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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 __________________________________________________________________________________________
FORM 10-Q
 __________________________________________________________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to         
Commission File Number 001-36092
 __________________________________________________________________________________________
Premier, Inc.
(Exact name of registrant as specified in its charter)
 ___________________________________________________________________________________________
Delaware
 
35-2477140
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
13034 Ballantyne Corporate Place
 
 
Charlotte,
North Carolina
 
28277
(Address of principal executive offices)
 
(Zip Code)
(704357-0022
(Registrant’s telephone number, including area code)
 __________________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A Common Stock, $0.01 Par Value
PINC
NASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒     No   ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒ No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
Smaller reporting company
 
Emerging growth company
 
(Do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No   ☒
As of October 29, 2020, there were 122,100,488 shares of the registrant’s Class A common stock, par value $0.01 per share outstanding.





TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
Item 5.
 




CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements made in this Quarterly Report that are not statements of historical or current facts, such as those under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in conditional or future tenses or that include terms such as “believes,” “belief,” “expects,” “estimates,” “intends,” “anticipates” or “plans” to be uncertain and forward-looking. Forward-looking statements may include comments as to our beliefs and expectations regarding future events and trends affecting our business and are necessarily subject to uncertainties, many of which are outside our control. Factors that could cause actual results to differ materially from those indicated in any forward-looking statement include, but are not limited to:
the impact of the continuing financial and operational uncertainty due to the coronavirus pandemic or other pandemics;
competition which could limit our ability to maintain or expand market share within our industry;
consolidation in the healthcare industry;
potential delays recognizing or increasing revenue if the sales cycle or implementation period takes longer than expected;
the impact on us if members of our group purchasing organization (“GPO”) programs reduce activity levels or terminate or elect not to renew their contracts on substantially similar terms or at all;
the rate at which the markets for our software as a service (“SaaS”) or licensed-based clinical analytics products and services develop;
the dependency of our members on payments from third-party payers;
our reliance on administrative fees that we receive from GPO suppliers;
our ability to maintain third-party provider and strategic alliances or enter into new alliances;
our ability to timely offer new and innovative products and services;
the portion of revenues we receive from our largest members;
risks and expenses related to future acquisition opportunities and integration of acquisitions;
financial and operational risks associated with non-controlling investments in other businesses or other joint ventures that we do not control, particularly early-stage companies;
potential litigation;
our reliance on Internet infrastructure, bandwidth providers, data center providers and other third parties and our own systems for providing services to our users;
data loss or corruption due to failures or errors in our systems and service disruptions at our data centers, or breaches or failures of our security measures;
the financial, operational and reputational consequences of cyber-attacks or other data security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us or our members or other third parties;
our ability to use, disclose, de-identify or license data and to integrate third-party technologies;
our use of “open source” software;
our dependency on contract manufacturing facilities located in various parts of the world;
inventory risk we face in the event of a potential material price decline for the personal protective equipment products we may have purchased at elevated market prices;
our ability to attract, hire, integrate and retain key personnel;
adequate protection of our intellectual property and potential claims against our use of the intellectual property of third parties;

3



potential sales and use tax liability in certain jurisdictions;
changes in tax laws that materially impact our tax rate, income tax expense, anticipated tax benefits, deferred tax assets, cash flows and profitability;
our indebtedness and our ability to obtain additional financing on favorable terms, including our ability to renew or replace our existing long-term credit facility at maturity;
fluctuation of our quarterly cash flows, revenues and results of operations;
changes and uncertainty in the political, economic or regulatory environment affecting healthcare organizations, including with respect to the status of the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act of 2010;
our compliance with complex international, federal and state laws governing financial relationships among healthcare providers and the submission of false or fraudulent healthcare claims;
interpretation and enforcement of current or future antitrust laws and regulations;
compliance with complex federal and state privacy, security and breach notification laws;
compliance with current or future laws, rules or regulations adopted by the Food & Drug Administration applicable to our software applications that may be considered medical devices;
our holding company structure and dependence on distributions from Premier Healthcare Alliance, L.P. (“Premier LP”);
different interests among our GPO members or between us and our GPO members;
the ability of our GPO members to exercise significant influence over us;
the terms of agreements between us and our GPO members;
the impact of payments required under the Unit Exchange and Tax Receivable Acceleration Agreements (the “Unit Exchange Agreements”) on our overall cash flow and our ability to fully realize the expected tax benefits to match such fixed payment obligations under the Unit Exchange Agreements;
provisions in our certificate of incorporation and bylaws and provisions of Delaware law that discourage or prevent strategic transactions, including a takeover of us;
failure to maintain an effective system of internal controls over financial reporting or an inability to remediate any weaknesses identified and the related costs of remediation;
the impact to us or the price of our Class A common stock if we cease paying dividends or reduce dividend payments from current levels;
the number of shares of Class A common stock repurchased by us pursuant to any Class A common stock repurchase program and the timing of any such repurchases;
the number of shares of Class A common stock eligible for sale after the issuance of Class A common stock in our August 2020 restructuring and the potential impact of such sales; and
the risk factors discussed under the heading “Risk Factors” under Item 1A of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (the “2020 Annual Report”), filed with the Securities and Exchange Commission (“SEC”).
More information on potential factors that could affect our financial results is included from time to time in the “Cautionary Note Regarding Forward-Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or similarly-captioned sections of this Quarterly Report and our other periodic and current filings made from time to time with the SEC, which are available on our website at http://investors.premierinc.com/ (the contents of which are not part of this Quarterly Report). You should not place undue reliance on any of our forward-looking statements which speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events or otherwise. Furthermore, we cannot guarantee future results, events, levels of activity, performance or achievements.

