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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~September 3130, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 333-169979

Zayo Group, LLC

(Exact Name of Registrant as Specified in Its Charter)

DELAWARE		26-2012549
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

DELAWARE

26-2012549

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1821 30th Street, Unit A,

Boulder, CO 80301

(Address of Principal Executive Offices)

(303) 381-4683

(Registrant’s Telephone Number, Including Area Code)

~~Indicate~~Securities byregistered ~~check~~pursuant ~~mark whether the registrant (1) has filed all reports required~~ to ~~be filed by~~ Section 13 ~~or 15~~12(db) 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 ☐

		Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Not applicable	Not applicable	Not applicable

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, a 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 ☐

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 ☒ ⌧



~~Securities registered pursuant to Section 12(b) of the Act:~~

~~Title of each class Trading Symbol(s) Name of each exchange on which registered Not applicable Not applicable Not applicable~~

Table of Contents

ZAYO GROUP, LLC AND SUBSIDIARIES

INDEX


		Page
Part I. FINANCIAL INFORMATION
		Page
Item 1. Financial Statements (Unaudited)		3
Part I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets as of March 31, 2019 and June 30, 2018		3
Item 1. Financial Statements (Unaudited)		1
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2019 and 2018		4
Condensed Consolidated Balance Sheets as of September 30, 2019 and June 30, 2019		1
Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended March 31, 2019 and 2018		5
Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2019 and 2018		2
Condensed Consolidated Statements of Member's Equity for the Three and Nine Months Ended March 31, 2019 and 2018		6
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended September 30, 2019 and 2018		3
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2019 and 2018		7
Condensed Consolidated Statement of Member's Equity for the Three Months Ended September 30, 2019 and 2018		4
Notes to Condensed Consolidated Financial Statements		8
Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2019 and 2018		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		46
Notes to Condensed Consolidated Financial Statements		6
Item 3. Quantitative and Qualitative Disclosures about Market Risk		66
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		35
Item 4. Controls and Procedures		67
Item 3. Quantitative and Qualitative Disclosures about Market Risk		49
Part II. OTHER INFORMATION
Item 4. Controls and Procedures		50
Item 1. Legal Proceedings		67
Part II. OTHER INFORMATION
Item 1A. Risk Factors		67
Item 1. Legal Proceedings		50
Item 6. Exhibits		70
Item 1A. Risk Factors		51
Signatures		71
Item 6. Exhibits		52
Signatures		53

Table of Contents

ZAYO GROUP, LLC AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

~~ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)~~

~~CONDENSED~~ITEM ~~CONSOLIDATED~~1. ~~BALANCE~~FINANCIAL ~~SHEETS~~STATEMENTS (UNAUDITED)

~~(in~~CONDENSED ~~millions~~CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	March 31, 2019		June 30, 2018
Assets
Current assets
Cash and cash equivalents	$	179.1	$	256.0
Trade receivables, net of allowance of $16.9 and $11.1 as of March 31, 2019 and June 30, 2018, respectively		216.9		235.6
Prepaid expenses		71.7		74.1
Other current assets		42.8		25.8
Assets held for sale		—		41.8
Total current assets		510.5		633.3
Property and equipment, net		5,679.1		5,427.6
Intangible assets, net		1,142.3		1,212.1
Goodwill		1,709.4		1,719.1
Deferred income taxes, net		30.7		37.6
Other assets		191.2		175.6
Total assets	$	9,263.2	$	9,205.3
Liabilities and member's equity
Current liabilities
Accounts payable	$	47.5	$	45.9
Accrued liabilities		305.0		315.1
Accrued interest		85.4		72.6
Current portion of long-term debt		5.0		5.0
Capital lease obligations, current		9.2		11.9
Deferred revenue, current		170.8		162.9
Liabilities associated with assets held for sale		—		6.1
Total current liabilities		622.9		619.5
Long-term debt, non-current		5,864.1		5,690.1
Capital lease obligation, non-current		171.5		121.6
Deferred revenue, non-current		1,135.9		1,076.3
Deferred income taxes, net		183.9		152.4
Other long-term liabilities		50.7		57.8
Total liabilities		8,029.0		7,717.7
Commitments and contingencies (Note 11)
Member's equity
Member's interest		1,549.0		1,876.6
Accumulated other comprehensive loss		(28.3)		(15.5)
Accumulated deficit		(286.5)		(373.5)
Total member's equity		1,234.2		1,487.6
Total liabilities and member's equity	$	9,263.2	$	9,205.3

(in millions)

The accompanying notes are an integral part of these condensed consolidated financial statements.



	September 30, 2019		June 30, 2019
Assets
Current assets
Cash and cash equivalents	$	253.9	$	185.4
Trade receivables, net of allowance of $16.9 and $17.6 as of September 30, 2019 and June 30, 2019, respectively		151.9		177.0
Prepaid expenses		68.1		65.3
Other current assets		57.0		56.8
Total current assets		530.9		484.5
Property and equipment, net		5,851.8		5,808.9
Intangible assets, net		1,092.8		1,118.8
Goodwill		1,701.1		1,706.6
Right-of-use operating lease assets		499.2		—
Deferred income taxes, net		21.3		24.8
Other assets		184.0		190.2
Total assets	$	9,881.1	$	9,333.8
Liabilities and member's equity
Current liabilities
Accounts payable	$	31.9	$	73.7
Accrued liabilities		323.6		314.8
Accrued interest		84.9		73.1
Current portion of long-term debt		130.0		5.0
Operating lease obligations, current		127.2		—
Finance lease obligations, current		9.5		10.0
Deferred revenue, current		172.9		174.9
Total current liabilities		880.0		651.5
Long-term debt, non-current		5,696.1		5,839.7
Operating lease liabilities, non-current		387.4		—
Finance lease obligation, non-current		176.0		172.2
Deferred revenue, non-current		1,205.4		1,148.1
Deferred income taxes, net		147.5		138.8
Other long-term liabilities		30.1		54.7
Total liabilities		8,522.5		8,005.0
Commitments and contingencies (Note 11)
Member's equity
Member's interest		1,602.5		1,576.2
Accumulated other comprehensive loss		(38.3)		(23.9)
Accumulated deficit		(205.6)		(223.5)
Total member's equity		1,358.6		1,328.8
Total liabilities and member's equity	$	9,881.1	$	9,333.8

~~Table~~The accompanying notes are an integral part of ~~Contents~~ these condensed consolidated financial statements.

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)~~ 1

~~(in~~Table ~~millions)~~ of Contents

	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
Revenue	$	647.2	$	649.0	$	1,927.4	$	1,945.2
Operating costs and expenses
Operating costs (excluding depreciation and amortization and including stock-based compensation—Note 8)		226.3		234.9		676.7		702.6
Selling, general and administrative expenses (including stock-based compensation—Note 8)		128.1		117.7		375.7		368.0
Depreciation and amortization		161.2		190.9		475.9		570.4
Total operating costs and expenses		515.6		543.5		1,528.3		1,641.0
Operating income		131.6		105.5		399.1		304.2
Other expenses
Interest expense		(86.4)		(75.3)		(252.6)		(222.0)
Loss on extinguishment of debt		—		—		—		(4.9)
Foreign currency gain/(loss) on intercompany loans		7.1		13.9		(5.8)		27.8
Other income, net		0.4		0.4		7.3		1.7
Total other expenses, net		(78.9)		(61.0)		(251.1)		(197.4)
Income from operations before income taxes		52.7		44.5		148.0		106.8
Provision for income taxes		18.0		21.0		61.0		46.8
Net income	$	34.7	$	23.5	$	87.0	$	60.0

ZAYO GROUP, LLC AND SUBSIDIARIES

~~The~~CONDENSED ~~accompanying~~CONSOLIDATED ~~notes~~STATEMENTS ~~are~~OF anOPERATIONS ~~integral~~(UNAUDITED) ~~part of these condensed consolidated financial statements.~~

4 (in millions)

Table of Contents


	Three Months Ended September 30,
	2019		2018
Revenue	$	638.6	$	641.1
Operating costs and expenses
Operating costs (excluding depreciation and amortization and including stock-based compensation—Note 8)		231.0		228.4
Selling, general and administrative expenses (including stock-based compensation—Note 8)		122.6		122.1
Depreciation and amortization		156.1		167.8
Total operating costs and expenses		509.7		518.3
Operating income		128.9		122.8
Other expenses
Interest expense		(84.7)		(82.2)
Foreign currency loss on intercompany loans		(12.9)		(4.6)
Other income, net		0.6		6.6
Total other expenses, net		(97.0)		(80.2)
Income from operations before income taxes		31.9		42.6
Provision for income taxes		14.0		20.5
Net income	$	17.9	$	22.1

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)~~

~~(in~~The ~~millions)~~ accompanying notes are an integral part of these condensed consolidated financial statements.

	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
Net income	$	34.7	$	23.5	$	87.0	$	60.0
Foreign currency translation adjustments, net of tax		7.2		(8.1)		(15.2)		14.8
Defined benefit pension plan adjustments, net of tax		(0.1)		(5.8)		2.4		(10.8)
Comprehensive income	$	41.8	$	9.6	$	74.2	$	64.0

~~The accompanying notes are an integral part of these condensed consolidated financial statements.~~ 2

5 Table of Contents

~~Table~~ZAYO ofGROUP, ~~Contents~~ LLC AND SUBSIDIARIES

~~ZAYO~~CONDENSED ~~GROUP,~~CONSOLIDATED ~~LLC~~STATEMENTS ~~AND~~OF ~~SUBSIDIARIES~~ COMPREHENSIVE INCOME (UNAUDITED)

~~CONDENSED CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY~~ (~~UNAUDITED~~in millions)

(in millions)


	Three Months Ended September 30,
	2019		2018
Net income	$	17.9	$	22.1
Foreign currency translation adjustments, net of tax		(14.8)		8.2
Defined benefit pension plan adjustments, net of tax		0.4		(1.9)
Comprehensive income	$	3.5	$	28.4

	For the Three Months Ended March 31, 2019
	Member's Interest		AccumulatedOtherComprehensiveLoss		Accumulated Deficit		Total Member'sEquity
Balance at December 31, 2018	$	1,525.7	$	(35.4)	$	(321.2)	$	1,169.1
Stock-based compensation		23.3		—		—		23.3
Foreign currency translation adjustment		—		7.2		—		7.2
Defined benefit pension plan adjustments		—		(0.1)		—		(0.1)
Net income		—		—		34.7		34.7
Balance at March 31, 2019	$	1,549.0	$	(28.3)	$	(286.5)	$	1,234.2

	For the Three Months Ended March 31, 2018
	Member's Interest		AccumulatedOtherComprehensiveLoss		Accumulated Deficit		Total Member'sEquity
Balance at December 31, 2017	$	1,926.2	$	23.3	$	(445.0)	$	1,504.5
Stock-based compensation		20.6		—		—		20.6
Foreign currency translation adjustment		—		(8.1)		—		(8.1)
Defined benefit pension plan adjustments		—		(5.8)		—		(5.8)
Net income		—		—		23.5		23.5
Balance at March 31, 2018	$	1,946.8	$	9.4	$	(421.5)	$	1,534.7

The accompanying notes are an integral part of these condensed consolidated financial statements.

	For the Nine Months Ended March 31, 2019
	Member's Interest		AccumulatedOtherComprehensiveLoss		Accumulated Deficit		Total Member'sEquity
Balance at June 30, 2018	$	1,876.6	$	(15.5)	$	(373.5)	$	1,487.6
Stock-based compensation		74.9		—		—		74.9
Foreign currency translation adjustment		—		(15.2)		—		(15.2)
Capital distribution to ZGH		(402.5)		—		—		(402.5)
Defined benefit pension plan adjustments		—		2.4		—		2.4
Net income		—		—		87.0		87.0
Balance at March 31, 2019	$	1,549.0	$	(28.3)	$	(286.5)	$	1,234.2

	For the Nine Months Ended March 31, 2018
	Member's Interest		AccumulatedOtherComprehensiveLoss		Accumulated Deficit		Total Member'sEquity
Balance at June 30, 2017	$	1,879.0	$	5.4	$	(481.5)	$	1,402.9
Stock-based compensation		67.8		—		—		67.8
Foreign currency translation adjustment		—		14.8		—		14.8
Defined benefit pension plan adjustments		—		(10.8)		—		(10.8)
Net income		—		—		60.0		60.0
Balance at March 31, 2018	$	1,946.8	$	9.4	$	(421.5)	$	1,534.7

~~The~~Table ~~accompanying notes are an integral part~~ of ~~these condensed consolidated financial statements.~~ Contents

6 ZAYO GROUP, LLC AND SUBSIDIARIES

~~Table~~CONDENSED ofCONSOLIDATED ~~Contents~~ STATEMENTS OF MEMBER’S EQUITY (UNAUDITED)

~~ZAYO~~ ~~GROUP,~~(in ~~LLC AND SUBSIDIARIES~~ millions)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Member's Interest		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Member's Equity
Balance at June 30, 2019	$	1,576.2	$	(23.9)	$	(223.5)	$	1,328.8
Stock-based compensation		26.3		—		—		26.3
Foreign currency translation adjustment		—		(14.8)		—		(14.8)
Defined benefit pension plan adjustments		—		0.4		—		0.4
Net income		—		—		17.9		17.9
Balance at September 30, 2019	$	1,602.5	$	(38.3)	$	(205.6)	$	1,358.6

~~(in millions)~~

	Nine Months Ended March 31,

	2019		2018
	Member's Interest		AccumulatedOtherComprehensiveLoss		Accumulated Deficit		Total Member'sEquity
Cash flows from operating activities
Balance at June 30, 2018	$	1,876.6	$	(15.5)	$	(373.5)	$	1,487.6
Net income	$	87.0	$	60.0
Stock-based compensation		26.3		—		—		26.3
Adjustments to reconcile net income to net cash provided by operating activities
Foreign currency translation adjustment		—		8.2		—		8.2
Depreciation and amortization		475.9		570.4
Capital distribution to parent		(0.2)		—		—		(0.2)
Loss on extinguishment of debt		—		4.9
Defined benefit pension plan adjustments		—		(1.9)		—		(1.9)
Gain on sale of SRT		(5.5)		—
Net income		—		—		22.1		22.1
Non-cash interest expense		7.6		9.7
Balance at September 30, 2018	$	1,902.7	$	(9.2)	$	(351.4)	$	1,542.1
Stock-based compensation		79.9		70.5
Amortization of deferred revenue		(112.9)		(100.3)
Foreign currency loss / (gain) on intercompany loans		5.8		(27.8)
Deferred income taxes		37.1		39.0
Provision for bad debts		8.7		5.8
Non-cash loss on investments		0.8		0.5
Changes in operating assets and liabilities, net of acquisitions
Trade receivables		5.5		(33.7)
Accounts payable and accrued liabilities		19.2		23.7
Additions to deferred revenue		138.7		138.0
Other assets and liabilities		(21.8)		(41.2)
Net cash provided by operating activities		726.0		719.5
Cash flows from investing activities
Purchases of property and equipment		(591.1)		(581.9)
Cash paid for acquisitions, net of cash acquired		—		(155.3)
Proceeds from sale of SRT, net of cash held in escrow		39.0		—
Other		—		(0.2)
Net cash used in investing activities		(552.1)		(737.4)
Cash flows from financing activities
Proceeds from debt		275.0		462.8
Principal payments on long-term debt		(108.8)		(314.4)
Principal payments on capital lease obligations		(5.6)		(6.4)
Payment of debt issue costs		—		(4.2)
Payments to repurchase ZGH common stock		(402.5)		—
Cash paid for Santa Clara acquisition financing arrangement and other		(5.8)		(3.8)
Net cash (used in)/provided by financing activities		(247.7)		134.0
Net cash flows		(73.8)		116.1
Effect of changes in foreign exchange rates on cash		(6.6)		(7.3)
Net (decrease)/increase in cash, cash equivalents and restricted cash		(80.4)		108.8
Cash, cash equivalents and restricted cash, beginning of year		260.6		224.5
Cash, cash equivalents and restricted cash, end of period	$	180.2	$	333.3
Supplemental disclosure of non-cash investing and financing activities:
Cash paid for interest, net of capitalized interest	$	222.8	$	195.1
Cash paid for income taxes	$	3.5	$	16.9
Non-cash purchases of equipment through capital leasing	$	53.0	$	18.2
Non-cash purchases of equipment through nonmonetary exchange	$	35.7	$	10.7
Decrease in accounts payable and accrued expenses for purchases of property and equipment	$	(16.3)	$	(45.8)

Reconciliation of cash, cash equivalents, and restricted cash:		March 31, 2019		June 30, 2018		March 31, 2018		June 30, 2017
Cash and cash equivalents	$	179.1	$	256.0	$	328.6	$	220.0
Restricted cash included in other assets		1.1		4.6		4.7		4.5
Total cash, cash equivalents and restricted cash	$	180.2	$	260.6	$	333.3	$	224.5

The accompanying notes are an integral part of these condensed consolidated financial statements.

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~ 4

~~NOTES~~Table TOof ~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Contents

~~(1)~~ZAYO ~~BUSINESS~~GROUP, LLC AND ~~BASIS OF PRESENTATION~~SUBSIDIARIES

~~Business~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Zayo Group, LLC, a Delaware limited liability company, was formed on May 4, 2007, and is the operating parent company of a number of subsidiaries engaged in providing access to bandwidth infrastructure. Zayo Group LLC and its subsidiaries are collectively referred to as “Zayo Group” or the “Company.” The Company is a wholly-owned subsidiary of Zayo Group Holdings, Inc. (~~“ZGH”). Headquartered~~ in Boulder, Colorado, the Company provides communication infrastructure solutions, including fiber and bandwidth connectivity, colocation and cloud infrastructure, to businesses primarily in the United States (“U.S.”millions)~~, Canada and Europe. The Company provides its products and offerings through six segments:~~

· Fiber Solutions, including dark fiber and mobile infrastructure solutions.


	Three Months Ended September 30,
	2019		2018
Cash flows from operating activities
Net income	$	17.9	$	22.1
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		156.1		167.8
Gain on sale of SRT		—		(5.5)
Non-cash interest expense		2.7		2.5
Stock-based compensation		27.2		26.7
Amortization of deferred revenue		(40.3)		(37.0)
Foreign currency loss on intercompany loans		12.9		4.6
Deferred income taxes		11.8		15.9
Provision for bad debts		2.6		1.5
Non-cash loss on investments		—		0.3
Changes in operating assets and liabilities, net of acquisitions
Trade receivables		20.9		4.5
Accounts payable and accrued liabilities		27.3		9.0
Additions to deferred revenue		81.4		30.5
Other assets and liabilities		(8.7)		(1.1)
Net cash provided by operating activities		311.8		241.8
Cash flows from investing activities
Purchases of property and equipment		(217.1)		(182.5)
Proceeds from sale of SRT, net of cash held in escrow		—		39.0
Net cash used in investing activities		(217.1)		(143.5)

Cash flows from financing activities
Principal payments on long-term debt		(21.3)		(1.3)
Principal payments on finance lease obligations		(2.1)		(1.9)
Payments to repurchase ZGH common stock		—		(0.2)
Cash paid for Santa Clara acquisition financing arrangement and other		—		(3.3)
Net cash used in financing activities		(23.4)		(6.7)
Net cash flows		71.3		91.6
Effect of changes in foreign exchange rates on cash		(2.7)		2.2
Net increase in cash, cash equivalents and restricted cash		68.6		93.8
Cash, cash equivalents and restricted cash, beginning of period		186.6		260.6
Cash, cash equivalents and restricted cash, end of period	$	255.2	$	354.4

Supplemental disclosure of non-cash investing and financing activities:
Cash paid for interest, net of capitalized interest	$	67.2	$	63.4
Cash paid for income taxes	$	3.0	$	2.0
Non-cash purchases of equipment through finance leasing	$	5.7	$	21.9
Non-cash purchases of equipment through nonmonetary exchange	$	19.5	$	31.1
Decrease in accounts payable and accrued expenses for purchases of property and equipment	$	(39.9)	$	(2.4)

~~· Transport, including Ethernet, wavelength, wholesale IP, and SONET solutions.~~

· Enterprise Networks, including private lines, dedicated Internet and cloud-based computing and storage products.


Reconciliation of cash, cash equivalents, and restricted cash:		September 30, 2019		June 30, 2019		September 30, 2018		June 30, 2018
Cash and cash equivalents	$	253.9	$	185.4	$	353.2	$	256.0
Restricted cash included in other assets		1.3		1.2		1.2		4.6
Total cash, cash equivalents and restricted cash	$	255.2	$	186.6	$	354.4	$	260.6

·The ~~Colocation,~~accompanying ~~including~~notes ~~provision~~are ofan ~~colocation~~integral ~~space~~part ~~and~~of ~~power~~these ~~and~~condensed ~~interconnection~~consolidated ~~offerings~~financial statements.

~~· Allstream, including Cloud VoIP and Data Solutions.~~5

·Table ~~Other~~of ~~offerings, including Zayo Professional Services (“ZPS”).~~Contents

OnZAYO ~~May 3~~GROUP, ~~2018,~~LLC ~~the~~AND Company announced that it completed the first phase of its investigation on the advisability and feasibility of a conversion of ZGH to a real estate investment trust for U.S. federal income tax purposes (a “REIT”). The Company has begun the next phase of its evaluation and preparation for a potential conversion of ZGH to a REIT. As part of these efforts, the Company has begun a direct dialogue with the U.S. Internal Revenue Service (“IRS”) in an effort to obtain clarity and support for its position, and ZGH is seeking a private letter ruling (“PLR”) from the IRS. The ability of ZGH to qualify for taxation as a REIT will depend upon its continuing compliance following REIT conversion with various requirements, including requirements related to the nature of its assets, the sources of its income and the distributions to its stockholders. SUBSIDIARIES

~~ZGH~~NOTES isTO ~~requesting~~THE ~~that~~CONDENSED ~~the~~CONSOLIDATED ~~PLR~~STATEMENTS address whether ZGH’s revenues from dark and lit fiber satisfy applicable REIT income tests, and ZGH’s ultimate decision to convert to a REIT may depend upon a favorable ruling from the IRS on this topic. ZGH submitted a PLR request to the IRS in July 2018, but the IRS may not provide a response until later in 2019 or later or may not respond at all. (UNAUDITED)

On November 7, 2018, ZGH announced plans to separate into two publicly traded companies – one to focus on providing communications infrastructure and another to leverage infrastructure to provide solutions for enterprise customers – with the core tenets of the plan being simplification of the business and a focus on a communications infrastructure business. In February 2019, ZGH announced that while the tenets of this plan remain intact, ZGH no longer believed it is in the shareholders’ best interests for the separation to include a public spin.

~~See~~(1) ~~Note~~BUSINESS ~~16—Subsequent Events~~AND ~~for~~BASIS ~~information~~OF onPRESENTATION ~~a significant merger development.~~

~~Basis~~Business ~~of Presentation~~

~~The~~Zayo ~~accompanying~~Group, ~~condensed~~LLC, ~~consolidated~~a ~~financial~~Delaware ~~statements~~limited ~~include~~liability ~~all~~company, ~~the~~was ~~accounts~~formed ofon ~~the~~May ~~Company~~4, 2007, and ~~its~~is ~~wholly-owned~~the ~~subsidiaries.~~operating ~~All~~parent ~~inter-~~company ~~accounts~~of ~~and~~a ~~transactions~~number ~~have~~of ~~been~~subsidiaries ~~eliminated~~engaged in ~~consolidation.~~providing ~~The~~access ~~accompanying~~to ~~condensed~~bandwidth ~~consolidated~~infrastructure. ~~financial~~Zayo ~~statements~~Group LLC and ~~related~~its ~~notes~~subsidiaries are ~~unaudited~~collectively ~~and~~referred ~~have~~to ~~been~~as ~~prepared~~“Zayo inGroup” ~~accordance~~or ~~with accounting principles generally accepted in~~ the ~~United States (~~“~~GAAP~~Company.”) ~~for~~The ~~interim~~Company ~~financial~~is ~~reporting~~a ~~and~~wholly-owned ~~pursuant~~subsidiary ~~to the rules and regulations~~ of ~~the~~Zayo ~~Securities~~Group ~~and~~Holdings, ~~Exchange~~Inc. ~~Commission~~ (~~the~~ “~~SEC~~ZGH”). Headquartered ~~for~~in ~~quarterly~~Boulder, ~~reports~~Colorado, onthe ~~Form~~Company ~~10-Q,~~provides ~~and~~communication doinfrastructure ~~not~~solutions, ~~include~~including ~~all~~fiber ofand ~~the~~bandwidth ~~note~~connectivity, ~~disclosures~~colocation ~~required~~and bycloud ~~GAAP~~infrastructure, ~~for~~to ~~complete~~businesses ~~financial~~primarily ~~statements.~~in ~~These~~the ~~condensed~~United ~~consolidated~~States ~~financial~~(“U.S.”), ~~statements~~Canada ~~should,~~and ~~therefore,~~Europe. beThe ~~read~~Company inprovides ~~conjunction~~its ~~with~~products ~~the~~and ~~consolidated~~offerings ~~financial~~through four segments:

8 ●Zayo Networks, including dark fiber, mobile infrastructure solutions, ethernet, wavelength, wholesale IP, SONET solutions, private lines, and dedicated internet.

