Noncontrolling Interest

Ownership

Switch, Inc. owns an indirect minority economic interest in Switch, Ltd., where “economic interests” means the right to receive any distributions, whether cash, property or securities of Switch, Ltd., in connection with Common Units. Switch, Inc. presents interest held by noncontrolling interest holders within noncontrolling interest in the consolidated financial statements. During the years ended December 31, 2019 and 2018, Switch, Inc. issued an aggregate of 34.0 million shares and 19.1 million shares of Class A common stock, respectively, to members of Switch, Ltd. in connection with such members’ redemptions of an equivalent number of Common Units and corresponding cancellation and retirement of an equivalent number of Switch, Inc.’s Class B common stock. The redemptions occurred pursuant to the terms of the Switch Operating Agreement.

In August 2018, Switch, Inc.’s Board of Directors authorized a program by which Switch, Ltd. may repurchase up to $150.0 million of its outstanding Common Units for cash and Switch, Inc. will cancel a corresponding amount of its shares of Class B common stock. In November 2019, Switch, Inc.’s Board of Directors increased the repurchase authority by $5.0 million, with any unused amount from this increase expiring on December 31, 2019. The program was effective immediately upon authorization. The authorization may have been suspended or discontinued at any time without notice. Repurchases under the Common Unit repurchase program were funded from Switch’s existing cash and cash equivalents. During the years ended December 31, 2019 and 2018, Switch, Ltd. elected to repurchase an aggregate of 6.4 million and 6.1 million, respectively, of its outstanding Common Units for $91.0 million, of which $2.7 million was from Founder Members and $12.8 million was from an entity in which a member of the Company’s Board of Directors has a beneficial ownership interest, and $60.6 million, respectively, upon the exercise by certain members of their respective redemption right. Pursuant to these repurchases, Switch, Inc. canceled and retired an equivalent amount of its shares of Class B common stock, and such shares may not be reissued. As of December 31, 2019, the Company had no repurchase authority remaining.

The ownership of the Common Units is summarized as follows:



	December 31, 2019			December 31, 2018
	Units	Ownership %		Units	Ownership %
	(units in thousands)
Switch, Inc.’s ownership of Common Units⁽¹⁾	89,688	37.8	%	55,157	22.7	%
Noncontrolling interest holders’ ownership of Common Units⁽²⁾	147,859	62.2	%	187,440	77.3	%
Total Common Units	237,547	100.0	%	242,597	100.0	%

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(1)	Common Units held by Switch, Inc. as of December 31, 2019 exclude 80,000 Common Units underlying unvested restricted stock awards. Common Units held by Switch, Inc. as of December 31, 2018 exclude 61,000 Common Units underlying unvested restricted stock awards.


(2)	Common Units held by noncontrolling interest holders as of December 31, 2019 exclude 3.2 million unvested Common Unit awards. Common Units held by noncontrolling interest holders as of December 31, 2018 exclude 4.0 million unvested Common Unit awards.

The Company uses the weighted average ownership percentages during the period to calculate the income before income taxes attributable to Switch, Inc. and the noncontrolling interest holders of Switch, Ltd.

Distributions

Prior to the payment of Switch, Inc.’s Class A common stock dividends during the year ended December 31, 2019, Switch, Ltd. made cash distributions to holders of Common Units, excluding Switch, Inc., of $0.118 per Common Unit for a total distribution of $20.1 million. During the year ended December 31, 2018, Switch, Ltd. made cash distributions to holders of Common Units, excluding Switch, Inc., of $0.059 per Common Unit for a total distribution of $11.6 million.

During the year ended December 31, 2017, Switch, Ltd.’s Board of Managers for the period prior to the IPO and Switch, Inc.’s Board of Directors for the period subsequent to the IPO approved distributions of $185.4 million, comprised of $112.0 million to Switch, Ltd.’s members in accordance with their percentage interests (inclusive of $8.2 million distributed to members upon the accelerated vesting of Incentive Units in connection with the closing of the IPO) and $73.4 million to certain of Switch, Ltd.’s members with unreturned capital contributions in accordance with Switch, Ltd.’s then-current operating agreement.