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Zayo Group, LLC Reports Financial Results for the First Fiscal Quarter Ended September 30, 2012

First Fiscal Quarter Adjusted EBITDA of $122.6 Million on Revenue of $229.7 Million, Representing $490.4 Million and $918.8 Million of Annualized Adjusted EBITDA and Revenue, Respectively

LOUISVILLE, CO -- (Marketwire) -- 11/16/12 -- Zayo Group, LLC ("Zayo Group" or "the Company"), a leading provider of bandwidth infrastructure and network-neutral colocation and interconnection services, announced results for the three months ended on September 30, 2012.

The Company has experienced sequential quarter revenue and Adjusted EBITDA growth since inception. First quarter growth was largely a function of acquisition related growth resulting from the July 2, 2012 acquisition of AboveNet and the August 31, 2012 acquisition of FiberGate.

During the three months ended September 30, 2012, the Company made net capital expenditures of $66.7 million, which included adding 1,278 route miles and 709 buildings to the network.

Financial Highlights

FY 2013 Q1 compared to FY 2012 Q4

  • Zayo Group generated quarterly revenue of $229.7 million; a $120.1 million sequential quarter increase largely attributed to the acquisition of AboveNet.
  • Adjusted EBITDA for the quarter was $122.6 million, which was $65.1 million higher than the prior quarter.
  • Loss from continuing operations of $53.4 million for the quarter was $48.2 million higher than the $5.3 million net loss for the previous quarter.

FY 2013 Q1 compared to FY 2012 Q1

  • Quarterly revenue and Adjusted EBITDA increased by $151.3 million and $84.6 million, respectively, over the first quarter of fiscal year 2012.
  • Quarterly loss from continuing operations increased by $56.6 million over the first quarter of fiscal year 2012.

Recent Developments

Recently Closed Acquisitions

AboveNet Inc. ("AboveNet")

On July 2, 2012, the Company acquired 100% of the outstanding capital stock of AboveNet, previously a publicly-traded company listed on the New York Stock Exchange, in exchange for cash of approximately $2.2 billion, net of cash acquired.

AboveNet is a provider of bandwidth infrastructure and network-neutral colocation and interconnection services, primarily to large corporate enterprise clients and communication carriers, including Fortune 1000 and Financial Times and Stock Exchange ("FTSE") 500 companies in the United States and Europe. AboveNet's commercial strategy was consistent with the Company's; that is, to focus on leveraging its infrastructure assets to provide bandwidth infrastructure services to a select set of customers having high bandwidth demands. It provides lit and dark fiber bandwidth infrastructure services over its dense metropolitan, regional, national, and international fiber networks. It also operates a Tier 1 IP network with direct and indirect (through peering arrangements) connectivity in many of the most important bandwidth centers and peering exchanges in the U.S., Europe, and Japan. Its product set is highly aligned with Zayo's, consisting primarily of dark fiber, Wavelength, Ethernet, IP and colocation services. AboveNet also has grown a very strong base of business with enterprise clients, particularly within the financial services segment.

On June 30, 2012, AboveNet's fiber networks spanned approximately 20,590 route miles, approximately 2,500,000 fiber miles and connected to approximately 4,000 on-net buildings, including more than 2,600 enterprise locations, many of which house some of the largest corporate users of network services in the world. AboveNet's metropolitan networks typically contain 432, and in some cases 864, fiber strands in each cable. This high fiber count allows AboveNet to add new customers in a timely and cost-effective manner by focusing incremental construction and capital expenditures on the laterals that connect to the customer premises. AboveNet's metropolitan networks serve 17 markets in the U.S., with strong network footprints in a number of the largest metropolitan markets including Boston, Massachusetts; Chicago, Illinois; Los Angeles, California; New York, New York; Philadelphia, Pennsylvania; San Francisco, California; Seattle, Washington; and Washington, D.C. It also serves four metropolitan markets in Europe: London, United Kingdom; Amsterdam, Netherlands; Frankfurt, Germany; and Paris, France. These locations also include many private data centers and hub locations that are important for AboveNet's customers. AboveNet uses under-sea capacity on the Japan-U.S. Cable Network to provide connectivity between the U.S and Japan and capacity on the Trans-Atlantic undersea telecommunications network and other trans-Atlantic cables to provide connectivity from the U.S. to Europe.

FiberGate Holdings, Inc. ("FiberGate")

On August 31, 2012, the Company acquired 100% of the equity interest in FiberGate, a privately held corporation, for a purchase price of $117.5 million, subject to certain post-closing adjustments. The acquisition was funded with cash on hand.