~~Table~~● Zayo Colocation (“zColo”), including provision of ~~Contents~~ colocation space and power and interconnection offerings, and cloud-based computing offerings.

~~ZAYO~~● ~~GROUP~~Allstream, ~~LLC~~including ~~AND~~Cloud ~~SUBSIDIARIES~~ VoIP and Data Solutions.

~~NOTES~~● TOOther ~~THE~~offerings, ~~CONDENSED~~including ~~CONSOLIDATED~~Zayo ~~FINANCIAL~~Professional ~~STATEMENTS~~Services (~~UNAUDITED~~“ZPS”) .

~~statements~~Significant ~~and~~Merger notes thereto for the year ended June 30, 2018 included in the Company’s Annual Report on Form 10-K/A for the year ended June 30, 2018. In the opinion of management, all adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows of the Company have been included herein. The results of operations for the three and nine months ended March 31, 2019 are not necessarily indicative of the operating results for any future interim period or the full year. Unless otherwise noted, dollar amounts and disclosures throughout the notes to the condensed consolidated financial statements are presented in millions of dollars. Development

~~The~~On ~~Company’s~~May ~~fiscal~~8, ~~year~~2019, ~~ends~~ZGH, ~~June 30~~Front ~~each~~Range ~~year~~TopCo, ~~and~~Inc. we(“Parent”), ~~refer~~a toDelaware ~~the~~corporation ~~fiscal~~and ~~year~~Front ~~ending~~Range ~~June~~BidCo, 30Inc., ~~2020~~a asDelaware corporation and a wholly owned subsidiary of Parent (“~~Fiscal~~Merger ~~2020~~Sub”,) ~~the~~entered ~~fiscal~~into ~~year~~an ~~ending~~Agreement ~~June~~and ~~30,~~Plan ~~2019~~of asMerger (the “~~Fiscal~~Merger ~~2019~~Agreement”) to be acquired by a consortium of private equity funds including affiliates of EQT Infrastructure IV, Digital Colony Partners, LP, DC Front Range Holdings I, LP and FMR LLC (the ~~fiscal~~“Consortium”). ~~year~~Upon ~~ending~~the ~~June~~close 30of the Merger (defined below), ~~2018~~ZGH will operate as ~~“Fiscal~~a ~~2018”~~privately-held company. Parent and Merger Sub were formed by the Consortium.

~~Use~~The Merger Agreement provides, among other things and upon the terms and subject to the conditions of ~~Estimates~~the Merger Agreement, (i) Merger Sub will be merged with and into ZGH (the “Merger”), with ZGH surviving and continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Parent, and (ii) at the effective time of the Merger, each outstanding share of common stock of ZGH, par value $0.001 per share (“Common Stock”) (other than Common Stock owned by Parent, Merger Sub or any wholly owned subsidiary of Parent or Merger Sub or held in the treasury of ZGH, all of which shall be cancelled without any consideration being exchanged therefore, shares of ZGH Common Stock held by holders who have made a valid demand for appraisal in accordance with Section 262 of the Delaware General Corporation Law) will be converted into the right to receive an amount equal to $35.00 per share in cash (the “Merger Consideration”).

The ~~preparation~~closing of the ~~Company’s~~Merger ~~condensed~~is ~~consolidated~~subject ~~financial statements in conformity with GAAP requires management~~ to ~~make~~customary ~~estimates~~closing ~~and~~conditions, ~~assumptions~~including ~~that~~(i) ~~affect~~ the ~~reported~~adoption ~~amounts~~ of ~~assets~~the ~~and~~Merger ~~liabilities,~~Agreement ~~and~~by ~~disclosures of contingent assets and liabilities at~~ the ~~date~~holders of ~~the~~not ~~financial~~less ~~statements~~than ~~and~~a ~~the~~majority ~~reported amounts~~ of ~~revenue and expense during~~ the ~~reporting~~outstanding ~~period.~~shares ~~Estimates~~of ~~are~~ZGH ~~used~~Common ~~when establishing allowances for doubtful accounts and accruals for billing disputes~~Stock, ~~determining~~(ii) ~~useful~~the ~~lives~~receipt ~~for~~of ~~depreciation~~specified ~~and~~required ~~amortization~~regulatory ~~and accruals for exit activities associated with real estate leases~~approvals, ~~assessing the need for impairment charges~~ (~~including those related to intangible assets and goodwill~~iii), ~~determining~~ the ~~fair~~absence ~~values~~ of ~~assets~~any ~~acquired~~law ~~and~~or ~~liabilities~~order ~~assumed~~enjoining inor ~~business~~prohibiting ~~combinations, accounting for income taxes and related valuation allowances against deferred tax assets, determining~~ the ~~defined~~Merger ~~benefit~~or ~~costs~~making ~~and~~it ~~defined benefit obligations related to post-employment benefits~~illegal, ~~determining~~(iv) the ~~fair~~accuracy ~~value~~ of ~~plan~~the ~~assets~~representations ~~related to post-employment benefits~~ and ~~estimating~~warranties ~~certain~~contained ~~restricted~~in ~~stock unit grant fair values used to compute~~ the ~~stock-based~~Merger ~~compensation~~Agreement ~~liability~~(subject and expense. Management evaluates these estimates and judgments on an ongoing basis and makes estimates based on historical experience, current conditions, and various other assumptions that are believed to be“material ~~reasonable~~adverse ~~under~~effect” ~~the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets~~ and ~~liabilities~~materiality asqualifications) ~~well as identifying~~ and ~~assessing~~(v) ~~the~~compliance ~~accounting treatment~~ with ~~respect~~covenants toin ~~commitments~~the ~~and~~Merger ~~contingencies.~~Agreement ~~Actual~~in ~~results~~all ~~may~~material ~~differ from these estimates under different assumptions or conditions~~respects.

~~Significant~~ZGH’s ~~Accounting~~board ~~Policies~~ of directors and the board of directors of Parent have each unanimously approved the Merger and the Merger Agreement. On July 26, 2019, ZGH held a special meeting of stockholders where our stockholders approved the adoption of the Merger Agreement. On July 31, 2019, ZGH announced the early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, satisfying one of the conditions to the closing of the pending transaction. The closing of the deal continues to be subject to customary conditions, including regulatory clearances relating to review and clearance by the Committee on Foreign Investment in the United States and

On July 1, 2018, the Company adopted the requirements of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“ASC 606”). See “Recently Adopted Accounting Pronouncements” below and Note 12 – Revenue and Contract Costs for additional disclosure on the Company’s adoption of ASC 606 and its impact on the condensed consolidated financial statements. 6

~~There~~Table ~~have~~of ~~been no other changes to the Company’s significant accounting policies as described in its Annual Report on Form 10-K/A for the year ended June 30, 2018.~~ Contents

~~Recently~~the ~~Issued~~receipt ~~Accounting~~of ~~Pronouncements~~ certain foreign antitrust approvals, certain other foreign direct investment review approvals, and specified FCC and state public utility commission approvals. In addition, the Merger Agreement may be terminated under specified circumstances. The closing of the Merger is not subject to a financing condition. The Merger is expected to close in the first half of 2020. Until the closing, we will continue to operate as an independent company. The Company has incurred ongoing Merger-related costs of $2.0 million during the three months ended September 30, 2019, which are included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations. The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement, which has been filed as Exhibit 2.1 to ZGH’s Current Report on Form 8-K filed with the SEC on May 9, 2019.

InBasis ~~February 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification~~ of ~~Certain~~Presentation Tax Effects from Accumulated Other Comprehensive Income, which allows companies to reclassify the income tax effects resulting from tax bill H.R.1, from accumulated other comprehensive income to retained earnings. The standard also requires certain new disclosures regardless of the election. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018 (Fiscal 2020 for the Company), with early adoption permitted. The Company does not expect ASU 2018-02 to have a material impact on the condensed consolidated financial statements.

InThe ~~February~~accompanying ~~2016,~~condensed consolidated financial statements include all the ~~FASB~~accounts ~~issued~~of ~~ASU~~the ~~2016~~Company and its wholly-~~02, Leases~~owned subsidiaries. ~~The~~All ~~new~~inter-company ~~guidance~~accounts ~~supersedes~~and ~~existing~~transactions ~~guidance~~have onbeen ~~accounting~~eliminated ~~for~~in ~~leases~~consolidation. inThe ~~Topic~~accompanying ~~840~~condensed ~~and~~consolidated isfinancial ~~intended~~statements toand ~~increase~~related ~~the~~notes ~~transparency~~are unaudited and ~~comparability~~have ofbeen prepared in accordance with accounting ~~for~~principles ~~lease~~generally ~~transactions.~~accepted ~~ASU~~in ~~2016-02~~the ~~requires~~United ~~most~~States ~~leases~~(“GAAP”) for interim financial reporting and pursuant to bethe ~~recognized~~rules onand regulations of the ~~balance~~Securities ~~sheet.~~and ~~Lessees~~Exchange ~~will~~Commission ~~need~~(the to“SEC”) ~~recognize~~for aquarterly ~~right~~reports on Form 10-Q, and do not include all of~~-use~~ ~~asset~~the ~~and~~note adisclosures ~~lease~~required ~~liability~~by GAAP for ~~virtually~~complete ~~all~~financial ~~leases~~statements. ~~The~~These ~~liability~~condensed ~~will~~consolidated financial statements should, therefore, be ~~equal~~read toin conjunction with the ~~present~~consolidated ~~value~~financial ofstatements ~~lease~~and ~~payments.~~notes ~~The~~thereto ~~asset~~for ~~will~~the beyear ~~based~~ended June 30, 2019 included in the Company’s Annual Report on Form 10-K for the ~~liability~~year ended June 30, ~~subject~~2019. toIn ~~adjustment~~the opinion of management, ~~such~~all asadjustments considered necessary for ~~initial~~a ~~direct~~fair ~~costs~~presentation of financial position, results of operations and cash flows of the Company have been included herein. ~~For~~The ~~income~~results ~~statement~~of ~~purposes,~~operations for the ~~FASB~~three ~~retained~~months aended ~~dual~~September ~~model~~30, ~~requiring~~2019 ~~leases~~are tonot benecessarily ~~classified~~indicative asof ~~either~~the operating results for any future interim period or ~~finance~~the full year. Unless otherwise noted, dollar amounts and disclosures throughout the notes to the condensed consolidated financial statements are presented in millions of dollars.

9 The Company’s fiscal year ends June 30 each year, and we refer to the fiscal year ending June 30, 2020 as “Fiscal 2020” and the fiscal year ended June 30, 2019 as “Fiscal 2019.”

~~Table~~Use of ~~Contents~~ Estimates

~~ZAYO~~The ~~GROUP~~preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, ~~LLC~~and ~~AND~~disclosures ~~SUBSIDIARIES~~ of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Estimates are used when establishing allowances for doubtful accounts and accruals for billing disputes, determining useful lives for depreciation and amortization and accruals for exit activities associated with real estate leases, assessing the need for impairment charges (including those related to intangible assets and goodwill), determining the fair values of assets acquired and liabilities assumed in business combinations, accounting for income taxes and related valuation allowances against deferred tax assets, determining the defined benefit costs and defined benefit obligations related to post-employment benefits, selection of the discount rate used to value lease liabilities, determining the fair value of nonmonetary exchanges, determining the fair value of plan assets related to post-employment benefits and estimating certain restricted stock unit grant fair values used to compute the stock-based compensation liability and expense. Management evaluates these estimates and judgments on an ongoing basis and makes estimates based on historical experience, current conditions, and various other assumptions that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions.

~~NOTES~~Significant TOAccounting ~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Policies

~~Lessor~~On ~~accounting~~July ~~remains~~1, ~~similar~~2019, to the ~~current~~Company ~~model,~~adopted ~~but updated to align with certain changes to~~ the ~~lessee~~requirements ~~model~~of ~~and~~Accounting ~~the~~Standards ~~new~~Update ~~revenue~~(“ASU”) ~~recognition~~2016-02, ~~standard~~Leases (ASC ~~606~~842). ~~The~~See ~~ASU~~Recently ~~will~~Adopted ~~require~~Accounting ~~both~~Pronouncements ~~quantitative~~below and ~~qualitative~~Note ~~disclosures~~13 ~~regarding~~– ~~key~~Leases ~~information about leasing arrangements. The standard is effective~~ for ~~fiscal~~additional ~~years,~~disclosure ~~and~~on ~~interim periods within those fiscal years, beginning after December 15, 2018 (Fiscal 2020 for~~ the Company).’s ~~Early~~ adoption ~~is permitted. The standard will require application~~ of ~~the~~ASC ~~new~~842 ~~guidance at the beginning of the earliest comparative period presented using a modified retrospective transition,~~ and ~~provides~~its ~~for certain practical expedients. The Company established a project team and commenced an initial~~ impact ~~assessment process. To date, the Company has reviewed a sample of lessee and lessor arrangements and made preliminary assessments of the impact this standard will have~~ on the condensed consolidated financial statements. Additionally, the Company has commenced its implementation of a lease accounting software system. Although it is still assessing the impact of this standard, the Company expects the new guidance to significantly increase the reported assets and liabilities on the consolidated balance sheets. There are currently no plans to early adopt ASU 2016-02.

~~Recently Adopted Accounting Pronouncements~~ 7

InTable ~~March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715): Improving the Presentation~~ of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires an employer to report the service cost component of net periodic pension cost and net periodic postretirement cost in the same line item in the statement of operations as other compensation costs arising from services rendered by the related employees during the period. The other net cost components are required to be presented in the statement of operations separately from the service cost component and outside a subtotal of income from operations. Additionally, the line item used in the statement of operations to present the other net cost components must be disclosed in the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2017 (Fiscal 2019 for the Company), and interim periods within those fiscal years, and must be applied on a retrospective basis. The adoption did not result in a material impact to the condensed consolidated financial statements for either of the three and nine months ended March 31, 2019 or 2018 and retrospective application was applied. Contents

InThere ~~November~~have ~~2016,~~been ~~the~~no ~~FASB~~other ~~issued~~changes ~~ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The new standard requires a statement of cash flows~~ to ~~explain~~ the ~~change~~Company’s ~~during~~significant ~~the~~accounting ~~period~~policies ~~in the total of cash, cash equivalents, and amounts generally~~ described asin ~~restricted~~its ~~cash~~Annual orReport ~~restricted~~on ~~cash~~Form ~~equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning~~10-~~of-period~~K ~~and~~for ~~end-of-period total amounts shown on~~ the ~~statement~~year ofended ~~cash~~June ~~flows. The standard is effective for fiscal years~~30, ~~and interim periods within those fiscal years, beginning after December 15, 2017 (Fiscal~~ 2019 ~~for the Company)~~. ~~The retrospective adoption of this accounting standard did not have a material impact on its condensed consolidated financial statements.~~

InRecently ~~August~~Issued ~~2016,~~Accounting the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classifications of Certain Cash Receipts and Cash Payments. The new standard provides guidance for eight changes with respect to how cash receipts and cash payments are classified in the statement of cash flows, with the objective of reducing diversity in practice. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2017 (Fiscal 2019 for the Company). The retrospective adoption of this accounting standard did not have a material impact on its condensed consolidated financial statements. Pronouncements

In ~~May~~June ~~2014~~2016, the FASB issued ~~ASC~~ASU ~~606, which replaces numerous requirements in U.S. GAAP, including industry~~2016-~~specific requirements~~13, ~~and~~"Measurement ~~provides~~of ~~companies~~Credit ~~with~~Losses aon ~~single~~Financial ~~revenue recognition model for recognizing revenue from certain contracts with customers~~Instruments. " The ~~core~~primary ~~principle~~impact of ~~the~~ASU ~~new~~2016-13 ~~standard~~for us is ~~that~~ a ~~company~~change ~~should~~in ~~recognize~~the ~~revenue~~model tofor ~~depict~~ the ~~transfer~~recognition of ~~promised~~credit ~~goods~~losses orrelated ~~services~~ to ~~customers~~our infinancial aninstruments ~~amount~~from ~~that~~an ~~reflects~~incurred ~~the~~loss ~~consideration~~model, to which ~~the~~recognized ~~company~~credit ~~expects~~losses toonly beif ~~entitled~~it inwas ~~exchange~~probable ~~for~~a ~~those~~loss ~~goods~~had orbeen ~~services. In addition~~incurred, ~~the~~to ~~standard~~an ~~requires~~expected ~~disclosure~~loss ~~of the nature~~model, ~~amount,~~which ~~timing,~~requires ~~and~~our ~~uncertainty~~management ofteam ~~revenue and cash flows arising from contracts with customers and addressed accounting for costs~~ to ~~acquire~~estimate ~~and~~the ~~fulfill~~total ~~contracts.~~credit ~~The~~losses ~~standard~~expected ~~does~~on ~~not impact~~ the ~~manner~~portfolio inof ~~which~~financial ~~the Company accounts for revenue arrangements accounted for as leases~~instruments. ~~Effective~~ ~~July~~We 1,are ~~2018,~~currently ~~the~~reviewing ~~Company adopted~~ the requirements of ~~ASC~~the ~~606~~standard and ~~used~~evaluating the ~~full~~impact ~~retrospective~~on ~~transition~~our ~~method. The~~consolidated ~~full~~financial ~~retrospective transition method requires the Company to restate each prior reporting period presented~~statements. ~~The~~We ~~Company~~are ~~has~~required ~~implemented internal controls and system functionality~~ to ~~enable~~adopt the ~~preparation~~provisions of ~~financial~~ASU ~~information~~2016-13 inno ~~accordance~~later ~~with~~than ~~ASC~~July ~~606~~1, 2020.

10 Recently Adopted Accounting Pronouncements

~~Table~~In February 2016, the FASB issued ASU 2016-02, Leases. The new guidance supersedes existing guidance on accounting for leases in Topic 840 and is intended to increase the transparency and comparability of ~~Contents~~ accounting for lease transactions. ASU 2016-02 requires most leases to be recognized on the balance sheet. Lessees are required to recognize a right-of-use asset and a lease liability for virtually all leases. The liability is equal to the present value of lease payments. The asset is based on the liability, subject to certain adjustments. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Lessor accounting remains similar to the current model but updated to align with certain changes to the lessee model and the new revenue recognition standard (ASC 606). ASU 2016-02 requires both quantitative and qualitative disclosures regarding key information about leasing arrangements. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

~~ZAYO~~The ~~GROUP~~Company adopted ASC 842 effective July 1, ~~LLC~~2019 ~~AND~~using ~~SUBSIDIARIES~~ the modified retrospective transition method. Under this method, the Company recognized a cumulative effect adjustment in the first quarter of Fiscal 2020, rather than restating any prior periods. Comparative information for prior periods has not been restated and continues to be reported in accordance with Topic 840.

~~NOTES~~The TOCompany ~~THE~~elected ~~CONDENSED~~the ~~CONSOLIDATED~~package ~~FINANCIAL~~of ~~STATEMENTS~~practical expedients permitted under the transition guidance, which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct lease costs. As an accounting policy election, the Company will exclude short-term leases (~~UNAUDITED~~term of 12 months or less) from the balance sheet presentation and will account for non-lease and lease components in a contract as a single lease component for certain asset classes. The Company also elected the land easements practical expedient which permits the Company to carry forward the historical accounting treatment for agreements entered into prior to the adoption date.

The adoption of ASC ~~606~~842 ~~has~~impacted ~~an impact on~~ the ~~manner in which the~~ Company’s ~~recognizes~~condensed ~~revenue~~consolidated ~~associated~~balance sheet with ~~dark fiber sales that include~~ the ~~transfer of title to certain network assets, which prior to ASC 606 was considered a sale of real estate or integral equipment. Under previous GAAP, the Company deferred the~~ recognition of ~~revenue~~existing onoperating ~~the~~leases ~~sale~~as oflessee ~~network~~resulting ~~infrastructure assets that were considered to be integral equipment if the Company had a substantial continuing involvement~~ in ~~the transferred asset~~$527. ~~The~~6 ~~consideration~~million ~~received in this type~~ of arrangement had historically been amortized to revenue ratably over the period in which the Company had a substantial continuing involvement in the transferred asset. Under ASC 606 the asset transferred in this type right-of-use ~~arrangement~~(“ROU”) isassets ~~derecognized from the balance sheet~~ and ~~the~~$545.1 ~~amount~~million of ~~the~~lease ~~transaction~~liabilities ~~price~~recorded ~~attributable~~as ~~to the asset being sold is recognized upon customer acceptance. This change had an impact~~ of ~~(decreasing)/increasing~~July ~~the revenue previously reported by the Company during the years ended June 30, 2018 and 2017 by ($~~1~~.5) million and $20.5 million~~, ~~respectively~~2019. The ~~full~~standard ~~retrospective~~did ~~adoption~~not ofmaterially ~~ASC~~impact ~~606~~the ~~also~~Company’s ~~resulted~~consolidated innet ~~increasing~~earnings ~~the~~or ~~previously~~cash ~~reported~~flows ~~operating~~for ~~costs during~~ the ~~year~~three months ended ~~June~~September 30, ~~2017 by $18~~2019.8 ~~million, which represents the net book value of assets transferred to customers in these types of arrangements during Fiscal 2017.~~

~~The~~As ~~assets~~lessor, ~~transferred~~accounting infor ~~these~~the ~~real~~Company’s ~~estate~~leases ~~sales~~remains ~~had~~largely ~~historically~~unchanged ~~been~~from ~~included~~ASC in840. ~~property~~The ~~and~~Company ~~equipment,~~leases ~~net~~dark onfiber and circuits (within the ~~Company’s~~Zayo ~~balance~~Networks ~~sheet. Upon~~segment) ~~the~~and ~~adoption~~provides leases of ~~ASC~~colocation ~~606,~~space (within the ~~net~~zColo ~~book~~segment) ~~value~~which ofhave ~~these~~contract ~~assets~~terms ofthat ~~$19.6~~are ~~million~~accounted ~~was~~for ~~removed~~as ~~from~~operating ~~the~~leases ~~Company’s~~and ~~condensed~~are ~~consolidated~~further ~~balance~~described ~~sheet~~in Note 15 – Segment Reporting. The ~~Company~~new ~~also~~lease ~~derecognized~~standard ~~from~~more ~~its~~narrowly ~~June~~defines ~~30,~~initial ~~2018~~direct ~~balance~~costs ~~sheet~~as ~~$1.5~~only ~~million~~costs ~~and~~that ~~$20~~are incremental to origination of a lease (i.5e. ~~million~~costs inthat ~~related~~would ~~deferred~~not ~~revenue,~~have ~~current~~been ~~and~~incurred had the lease not been obtained). The Company did not historically capitalize non-~~current,~~incremental ~~respectively~~costs; therefore, ~~which~~this ~~represented~~change will not have an impact on the ~~unamortized~~accounting ~~consideration~~for ~~received~~initial direct costs in the condensed consolidated financial statements on ~~these~~a ~~arrangements~~prospective basis.

An additional impact from the adoption of ASC 606 is the accounting for the incremental costs of acquiring new service contracts, including certain compensation expense for internal sales representatives. Under ASC 606, the Company capitalizes these incremental costs of obtaining customer contracts and amortizes the expense over the relevant contract term. In addition, the Company will assess its deferred contract cost asset for impairment on a periodic basis. Prior to the adoption of ASC 606, compensation paid to internal sales representatives for obtaining new service contracts was expensed as incurred. The impact of the retrospective adoption of ASC 606 resulted in an increase to selling, general and administrative expenses as previously reported by the Company during the years ended June 30, 2018 and 2017 by $1.1 million and $0.2 million, respectively. Additionally, the Company recorded an increase to the previously reported other current assets and other assets on the consolidated balance sheet as of June 30, 2018 of $7.1 million and $5.6 million, respectively, to reflect the deferred cost of acquiring service contracts that will be recognized in future periods over the relevant contract term.

~~The~~(2) ~~table~~ACQUISITIONS ~~below~~AND presents the impact the full retrospective adoption of ASC 606 had on the Company’s condensed statement of operations for the years ended June 30, 2018 and 2017 and each of the quarters of Fiscal 2018: DISPOSITIONS

	Fiscal Year ended				Quarter Ended (unaudited)
	June 30, 2018		June 30,2017		September 30,2017		December 31,2017		March 31,2018		June 30,2018
	(in millions)
Revenue	$	(1.5)	$	20.5	$	(0.4)	$	(0.4)	$	(0.4)	$	(0.3)
Operating costs		—		18.8		—		—		—		—
Selling, general and administrative expenses		1.1		0.2		(0.2)		0.6		(0.3)		1.0
Depreciation and amortization		(0.9)		(0.7)		(0.3)		(0.3)		(0.2)		(0.1)
Provision for income taxes		(2.7)		0.8		—		(2.5)		—		(0.2)
Net income	$	1.0	$	1.4	$	0.1	$	1.8	$	0.1	$	(1.0)

11 Since inception through September 30, 2019, the Company has consummated 45 transactions accounted for as business combinations. The acquisitions were executed as part of the Company’s business strategy of expanding through

~~Table of Contents~~ 8

~~ZAYO~~Table ~~GROUP,~~of ~~LLC AND SUBSIDIARIES~~ Contents

~~NOTES~~acquisitions. TOThe ~~THE~~acquisitions ~~CONDENSED~~of ~~CONSOLIDATED~~these ~~FINANCIAL~~businesses ~~STATEMENTS~~have ~~(UNAUDITED)~~ allowed the Company to increase the scale at which it operates, which in turn affords the Company the ability to increase its operating leverage, extend its network reach, and broaden its customer base. The accompanying condensed consolidated financial statements include the operations of the acquired entities from their respective acquisition dates.

