What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 115 added, 71 removed, 531 unchanged (26% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data) March 31,

(in thousands, except share data) June 30,

2022 December 31,

28 unchanged sentences

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

11,998,877 shares issued and 7,472,829 shares outstanding at March 31, 2022;

12,023,288 shares issued and 7,275,337 shares outstanding at June 30, 2022;

and 11,906,747 shares issued and 7,506,151 shares outstanding at December 31, 2021

2 unchanged sentences

Accumulated other comprehensive income (loss) ( 267 ) 20

Treasury stock, at cost, 4,526,048 and 4,400,596 shares at March 31, 2022 and December 31, 2021, respectively

Treasury stock, at cost, 4,747,951 and 4,400,596 shares at June 30, 2022 and December 31, 2021, respectively

( 579,248 ) ( 509,248 )

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2022 2021 2022 2021

9 unchanged sentences

Operating expenses of consolidated investment products ("CIP") 649 659 1,389 1,218

Change in fair value of contingent consideration 2,900 — 2,900 —

Depreciation expense 962 981 1,897 2,079

27 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2022 2021 2022 2021

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax of $ 73 and $ — for the three months ended March 31, 2022 and 2021, respectively.

Foreign currency translation adjustment, net of tax of $ 176 and $( 2 ) for the three months ended June 30, 2022 and 2021, respectively, and $ 249 and $( 2 ) for the six months ended June 30, 2022 and 2021, respectively.

( 237 ) 0 ( 287 ) 6

Other comprehensive income (loss) ( 237 ) 0 ( 287 ) 6

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands) 2022 2021

8 unchanged sentences

Realized and unrealized (gains) losses on investments, net 13,562 ( 3,381 )

Distributions from equity method investments 2,102 1,908

Sales (purchases) of investments, net ( 9,952 ) ( 3,395 )

Change in fair value of contingent consideration 2,900 —

Deferred taxes, net ( 2,271 ) ( 1,518 )

18 unchanged sentences

Repurchase of common shares ( 70,000 ) ( 12,499 )

Stock options exercised — 66

Payment of contingent consideration ( 33,036 ) —

13 unchanged sentences

Common stock dividends payable $ 11,229 $ 6,277

(in thousands) March 31,

(in thousands) June 30,

2022 December 31, 2021

18 unchanged sentences

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

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

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) — — — 62,967 — — — 62,967 270 63,237 12,860

7 unchanged sentences

Stock-based compensation — — 6,745 — — — — 6,745 — 6,745 —

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, 2022 7,472,829 $ 120 $ 1,273,802 $ 81,783 $ ( 30 ) 4,526,048 $ ( 539,248 ) $ 816,427 $ 7,806 $ 824,233 $ 138,738

Net income (loss) — — — 17,402 — — — 17,402 ( 278 ) 17,124 ( 2,865 )

Foreign currency translation adjustments — — — — ( 237 ) — — ( 237 ) — ( 237 ) —

Net subscriptions (redemptions) and other — — — — — — — — ( 531 ) ( 531 ) 3,274

Cash dividends declared ($ 1.50 per common share)

— — — ( 10,989 ) — — — ( 10,989 ) — ( 10,989 ) —

Repurchases of common shares ( 221,903 ) — — — — 221,903 ( 40,000 ) ( 40,000 ) — ( 40,000 ) —

Issuance of common shares related to employee stock transactions 24,411 — — — — — — — — — —

Taxes paid on stock-based compensation — — ( 1,870 ) — — — — ( 1,870 ) ( 1,870 ) —

Stock-based compensation — — 3,975 — — — — 3,975 — 3,975 —

Balances at June 30, 2022 7,275,337 $ 120 $ 1,275,907 $ 88,196 $ ( 267 ) 4,747,951 $ ( 579,248 ) $ 784,708 $ 6,997 $ 791,705 $ 139,147

Permanent Equity Temporary Equity

Common Stock Additional

Capital Retained Earnings (Accumulated

Deficit) Accumulated

Comprehensive

Income (Loss) Treasury Stock Total

Attributed To

Virtus Investment Partners, Inc.