4



Certain Definitions
For periods prior to August 11, 2020, references in this Quarterly Report to "member owners" are to the participants in our GPO program that were also limited partners of Premier LP that held Class B Common Units of Premier LP and shares of our Class B Common Stock. For periods after August 11, 2020, references in this Quarterly Report to "member owners" are to the participants in our GPO program that, to our knowledge, hold shares of our Class A Common Stock. For periods on or after August 11, 2020, references in this Quarterly Report to "GPO member(s)" are to participants in our GPO program, including member owners.


5



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PREMIER, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
 
September 30, 2020
June 30, 2020
Assets
 
 
Cash and cash equivalents
$
120,416

$
99,304

Accounts receivable (net of $1,984 and $731 allowance for doubtful accounts, respectively)
131,783

135,063

Contract assets
245,099

215,660

Inventory
143,305

70,997

Prepaid expenses and other current assets
77,450

97,338

Total current assets
718,053

618,362

Property and equipment (net of $469,767 and $452,609 accumulated depreciation, respectively)
214,166

206,728

Intangible assets (net of $258,364 and $245,160 accumulated amortization, respectively)
404,218

417,422

Goodwill
942,870

941,965

Deferred income tax assets
827,676

430,025

Deferred compensation plan assets
50,499

49,175

Investments in unconsolidated affiliates
139,263

133,335

Operating lease right-of-use assets
55,316

57,823

Other assets
89,522

93,680

Total assets
$
3,441,583

$
2,948,515

 
 
 
Liabilities, redeemable limited partners' capital and stockholders' equity
 
 
Accounts payable
$
68,213

$
54,841

Accrued expenses
46,560

53,500

Revenue share obligations
170,345

145,777

Limited partners' distribution payable

8,012

Accrued compensation and benefits
50,076

73,262

Deferred revenue
33,607

35,446

Current portion of tax receivable agreements

13,689

Current portion of notes payable to members
67,837


Line of credit and current portion of long-term debt
154,372

79,560

Other liabilities
77,054

31,987

Total current liabilities
668,064

496,074

Long-term debt, less current portion
4,640

4,640

Tax receivable agreements, less current portion

279,981

Notes payable to members, less current portion
371,130


Deferred compensation plan obligations
50,499

49,175

Deferred tax liabilities

17,508

Deferred consideration, less current portion
83,700

112,917

Operating lease liabilities, less current portion
50,545

52,990

Other liabilities
78,424

75,658

Total liabilities
1,307,002

1,088,943

Commitments and contingencies (Note 16)


Redeemable limited partners' capital

1,720,309

Stockholders' equity:
 
 

6



 
September 30, 2020
June 30, 2020
Class A common stock, $0.01 par value, 500,000,000 shares authorized; 122,080,741 shares issued and outstanding at September 30, 2020 and 71,627,462 shares issued and outstanding at June 30, 2020
1,221

716

Class B common stock, $0.000001 par value, 600,000,000 shares authorized; 0 and 50,213,098 shares issued and outstanding at September 30, 2020 and June 30, 2020, respectively


Additional paid-in-capital
2,012,047

138,547

Retained earnings
121,313


Total stockholders' equity
2,134,581

139,263

Total liabilities, redeemable limited partners' capital and stockholders' equity
$
3,441,583

$
2,948,515

See accompanying notes to the unaudited condensed consolidated financial statements.

7



PREMIER, INC.
Condensed Consolidated Statements of Income and Comprehensive Income
(Unaudited)
(In thousands, except per share data)
 
Three Months Ended
 
September 30,
 
2020
2019
Net revenue:
 
 
Net administrative fees
$
132,645

$
172,403

Other services and support
98,827

81,886

Services
231,472

254,289

Products
115,415

48,121

Net revenue
346,887

302,410

Cost of revenue:
 
 
Services
38,750

47,536

Products
113,428

43,475

Cost of revenue
152,178

91,011

Gross profit
194,709

211,399

Operating expenses:
 
 
Selling, general and administrative
123,954

113,929

Research and development
576

379

Amortization of purchased intangible assets
13,204

13,044

Operating expenses
137,734

127,352

Operating income
56,975

84,047

Equity in net income of unconsolidated affiliates
5,927

3,607

Interest and investment (loss) income, net
(2,119
)
476

Loss on FFF put and call rights
(1,919
)
(7,839
)
Other income
3,683

262

Other income (expense), net
5,572

(3,494
)
Income before income taxes
62,547

80,553

Income tax (benefit) expense
(118,138
)
9,614

Net income from continuing operations
180,685

70,939

Income from discontinued operations, net of tax

390

Net income
180,685

71,329

Net income from continuing operations attributable to non-controlling interest
(11,845
)
(41,710
)
Net income from discontinued operations attributable to non-controlling interest

(197
)
Net income attributable to non-controlling interest in Premier LP
(11,845
)
(41,907
)
Adjustment of redeemable limited partners' capital to redemption amount
(26,685
)
694,309

Net income attributable to stockholders
$
142,155

$
723,731

 
 
 
Comprehensive income:
 
 
Net income
180,685

71,329

Less: comprehensive income attributable to noncontrolling interest
(11,845
)
(41,907
)
Comprehensive income attributable to stockholders
$
168,840

$
29,422

 
 
 
Weighted average shares outstanding:
 
 
Basic
99,575

62,785

Diluted
100,130

126,632

 
 
 

8



 
Three Months Ended
 
September 30,
 
2020
2019
Earnings per share attributable to stockholders:
 
 
Basic earnings per share attributable to stockholders
$
1.43

$
11.53

Diluted earnings per share attributable to stockholders
$
1.42

$
0.49

See accompanying notes to the unaudited condensed consolidated financial statements.

