(10) REDEEMABLE LIMITED PARTNERS' CAPITAL

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, the redeemable limited partners' capital is classified as temporary equity in the mezzanine section of the accompanying condensed 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' 66% ownership of Premier LP at September 30, 2016. 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 required and the redeemable limited partners' capital is recorded at the redemption amount, which represents the greater of the book value or redemption amount per the Amended and Restated Limited Partnership Agreement of Premier LP (as amended, the "LP Agreement") in the mezzanine section of the accompanying condensed consolidated balance sheet at September 30, 2016. 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. For the three months ended September 30, 2016 and 2015 the Company recorded decreases to fair value for the redemption amount to redeemable limited partners' capital of $61.8 million and $466.8 million, respectively.

During the three months ended September 30, 2016, the Company recorded a reduction of $43.1 million to redeemable limited partners' capital to reflect the exchange of Class B common units and associated shares of Class B common stock by the member owners for a like number of shares of the Company's Class A common stock pursuant to the terms of the Exchange Agreement (see Note 12 - Earnings Per Share). The table below shows the changes in the redeemable limited partners' capital classified as temporary equity from June 30, 2016 to September 30, 2016 (in thousands):



	Receivables From Limited Partners			Redeemable Limited Partners' Capital			Accumulated Other Comprehensive Loss			Total Redeemable Limited Partners' Capital
June 30, 2016	$	(6,226	)	$	3,143,541		$	(85	)	$	3,137,230
Distributions applied to receivables from limited partners	558			—			—			558
Net income attributable to Premier LP	—			49,601			—			49,601
Distributions to limited partners	—			(22,137		)	—			(22,137		)
Realized loss on sale of marketable securities	—			—			85			85
Exchange of Class B common units for Class A common stock by member owners	—			(43,072		)	—			(43,072		)
Adjustment to redemption amount	—			(61,808		)	—			(61,808		)
September 30, 2016	$	(5,668	)	$	3,066,125		$	—		$	3,060,457

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 three months ended September 30, 2016.

During the three months ended September 30, 2016, no limited partners withdrew from Premier LP.

Since the Reorganization and IPO, Premier LP's distribution policy has required cash distributions as long as taxable income is generated and cash is available to distribute, on a quarterly basis prior to the 60^th day after the end of each calendar quarter. The Company makes quarterly distributions to its limited partners in the form of a legal partnership income distribution governed by the terms of the LP Agreement. These partner distributions are based on the limited partner's ownership in Premier LP and relative participation across Premier service offerings. While these distributions are based on relative participation across Premier service offerings, it is not based directly on revenue generated from an individual partner's participation as the distributions are based on the net income or loss of the partnership which encompass the operating expenses of the partnership as well as participation by non-owner members in Premier's service offerings. To the extent Premier LP incurred a net loss, the partners would not receive a quarterly distribution. As provided in the LP 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 August 25, 2016 to its limited partners of $22.5 million, which is equal to Premier LP's total taxable income for the three months ended June 30, 2016 multiplied by the Company's standalone effective combined federal, state and local income tax rate.

Premier LP expects to make a quarterly distribution on or before November 28, 2016 to its limited partners of $22.1 million, which is equal to Premier LP's total taxable income for the three months ended September 30, 2016 multiplied by the Company's standalone effective combined federal, state and local income tax rate. The distribution is reflected in limited partners' distribution payable in the accompanying condensed consolidated balance sheet at September 30, 2016.