~~The~~In ~~table~~the ~~below~~Company’s ~~presents~~acquisitions, the ~~impact~~Company ~~the~~acquired ~~full~~certain ~~retrospective~~customer ~~adoption~~relationships. ofThese ~~ASC~~relationships ~~606~~represent ~~had~~a onvaluable intangible asset, as the Company anticipates continued business from the acquired customer bases. The Company’s ~~consolidated~~estimate ~~balance~~of ~~sheet~~the ~~for~~fair value of the ~~year~~acquired ~~ended~~customer ~~June~~relationships ~~30,~~is ~~2018:~~ generally based on a multi-period excess earnings valuation technique utilizing Level 3 inputs.

	As of June 30, 2018
	As Previously Reported		Effect of Adoption		As Adjusted
	(in millions)
Assets
Other current assets	$	18.7	$	7.1	$	25.8
Property and equipment, net	$	5,447.2	$	(19.6)	$	5,427.6
Other assets	$	170.0	$	5.6	$	175.6
Liabilities
Deferred revenue, current	$	164.4	$	(1.5)	$	162.9
Deferred revenue, non-current	$	1,096.8	$	(20.5)	$	1,076.3
Deferred income taxes, net	$	148.5	$	3.9	$	152.4
Stockholders' equity
Accumulated deficit	$	(384.7)	$	11.2	$	(373.5)

Transaction Costs

Transaction costs include expenses associated with professional services (2i.e., legal, accounting, regulatory, etc.) ~~ACQUISITIONS~~rendered ~~AND~~in ~~DISPOSITIONS~~connection with signed and/or closed acquisitions or disposals, travel expense, severance expense incurred associated with acquisitions or disposals, and other direct expenses incurred associated with signed and/or closed acquisitions or disposals and unsuccessful acquisitions. The Company incurred transaction costs of $2.0 million and $0.7 million for the three months ended September 30, 2019 and 2018, respectively. Transaction costs of $2.0 million in the three months ended September 30, 2019 are related to the Merger Agreement between the Company, Parent and Merger Sub (see Note 1 – Organization and Description of Business). Transaction costs have been included in selling, general and administrative expenses in the condensed consolidated statements of operations and in cash flows from operating activities in the condensed consolidated statements of cash flows during these periods.

~~Since~~Scott-Rice ~~inception~~Telephone ~~through March 31, 2019, the Company has consummated 45 transactions accounted for as business combinations~~Co. The acquisitions were executed as part of the Company’s business strategy of expanding through acquisitions. The acquisitions of these businesses have allowed the Company to increase the scale at which it operates, which in turn affords the Company the ability to increase its operating leverage, extend its network reach, and broaden its customer base.

On July 31, 2018, the Company completed the sale of Scott-Rice Telephone Co. (“SRT”), a Minnesota incumbent local exchange carrier, for $42.2 million to Nuvera Communications, Inc. (formerly New Ulm Telecom, Inc.). As of September 30, 2019, $3.2 million of purchase consideration was held in escrow. The ~~accompanying~~Company recognized a pre-tax gain of $5.5 million on the sale, which is included in other income, net in the condensed consolidated ~~financial~~ statements ~~include~~of operations. The Company acquired SRT as part of its March 1, 2017 purchase of Electric Lightwave Parent, Inc. and it was included as part of the ~~operations~~Allstream segment. SRT had a pre-tax net loss of $1.6 million for the ~~acquired~~year ~~entities~~ended June 30, 2018 and pre-tax net income of $2.9 million from ~~their~~when ~~respective~~it ~~acquisition~~was ~~dates~~acquired in March 1, 2017 through June 30, 2017. The Company concluded SRT was not a significant disposal group and did not represent a strategic shift, and therefore was not classified as discontinued operations.

~~Acquisitions Completed During Fiscal 2018~~

~~Neutral~~(3) ~~Path~~GOODWILL ~~Communications~~

OnDuring ~~April 17, 2018,~~ the ~~Company~~fourth ~~acquired~~quarter ~~substantially all~~ of ~~the~~Fiscal ~~assets of Neutral Path Communications and Near North Partners (collectively~~2019, ~~“Neutral~~the ~~Path”)~~Company ~~for~~implemented ~~$33.3~~organizational ~~million,~~changes ~~which~~resulting isin ~~net~~changes ofto ~~cash~~its ~~acquired~~reportable ~~and also included an estimate for a contingent payment based on sales performance through June 30, 2018~~segments. In Asconnection ofwith ~~March~~the ~~31,~~organizational ~~2019~~change, ~~$4.0 million of~~ the ~~purchase~~Company’s ~~consideration~~reporting isunits ~~being~~changed ~~held~~and ingoodwill ~~escrow~~was ~~pending~~re-allocated ~~the~~to ~~expiration of~~ the ~~indemnification~~new ~~adjustment~~reporting ~~period.~~units ~~The all-cash acquisition was funded with cash~~ on ~~hand~~a ~~and~~relative ~~was~~fair ~~considered~~value ~~an asset purchase for U~~basis.S. ~~federal~~The ~~income~~Company ~~tax~~completed ~~purposes.~~an ~~Neutral~~assessment ~~Path~~immediately isprior ~~a long haul infrastructure provider, providing access~~ to aand ~~fiber~~after ~~network~~the ~~section~~organizational inchange ~~the~~and ~~Midwest.~~determined ~~The~~it ~~transaction~~is ~~added~~more ~~owned~~likely ~~plus~~than ~~additional~~not ~~leased~~the ~~route~~fair ~~miles~~value toof the Company’s ~~extensive~~reporting ~~North~~units ~~American~~is ~~network,~~greater ~~including~~than atheir ~~unique~~carrying ~~high-count fiber route from Minneapolis to Omaha~~amounts.

~~McLean~~The ~~Data~~following ~~Center~~ reflects the changes in the carrying amount of goodwill during the three months ended September 30, 2019:

On April 4, 2018, the Company acquired McLean Data Center, a privately owned data center, for an insignificant amount. The acquisition was considered an asset purchase for U.S. federal income tax purposes and a business combination for accounting purposes. The Company assumed an operating lease obligation and acquired certain assets, such as cash, structural components, equipment, and assumed customer contracts.


Product Group	As of June 30, 2019		Foreign Currency Translation and Other		As of September 30, 2019
	(in millions)
Fiber Solutions	$	1,000.9	$	(3.2)	$	997.7
Layer 2/3		200.8		(0.7)		200.1
Transport		176.2		(0.6)		175.6
zColo		259.6		(1.0)		258.6
Cloud		14.7		—		14.7
Allstream		39.0		—		39.0
Other		15.4		—		15.4
Total	$	1,706.6	$	(5.5)	$	1,701.1

~~Table of Contents~~

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~ 9

~~NOTES~~Table TOof ~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Contents

~~Spread~~(4) ~~Networks~~ INTANGIBLE ASSETS

OnIdentifiable ~~February~~intangible ~~28,~~assets ~~2018,~~as ~~the~~of ~~Company~~September ~~acquired Spread Networks~~30, ~~LLC~~2019 ~~(“Spread Networks”), a privately owned telecommunications provider that owns~~ and ~~offers access to a high-fiber count long haul route connecting~~June ~~New York and Chicago~~30, ~~for net purchase consideration of $130.5 million, net of cash acquired, subject to certain post-closing adjustments. During the three months ended March 31,~~ 2019, ~~the~~were ~~indemnification~~as ~~adjustment~~follows: period expired and the final distribution of $0.6 million of the indemnity escrow fund was made. The all-cash acquisition was funded with cash on hand and debt and was considered an asset purchase for U.S. federal income tax purposes.

~~Optic Zoo Networks~~

On January 18, 2018, the Company acquired Vancouver, BC Canada-based Optic Zoo Networks for net purchase consideration of CAD $30.9 million (or $24.8 million), net of cash acquired, subject to certain post-closing adjustments. Optic Zoo Networks owns and provides access to high-capacity fiber in Vancouver. As of March 31, 2019, CAD $3.1 million (or $2.3 million) of the purchase consideration is being held in escrow pending the expiration of the indemnification adjustment period. The acquisition was funded with cash on hand and was considered a stock purchase for U.S. federal income tax purposes.


	Gross Carrying Amount		Accumulated Amortization		Net
	(in millions)
September 30, 2019
Finite-Lived Intangible Assets
Customer relationships	$	1,550.6	$	(477.0)	$	1,073.6
Underlying rights and other		3.4		(1.7)		1.7
Total		1,554.0		(478.7)		1,075.3
Indefinite-Lived Intangible Assets
Certifications		3.5		—		3.5
Underlying rights and other		14.0		—		14.0
Total	$	1,571.5	$	(478.7)	$	1,092.8
June 30, 2019
Finite-Lived Intangible Assets
Customer relationships	$	1,597.6	$	(498.7)	$	1,098.9
Underlying rights and other		3.4		(1.5)		1.9
Total		1,601.0		(500.2)		1,100.8
Indefinite-Lived Intangible Assets
Certifications		3.5		—		3.5
Underlying rights and other		14.5		—		14.5
Total	$	1,619.0	$	(500.2)	$	1,118.8

~~Acquisition Method Accounting Estimates~~

The Company initially recognizes the assets and liabilities acquired from the aforementioned acquisitions based on its preliminary estimates of their acquisition date fair values. As additional information becomes known concerning the acquired assets and assumed liabilities, management may make adjustments to the opening balance sheet of the acquired company up to the end of the measurement period, which is no longer than a one year period following the acquisition date. The determination of the fair values of the acquired assets and liabilities assumed (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment.

As(5) ~~of March 31, 2019, the Company has completed its fair value analysis and calculations in sufficient detail necessary to arrive at the final estimates of the fair value of working capital and non~~LONG-~~working~~TERM ~~capital~~DEBT acquired assets and assumed liabilities, including the allocations to goodwill and intangible assets, property and equipment and resulting deferred taxes for all of its acquisitions completed during Fiscal 2018. As a result of integrated reporting, it is impracticable to determine the amount of revenue and net income associated with each acquisition recognized in the post-acquisition period.

13 As of September 30, 2019 and June 30, 2019, long-term debt was as follows:

~~Table of Contents~~

ZAYO GROUP, LLC AND SUBSIDIARIES


	Date of				Outstanding as of
	Issuance or most recent amendment	Maturity	Interest Payments	Interest Rate	September 30, 2019		June 30, 2019
					(in millions)
Term Loan Facility due 2021	Jan 2017	Jan 2021	Monthly	LIBOR +2.00%	$	487.5	$	488.7
B-2 Term Loan Facility	Feb 2018	Jan 2024	Monthly	LIBOR +2.25%		1,269.3		1,269.3
6.00% Senior Unsecured Notes	Jan & Mar 2015	Apr 2023	Apr/Oct	6.00%		1,430.0		1,430.0
6.375% Senior Unsecured Notes	May 2015 & Apr 2016	May 2025	May/Nov	6.375%		900.0		900.0
5.75% Senior Unsecured Notes	Jan, Apr & Jul 2017	Jan 2027	Jan/Jul	5.75%		1,650.0		1,650.0
Revolving Loan Facility	Jan/Apr 2019 ⁽¹⁾	Jul 2020⁽²⁾	Monthly	LIBOR +1.75%		125.0		145.0
Total obligations						5,861.8		5,883.0
Unamortized premium, net						11.9		11.9
Unamortized debt issuance costs						(47.6)		(50.2)
Carrying value of debt						5,826.1		5,844.7
Less current portion⁽²⁾						(130.0)		(5.0)
Total long-term debt, less current portion					$	5,696.1	$	5,839.7

~~NOTES~~(1) TOThe ~~THE~~most ~~CONDENSED~~recent ~~CONSOLIDATED~~borrowings ~~FINANCIAL~~under ~~STATEMENTS~~the ~~(UNAUDITED)~~ Revolving Loan Facility occurred in January 2019 and the most recent amendment on the Revolving Loan Facility was April 2019.

(2) The ~~table~~earliest ~~below~~possible ~~reflects~~maturity under the ~~Company's~~Extension ~~estimates~~Amendment ofNo. ~~the~~1 ~~acquisition~~entered ~~date~~into ~~fair~~on ~~values~~April of3, ~~the~~2019 ~~assets~~is ~~acquired~~July 2020 and ~~liabilities~~as ~~assumed~~a ~~from~~result, ~~its~~the ~~Fiscal~~Revolving ~~2018~~Loan ~~acquisitions:~~ Facility is classified as current. See below for further details.

	Neutral Path		McLean Data Center		Spread Networks		Optic Zoo Networks
Acquisition date	April 17, 2018		April 4, 2018		February 28, 2018		January 18, 2018
	(in millions)
Cash	$	0.7	$	9.2	$	1.5	$	1.4
Other current assets		0.2		—		4.2		0.4
Property and equipment		15.2		0.6		143.7		13.1
Intangibles		6.9		—		9.3		3.8
Goodwill		15.9		—		14.4		10.4
Deferred tax assets		1.5		—		7.1		—
Other assets		—		—		1.4		0.2
Total assets acquired		40.4		9.8		181.6		29.3
Current liabilities		0.6		1.6		2.6		0.6
Deferred revenue		5.8		—		27.2		1.2
Deferred tax liability, net		—		—		—		1.3
Other liabilities		—		8.2		19.8		—
Total liabilities assumed		6.4		9.8		49.6		3.1
Net assets acquired		34.0		—		132.0		26.2
Less cash acquired		(0.7)		(9.2)		(1.5)		(1.4)
Net consideration paid	$	33.3	$	(9.2)	$	130.5	$	24.8

~~The~~Table ~~goodwill arising from the Company’s acquisitions results from synergies, anticipated incremental sales to the acquired company customer base and economies-~~of~~-scale~~ expected from the acquisitions. The Company has allocated the goodwill to the reporting units (in existence on the respective acquisition dates) that were expected to benefit from the acquired goodwill. The allocation was determined based on the excess of the estimated fair value of the reporting unit over the estimated fair value of the individual assets acquired and liabilities assumed that were assigned to the reporting units. See Note 3 – Goodwill for the allocation of the Company's acquired goodwill to each of its reporting units. Contents

InTerm ~~the~~Loan ~~Company’s~~Facility ~~acquisitions,~~and ~~the~~Revolving ~~Company~~Credit ~~acquired~~Facility certain customer relationships. These relationships represent a valuable intangible asset, as the Company anticipates continued business from the acquired customer bases. The Company’s estimate of the fair value of the acquired customer relationships is generally based on a multi-period excess earnings valuation technique that utilizes Level 3 inputs.

~~Transaction~~On ~~Costs~~May 6, 2015, the Company and Zayo Capital, Inc. (“Zayo Capital”) entered into an Amendment and Restatement Agreement whereby the Credit Agreement (the “Credit Agreement”) governing the senior secured term loan facility (the “Term Loan Facility”) and $450.0 million senior secured revolving credit facility (the “Revolver”) was amended and restated in its entirety. The amended and restated Credit Agreement extended the maturity date of a portion of the outstanding term loans under the Term Loan Facility from July 2, 2019 to May 6, 2021, which was subsequently revised to January 19, 2021 in Incremental Amendment No. 2 (as defined and discussed below). The terms of the Term Loan Facility require the Company to make quarterly principal payments of 25 basis points per quarter of the original loan amount (unless reduced by any prepayments), plus an annual payment of up to 50% of excess cash flow, as determined in accordance with the Credit Agreement (no such annual payment was required during Fiscal 2020 or Fiscal 2019).

~~Transaction~~On ~~costs~~January ~~include~~19, ~~expenses~~2017, ~~associated~~the ~~with~~Company ~~professional~~and ~~services~~Zayo Capital entered into an Incremental Amendment No. 2 (ithe “Incremental Amendment”) to the Company’s Credit Agreement.~~e.,~~ ~~legal,~~Per ~~accounting,~~the ~~regulatory~~terms of the Incremental Amendment, ~~etc~~the existing $1.)85 ~~rendered~~billion inof ~~connection~~term loans under the Credit Agreement were repriced at 99.75% with ~~signed~~one ~~and/or~~$500.0 ~~closed~~million ~~acquisitions~~tranche orthat ~~disposals,~~bears ~~travel~~interest ~~expense,~~at ~~severance~~a ~~expense~~rate ~~incurred~~of ~~associated~~LIBOR plus 2.0%, with ~~acquisitions~~a orminimum ~~disposals,~~LIBOR rate of 0.0% and ~~other~~a ~~direct~~maturity ~~expenses~~date ~~incurred~~of ~~that~~four ~~are~~years ~~associated~~from ~~with~~incurrence ~~signed~~(January ~~and/or~~19, ~~closed~~2021), ~~acquisitions~~which orrepresents ~~disposals~~a ~~and~~downward ~~unsuccessful~~adjustment ~~acquisitions.~~of ~~The~~75 ~~Company~~basis ~~incurred~~points ~~transaction~~along ~~costs~~with the lowering of the previous LIBOR floor, and a second $01.935 ~~million~~billion tranche (the “B-2 Term Loan” and along with the $4500.40 million ~~for~~tranche, the ~~three~~“Refinancing Term Loans”) that bears interest at a rate of LIBOR plus 2.5%, with a minimum LIBOR rate of 1.0% and ~~nine~~a ~~months~~maturity ~~ended~~of ~~March~~seven 31years from incurrence, ~~2019~~which represents a downward adjustment of 25 basis points. In addition, ~~respectively~~per the terms of the Incremental Amendment, the Company and ~~$3.3~~Zayo ~~million~~Capital ~~and~~added a new $17650.50 million ~~for~~term loan tranche under the ~~three~~Credit ~~and~~Agreement ~~nine~~(the ~~months~~“Electric ~~ended~~Lightwave ~~March~~Incremental ~~31,~~Term ~~2018,~~Loan”) ~~respectively.~~that ~~Included~~bears ininterest ~~the~~at ~~three~~LIBOR ~~and~~plus ~~nine~~2.5%, ~~months~~with ~~ended~~a ~~March~~minimum 31LIBOR rate of 1.0%, ~~2019~~with ~~are~~a ~~transaction~~maturity ~~costs~~of seven years from the closing date of $0the Incremental Amendment.7 ~~million~~In ~~and~~connection with the Incremental Amendment, the full $12,500.60 million Term Loan Facility, ~~respectively~~including the Refinancing Term Loans and the Electric Lightwave Incremental Term Loan, ~~related~~was tore-issued ~~divestitures~~at a price of ~~assets~~99.75%. No ~~Transaction~~other ~~costs~~material ~~have~~terms ~~been~~of ~~included~~the inCredit ~~selling,~~Agreement ~~general~~with ~~and~~respect ~~administrative~~to ~~expenses~~the inRefinancing Term Loans and the ~~condensed~~Electric ~~consolidated~~Lightwave ~~statements~~Incremental Term Loan were amended. On April 10, 2017, $570.1 million of ~~operations~~the B-2 Term Loan and inthe ~~cash~~Electric ~~flows~~Lightwave Incremental Term Loan was repaid from ~~operating~~proceeds ~~activities~~of issuance of senior unsecured notes as further discussed below. Additionally, in July 2017, $310.7 million of the ~~condensed~~B-2 ~~consolidated~~Term ~~statements~~Loan was repaid from the proceeds of ~~cash~~issuance ~~flows~~of ~~during~~senior ~~these~~unsecured ~~periods~~notes as further discussed below.

14 On July 20, 2017, the Company and Zayo Capital entered into a second repricing (the “Repricing Amendment No. 2”) to the Credit Agreement. Per the terms of the Repricing Amendment No. 2, the outstanding balances of the B-2 Term Loan and Electric Lightwave Incremental Term Loan were repriced at par to bear interest at a rate of LIBOR plus 2.25%, with a minimum LIBOR rate of 1.0%, which represented a downward adjustment of 25 basis points. No other terms of the Credit Agreement were amended.

~~Table~~On December 22, 2017, the Company and Zayo Capital entered into a third repricing amendment (the “Repricing Amendment No. 3”) to the Credit Agreement. Per the terms of ~~Contents~~ the Repricing Amendment No. 3, the Revolver under the Credit Agreement was repriced to bear interest at a rate of LIBOR plus 1.00% to LIBOR plus 1.75% per annum based on the Company’s leverage ratio, which represented a downward adjustment of 100 basis points. No other terms of the Credit Agreement were amended. The Revolver matures on April 17, 2020, which was subsequently extended on April 3, 2019. Refer below for more information on the extension. The Credit Agreement also allows for letter of credit commitments of up to $50.0 million. The Revolver is subject to a fee per annum of 0.25% to 0.375% (based on the Company’s current leverage ratio) of the weighted-average unused capacity, and the undrawn amount of outstanding letters of credit backed by the Revolver are subject to a 0.25% fee per annum. Outstanding letters of credit backed by the Revolver are subject to a fee of 1.00% to 1.75% per annum based upon the Company’s leverage ratio.

~~ZAYO~~On ~~GROUP~~February 26, ~~LLC~~2018, the ~~AND~~Company ~~SUBSIDIARIES~~ and Zayo Capital entered into an amendment to the Credit Agreement and the Company added a new $150 million term loan tranche under the Credit Agreement (the “Incremental $150 Million Term Loan”). The Incremental $150 Million Term Loan bears interest at LIBOR plus 2.25%, with a minimum LIBOR rate of 1.0%, with a maturity date of January 19, 2024, which is coterminous with the B-2 Term Loan. The Company used the proceeds of the Incremental $150 Million Term Loan for general corporate purposes, including the funding of acquisitions permitted under the Credit Agreement. No other terms of the Credit Agreement were amended.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ 11

~~Pro-forma~~Table ~~Financial~~of ~~Information~~ Contents

~~The~~On ~~pro~~April 3, ~~forma~~2019, ~~results~~the ~~presented~~Company ~~below~~and ~~include~~Zayo ~~the~~Capital ~~effects~~entered ofinto ~~the~~Extension ~~Company’s~~Amendment ~~acquisitions~~No. ~~for~~1 to the ~~nine~~Credit ~~months~~Agreement ~~ended~~(the ~~March~~“Extension ~~31,~~Amendment”) ~~2018~~with asrespect ifto the ~~Fiscal~~Revolver. ~~2018~~Under ~~acquisitions~~the ~~occurred~~terms onof ~~July 1,~~the ~~2017.~~Extension ~~The~~Amendment, ~~pro~~the ~~forma~~maturity ~~net~~date ~~income~~of ~~for~~ the ~~three~~revolving ~~and~~credit ~~nine~~facility ~~months~~was ~~ended~~extended from April ~~March 31~~17, ~~2018~~ ~~includes~~2020 to the ~~additional~~earliest ~~depreciation~~of ~~and~~(i) April 17, ~~amortization~~2023, ~~resulting~~(ii) six ~~from~~months ~~the~~prior ~~adjustments~~ to the ~~value~~maturity date of ~~property~~the ~~and~~$500.0 ~~equipment~~million ~~and~~term ~~intangible~~loan ~~assets~~tranche, ~~resulting~~which ~~from~~matures ~~purchase~~on ~~accounting~~January 19, ~~and~~2021, ~~adjustment~~subject to ~~amortized~~the ~~revenue~~refinancing ~~during~~thereof ~~Fiscal~~with ~~2018~~debt ashaving a ~~result~~maturity ofdate ~~the~~no ~~acquisition~~earlier ~~date~~than ~~valuation~~April 17, of2023 ~~assumed~~or ~~deferred~~repayment ~~revenue.~~in ~~The~~full, ~~pro~~and ~~forma~~(iii) six ~~results~~months ~~also~~prior ~~include~~to ~~interest~~the ~~expense~~maturity ~~associated~~date ~~with~~of ~~debt~~the ~~used~~2023 toUnsecured ~~fund~~Notes, ~~the~~which ~~acquisitions.~~mature on April ~~The~~1, ~~pro~~2023, ~~forma~~subject ~~results~~to dothe ~~not~~refinancing ~~include~~thereof ~~any~~with ~~anticipated~~debt ~~synergies~~having ora ~~other~~maturity ~~expected~~date ~~benefits~~no ofearlier ~~the~~than ~~acquisitions.~~April 17, ~~The~~2023 ~~unaudited~~or ~~pro~~repayment ~~forma~~in ~~financial~~full. As ~~information~~of isSeptember ~~not~~30, ~~necessarily~~2019, ~~indicative~~the ofCompany ~~either~~has ~~future~~reclassified ~~results~~the ofRevolver ~~operations~~to orcurrent ~~results~~portion ~~that~~of ~~might~~long-term ~~have~~debt ~~been~~because ~~achieved~~July ~~had~~2020 is the ~~acquisitions~~earliest ~~been~~possible ~~consummated~~maturity asdate ofunder ~~July 1,~~the ~~2017~~Extension Amendment.

