,012 $ 99,277

Balances at June 30, 2021 7,651,606 $ 119 $ 1,280,667 $ ( 35,704 ) $ 35 4,254,236 $ ( 464,248 ) $ 780,869 $ 8,968 $ 789,837 $ 131,525

Balances at March 31, 2021 7,649,679 $ 119 $ 1,284,643 $ ( 98,671 ) $ 35 4,227,315 $ ( 456,748 ) $ 729,378 $ 9,317 $ 738,695 $ 112,482

Net income (loss) — — — 58,736 — — — 58,736 374 59,110 13,401

7 unchanged sentences

Stock-based compensation — — 4,872 — — — — 4,872 — 4,872 —

Balances at June 30, 2021 7,651,606 $ 119 $ 1,280,667 $ ( 35,704 ) $ 35 4,254,236 $ ( 464,248 ) $ 780,869 $ 8,968 $ 789,837 $ 131,525

Balances at September 30, 2021 7,587,757 $ 119 $ 1,273,376 $ 23,032 $ 18 4,318,730 $ ( 484,248 ) $ 812,297 $ 8,813 $ 821,110 $ 131,669

Permanent Equity Temporary Equity

5 unchanged sentences

Attributed To

Stockholders Non-

Virtus Investment Partners, Inc.

Interests Total

12 unchanged sentences

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

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 September 30, 2020 7,613,154 $ 118 — $ — $ 1,301,735 $ ( 178,574 ) $ 0 4,167,327 $ ( 444,249 ) $ 679,030 $ 8,982 $ 688,012 $ 99,277

Balances at December 31, 2020 7,583,466 $ 118 — $ — $ 1,298,002 $ ( 135,259 ) $ 29 4,207,403 $ ( 451,749 ) $ 711,141 $ 9,799 $ 720,940 $ 115,513

8 unchanged sentences

Stock-based compensation — — — — 20,052 — — — — 20,052 — 20,052 —

Balances at June 30, 2021 7,651,606 $ 119 — $ — $ 1,280,667 $ ( 35,704 ) $ 35 4,254,236 $ ( 464,248 ) $ 780,869 $ 8,968 $ 789,837 $ 131,525

Balances at September 30, 2021 7,587,757 $ 119 — $ — $ 1,273,376 $ 23,032 $ 18 4,318,730 $ ( 484,248 ) $ 812,297 $ 8,813 $ 821,110 $ 131,669

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, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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, 2020 ("2020 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC").

18 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2021 2020 2021 2020

7 unchanged sentences

Total investment management fees $ 201,133 $ 129,785 $ 567,912 $ 360,623

Business Combinations

AllianzGI Strategic Partnership

2 unchanged sentences

Assets acquired in connection with the transaction primarily consisted of definite-lived intangible assets representing open-end, closed-end and retail separate account investment contracts as well as indefinite-lived assets consisting of goodwill related to NFJ.

The revenues and operating income of NFJ were not material to the Company's results of operations for the three and six months ended June 30, 2021.

The revenues and operating income of NFJ were not material to the Company's results of operations for the three and nine months ended September 30, 2021.

Transaction consideration consists of variable cash payments based on a percentage of the investment management fees earned on certain open-end, closed-end and retail separate account assets adopted under the transaction.

Payments are to be made annually around the anniversary of the closing date of the transaction over the next seven years .

The estimate of these future revenue participation payments of $ 137.7 million at June 30, 2021 have been recorded as a liability and included as Contingent Consideration on the Company's Condensed Consolidated Balance Sheet.

The estimate of these future revenue participation payments of $ 137.7 million at September 30, 2021 has been recorded as a liability and included as Contingent Consideration on the Company's Condensed Consolidated Balance Sheet.

In addition, the Company capitalized $ 7.7 million of costs associated with certain assets acquired.

11 unchanged sentences

Below is a summary of intangible assets, net:

(in thousands) June 30, 2021 December 31, 2020

Definite-lived intangible assets:

Investment contracts and other $ 609,958 $ 489,570

Accumulated amortization ( 272,650 ) ( 252,822 )

Definite-lived intangible assets, net 337,308 236,748

Indefinite-lived intangible assets 43,516 43,516

Total intangible assets, net $ 380,824 $ 280,264

Activity in intangible assets, net was as follows:

Six Months Ended June 30,

(in thousands) 2021 2020

Intangible assets, net

Balance, beginning of period $ 280,264 $ 310,391

Definite-Lived Indefinite-Lived Total

(in thousands) Gross Book Value Accumulated Amortization Net Book Value Net Book Value Net Book Value

Balances of December 31, 2020 $ 489,570 $ ( 252,822 ) $ 236,748 $ 43,516 $ 280,264