Headquartered in Alexandria, Virginia, FiberGate is a provider of dark fiber services throughout the Washington, D.C., Northern Virginia, and Baltimore, Maryland corridor. The FiberGate network includes 779 high fiber count route miles in and around the U.S. capital region. FiberGate also has 317 on-net buildings, including federal government sites, carrier hotels, data centers, cell towers, and enterprise buildings. FiberGate has provided dark fiber services to the federal government since its inception in 1995 and has since expanded its clientele to include large enterprise and telecommunications customers.

USCarrier

In connection with the Company's July 1, 2010 acquisition of American Fiber Systems Holding Corporation ("AFS"), the Company acquired an ownership interest in USCarrier Telecom Holdings, LLC ("USCarrier") consisting of approximately 50% of the equity interest in USCarrier.

On August 15, 2012, the Company entered into an agreement with the owners of USCarrier to purchase all remaining ownership units of USCarrier such that upon consummation of the acquisition, the Company would own 100% of the equity interest in USCarrier. On October 1, 2012, the transaction was consummated and the Company acquired the remaining outstanding equity interest in USCarrier. The purchase price of $15.9 million for the remaining interest in USCarrier was funded with cash on hand.

The USCarrier business operates a 3,700 mile regional fiber network that connects major markets such as Atlanta, Jacksonville, Tallahassee, Nashville and Chattanooga along with 40 smaller cities throughout the Southeast region of the United States. USCarrier provides transport services such as Ethernet and Wavelength primarily to other telecommunications providers.

Pending acquisitions

First Telecom Services Purchase Agreement

On October 12, 2012, the Company entered into an agreement to acquire 100% of the equity interest in First Telecom Services, LLC ("First Telecom Services") a subsidiary of First Communications, Inc. First Telecom Services provides dark fiber, transport, and construction services. The $110.0 million purchase price, subject to post-closing adjustments, will be funded with cash on hand.

New Invested Capital

On July 2, 2012, the Company issued $750.0 million aggregate principal amount of 8.125% senior secured first-priority notes due 2020 and $500.0 million aggregate principal amount of 10.125% senior unsecured notes due 2020. The Company also entered into a new $250.0 million senior secured revolving credit facility, and a new $1,620.0 million senior secured term loan facility which accrues interest at floating rates. The effective rate on the New Term Loan Facility on September 30, 2012 was 7.125%.

On August 13, 2012, the Company entered into forward-starting interest rate swap agreements with an aggregate notional value of $750.0 million, a start date of June 30, 2013, and a maturity date of June 30, 2017. The contract states that the Company shall pay a 1.67% fixed rate of interest for the term of the agreement beginning on the start date. The counterparty will pay to the Company the greater of actual LIBOR or 1.25%, the minimum reference rate on the term loan. The Company entered into the forward-starting swap arrangements to reduce the risk of increased interest costs associated with potential future changes in LIBOR rates.

On October 5, 2012, the Company's new revolving credit facility and new term loan facility were amended. Among other changes, the applicable margin over base rate was reduced by 187.5 bps on both of the facilities. The effective rate on the new term loan subsequent to the amendment was 5.25%.

On July 2, 2012, in connection with the Company's acquisition of AboveNet, Zayo Group Holdings, Inc. ("Holdings") completed a third round of equity financing of which $472.3 million was contributed to the Company.

A portion of the proceeds from the debt and equity contributions were used to pay the outstanding portion of the Company's previous indebtedness and fees associated with early redeeming the Company's previous indebtedness and to pay the cash consideration for the AboveNet acquisition and associated fees and expenses.

Spin-Off of Professional Services Business

AboveNet's legacy service offering included a business segment that provided professional services to certain users of bandwidth capacity. As the professional services business segment ("Zayo Professional Services" or "ZPS") does not align with the Company's primary focus of providing bandwidth infrastructure services, the segment was spun off to Holdings on September 30, 2012. The Company estimated the fair value of the assets and liabilities which were distributed to Holdings to be $26.7 million. During the quarter ended September 30, 2012, the results of the operations of ZPS prior to the spin-off date have been aggregated and are presented in a single caption entitled, "Earnings from discontinued operations, net of income taxes" on the Company's consolidated statements of operations.


