Electric

Electric

Lightwave Pro

Pro Forma

Zayo Group Pro

Zayo Group

Lightwave

Forma

Adjustments for

Forma as

Historical (1)

Historical (1)

Adjustments (2)

debt offerings (4)

adjusted

(in millions)

Revenue

$

$

$

a, c  

$

— 

$

Operating costs and expenses

Operating costs (excluding depreciation and amortization and including stock-based compensation)

c  

— 

Selling, general and administrative expenses (including stock-based compensation)

— 

— 

Depreciation and amortization

b  

— 

Total operating costs and expenses

— 

Operating income

— 

Other expenses

Interest expense

— 

Loss on extinguishment of debt

— 

— 

— 

Foreign currency loss on intercompany loans

— 

— 

— 

Other (expense)/income, net

— 

— 

Total other expenses, net

— 

(Loss)/income from operations before income taxes

Provision/(benefit) for income taxes (3)

— 

Net (loss)/income

$

$

$

$

$

Electric

Electric

Lightwave Pro

Pro Forma

Zayo Group Pro

Zayo Group

Lightwave

Forma

Adjustments for

Forma as

Historical (1)

Historical (1)

Adjustments (2)

debt offerings (4)

adjusted

(in millions)

Revenue

$

$

$

a,c  

$

— 

$

Operating costs and expenses

Operating costs (excluding depreciation and amortization and including stock-based compensation)

c

— 

Selling, general and administrative expenses (including stock-based compensation)

— 

— 

Depreciation and amortization

b

— 

Total operating costs and expenses

— 

Operating income

— 

Other expenses

Interest expense

— 

Foreign currency loss on intercompany loans

— 

— 

— 

Other (expense)/income, net

— 

— 

Total other expenses, net

— 

Income/(loss) from operations before income taxes

Provision/(benefit) for income taxes (3)

Net income/(loss)

$

$

$

$

$

(1)

The ‘‘Zayo Group Historical’’ columns reflect the Company’s historical operating results for the six months ended December 31, 2016 and for the year ended June 30, 2016. The ‘‘Electric Lightwave Historical’’ column reflects Electric Lightwave’s historical operating results for the six months ended December 31, 2016 and for the twelve months ended June 30, 2016. Electric Lightwave’s historical financial results of operations for the twelve months ended June 30, 2016 were derived by taking Electric Lightwave’s audited historical financial statements for the twelve months ended December 31, 2015, deducting the unaudited historical financial results for the six months ended June 30, 2015 and adding Electric Lightwave’s unaudited historical financial results for the six months ended June 30, 2016.

(2)

The ‘‘Electric Lightwave Pro Forma Adjustments’’ column reflects the following adjustments:

(a)

A reduction of $0.2 million and $0.3 million to pro forma revenue recognized during the six months ended December 31, 2016 and twelve months ended June 30, 2016, respectively, resulting from estimated purchase accounting adjustments to the acquired deferred revenue balance.

(b)

An increase of $2.8 million and $10.2 million during the six months ended December 31, 2016 and year ended June 30, 2016, respectively, to historical depreciation and amortization expense based on the estimated fair value and useful lives of acquired tangible and customer relationship assets, based on preliminary estimates. The Company’s preliminary estimate of the acquisition date fair value of the acquired customer relationship is $312.2 million. The pro-forma adjustment associated with the amortization of the customer relationship value assumes this intangible asset will be amortized ratably on a straight-line basis over a period of 20 years. The Company’s preliminary estimate of the acquisition date

fair value of the acquired property and equipment is $493.1 million which represents a 30% increase to the acquisition date book value on the Electric Lightwave historical balance sheet. The pro-forma adjustment associated with the depreciation of the property and equipment assumes an estimated 30% increase to the historical depreciation expense recorded by Electric Lightwave adjusted for changes in estimated useful lives to match Zayo’s accounting policies.

(c)

During the pro forma periods presented, the Company and Electric Lightwave have entered into transactions which have been reflected in their respective historical statements of operations as revenue and operating costs. Had the Electric Lightwave Acquisition been consummated on July 1, 2015, these transactions would have been eliminated in consolidation. The ‘‘Electric Lightwave Pro Forma Adjustments’’ column included a reduction to revenue and operating costs of $3.2 million and $6.6 million for the six months ended December 31, 2016 and the twelve months ended June 30, 2016, respectively, related to the elimination of transactions between the two companies.

(3)

The income tax expense for each of the Pro Forma Adjustments columns has been adjusted to reflect an assumed effective tax rate of 39%. This includes the recording of an income tax benefit for the six months ended December 31, 2016 and the twelve months ended June 30, 2016 of $11.9 million and $21.6 million, respectively, as Electric Lightwave historically recorded a valuation allowance against all tax net operating losses.

(4)

In connection with the Electric Lightwave Acquisition, the Company refinanced Electric Lightwave’s existing indebtedness, entered into the Incremental Term Loan and the January 2017 Notes Offering to finance the acquisition.   The proceeds from the Incremental Term Loan were approximately $662.6 million and the Company received $800.0 million of proceeds from the Notes (collectively the ‘‘New Indebtedness’’).  The Incremental Term Loan was issued at a discount of $6.3 million and the Company incurred debt issuance costs associated with the New Indebtedness of approximately $27.9 million.   The effective interest rate on the combined New Indebtedness, inclusive of interest expense associated with the amortization of the discount on the term loan and debt issuance costs is approximately 5.2%.  If the Company had entered into this New Indebtedness on July 1, 2015, the combined companies would have recognized an additional $10.5 million and $22.8 million of interest expense during the six months ended December 31, 2016 and year ended June 30, 2016, respectively. These adjustments are reflected in the ‘‘Pro Forma Adjustments for Debt Offerings’’ column.