Additions 120,388 — 120,388 — 120,388

Amortization ( 19,828 ) ( 15,066 )

Balance, end of period $ 380,824 $ 295,325

Intangible amortization — ( 30,219 ) ( 30,219 ) — ( 30,219 )

Balances of September 30, 2021 $ 609,958 $ ( 283,041 ) $ 326,917 $ 43,516 $ 370,433

Definite-lived intangible asset amortization for the remainder of fiscal year 2021 and succeeding fiscal years is estimated as follows:

5 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 16, at June 30, 2021 and December 31, 2020 were as follows:

(in thousands) June 30, 2021 December 31, 2020

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 16, at September 30, 2021 and December 31, 2020 were as follows:

(in thousands) September 30, 2021 December 31, 2020

Investment securities - fair value $ 78,143 $ 39,990

7 unchanged sentences

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

(in thousands) Cost Fair Value Cost Fair Value

4 unchanged sentences

Total investment securities - fair value $ 69,711 $ 78,143 $ 31,999 $ 39,990

For the three and six months ended June 30, 2021, the Company recognized realized gains of $ 1.0 million and $ 1.8 million on the sale of its investment securities - fair value, respectively.

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

For the three and nine months ended September 30, 2021, the Company recognized realized gains of $ 0.2 million and $ 2.0 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.

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 16, as of June 30, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

June 30, 2021

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 16, as of September 30, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

September 30, 2021

(in thousands) Level 1 Level 2 Level 3 Total

19 unchanged sentences

Sponsored funds represent investments in open-end funds, closed-end funds and ETFs for which the Company acts as the investment manager.

The fair value of open-end funds is determined based on their published net asset values and are

categorized as Level 1.

The fair value of open-end funds is determined based on their published net asset values and are categorized as Level 1.

The fair value of closed-end funds and ETFs is determined based on the official closing price on the exchange on which they are traded and are categorized as Level 1.

3 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, 2021 and 2020, respectively.

The Company had no Level 3 investments for the three- and nine-month periods ended September 30, 2021 and 2020, respectively.

Equity Transactions

Dividends Declared

On May 13, 2021, the Company declared a quarterly cash dividend of $ 0.82 per common share to be paid on August 13, 2021 to stockholders of record at the close of business on July 30, 2021.

On August 18, 2021, the Company declared a quarterly cash dividend of $ 1.50 per common share to be paid on November 12, 2021 to stockholders of record at the close of business on October 29, 2021.

Common Stock Repurchases

During the three and six months ended June 30, 2021, the Company repurchased 26,921 and 46,833 common shares, respectively, at a weighted average price of $ 278.56 and $ 266.87 per share, respectively, for a total cost, including fees and expenses, of $ 7.5 million and $ 12.5 million, respectively, under its share repurchase program.

As of June 30, 2021, 675,809 shares remained available for repurchase.

During the three and nine months ended September 30, 2021, the Company repurchased 64,494 and 111,327 common shares, respectively, at a weighted average price of $ 310.07 and $ 291.90 per share, respectively, for a total cost, including fees and expenses, of $ 20.0 million and $ 32.5 million, respectively, under its share repurchase program.

As of September 30, 2021, 611,315 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, 2021 and 2020 were as follows:

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2021 and 2020 were as follows:

(in thousands) Foreign

2 unchanged sentences

Net current-period other comprehensive income (loss) ( 11 )

Balance at June 30, 2021 $ 35

Balance at September 30, 2021 $ 18

(in thousands) Foreign

2 unchanged sentences

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

Balance at June 30, 2020 $ ( 17 )

Balance at September 30, 2020 $ 0

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, 2021, 814,812 shares of common stock remained available for issuance of the 3,370,000 shares that are authorized for issuance under the Plan.

At September 30, 2021, 805,875 shares of common stock remained available for issuance of the 3,370,000 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,

2021 2020 2021 2020

5 unchanged sentences

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

RSU activity, inclusive of PSUs, for the six months ended June 30, 2021 is summarized as follows:

RSU activity, inclusive of PSUs, for the nine months ended September 30, 2021 is summarized as follows:

of Shares Weighted Average

3 unchanged sentences

Settled ( 184,589 ) $ 123.17

Outstanding at June 30, 2021 425,239 $ 133.39

For the six months ended June 30, 2021 and 2020, a total of 72,324 and 62,899 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 19.3 million and $ 5.5 million for the six months ended June 30, 2021 and 2020, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the net share settlements.

During the six months ended June 30, 2021, the Company granted 24,798 PSUs that contain performance-based metrics in addition to a service condition.

Outstanding at September 30, 2021 433,060 $ 138.00

For the nine months ended September 30, 2021 and 2020, a total of 72,795 and 63,566 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 19.4 million and $ 5.6 million for the nine months ended September 30, 2021 and 2020, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the net share settlements.