	For the Three Months EndedMarch 31, 2018			For the Nine Months EndedMarch 31, 2018
		(in millions)
Revenue		$	654.4		$	1,966.5
Net income		$	21.9		$	53.7

The weighted average interest rates (including margin) on the Term Loan Facility were approximately 4.2% and 4.6% at September 30, 2019 and June 30, 2019, respectively. The weighted average interest rates on the Revolver were approximately 3.8% and 4.2% at September 30, 2019 and June 30, 2019, respectively.

~~Dispositions~~The ~~Completed~~Company ~~During~~had ~~Fiscal~~no borrowings under the Revolver during the three months ended September 30, 2019 and 2018. As of September 30, 2019, $125.0 million was outstanding under the Revolver and $1,756.8 million in aggregate principal amount was outstanding under the Term Loan Facility. Standby letters of credit were outstanding in the amount of $8.6 million as of September 30, 2019, leaving $316.4 million available under the Revolver, subject to certain conditions.

~~Scott-Rice~~Senior ~~Telephone~~Unsecured ~~Co.~~ Notes

On July 31, 2018, the Company completed the sale of Scott-Rice Telephone Co. (“SRT”), a Minnesota incumbent local exchange carrier, for $42.2 million to Nuvera Communications, Inc. (formerly New Ulm Telecom, Inc.). As of March 31, 2019, $3.2 million of purchase consideration was held in escrow. The Company recognized a pre-tax gain of $5.5 million on the sale, which is included in other income, net in the condensed consolidated statements of operations. The Company acquired SRT as part of its March 1, 2017 purchase of Electric Lightwave Parent, Inc. and it was included as part of the Allstream segment. SRT had a pre-tax net loss of $1.6 ~~million for the year ended June 30, 2018 and pre-tax net income of $2~~.900% ~~million~~Senior ~~from~~Unsecured ~~when~~Notes itdue ~~was acquired in March 1, 2017 through June 30, 2017.~~ 2023

~~SRT~~On ~~qualified~~January 23, as2015 ~~held-for-sale~~and ~~as of~~ March 319, ~~2018~~2015, ~~and was classified as held-for-sale in~~ the Company’s ~~June~~and ~~30,~~Zayo ~~2018~~Capital ~~balance~~completed ~~sheet.~~private ~~The~~offerings ~~Company~~of ~~concluded~~aggregate ~~that~~principal ~~SRT~~amounts ~~was~~of ~~not~~$700.0 amillion ~~significant disposal group~~ and ~~did~~$730.0 ~~not~~million, ~~represent a strategic shift~~respectively, ~~and~~of ~~therefore~~6.00% ~~was~~senior ~~not~~unsecured ~~classified~~notes asdue ~~discontinued~~in ~~operations.~~2023 ~~The following tables summarize~~ (the ~~net~~“2023 ~~assets~~Unsecured ~~and liabilities held for sale as of June 30, 2018:~~ Notes”).

	June 30, 2018
	(in millions)
Assets held for sale:
Property and equipment, net	$	35.7
Goodwill		5.2
Other assets		0.9
Total assets held for sale	$	41.8
Liabilities associated with assets held for sale:
Deferred tax liability, net	$	5.1
Other liabilities		1.0
Total liabilities associated with assets held for sale	$	6.1

6.375% Senior Unsecured Notes due 2025

15 On April 14, 2016, the Company and Zayo Capital completed a private offering of $550.0 million aggregate principal amount of 2025 Unsecured Notes (the “Incremental 2025 Notes”). The Incremental 2025 Notes were priced at 97.76% and were an additional issuance of the $350.0 million 6.375% senior unsecured notes due in 2025 that were originally issued on May 6, 2015 (the “2025 Notes” and together with the Incremental 2025 Notes, the “2025 Unsecured Notes”). The net proceeds from the Incremental 2025 Notes, plus cash on hand, were used to (i) redeem the then outstanding $325.6 million 10.125% senior unsecured notes due 2020, including the required $20.3 million make-whole premium and accrued interest, and (ii) repay $196.0 million of borrowings under the then outstanding secured Term Loan Facility.

~~Table~~5.75% ofSenior ~~Contents~~ Unsecured Notes due 2027

~~ZAYO~~On ~~GROUP~~January 27, ~~LLC~~2017, ~~AND~~the ~~SUBSIDIARIES~~ Company and Zayo Capital completed a private offering of $800.0 million aggregate principal amount of 5.75% senior unsecured notes due 2027 (the “January 2027 Notes”), which were issued at par. The net proceeds from the offering, along with the Electric Lightwave Incremental Term Loan discussed above, were used to fund the Electric Lightwave acquisition.

~~NOTES~~On TOApril ~~THE~~10, ~~CONDENSED~~2017, ~~CONSOLIDATED~~the ~~FINANCIAL~~Company ~~STATEMENTS~~completed a private offering of $550.0 million aggregate principal amount of 5.75% senior unsecured notes due 2027 (~~UNAUDITED~~the “Incremental 2027 Notes”) . The Incremental 2027 Notes were an additional issuance of the January 2027 Notes and were priced at 104.0%. The net proceeds from the Incremental 2027 Notes were used to repay certain outstanding balances on the Company’s B-2 Term Loan.

On July 5, 2017, the Company completed a private offering of $300.0 million aggregate principal amount of 5.75% senior notes due 2027 (3the “July Incremental 2027 Notes” and together with the Incremental 2027 Notes and the January 2027 Notes, the “2027 Unsecured Notes”). ~~GOODWILL~~The July Incremental 2027 Notes were an additional issuance of the

~~The Company’s goodwill balance was $1,709.4 million and $1,719.1 million as of March 31, 2019 and June 30, 2018, respectively.~~ 12

~~The~~Table ~~Company’s reporting units are comprised~~ of its strategic product groups (“SPG” or “SPGs”). Effective April 1, 2018, the Company implemented further organizational changes by creating two new reporting units: CloudLink Solutions (“CloudLink”) and Live Video Solutions (“Live Video”). In connection with the organizational change, goodwill was re-allocated to the Company’s SPGs on a relative fair value basis. The Company completed an assessment immediately prior to and after the organizational change at the SPG level and determined that it is more likely than not that the fair value of the Company’s reporting units is greater than their carrying amounts. Contents

AsJanuary of2027 ~~March~~Notes ~~31,~~and ~~2019,~~Incremental ~~the~~2027 ~~Company’s~~Notes ~~SPGs~~and were ~~comprised~~priced ofat ~~the~~104.25%. ~~following:~~The ~~Fiber~~net ~~Solutions,~~proceeds ~~Zayo~~of ~~Wavelength~~$310.7 ~~Solutions~~million ~~(“Waves”),~~from ~~Zayo~~the ~~SONET~~offering ~~Solutions~~were ~~(“SONET”),~~used ~~Zayo~~to ~~Ethernet~~further ~~Solutions~~repay ~~(“Ethernet”), Live~~certain ~~Video,~~outstanding ~~Wide~~balances ~~Area~~on ~~Networks~~the ~~(“WANs”,~~Company’s ~~formerly~~B-2 ~~Enterprise~~Term ~~Private and Connectivity), Zayo Cloud Solutions (“Cloud”), Zayo Colocation (“zColo”), CloudLink, Allstream, and Other (primarily ZPS)~~Loan.

~~The~~Debt ~~following~~covenants ~~reflects the changes in the carrying amount of goodwill during the nine months ended March 31, 2019:~~

Product Group	As of June 30, 2018		Adjustments to Fiscal 2018Acquisitions		Foreign CurrencyTranslation andOther		As of March 31, 2019
	(in millions)
Fiber Solutions	$	756.4	$	(5.2)	$	(0.8)	$	750.4
Waves		194.8		(1.3)		(1.1)		192.4
Sonet		87.6		—		—		87.6
Ethernet		104.2		(0.2)		(0.3)		103.7
Live Video		3.3		—		—		3.3
WANs		179.3		—		—		179.3
zColo		260.1		—		(0.8)		259.3
Cloud		65.3		—		—		65.3
Cloudlink		13.5		—		—		13.5
Allstream		39.0		—		—		39.0
Other		15.6		—		—		15.6
Total	$	1,719.1	$	(6.7)	$	(3.0)	$	1,709.4

The indentures (the “Indentures”) governing the 2023 Unsecured Notes, the 2025 Unsecured Notes and the 2027 Unsecured Notes (collectively the “Notes”) contain covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness and issue preferred stock, pay dividends or make other distributions with respect to any equity interests, make certain investments or other restricted payments, create liens, sell assets, incur restrictions on the ability of the Company’s restricted subsidiaries to pay dividends or make other payments to the Company, consolidate or merge with or into other companies or transfer all or substantially all of their assets, engage in transactions with affiliates, and enter into sale and leaseback transactions. The terms of the Indentures include customary events of default.

16 The Credit Agreement contains customary events of default, including among others, non-payment of principal, interest, or other amounts when due, inaccuracy of representations and warranties, breach of covenants, cross default to certain other indebtedness, insolvency or inability to pay debts, bankruptcy, or a change of control. The Credit Agreement also contains a covenant, applicable only to the Revolver, that the Company maintain a senior secured leverage ratio below or equal to 5.25:1.00 at any time when the aggregate principal amount of loans outstanding under the Revolver is greater than 35% of the commitments under the Revolver. The Credit Agreement also requires the Company and its subsidiaries to comply with customary affirmative and negative covenants, including covenants restricting the ability of the Company and its subsidiaries, subject to specified exceptions, to incur additional indebtedness, make additional guaranties, incur additional liens on assets, or dispose of assets, pay dividends, or make other distributions, voluntarily prepay certain other indebtedness, enter into transactions with affiliated persons, make investments and amend the terms of certain other indebtedness.

~~Table~~The Indentures limit any increase in the Company’s secured indebtedness (other than certain forms of ~~Contents~~ secured indebtedness expressly permitted under the Indentures) to a pro forma secured debt ratio of 4.50 times the Company’s previous quarter’s annualized modified EBITDA (as defined in the Indentures), and limit the Company’s incurrence of additional indebtedness to a total indebtedness ratio of 6.00 times the previous quarter’s annualized modified EBITDA.

~~ZAYO~~The ~~GROUP,~~Company ~~LLC~~was ~~AND~~in ~~SUBSIDIARIES~~ compliance with all covenants associated with its debt agreements as of September 30, 2019.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Guarantees

~~(4)~~The ~~INTANGIBLE~~Notes ~~ASSETS~~are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s current and future domestic restricted subsidiaries. The Notes were co-issued with Zayo Capital, which does not have independent assets or operations.

~~Identifiable~~The ~~intangible~~Term ~~assets~~Loan asFacility ofand ~~March~~Revolver 31are fully and unconditionally guaranteed, ~~2019~~jointly and ~~June 30~~severally, ~~2018~~ ~~were~~on asa ~~follows:~~senior secured basis by all of the Company’s current and future domestic restricted subsidiaries.

	Gross Carrying Amount		AccumulatedAmortization		Net
	(in millions)
March 31, 2019
Finite-Lived Intangible Assets
Customer relationships	$	1,597.7	$	(475.8)	$	1,121.9
Underlying rights and other		3.4		(1.3)		2.1
Total		1,601.1		(477.1)		1,124.0
Indefinite-Lived Intangible Assets
Certifications		3.5		—		3.5
Underlying rights and other		14.8		—		14.8
Total	$	1,619.4	$	(477.1)	$	1,142.3
June 30, 2018
Finite-Lived Intangible Assets
Customer relationships	$	1,597.0	$	(405.6)	$	1,191.4
Underlying rights and other		2.7		(0.6)		2.1
Total		1,599.7		(406.2)		1,193.5
Indefinite-Lived Intangible Assets
Certifications		3.5		—		3.5
Underlying rights and other		15.1		—		15.1
Total	$	1,618.3	$	(406.2)	$	1,212.1

Debt issuance costs

17 In connection with the Credit Agreement (and subsequent amendments thereto), and the various Notes offerings, the Company incurred debt issuance costs of $114.8 million (net of extinguishments). These costs are being amortized to interest expense over the respective terms of the underlying debt instruments using the effective interest method, unless extinguished earlier, at which time the related unamortized costs are to be immediately expensed.

~~Table~~The balance of ~~Contents~~ debt issuance costs as of September 30, 2019 and June 30, 2019 was $47.6 million and $50.2 million, net of accumulated amortization of $67.3 million and $64.6 million, respectively. The amortization of debt issuance costs is included on the condensed consolidated statements of cash flows within non-cash interest expense along with the amortization or accretion of the premium and discount on the Company’s indebtedness. Interest expense

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~ 13

~~NOTES~~Table TOof ~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Contents

(associated with the amortization of debt issuance costs of $2.7 million and $2.5) ~~LONG-TERM~~million ~~DEBT~~for the three months ended September 30, 2019 and 2018, respectively.

AsDebt ofissuance ~~March~~costs ~~31,~~are ~~2019~~presented ~~and~~in ~~June~~the ~~30,~~condensed ~~2018,~~consolidated balance sheets as a reduction to long-term debt, ~~was as follows:~~ non-current.

	Date of				Outstanding as of
	Issuance or mostrecent amendment	Maturity	InterestPayments	Interest Rate	March 31, 2019		June 30, 2018
					(in millions)
Term Loan Facility due 2021	Jan 2017	Jan 2021	Monthly	LIBOR +2.00%	$	490.0	$	493.8
B-2 Term Loan Facility	Feb 2018	Jan 2024	Monthly	LIBOR +2.25%		1,269.3		1,269.3
6.00% Senior Unsecured Notes	Jan & Mar 2015	Apr 2023	Apr/Oct	6.00%		1,430.0		1,430.0
6.375% Senior Unsecured Notes	May 2015 & Apr 2016	May 2025	May/Nov	6.375%		900.0		900.0
5.75% Senior Unsecured Notes	Jan, Apr & Jul 2017	Jan 2027	Jan/Jul	5.75%		1,650.0		1,650.0
Revolving Loan Facility	Jan/Apr 2019 (1)	Apr 2020	Monthly	LIBOR +1.75%		170.0		—
Total obligations						5,909.3		5,743.1
Unamortized premium, net						12.0		11.6
Unamortized debt issuance costs						(52.2)		(59.6)
Carrying value of debt						5,869.1		5,695.1
Less current portion						(5.0)		(5.0)
Total long-term debt, less current portion					$	5,864.1	$	5,690.1

(16) ~~The~~ ~~most~~INCOME ~~recent borrowings under the Revolving Loan Facility occurred in January 2019 and the most recent amendment on the Revolving Loan Facility was in April 2019. See Note 16 – Subsequent Events.~~ TAXES

~~Term~~A ~~Loan~~reconciliation ~~Facility~~of the actual income tax provision and ~~Revolving~~the ~~Credit~~tax ~~Facility~~computed by applying the U.S. federal rate to the earnings before income taxes during the three month periods ended September 30, 2019 and 2018 is as follows:

On May 6, 2015, the Company and Zayo Capital, Inc. (“Zayo Capital”) entered into an Amendment and Restatement Agreement whereby the Credit Agreement (the “Credit Agreement”) governing their senior secured term loan facility (the “Term Loan Facility”) and $450.0 million senior secured revolving credit facility (the “Revolver”) was amended and restated in its entirety. The amended and restated Credit Agreement extended the maturity date of a portion of the outstanding term loans under the Term Loan Facility from July 2, 2019 to May 6, 2021, which was subsequently revised to January 19, 2021 in Incremental Amendment No. 2 (as defined and discussed below). The terms of the Term Loan Facility require the Company to make quarterly principal payments of 25 basis points per quarter of the original loan amount (unless reduced by any prepayments) plus an annual payment of up to 50% of excess cash flow, as determined in accordance with the Credit Agreement (no such annual payment was required during Fiscal 2018).

On January 15, 2016, the Company and Zayo Capital entered into an Incremental Amendment (the “Amendment”) to the Credit Agreement. Under the terms of the Amendment, the portion of the Term Loan Facility due 2021 was increased by $400.0 million (the “Incremental Term Loan”). The additional amounts borrowed bear interest at LIBOR plus 3.5% with a minimum LIBOR rate of 1.0%. The $400.0 million add-on was priced at 99.0%. No other terms of the Credit Agreement were amended. The Incremental Term Loan proceeds were used to fund the acquisition of Allstream, Inc. and Allstream Fiber U.S. Inc. and for general corporate purposes.


	Three Months Ended September 30,
	2019		2018
	(in millions)
Expected provision at the statutory rate	$	6.7	$	8.9
Increase/(decrease) due to:
Stock-based compensation		0.7		1.1
State income taxes expense, net of federal benefit		1.9		1.5
Change in statutory tax rate, outside U.S.		—		(0.1)
Change in uncertain tax benefits		1.0		—
Foreign tax rate differential		1.2		0.2
State NOL expirations		1.6		—
U.S. Tax Reform		—		7.6
Change in valuation allowance		—		(0.3)
Other, net		0.9		1.6
Provision for income taxes	$	14.0	$	20.5

On July 22, 2016, the Company and Zayo Capital entered into a Repricing Amendment (the “Repricing Amendment”) to the Credit Agreement. Per the terms of the Repricing Amendment, the Incremental Term Loan was repriced at par to bear interest at a rate of LIBOR plus 2.75%, with a minimum LIBOR rate of 1.0%, which represented a downward adjustment of 75 basis points. No other terms of the Credit Agreement were amended.

OnThe ~~January 19, 2017, the~~ Company’s ~~and~~interim ~~Zayo~~income ~~Capital~~tax ~~entered~~provision ~~into~~reflects an ~~Incremental~~estimate ~~Amendment~~of ~~No. 2 (~~the ~~“Incremental~~effective ~~Amendment”)~~tax torate ~~the~~for ~~Company’s Credit Agreement. Per~~ the ~~terms~~full offiscal ~~the Incremental Amendment~~year, ~~the~~applied ~~existing~~to ~~$1.85 billion of term loans under~~ the ~~Credit~~year-to-date ~~Agreement~~book ~~were repriced at 99.75% with one $500.0 million tranche that bears interest at a rate of LIBOR plus 2.0%~~income, ~~with~~adjusted afor ~~minimum~~any ~~LIBOR~~discrete ~~rate of 0.0% and a maturity date of four years from incurrence (January 19~~events, ~~2021),~~ which ~~represents~~are arecorded ~~downward~~in ~~adjustment of 75 basis points along with~~ the ~~lowering~~period ofin ~~the~~which ~~previous~~they ~~LIBOR floor, and a second $1~~occur.35 ~~billion~~The ~~tranche~~estimates ~~(the~~are “Bre-2evaluated ~~Term~~each ~~Loan”~~quarter ~~and~~based ~~along~~on ~~with~~estimated ~~the~~tax ~~$500.0~~expense ~~million~~for ~~tranche,~~ the ~~“Refinancing~~full ~~Term~~fiscal ~~Loans”) that bears interest at a rate of LIBOR plus 2~~year.~~5%, with a minimum LIBOR rate of 1.0% and a maturity of seven years from incurrence, which represents a downward adjustment of 25 basis~~

18 On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018, previously known as the Tax Cuts and Jobs Act of 2017 (“U.S. Tax Reform”). U.S. Tax Reform reduced the U.S. corporate tax rate from 35% to 21%, created a territorial tax system with a one-time mandatory repatriation tax on previously deferred foreign earnings, and changed business-related deductions and credits. Provisional impacts of U.S. Tax Reform were recorded in the six months ended June 30, 2018 and further adjusted during the three months ended September 30, 2018. In accordance with SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, the Company recorded the final impacts of U.S. Reform at the end of the provisional measurement period on December 31, 2018.

~~Table~~The Company files income tax returns in various federal, state, and local jurisdictions including the United States, Canada, United Kingdom and France. In the normal course of ~~Contents~~ business, the Company is subject to examination by taxing authorities throughout the world. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities in major tax jurisdictions for years prior to 2014.

~~ZAYO~~The ~~GROUP~~Company had gross unrecognized tax benefits of $16.4 million and $15.7 million, ~~LLC~~as ~~AND~~of ~~SUBSIDIARIES~~ September 30, 2019 and June 30, 2019, respectively. These amounts include accrued interest and penalties of $2.5 million and $2.2 million, respectively as of September 30, 2019 and June 30, 2019. The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ 14

~~points. In~~Table ~~addition, per the terms~~ of the Incremental Amendment, the Company and Zayo Capital added a new $650.0 million term loan tranche under the Credit Agreement (the “Electric Lightwave Incremental Term Loan”) that bears interest at LIBOR plus 2.5%, with a minimum LIBOR rate of 1.0%, with a maturity of seven years from the closing date of the Incremental Amendment. In connection with the Incremental Amendment, the full $2,500.0 million Term Loan Facility, including the Refinancing Term Loans and the Electric Lightwave Incremental Term Loan, was re-issued at a price of 99.75%. No other material terms of the Credit Agreement with respect to the Refinancing Term Loans and the Electric Lightwave Incremental Term Loan were amended. On April 10, 2017, $570.1 million of the B-2 Term Loan and the Electric Lightwave Incremental Term Loan was repaid from proceeds of issuance of senior unsecured notes as further discussed below. Additionally, in July 2017, $310.7 million of the B-2 Term Loan was repaid from the proceeds of issuance of senior unsecured notes as further discussed below. Contents

~~On July 20, 2017, the Company and Zayo Capital entered into a second repricing~~ (~~the “Repricing Amendment No. 2”~~7) toEQUITY the Credit Agreement. Per the terms of the Repricing Amendment No. 2, the outstanding balances of the B-2 Term Loan and Electric Lightwave Incremental Term Loan were repriced at par to bear interest at a rate of LIBOR plus 2.25%, with a minimum LIBOR rate of 1.0%, which represented a downward adjustment of 25 basis points. No other terms of the Credit Agreement were amended.

InOn ~~connection~~May ~~with~~7, 2018, the ~~Repricing~~Board ~~Amendment~~of ~~No.~~Directors 2,of ~~the~~ZGH ~~Company~~authorized ~~recognized~~the anrepurchase ~~expense~~ of up to $~~4.9~~500 million ~~during~~of ~~the~~shares ~~nine~~of ~~months~~ZGH ~~ended~~outstanding ~~March~~common ~~31,~~stock ~~2018~~from ~~associated~~time ~~with~~to ~~debt~~time ~~extinguishment. The~~using ~~$4.9~~a ~~million~~variety ~~loss~~of onmethods, ~~extinguishment~~including ofopen ~~debt~~market ~~primarily~~purchases, ~~represents~~privately ~~non-cash~~negotiated ~~expenses~~transactions ~~associated~~and other means in accordance with federal securities laws. During the ~~write-off~~three months ended September 30, 2018, the Company repurchased 6,229 shares of ~~unamortized~~ZGH ~~debt~~outstanding ~~issuance~~common ~~costs~~stock ~~and~~at ~~the~~an ~~issuance~~average ~~discounts~~price of $34.00, or $0.2 million. The authorization expired on ~~the~~November ~~portion~~7, of2018 with the ~~Credit~~Company ~~Agreement,~~having asrepurchased ~~further~~$496.0 ~~amended~~million under the authorization. The ~~loss~~stock repurchase on ~~extinguishment~~behalf of ~~debt~~ZGH ~~also~~is ~~includes~~included ~~certain~~in ~~fees~~the ~~paid~~condensed toconsolidated ~~third~~statement ~~parties~~of ~~involved~~member’s inequity ~~the~~as ~~Repricing~~a ~~Amendment~~capital ~~No.~~distribution 2to ZGH.

OnDuring ~~December 22, 2017,~~ the ~~Company~~three ~~and~~months ~~Zayo~~ended ~~Capital~~September ~~entered~~30, ~~into~~2019 aand ~~third~~2018, ~~repricing amendment (~~the ~~“Repricing~~Company ~~Amendment~~recorded No$26. 3”) tomillion ~~the~~in ~~Credit~~each ~~Agreement.~~period ~~Per~~in ~~the~~member’s ~~terms of the Repricing Amendment No. 3, the Revolver under the Credit Agreement was repriced to bear~~ interest atassociated awith ~~rate~~stock-based ofcompensation ~~LIBOR~~expense ~~plus~~related ~~1.00%~~ to ~~LIBOR plus 1.75% per annum based on~~ the Company’s ~~leverage~~equity ~~ratio,~~classified ~~which~~stock-based ~~represented~~compensation aawards ~~downward~~(See ~~adjustment of 100 basis points. No other terms of the Credit Agreement were amended. The Revolver matures on April 17, 2020, which was subsequently extended as further defined and discussed below in~~ Note 168 – ~~Subsequent Events. The Credit Agreement also allows for letter of credit commitments of up to $50.0 million. The Revolver is subject to a fee per annum of 0.25% to 0.375% (~~Stock-based ~~on the Company’s current leverage ratio~~Compensation) ~~of the weighted-average unused capacity, and the undrawn amount of outstanding letters of credit backed by the Revolver are subject to a 0~~.~~25%~~ ~~fee per annum. Outstanding letters of credit backed by the Revolver are subject to a fee of 1.00% to 1.75% per annum based upon the Company’s leverage ratio.~~

On February 26, 2018, the Company and Zayo Capital entered into an amendment (the “Incremental Amendment No. 3”) to the Credit Agreement. Per the terms of the Incremental Amendment No. 3, the Company added a new $150 million term loan tranche under the Credit Agreement (the “Incremental $150 Million Term Loan”). The Incremental $150 Million Term Loan bears interest at LIBOR plus 2.25%, with a minimum LIBOR rate of 1.0%, with a maturity date of January 19, 2024, which is coterminous with the B-2 Term Loan. The Company used the proceeds of the Incremental $150 Million Term Loan for general corporate purposes, including the funding of acquisitions permitted under the Credit Agreement. No other terms of the Credit Agreement were amended.