Interests Total

Equity Redeemable

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

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 — — 15,180 — — — — 15,180 — 15,180 —

Balances at March 31, 2022 7,472,829 $ 120 $ 1,273,802 $ 81,783 $ ( 30 ) 4,526,048 $ ( 539,248 ) $ 816,427 $ 7,806 $ 824,233 $ 138,738

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 December 31, 2021 7,506,151 $ 119 $ 1,276,424 $ 60,962 $ 20 4,400,596 $ ( 509,248 ) $ 828,277 $ 8,350 $ 836,627 $ 138,965

Net income (loss) — — — 50,461 — — — 50,461 ( 335 ) 50,126 3,252

Foreign currency translation adjustments — — — — ( 287 ) — — ( 287 ) — ( 287 ) —

Net subscriptions (redemptions) and other — — — — — — — — ( 1,018 ) ( 1,018 ) ( 3,070 )

Cash dividends declared ($ 3.00 per common share)

— — — ( 23,227 ) — — — ( 23,227 ) — ( 23,227 ) —

Repurchases of common shares ( 347,355 ) — — — — 347,355 ( 70,000 ) ( 70,000 ) — ( 70,000 ) —

Issuance of common shares related to employee stock transactions 116,541 1 ( 1 ) — — — — — — — —

Taxes paid on stock-based compensation — — ( 15,284 ) — — — — ( 15,284 ) ( 15,284 ) —

Stock-based compensation — — 14,768 — — — — 14,768 — 14,768 —

Balances at June 30, 2022 7,275,337 $ 120 $ 1,275,907 $ 88,196 $ ( 267 ) 4,747,951 $ ( 579,248 ) $ 784,708 $ 6,997 $ 791,705 $ 139,147

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

18 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 three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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, 2021 ("2021 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC").

4 unchanged sentences

Because of this, these fees are considered constrained until the end of the contractual measurement period (monthly or quarterly), which is when asset values are generally determinable.

Revenue Disaggregated by Source

Investment Management Fees by Source

The following table summarizes investment management fees by source:

Three Months Ended

June 30, Six Months Ended

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

Institutional accounts 38,663 37,367 81,560 71,064

Structured products 906 1,259

Total investment management fees $ 185,024 $ 193,510 $ 391,841 $ 366,779

5 unchanged sentences

The final fair value of the net assets acquired may result in adjustments to certain assets and liabilities, including goodwill.

The revenues and operating income of Stone Harbor were not material to the Company's results of operations for the three months ended March 31, 2022.

The revenues and operating income of Stone Harbor were not material to the Company's results of operations for the three and six months ended June 30, 2022.

Transaction consideration consisted of $ 28.2 million in cash paid at closing and $ 1.2 million in contingent consideration recorded at fair value, which represents future potential earn-out payments based on pre-established performance metrics related to revenue retention and revenue growth rates.

24 unchanged sentences

On October 1, 2021, the Company completed the acquisition of Westchester Capital Management, LLC ("Westchester"), which was accounted for in accordance with ASC 805.

The total transaction consideration of $ 169.3 million was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition.

The total transaction consideration of $ 169.3 million

was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition.

Goodwill of $ 23.0 million and intangible assets of $ 144.4 million were recorded as a result of the acquisition.

The Company expects $ 155.6 million of the purchase price to be tax deductible over 15 years.

The revenues and operating income of Westchester were not material to the Company's results of operations for the three months ended March 31, 2022.

The revenues and operating income of Westchester were not material to the Company's results of operations for the three and six months ended June 30, 2022.

Transaction consideration consisted of $ 156.8 million in cash and contingent consideration accounted for as a liability on the Company's Condensed Consolidated Balance sheet, which represents future potential earn-out payments based on pre-established performance metrics related to revenue growth rates.

