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): October 28, 2015

CYRUSONE INC.

(Exact Name of Registrant as Specified in its Charter)

Maryland	001-35789	46-0691837
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1649 West Frankford Road

Carrollton, TX 75007

(Address of Principal Executive Office)

Registrant’s telephone number, including area code: (972) 350-0060

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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

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

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

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

ITEM 9.01 — Financial Statements and Exhibits.

As previously announced in the Current Report on Form 8-K filed by CyrusOne Inc. (the “Company”) on July 1, 2015, the Company’s operating partnership, CyrusOne LP, a Maryland limited partnership, closed its previously announced acquisition (the “Cervalis Acquisition”) of Cervalis Holdings LLC, a Delaware limited liability company (“Cervalis”).

The Company is filing certain historical and pro forma financial information related to the Cervalis Acquisition as exhibits to this Current Report on Form 8-K.

(a) Financial statements of businesses acquired

The condensed consolidated interim financial statements of Cervalis as of June 30, 2015 and December 31, 2014 and for the three and six months ended June 30, 2015 and 2014 are filed as Exhibit 99.1 hereto.  The Company previously filed the audited consolidated financial statements of Cervalis as of and for the year ended December 31, 2014 as Exhibit 99.2 in its Current Report on Form 8-K, as filed on June 22, 2015.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined balance sheet as of June 30, 2015 and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2015, reflecting the Cervalis Acquisition are filed as Exhibit 99.2 hereto. Such unaudited pro forma condensed combined financial statements are not necessarily indicative of the operating results or financial position that actually would have been achieved if the Cervalis Acquisition had been in effect on the dates indicated or that may be achieved in future periods, and should be read in conjunction with the financial statements of the Company and Cervalis. The Company previously filed the unaudited pro forma condensed combined balance sheet as of March 31, 2015 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2014 and the three months ended March 31, 2015 as Exhibit 99.3 in its Current Report on Form 8-K, as filed on June 22, 2015.

(d) Exhibits

Exhibit No.	Description
99.1	Condensed Consolidated Interim Financial Statements of Cervalis Holdings LLC as of June 30, 2015 and December 31, 2014 and for the three and six months ended June 30, 2015 and 2014.
99.2	Unaudited Pro Forma Condensed Combined Financial Information of CyrusOne Inc. as of June 30, 2015 and for the six months ended June 30, 2015.

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SIGNATURES

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.

	CYRUSONE INC.
Date: October 28, 2015	By:	/s/ Robert M. Jackson
		Robert M. Jackson
		Executive Vice President, General Counsel and Secretary

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Condensed Consolidated Interim Financial Statements of Cervalis Holdings LLC as of June 30, 2015 and December 31, 2014 and for the three and six months ended June 30, 2015 and 2014.
99.2	Unaudited Pro Forma Condensed Combined Financial Information of CyrusOne Inc. as of June 30, 2015 and for the six months ended June 30, 2015.

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EX-99.1

Exhibit 99.1

Cervalis Holdings LLC and Subsidiary

Condensed Consolidated Financial Report

June 30, 2015 and December 31, 2014 and

Three and Six Months Ended June 30, 2015 and 2014

Contents

Financial Statements
Condensed consolidated balance sheets	1
Condensed consolidated statements of operations	2
Condensed consolidated statements of changes in members’ (deficiency) equity	3
Condensed consolidated statements of cash flows	4
Notes to condensed consolidated financial statements	5-9

Cervalis Holdings LLC and Subsidiary

Condensed Consolidated Balance Sheets

June 30, 2015 and December 31, 2014

(amounts in thousands)