9



PREMIER, INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
Three Months Ended September 30, 2020 and 2019
(Unaudited)
(In thousands)
 
Class A
Common Stock
Class B
Common Stock
Treasury Stock
Additional Paid-In Capital
Retained Earnings
Total Stockholders' Equity
 
Shares
Amount
Shares
Amount
Shares
Amount
Balance at June 30, 2020
71,627

$
716

50,213

$


$

$
138,547

$

$
139,263

Balance at July 1, 2020
71,627

716

50,213




138,547


139,263

Impact of change in accounting principle







(1,228
)
(1,228
)
Adjusted balance at July 1, 2020
71,627

716

50,213




138,547

(1,228
)
138,035

Exchange of Class B common units for Class A common stock by member owners
70

1

(70
)



2,436


2,437

Increase in additional paid-in capital related to quarterly exchange by member owners, including associated TRA revaluation






37,319


37,319

Increase in additional paid-in capital related to final exchange by member owners, including TRA termination






517,526


517,526

Issuance of Class A common stock under equity incentive plan
241

2





642


644

Stock-based compensation expense






7,229


7,229

Repurchase of vested restricted units for employee tax-withholding






(3,023
)

(3,023
)
Net income







180,685

180,685

Net income attributable to non-controlling interest in Premier LP







(11,845
)
(11,845
)
Adjustment of redeemable limited partners' capital to redemption amount







(26,685
)
(26,685
)
Reclassification of redeemable limited partners' capital to permanent equity






1,750,840

3,767

1,754,607

Final exchange of Class B common units for Class A common stock by member owners
50,143

502

(50,143
)



(502
)


Early Termination Payments to former member owners






(438,967
)

(438,967
)
Dividends ($0.19 per share)







(23,381
)
(23,381
)
Balance at September 30, 2020
122,081

$
1,221


$


$

$
2,012,047

$
121,313

2,134,581

 
Class A
Common Stock
Class B
Common Stock
Treasury Stock
Additional Paid-In Capital
Accumulated Deficit
Total Stockholders’ Deficit
 
Shares
Amount
Shares
Amount
Shares
Amount
Balance at June 30, 2019
61,938

$
644

64,548

$

2,419

$
(87,220
)
$

$
(775,674
)
$
(862,250
)
Balance at July 1, 2019
61,938

644

64,548


2,419

(87,220
)

(775,674
)
(862,250
)
Impact of change in accounting principle







(899
)
(899
)
Adjusted balance at July 1, 2019
61,938

644

64,548


2,419

(87,220
)

(776,573
)
(863,149
)
Exchange of Class B common units for Class A common stock by member owners
1,311


(1,311
)

(1,311
)
47,258

3,534


50,792

Redemption of limited partners


(782
)






Increase in additional paid-in capital related to quarterly exchange by member owners, including associated TRA revaluation






12,272


12,272

Issuance of Class A common stock under equity incentive plan
485

5





1,749


1,754

Treasury stock
(1,055
)



1,055

(35,649
)


(35,649
)
Stock-based compensation expense






3,704


3,704

Repurchase of vested restricted units for employee tax-withholding






(8,311
)

(8,311
)
Net income







71,329

71,329

Net income attributable to non-controlling interest in Premier LP







(41,907
)
(41,907
)
Adjustment of redeemable limited partners' capital to redemption amount






(12,948
)
707,257

694,309

Balance at September 30, 2019
62,679

$
649

62,455

$

2,163

$
(75,611
)
$

$
(39,894
)
(114,856
)
See accompanying notes to the unaudited condensed consolidated financial statements.

10



PREMIER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 
Three Months Ended September 30,
 
2020
2019
Operating activities
 
 
Net income
$
180,685

$
71,329

Adjustments to reconcile net income to net cash provided by operating activities:


Income from discontinued operations, net of tax

(390
)
Depreciation and amortization
30,678

37,579

Equity in net income of unconsolidated affiliates
(5,927
)
(3,607
)
Deferred income taxes
(129,543
)
(1,985
)
Stock-based compensation
7,229

3,704

Remeasurement of tax receivable agreement liabilities

4,674

Loss on FFF put and call rights
1,919

7,839

Other
201

2,562

Changes in operating assets and liabilities, net of the effects of acquisitions:


Accounts receivable, inventories, prepaid expenses and other assets
(45,469
)
6,972

Contract assets
(29,568
)
(8,768
)
Accounts payable, accrued expenses, deferred revenue, revenue share obligations and other liabilities
20,577

(23,830
)
Net cash provided by operating activities from continuing operations
30,782

96,079

Net cash provided by operating activities from discontinued operations

11,196

Net cash provided by operating activities
30,782

107,275

Investing activities


Purchases of property and equipment
(24,982
)
(21,983
)
Investments in unconsolidated affiliates

(4,665
)
Proceeds from sale of assets

3,632

Other
29

(5,250
)
Net cash used in investing activities
(24,953
)
(28,266
)
Financing activities


Payments made on notes payable
(188
)
(1,513
)
Proceeds from credit facility
100,000


Payments on credit facility
(25,000
)
(25,000
)
Distributions to limited partners of Premier LP
(9,949
)
(13,202
)
Payments to limited partners of Premier LP related to tax receivable agreements
(24,218
)
(17,425
)
Cash dividends paid
(23,195
)

Repurchase of Class A common stock (held as treasury stock)

(31,123
)
Other
(2,167
)
(6,557
)
Net cash provided by (used in) financing activities
15,283

(94,820
)
Net increase (decrease) in cash and cash equivalents
21,112

(15,811
)
Cash and cash equivalents at beginning of year
99,304

141,055

Cash and cash equivalents at end of period
$
120,416

$
125,244

See accompanying notes to the unaudited condensed consolidated financial statements.