Future contingent consideration payments will be made, if earned, in 2025 and 2026.

As of March 31, 2022, the contingent consideration balance was $ 12.5 million.

AllianzGI Strategic Partnership

On February 1, 2021, the Company finalized a strategic partnership with Allianz Global Investors U.S.

LLC ("AllianzGI"), pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AllianzGI's open-end, closed-end and retail separate account assets.

As of June 30, 2022, the contingent consideration balance was $ 15.4 million.

Fund Adoption and NFJ Investment Group

On February 1, 2021, the Company finalized an agreement with Allianz Global Investors U.S.

LLC ("AGI"), pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AGI's open-end, closed-end and retail separate account assets.

This transaction was classified as an asset acquisition and the cost of the acquisition was allocated to the assets acquired on the basis of their relative fair values.

Additionally, as part of the strategic partnership, AllianzGI’s Dallas-based Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group ("NFJ").

Additionally, as part of the transaction, AGI’s Dallas-based Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group ("NFJ").

The addition of NFJ was classified as a business combination under ASC 805 and assets acquired were recorded at fair value.

Assets acquired primarily consisted of definite-lived intangible assets representing 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 months ended March 31, 2022 or 2021.

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, 2022 or 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 from the transaction.

3 unchanged sentences

A payment of $ 33.0 million was made in the first quarter of 2022.

The estimated value of future revenue participation payments at March 31, 2022 was $ 117.0 million.

The estimated value of future revenue participation payments at June 30, 2022 was $ 117.0 million.

Goodwill and Intangible Assets, Net

3 unchanged sentences

Acquisitions 9,017

Balance at March 31, 2022 $ 347,423

Balance at June 30, 2022 $ 347,423

Below is a summary of intangible assets, net:

1 unchanged sentence

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

Balances of December 31, 2021 $ 755,576 $ ( 297,303 ) $ 458,273 $ 42,298 $ 500,571

Balances at December 31, 2021 $ 755,576 $ ( 297,303 ) $ 458,273 $ 42,298 $ 500,571

Additions 10,800 — 10,800 — 10,800

Intangible amortization — ( 29,286 ) ( 29,286 ) — ( 29,286 )

Balances of March 31, 2022 $ 766,376 $ ( 311,965 ) $ 454,411 $ 42,298 $ 496,709

Balances at June 30, 2022 $ 766,376 $ ( 326,589 ) $ 439,787 $ 42,298 $ 482,085

Definite-lived intangible asset amortization for the remainder of fiscal year 2022 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 March 31, 2022 and December 31, 2021 were as follows:

(in thousands) March 31, 2022 December 31, 2021

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 16, at June 30, 2022 and December 31, 2021 were as follows:

(in thousands) June 30, 2022 December 31, 2021

Investment securities - fair value $ 77,184 $ 80,335

7 unchanged sentences

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(in thousands) Cost Fair Value Cost Fair Value

3 unchanged sentences

Total investment securities - fair value $ 83,510 $ 77,184 $ 73,749 $ 80,335

For the three months ended March 31, 2022 and March 31, 2021, the Company recognized realized gains of $ 0.1 million and $ 0.8 million, respectively, on the sale of its investment securities - fair value.

For the three and six months ended June 30, 2022, the Company recognized net realized losses of $ 0.1 million and $ 30 thousand, respectively, on the sale of its investment securities - fair value.

For the three and six months ended June 30, 2021, the Company recognized net realized gains of $ 1.0 million and $ 1.8 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 March 31, 2022 and December 31, 2021 by fair value hierarchy level were as follows:

March 31, 2022

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, 2022 and December 31, 2021 by fair value hierarchy level were as follows:

June 30, 2022

(in thousands) Level 1 Level 2 Level 3 Total

32 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2022 2021 2022 2021

2 unchanged sentences

Reduction for payments made — — ( 19,520 ) —

Increase (reduction) of liability related to re-measurement of fair value 2,900 — 2,900 —

Contingent consideration, end of period $ 72,980 $ 63,500 $ 72,980 $ 63,500

1 unchanged sentence

Dividends Declared

On February 23, 2022, the Company declared a quarterly cash dividend of $ 1.50 per common share to be paid on May 13, 2022 to stockholders of record at the close of business on April 29, 2022.

