Communications Sales & Leasing, Inc.

Schedule I – Condensed Financial Information of

The Registrant (Parent Company)

Balance Sheets

(Thousands, except par value)	December 31, 2016			December 31, 2015
Assets:
Cash and cash equivalents	$	131,145		$	17
Accounts receivable, net		(3	)		-
Other assets		1,066			-
Investment in consolidated subsidiaries		2,801,234			2,458,679
Total Assets	$	2,933,442		$	2,458,696

Liabilities:
Accrued interest payable	$	27,812		$	24,440
Derivative liability		6,102			5,427
Dividends payable		94,607			90,507
Contingent consideration		98,600			—
Notes and other debt, net		4,028,214			3,505,228
Total liabilities		4,255,335			3,625,602

Convertible Preferred Stock, Series A, $0.0001 par value, 88 shares authorized, issued and outstanding, $87,500 liquidation value		80,552

Shareholders' Deficit:
Preferred stock, $0.0001 par value, 50,000 shares authorized, no shares issued and outstanding		-			-
Common stock, $0.0001 par value, 500,000 shares authorized, issued and outstanding: 155,139 shares at December 31, 2016 and 149,862 at December 31, 2015		15			15
Additional paid-in capital		141,092			1,392
Accumulated other comprehensive income		(6,369	)		(5,427	)
Distributions in excess of accumulated earnings		(1,537,183	)		(1,162,886	)
Total shareholders' deficit		(1,402,445	)		(1,166,906	)
Total Liabilities, Convertible Preferred Stock, and Shareholders' Deficit	$	2,933,442		$	2,458,696

See notes to Consolidated Financial Statements of CS&L, Inc. included in Financial Statements and Supplementary Data.

Communications Sales & Leasing, Inc.

Schedule I – Condensed Financial Information of

The Registrant (Parent Company)

Statements of Comprehensive Income

	Year Ended			Period from
(Thousands)	December 31, 2016			April 24 - December 31, 2015
Costs and Expenses:
Interest expense	$	267,959		$	181,797
General and administrative expense		4,829			1,934
Transaction related costs		3,945			-
Total costs and expenses		276,733			183,731
Operating loss		(276,733	)		(183,731	)
Earnings from consolidated subsidiaries		276,521			208,601
(Loss) income before income taxes		(212	)		24,870
Net (loss) income		(212	)		24,870
Comprehensive (loss) income	$	(1,154	)	$	19,443

See notes to Consolidated Financial Statements of CS&L, Inc. included in Financial Statements and Supplementary Data.

Communications Sales & Leasing, Inc.

Schedule I – Condensed Financial Information of

The Registrant (Parent Company)

Statements of Cash Flows

	Year Ended			Period from
(Thousands)	December 31, 2016			April 24 - December 31, 2015
Cash flow from operating activities
Net (loss) income	$	(212	)	$	24,870
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Amortization of deferred financing costs		7,823			4,832
Amortization of debt discount		8,179			5,172
Equity in earnings from subsidiaries		(276,521	)		(208,601	)
Distributions from subsidiaries		194,500			253,362
Stock-based compensation		4,846			1,934
Changes in:
Accounts receivable		3			-
Other assets		(1,066	)		-
Accounts payable, accrued expenses and other liabilities		3,372			24,763
Net cash (used in) provided by operating activities		(59,076	)		106,332

Cash flow from investing activities
Acquisition of businesses, net of cash acquired		-			-
Consideration paid to Windstream Services		-			(1,035,029	)
Capital expenditures		-			-
Net cash used in investing activities		-			(1,035,029	)

Cash flow from financing activities
Principal payment on debt		(22,027	)		(10,700	)
Dividends paid		(367,830	)		(156,854	)
Proceeds from issuance of Term Loans		-			1,127,000
Proceeds from issuance of Notes		548,875			-
Borrowings under revolving credit facility		641,000			-
Payments under revolving credit facility		(641,000	)		-
Capital lease payments		-			-
Deferred financing costs		(20,557	)		(30,057	)
Common stock issuance, net of costs		54,213			(543	)
Net share settlement		(2,359	)		(113	)
Intercompany transactions, net		(111	)		-
Cash in-lieu of fractional shares		-			(19	)
Net cash provided by investing activities		190,204			928,714
Effect of exchange rates on cash and cash equivalents		-			-
Net increase in cash and cash equivalents		131,128			17
Cash and cash equivalents at beginning of period		17			-
Cash and cash equivalents at end of period	$	131,145		$	17

See notes to Consolidated Financial Statements of CS&L, Inc. included in Financial Statements and Supplementary Data.

Communications Sales & Leasing, Inc.

Schedule I – Condensed Financial Information of

The Registrant (Parent Company)

Background and Basis of Presentation – Pursuant to SEC Regulation S-X Rule 3-10 “Financial statements of guarantors and issuers of guaranteed securities registered or being registered,” the Company is required to provide condensed consolidating financial information for CSL Capital and the Guarantors because the Exchange Notes and the guarantees thereof were registered with the SEC under the Securities Act. While the condensed consolidating financial information presented below is in respect of our Exchange Notes only, our Secured Notes, 2024 Notes and senior credit facilities under the Credit Agreement are guaranteed by the Guarantors. These guarantees are full and unconditional as well as joint and several. All property assets and related operations of the Guarantors are pledged as collateral under the Secured Notes and Credit Agreement and the Guarantors are subject to restrictions on certain investments and payments. Accordingly, these condensed financial statements of CS&L have been presented on a “Parent Only” basis. Under this basis of presentation, CS&L’s investment in its consolidated subsidiaries are presented under the equity method of accounting. The condensed parent company financial statements should be read in conjunction with the consolidated financial statements and notes of CS&L and its subsidiaries included in Item 8 Financial Statements and Supplementary Data in this Annual Report on Form 10-K.