11



PREMIER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION
Organization
Premier, Inc. (“Premier” or the “Company”) is a publicly-held, for-profit Delaware corporation located in the United States. The Company is a holding company with no material business operations of its own. The Company’s primary asset is its equity interest in its wholly-owned subsidiary Premier Services, LLC, a Delaware limited liability company (“Premier GP”). Premier GP is the sole general partner of Premier Healthcare Alliance, L.P. (“Premier LP”), a California limited partnership. The Company conducts substantially all of its business operations through Premier LP and its other consolidated subsidiaries. The Company, together with its subsidiaries and affiliates, is a leading healthcare performance improvement company that unites hospitals, health systems, physicians and other healthcare providers to improve and innovate in the clinical, financial and operational areas of their businesses to meet the demands of a rapidly evolving healthcare industry.
The Company’s business model and solutions are designed to provide its members access to scale efficiencies, spread the cost of their development, provide actionable intelligence derived from anonymized data in the Company’s enterprise data warehouse, mitigate the risk of innovation and disseminate best practices to help the Company’s member organizations succeed in their transformation to higher quality and more cost-effective healthcare.
The Company, together with its subsidiaries and affiliates, delivers its integrated platform of solutions through two business segments: Supply Chain Services and Performance Services. See Note 17 - Segments for further information related to the Company’s reportable business segments. The Supply Chain Services segment includes one of the largest healthcare group purchasing organization (“GPO”) programs in the United States, supply chain co-management and direct sourcing activities. The Performance Services segment, through its development, integration and delivery of technology with wrap-around service offerings, includes one of the largest clinical analytics and consulting services businesses in the United States focused on healthcare providers. The Company’s software as a service (“SaaS”) and licensed-based clinical analytics products utilize the Company’s comprehensive data set to provide actionable intelligence to its members, enabling them to benchmark, analyze and identify areas of improvement across the three main categories of cost management, quality and safety, and value-based care. While leveraging these tools, the Company also combines its consulting services and technology-enabled performance improvement collaboratives to provide a more comprehensive and holistic customer value proposition and overall experience. The Performance Services segment also includes the Company’s direct to employer initiative and insurance management services.
Company Structure and Restructuring
The Company, through Premier GP, the sole general partner of Premier LP, and Premier Services II, LLC, a Delaware limited liability company, wholly-owned subsidiary of the Company and the sole limited partner of Premier LP, held 100% interest in Premier LP at September 30, 2020. At June 30, 2020, the Company held 59% sole general partner interest in Premier LP. In addition to their equity ownership interest in the Company, our member owners held a 0% and 41% limited partner interest in Premier LP at September 30, 2020 and June 30, 2020, respectively. On July 31, 2020, after the resignation of three directors affiliated with the Company’s GPO members, the Board of Directors consisted of fifteen (15) directors, comprised of eight (8) independent directors, six (6) member-directors and the Company’s Chief Executive Officer, thus having a majority of independent directors on the Board of Directors. Since the member-directors no longer comprised a majority of the Board of Directors, as of July 31, 2020, the limited partner’s redemption feature was under the control of the Company (not the holders of Class B common units). As a result, $1.8 billion representing the fair value of redeemable limited partners’ capital at July 31, 2020 was reclassified from temporary equity in the mezzanine section of the Condensed Consolidated Balance Sheets to additional paid in capital as a component of permanent equity.
On August 11, 2020, the Company entered into an Agreement and Plan of Merger dated as of August 11, 2020 (the “Merger Agreement”), by and among the Company, Premier LP and BridgeCo, LLC (“BridgeCo”), a wholly owned subsidiary of Premier Services, LLC formed for the sole purpose of merging with and into Premier LP. Pursuant to the Merger Agreement, effective August 11, 2020, (i) BridgeCo merged with and into Premier LP, with Premier LP being the surviving entity (the “Merger”), and (ii) each of the issued and outstanding Class B common units was canceled and converted automatically into a right to receive one share of the Company’s Class A common stock. In conjunction with the Merger, all of the issued and outstanding shares of Class B common stock of the Company beneficially held by the former limited partners of Premier LP (individually a “LP” and collectively, the “LPs”) were canceled in accordance with the Company’s Certificate of Incorporation. No statutory dissenters’ rights were exercised in connection with the Merger. The exchange agreement (“Exchange Agreement”), which allowed the Company to redeem Class B common units for cash or Class A common stock at its discretion, was terminated in connection with the restructuring activity discussed above.

12



Furthermore, on August 10, 2020, the Company exercised its right to terminate the Tax Receivable Agreement (“TRA”). See Note 9 - Debt and Notes Payable and Note 14 - Income Taxes for further information.
Basis of Presentation and Consolidation
Basis of Presentation
At September 30, 2020, the Company was wholly-owned by public investors, which include member owners that received shares of Class A Stock in connection with the aforementioned restructuring as well previous exchanges of Class B common units and associated Class B common stock.
At June 30, 2020, the member owners’ interest in Premier LP is reflected as redeemable limited partners’ capital in the Company’s accompanying Condensed Consolidated Balance Sheets, and the limited partners’ proportionate share of income in Premier LP is reflected within net income attributable to non-controlling interest in Premier LP and within comprehensive income attributable to non-controlling interest in Premier LP in the Company’s accompanying Condensed Consolidated Statements of Income and Comprehensive Income.
At June 30, 2020, public investors, which include member owners that have received shares of Class A common stock in connection with previous exchanges of their Class B common units and associated Class B common shares, owned 59% of the Company’s outstanding common stock through their ownership of Class A common stock. The member owners owned 41% of the Company’s combined Class A and Class B common stock through their ownership of Class B common stock.
Principles of Consolidation
The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC and in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries over which the Company exercised control and when applicable, entities for which the Company had a controlling financial interest or was the primary beneficiary. All intercompany transactions have been eliminated upon consolidation. Accordingly, certain information and disclosures normally included in annual financial statements have been condensed or omitted. The accompanying condensed consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, including normal recurring adjustments. The Company believes that the disclosures are adequate to make the information presented not misleading and should be read in conjunction with the audited consolidated financial statements and related footnotes contained in the 2020 Annual Report.