~~The weighted average interest rates~~ (~~including margin~~8) onSTOCK-BASED ~~the~~COMPENSATION Term Loan Facility were approximately 4.7% and 4.3% as of March 31, 2019 and June 30, 2018, respectively. The weighted average interest rate on the Revolver was approximately 4.2% as of March 31, 2019. The interest rate on the Revolver was approximately 3.8% as of June 30, 2018, and there were no borrowings outstanding under the Revolver as of such date.

The ~~Company~~following ~~borrowed~~tables ~~$25.0~~summarize ~~million and $275.0 million under~~ the ~~Revolver~~Company’s ~~during~~stock-based ~~the~~compensation ~~three~~expense ~~and~~for ~~nine~~liability ~~months ended March 31, 2019, respectively. As of March 31, 2019, $170.0 million was outstanding under the Revolver~~ and ~~$1,759.3~~equity ~~million~~classified inawards ~~aggregate~~included ~~principal amount was outstanding under the Term Loan Facility. Standby letters of credit were outstanding~~ in the ~~amount~~condensed ofconsolidated ~~$8.5~~statements ~~million as~~ of ~~March 31, 2019, leaving $271~~operations.5 ~~million available under the Revolver, subject to certain conditions.~~

Table of Contents


	Three Months Ended September 30,
	2019		2018
	(in millions)
Included in:
Operating costs	$	3.2	$	2.7
Selling, general and administrative expenses		24.0		24.0
Total stock-based compensation expense	$	27.2	$	26.7

Part A restricted stock units	$	22.7	$	23.3
Part B restricted stock units		3.8		2.9
Part C restricted stock units		0.7		0.5
Total stock-based compensation expense	$	27.2	$	26.7

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~

~~NOTES~~Performance TOCompensation ~~THE~~Incentive ~~CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Program

~~Senior~~During ~~Unsecured~~October ~~Notes~~2014, the Company adopted the 2014 Performance Compensation Incentive Program (“PCIP”). The PCIP includes incentive cash compensation and equity (in the form of restricted stock units or “RSUs”). Grants under the PCIP RSU plans are made quarterly for all participants. The PCIP was effective on October 16, 2014 and will remain in effect for a period of 10 years (or through October 16, 2024) unless it is earlier terminated by ZGH’s Board of Directors.

~~6.00%~~The ~~Senior~~PCIP ~~Unsecured~~has ~~Notes~~the ~~due~~following ~~2023~~ components:

OnPart January 23, 2015 and March 9, 2015, the Company and Zayo Capital completed private offerings of aggregate principal amounts of $700.0 million and $730.0 million, respectively, of 6.00% senior unsecured notes due in 2023 (the “2023 Unsecured Notes”). A

6Under Part A of the PCIP, certain full-time employees, including the Company’s executives, are eligible to earn quarterly awards of RSUs.~~375%~~ ~~Senior~~Each ~~Unsecured~~participant ~~Notes~~in ~~due~~Part ~~2025~~ A of the PCIP will have an RSU annual award target value, which will be allocated to each fiscal quarter. The final Part A value awarded to a participant for any fiscal quarter is determined by the Compensation Committee of the Board of Directors subsequent to the end of the respective performance period taking into account the Company’s measured value creation for the quarter, as well as such other subjective factors that it deems relevant (including group and individual level performance factors). The number of Part A RSUs granted will be calculated based on the final award value determined by the Compensation Committee divided by the average closing price of the Company’s common stock over the last ten trading days of the respective performance period. Part A RSUs will vest assuming continuous employment fifteen months subsequent to the end of the performance period (for awards relating to quarterly periods through June 30, 2017) or twelve months subsequent to

On April 14, 2016, the Company and Zayo Capital completed a private offering of $550.0 million aggregate principal amount of 2025 Unsecured Notes (the “Incremental 2025 Notes”). The Incremental 2025 Notes were priced at 97.76% and were an additional issuance of the $350.0 million 6.375% senior unsecured notes due in 2025 that were originally issued on May 6, 2015 (the “2025 Notes” and together with the Incremental 2025 Notes, the “2025 Unsecured Notes”). The net proceeds from the Incremental 2025 Notes, plus cash on hand, were used to (i) redeem the then outstanding $325.6 million 10.125% senior unsecured notes due 2020, including the required $20.3 million make-whole premium and accrued interest, and (ii) repay $196.0 million of borrowings under the then outstanding secured Term Loan Facility. 15

~~5.75%~~Table ~~Senior~~of ~~Unsecured Notes due 2027~~ Contents

Onthe ~~January~~end ~~27,~~of ~~2017,~~ the ~~Company~~performance ~~and~~period ~~Zayo~~(for ~~Capital~~awards ~~completed~~relating ato ~~private~~quarterly ~~offering~~periods ofsubsequent ~~$800.0~~to ~~million~~June ~~aggregate~~30, ~~principal amount of 5~~2017).~~75%~~ ~~senior~~Upon ~~unsecured~~vesting, ~~notes due 2027 (~~the ~~“January~~RSUs ~~2027~~convert ~~Notes”),~~to ~~which~~an ~~were~~equal ~~issued~~number atof ~~par.~~shares ~~The~~of ~~net~~ZGH’s ~~proceeds~~common ~~from~~stock. ~~the offering~~Additionally, ~~along~~Part ~~with~~A ~~the~~RSU ~~Electric~~awards ~~Lightwave~~may ~~Incremental~~be ~~Term~~granted ~~Loan~~to ~~discussed~~certain ~~above,~~employees ~~were~~upon ~~used~~commencement toof ~~fund~~their ~~the~~employment ~~Electric~~with ~~Lightwave~~the ~~acquisition~~Company.

OnThe ~~April~~September ~~10,~~2019 ~~2017,~~and ~~the~~June ~~Company~~2019 ~~completed~~quarterly aawards ~~private~~were ~~offering~~recorded ofas liabilities totaling $~~550~~6.07 million ~~aggregate~~and ~~principal~~$6.2 ~~amount~~million, as of ~~5.75%~~September ~~senior~~30, ~~unsecured~~2019 ~~notes~~and ~~due~~June 30, 2019, ~~2027~~respectively, (as the ~~“Incremental~~awards ~~2027~~represent ~~Notes”).~~an obligation denominated in a fixed dollar amount to be settled in a variable number of shares during the subsequent quarter. The ~~Incremental~~quarterly ~~2027~~stock-based ~~Notes~~compensation ~~were~~liability anis ~~additional~~included in accrued liabilities in the accompanying condensed consolidated balance sheets. Upon the issuance of the ~~January~~RSUs, ~~2027~~the ~~Notes~~liability is re-measured and ~~were~~then ~~priced~~reclassified atto ~~104~~additional paid-in-capital, with a corresponding charge (or credit) to stock based compensation expense.~~0%.~~ The ~~net~~value ~~proceeds~~of ~~from~~the remaining unvested RSUs is expensed ratably through the ~~Incremental~~vesting ~~2027~~date. ~~Notes~~At ~~were~~September ~~used~~30, to2019, ~~repay~~the ~~certain~~remaining ~~outstanding~~unrecognized ~~balances~~compensation oncost to be expensed over the ~~Company’s~~remaining ~~B-2~~vesting ~~Term~~period ~~Loan~~for Part A awards is $29.2 million.

OnThe ~~July~~following 5,table ~~2017,~~summarizes the Company’s ~~completed~~Part aA ~~private~~RSU ~~offering~~activity offor ~~$300.0 million aggregate principal amount of 5.75% senior notes due 2027 (~~the ~~“July~~three ~~Incremental~~months ~~2027~~ended ~~Notes”~~September ~~and together with the Incremental 2027 Notes and the January 2027 Notes~~30, the “2027 Unsecured Notes”). The July Incremental 2027 Notes were an additional issuance of the January 2027 Notes and Incremental 2027 Notes and were priced at 104.25%. The net proceeds of $310.7 million from the offering were used to further repay certain outstanding balances on the Company’s B-2 Term Loan. 2019:

~~Debt covenants~~


	Number of Part A RSUs	Weighted average grant-date fair value per share		Weighted average remaining contractual term in months
Outstanding at July 1, 2019	2,324,396	$	28.49	6.6
Granted	640,191		33.73
Vested	(552,064)		25.93
Forfeited	(74,448)		n/a
Outstanding at September 30, 2019	2,338,075	$	30.39	5.8

The Credit Agreement contains customary events of default, including among others, non-payment of principal, interest, or other amounts when due, inaccuracy of representations and warranties, breach of covenants, cross default to certain other indebtedness, insolvency or inability to pay debts, bankruptcy, or a change of control. The Credit Agreement also contains a covenant, applicable only to the Revolver, that the Company maintain a senior secured leverage ratio below or equal to 5.25:1.00 at any time when the aggregate principal amount of loans outstanding under the Revolver is greater than 35% of the commitments under the Revolver. The Credit Agreement also requires the Company and its subsidiaries to comply with customary affirmative and negative covenants, including covenants

20 Part B

~~Table~~Under Part B of ~~Contents~~ the PCIP, participants, including the Company’s executives, are awarded quarterly grants of RSUs. The number of the RSUs earned by the participants is based on ZGH’s stock price performance over a performance period of one year with the starting price being the average closing price over the last ten trading days of the quarter immediately prior to the grant and the ending price being the average closing price over the last ten trading days of the quarter immediately prior to vesting. The RSUs vest on the last day of the twelve month period, after the beginning of the performance period (for awards vesting on or prior to June 30, 2018) or the fifteen month period after the beginning of the performance period (for awards vesting after June 30, 2018), subject to continued employment through such date. The existence of a vesting provision that is associated with the performance of ZGH’s stock price is a market condition, which affects the determination of the grant date fair value. Upon vesting, RSUs earned convert to an equal number of shares of ZGH’s common stock.

~~ZAYO~~The ~~GROUP~~Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are also awarded quarterly grants of RSUs under the same provisions as other Part B participants outlined above. However, ~~LLC~~beginning ~~AND~~with ~~SUBSIDIARIES~~ the grant during the three months ended December 31, 2018, in the case of the CEO, and beginning with the grant during the three months ended March 31, 2019, in the case of the CFO, awards are subject to additional vesting criteria that are based on ZGH’s stock performance subsequent to the end of the measurement period. In order for the CEO and CFO to receive the maximum award, ZGH’s stock price must remain at or above the ending measurement period price for the six months subsequent to the end of the performance period.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

restricting the ability of the Company and its subsidiaries, subject to specified exceptions, to incur additional indebtedness, make additional guaranties, incur additional liens on assets, or dispose of assets, pay dividends, or make other distributions, voluntarily prepay certain other indebtedness, enter into transactions with affiliated persons, make investments and amend the terms of certain other indebtedness. 16

~~The~~Table ~~Indentures limit any increase in the Company’s secured indebtedness (other than certain forms~~ of secured indebtedness expressly permitted under the Indentures) to a pro forma secured debt ratio of 4.50 times the Company’s previous quarter’s annualized modified EBITDA (as defined in the Indentures), and limit the Company’s incurrence of additional indebtedness to a total indebtedness ratio of 6.00 times the previous quarter’s annualized modified EBITDA. Contents

The ~~Company~~following ~~was~~table insummarizes ~~compliance~~the ~~with~~Company’s ~~all~~Part ~~covenants~~B ~~associated~~RSU ~~with~~activity ~~its~~for ~~debt~~the ~~agreements~~three asmonths ofended ~~March~~September 3130, 2019. :

~~Guarantees~~

The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s current and future domestic restricted subsidiaries. The Notes were co-issued with Zayo Capital, which does not have independent assets or operations.


	Number of Part B RSUs	Weighted average grant-date fair value per unit		Weighted average remaining contractual term in months
Outstanding at July 1, 2019	289,254	$	49.73	8.0
Granted	64,705		69.86
Vested	(57,336)		64.41
Forfeited	—		n/a
Outstanding at September 30, 2019	296,623	$	51.28	7.5

The Term Loan Facility and Revolver are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by all of the Company’s current and future domestic restricted subsidiaries.

~~Debt~~The ~~issuance~~table ~~costs~~below reflects the total Part B RSUs granted during each period presented, the maximum eligible shares of ZGH’s common stock that the respective Part B RSU grant could be converted into shares of ZGH’s common stock, and the grant date fair value per Part B RSU during the period indicated. The table below also reflects the units converted to ZGH’s common stock at a vesting date that is subsequent to the period indicated for those RSUs granted during the period indicated:

In connection with the Credit Agreement (and subsequent amendments thereto), and the various Notes offerings, the Company incurred debt issuance costs of $114.1 million (net of extinguishments). These costs are being amortized to interest expense over the respective terms of the underlying debt instruments using the effective interest method, unless extinguished earlier, at which time the related unamortized costs are to be immediately expensed.

The balance of debt issuance costs as of March 31, 2019 and June 30, 2018 was $52.2 million and $59.6 million, respectively, net of accumulated amortization of $61.9 million and $54.5 million, respectively. The amortization of debt issuance costs is included on the condensed consolidated statements of cash flows within non-cash interest expense along with the amortization or accretion of the premium and discount on the Company’s indebtedness. Interest expense associated with the amortization of debt issuance costs was $2.5 million and $7.4 million for the three and nine months ended March 31, 2019, respectively, and $2.4 million and $7.1 million for the three and nine months ended March 31, 2018, respectively.


	During the Three Months Ended
	September 30, 2019
Part B RSUs granted		64,705
Maximum eligible shares of ZGH’s common stock		446,465
Grant date fair value per Part B RSU	$	69.86
Units converted to ZGH’s common stock at vesting date		n/a

~~Debt issuance costs are presented in the condensed consolidated balance sheets as a reduction to long-term debt, non-current.~~


	During the Three Months Ended
	June 30, 2019		March 31, 2019		December 31, 2018		September 30, 2018
Part B RSUs granted		75,370		98,342		61,123		58,418
Maximum eligible shares of ZGH's common stock		520,053		678,560		421,749		403,084
Grant date fair value per Part B RSU	$	63.67	$	52.81	$	22.43	$	64.41
Units converted to ZGH's common stock at vesting date		n/a		n/a		n/a		—

~~Table of Contents~~

~~ZAYO~~The ~~GROUP~~grant date fair value of Part B RSU grants is estimated utilizing a Monte Carlo simulation. This simulation estimates the ten-day average closing stock price ending on the vesting date, ~~LLC~~the ~~AND~~stock ~~SUBSIDIARIES~~ price performance over the performance period, and the number of common shares to be issued at the vesting date. Various assumptions are utilized in the valuation method, including the target stock price performance ranges and respective share payout percentages, the ZGH historical stock price performance and volatility, peer companies’ historical volatility and an appropriate risk-free rate. The aggregate future value of the grant under each simulation is calculated using the estimated per share value of the common stock at the end of the vesting period multiplied by the number of common shares projected to be granted at the vesting date. The present value of the aggregate grant is then calculated under each of the simulations, resulting in a distribution of potential present values. The fair value of the grant is then calculated based on the average of the potential present values. The remaining unrecognized compensation cost associated with Part B RSU grants is $8.8 million at September 30, 2019.

~~NOTES~~Part ~~TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ C

~~(6)~~Under ~~INCOME~~Part ~~TAXES~~ C of the PCIP, independent directors of the Company are eligible to receive quarterly awards of RSUs. Independent directors electing to receive a portion of their annual director fees in the form of RSUs are granted a set dollar amount of Part C RSUs each quarter. The quantity of Part C RSUs granted is based on the average closing price of ZGH’s common stock over the last ten trading days of the quarter ended immediately prior to the grant date and

A reconciliation of the actual income tax provision and the tax computed by applying the U.S. federal rate to the earnings before income taxes during the three and nine month periods ended March 31, 2019 and 2018, respectively, is as follows: 17

	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019			2018
	(in millions)
Applicable statutory rate		21%		28%		21%		28%
Expected provision at the statutory rate	$	11.1	$	12.4	$	31.1	$	29.8
Increase/(decrease) due to:
Stock-based compensation		1.7		1.6		5.3		4.1
State income tax expense, net of federal benefit		2.0		1.3		6.0		2.8
Non-deductible transaction costs		0.3		0.4		0.7		0.6
Change in statutory tax rates outside U.S.		—		—		(0.1)		0.8
Changes in uncertain tax positions		1.8		—		8.2		—
Foreign tax rate differential		1.4		(1.0)		2.9		(2.7)
U.S. Tax Reform		—		4.6		7.2		48.7
Change in valuation allowance		(1.5)		(0.2)		(2.3)		(31.6)
Other, net		1.2		1.9		2.0		(5.7)
Provision for income taxes	$	18.0	$	21.0	$	61.0	$	46.8

Table of Contents

Onvest ~~December~~at ~~22, 2017,~~ the ~~U.S.~~end ~~federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V~~ of ~~the~~each ~~Concurrent~~quarter ~~Resolution on the Budget~~ for ~~Fiscal~~which ~~Year 2018, previously known as~~ the ~~Tax~~grant ~~Cuts~~was ~~and Jobs Act of 2017 (“U~~made.S. ~~Tax~~During ~~Reform”). U.S. Tax Reform reduced~~ the ~~U.S.~~three ~~corporate~~months ~~tax~~ended ~~rate~~September ~~from~~30, ~~35%~~2019 toand ~~21%~~2018, ~~created~~the aCompany’s ~~territorial~~independent ~~tax~~directors ~~system~~were ~~with~~granted ~~a one-time mandatory repatriation tax on previously deferred foreign earnings~~19,347 and ~~changed~~14,137 ~~business-related~~Part ~~deductions~~C ~~and~~RSUs, ~~credits~~respectively.

ASC 740, Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment. The SEC staff issued SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (~~“SAB 118”~~9), ~~which~~EMPLOYEE will allow registrants to record provisional amounts during a measurement period. The measurement period is similar to the measurement period used when accounting for business combinations under ASC 805, Business Combinations. SAB 118 allows a registrant to recognize provisional amounts when it does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its accounting for the change in tax law. Provisional amounts were recorded in prior quarters; however, the measurement period ended as of December 31, 2018 and final amounts were recorded in the three months ended December 31, 2018. Therefore, no amounts were recognized related to U.S. Tax Reform under SAB 118 for the three months ended March 31, 2019. BENEFITS

~~Although~~In ~~these~~connection ~~amounts~~with ~~are~~the noCompany’s ~~longer~~acquisition ~~provisional~~of Allstream, ~~the~~Inc. ~~determination~~in ofJanuary ~~U.S.~~2016, ~~Tax~~the ~~Reform’s~~Company ~~income~~assumed ~~tax~~sponsorship ~~effects~~for ~~may~~a ~~change~~defined ~~following~~pension ~~future~~plan ~~legislation~~for orcertain ~~further~~employees ~~interpretation~~of ~~based~~Allstream, onInc. ~~the~~The ~~publication~~Company also assumed sponsorship of ~~U.S.~~an ~~Treasury~~OPEB ~~regulations~~for ascertain ~~well~~employees asof ~~guidance~~Allstream, ~~from~~Inc., ~~the~~which ~~Internal~~provides ~~Revenue~~health ~~Service~~care and ~~state~~life ~~tax~~insurance ~~authorities. Amounts~~benefits ~~recognized~~for ~~related~~certain toeligible Uretirees.S. ~~Tax~~These ~~Reform~~OPEB ~~under~~plans ~~SAB~~are ~~118~~not ~~for~~funded. ~~the~~Benefits ~~nine~~are ~~months~~paid ~~ended~~directly ~~March~~to ~~31,~~the ~~2019:~~ participants of these plans.

	Tax Expense recognized for the Nine Months Ended March 31, 2019
Change in statutory tax rate, U.S. only	$	6.2
Changes to indefinite reinvestment assertion		(0.2)
Repatriation Tax		1.2
Net impacts of U.S. Tax Reform	$	7.2

The service cost component of the defined benefit pension and post-retirement benefit (OPEB) plans is included within selling, general and administrative expenses and all other components are recognized in other income, net in the accompanying condensed consolidated statements of operations.

Table of Contents


	Pension Plans
	Three Months Ended September 30,
	2019		2018
	(in millions)
Service cost	$	0.6	$	0.8
Interest cost		0.9		0.9
Expected return on plan assets		(1.3)		(1.4)
Amortization of service cost from earlier periods		0.2		0.2
Gain on curtailment⁽¹⁾		—		(0.4)
Net periodic pension benefit cost	$	0.4	$	0.1

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~

~~NOTES~~(1) TODuring ~~THE~~the ~~CONDENSED~~three ~~CONSOLIDATED~~months ~~FINANCIAL~~ended ~~STATEMENTS~~September ~~(UNAUDITED)~~ 30, 2018, the Company approved an amendment to the defined benefit pension plan freezing benefit accruals for certain members of the pension plan as of September 30, 2018. The plan freeze had an immaterial impact to the financial statements for the period ended September 30, 2018.

The Company files income tax returns in various federal, state, and local jurisdictions including the United States, Canada, United Kingdom and France. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities in major tax jurisdictions for years before 2013.

As of March 31, 2019 and June 30, 2018, the Company had gross unrecognized tax benefits of $12.0 million and $3.0 million, respectively. During the nine months ended March 31, 2019, an additional $9.0 million ($8.2 million net of federal benefit) was recognized for prior year tax positions. These amounts include accrued interest and penalties of $1.9 million as of March 31, 2019 and $0.1 million as of June 30, 2018. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.


	OPEB Plans
	Three Months Ended September 30,
	2019		2018
	(in millions)
Interest cost	$	0.1		0.1
Net periodic OPEB benefit cost	$	0.1	$	0.1

~~(7) EQUITY~~

On May 7, 2018, the Board of Directors of ZGH authorized the repurchase of up to $500 million of shares of ZGH outstanding common stock from time to time using a variety of methods, including open market purchases, privately negotiated transactions and other means in accordance with federal securities laws. During the nine months ended March 31, 2019, the Company repurchased 12,973,892 shares of ZGH outstanding common stock at an average price of $31.03, or $402.5 million. The authorization expired on November 7, 2018 with the Company having repurchased $496.0 million under the authorization. The stock repurchase on behalf of ZGH is included on the condensed consolidated statement of member’s equity as a Capital distribution to ZGH during the nine months ended March 31, 2019.

During the three and nine months ended March 31, 2019, the Company recorded an increase of $23.3 million and $74.9 million, respectively, in additional paid-in capital associated with stock-based compensation expense related to the Company’s equity classified stock-based compensation awards (~~See~~10) ~~Note~~FAIR 8VALUE ~~–Stock-based~~MEASUREMENTS ~~Compensation).~~

~~(8)~~The ~~STOCK~~Company’s financial instruments consist of cash and cash equivalents, restricted cash, trade receivables, accounts payable, long-~~BASED~~term ~~COMPENSATION~~debt, certain post-employment plans and stock-based compensation liability. The carrying values of cash and cash equivalents, restricted cash, trade receivables and accounts payable approximated their fair values at September 30, 2019 and June 30, 2019 due to the short maturity of these instruments.

The ~~following~~carrying ~~tables~~value ~~summarize~~of the Company’s ~~stock-based~~Notes, ~~compensation~~excluding ~~expense~~debt issuance costs, reflects the original amounts borrowed, inclusive of net unamortized premium, and was $4,000.4 million and $4,001.1 million as of September 30, 2019 and June 30, 2019, respectively. Based on market interest rates for ~~liability~~debt of similar terms and ~~equity~~average ~~classified~~maturities, ~~awards~~the ~~included~~fair invalue of the ~~condensed~~Company's ~~consolidated~~Notes ~~statements~~as of ~~operations~~September 30, 2019 and June 30, 2019 was estimated to be $4,069.1 million and $4,067.7 million, respectively. The Company’s fair value estimates associated with its Note obligations were derived utilizing Level 2 inputs – quoted prices for similar instruments in active markets.