Electric

Electric Lightwave

Pro Forma

Zayo Group

Zayo Group, LLC

Lightwave

Pro Forma

Adjustments for

Pro Forma as

Historical

Historical (1)

Adjustments (2)

Debt Offerings (3)

adjusted

(in millions)

Assets

Current assets

Cash and cash equivalents

$

$

$

a  

$

$

Trade receivables, net

— 

— 

Prepaid expenses

— 

— 

Other assets

— 

— 

Total current assets

Property and equipment, net

b  

— 

Intangible assets, net

c  

— 

Goodwill

d  

— 

Other assets

— 

— 

Total assets

$

$

$

$

$

Liabilities and stockholders' equity

Current liabilities

Current portion of long-term debt

— 

f, g  

Revolving credit facility

— 

g

— 

— 

Accounts payable

— 

— 

Accrued liabilities

e, i  

— 

Accrued interest

g  

— 

Capital lease obligations, current

— 

f  

— 

Deferred revenue, current

— 

e  

— 

Total current liabilities

Long-term debt, non-current

f, g  

Indebtedness to related parties

— 

g  

— 

— 

Capital lease obligation, non-current

— 

f  

— 

Deferred revenue, non-current

— 

e  

— 

Deferred income taxes, net

h  

— 

Other long-term liabilities

e, i  

— 

Total liabilities

Stockholders' equity

Common stock

j  

— 

Additional paid-in capital

j  

— 

Common stock warrants

— 

j  

— 

— 

Accumulated other comprehensive loss

j  

— 

Accumulated deficit

j  

— 

Total stockholders' equity

— 

Total liabilities and stockholders' equity

$

$

$

$

$

(1)

Represents the historical audited balance sheet of Electric Lightwave as of December 31, 2016.

(2)

The ‘‘Electric Lightwave Pro Forma Adjustments’’ column includes adjustments deemed necessary to record the acquisition and includes the following:

a.

A reduction to the cash and cash equivalents balance of $1,440.6 million to reflect the cash proceeds used in acquiring Electric Lightwave.

b.

An increase of $112.9 million to property and equipment to reflect the Company’s preliminary estimates of the fair value of property and equipment acquired.

c.

An increase to the intangible asset balance of $230.8 million to reflect the Company’s preliminary estimate of the fair value of customer relationships and other intangible assets acquired.

d.

An increase of $327.9 million to the goodwill balance to reflect the excess of purchase consideration paid over the preliminary fair value of assets acquired and liabilities assumed in the Electric Lightwave acquisition.

e.

A reclassification of deferred revenue of $21.2 million included in “Other long-term liabilities” to “Deferred revenue, non-current” and $9.5 million included in “Accrued liabilities” to “Deferred revenue, current” to conform to the Company’s financial caption presentation.  The “Deferred revenue, current” and “Deferred revenue, non-current” captions include a reduction of $1.1 million and $0.5 million, respectively, to reflect the Company’s preliminary estimate of the fair value of the acquired deferred revenue obligation.

f.

A reclassification of $1.2 million and $2.2 million in capital lease obligations which was included within “Current portion of long-term debt” and “Long-term debt, non-current,” respectively. “Capital Lease, non-current” also includes a reduction of $0.9 million associated with a capital lease balance that Electric Lightwave held with the Company.   

g.

A reduction to remove the historical debt and accrued interest balances which was extinguished in connection with the acquisition.

h.

A reduction of $42.7 million to the net deferred income tax liability to reflect the Company’s anticipated ability to utilize net operating loss carryforwards and other deferred tax assets that were previously reserved for by Electric Lightwave as well as an offsetting deferred tax liability of the aforementioned purchase accounting adjustments to the acquired intangible assets and PP&E.

Deferred income tax assets acquired:

Net operating loss carryforwards

$

Accrued Liabilities

Allowance for Doubtful Accounts

Total deferred income tax assets acquired

Deferred income tax liabilities acquired:

Intangibles

Property and equipment

Total deferred income tax liabilities acquired

Net deferred income tax assets acquired

$

i.

A reduction to “Accrued liabilities” and “Other long-term liabilities” of $0.4 million and $2.9 million, respectively, related to preliminary purchase accounting estimates associated with the fair value of deferred rent obligations acquired.  “Other long-term liabilities” also includes a reduction of $1.1 million associated with the elimination of liability classified stock-options.

j.

A reduction to remove the historical equity balances of the acquired equity.

(3)

The ‘‘Pro Forma Adjustments for Debt Offerings’’ column reflects the principal amount of the New Indebtedness of $1,462.6 million net of costs associated with the issuance of the New Indebtedness of $27.9 million and a net discount on the New Indebtedness of $6.3 million and an increase to cash of $1,428.4 million associated with the net proceeds from the New Indebtedness.