On May 18, 2022, the Company declared a quarterly cash dividend of $ 1.50 per common share to be paid on August 15, 2022 to stockholders of record at the close of business on July 29, 2022.

Common Stock Repurchases

During the three months ended March 31, 2022, the Company repurchased 125,452 common shares, at a weighted average price of $ 239.10 per share, for a total cost, including fees and expenses, of $ 30.0 million, under its share repurchase program.

As of March 31, 2022, 403,997 shares remained available for repurchase.

During the three and six months ended June 30, 2022, the Company repurchased 221,903 and 347,355 common shares, respectively, at a weighted average price of $ 180.23 and $ 201.49 per share, respectively, for a total cost, including fees and expenses, of $ 40.0 million and $ 70.0 million, respectively, under its share repurchase program.

In May 2022, the Company's Board of Directors authorized an additional 750,000 shares to be repurchased under the share repurchase program.

As of June 30, 2022, 932,094 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 three months ended March 31, 2022 and 2021 were as follows:

The changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2022 and 2021 were as follows:

Foreign Currency

3 unchanged sentences

Net current-period other comprehensive income (loss) (1) ( 287 )

Balance at March 31, 2022 $ ( 30 )

Balance at June 30, 2022 $ ( 267 )

Foreign Currency

3 unchanged sentences

Net current-period other comprehensive income (loss) (1) 6

Balance at March 31, 2021 $ 35

(1) Consists of foreign currency translation adjustments, net of tax of $ 73 and $ — for the three months ended March 31, 2022 and 2021, respectively

Balance at June 30, 2021 $ 35

(1) Consists of foreign currency translation adjustments, net of tax of $ 249 and $( 2 ) for the six months ended June 30, 2022 and 2021, respectively.

Stock-Based Compensation

Pursuant to the Company's Omnibus Incentive and Equity Plan (the "Omnibus 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 March 31, 2022, 645,198 shares of common stock remain available for issuance of the 3,370,000 shares that are authorized for issuance under the Omnibus Plan.

stock options and unrestricted shares of common stock.

At June 30, 2022, 668,628 shares of common stock remain available for issuance of the 3,370,000 shares that are authorized for issuance under the Omnibus Plan.

Stock-based compensation expense is summarized as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

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

RSU activity, inclusive of PSUs, for the three months ended March 31, 2022 is summarized as follows:

RSU activity, inclusive of PSUs, for the six months ended June 30, 2022 is summarized as follows:

of Shares Weighted Average

3 unchanged sentences

Settled ( 183,995 ) $ 119.53

Outstanding at March 31, 2022 439,214 $ 166.24

For the three months ended March 31, 2022 and 2021, a total of 61,859 and 57,885 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 13.4 million and $ 15.2 million for the three months ended March 31, 2022 and 2021, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the net share settlements.

Outstanding at June 30, 2022 385,778 $ 173.99

For the six months ended June 30, 2022 and 2021, a total of 72,043 and 72,324 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 15.3 million and $ 19.3 million for the six months ended June 30, 2022 and 2021, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the 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 otherwise been issued as a result of the vesting.

During the three months ended March 31, 2022, the Company granted 30,516 PSUs that contain performance-based metrics in addition to a service condition.

During the six months ended June 30, 2022, the Company granted 30,516 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 March 31, 2022, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 41.1 million with a weighted-average remaining contractual life of 1.3 years.

As of June 30, 2022, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 35.2 million with a weighted-average remaining contractual life of 1.4 years.