	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
	(in millions)
Included in:
Operating costs	$	2.4	$	2.1	$	7.8	$	7.6
Selling, general and administrative expenses		24.6		17.1		72.1		62.9
Total stock-based compensation expense	$	27.0	$	19.2	$	79.9	$	70.5
Part A restricted stock units	$	23.2	$	16.8	$	68.9	$	58.4
Part B restricted stock units		3.1		1.9		9.3		10.6
Part C restricted stock units		0.7		0.5		1.7		1.5
Total stock-based compensation expense	$	27.0	$	19.2	$	79.9	$	70.5

The carrying value of the Company’s Term Loan Facility, excluding debt issuance costs, reflects the original amounts borrowed, inclusive of unamortized discounts, and was $1,748.3 million and $1,748.8 million as of September 30, 2019 and June 30, 2019, respectively. The Company’s Term Loan Facility accrues interest at variable rates based upon the one month, three month or nine month LIBOR plus i) a spread of 2.0% on the Company’s $500.0 million

~~Performance Compensation Incentive Program~~ 18

~~During~~Table ~~October 2014, ZGH adopted the 2014 Performance Compensation Incentive Program (“PCIP”). The PCIP includes incentive cash compensation and equity in the form~~ of restricted stock units (“RSUs”). Grants under the PCIP RSU plans are made quarterly for all participants. The PCIP was effective on October 16, 2014 and will remain in effect for a period of 10 years (or through October 16, 2024) unless it is earlier terminated by ZGH’s Board of Directors. Contents

23 tranche (which has a LIBOR floor of 0.0%) and ii) a spread of 2.25% on its B-2 Term Loan tranche (which has a LIBOR floor of 1.00%). Based on market interest rates for debt of similar terms and average maturities, the fair value of the Company’s Term Loan Facility as of September 30, 2019 and June 30, 2019 was estimated to be $1,762.8 million and $1,758.0 million, respectively. The Company’s fair value estimates associated with its Term Loan Facility obligations were derived utilizing Level 2 inputs—quoted prices for similar instruments in active markets.

~~Table~~As of ~~Contents~~ September 30, 2019 and June 30, 2019, the outstanding balance under the Company’s Revolver was $125.0 million and $145.0 million, respectively.

~~ZAYO~~A ~~GROUP,~~hypothetical ~~LLC~~increase ~~AND~~in ~~SUBSIDIARIES~~ the applicable interest rate on the Company’s Term Loan Facility of one percentage point above the 1.0% LIBOR floor would increase the Company’s annual interest expense by approximately $18.8 million.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~The~~(11) ~~PCIP~~COMMITMENTS ~~has~~AND ~~the~~CONTINGENCIES ~~following components:~~

~~Part~~Purchase A Commitments

~~Under~~As ~~Part A~~ of ~~the~~September ~~PCIP~~30, ~~certain full-time employees~~2019, ~~including~~ the Company’s ~~executives,~~was ~~are~~contractually ~~eligible~~committed tofor ~~earn quarterly awards of RSUs~~$586.7 ~~Each~~million ~~participant in Part A~~ of ~~the~~capital ~~PCIP~~expenditures ~~will have an RSU annual award target value, which will be allocated to each fiscal quarter. The final Part A value awarded to a participant~~ for ~~any~~construction ~~fiscal~~materials ~~quarter~~and ispurchases ~~determined by the Compensation Committee~~ of ~~the~~property Board of Directors subsequent to the end of the respective performance period taking into account ZGH’s measured value creation for the quarter, as well as such other subjective factors that it deems relevant (including group and ~~individual level performance factors)~~equipment. ~~The~~A ~~number~~majority of ~~Part~~these Aobligations ~~RSUs~~are ~~granted~~expected ~~will~~to be ~~calculated~~satisfied ~~based~~in on the ~~final~~next ~~award~~twelve ~~value determined by the Compensation Committee divided by the average closing price of ZGH’s common stock over the last ten trading days of the respective performance period~~months. ~~Part~~These Aobligations ~~RSUs~~are ~~will~~primarily ~~vest~~success onbased; ~~the~~that ~~last day of the fifteen month period subsequent to the end of the performance period (for awards relating to quarterly periods through June 30~~is, ~~2017) or~~ the ~~twelve~~Company ~~month~~has ~~period~~executed ~~subsequent~~customer tocontracts ~~the~~that ~~end~~support of the ~~performance~~future ~~period~~capital ~~(for awards relating to the quarterly period ended September 30, 2017 and subsequent quarters), subject to continuous employment through such date~~expenditures. ~~Upon vesting, the RSUs convert to an equal number of ZGH’s common stock. Additionally, Part A RSUs may be granted to certain employees upon commencement of their employment with the Company.~~

During the ~~three~~year ~~and nine months~~ ended ~~March~~June 3130, 2019, the Company ~~recognized~~entered ~~$23.2~~into ~~million~~a ~~and~~CAD $68127.90 million, ~~respectively,~~(or ~~of compensation expense associated with the vested portion of the Part A awards. During the three and nine months ended March 31, 2018, the Company recognized~~ $1695.89 million) ~~and~~commitment ~~$58.4~~for ~~million,~~telecommunications ~~respectively,~~services ofover ~~compensation~~a ~~expense~~two ~~associated~~year ~~with~~period. ~~the~~As ~~vested portion~~ of ~~the~~September ~~Part~~30, ~~A awards. The March~~ 2019, ~~and~~CAD ~~June 2018 quarterly awards were recorded as liabilities totaling~~ $583.90 million ~~and~~(or $562.7 million, as of March 31, 2019 and June 30, 2018, respectively, as the awards represent an obligation denominated in a fixed dollar amount to be settled in a variable number of shares during the subsequent quarter. The quarterly stock-based compensation liability is included in accrued liabilities in the accompanying condensed consolidated balance sheets. Upon the issuance of the RSUs, the liability is re-measured and then reclassified to additional paid-in capital, with a corresponding charge (or credit) toremained ~~stock~~on ~~based compensation expense. The value of~~ the ~~remaining unvested RSUs is expensed ratably through the vesting date~~commitment. ~~At March 31, 2019, the remaining unrecognized compensation cost to be expensed over the remaining vesting period for Part A awards is $23.1 million.~~

~~The~~Also, ~~following~~during ~~table~~the ~~summarizes~~year ended June 30, 2019, the Company’s ~~Part~~entered Ainto ~~RSU~~a ~~activity~~CAD $40.0 million (or $30.2 million) commitment for ~~the~~telecommunications ~~nine~~services ~~months~~over ~~ended~~a ~~March~~three 31year period. As of September 30, 2019: , CAD $22.2 million (or $16.8 million) remained on the commitment.

	Number of Part ARSUs	Weighted averagegrant-date fairvalue per share		Weighted averageremaining contractualterm in months
Outstanding at July 1, 2018	2,246,495	$	35.08	6.4
Granted	2,206,340		28.74
Vested	(2,058,668)		34.13
Forfeited	(369,784)		n/a
Outstanding at March 31, 2019	2,024,383	$	28.40	6.3

Outstanding Letters of Credit

~~Part~~As B of September 30, 2019, the Company had $8.6 million in outstanding letters of credit, which were primarily entered into in connection with various lease agreements. Additionally, as of September 30, 2019, Zayo Canada, Inc., a subsidiary of the Company, had CAD $2.8 million (or $2.1 million) in letters of credit under a CAD $5.0 million (or $3.8 million) unsecured credit agreement.

Under Part B of the PCIP, participants, including the Company’s executives, are awarded quarterly grants of RSUs. The number of the RSUs earned by the participants is based on ZGH’s stock price performance over a performance period of one year with the starting price being the average closing price over the last ten trading days of the quarter immediately prior to the grant and the ending price being the average closing price over the last ten trading days of the quarter immediately prior to vesting. The RSUs vest on the last day of the twelve month period after the beginning of the performance period (for awards vesting on or prior to June 30, 2018) or the fifteen month period after the beginning of the performance period (for awards vesting after June 30, 2018), subject to continued employment through such date. The existence of a vesting provision that is associated with the performance of ZGH’s stock price is a market condition, which affects the determination of the grant date fair value. Upon vesting, RSUs earned convert to an equal number of shares of ZGH’s common stock. Contingencies

~~The~~In the normal course of business, the Company’s ~~Chief~~is ~~Executive~~party ~~Officer~~to ~~(“CEO”)~~various ~~and~~outstanding ~~Chief~~legal ~~Financial~~proceedings, ~~Officer~~asserted ~~(“CFO”)~~and ~~are~~unasserted ~~also~~claims, ~~awarded~~and ~~quarterly~~disputes. ~~grants~~In ofthe ~~RSUs~~opinion ~~under~~of management, the ~~same~~ultimate ~~provisions~~disposition asof ~~other~~these ~~Part~~matters, Bboth ~~participants~~asserted ~~outlined~~and ~~above. However~~unasserted, ~~beginning~~will ~~with~~not have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.

24 The Company accrues for losses related to contingencies when a loss from such claims is probable and the amount of loss can be reasonably estimated. In determining whether a loss from a claim is probable and the loss can be reasonably estimated, the Company reviews and evaluates its litigation and regulatory matters in light of potentially relevant factual and legal developments. If the Company determines an unfavorable outcome is not probable or the amount of loss cannot be reasonably estimated, the Company does not accrue for a potential litigation loss. In those situations, the Company discloses an estimate or range of the reasonably possible losses, if such estimates can be made. At this time, the Company does not believe that it is possible to estimate the reasonably possible losses or a range of reasonably possible losses related to the matters described below.

~~Table~~Following the filing of ~~Contents~~ the preliminary proxy statement on June 3, 2019, several complaints were filed against ZGH and its Board of Directors challenging the Merger. Four actions were filed in the United States District Court for the District of Delaware captioned Scarantino v. Zayo Group Holdings, Inc., et al., Case No. 1:19-cv-01068-RGA (D.

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~ 19

~~NOTES~~Table TOof ~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Contents

~~grant~~Del.), ~~during~~Klein ~~the~~v. ~~three~~Zayo ~~months~~Group ~~ended~~Holdings, ~~December~~Inc., 31et al., ~~2018~~Case No. 1:19-cv-01085-RGA (D. Del.), inDuggan ~~the~~v. ~~case~~Zayo ofGroup ~~the~~Holdings, ~~CEO~~Inc., et al., Case No. 1:19-cv-01112-RGA (D. Del.), and ~~beginning~~Dixon ~~with~~v. Zayo Group Holdings, Inc., et al., Case No. 1:19-cv-01123-RGA (D. Del.); one action was filed in the ~~grant~~United ~~during~~States District Court for the ~~three~~District ~~months~~of ~~ended~~Colorado ~~March~~captioned 31Graves v. Zayo Group Holdings, ~~2019~~Inc., et al., Case No. 1:19-cv-01747-LTB (D. Colo.); and one action was filed in the ~~case~~District Court of ~~the~~Boulder ~~CFO~~County, ~~awards~~Colorado ~~are~~captioned ~~subject~~Saroop tov. ~~additional~~Zayo ~~vesting~~Group ~~criteria~~Holdings, ~~that~~Inc., ~~are~~et ~~based~~al., onCase ~~ZGH’s~~No. ~~stock~~2019CV30601. The ~~performance~~complaints ~~subsequent~~generally toalleged, ~~the~~among ~~end~~other ofthings, ~~the~~that ~~measurement~~ZGH ~~period. In~~and ~~order~~its ~~for~~directors ~~the~~disseminated ~~CEO~~an allegedly false and ~~CFO~~materially tomisleading ~~receive~~proxy ~~the~~statement ~~maximum~~or ~~award~~that ZGH’s ~~stock~~Board ~~price~~of ~~must~~Directors ~~remain~~breached attheir orfiduciary ~~above~~duties in connection with the ~~ending~~merger. ~~measurement~~The ~~period~~complaints ~~price~~sought, ~~for~~among other things, to enjoin the ~~six~~merger, ~~months~~a ~~subsequent~~declaration tothat the ~~end~~proxy statement violated federal securities laws, unspecified damages, and an award of ~~the~~attorneys’ ~~performance~~and ~~period~~experts’ fees.

~~The~~ZGH ~~following~~issued ~~table~~supplemental ~~summarizes~~disclosures in the ~~Company’s~~definitive ~~Part~~proxy Bstatement ~~RSU~~dated ~~activity~~June ~~for~~26, ~~the~~2019. In ~~nine~~light ~~months~~of ~~ended~~those ~~March~~supplemental 31disclosures, as of September 30, 2019: , each of the above-referenced complaints was voluntarily dismissed as moot.

	Number of Part B RSUs	Weighted averagegrant-date fairvalue per unit		Weighted averageremaining contractualterm in months
Outstanding at July 1, 2018	185,775	$	57.19	8.9
Granted	217,883		47.40
Vested	(124,129)		48.62
Forfeited	(5,141)		n/a
Outstanding at March 31, 2019	274,388	$	51.35	8.1

Three ZGH stockholders also filed complaints in the Delaware Court of Chancery pursuant to 8 Del. C. §220 seeking corporate books and records, captioned Teamsters Local 237 Additional Security Benefit Fund, et al. v. Zayo, C.A. No. 2019-0572-TMR (July 25, 2019); Massachusetts Laborers' Annuity Fund v. Zayo Group Holdings, Inc., C.A. No. 2019-0573-TMR; and Waterhouse v. Zayo Group Holdings, Inc., C.A. No. 2019-0589-TMR (July 31, 2019). The Company intends to vigorously defend against these actions.

The table below reflects the total Part B RSUs granted during Fiscal 2019 and 2018, the maximum eligible shares of ZGH’s common stock that the respective Part B RSU grant could be converted into shares of ZGH’s common stock, and the grant date fair value per Part B RSU during the period indicated. The table below also reflects the units converted to the ZGH’s common stock at a vesting date that is subsequent to the period indicated for those RSUs granted during the period indicated:

	During the Three Months Ended
		March 31, 2019		December 31, 2018		September 30, 2018
Part B RSUs granted		98,342		61,123		58,418
Maximum eligible shares of ZGH's common stock		826,073		513,433		403,084
Average grant date fair value per Part B RSU	$	52.81	$	22.43	$	64.41
Units converted to ZGH's common stock at vesting date		n/a		n/a		n/a

(12) REVENUE AND CONTRACT COSTS

	During the Three Months Ended
	June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2017
Part B RSUs granted		78,123		77,218		82,556		163,960
Maximum eligible shares of ZGH's common stock		539,049		532,804		569,636		590,256
Average grant date fair value per Part B RSU	$	74.44	$	52.47	$	45.10	$	19.06
Units converted to ZGH's common stock at vesting date		n/a		—		—		54,671

Nature of the Company’s Products and Offerings

~~During~~Refer to the ~~three~~Revenue ~~and~~Recognition ~~nine~~section ~~months~~of ~~ended~~Note ~~March~~2 ~~31,~~– ~~2019,~~Basis ~~the~~of ~~Company~~Presentation ~~recognized~~and ~~stock-based~~Significant ~~compensation~~Accounting ~~expense~~Policies ofand ~~$3.1~~Note ~~million~~15 ~~and~~– ~~$9.3~~Revenue ~~million,~~and ~~respectively,~~Contract ~~related~~Costs toin ~~Part~~our Bannual ~~awards.~~report ~~During~~on ~~the~~Form ~~three~~10-K ~~and~~for ~~nine~~the ~~months~~year ended ~~March~~June 3130, ~~2018,~~2019 ~~the~~for ~~Company~~further ~~recognized~~information ~~stock-based~~regarding ~~compensation~~our ~~expense~~application of ~~$1.9~~ASC ~~million~~606, including practical expedients and ~~$10.6~~judgments ~~million,~~applied ~~respectively,~~in ~~related~~determining tothe ~~Part~~amounts Band ~~awards~~timing of revenue from contracts with customers.

~~The~~Reconciliation ~~grant date fair value~~ of ~~Part~~Total BRevenue RSU grants is estimated utilizing a Monte Carlo simulation. This simulation estimates the ten-day average closing stock price ending on the vesting date, the stock price performance over the performance period, and the number of common shares to beRevenue ~~issued~~from atContracts the vesting date. Various assumptions are utilized in the valuation method, including the target stock price performance ranges and respective share payout percentages, ZGH’s historical stock price performance and volatility, peer companies’ historical volatility and an appropriate risk-free rate. The aggregate future value of the grant under each simulation is calculated using the estimated per share value of the common stock at the end of the vesting period multiplied by the number of common shares projected to be granted at the vesting date. The present value of the aggregate grant is then calculated under each of the simulations, resulting in a distribution of potential present values. The fair value of the grant is then calculated based on the average of the potential present values. The remaining unrecognized compensation cost associated with ~~Part B RSU grants is $7.0 million at March 31, 2019.~~ Customers

25 The following table provides the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards:

Table of Contents


	Three Months Ended September 30,
		2019		2018
		(in millions)
Revenue from Contracts with Customers - ASC 606		$	346.9		380.9
Lease Revenue - ASC 842 ⁽¹⁾			291.7		260.2
Total revenue		$	638.6	$	641.1

~~ZAYO~~(1) Includes ~~GROUP~~revenue from use of long-term Fiber Contracts and Colocation solutions, ~~LLC~~which ~~AND~~are ~~SUBSIDIARIES~~ not within the scope of ASC 606. See Note 13 –Leases.

~~NOTES~~Remaining TOPerformance ~~THE~~Obligation ~~CONDENSED~~Associated ~~CONSOLIDATED~~with ~~FINANCIAL~~Non-Lease ~~STATEMENTS (UNAUDITED)~~ Arrangements

~~Part~~A C majority of the Company’s revenue is provided over a contract term. When allocating the total contract transaction price to identified performance obligations, a portion of the total transaction price relates to performance obligations that are yet to be satisfied or are partially satisfied as of the end of the reporting period.

~~Under~~Remaining ~~Part~~performance Cobligations ofassociated ~~the~~with ~~PCIP, independent directors of~~ the Company are eligible to receive quarterly awards of RSUs. Independent directors electing to receive a portion of their annual director fees in the form of RSUs are granted a set dollar amount of Part C RSUs each quarter. The quantity of Part C RSUs granted is based on the average closing price of ZGH’s ~~common~~contracts ~~stock~~reflect ~~over~~recurring ~~the~~charges ~~last~~billed, ~~ten~~adjusted ~~trading days of the quarter ended immediately prior~~ to ~~the~~reflect ~~grant~~estimates ~~date and vest at the end of each quarter~~ for ~~which~~sales ~~the~~incentives ~~grant~~and ~~was~~revenue ~~made~~adjustments. ~~During~~ ~~the~~At ~~three~~September ~~and nine months ended March 31~~30, 2019, the ~~Company’s~~aggregate ~~independent~~amount ~~directors~~of ~~were granted 30,319 and 60,505 Part C RSUs, respectively. During~~ the ~~three~~transaction ~~and~~price ~~nine~~allocated ~~months~~to ~~ended~~remaining ~~March~~performance ~~31,~~obligations ~~2018,~~was ~~the~~approximately ~~Company’s independent directors were granted 13,555 and 43,502 Part C RSUs, respectively. During the three and nine months ended March 31, 2019 the Company recognized~~ $01.72 ~~million and $1~~billion.7 ~~million,~~For ~~respectively,~~contracts ~~of stock-based compensation expense associated~~ with ~~the~~original ~~Part~~durations Cof ~~awards.~~more ~~During~~than ~~the~~one ~~three~~year ~~and~~remaining, ~~nine~~we ~~months~~expect ~~ended~~to ~~March~~recognize ~~31,~~approximately ~~2018~~49.3%, ~~the Company recognized $0~~31.52% ~~million~~ and $113.52% ~~million, respectively, of compensation expense associated with the Part C RSUs.~~

~~(9) EMPLOYEE BENEFITS~~ 20

~~The~~Table ~~service cost component~~ of the defined benefit pension and post-retirement benefit (OPEB) plans is included within selling, general and administrative expenses and all other components are recognized in other income, net in the accompanying condensed consolidated statements of operations. Contents

	Pension Plans
	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
	( in millions)				( in millions)
Service cost	$	0.8	$	0.7	$	2.2	$	2.1
Interest cost		1.0		0.9		2.8		1.6
Expected return on plan assets		(1.5)		(1.4)		(4.1)		(2.5)
Amortization of service cost from earlier periods		0.2		0.2		0.6		0.2
Gain on curtailment(1)		—		—		(0.4)		—
Net periodic pension cost	$	0.5	$	0.4	$	1.1	$	1.4

of our remaining performance obligations as revenue during the remainder of the nine months ended June 30, 2020, year ended June 30, 2021 and year ended June 30, 2022, respectively, with the remaining balance thereafter.

~~(1)~~Contract ~~During~~Assets ~~the~~and three months ended September 30, 2018, the Company approved an amendment to the defined benefit pension plan freezing benefit accruals for certain members of the pension plan as of September 30, 2018. The plan freeze had an immaterial impact to the financial statements for the nine months ended March 31, 2019.Liabilities

	OPEB Plans
	Three Months Ended March 31,				Nine Months Ended March 31,
	2019		2018		2019		2018
	( in millions)				( in millions)
Service cost	$	—	$	—	$	0.1	$	0.1
Interest cost		—		0.1		0.2		0.3
Net periodic post-retirement benefit cost	$	—	$	0.1	$	0.3	$	0.4

The timing of revenue recognition may differ from the time of billing to the Company’s customers. Customer receivables represent an unconditional right to consideration net of an estimated allowance for doubtful accounts. Contract balances represent amounts from an arrangement when either the Company has performed, by transferring a solution to the customer in advance of receiving all or partial consideration for such goods and offerings from the customer, or the customer has made payment to the Company in advance of obtaining control of the goods and/or offerings promised to the customer in the contract.

~~(10)~~Contract ~~FAIR~~liabilities ~~VALUE~~arise ~~MEASUREMENTS~~when the Company bills its customers and receives consideration in advance of providing the goods or offerings promised in the contract. Contract liabilities are recognized as revenue when product offerings are provided to the customer. Contract liabilities are presented in the Company’s condensed consolidated balance sheet as deferred revenue.

The ~~Company’s~~following ~~financial~~table ~~instruments~~presents ~~consist~~information ofabout ~~cash~~the ~~and~~Company’s ~~cash~~customer ~~equivalents, restricted cash, trade~~ receivables, ~~accounts~~contract ~~payable,~~assets ~~long-term debt, certain post-employment plans~~ and ~~stock-based~~contract ~~compensation~~liabilities ~~liability.~~as ~~The carrying values~~ of ~~cash~~September ~~and cash equivalents~~30, ~~restricted cash, trade receivables and accounts payable approximated their fair values at March 31,~~ 2019 and June 30, ~~2018 due to the short maturity of these instruments.~~ 2019:


	September 30, 2019		June 30, 2019
	(in millions)
Customer receivable, net⁽¹⁾	$	86.6	$	136.4
Contract liabilities⁽¹⁾	$	47.1	$	50.5

~~Table~~ of(1) ~~Contents~~ Amounts do not include balances associated with lease revenue from the Company’s Zayo Networks and zColo segments.

~~ZAYO~~During ~~GROUP~~the three months ended September 30, ~~LLC~~2019 ~~AND~~and ~~SUBSIDIARIES~~ 2018, the Company recognized $4.8 million and $5.4 million, respectively, of revenue that was included in contract liabilities as of June 30, 2019 and June 30, 2018, respectively.

~~NOTES~~Contract ~~TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Costs

The ~~carrying~~Company ~~value~~recognizes ofan ~~the~~asset ~~Notes,~~for ~~excluding~~incremental ~~debt~~commission ~~issuance~~and ~~costs,~~bonus ~~reflects~~expenses ~~the~~paid ~~original~~to ~~amounts~~internal ~~borrowed,~~sales ~~inclusive~~personnel ~~of net unamortized premium,~~ and ~~was~~third ~~$4,001.7~~party ~~million~~agents ~~and~~in ~~$4,003.4~~conjunction ~~million~~with asobtaining ofcertain ~~March~~customer ~~31, 2019 and June 30, 2018, respectively~~contracts. ~~Based~~These oncosts ~~market~~are ~~interest~~only ~~rates~~deferred ~~for~~when ~~debt~~the ofcommissions ~~similar~~are ~~terms~~incremental and ~~average~~would ~~maturities,~~not ~~the~~have ~~fair~~been ~~value~~incurred ofabsent the ~~Notes~~customer ascontract. ofCosts ~~March~~to ~~31,~~obtain ~~2019~~a ~~and~~contract ~~June~~are ~~30,~~amortized ~~2018~~and ~~was~~recorded ~~estimated~~ratably towithin ~~be $3~~selling,~~998.0~~ ~~million~~general and ~~$3,986.5~~administrative ~~million,~~expenses ~~respectively.~~on ~~The~~the Company’s ~~fair~~condensed ~~value~~consolidated ~~estimates~~statements ~~associated~~of ~~with~~operations ~~its~~over ~~obligations with respect to~~ the ~~Notes~~estimated ~~were~~contract ~~derived utilizing Level 2 inputs—quoted prices for similar instruments in active markets~~term.