First Quarter Financial Results
Three Months Ended September 30, 2012 and June 30, 2012
Figure 1.0

Zayo Group Summary Results
($ in millions)                                     Three months ended
                                               ----------------------------
                                               September 30,     June 30,
                                                    2012           2012
                                               -------------  -------------
Revenue                                        $       229.7  $       109.6
  Annualized revenue growth                              438%
Gross profit                                           197.0           86.8
  Gross profit %                                          86%            79%
Operating income                                        46.2           23.4
Earnings from continuing operations before
 taxes                                                 (80.7)           5.5
(Benefit)/provision for income taxes                   (27.3)          10.8
                                               -------------  -------------
Loss from continuing operations                $       (53.4) $        (5.3)
                                               =============  =============

Adjusted EBITDA from continuing operations     $       122.6  $        57.5
Purchases of property and equipment                     66.7           21.4
                                               -------------  -------------
Unlevered free cash flow                       $        55.9  $        36.1
                                               =============  =============
  Annualized EBITDA growth                               453%
  Adjusted EBITDA margin                                  53%            52%

The sequential quarterly revenue increase of $120.1 million was primarily the result of the July 2, 2012 acquisition of AboveNet and the August 31, 2012 acquisition of FiberGate. The Company generated additional monthly revenue of $4.1 million associated with gross installations accepted during the quarter ended September 30, 2012. This increase in revenue related to organic growth was partially offset by total customer churn of $3.1 million in monthly revenue during the quarter. Also offsetting the revenue growth was a decrease of $3.3 million to other revenue recognized during the quarter ended September 30, 2012 as compared to the quarter ended June 30, 2012. Other revenue recognized during the quarter ended June 30, 2012 primarily related to early termination charges collected and the accelerated recognition of the deferred revenue associated with those terminated contracts.

Adjusted EBITDA and Adjusted EBITDA margin benefited from both the high margin dark fiber concentration and the additional scale achieved from the acquisitions of AboveNet and FiberGate.

Loss from continuing operations increased by $48.2 million in the quarter ended September 30, 2012 as compared to the previous quarter. The increase in the loss is attributed to a $47.0 million increase in interest expense associated with the Company's new debt financing as well as $65.0 million of expenses associated with debt extinguishment costs. Partially offsetting the quarter-over-quarter increase to loss from continuing operations was a $22.8 million increase in operating income during the current quarter.


Three Months Ended September 30, 2012 and September 30, 2011
Figure 1.1

Zayo Group Summary Results
($ in millions)                                     Three months ended
                                               ----------------------------
                                               September 30,  September 30,
                                                    2012           2011
                                               -------------  -------------
Revenue                                        $       229.7  $        78.4
  Revenue growth                                         193%
Gross profit                                           197.0           60.3
  Gross profit %                                          86%            77%
Operating income                                        46.2           16.9
Earnings from continuing operations before
 taxes                                                 (80.7)           7.7
Provision for income taxes                             (27.3)           4.6
                                               -------------  -------------
(Loss)/earnings from continuing operations     $       (53.4) $         3.1
                                               =============  =============

Adjusted EBITDA                                $       122.6  $        38.0
Purchases of property and equipment                     66.7           28.6
                                               -------------  -------------
Unlevered free cash flow                       $        55.9  $         9.4
                                               =============  =============
  EBITDA growth                                          222%
  Adjusted EBITDA margin                                  53%            48%

Revenue increased $151.3 million over the first quarter of fiscal year 2012 principally as a result of our Fiscal 2012 and 2013 acquisitions. The monthly recurring revenue on the acquisition date of the acquired 360networks, MarquisNet, Arialink, AboveNet and FiberGate businesses was approximately $7.0 million, $0.6 million, $0.4 million, $40.1 million and $1.4 million, respectively. The remaining increase in revenue recognized during the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 was a result of organic growth. As a result of internal sales efforts since September 30, 2011, the Company has entered into $754.0 million of gross new sales contracts, which will represent an additional $11.3 million in monthly revenue once installation on those contracts is accepted. Since September 30, 2011, the company has received acceptance on gross installations that have resulted in additional monthly revenue of $9.9 million as of September 30, 2012 as compared to September 30, 2011. This increase in revenue related to our organic growth is partially offset by total customer churn of $7.1 million in monthly revenue since September 30, 2011.

Gross profit increased $136.7 million, principally as a result of our Fiscal 2012 and 2013 acquisitions. The gross profit percentage increase by nine percentage points primarily as a result of gross installed revenues having a lower component of associated operating costs than the prior period's installed revenue base due to a higher percentage of our newly installed revenue being supported by our owned infrastructure assets (i.e. on-net). The gross profit percentage also benefited from a higher percentage of acquired revenue being on-net and from synergies realized related to our Fiscal 2012 and 2013 acquisitions.

