8-K 1 d349934d8k.htm FORM 8-K Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): May 7, 2012

 

 

ZAYO GROUP, LLC

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   333-169979   26-201259

(State or Other Jurisdiction of

Incorporation

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

400 Centennial Parkway, Suite 200, Louisville, CO 80027

(Address of Principal Executive Offices)

(303) 381-4683

(Registrant’s Telephone Number, Including Area Code)

 

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 4.02(a) – Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

On May 7, 2012, the Audit Committee of the Board of Directors of Zayo Group, LLC (the “Company”) and management of the Company concluded that as a result of the identification of an error in accounting for a business combination that occurred during the fiscal year ended June 30, 2010, the Company’s annual financial statements as of and for the fiscal years ended June 30, 2011 (“fiscal 2011”) and 2010 (“fiscal 2010”), the Company’s interim financial statements for each of the periods in fiscal 2011, and the interim financial statements as of and for the periods ended September 30, 2011 and December 31, 2011 should be restated and accordingly can no longer be relied upon. The Company intends to file an amended Annual Report on Form 10-K/A for the fiscal year ended June 30, 2011 and amended Quarterly Reports on Form 10-Q/A for the quarters ended September 30, 2011 and December 31, 2011. We have discussed these matters with Grant Thornton LLP, the independent registered public accounting firm that conducted the audits of the financial statements as of and for the years ended June 30, 2011 and 2010.

The restatement is a result of an error in accounting for the Company’s September 9, 2009 acquisition of FiberNet Telecom Group Inc. (“FiberNet”). The error relates to the calculation of the deferred tax assets recognized in the acquisition. The error arose from a mathematical error on the stub period tax return of FiberNet which covered the period January 1, 2009 through September 9, 2009. The mathematical error in the stub period tax return resulted in an overstatement of the tax deduction associated with the exercise of warrants that had previously been issued to a landlord of FiberNet. In purchase accounting, management utilized the overstated net operating loss carryforward included on the stub period return when determining the value to ascribe to the deferred tax assets and the resulting gain on bargain purchase.

The Company intends to restate the financial statements identified above in order to correct the error. The misstatement does not impact operating income or cash flows from operating, investing or financing activities for any of the periods impacted by the misstatement.


The correction of the amount of the deferred tax asset recorded in the acquisition of FiberNet will have the following impact on the fiscal 2010 financial statements:

ZAYO GROUP, LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

(Unaudited)

     As of June 30, 2010  
     Previously
Reported
    Correction 1     Restated  

Assets

      

Current assets

      

Cash and cash equivalents

   $ 87,864        —        $ 87,864   

Trade receivables, net of allowance of $799 and $498 as of June 30, 2011 and 2010, respectively

     11,551        —          11,551   

Due from related-parties

     626        —          626   

Prepaid expenses

     4,810        —          4,810   

Deferred income taxes

     4,060        —          4,060   

Other assets, current

     334        —          334   

Assets of discontinued operations, current

     3,061        —          3,061   
  

 

 

   

 

 

   

 

 

 

Total current assets

     112,306          112,306   

Property and equipment, net of accumulated depreciation of $101,941 and $54,077 as of June 30, 2011 and 2010, respectively

     297,889        —          297,889   

Intangible assets, net of accumulated amortization of $37,980 and $25,421 as of June 30, 2011 and 2010, respectively

     56,714        —          56,714   

Goodwill

     67,854        1,160        69,014   

Deferred income taxes

     8,508        (8,508     —     

Debt issuance costs, net

     9,560        —          9,560   

Other assets, non-current

     4,866        —          4,866   

Assets of discontinued operations, non-current

     8,143        —          8,143   
  

 

 

   

 

 

   

 

 

 

Total assets

   $  565,840        (7,348   $  558,492   
  

 

 

   

 

 

   

 

 

 

Liabilities and member’s equity

      

Current liabilities

      

Accounts payable

   $ 10,015        —        $ 10,015   

Accrued liabilities

     17,152        —          17,152   

Accrued interest

     7,794        —          7,794   

Capital lease obligations, current

     1,673        —          1,673   

Deferred revenue, current

     8,091        —          8,091   

Liabilities of discontinued operations, current

     1,740        —          1,740   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     46,465        —          46,465   