The ~~carrying value of the~~ Company’s ~~Term~~also ~~Loan~~defers ~~Facility, excluding debt issuance~~ costs, ~~reflects~~incurred ~~the~~to ~~original~~fulfill ~~amounts~~contracts ~~borrowed,~~that ~~inclusive~~relate ofdirectly ~~unamortized~~to ~~discounts, and was $1,749.6 million and $1,751.3 million as of March 31, 2019 and June 30, 2018, respectively. The Company’s Term Loan Facility accrues interest at variable rates based upon~~ the ~~one-month~~contract, ~~three-month~~are orexpected ~~six-month~~to ~~LIBOR~~generate ~~plus~~resources i)that awill ~~spread~~be ofused ~~2.0%~~to onsatisfy the Company’s ~~$500.0~~performance ~~million~~obligation ~~tranche~~under ~~(which~~the ~~has~~contract ~~a LIBOR floor of 0.0%)~~ and ~~ii)~~are aexpected ~~spread~~to ofbe ~~2.25%~~recovered onthrough ~~its~~revenue ~~B-2~~generated ~~Term~~under ~~Loan~~the ~~tranche (which has a LIBOR floor of 1~~contract.~~00%).~~ ~~Based~~Contract onfulfillment ~~market~~costs ~~interest~~are ~~rates~~expensed ~~for~~to ~~debt~~cost of ~~similar~~service ~~terms~~as ~~and average maturities,~~ the ~~fair value of the~~ Company’s ~~Term~~satisfies ~~Loan~~its ~~Facility~~performance asobligations. ofThese ~~March~~costs ~~31,~~principally ~~2019~~relate ~~and June 30, 2018 was estimated~~ to bedirect ~~$1,746.7~~costs ~~million and $1,772.3 million, respectively. The Company’s fair value estimates~~ associated with ~~its~~activating ~~Term~~new ~~Loan~~customer ~~Facility obligations were derived utilizing Level 2 inputs—quoted prices for similar instruments in active markets~~solutions.

AsThe ofCompany ~~March~~estimates ~~31,~~the ~~2019,~~amortization ~~there~~period ~~was~~for aits ~~$170.0~~costs ~~million~~incurred ~~balance~~to ~~outstanding~~obtain ~~under~~and fulfill customer contracts at a portfolio level due to the ~~Company's~~similarities ~~Revolver.~~within Asits ofcustomer ~~June~~contract ~~30,~~portfolios. Other ~~2018~~costs, ~~there~~such ~~was~~as nogeneral ~~balance~~costs ~~outstanding~~or ~~under~~costs ~~the~~related ~~Company's~~to ~~Revolver~~past performance obligations, are expensed as incurred.

AAs ~~hypothetical~~of ~~increase~~September in30, ~~the~~2019 ~~applicable~~and ~~interest~~June ~~rate~~30, on2019, the Company’s ~~Term~~had ~~Loan~~$5.6 ~~Facility~~million and ~~Revolver~~$5.7 million, respectively, of ~~one~~short-term ~~percentage~~unamortized ~~point~~contract ~~above~~costs ~~the 1~~included in other current assets and $4.~~0% LIBOR~~5 ~~floor~~million ~~would~~and ~~increase~~$3.8 million, respectively, of long term unamortized contact contract costs included in other assets on its condensed consolidated balance sheets. During the three months ended September 30, 2019 and 2018, the Company’s ~~annual~~recorded ~~interest~~$1.7 ~~expense~~million byand ~~approximately~~ $192.31 million, respectively, in selling, general and administrative expenses associated with the amortization of deferred contract costs. The amortization period for these contract costs ranges from 1 to 18 years.

~~(11) COMMITMENTS AND CONTINGENCIES~~ 21

~~Purchase~~Table ~~commitments~~of Contents

At(13) ~~March~~LEASES 31, 2019, the Company was contractually committed for $446.0 million of capital expenditures for construction materials and purchases of property and equipment. A majority of these purchase commitments are expected to be satisfied in the next twelve months. These purchase commitments are primarily success based; that is, the Company has executed customer contracts that support the future capital expenditures.

~~During~~As previously discussed in Note 1, the ~~nine~~Company ~~months~~adopted ~~ended~~ASC ~~March~~842 31effective July 1, 2019 using the modified retrospective transition method at the adoption date. In addition, the Company ~~entered~~elected ~~into~~the apackage ~~CAD~~of ~~$127~~practical expedients permitted under the transition guidance which permits companies to carry forward the historical lease classification.0 ~~million~~Adoption ~~(or~~of the new standard resulted in $93527.26 million) ~~commitment~~of ~~for~~ROU ~~telecommunications~~assets ~~services~~and ~~over~~$545.1 amillion ~~two~~of ~~year~~lease ~~period.~~liabilities Asrecorded as of ~~March~~July 311, 2019,. The ~~CAD~~standard ~~$111.9~~did ~~million~~not (materially impact the Company’s consolidated net income or ~~$83~~cash flows in the three months ended September 30, 2019.8 ~~million)~~The ~~remained~~Company’s financial position for reporting periods beginning on or after July 1, 2019 are presented under the ~~commitment~~new guidance, while prior period amounts are not adjusted for the new guidance and continue to be reported in accordance with previous guidance.

~~Also,~~Leases ~~during~~as the nine months ended March 31, 2019, the Company entered into a CAD $40.0 million (or $29.3 million) commitment for telecommunications services over a three year period. As of March 31, 2019, CAD $28.7 million (or $21.5 million) remained on the commitment. Lessee

~~Outstanding~~The ~~Letters~~Company determines if an arrangement is a lease at inception and whether that lease meets the classification criteria of ~~Credit~~ a finance or operating lease in accordance with U.S. GAAP. The Company leases office space, warehouse space, network assets, switching and transport sites, points of presence, components and equipment under non-cancelable operating leases. For leases with an initial term of 12 months or less, the Company recognizes lease expense on a straight-line basis over the lease term but does not recognize a ROU asset or lease liability.

AsOperating lease assets have been included as right-of-use ~~March~~operating 31lease assets on the condensed consolidated balance sheets. The associated lease liabilities have been included as operating lease obligations, current ~~2019~~or operating lease liabilities, non-current on the ~~Company~~condensed ~~had~~consolidated $8balance sheets.5 ~~million~~ROU inassets ~~outstanding~~represent ~~letters~~the ofCompany’s ~~credit,~~right ~~which~~to ~~were~~use ~~primarily~~an ~~entered~~underlying ~~into~~asset infor ~~connection~~the ~~with~~lease ~~various~~term and lease ~~agreements~~liabilities represent the Company’s obligation to make lease payments arising from the lease. ~~Additionally,~~ROU asassets and lease liabilities are recognized at the commencement date based on the present value of ~~March~~lease ~~31,~~payments ~~2019,~~over ~~Zayo~~the ~~Canada,~~lease ~~Inc~~term., aVariable ~~subsidiary~~lease payments consist of non-lease services related to the lease. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As the Company’s leases as lessee typically do not provide an implicit rate, ~~had~~the ~~CAD~~Company ~~$3.5~~uses ~~million~~its ~~(or~~incremental ~~$2.6~~borrowing ~~million)~~rate based on the information available at the commencement date in ~~letters~~determining the present value of ~~credit~~lease payments. The Company assessed multiple variables when determining the incremental borrowing rate, ~~under~~such aas ~~CAD~~lease ~~$5.0~~term, ~~million~~payment ~~(or~~terms, $3collateral, economic conditions, and creditworthiness.7 ~~million)~~ROU ~~unsecured~~assets ~~credit~~also ~~agreement~~include any lease payments made and exclude lease incentives. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.

~~Contingencies~~Some of the Company’s lease arrangements contain lease components and non-lease components. The Company generally accounts for each component separately based on the estimated standalone price of each component. For colocation leases, the Company accounts for the lease and non-lease components as a single lease component.

InMany of the ~~normal~~Company’s ~~course~~lease ofagreements ~~business~~contain renewal options; however, the Company isdoes ~~party~~not torecognize ~~various~~ROU ~~outstanding~~assets ~~legal~~or ~~proceedings,~~lease ~~asserted~~liabilities ~~and~~for ~~unasserted~~renewal ~~claims,~~periods ~~and~~unless ~~carrier~~it ~~disputes.~~is Indetermined the ~~opinion~~Company is reasonably certain of ~~management,~~renewing the ~~ultimate~~lease ~~disposition~~at ofinception ~~these~~or ~~matters,~~when ~~both~~a ~~asserted~~triggering event occurs. The depreciable life of assets and ~~unasserted~~leasehold improvements are limited by the expected lease term, ~~will~~unless ~~not~~there ~~have~~is a ~~material~~transfer ~~adverse~~of ~~effect~~title onor ~~the~~purchase option reasonably certain to be exercised. The Company’s ~~financial~~lease ~~condition,~~agreements ~~results~~do ofnot ~~operations~~contain any material purchase option, material residual value guarantees or ~~cash~~material ~~flows~~restrictive covenants.

27 Lease expense consisted of the following:

~~Table of Contents~~

ZAYO GROUP, LLC AND SUBSIDIARIES


	Three Months Ended September 30, 2019
		(in millions)
Operating and short-term lease cost	$	57.9
Finance lease cost:
Amortization of right-of-use assets		3.5
Interest on lease liability		2.9
Total finance lease cost		6.4
Total lease cost	$	64.3

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~(12) REVENUE AND CONTRACT COSTS~~ 22

~~The~~Table ~~Company earns revenues from contracts with customers, primarily through the provision~~ of telecommunications and other related offerings. Revenues from leasing arrangements, such as those from dark fiber contracts and colocation facility rental agreements, are not accounted for under ASC 606. Other revenues are accounted for under ASC 606, which the Company adopted on July 1, 2018, using the full retrospective transition method. Contents

~~The~~Supplemental ~~Company~~unaudited ~~recognizes~~condensed ~~revenues~~consolidated ~~derived~~balance ~~from~~sheet ~~leasing~~information ~~access to the Company’s fiber optic telecommunications infrastructure~~ and ~~colocation~~other ~~offerings~~information ~~when~~related the offering has been provided and there is persuasive evidence of an arrangement, the fee is fixed or determinable, customer acceptance has been obtained with relevant contract terms, and collection of the receivable is reasonably assured. Taxes collected from customers and remitted to aleases ~~governmental~~(in ~~authority~~millions ~~are~~unless ~~reported~~otherwise ~~on a net basis and are excluded from revenue.~~ stated):

Most revenue is billed in advance on a fixed-rate basis and the remainder is billed in arrears on a transactional basis determined by customer usage. The Company often bills customers for upfront charges, which are non-refundable. These charges relate to activation fees, installation charges or prepayments for future access or offerings and are influenced by various business factors including how the Company and customer agree to structure the payment terms. These upfront charges are assessed to determine if they represent separate performance obligations or to determine if they provide the customer with a material right (such as discounted pricing on renewals or future orders). A majority of the Company’s upfront payments from customers do not relate to a separate performance obligation, do not provide the customer with a material right and are recognized to revenue ratably over the underlying contract term. Upfront payments that give the customer a right to renew a product offering at a discounted rate are amortized over the period the Company expects to provide the underlying offering.

The Company typically records revenues from leases of dark fiber, including indefeasible rights-of-use (“IRU”) agreements, over the term that the customer is given exclusive access to the assets. Dark fiber IRU agreements generally require the customer to make a down payment upon the execution of the agreement with monthly IRU fees paid over the contract term. However, in some cases, the Company receives up to the entire lease payment at the inception of the lease and recognizes the revenue ratably over the lease term. Revenue related to professional services to provide network management and technical support is recognized as services are provided.


Leases	Classification on the Balance Sheet	As of September 30, 2019
		(in millions)
Assets
Operating lease assets	Right-of-use operating lease assets	$	499.2
Finance lease assets	Property, plant and equipment, net of accumulated depreciation		153.8
Total leased assets			653.0

Liabilities
Current
Operating	Operating lease obligations, current	$	127.2
Finance	Finance lease obligation, current		9.5
Noncurrent
Operating	Operating lease liabilities, non-current		387.4
Finance	Finance lease obligations, non-current		176.0
Total lease liabilities		$	700.1

Weighted-average remaining lease term (years)
Operating leases			7.1
Finance leases			11.9
Weighted-average discount rate
Operating leases			3.95%
Finance leases			5.78%

In determining the appropriate amount of revenue and related reserves to reflect in its consolidated financial statements, management evaluates payment history, credit ratings, customer financial performance, and historical or potential billing disputes and related estimates are based on these factors and assumptions.

~~Nature~~Supplemental ofunaudited ~~the~~condensed ~~Company’s~~consolidated ~~Products~~cash ~~and~~flow ~~Offerings~~ statement information related to leases:

The Company operates and manages the business in six reportable segments. Revenue is disaggregated by products and offerings, which the Company views as the relevant categorization of revenues for the Company’s businesses. See Note 14 – Segment Reporting, for additional information on the nature of the Company’s products and offerings by segment.


	Three Months Ended September 30, 2019
		(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	37.2
Operating cash flows from finance leases		2.9
Finance cash flows from finance leases		2.1
Total lease cost	$	42.2

~~The Company’s Fiber Solutions and zColo segments have contract terms that are accounted for as leases and are further described below.~~

~~Fiber~~As ~~Solutions~~of ~~arrangements~~September ~~are~~30, ~~generally fixed rate contracts and can be payable upfront~~2019, onmaturities ~~a monthly recurring basis or a combination~~ of ~~both.~~lease ~~Monthly~~liabilities ~~recurring~~were ~~payment structures in this segment generally include annual inflationary pricing escalators. A majority of the revenue earned from the Fiber Solutions segment is not accounted for under ASC 606~~ as the contract terms are accounted for as lease arrangements. The Company recognizes revenue associated with its dark fiber leases on a straight-line basis from the customer acceptance date through the lease term. follows:

Table of Contents


	Operating Leases		Finance Leases
Year Ended June 30,		(in millions)
2020 (remaining nine months)	$	95.5	$	15.4
2021		111.7		20.1
2022		84.2		20.3
2023		67.2		20.1
2024		53.8		19.3
Thereafter		193.1		180.3
Total lease payments	$	605.5	$	275.5
Less: interest		(90.9)		(90.0)
Total	$	514.6	$	185.5
Less: current portion		(127.2)		(9.5)
Long-term portion	$	387.4	$	176.0

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ 23

~~The~~Table ~~Fiber Solutions segment may provide telecommunications construction solutions or perform variable non-routine maintenance activities that are billable to its customers. These types~~ of solutions are accounted for under ASC 606 and are recognized as the service is performed. Revenue recognized from these non-lease arrangements was $15.1 million and $29.7 million during the three and nine months ended March 31, 2019, respectively, and $6.7 million and $16.9 million during the three and nine months ended March 31, 2018, respectively. Contents

~~The~~As ~~Company’s~~of ~~contract~~September terms for the zColo segment includes terms that may be fixed or variable. The Company’s zColo revenue contracts generally include multiple performance obligations including space and infrastructure30, ~~which is considered a lease component~~2019, ~~and power and remote hand component, which are considered to be separate components of~~ the ~~zColo revenue arrangement. The transaction price in contracts that include multiple performance obligations is allocated to each performance obligation based on the~~ Company’s ~~standalone~~had ~~selling~~no ~~price~~material ~~for~~operating ~~each~~or ~~component~~finance ~~when~~leases ~~such~~that ~~offerings~~had ~~are sold separately. In instances where the Company does~~ not ~~sell~~yet ~~the product or offering separately, the Company estimates the standalone selling prices based on observable inputs as well as various market conditions~~commenced. ~~The Company estimates the standalone selling price to be the price of the offerings when sold on a standalone basis without any promotional discounts.~~

~~The~~Future ~~Company~~contractual ~~recognizes~~payments ~~revenue~~under ~~on space and infrastructure leases on a straight-line basis over~~ the ~~customer lease term. The Company’s customer leases often include customary renewal~~ terms. ~~However,~~of the Company ~~does not include any extension options in a customer~~’s ~~lease~~finance ~~term for~~ lease ~~classification~~obligations ~~purposes~~as ~~or recognizing rental revenue unless it is reasonably certain that the customer will exercise the extension renewal option. The excess~~ of ~~zColo~~June ~~lease~~30, ~~revenue~~2019 ~~recognized~~were inas ~~excess of lease payments received is recorded within other assets on the Company’s condensed consolidated balance sheets.~~ follows:

Customer power arrangements are coterminous with the respective customer lease and may be billed at fixed or variable rates. The Company recognizes revenue on its fixed rate power contracts as the arrangements are rendered, as the customer simultaneously receives and consumes the benefit of the arrangements provided. Variable contracts are invoiced based on usage and are billed in arrears and recognized as the usage occurs. Revenue is recognized on remote hand services as the services are provided. Revenue recognized by the zColo segment from these non-lease arrangements was $13.7 million and $42.1 million during the three and nine months ended March 31, 2019, respectively, and was $14.3 million and $42.9 million during the three and nine months ended March 31, 2018, respectively.


Year Ended June 30,		(in millions)
2020	$	20.1
2021		20.0
2022		20.3
2023		19.9
2024		19.5
Thereafter		171.0
Total minimum lease payments		270.8
Less amounts representing interest		(88.6)
Less current portion		(10.0)
Finance lease obligations, non-current	$	172.2

~~Contracts in the Company’s zColo segment do not include significant financing components.~~

~~The~~Minimum ~~Company’s~~contractual ~~contract~~lease ~~terms~~payments ~~for~~due ~~Transport,~~under ~~Enterprise~~the ~~Networks, Allstream and Other segments include terms that may be fixed or variable. The~~ Company’s ~~recognizes~~long-term ~~revenue~~operating onleases ~~its fixed rate contracts~~ as ~~the~~of ~~product~~June ~~offerings are rendered~~30, as2019 ~~the customer simultaneously receives and consumes the benefit of the products provided. Variable contracts~~ are ~~invoiced based on usage and are billed in arrears and recognized~~ as the usage occurs. These contracts do not include significant financing components and generally include a single performance obligation. The transaction price in contracts that include multiple performance obligations is allocated to each performance obligation based on the Company’s standalone selling price for each product offering. The Company estimates the standalone selling price to be the price of the offering when sold on a standalone basis without any promotional discounts. follows:

The Company may provide performance-based credits associated with the solution it offers, which are accounted for as variable consideration when estimating the transaction price. Credits are estimated at contract inception and are updated at the end of each reporting period as additional information becomes available. The assessment of this variable consideration involves judgment and impacts the Company’s determination of transaction price and related disclosures.


Year Ended June 30,	(in millions)
2020	$	128.1
2021		107.0
2022		83.7
2023		68.0
2024		55.7
Thereafter		215.8
	$	658.3

~~Remaining Performance Obligation Associated with Non-Lease Arrangements~~

ALeases majority of the Company’s revenue is provided over a contract term. When allocating the total contract transaction price to identified performance obligations, a portion of the total transaction price relates to performance obligations that are yet to be satisfied or are partially satisfied as ~~of the end of the reporting period.~~ Lessor

InAs ~~determining~~of ~~the~~September ~~transaction~~30, ~~price allocated to remaining performance obligations~~2019, ~~the~~maturities ~~Company~~of ~~does not include~~ non-~~recurring~~cancellable ~~charges~~leases ~~and~~were ~~estimates~~as ~~for usage.~~ follows:


Year Ended June 30,	(in millions)
2020 (remaining nine months)	$	719.3
2021		728.7
2022		598.6
2023		496.4
2024		432.5
Thereafter		399.3
Total lease payments	$	3,374.8

~~Table of Contents~~

~~ZAYO~~The ~~GROUP,~~Company ~~LLC~~leases ~~AND~~dark ~~SUBSIDIARIES~~ fiber and circuits (within the Zayo Networks segment) and zColo segments have contract terms that are accounted for as operating leases and are further described in Note 15 – Segment Reporting. Lease income is included in operating revenue in the condensed consolidated statements of operations. The Company’s lease revenue contains both minimum lease payments as well as variable lease payments. See Note 12 – Revenue and Contract Costs for further details on the Company’s disaggregated revenue streams and associated accounting treatment.

~~NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ 24

~~Remaining~~Table ~~performance~~of ~~obligations associated with the Company’s contracts reflect recurring charges billed, adjusted to reflect estimates for sales incentives and revenue adjustments.~~ Contents

~~The~~(14) ~~table below reflects an estimate of the remaining transaction price of fixed fee, non~~RELATED-~~lease~~PARTY ~~revenue~~TRANSACTIONS ~~arrangements to be recognized in the future periods presented. The table below does not include estimated amounts to be recognized in future periods associated with variable usage-based consideration.~~

	Three Months Ending		Year ended June 30,
	June 30,2019		2020		2021		2022		2023		Thereafter		Total
	(in millions)
Reportable Segment
Fiber Solutions	$	1.7	$	10.0	$	5.0	$	1.5	$	—	$	—	$	18.2
Transport		129.3		320.3		156.5		56.9		22.8		24.7		710.5
Enterprise Networks		71.4		178.2		82.9		28.6		7.8		1.9		370.8
zColo		10.5		27.7		14.6		7.7		4.0		5.6		70.1
Allstream		59.6		74.2		18.9		4.2		1.2		0.3		158.4
Total	$	272.5	$	610.4	$	277.9	$	98.9	$	35.8	$	32.5	$	1,328.0

Dan Caruso, the Company’s Chief Executive Officer and Chairman of the Board, is a party to an aircraft charter (or membership) agreement through his affiliate, Bear Equity LLC, for business and personal travel. Under the terms of the charter agreement, all fees for the use of the aircraft are effectively variable in nature. For his business travel on behalf of the Company, Mr. Caruso is reimbursed for his use of the aircraft subject to an annual maximum reimbursement threshold approved by the Company's Nominating and Governance Committee. In each of the three months ended September 30, 2019 and 2018, the Company reimbursed Mr. Caruso $0.1 million for his business use of the aircraft.

~~Contract~~(15) ~~Assets~~SEGMENT ~~and~~REPORTING ~~Liabilities~~

The ~~timing~~Company ofuses ~~revenue recognition may differ from~~ the ~~time~~management ofapproach ~~billing~~ to determine the ~~Company’s~~segment ~~customers.~~financial ~~Customer~~information ~~receivables~~that ~~represent~~should anbe ~~unconditional~~disaggregated ~~right~~and topresented ~~consideration~~separately ~~net~~in ~~of an estimated allowance for doubtful accounts. Contract balances represent amounts from an arrangement when either~~ the Company's ~~has~~notes ~~performed, by transferring a solution~~ to ~~the~~its ~~customer~~condensed inconsolidated ~~advance~~financial ofstatements. ~~receiving~~The ~~all~~management orapproach ~~partial~~is ~~consideration~~based ~~for~~on ~~such goods and offerings from~~ the ~~customer,~~manner orby ~~the~~which ~~customer~~management has ~~made~~organized ~~payment~~the tosegments within the Company infor ~~advance~~making ofoperating ~~obtaining~~decisions, ~~control~~allocating ofresources, ~~the goods~~ and~~/or~~ ~~offerings~~assessing ~~promised to the customer in the contract~~performance.

~~Contract~~As ~~liabilities~~the ~~arise~~Company ~~when~~has ~~the~~increased ~~Company~~in ~~bills~~scope and scale, it has developed its ~~customers~~management and ~~receives~~reporting ~~consideration~~structure into ~~advance~~support this growth. The Company’s bandwidth infrastructure, colocation and connectivity offerings are comprised of ~~providing~~various related product groups generally defined around the ~~goods~~type orof ~~offerings~~offering ~~promised~~to inwhich the ~~contract.~~customer ~~Contract~~is ~~liabilities~~licensing ~~are~~access, ~~recognized~~referred to as SPGs. Each SPG is responsible for the revenue, ~~when~~costs ~~product~~and ~~offerings~~associated ~~are~~capital ~~provided~~expenditures toof ~~the~~its ~~customer~~respective solutions. ~~Contract~~ ~~liabilities~~The ~~are~~SPGs ~~presented~~enable inlicensing ~~the~~and ~~Company’s~~sales, ~~condensed~~make ~~consolidated~~pricing ~~balance~~and ~~sheet~~product asdecisions, ~~deferred~~engineer ~~revenue~~networks and deliver solutions to customers, and support customers for specific telecom and internet infrastructure requirements.