	(Unaudited)
	2015			2014
Assets
Current Assets
Cash and cash equivalents	$	1,087		$	1,889
Accounts receivable, less allowance for doubtful accounts of $83 and $96 as of June 30, 2015 and December 31, 2014, respectively	6,848			5,612
Note receivable	302			286
Prepaid expenses	1,410			1,570
Other assets, current	265			1,385
Deferred costs	1,207			832
Total current assets	11,119			11,574
Property and Equipment, Net	182,421			183,180
Other Assets
Long-term portion of other assets	2,260			2,080
Long-term portion of prepaid expenses	13			23
Long-term portion of note receivable	2,329			2,485
Rental security deposits	7,485			7,568
Long-term portion of deferred costs	1,102			1,853
Total other assets	13,189			14,009
Total assets	$	206,729		$	208,763
Liabilities and Members’ (Deficiency) Equity
Current Liabilities
Accounts payable	$	2,294		$	2,364
Accrued expenses	4,117			5,507
Accrued fixed assets	1,657			959
Customer deposits	119			463
Note payable	167,275			3,450
Deemed landlord financing	1,316			1,218
Capital leases	596			500
Deferred revenue	8,150			7,893
Total current liabilities	185,524			22,354
Long-Term Liabilities
Long-term portion of accrued expenses	1,446			1,477
Long-term portion of note payable	—			162,550
Long-term portion of deemed landlord financing	99,115			98,677
Long-term portion of capital leases	1,120			1,025
Long-term portion of deferred revenue	647			643
Total long-term liabilities	102,328			264,372
Members’ (Deficiency) Equity	(81,123		)	(77,963		)
Total liabilities and members’ (deficiency) equity	$	206,729		$	208,763

See Notes to Unaudited Condensed Consolidated Financial Statements.

1

Cervalis Holdings LLC and Subsidiary

Condensed Consolidated Statements of Operations

(Unaudited)

(amounts in thousands)

	Quarter ended June 30,						Six months ended June 30,
	2015			2014			2015			2014
Net Sales	$	19,179		$	17,541		$	39,541		$	34,145
Cost of Services	13,482			12,930			28,304			24,895
Gross profit	5,697			4,611			11,237			9,250
Operating Expenses
General and administrative expenses	1,142			1,337			2,188			2,278
Transaction related expenses	1,149			—			1,149			—
Selling expenses	755			756			1,451			1,506
Total operating expenses	3,046			2,093			4,788			3,784
Income from operations	2,651			2,518			6,449			5,466
Other Income (Expense)
Interest income	89			94			174			188
Interest expense	(4,907		)	(4,634		)	(9,540		)	(9,100		)
Other Income (Expense)	1			—			1			1
Total other income (expense)	(4,817		)	(4,540		)	(9,365		)	(8,911		)
Net loss	$	(2,166	)	$	(2,022	)	$	(2,916	)	$	(3,445	)

See Notes to Unaudited Condensed Consolidated Financial Statements.

2

Cervalis Holdings LLC and Subsidiary

Condensed Consolidated Statements of Changes in Members’ (Deficiency) Equity

Six Months Ended June 30, 2015 and 2014

(Unaudited)

(amounts in thousands)

	Preferred			Common			Total
	Members’			Members’			Members’
	(Deficiency)			(Deficiency)			(Deficiency)
	Equity			Equity			Equity
Members’ (Deficiency) Equity, December 31, 2013	$	(63,840	)	$	(7,629	)	$	(71,469	)
Member distributions	—			(5		)	(5		)
Net loss	(3,445		)	—			(3,445		)
Members’ (Deficiency) Equity, June 30, 2014	$	(67,285	)	$	(7,634	)	$	(74,919	)
Members’ (Deficiency) Equity, December 31, 2014	$	(70,234	)	$	(7,729	)	$	(77,963	)
Member distributions	—			(244		)	(244		)
Net loss	(2,916		)	—			(2,916		)
Members’ (Deficiency) Equity, June 30, 2015	$	(73,150	)	$	(7,973	)	$	(81,123	)

See Notes to Unaudited Condensed Consolidated Financial Statements.