Adjusted EBITDA increased $84.6 million as compared to the first quarter of fiscal year 2012, due to the Adjusted EBITDA contribution from our Fiscal 2012 and 2013 acquisitions, synergies realized from those acquisitions, and organic revenue growth.

Conference Call

Zayo Group will hold a conference call to report fiscal year first quarter 2013 results at 11:00 a.m. EST, November 16, 2012. The dial in number for the call is (800) 769-9015. A live webcast of the call can be found in the Investor Relations section of Zayo's website or can be accessed directly at https://cc.readytalk.com/r/90l1a7v9bczg. During the call the company will review an earnings supplement presentation that summarizes the financial results of the quarter, which can be found at http://www.zayo.com/financial-earnings-release.

About Zayo Group

Based in Louisville, Colorado, privately owned Zayo Group (www.zayo.com) is a provider of fiber-based bandwidth infrastructure and network-neutral colocation and interconnection services. Zayo Group is organized into autonomous operating segments supporting customers who require lit and dark fiber services and carrier-neutral colocation. Zayo Group's business units provide these services over international, national, regional, metro and fiber-to-the-tower networks.

Forward Looking Statements

Information contained or incorporated by reference in this earnings release, in other SEC filings by the Company, in press releases and in presentations by the Company or its management that are not historical by nature constitute "forward-looking statements" which can be identified by the use of forward-looking terminology such as "believes," "expects," "plans," "intends," "estimates," "projects," "could," "may," "will," "should," or "anticipates" or the negatives thereof, other variations thereon or comparable terminology, or by discussions of strategy. No assurance can be given that future results expressed or implied by the forward-looking statements will be achieved and actual results may differ materially from those contemplated by the forward-looking statements. Such statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, those relating to the Company's financial and operating prospects, current economic trends, future opportunities, ability to retain existing customers and attract new ones, the Company's acquisition strategy and ability to integrate acquired companies and assets, outlook of customers, reception of new products and technologies, and strength of competition and pricing. Other factors and risks that may affect the Company's business and future financial results are detailed in the Company's SEC filings, including, but not limited to, those described under "Risk Factors" within the Company's Annual Report on Form 10-K. The Company cautions you not to place undue reliance on these forward-looking statements, which speak only as of their respective dates. The Company undertakes no obligation to publicly update or revise forward-looking statements to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events, except as required by law.

This earnings release should be read together with the Company's unaudited condensed consolidated financial statements and notes thereto for the three months ended September 30, 2012 included in the Company's Quarterly Report on Form 10Q filed with the SEC on November 14, 2012 and the audited consolidated financial statements and notes thereto for the year ended June 30, 2012 included in the Company's Annual Report on Form 10-K filed with the SEC on September 14, 2012.

Non-GAAP Financial Measures

The Company provides financial measures that are not defined under generally accepted accounting principles in the United States, or GAAP, including earnings before interest, taxes, depreciation and amortization ("EBITDA"), Adjusted EBITDA. EBITDA and Adjusted EBITDA are not measurements of our financial performance under GAAP and should not be considered in isolation or as alternatives to net income or any other performance measures derived in accordance with GAAP or as alternatives to cash flows from operating activities as measures of liquidity.

"Adjusted EBITDA" is defined as EBITDA from continuing operations adjusted to exclude transaction costs, stock-based compensation, and certain non-cash and non-recurring items. Management uses EBITDA and Adjusted EBITDA to evaluate operating performance, and these financial measures are among the primary measures used by management for planning and forecasting future periods. The Company believes Adjusted EBITDA is especially important in a capital-intensive industry such as telecommunications. The Company further believes that the presentation of EBITDA and Adjusted EBITDA is relevant and useful for investors because it allows investors to view results in a manner similar to the method used by management and makes it easier to compare our results with the results of other companies that have different financing and capital structures.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and should not be considered in isolation from, or as substitutes for, analysis of our results as reported under GAAP. For example, Adjusted EBITDA:

  • does not reflect capital expenditures, or future requirements for capital and major maintenance expenditures or contractual commitments;
  • does not reflect changes in, or cash requirements for, our working capital needs;
  • does not reflect the significant interest expense, or the cash requirements necessary to service the interest payments, on our debt; and
  • does not reflect cash required to pay income taxes.

The Company's computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies because all companies do not calculate Adjusted EBITDA in the same fashion.