~~The~~During ~~following~~the ~~table~~fourth ~~presents~~quarter ~~information~~of ~~about~~Fiscal 2019, with the ~~Company’s~~continued ~~customer~~increase ~~receivables~~in our scope and scale, ~~contract~~our ~~assets~~chief operating decision maker ("CODM"), who is our Chief Executive Officer, implemented certain organizational changes to the management and ~~contract~~operation ~~liabilities~~of asthe business that directly impact how the CODM makes resource allocation decisions and manages the Company. The changes in structure had the impact of ~~March~~combining 31our legacy Fiber Solutions, ~~2019~~Transport and ~~June~~Enterprise 30segments into a single new segment, ~~2018~~Zayo Networks and re-aligning our Cloud and Cybersecurity SPG from our legacy Enterprise segment to our zColo segment. These changes to our existing reportable segments have been recast for all prior periods. The Company’s segments are further described below:

	March 31, 2019		June 30, 2018
	(in millions)
Customer receivable, net(1)	$	168.2	$	164.0
Contract liabilities(1)	$	56.1	$	68.9

Zayo Networks. Our Zayo Networks segment provides access to bandwidth infrastructure. This includes our Fiber, Layer 2/3 and Transport solutions. Within the Fiber business, Zayo provides access to mobile infrastructure (fiber-to-the-tower and small cell). Our mobile infrastructure solutions permit direct fiber connections to cell towers, small cells, hub sites and mobile switching centers. Fiber solutions customers include carriers and other communication service providers, internet service providers, wireless service providers, major media and content companies, large enterprises and other companies that have the expertise to run their own fiber optic networks or require interconnected technical space. The contract terms for fiber solutions customers tend to range from three to twenty or more years. Our Layer 2/3 line of business provides connectivity and telecommunications solutions to medium and large enterprises. Our offerings within Layer 2/3 include Ethernet, internet offerings, Wide Area Networking products and CloudLink. Solutions range from point-to-point data connections to multi-site managed networks to international outsourced IT infrastructure environments. The contract terms for Layer 2/3 solutions tend to range from one to five years. Our Transport line of business provide access to lit communications bandwidth infrastructure using customer-accessed optronics to light the fiber and, and our customers pay for access based on the amount and type of bandwidth they require. We target customers who require a significant amount of bandwidth across their networks. Transport customers include carriers, content providers, financial services companies, healthcare, government entities, education institutions and other medium and large enterprises. The contract terms in this segment tend to range from two to five years.

Zayo Colocation (1“zColo”). The ~~Amounts~~zColo dosegment ~~not~~provides ~~include~~data ~~balances~~center ~~associated~~and ~~with~~cloud ~~lease~~infrastructure ~~revenue~~solutions ~~from~~to ~~the~~a ~~Company’s~~broad ~~Fiber~~range ~~Solutions~~of enterprise, carrier, cloud and ~~zColo~~content ~~segments~~customers. Our offerings within this segment include the provision of colocation space, power and interconnection offerings in North America and Western

During the three and nine months ended March 31, 2019, the Company recognized $5.5 million and $16.4 million, respectively, of revenue that was included in contract liabilities as of June 30, 2018. During the three and nine months ended March 31, 2018, the Company recognized $5.6 million and $16.9 million, respectively, of revenue that was included in contract liabilities as of June 30, 2017. 25

30 Table of Contents

~~Table~~Europe. Solutions range in size from single cabinet solutions to 1MW+ data center infrastructure environments. Our data centers also support a large component of ~~Contents~~ networking components for the purpose of aggregating and accommodating customers’ data, voice, internet and video traffic. The contract terms in this segment tend to range from two to five years. Our Cloud and Cybersecurity SPG is included in the zColo segment. The Cloud and Cybersecurity SPG combines private cloud, public cloud and managed offerings in order to provide its customers secure infrastructure as a service (IaaS), which enables on-demand scaling and virtual computing in hybrid environments.

~~ZAYO~~Allstream. The ~~GROUP~~Allstream segment provides Cloud VoIP and Data Solutions. This includes a full range of local voice offerings allowing business customers to complete telephone calls in their local exchange, ~~LLC~~as ~~AND~~well ~~SUBSIDIARIES~~ as make long distance, toll-free and related calls. Unified Communications is the integration of real-time communication services such as telephony (including Cloud-based IP telephony), instant messaging and video conferencing with non-real-time communication services, such as integrated voicemail and e-mail. Allstream also provides customers with comprehensive telecommunications services including Ethernet, and IP/MPLS VPN Solutions.

~~NOTES~~Other. The TOOther ~~THE~~segment ~~CONDENSED~~is ~~CONSOLIDATED~~primarily ~~FINANCIAL~~comprised ~~STATEMENTS~~of Zayo Professional Services (~~UNAUDITED~~“ZPS”) . ZPS provides network and technical resources to customers who wish to leverage the Company’s expertise in designing, acquiring and maintaining a network. The contract terms typically run for one year for a fixed recurring monthly fee in the case of network and on an hourly basis for technical resources (usage revenue). ZPS also generates revenue via telecommunication equipment sales.

~~Contract~~The ~~Costs~~ results of operations for each segment include an allocation of certain indirect costs and corporate related costs, including overhead and third party-financed debt. The allocation is based on a percentage that represents management’s estimate of the relative burden each segment bears of indirect and corporate costs. Management has evaluated the allocation methods utilized to allocate these costs and determined they are systematic, rational and consistently applied. Identifiable assets for each reportable segment are reconciled to total consolidated assets including unallocated corporate assets and intersegment eliminations. Unallocated corporate assets consist primarily of cash and deferred taxes.

~~The~~Segment ~~Company~~Adjusted recognizes an asset for incremental commission and bonus expenses paid to internal sales personnel and third party agents in conjunction with obtaining certain customer contracts. These costs are only deferred when the commissions are incremental and would not have been incurred absent the customer contract. Costs to obtain a contract are amortized and recorded ratably within selling, general and administrative expenses on the Company’s condensed consolidated statements of operations over the estimated contract term. EBITDA

~~The~~Segment ~~Company~~Adjusted ~~also~~EBITDA ~~defers~~is ~~costs incurred to fulfill contracts that relate directly to~~ the ~~contract,~~primary ~~are~~measure ~~expected to generate resources that will be~~ used toby ~~satisfy~~ the Company’s ~~performance~~CODM ~~obligation under the contract and are expected~~ to beevaluate ~~recovered~~segment ~~through~~operating ~~revenue generated under the contract. Contract fulfillment costs are expensed to cost of service as the Company satisfies its~~ performance ~~obligations~~. ~~These costs principally relate to direct costs associated with activating new customer solutions.~~

The Company ~~estimates~~defines ~~the~~Segment Adjusted EBITDA as earnings from operations before interest, income taxes, depreciation and amortization ~~period~~(“EBITDA”) ~~for~~adjusted ~~its~~to exclude acquisition or disposal-related transaction costs, ~~incurred~~losses on extinguishment of debt, stock-based compensation, unrealized foreign currency gains/(losses) on intercompany loans, gains/(losses) on business dispositions and non-cash income/(loss) on equity and cost method investments. The Company uses Segment Adjusted EBITDA to ~~obtain~~evaluate operating performance, and ~~fulfill~~this ~~customer~~financial ~~contracts~~measure atis aamong ~~portfolio~~the ~~level~~primary ~~due~~measures used by management for planning and forecasting of future periods. The Company believes the presentation of Segment Adjusted EBITDA is relevant and useful for investors because it allows investors to view results in a manner similar to the ~~similarities~~method ~~within~~used ~~its~~by ~~customer~~management ~~contract~~and ~~portfolios~~facilitates comparison of the Company’s results with the results of other companies that have different financing and capital structures.

~~Other~~Segment ~~costs~~Adjusted EBITDA results, ~~such~~along aswith ~~general~~other ~~costs~~quantitative orand ~~costs~~qualitative ~~related~~information, toare ~~past~~also ~~performance~~utilized ~~obligations,~~by ~~are~~the ~~expensed~~Company asand ~~incurred~~its Compensation Committee for purposes of determining bonus payouts to employees.

AsSegment ofAdjusted ~~March~~EBITDA ~~31,~~has ~~2019~~limitations ~~and~~as ~~June~~an ~~30,~~analytical ~~2018,~~tool ~~the Company had $6.0 million~~ and ~~$7.1~~should ~~million,~~not ~~respectively,~~be ofconsidered ~~short-term unamortized contract costs included~~ in ~~other~~isolation ~~current~~from, ~~assets~~or ~~and~~as ~~$4.2~~a ~~million~~substitute ~~and $5.6 million~~for, ~~respectively,~~analysis of ~~long term unamortized contract costs included in other assets on its condensed consolidated balance sheets. During~~ the ~~three and nine months ended March 31, 2019, the~~ Company’s ~~recorded~~results ~~$2.1~~from ~~million~~operations and ~~$6.0~~operating ~~million,~~cash ~~respectively,~~flows inas ~~selling,~~reported ~~general~~under ~~and administrative expenses associated with the amortization of deferred contract costs~~GAAP. ~~During~~For ~~the three and nine months ended March 31~~example, ~~2018,~~Segment ~~the~~Adjusted Company recorded $2.3 million and $6.6 million, respectively, in selling, general and administrative expenses associated with the amortization of deferred contract costs. The amortization period for these contract costs ranges from 12 to 51 months. EBITDA:

~~(13)~~●does ~~RELATED~~not ~~PARTY~~reflect ~~TRANSACTIONS~~capital expenditures, or future requirements for capital and major maintenance expenditures or contractual commitments;

In May 2016, Communication Infrastructure Investments, LLC sold Onvoy, LLC and its subsidiaries (“OVS”), a company that provided voice and managed offerings that the Company spun off during the year ended June 30, 2014, to an entity that had a material ownership interest in the Company during Fiscal 2018. As of June 30, 2018, the entity that owns Inteliquent, Inc., successor by merger to OVS (“Inteliquent”), no longer has an ownership interest in the Company and is no longer considered a related party. 26

~~The~~Table ~~following~~of ~~table represents the revenue and expense transactions the Company recorded with Inteliquent for the prior period:~~ Contents

	Three Months Ended March 31, 2018		Nine Months Ended March 31, 2018
	(in millions)		(in millions)
Revenues	$	1.9	$	5.6
Operating costs	$	0.8	$	2.0

●does not reflect changes in, or cash requirements for, working capital needs;

~~Dan~~●does ~~Caruso,~~not reflect the ~~Company’s~~significant ~~Chief~~interest ~~Executive~~expense, ~~Officer~~or ~~and Chairman of~~ the ~~Board,~~cash isrequirements anecessary ~~party~~ to anservice ~~aircraft charter (or membership) agreement through his affiliate, Bear Equity LLC, for business and personal travel. Under~~ the ~~terms~~interest ~~of the charter agreement~~payments, ~~all fees for the use of the aircraft are effectively variable in nature. For his business travel~~ on ~~behalf of~~ the Company~~, Mr. Caruso is reimbursed for his use of the aircraft subject to an annual maximum reimbursement threshold approved by the Company'~~’s ~~Nominating~~debt; and Governance Committee. During the three and nine months ended March 31, 2019, the Company reimbursed Mr. Caruso $0.3 million and $0.5 million, respectively, and during the three and nine months ended March 31, 2018, reimbursed $0.2 million and $0.5 million, respectively, for his business use of the aircraft.

31 ●does not reflect cash required to pay income taxes.

~~Table~~The Company’s computation of ~~Contents~~ Segment Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies because all companies do not calculate segment Adjusted EBITDA in the same manner.

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


	As of and for the Three Months Ended September 30, 2019
	Zayo Networks		zColo		Allstream		Other		Corp/ Eliminations		Total
	(in millions)
Revenue from external customers	$	483.2	$	63.7	$	86.6	$	5.1	$	—	$	638.6
Segment Adjusted EBITDA		277.5		26.6		9.3		1.4		—		314.8
Total assets		7,992.4		1,312.2		388.6		33.1		154.8		9,881.1
Capital expenditures		194.8		18.1		4.2		—		—		217.1

~~(14) SEGMENT REPORTING~~

The Company uses the management approach to determine the segment financial information that should be disaggregated and presented separately in the Company's notes to its condensed consolidated financial statements. The management approach is based on the manner by which management has organized the segments within the Company for making operating decisions, allocating resources, and assessing performance.


	For the Three Months Ended September 30, 2018
	Zayo Networks		zColo		Allstream		Other		Corp/ Eliminations		Total
	(in millions)
Revenue from external customers	$	461.6	$	69.3	$	105.0	$	5.2	$	—	$	641.1
Segment Adjusted EBITDA		266.2		31.3		20.8		1.1		—		319.4
Capital expenditures		149.2		28.7		4.6		—		—		182.5

As the Company has increased in scope and scale, it has developed its management and reporting structure to support this growth. The Company’s bandwidth infrastructure, colocation and connectivity offerings are comprised of various related product groups generally defined around the type of offering to which the customer is licensing access, referred to as SPGs. Each SPG is responsible for the revenue, costs and associated capital expenditures of its respective solutions. The SPGs enable licensing and sales, make pricing and product decisions, engineer networks and deliver solutions to customers, and support customers for specific telecom and Internet infrastructure requirements.

During Fiscal 2018, with the continued increase in its scope and scale, the Company’s chief operating decision maker ("CODM"), who is the Company’s Chief Executive Officer, implemented certain organizational changes to the management and operation of the business that directly impact how the CODM makes resource allocation decisions and manages the Company. The changes in structure had the impact of creating two new SPGs and re-aligning an existing SPG among the Company’s reportable segments. The changes in structure also resulted in changes in how the Company measures the relative burden each segment bears of indirect and corporate related costs.


	As of June 30, 2019
	Zayo Networks		zColo		Allstream		Other		Corp/ Eliminations		Total
	(in millions)
Total assets	$	7,677.4		1,152.3		376.9		35.1		92.1	$	9,333.8

Effective April 1, 2018 the Company’s Ethernet SPG, previously reported under the Enterprise Networks segment, is now reported under the Company’s Transport segment. Additionally, certain activities and operations of the legacy Waves, WAN, and Ethernet SPGs were combined to form a new SPG, CloudLink. These changes to the existing reportable segments (the “Realignment”) have been recast for all prior period financial and operating metrics presented in this Quarterly Report on Form 10-Q for comparability, such as;

Reconciliation ~~Certain~~from ~~activities~~Total ~~and~~Segment ~~operations~~Adjusted ofEBITDA ~~the legacy Waves, WAN, and Ethernet SPGs, after giving effect~~ to ~~the~~income ~~Realignment,~~from ~~are now reported in a new SPG, CloudLink, under the Enterprise Networks segment; and  The wholesale IP services and Sonet SPGs, and the remaining activities and~~ operations ofbefore ~~the~~taxes: ~~legacy Waves and Ethernet SPGs (the activities and operations not related to CloudLink), after giving effect to the Realignment, are now reported under the Transport segment.~~

In addition to the changes in structure, the Company also adjusted intercompany pricing methodologies to more closely align to third party pricing on the products and offerings which are exchanged between our SPGs. However, it was not practicable to retrospectively present the impact of this change for all historical periods presented.

The Company’s segments are further described below:


	Three Months Ended September 30,
	2019		2018
	(in millions)
Total Segment Adjusted EBITDA	$	314.8	$	319.4
Interest expense		(84.7)		(82.2)
Depreciation and amortization expense		(156.1)		(167.8)
Transaction costs		(2.0)		(0.7)
Stock-based compensation		(27.2)		(26.7)
Foreign currency loss on intercompany loans		(12.9)		(4.6)
Gain on business disposition		—		5.5
Non-cash loss on investments		—		(0.3)
Income from operations before income taxes	$	31.9	$	42.6

Fiber Solutions. The Fiber Solutions segment offers access to raw bandwidth infrastructure to customers that require control of their internal networks. These solutions include dark fiber, dedicated lit network sections and mobile infrastructure (fiber-to-the-tower and small cell). Dark fiber is a physically separate and secure, private platform for dedicated bandwidth. The Company leases dark fiber pairs (usually 2 to 12 total fibers) to customers, who “light” the fiber using their own optronics. The Company’s mobile infrastructure solutions permit direct fiber connections to cell towers, small cells, hub sites, and mobile switching centers. Fiber Solutions customers include carriers and other communication service providers, Internet service providers, wireless service providers, major media and content companies, large enterprises, and other companies that have the expertise to run their own fiber optic networks or require interconnected technical space. The contract terms in the Fiber Solutions segment tend to range from three to twenty years.

Transport. The Transport segment provides access to lit bandwidth infrastructure solutions over metro, regional, and long-haul fiber network sections. The segment uses customer-accessed optronics to light the fiber, and the Company’s customers pay for access based on the amount and type of bandwidth they require. The offerings within this segment include Wavelengths, Ethernet, SONET, and wholesale IP offerings. The Company targets customers who require a minimum of 10G of bandwidth across their networks. Transport customers include carriers, content providers, financial services companies, healthcare, government entities,

32 (16) CONDENSED CONSOLIDATING FINANCIAL INFORMATION

~~Table~~As discussed Note 5 – Long-Term Debt, as of ~~Contents~~ September 30, 2019, the Company has outstanding $1430.0 million 2023 Unsecured Notes, $900.0 million 2025 Unsecured Notes and $1,650.0 million of 2027 Unsecured Notes. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by all of the Company’s current and future domestic restricted subsidiaries. Zayo Capital does not have independent assets or

~~ZAYO GROUP, LLC AND SUBSIDIARIES~~ 27

~~NOTES~~Table TOof ~~THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~ Contents

~~education~~operations. ~~institutions~~The ~~and~~non-guarantor ~~other~~subsidiaries ~~medium~~consist ~~and~~of ~~large~~the ~~enterprises.~~foreign ~~The~~subsidiaries ~~contract~~that ~~terms~~were acquired in ~~this~~conjunction ~~segment~~with ~~tend~~the toCompany's ~~range from two to five years~~acquisitions.

~~Enterprise Networks.~~ The ~~Enterprise~~accompanying ~~Networks~~condensed ~~segment~~consolidating ~~provides~~financial ~~connectivity~~information has been prepared and ~~telecommunications~~is ~~solutions~~presented to ~~medium~~display ~~and~~the ~~large~~components ~~enterprises.~~of ~~The~~the ~~offerings~~Company’s ~~within~~balance ~~this~~sheets, ~~segment~~statements ~~include~~of ~~Internet,~~operations ~~wide~~and ~~area~~statements ~~networking~~of ~~products,~~cash ~~managed~~flows ~~products~~in ~~and cloud~~a ~~based~~manner ~~computing~~that ~~and~~allows ~~storage~~an ~~offerings. Solutions~~existing ~~range from point-to-point~~or ~~data~~future ~~connections~~holder toof ~~multi-site~~the ~~managed~~Company’s ~~networks~~Notes to ~~international~~review ~~outsourced~~and ITanalyze ~~infrastructure~~the ~~environments. The~~current ~~contract terms~~financial inposition ~~the~~and ~~Enterprise~~recent ~~Networks~~operating ~~segment~~results ~~tend~~of tothe ~~range~~legal ~~from~~subsidiaries ~~one~~that toguarantee ~~ten~~the ~~years~~Company’s debt obligations.

~~Zayo Colocation (“zColo”).~~ The ~~Colocation~~operating ~~segment~~activities ~~provides~~of ~~data~~the ~~center~~separate ~~infrastructure~~legal ~~solutions~~entities toincluded ain ~~broad~~the ~~range~~Company’s ofcondensed ~~enterprise,~~consolidated ~~carrier,~~financial ~~cloud,~~statements ~~and~~are ~~content customers~~interdependent. The ~~offerings~~accompanying ~~within~~condensed ~~this~~consolidating ~~segment~~financial ~~include~~information presents the ~~provision~~results of ~~colocation space~~operations, ~~power~~financial position and ~~interconnection~~cash ~~offerings~~flows inof ~~North~~each ~~America~~legal ~~and Western Europe~~entity. ~~Solutions~~ ~~range~~Zayo inGroup ~~size~~and ~~from~~its ~~single~~guarantors ~~cabinet~~provide ~~solutions~~services to ~~1MW+~~each ~~data~~other ~~center infrastructure~~during ~~environments~~the normal course of business. ~~The~~These ~~Company’s~~transactions ~~data~~are ~~centers~~eliminated ~~also~~in ~~support~~the aconsolidated ~~large~~results ~~component~~of operations of ~~networking~~the ~~components~~Company. ~~for~~Activity ~~the~~related ~~purpose~~to ofincome ~~aggregating~~taxes ~~and~~is ~~accommodating~~included ~~customers’~~at ~~data,~~the ~~voice~~issuer, ~~Internet~~or Zayo Group level, and ~~video~~the ~~traffic.~~Company's ~~The~~non-guarantor ~~contract~~subsidiaries ~~terms~~and inis ~~this~~not ~~segment~~allocated ~~tend~~ to ~~range~~the ~~from~~Company's ~~two~~guarantor tosubsidiaries ~~five~~in ~~years~~the condensed consolidated financial information presented below.

Allstream. The Allstream segment provides Cloud VoIP and Data Solutions. This includes a full range of local voice offerings allowing business customers to complete telephone calls in their local exchange, as well as make long distance, toll-free and related calls. Unified Communications is the integration of real-time communication services such as telephony (including Cloud-based IP telephony), instant messaging and video conferencing with non-real-time communication services, such as integrated voicemail and e-mail. Allstream also provides customers with comprehensive telecommunications services, including Ethernet, and IP/MPLS VPN Solutions.

Other. The Other segment is primarily comprised of Zayo Professional Services (“ZPS”). ZPS provides network and technical resources to customers who wish to leverage the Company’s expertise in designing, acquiring and maintaining network sections. The contract terms typically run for one year for a fixed recurring monthly fee in the case of network and on an hourly basis for technical resources (usage revenue). ZPS also generates revenue via telecommunication equipment sales. 28

~~The~~Table ~~results~~ of operations for each segment include an allocation of certain indirect costs and corporate related costs, including overhead and third party-financed debt. The allocation is based on a percentage that represents management’s estimate of the relative burden each segment bears of indirect and corporate costs. Management has evaluated the allocation methods utilized to allocate these costs and determined they are systematic, rational and consistently applied. Identifiable assets for each reportable segment are reconciled to total consolidated assets including unallocated corporate assets and intersegment eliminations. Corporate assets consist primarily of cash and deferred taxes. Contents

InCondensed ~~connection~~Consolidating ~~with~~Balance ~~the~~Sheets Company’s acquisition of Electric Lightwave Parent, Inc., the Company acquired certain customer contracts that included the bundled provision of VoIP and data connectivity solutions. This bundled package was historically managed and reported as revenue by the Enterprise Networks segment. Subsequent to June 30, 2018, operational changes were made which resulted in the management of these bundled contracts to be provided by the Allstream segment and as such a portion of the revenue associated with these contracts are now reported as revenue of the Allstream segment. The Enterprise Networks segment continues to own the infrastructure and equipment that supports these contracts and as such the segments entered into an intercompany agreement for the continued use of these assets, which will result in the recognition of intercompany revenue at the Enterprise Networks segment. Management determined it was impracticable to retrospectively present the impacts of this change to historical periods. This change increased Allstream’s Segment Adjusted EBITDA for the three and nine months ended March 31, 2019 by $0.7 million and $2.1 million, respectively, and decreased Enterprise’s Segment Adjusted EBITDA for the three and nine months ended March 31, 2019 by $0.7 million and $2.1 million, respectively. (Unaudited)

WeSeptember continue to make certain operational changes that we expect to change the way the CODM makes resource allocation decisions and manages the Company (originally anticipated and previously disclosed to be effective January 1, 2019). As such, we expect for the quarter ending June 30, 2019~~, the Company will have four reportable segments: Zayo Networks, zColo, Allstream and Other. The Company will recast its prior period financial and operating metrics~~

Table of Contents


	Zayo Group,
	LLC		Guarantor		Non-Guarantor
	(Issuer)		Subsidiaries		Subsidiaries		Eliminations		Total
	(in millions)
Assets
Current assets
Cash and cash equivalents	$	145.1	$	7.4	$	101.4	$	—	$	253.9
Trade receivables, net of allowance		92.5		1.4		58.0		—		151.9
Prepaid expenses		55.1		0.2		12.8		—		68.1
Other current assets		129.8		—		(72.8)		—		57.0
Total current assets		422.5		9.0		99.4		—		530.9
Property and equipment, net		5,055.9		—		795.9		—		5,851.8
Intangible assets, net		963.3		6.9		122.6		—		1,092.8
Goodwill		1,520.4		14.6		166.1		—		1,701.1
Right-of-use operating lease assets		328.7		1.9		168.6		—		499.2
Deferred income taxes, net		—		—		21.3		—		21.3
Other assets		149.3		—		34.7		—		184.0
Investment in subsidiary		635.2		—		—		(635.2)		—
Total assets	$	9,075.3	$	32.4	$	1,408.6	$	(635.2)	$	9,881.1
Liabilities and member's equity
Current liabilities
Accounts payable	$	15.7	$	0.1	$	16.1	$	—	$	31.9
Accrued liabilities		260.3		0.8		62.5		—		323.6
Accrued interest		84.9		—		—		—		84.9
Current portion of long-term debt		130.0		—		—		—		130.0
Operating lease obligations, current		95.7		1.8		29.7		—		127.2
Finance lease obligations, current		8.3		—		1.2		—		9.5
Deferred revenue, current		135.0		0.1		37.8		—		172.9
Total current liabilities		729.9		2.8		147.3		—		880.0
Long-term debt, non-current		5,318.4		—		377.7		—		5,696.1
Operating lease liabilities, non-current		252.1		—		135.3		—		387.4
Finance lease obligation, non-current		167.5		—		8.5		—		176.0
Deferred revenue, non-current		1,104.0		—		101.4		—		1,205.4
Deferred income taxes, net		144.1		—		3.4		—		147.5
Other long-term liabilities		0.7		—		29.4		—		30.1
Total liabilities		7,716.7		2.8		803.0		—		8,522.5

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