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 year ended December 31, 2018, Switch, Inc. issued an aggregate of 19.1 million shares of Class A common stock to Members in connection with such Members’ redemptions of an equivalent number of Common Units and the corresponding cancellation 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. The program was effective immediately upon authorization. The authorization may be suspended or discontinued at any time without notice. Repurchases under the Common Unit repurchase program will be funded from Switch’s existing cash and cash equivalents. In August 2018, Switch, Ltd. repurchased 6.1 million of its outstanding Common Units for $60.6 million. Pursuant to this repurchase, Switch, Inc. canceled an equivalent amount of its shares of Class B common stock.

The ownership of the Common Units is summarized as follows:



	December 31,
	2018			2017
	Units	Ownership %		Units	Ownership %
	(units in thousands)
Switch, Inc.’s ownership of Common Units⁽¹⁾	55,157	22.7	%	35,938	14.5	%
Noncontrolling interest holders’ ownership of Common Units⁽²⁾	187,440	77.3	%	211,676	85.5	%
Total Common Units	242,597	100.0	%	247,614	100.0	%

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(1)	Common Units held by Switch, Inc. as of December 31, 2018 exclude 61,000 Common Units underlying unvested RSAs.


(2)	Common Units held by noncontrolling interest holders as of December 31, 2018 exclude 4.0 million unvested Common Unit awards. Common Units held by noncontrolling interest holders as of December 31, 2017 exclude 4.8 million unvested Common Unit awards and 110,000 vested and exercisable unit options.

The Company uses the weighted average ownership percentages during the period to calculate the income (loss) 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, 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.