Capital lease obligations, non-current

     11,033        —          11,033   

Long-term debt

     247,080        —          247,080   

Deferred revenue, non-current

     22,605        —          22,605   

Stock-based compensation liability

     21,556        —          21,556   

Deferred tax liability

     —          1,733        1,733   

Other long term liabilities

     2,397        —          2,397   

Liabilities of discontinued operations, non-current

     1,568        —          1,568   
  

 

 

   

 

 

   

 

 

 

Total liabilities

     352,704        1,733        354,437   

Member’s equity

      

Member’s interest

     217,129        —          217,129   

Accumulated deficit

     (3,993     (9,081     (13,074
  

 

 

   

 

 

   

 

 

 

Total member’s equity

     213,136        (9,081     204,055   
  

 

 

   

 

 

   

 

 

 

Total liabilities and member’s equity

   $ 565,840        (7,348 )    $ 558,492   
  

 

 

   

 

 

   

 

 

 

 

1 

- The adjustments to the balance sheet in fiscal 2010 will flow through each of the quarters and fiscal years subject to restatement.


CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

(Unaudited)

 

     Year Ended June 30, 2010  
     Previously
Reported
    Correction     Restated  

Revenue

   $  199,330      $  —        $  199,330   

Operating costs and expenses

      

Operating costs, excluding depreciation and amortization

     62,688        —          62,688   

Selling, general and administrative expenses

     65,911        —          65,911   

Stock-based compensation

     18,168        —          18,168   

Depreciation and amortization

     38,738        —          38,738   
  

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     185,505        —          185,505   
  

 

 

   

 

 

   

 

 

 

Operating income

     13,825        —          13,825   

Other income/(expense)

      

Interest expense

     (18,692     —          (18,692

Other income, net

     1,526        —          1,526   

Gain on bargain purchase

     9,081        (9,081     —     

Loss on extinguishment of debt

     (5,881     —          (5,881
  

 

 

   

 

 

   

 

 

 

Total other expense, net

     (13,966     (9,081     (23,047 ) 
  

 

 

   

 

 

   

 

 

 

Loss from continuing operations before provision for income taxes

     (141 )       (9,081     (9,222

Provision for income taxes

     4,823        —          4,823   
  

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (4,964 )       (9,081     (14,045

Earnings from discontinued operations, net of income taxes

     5,425        —          5,425   
  

 

 

   

 

 

   

 

 

 

Net earnings/(loss)

   $ 461      $  (9,081)      $ (8,620)   
  

 

 

   

 

 

   

 

 

 

Management has evaluated the effect of the restatement on the Company’s prior conclusions on the adequacy of its internal control over financial reporting and disclosure controls and procedures as of the end of each of the applicable restatement periods. Based on this evaluation, management concluded the Company’s controls to evaluate the fair value of acquired assets and liabilities and to record the related deferred income taxes associated with business combinations were not designed in a manner that ensured all relevant factors were considered. The Company will amend its disclosures pertaining to its evaluation of such controls and procedures in connection with filing the amendments to its Form 10-K for the fiscal year ended June 30, 2011 and Forms 10-Q for the quarters ended September 30, 2011 and December 31, 2011.

The foregoing reflects the Company’s views about the accounting adjustments, its financial condition, performance and other matters that constitute “forward-looking” statements, as such term is defined by the federal securities laws. You can find many of these statements by looking for words such as “may,” “will,” “expect,” “anticipate,” believe,” estimate,” “should,” “continue,” “predict,” “preliminary” and similar words used herein. These forward-looking statements are subject to the safe harbor protection provided by federal securities laws. These forward-looking statements are subject to numerous risks, uncertainties and assumptions. These risks and uncertainties include, but are not limited to, the results and effect of the Company’s review of its accounting practices, any potential SEC inquiry with respect to the adjustments or the Company’s accounting practices, the ability of the Company to file its periodic reports, the impact on the Company’s business and the risks detailed from time to time in the Company’s periodic filings under the Securities Exchange Act of 1934. Because the statements are subject to risks and uncertainties, actual developments and results may differ materially from those express or implied by the forward-looking statements. Readers are cautioned not to place undue reliance on the statements, which speak only as of the date hereof.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

ZAYO GROUP, LLC

By:

 

/s/ Ken desGarennes

  Ken desGarennes
  Chief Financial Officer

DATED: May 9, 2012