During the nine months ended September 30, 2021, the Company granted 26,425 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.

1 unchanged sentence

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, 2021, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 33.2 million,

with a weighted-average remaining contractual life of 1.4 years.

As of September 30, 2021, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 30.8 million, with a weighted-average remaining contractual life of 1.2 years.

Earnings (Loss) Per Share

6 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) 2021 2020 2021 2020

9 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) 2021 2020 2021 2020

4 unchanged sentences

The provision for income taxes reflected U.S.

federal, state and local taxes at an estimated effective tax rate of 22.6 % and 50.9 % for the six months ended June 30, 2021 and 2020, respectively.

The comparatively lower estimated effective tax rate for the six months ended June 30, 2021 was primarily due to valuation allowances recorded in the prior year period 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, 2021, the Company repaid $ 11.8 million outstanding under its Term Loan.

At June 30, 2021, $ 193.8 million remained 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 $ 3.6 million as of June 30, 2021.

federal, state and local taxes at an estimated effective tax rate of 24.0 % and 33.9 % for the nine months ended September 30, 2021 and 2020, respectively.

The comparatively lower estimated effective tax rate for the nine months ended September 30, 2021 was primarily due to valuation allowances recorded in the prior year period for the tax effects of unrealized losses on certain Company investments.

Credit Agreement Refinancing

On September 28, 2021, the Company completed a refinancing of its credit agreement through an amended and restated credit agreement dated September 28, 2021 (the "Credit Agreement").

The Credit Agreement provides for (a) a $ 275.0 million term loan with a seven-year term (the "Term Loan") and (b) a $ 175.0 million revolving credit facility with a five-year term.

A portion of the proceeds from the refinancing was used to pay $ 194.0 million outstanding on the previous term loan.

At September 30, 2021, $ 275.0 million was outstanding under the Term Loan, and the Company had no outstanding borrowings under its revolving credit facility.

In accordance with ASC 835, Interest , the amounts outstanding under the Company's Term Loan are presented in the Condensed Consolidated Balance Sheet net of related debt issuance costs, which were $ 8.3 million as of September 30, 2021.

Because the debt instruments are not substantially different, the refinancing was treated as a debt modification for accounting purposes.

Amounts outstanding under the Credit Agreement bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves) for interest periods of one, three or six months (or, solely in the case of the revolving credit facility, if agreed to by each relevant Lender, twelve months) or an alternate base rate, in either case plus an applicable margin.

The applicable margins are 2.25 %, in the case of LIBOR-based loans, and 1.25 %, in the case of alternate

base rate loans.

Interest is payable quarterly in arrears with respect to alternate base rate loans and on the last day of each interest period with respect to LIBOR-based loans (but, in the case of any LIBOR-based loan with an interest period of more than three months, at three-month intervals).

The Credit Agreement contains LIBOR and other subsequent benchmark successor provisions.

Under the terms of the Credit Agreement, the Company is required to pay a quarterly commitment fee on the average unused amount of the revolving credit facility, which fee is initially set at 0.50 % and will, following the first delivery of certain financial reports required under the Credit Agreement, range from 0.375 % to 0.50 %, based on the secured net leverage ratio of the Company as of the last day of the preceding fiscal quarter, as reflected in such financial reports.

The term loans will amortize at the rate of 1.00 % per annum payable in equal quarterly installments on the last day of each March, June, September and December (commencing on December 31, 2021).

In addition, the Credit Agreement requires that the term loans be mandatorily prepaid with (a) 50 % of the Company’s excess cash flow on an annual basis, stepping down to 25 % if the Company’s secured net leverage ratio declines to 2 :1 or below and stepping down to 0 % if the Company’s secured net leverage ratio declines below 1.5 :1;

(b) 50 % of the net proceeds of certain asset sales, casualty or condemnation events, subject to customary reinvestment rights;

and (c) 100 % of the proceeds of any indebtedness incurred to refinance the term loans or other refinancing indebtedness as well as indebtedness incurred other than indebtedness permitted to be incurred by the Credit Agreement.

At any time, upon timely notice, the Company may terminate the Credit Agreement in full, reduce the commitment under the facility in minimum specified increments or prepay loans in whole or in part, subject to the payment of breakage fees with respect to LIBOR-based loans and, in the case of any term loans that are prepaid in connection with a “repricing transaction” occurring within the six-month period following the closing date of the Credit Agreement, a 1.00 % premium.

The Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and leaseback transactions, make distributions and dividends and prepayments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year and modify its organizational documents, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the Credit Agreement contains a financial performance covenant that is only applicable when greater than 35 % of the revolving credit facility is outstanding, requiring a maximum leverage ratio, as of the last day of each of the four fiscal quarter periods, of no greater than the levels set forth in the Credit Agreement.