13



Supplementary Cash Flows Information
The following table presents supplementary cash flows information for the three months ended September 30, 2020 and 2019:
 
Three Months Ended September 30,
 
2020
2019
Supplemental schedule of non-cash investing and financing activities:
 
 
Increase (decrease) in redeemable limited partners' capital for adjustment to fair value, with offsetting decrease (increase) in stockholders' equity
$
26,685

$
(694,309
)
Decrease in redeemable limited partners' capital, with offsetting increase in stockholders' equity related to quarterly exchanges by member owners
(2,437
)
(50,792
)
Net increase in deferred tax assets related to departures and quarterly exchanges by member owners and other adjustments
331

7,140

Net increase in deferred tax assets related to final exchange by member owners
284,852


Reclassification of redeemable limited partners' capital to additional paid in capital
1,754,607


Decrease in additional paid-in capital related to notes payable to members, net of discounts
438,967


Increase in additional paid-in capital related to departures and quarterly exchanges by member owners and other adjustments
37,319

12,272

Increase in additional paid-in capital related to final exchange by member owners
517,526


Increase in treasury stock related to a payable as a result of applying trade date accounting when recording the repurchase of Class A common stock

4,526

Accrued dividend equivalents
186



Variable Interest Entities
At September 30, 2020, as a result of the aforementioned restructuring, Premier LP no longer meets the definition of a variable interest entity (“VIE”), as defined in Accounting Standards Codification (“ASC”) Topic 810. The results of operations of Premier LP are included in the consolidated financial statements.
At June 30, 2020, Premier LP was a VIE as the limited partners did not have the ability to exercise a substantive removal right with respect to the general partner. The Company, through Premier GP, had the exclusive power and authority to manage the business and affairs of Premier LP, to make all decisions with respect to driving the economic performance of Premier LP, and had both an obligation to absorb losses and a right to receive benefits. As such, the Company was the primary beneficiary of the VIE and consolidated the operations of Premier LP under the Variable Interest Model.
The assets and liabilities of Premier LP at June 30, 2020, including assets and liabilities of discontinued operations, consisted of the following (in thousands):
 
June 30, 2020
Assets
 
Current
$
610,990

Noncurrent
1,900,137

Total assets of Premier LP
$
2,511,127

 
 
Liabilities
 
Current
$
580,430

Noncurrent
296,801

Total liabilities of Premier LP
$
877,231


14



Net income attributable to Premier LP, including income and expense that has been classified as discontinued operations, during the three months ended September 30, 2019 was as follows (in thousands):
 
Three Months Ended September 30, 2019
Premier LP net income
$
84,140

Premier LP’s cash flows, including cash flows attributable to discontinued operations, for the three months ended September 30, 2019 consisted of the following (in thousands):
 
Three Months Ended September 30, 2019
Net cash provided by (used in):
 
Operating activities
$
92,634

Investing activities
(28,266
)
Financing activities
(79,150
)
Net decrease in cash and cash equivalents
(14,782
)
Cash and cash equivalents at beginning of year
131,210

Cash and cash equivalents at end of period
$
116,428


Use of Estimates in the Preparation of Financial Statements
The preparation of the Company’s condensed consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Significant estimates are evaluated on an ongoing basis, including estimates for net administrative fees revenue, other services and support revenue, contract assets, deferred revenue, contract costs, allowances for doubtful accounts, useful lives of property and equipment, stock-based compensation, deferred tax balances including valuation allowances on deferred tax assets, uncertain tax positions, values of investments not publicly traded, projected future cash flows used in the evaluation of asset impairments, values of put and call rights, values of earn-out liabilities and the allocation of purchase prices. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
(2) SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes to the Company’s significant accounting policies as described in the 2020 Annual Report, except as described below.
Accounts Receivable
Financial instruments, other than marketable securities, that subject the Company to potential concentrations of credit risk consist primarily of the Company's receivables. Receivables consist primarily of amounts due from hospital and healthcare system members for services and products. The Company maintains an allowance for expected credit losses. This allowance is an estimate and is regularly evaluated by the Company for adequacy by taking into consideration factors such as past experience, credit quality of the member base and age of the receivable balances, both individually and in the aggregate. As receivables are generally due within one year, changes to economic conditions are not expected to have a significant impact on our estimate of expected credit losses. However, we will monitor economic conditions on a quarterly basis to determine if any adjustments are deemed necessary. Provisions for the allowance for expected credit losses attributable to bad debt are recorded in selling, general and administrative expenses in the accompanying Consolidated Statements of Income and Comprehensive Income. Accounts deemed uncollectible are written off, net of actual recoveries. If circumstances related to specific customers change, the Company's estimate of the recoverability of receivables could be further adjusted.
Contract Assets
Supply Chain Services contract assets represents estimated customer purchases on supplier contracts for which administrative fees have been earned, but not collected. Performance Services contract assets represents revenue earned for services provided but

