REDEEMABLE LIMITED PARTNERS' CAPITAL

At June 30, 2013, redeemable limited partners' capital represents the limited partners' 99% ownership of Premier LP. Pursuant to the terms of the historical limited partnership agreement, Premier LP was required to repurchase a limited partner's interest in Premier LP upon the sale of such limited partner's shares of PHSI common stock, such limited partner's withdrawal from Premier LP or such limited partner's failure to comply with the applicable purchase commitments under the existing limited partnership agreement of Premier LP. As a result, at June 30, 2013, the redeemable limited partners' capital is classified as temporary equity in the mezzanine section of the consolidated balance sheets since (i) the withdrawal is at the option of each limited partner and (ii) the conditions of the repurchase are not solely within the Company's control.

Upon the consummation of the Reorganization and IPO, each limited partner's shares of PHSI were contributed for Class B common units of Premier LP. Commencing on October 31, 2014, and during each year thereafter, each limited partner has the cumulative right to exchange up to one-seventh of its initial allocation of Class B common units for shares of Class A common stock, cash or a combination of both, the form of consideration to be at the discretion of the Company's independent audit committee of the board of directors.

Redeemable limited partners' capital represents the member owners' 78% ownership of Premier LP at June 30, 2014. The limited partners hold the majority of the votes of the board of directors and any redemption or transfer or choice of consideration cannot be assumed to be within the control of the Company. As such, classification outside of permanent equity is still required and the redeemable limited partners' capital, which is recorded at the greater of the book value or redemption amount per the LP Agreement, is classified as temporary equity in the mezzanine section of the consolidated balance sheet at June 30, 2014. As previously discussed, the Company records redeemable limited partners' capital at the greater of the book value or redemption amount per the LP Agreement that the Company calculates as the fair value of all Class B common units, as if immediately exchangeable into Class A common shares.

The table below shows the changes in the redeemable limited partners' capital classified as temporary equity from June 30, 2011 to June 30, 2014 (in thousands):



	Receivables From Limited Partners			Redeemable Limited Partners' Capital			Accumulated Other Comprehensive Income (Loss)			Total Redeemable Limited Partners' Capital
June 30, 2011	$	(7,269	)	$	264,725		$	3		$	257,459
Issuance of redeemable limited partnership interest for notes receivable	(774		)	774			—			—
Distributions applied to receivables from limited partners	3,085			(1,214		)	—			1,871
Repurchase of redeemable limited partnership interest	—			(2,896		)	—			(2,896		)
Net income attributable to Premier LP	—			323,339			—			323,339
Distributions to limited partners	—			(300,194		)	—			(300,194		)
Net unrealized loss on marketable securities	—			—			(66		)	(66		)
June 30, 2012	$	(4,958	)	$	284,534		$	(63	)	$	279,513
Issuance of redeemable limited partnership interest for notes receivable	(61,859		)	61,859			—			—
Receipts on receivables from limited partners	8,143			—			—			8,143
Distributions applied to receivables from limited partners	2,103			(380		)	—			1,723
Repurchase of redeemable limited partnership interest	—			(14,268		)	—			(14,268		)
Net income attributable to Premier LP	—			369,189			—			369,189
Distributions to limited partners	—			(336,715		)	—			(336,715		)
Net unrealized loss on marketable securities	—			—			50			50
June 30, 2013	$	(56,571	)	$	364,219		$	(13	)	$	307,635
Issuance of redeemable limited partnership interest for notes receivable	(7,860		)	7,860			—			—
Receipts on receivables from limited partners	12,706			—			—			12,706
Distributions and reductions applied to receivables from limited partners	33,586			(28,009		)	—			5,577
Repurchase of redeemable limited partnership interest	—			(1,781		)	—			(1,781		)
Net income attributable to Premier LP	—			303,336			—			303,336
Distributions to limited partners	—			(348,277		)	—			(348,277		)
Purchase of Class A common units from Premier LP	—			247,742			—			247,742
Purchase of Class B common units from PHSI	—			30,072			—			30,072
Contribution of PHSI common stock in connection with the IPO	—			76,916			—			76,916
Acquisition of noncontrolling interest from members	—			(131,000		)	(3		)	(131,003		)
Net unrealized gain on marketable securities	—			—			163			163
Adjustment to redemption amount	—			2,741,588			—			2,741,588
June 30, 2014	$	(18,139	)	$	3,262,666		$	147		$	3,244,674

Receivables from limited partners represent amounts due from limited partners for their required capital in Premier LP. These receivables are either interest bearing notes issued to new limited partners or non-interest bearing loans (contribution loans) provided to existing limited partners and are reflected as a reduction in redeemable limited partners' capital so that amounts due from limited partners for capital are not reflected as redeemable limited partnership capital until paid. No interest bearing notes receivable were executed by limited partners of Premier LP during the year ended June 30, 2014.

During the year ended June 30, 2014, one limited partner withdrew from Premier LP. The limited partnership agreement provides for the redemption of the former limited partner's Class B common units that are not eligible for exchange in the form of a five-year, unsecured, non-interest bearing term promissory note, a cash payment equal to the present value of the redemption amount, or other mutually agreed upon terms. Partnership interest obligations to former limited partners are reflected in notes payable in the accompanying consolidated balance sheets.

Prior to the consummation of the Reorganization and IPO, Premier LP maintained a discretionary distribution policy in which semi-annual cash distributions were made each February attributable to the recently completed six months ended December 31 and each September attributable to the recently completed six months ended June 30. As provided in the then existing limited partnership agreement, the amount of actual cash distributed may have been reduced by the amount of such distributions used by limited partners to offset contribution loans or other amounts payable to the Company.

Premier LP distributed $214.5 million to its limited partners during the three months ended September 30, 2013 attributable to income generated through June 30, 2013, of which $2.8 million was retained to reduce limited partner notes payable and related interest obligations and an additional $3.4 million was retained to reduce other amounts payable by limited partners to the Company, resulting in a cash distribution of $208.3 million. During the three months ended December 31, 2013, Premier LP distributed cash of $72.6 million to its limited partners attributable to income generated through September 30, 2013.

Upon the consummation of the Reorganization and IPO, Premier LP amended its distribution policy in which cash distributions will be required, as long as taxable income is generated and cash is available to distribute, on a quarterly basis instead of a semi-annual basis due within 60 days of each calendar quarter-end. As provided in the limited partnership agreement, the amount of actual cash distributed may be reduced by the amount of such distributions used by limited partners to offset contribution loans or other amounts payable to the Company.

Premier LP made a quarterly distribution on May 29, 2014 to its limited partners of $21.4 million and a quarterly distribution on February 27, 2014 to its limited partners of $17.4 million. Each distribution was equal to the previous fiscal quarter's total taxable income for Premier LP multiplied by the effective combined federal, state and local income tax rate.

Premier LP made a quarterly distribution on August 28, 2014 to its limited partners of $22.4 million, which is reflected as a liability as of June 30, 2014 in the accompanying consolidated balance sheets. Consistent with the Company's discretionary distribution policy prior to the Reorganization and IPO, the Company had no such distribution payable at June 30, 2013.