Noncontrolling Interests

3 Months Ended

Mar. 31, 2020

Noncontrolling interests consist of equity owned by management of the Company’s majority-owned affiliate, DGHM. Net income attributable to noncontrolling interests in the Consolidated Statements of Operations represents the net income allocated to the noncontrolling interest owners of DGHM. Net income allocated to the noncontrolling interest owners was $6 thousand and $100 thousand for the three-month periods ended March 31, 2020 and 2019, respectively.

On the Consolidated Balance Sheets, noncontrolling interests are included as the sum of the capital and undistributed profits allocated to the noncontrolling interest owners. Typically, this balance is included in a company’s permanent shareholders’ equity in the Consolidated Balance Sheets. When the noncontrolling interest owners’ rights include certain redemption features, as described in ASC 480, Distinguishing Liabilities from Equity, such redeemable noncontrolling interests are classified as mezzanine equity and are not included in permanent shareholders’ equity. Due to the redemption features of the noncontrolling interests of DGHM, the Company had redeemable noncontrolling interests held in mezzanine equity in the accompanying Consolidated Balance Sheets of zero and $1.4 million as of March 31, 2020 and December 31, 2019, respectively. The aggregate amount of such redeemable noncontrolling equity interests are recorded at the estimated maximum redemption values. The Company had no noncontrolling interests included in permanent shareholder’s equity at March 31, 2020 and December 31, 2019.

The DGHM operating agreement provides the Company and/or the noncontrolling interest holders with contingent call and put options and mandatory repurchase obligations used for the orderly transfer of noncontrolling equity interests between the noncontrolling interest holders and the Company at contractually predetermined values. This agreement is discussed in Part II. Item 8. “Financial Statements and Supplementary Data - Note 14: Noncontrolling Interests” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The interests in DGHM take the form of limited liability company units. There are various events that could trigger a put, call or mandatory repurchase, such as a change in control, death, disability, retirement, resignation or termination. The terms of these rights and obligations are governed by the operating agreement of DGHM.

The following table presents a rollforward of the Company’s redeemable noncontrolling interests for the periods indicated:


	Three months ended
	March 31, 2020		March 31, 2019

	(In thousands)
Redeemable noncontrolling interests at beginning of period	$	1,383	$	2,526
Net income attributable to noncontrolling interests	6		100
Distributions	(6)		(100)
Purchases/(sales) of ownership interests	(64)		12

Amortization of equity compensation	8		17
Adjustments to fair value	(1,327)		(1,893)
Redeemable noncontrolling interests at end of period	$	—	$	662