15



which the company is not contractually able to bill as of the end of the respective reporting period. Historically, we have not recognized a provision for contract assets. Under ASC Topic 326, we include Performance Services’ contract assets in our reserving process and assess the risk of loss similar to our methodology of the Company’s receivables, since the contract assets are reclassified to receivables when we become entitled to payment. Accordingly, a reserve is applied upon recognition of the contract asset.
Recently Adopted Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, (“ASU 2016-13”), which modifies the measurement of expected credit losses on certain financial instruments and the timing of when such losses are recorded. The Company adopted ASU 2016-13 effective July 1, 2020 on a modified retrospective basis which resulted in an adjustment to retained earnings. The implementation of ASU 2016-13 did not have a material effect on the Company’s condensed consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU 2018-13”), which improves the effectiveness of fair value measurement disclosures by eliminating, adding and modifying certain disclosure requirements for fair value measurements as part of its disclosure framework project. Entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but public companies will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. The Company adopted ASU 2018-13 effective July 1, 2020 and has updated the financial statements accordingly to reflect the updates in the disclosure requirements (see Note 6 - Fair Value Measurements).
In August 2018, the FASB issued ASU 2018-15, Intangibles- Goodwill and Other-Internal Use Software (Topic 350): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, (“ASU 2018-15”), which requires customers in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal use software guidance in ASC 350-40 to determine which implementation costs to capitalize or expense. The Company adopted ASU 2018-15 effective July 1, 2020 on a prospective basis. The implementation of ASU 2018-15 did not have a material effect on the Company’s condensed consolidated financial statements.
Recently Issued Accounting Standards Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, ("ASU 2020-04"), which provides optional expedients for contract modification that replace a reference rate affected by reference rate reform and contemporaneous modifications of other contract terms related to the replacement of the reference rate. Additionally, ASU 2020-04 allows companies to make a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity at any time between March 12, 2020 and December 21, 2022. The amendments are effective during the period of March 12, 2020 through December 31, 2022. The Company does not expect the adoption to have a material impact on the Company’s condensed consolidated financial statements and related disclosures.
(3) BUSINESS ACQUISITIONS
Acquisition of Health Design Plus, LLC
On May 4, 2020, the Company, through its consolidated subsidiary Premier Healthcare Solutions, Inc. (“PHSI”), acquired 97% of the equity of Health Design Plus, LLC (“HDP”) for an adjusted purchase price of $24.0 million, giving effect to certain purchase price adjustments provided for in the purchase agreement. The transaction was funded with borrowings under the Company’s Credit Facility (as defined below). The initial purchase price allocation is preliminary and subject to changes in the fair value of working capital. 
Acquisition of Acurity and Nexera Assets
On February 28, 2020, the Company acquired substantially all of the assets and certain liabilities of Acurity, Inc. and Nexera, Inc. (the “Acurity and Nexera asset acquisition”). The Company agreed to pay an aggregate amount of $291.5 million, of which $166.1 million was paid at closing with borrowings under the Credit Facility. An additional $120.0 million will be paid in four equal annual installments of $30.0 million on or about June 30, 2021, 2022, 2023 and 2024. An additional $4.7 million was paid to GNYHA during the three months ended September 30, 2020.
In addition, the asset purchase agreement provides an earn-out opportunity for Acurity, Inc. of up to $30.0 million based upon the Company’s achievement of a range of member renewals on terms to be agreed to by the Company and GNYHA based on prevailing market conditions in December 2023. As of September 30, 2020, the fair value of the earn-out liability was $22.7 million (see Note 6 - Fair Value Measurements).

16



Prior to entering into the Purchase Agreement, Acurity, Inc. agreed to provide one-time rebates of $93.8 million to certain of its then members based on their pre-closing purchasing volume. The Company concluded that these one-time rebates should be excluded from the purchase price and capitalized as prepaid contract administrative fee share at closing. As a result, the total fair value of consideration paid as part of the acquisition totaled $202.6 million.
The purchase price allocation was finalized during the three months ended September 30, 2020.
Acquisition of Medpricer
On October 28, 2019, the Company, through its consolidated subsidiary Premier Supply Chain Improvement, Inc (“PSCI”), acquired all of the outstanding capital stock in Medpricer.com, Inc. (“Medpricer”) for an adjusted purchase price of $38.5 million. The transaction was funded with borrowings under the Credit Facility.
The acquisition provides the sellers an earn-out opportunity of up to $5.0 million based on Medpricer’s achievement of a revenue target for the calendar year ended December 31, 2020. As of September 30, 2020, the fair value of the earn-out liability was $0.3 million.
The purchase price allocation was finalized during the three months ended September 30, 2020.
(4) DISCONTINUED OPERATIONS AND EXIT ACTIVITIES
In connection with the sale of certain assets and wind down and exit from the specialty pharmacy business, the Company met the criteria for classifying certain assets and liabilities of its specialty pharmacy business as a discontinued operation as of June 30, 2019. Prior to its classification as a discontinued operation, the specialty pharmacy business was included as part of the Supply Chain Services segment.
As of September 30, 2020, the Company had completed the wind down and exit from the specialty pharmacy business and had no net income or loss from discontinued operations for the three months ended September 30, 2020.
The following table summarizes the major components of net income from discontinued operations (in thousands):
 
Three Months Ended September 30, 2019
Net revenue
$

Cost of revenue

Gross profit

Selling, general and administrative expense
1,936

Operating expenses
1,936

Operating loss from discontinued operations
(1,936
)
Net gain on disposal of assets
2,409

Income from discontinued operations before income taxes
473

Income tax expense
83

Income from discontinued operations, net of tax
390

Net income from discontinued operations attributable to non-controlling interest in Premier LP
(197
)
Net income from discontinued operations attributable to stockholders
$
193



17



(5) INVESTMENTS
Investments in Unconsolidated Affiliates
The Company’s investments in unconsolidated affiliates consisted of the following (in thousands):
 
Carrying Value
 
Equity in Net Income
 
 
 
 
Three Months Ended September 30,
 
September 30, 2020
June 30, 2020
 
2020
2019
FFF
$
113,778

$
109,204

 
$
4,574

$
3,605

Prestige
12,246

11,194

 
1,052


Other investments
13,239

12,937

 
301

2

Total investments
$
139,263

$
133,335

 
$
5,927

$
3,607


The Company, through PSCI, held a 49% interest in FFF Enterprises, Inc. (“FFF”) through its ownership of stock of FFF at September 30, 2020 and June 30, 2020. The Company records the fair value of the FFF put and call rights in the accompanying Condensed Consolidated Balance Sheets (see Note 6 - Fair Value Measurements for additional information). The Company accounts for its investment in FFF using the equity method of accounting and includes the investment as part of the Supply Chain Services segment.
The Company, through PSCI along with 16 health systems hold a minority interest in Prestige Ameritech Ltd. (“Prestige”). The Company, through its consolidated subsidiary, PRAM Holdings, LLC (“PRAM”), held an approximate 20% interest in Prestige through its ownership of limited partnership units at September 30, 2020. The Company owns approximately 26% of the membership interest of PRAM. The Company accounts for its investment in Prestige using the equity method of accounting and includes the investment as part of the Supply Chain Services segment.
(6) FAIR VALUE MEASUREMENTS
Recurring Fair Value Measurements
The following tables provide for the periods presented a summary of the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands):
September 30, 2020
Fair Value of Financial Assets and Liabilities
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs
(Level 3)
Cash equivalents
$
75