Future minimum Term Loan payments (exclusive of any mandatory excess cash flow repayments) as of September 30, 2021 are as follows:

(in thousands)

Remainder of 2021 $ 687.5

2026 and thereafter 263,312.5

Total $ 275,000.0

Commitments and Contingencies

2 unchanged sentences

Legal and regulatory matters of this nature involve or may involve but are not limited to the Company's activities as an employer, issuer of securities, investor, investment adviser, broker-dealer or taxpayer.

In addition, in the normal course of business, the Company discusses matters with its regulators raised during regulatory examinations or is otherwise subject to their inquiry.

In addition, in

the normal course of business, the Company discusses matters with its regulators raised during regulatory examinations or is otherwise subject to their inquiry.

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

12 unchanged sentences

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

Redeemable noncontrolling interests for the six months ended June 30, 2021 included the following amounts:

Redeemable noncontrolling interests for the nine months ended September 30, 2021 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

4 unchanged sentences

Net subscriptions (redemptions) and other ( 16,112 ) ( 9,544 ) ( 25,656 )

Balances at June 30, 2021 $ 22,586 $ 108,939 $ 131,525

Balances at September 30, 2021 $ 12,808 $ 118,861 $ 131,669

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

3 unchanged sentences

The Company evaluates any variable interest entities ("VIEs") in which the Company has a variable interest for consolidation.

A VIE is an entity in which either (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support or (ii) where as a group, the holders of the equity investment at risk do not possess (x) the power through voting or similar rights to direct the activities that most significantly impact the entity’s economic performance;

possess (x) the power through voting or similar rights to direct the activities that most significantly impact the entity’s economic performance;

(y) the obligation to absorb expected losses or the right to receive expected residual returns of the entity;

7 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 on the Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020:

September 30, 2021 December 31, 2020

VOEs VIEs VOEs VIEs

9 unchanged sentences

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

At June 30, 2021, the Company consolidated six CLOs.

At September 30, 2021, 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's financial information.

1 unchanged sentence

Investments of CLOs

The CLOs held investments of $ 2.2 billion at June 30, 2021 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 $ 2.1 billion at September 30, 2021 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 2022 and 2029 and pay interest at LIBOR plus a spread of up to 10.00 %.

1 unchanged sentence

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

At June 30, 2021, the fair value of the senior bank loans was less than the unpaid principal balance by $ 35.5 million.

At June 30, 2021, there were no material collateral assets in default.

At September 30, 2021, the fair value of the senior bank loans was less than the unpaid principal balance by $ 36.9 million.

At September 30, 2021, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs held notes payable with a total value, at par, of $ 2.3 billion at June 30, 2021, consisting of senior secured floating rate notes payable with a par value of $ 2.1 billion and subordinated notes with a par value of $ 225.9 million.

The CLOs held notes payable with a total value, at par, of $ 2.3 billion at September 30, 2021, consisting of senior secured floating rate notes payable with a par value of $ 2.0 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, 2021, as shown in the table below:

(in thousands)

3 unchanged sentences

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) Six Months Ended June 30, 2021

(in thousands) Nine Months Ended September 30, 2021

Realized and unrealized gain (loss), net $ ( 6,382 )

7 unchanged sentences

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, 2021

(in thousands) Nine Months Ended September 30, 2021

Distributions received and unrealized gains (losses) on the subordinated notes $ 8,720

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, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

As of June 30, 2021

The assets and liabilities of CIP measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

As of September 30, 2021

(in thousands) Level 1 Level 2 Level 3 Total

22 unchanged sentences

Equity investments are valued at the official closing price on the exchange on which the securities are traded and are generally categorized within Level 1.

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

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.

13 unchanged sentences

The fair value of such derivatives at December 31, 2020, was immaterial.

There were no derivative assets or liabilities held at June 30, 2021.

There were no derivative assets or liabilities held at September 30, 2021.

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

3 unchanged sentences

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 June 30, 2021 and December 31, 2020 approximated fair value due to the short-term nature of the instruments.

The securities purchase payable at September 30, 2021 and December 31, 2020 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)

14 unchanged sentences

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 June 30, 2021, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 30.8 million.

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, 2021, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 30.6 million.

Subsequent Event

Westchester Capital Management

On October 1, 2021, the Company completed its previously announced acquisition of Westchester Capital Management ("Westchester").

The initial purchase price payment of $ 135.0 million was made at closing and an additional $ 20.0 million payment is due near year end, subject to retention of revenue levels, which is expected.

Due to the limited time since the closing, the related acquisition accounting is incomplete at this time.

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