Earnings (Loss) Per Share

4 unchanged sentences

The computation of basic and diluted EPS is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended

(in thousands, except per share amounts) 2022 2021 2022 2021

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 March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

The provision for income taxes reflected U.S.

federal, state and local taxes at an estimated effective tax rate of 30.0 % and 22.5 % for the three months ended March 31, 2022 and 2021, respectively.

The comparatively higher estimated effective tax rate for the three months ended March 31, 2022 was primarily due to valuation allowances recorded in the current year for the tax effects of unrealized losses on certain Company investments.

federal, state and local taxes at an estimated effective tax rate of 38.4 % and 22.6 % for the six months ended June 30, 2022 and 2021, respectively.

The higher estimated effective tax rate for the six months ended June 30, 2022 was primarily due to valuation allowances recorded in the current year for the tax effects of unrealized losses on certain Company investments.

Credit Agreement

The Company's credit agreement, as amended (the "Credit Agreement"), comprises (i) a $ 275.0 million seven-year term loan (the "Term Loan") expiring in September 2028, and (ii) a $ 175.0 million revolving credit facility with a five-year term expiring in September 2026.

During the three months ended March 31, 2022, the Company repaid $ 0.7 million outstanding under its Term Loan.

At March 31, 2022, $ 273.6 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 $ 7.7 million as of March 31, 2022.

During the six months ended June 30, 2022, the Company repaid $ 11.4 million outstanding under its Term Loan.

At June 30, 2022, $ 262.9 million was outstanding under the Term Loan, and the Company had no outstanding borrowings under its revolving credit facility.

Commitments and Contingencies

18 unchanged sentences

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

Redeemable noncontrolling interests for the three months ended March 31, 2022 included the following amounts:

Redeemable noncontrolling interests for the six months ended June 30, 2022 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

4 unchanged sentences

Net subscriptions (redemptions) and other 2,227 ( 5,297 ) ( 3,070 )

Balances at March 31, 2022 $ 9,433 $ 129,305 $ 138,738

Balances at June 30, 2022 $ 13,050 $ 126,097 $ 139,147

(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 on the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

VOEs VIEs VOEs VIEs

9 unchanged sentences

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

At March 31, 2022, the Company consolidated six CLOs.

At June 30, 2022, 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 their financial information.

1 unchanged sentence

Investments of CLOs

The CLOs held investments of $ 2.0 billion at March 31, 2022 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 $ 1.9 billion at June 30, 2022 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 10.0 %.

1 unchanged sentence

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

At March 31, 2022, the fair value of the senior bank loans was less than the unpaid principal balance by $ 52.4 million.

At March 31, 2022, there were no material collateral assets in default.

At June 30, 2022, the fair value of the senior bank loans was less than the unpaid principal balance by $ 113.6 million.

At June 30, 2022, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs held notes payable with a total value, at par, of $ 2.2 billion at March 31, 2022, consisting of senior secured floating rate notes payable with a par value of $ 2.0 billion and subordinated notes with a par value of $ 233.7 million.

The CLOs held notes payable with a total value, at par, of $ 2.2 billion at June 30, 2022, consisting of senior secured floating rate notes payable with a par value of $ 1.9 billion and subordinated notes with a par value of $ 233.7 million.

These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 0.8 % to 8.9 %.

3 unchanged sentences

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 March 31, 2022, 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:

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

(in thousands)

8 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:

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

(in thousands)

3 unchanged sentences

Fair Value Measurements of CIP

The assets and liabilities of CIP measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 by fair value hierarchy level were as follows:

As of March 31, 2022

The assets and liabilities of CIP measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 by fair value hierarchy level were as follows:

As of June 30, 2022

(in thousands) Level 1 Level 2 Level 3 Total

34 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 March 31, 2022 and December 31, 2021 approximated fair value due to the short-term nature of the instruments.

The securities purchase payable at June 30, 2022 and December 31, 2021 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

15 unchanged sentences

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 March 31, 2022, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 31.3 million .

At June 30, 2022, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 27.8 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