$
75

$

$

Deferred compensation plan assets
53,904

53,904



Total assets
53,979

53,979



Earn-out liabilities
23,017



23,017

FFF put right
38,677



38,677

Total liabilities
$
61,694

$

$

$
61,694


June 30, 2020
Fair Value of Financial Assets and Liabilities
Quoted Prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs
(Level 3)
Cash equivalents
$
13,272

$
13,272

$

$

Deferred compensation plan assets
52,538

52,538



Total assets
65,810

65,810



Earn-out liability
33,151



33,151

FFF put right
36,758



36,758

Total liabilities
$
69,909

$

$

$
69,909



18


Deferred compensation plan assets consisted of highly liquid mutual fund investments, which were classified as Level 1. The current portion of deferred compensation plan assets ($3.4 million at September 30, 2020 and June 30, 2020) was included in prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets.
Financial Instruments Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)
FFF put and call rights
In connection with the Company’s equity investment in FFF, the Company entered into a shareholders’ agreement that provides, among other things, that the majority shareholder of FFF holds a put right that requires the Company to purchase the majority shareholder’s interest in FFF, on an all or nothing basis, on or after April 15, 2023. Any required purchase by the Company upon exercise of the put right by FFF’s majority shareholder must be made at a per share price equal to FFF’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) over the twelve calendar months prior to the purchase date multiplied by a market adjusted multiple, adjusted for any outstanding debt and cash and cash equivalents (“Equity Value per Share”). In addition, in the event of a Key Man Event (generally defined in the shareholders’ agreement as the resignation, termination for cause, death or disability of the majority shareholder), the Company has a call right that requires the majority shareholder to sell its remaining interest in FFF to the Company, and is exercisable at any time within the later of 180 calendar days after (i) the date of a Key Man Event or (ii) January 30, 2021. As of September 30, 2020 and June 30, 2020, the call right had zero value. In the event that either of these rights are exercised, the purchase price for the additional interest in FFF will be at a per share price equal to the Equity Value per Share.
The fair values of the FFF put and call rights were determined using a Monte Carlo simulation in a risk-neutral framework based on the Equity Value per Share calculation using unobservable inputs, which included the estimated FFF put and call rights’ expiration dates, the forecast of FFF’s EBITDA and enterprise value over the option period, forecasted movements in the overall market and the likelihood of a Key Man Event. FFF’s enterprise value over the option period was valued utilizing expected annual EBITDA and Revenue growth rates, among other assumptions. The resulting FFF enterprise value was an assumption utilized in the valuation of the put and call rights. Significant increases to weighted average cost of capital, business enterprise value, correlation and credit spread could significantly decrease the liability while a significant increase to asset volatility, EBITDA growth rate and revenue growth rate could significantly increase the liability.
The Company utilized the following assumptions to estimate the fair value of FFF Put and Call Rights:
 
September 30, 2020
June 30, 2020
Annual EBITDA Growth Rate
2.5-26.5%

2.5-26.5%

Annual Revenue Growth Rate
1.4-14.4%

1.4-14.4%

Correlation
80.0
%
80.0
%
Weighted Average Cost of Capital
14.5
%
14.5
%
Asset Volatility
29.0
%
28.0
%
Credit Spread
1.4
%
1.7
%

The significant assumptions using the Monte Carlo simulation approach for valuation of the Put and Call Rights are:
(i)
Annual EBITDA Growth Rate: The forecasted EBITDA growth range over 7 years;
(ii)
Annual Revenue Growth Rate: The forecasted Revenue growth range over 7 years;
(iii)
Correlation: The estimated correlation between future Business Enterprise Value and EBITDA of FFF;
(iv)
Weighted Average Cost of Capital: The expected rate paid to security holders to finance debt and equity;
(v)
Asset volatility: Based on the asset volatility of guideline public companies in the healthcare industry; and
(vi)
Credit Spread: Based on term-matched BBB yield curve.
The Company recorded the FFF put and call rights within long-term other liabilities and long-term other assets, respectively, within the accompanying Condensed Consolidated Balance Sheets. Net changes in the fair values of the FFF put and call rights were recorded within other expense in the accompanying Condensed Consolidated Statements of Income and Comprehensive Income.
Earn-out liabilities
Earn-out liabilities were established in connection with the Acurity and Nexera asset acquisition as well as the Stanson Health, Inc. (“Stanson”) and Medpricer acquisitions. The earn-out liabilities associated with the Acurity and Nexera asset acquisition and the Medpricer acquisition were classified as Level 3 of the fair value hierarchy. The earn-out associated with the Stanson acquisition