Because the Company has acquired numerous entities since inception and incurred transaction costs in connection with each acquisition, has borrowed money in order to finance operations, has used capital and intangible assets in the business, and because the payment of income taxes is necessary if taxable income is generated, any measure that excludes these items has material limitations. As a result of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to invest in the growth of the business or as measures of liquidity.

In addition to Adjusted EBITDA, management uses Unlevered Free Cash Flow, which measures the ability of Adjusted EBITDA to cover capital expenditures. Adjusted EBITDA is a performance, rather than cash flow measure. Correlating our capital expenditures to our Adjusted EBITDA does not imply that we will be able to fund such capital expenditures solely with cash from operations.

Gross profit, defined as revenue less operating costs, excluding depreciation and amortization, is used by management to assess profitability prior to selling, general and administrative expenses, stock-based compensation and depreciation and amortization.


Consolidated Financial Information
Zayo Group
Consolidated Statements of Operations
Unaudited
Figure 1.2

Consolidated Statement of Operations
($ in thousands)                           Three months ended September 30,
                                           --------------------------------
                                                 2012             2011
                                           ---------------  ---------------
Revenue                                    $       229,693  $        78,443
Operating costs and expenses
  Operating costs, excluding depreciation
   and amortization                                 32,717           18,150
  Selling, general and administrative
   expenses                                         85,793           22,596
  Stock-based compensation                          10,481            3,704
  Depreciation and amortization                     54,500           17,062
                                           ---------------  ---------------
    Total operating costs and expenses             183,491           61,512
                                           ---------------  ---------------

Operating income                                    46,202           16,931
                                           ---------------  ---------------

Other expenses
Interest expense                                   (62,555)          (9,168)
Loss on extinguishment of debt                     (64,975)               -
Other income/(expense), net                            585              (11)
                                           ---------------  ---------------
  Total other expense, net                        (126,945)          (9,179)
                                           ---------------  ---------------

(Loss)/earnings from continuing operations
 before provision for income taxes                 (80,743)           7,752
(Benefit)/provision for income taxes               (27,320)           4,604
                                           ---------------  ---------------
(Loss)/earnings from continuing operations         (53,423)           3,148

Earnings from discontinued operations, net
 of income taxes                                     1,808                -
                                           ---------------  ---------------
Net (loss)/earnings                        $       (51,615) $         3,148
                                           ===============  ===============



Zayo Group
Consolidated Balance Sheets
Figure 1.3

Consolidated Balance Sheet
($ in thousands)
                                               September 30,     June 30,
                                                    2012           2012
                                               -------------  -------------

Assets
Current assets
  Cash and cash equivalents                    $     213,730  $     150,693
  Trade receivables, net                              74,152         31,703
  Due from related-parties                            10,945            231
  Prepaid expenses                                    19,095          7,099
  Deferred income taxes, net                          29,547          6,018
  Restricted cash                                          -         22,417
  Other assets                                         1,445          1,757
                                               -------------  -------------
    Total current assets                             348,914        219,918

  Property and equipment, net                      1,560,440        754,738
  Intangible assets, net                             577,721        128,705
  Goodwill                                         1,232,064        137,439
  Debt issuance costs, net                            82,179         19,706
  Investment in US Carrier                            12,827         12,827
  Deferred income taxes, net                         183,237         89,378
  Other assets                                        23,144          9,070
                                               -------------  -------------
    Total assets                               $   4,020,526  $   1,371,781
                                               =============  =============

Liabilities and member's equity
Current liabilities
  Accounts payable                             $      11,792  $      16,180
  Accrued liabilities                                139,859         45,512
  Accrued interest                                    56,182         10,863
  Capital lease obligations, current                     716          1,148
  Deferred revenue, current                           41,020         22,940
  Current portion of long-term debt                   20,685          4,440
                                               -------------  -------------
    Total current liabilities                        270,254        101,083

Long-term debt, non-current                        2,820,859        685,281
Capital lease obligations, non-current                 3,602         10,470
Deferred revenue, non-current                        214,326        146,663
Stock-based compensation liability                    64,635         54,367
Other long term liabilities                           17,406          8,068
                                               -------------  -------------
    Total liabilities                              3,391,082      1,005,932

Member's equity
  Member's interest                                  699,625        388,867
  Accumulated other comprehensive income               4,452              -
  Accumulated deficit                                (74,633)       (23,018)
                                               -------------  -------------
  Total member's equity                              629,444        365,849
                                               -------------  -------------
    Total liabilities and member's equity      $   4,020,526  $   1,371,781
                                               =============  =============



