Non-controlling Interest

9 Months Ended

Sep. 30, 2020

Noncontrolling Interest

Ownership

Switch, Inc. owns a minority economic interest in Switch, Ltd., where “economic interest” 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 nine months ended September 30, 2020, Switch, Inc. issued an aggregate of 18.3 million shares of Class A common stock 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. Such retired shares of Class B common stock may not be reissued. The redemptions occurred pursuant to the terms of the Switch operating agreement entered into in connection with the Company’s IPO.

In February 2020, Switch, Inc.’s Board of Directors authorized the repurchase by Switch, Ltd. of up to $20.0 million of its outstanding Common Units, which authorization expired unused on March 17, 2020. In addition, in May 2020, Switch, Inc.’s Board of Directors authorized the repurchase by Switch, Ltd. of up to $20.0 million of its outstanding Common Units held by Founder Members, with any unused amount from this authorization expiring on June 16, 2020. Switch, Ltd. elected to repurchase 1.1 million of its outstanding Common Units for $20.0 million from Founder Members under the May 2020 authorization. Pursuant to this repurchase, Switch, Inc. canceled and retired an equivalent amount of its shares of Class B common stock, and such shares may not be reissued. Repurchases under the Common Unit repurchase program were funded from Switch’s existing cash and cash equivalents. As of September 30, 2020, the Company had no repurchase authority remaining.

The ownership of the Common Units is summarized as follows:


	September 30, 2020			December 31, 2019
	Units	Ownership %		Units	Ownership %
	(units in thousands)
Switch, Inc.’s ownership of Common Units(1)	108,896	45.6	%	89,688	37.8	%
Noncontrolling interest holders’ ownership of Common Units(2)	129,674	54.4	%	147,859	62.2	%
Total Common Units	238,570	100.0	%	237,547	100.0	%

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(1) Common Units held by Switch, Inc. exclude 59,000 and 80,000 Common Units underlying unvested restricted stock awards as of September 30, 2020 and December 31, 2019, respectively.

(2) Common Units held by noncontrolling interest holders exclude 2.0 million and 3.2 million unvested Common Unit awards as of September 30, 2020 and December 31, 2019, respectively.

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.