19


is no longer measured at fair value as of September 30, 2020 given Management’s anticipation of Stanson achieving all of the requirements in order to obtain the full pay out of the earn-out.
The earn-out liability arising from expected earn-out payments related to the Acurity and Nexera asset acquisition were measured on the acquisition date using a probability-weighted expected payment model and are remeasured periodically due to changes in management’s estimates of the number of member renewals and market conditions. In determining the fair value of the contingent liabilities, management reviews the current results of the acquired business, along with projected results for the remaining earn-out period, to calculate the expected earn-out payment to be made based on the contractual terms set out in the respective acquisition agreement. The Acurity and Nexera earn-out liabilities utilized a credit spread of 1.0% at September 30, 2020 and June 30, 2020. As of September 30, 2020 and June 30, 2020, the undiscounted range of outcomes is between $0 and $30.0 million. A significant decrease in the probability could result in a significant decrease in the value of the earn-out liability. The fair value of the Acurity and Nexera earn-out liability at September 30, 2020 and June 30, 2020 is $22.7 million.
Acurity and Nexera Earn-out (a) 
Input Assumptions
As of September 30, 2020
As of June 30, 2020
Probability of Transferred Member Renewal Percentage < 50%
5.0
%
5.0
%
Probability of Transferred Member Renewal Percentage between 50% and 65%
10.0
%
10.0
%
Probability of Transferred Member Renewal Percentage between 65% and 80%
25.0
%
25.0
%
Probability of Transferred Member Renewal Percentage > 80%
60.0
%
60.0
%
Credit Spread
1.0
%
1.0
%

(a)
The Acurity and Nexera Earn-out was initially valued as of February 28, 2020.
A reconciliation of the Company’s FFF put and call rights and earn-out liabilities is as follows (in thousands):
 
Beginning Balance
Purchases (Settlements) (b)
Gain (Loss)
Ending Balance
Three months ended September 30, 2020
 
 
 
 
Earn-out liabilities
33,151

(9,073
)
1,061

23,017

FFF put right
36,758


(1,919
)
38,677

Total Level 3 liabilities
$
69,909

$
(9,073
)
$
(858
)
$
61,694

 
 
 
 
 
Three months ended September 30, 2019
 
 
 
 
FFF call right
$
204

$

$
(152
)
$
52

Total Level 3 assets
204


(152
)
52

Earn-out liabilities
6,816


(2,574
)
9,390

FFF put right
41,652


(7,687
)
49,339

Total Level 3 liabilities
$
48,468

$

$
(10,261
)
$
58,729


(b)
Purchases (Settlements) include 100% of the Stanson earn-out, which has been earned but not yet paid as of September 30, 2020.
Non-Recurring Fair Value Measurements
During the three months ended September 30, 2020, no non-recurring fair value measurements were required relating to the measurement of goodwill and intangible assets for impairment. However, the Company recorded notes payable to members resulting from the deferral of the early termination payments associated with the termination of the TRA as part of the August 2020 restructuring. These notes include a Level 2 input associated with the implied interest rate of 1.8% and are calculated as of August 11, 2020. (see Note 9 - Debt and Notes Payable).
Financial Instruments For Which Fair Value Only is Disclosed
The fair values of non-interest bearing notes payable, classified as Level 2, were less than their carrying value by $0.2 million at September 30, 2020 and June 30, 2020, based on assumed market interest rates of 1.6% for both periods.

20


Other Financial Instruments
The fair values of cash, accounts receivable, accounts payable, accrued liabilities, and the Credit Facility (as defined in Note 9 - Debt and Notes Payable) approximated carrying value due to the short-term nature of these financial instruments.
(7) CONTRACT BALANCES
Deferred Revenue
Revenue recognized during the three months ended September 30, 2020 that was included in the opening balance of deferred revenue at June 30, 2020 was $9.1 million, which is a result of satisfying performance obligations.
Performance Obligations
A performance obligation is a promise to transfer a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Contracts may have a single performance obligation as the promise to transfer individual goods or services is not separately identifiable from other promises and, therefore, not distinct, while other contracts may have multiple performance obligations, most commonly due to the contract covering multiple phases or deliverable arrangements (licensing fees, implementation fees, maintenance and support fees, professional fees for consulting services), including certain performance guarantees.
Reduction in net revenue recognized during the three months ended September 30, 2020 from performance obligations that were satisfied or partially satisfied in prior periods was $2.5 million. The reduction was driven by a $2.7 million decrease in net administrative fees revenue related to over-forecasted cash receipts received in the current period partially offset by $0.2 million associated with revised forecasts from underlying contracts that include variable consideration components as well as additional fluctuations due to input method contracts which occur in the normal course of business.
Net revenue recognized during the three months ended September 30, 2019 from performance obligations that were satisfied or partially satisfied in prior periods was $1.2 million. The net revenue recognized during the three months ended September 30, 2019 was driven primarily by $3.8 million of net administrative fees revenue related to under-forecasted cash receipts received in the current period as well as a reduction of $2.6 million associated with revised forecasts from underlying contracts that include variable consideration components as well as additional fluctuations due to input method contracts which occur in the normal course of business.
Remaining performance obligations represent the portion of the transaction price that has not yet been satisfied or achieved. As of September 30, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $547.3 million. The Company expects to recognize approximately 46% of the remaining performance obligations over the next 12 months and an additional 27% over the following 12 months, with the remainder recognized thereafter.
(8) GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill consisted of the following (in thousands):
 
Supply Chain Services
Performance Services
Total
June 30, 2020
$
387,722

$
554,243

$
941,965

Adjustments to acquisition purchase price
780

125

905

September 30, 2020
$
388,502

$
554,368

$
942,870


The change in goodwill since June 30, 2020 is a result of measurement period adjustments from the Company’s asset acquisition of Acurity and the HDP acquisition. The initial purchase price allocations for the acquisition of HDP are preliminary and subject to changes in fair value of working capital. See Note 3 - Business Acquisitions for more information.

21


Intangible Assets, Net
Intangible assets, net consisted of the following (in thousands):
 
Useful Life
September 30, 2020
June 30, 2020
Member relationships
14.7 years
$
386,100

$
386,100

Technology
5.6 years
164,117

164,117

Customer relationships
9.6 years
70,830

70,830

Trade names
7.5 years
24,160

24,160

Non-compete agreements
5.3 years
11,315

11,315

Other (a)
12.1 years
6,060

6,060

Total intangible assets
 
662,582

662,582

Accumulated amortization
 
(