Zayo Group
Consolidated Statements of Cash Flows
Figure 1.4

Consolidated Statements of Cash Flows
($ in thousands)

                                                      Three months ended
                                                         September 30,
                                                   ------------------------
                                                       2012         2011
                                                   -----------  -----------
Cash flows from operating activities
    Net (loss)/earnings                            $   (51,615) $     3,148
    Earnings from discontinued operations                1,808            -
                                                   -----------  -----------
    (Loss)/earnings from continuing operations         (53,423)       3,148

Adjustments to reconcile net (loss)/earnings to
 net cash provided by operating activities
  Depreciation and amortization                         54,500       17,062
  Loss on extinguishment of debt                        64,975            -
  Non-cash interest expense                              8,642          616
  Stock-based compensation                              10,481        3,704
  Amortization of deferred revenues                     (7,814)      (2,580)
  Provision for bad debts                                  535          148
  Deferred income taxes                                (29,796)       4,462
  Changes in operating assets and liabilities, net
   of acquisitions
    Trade receivables                                  (16,042)      (7,141)
    Prepaid expenses                                     4,946         (498)
    Other assets                                        (1,291)         201
    Accounts payable and accrued liabilities            41,521       (5,268)
    Payables to related parties, net                      (993)         169
    Deferred revenue                                     2,899       10,182
    Other liabilities                                      (70)          20
                                                   -----------  -----------
      Net cash provided by operating activities of
       continuing operations                            79,070       24,225
                                                   -----------  -----------

Cash flows from investing activities
  Purchases of property and equipment                  (70,163)     (31,442)
  Broadband stimulus grants received                     3,507        2,798
  Acquisition of Abovenet, Inc., net of cash
   acquired                                         (2,212,492)           -
  Acquisition of FiberGate, net of cash acquired      (117,548)           -
  Mercury Marquis Holdings, LLC purchase
   consideration returned                                1,875            -
                                                   -----------  -----------
      Net cash used in investing activities of
       continuing operations                        (2,394,821)     (28,644)
                                                   -----------  -----------

Cash flows from financing activities
  Equity contributions                                 337,203          100
  Principal repayments on capital lease
   obligations                                            (378)        (229)
  Principal payments on long-term debt                (697,475)           -
  Payment of early redemption fees on debt
   extinguished                                        (39,797)           -
  Proceeds from issuance of long-term debt           2,840,000            -
  Change in restricted cash, net                        22,415            -
  Cash contributed to ZPS                               (2,424)           -
  Payment of deferred debt issuance costs              (82,508)           -
                                                   -----------  -----------
      Net cash provided by/(used in) financing
       activities of continuing operations           2,377,036         (129)
                                                   -----------  -----------

        Cash flows from continuing operations           61,285       (4,548)

Cash flows from discontinued operations
  Operating activities                                   1,544            -

Effect of changes in foreign exchange rates on
 cash                                                      208            -
                                                   -----------  -----------
Net increase/(decrease) in cash and cash
 equivalents                                            63,037       (4,548)

Cash and cash equivalents, beginning of period         150,693       25,394
                                                   -----------  -----------
Cash and cash equivalents, end of period           $   213,730  $    20,846
                                                   ===========  ===========



Zayo Group
Reconciliation of Non-GAAP Financial Measures
Figure 1.5

Adjusted EBITDA and Cash Flow
 Reconciliation
($ in millions)                               Three months ended
                                 -------------------------------------------
                                 September 30,     June 30,    September 30,
                                      2012           2012           2011
                                 -------------  -------------  -------------
Net earnings/(loss)              $       (51.6) $        (5.3) $         3.1
Earnings from discontinued
 operations, net of taxes                 (1.8)             -              -
Interest expense                          62.5           15.6            9.2
(Benefit)/provision for income
 taxes                                   (27.3)          10.8            4.6
Depreciation and amortization
 expense                                  54.5           24.3           17.1
Transaction costs                         11.4            3.3            0.3
Stock-based compensation                  10.5            6.6            3.7
Loss on extinguishment of debt            65.0              -              -
Foreign currency gain on
 intercompany loans                       (0.6)             -              -
Impairment on cost method
 investment                                  -            2.2              -
                                 -------------  -------------  -------------
  Adjusted EBITDA                $       122.6  $        57.5  $        38.0
Purchases of property and
 equipment                                66.7           21.4           28.6
                                 -------------  -------------  -------------
Unlevered Free Cash Flow, as
 defined                         $        55.9  $        36.1  $         9.3
                                 =============  =============  =============



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