3

Cervalis Holdings LLC and Subsidiary

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2015 and 2014

(Unaudited)

(amounts in thousands)

	2015			2014
Cash Flows From Operating Activities
Net loss	$	(2,916	)	$	(3,445	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	11,034			10,412
Deferred revenue	261			(11		)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable	(1,236		)	216
Decrease in note receivable	140			125
Decrease (increase) in prepaid expenses and deferred costs - commissions	546			(613		)
Decrease (increase) in other assets	940			(107		)
Increase (decrease) of deemed landlord financing	536			(59		)
Decrease in customer deposits	(344		)	(30		)
(Decrease) increase in accounts payable	(70		)	216
Decrease in accrued expenses	(1,852		)	(5,895		)
Net cash provided by operating activities	7,039			809
Cash Flows From Investing Activities
Return of security deposits	83			129
Purchase of property and equipment	(9,146		)	(3,081		)
Net cash used in investing activities	(9,063		)	(2,952		)
Cash Flows From Financing Activities
Payments made on capital leases	191			(719		)
Proceeds from note payable	1,275			5,000
Payments made on note payable	—			(2,000		)
Distributions to members	(244		)	(5		)
Net cash provided by financing activities	1,222			2,276
Net (decrease) increase in cash and cash equivalents	(802		)	133
Cash and Cash Equivalents
Beginning of period	1,889			3,045
End of period	$	1,087		$	3,178

See Notes to Unaudited Condensed Consolidated Financial Statements.

4

Cervalis Holdings LLC and Subsidiary

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(amounts in thousands)

Note 1.Organization

Cervalis Holdings LLC (Holdings LLC) was formed on August 10, 2010, as a Delaware limited liability company for the purposes of obtaining an equity investment from outside investors. Following the formation of Holdings LLC, the members of Cervalis LLC (Operating LLC) contributed their ownership interests in Operating LLC to Holdings LLC.

Cervalis LLC is a data center operator and a provider of information technology (IT) infrastructure solutions and web hosting including business continuity/disaster recovery, managed hosting, managed security, managed storage, networking and telecommunications and colocation services. Cervalis LLC performs its operations through its data-centers and recovery-centers in Connecticut, New York and New Jersey.

Note 2.Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of June 30, 2015 and December 31, 2014, and for the three and six months ended June 30, 2015 and June 30, 2014, are prepared on a consolidated basis.

In addition, the accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and should be read in conjunction with the financial statements and notes thereto included in our Annual Report for the year ended December 31, 2014.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim periods. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary to present fairly the Company’s financial position as of June 30, 2015, and the Company’s results of operations for the three and six months ended June 30, 2015 and 2014. These adjustments are of a normal recurring nature and consistent with the adjustments recorded to prepare the annual audited financial statements as of December 31, 2014.

Although management believes the disclosures in the condensed consolidated financial statements are adequate to make the information presented not misleading, certain information normally included in the footnotes prepared in accordance with GAAP has been omitted. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the annual consolidated financial statements for the year ended December 31, 2014. Interim results are not necessarily indicative of the results that may be expected for a full year.

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Cervalis Holdings LLC and Subsidiary

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(amounts in thousands)

Note 3.Significant Accounting Policies

No material changes have been made to the significant accounting policies disclosed in the audited consolidated financial statements for the year ended December 31, 2014.

Recently issued accounting pronouncements: In May 2014, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers. The amendments supersede the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605-35, Revenue Recognition—Construction-Type and Production-Type Contracts, and create new Subtopic 340-40, Other Assets and Deferred Costs—Contracts with Customers. The core principle of Topic 605 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for fiscal years ending after December 15, 2017. The Company is currently evaluating the impact of the pending adoption of the ASU on its condensed consolidated financial statements.

On April 1, 2015, the FASB voted to propose a delay in the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as follows:

Public business entities: The proposed new effective date will be annual reporting periods beginning after December 15, 2017 and the interim periods within that year. As such, for a public business entity with a calendar year-end, the ASU would be effective on January 1, 2018 for both its interim and annual reporting periods. This proposal represents a one-year deferral from the original effective date.

Entities other than public business entities (e.g., private companies): The proposed new effective date will be annual reporting periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019. As such, for a private company with a calendar year-end, the ASU would be effective for the year ending December 31, 2019 and interim periods in 2020. This proposal represents a one-year deferral from the original effective date.

Early adoption: The proposed new effective date guidance will allow early adoption for all entities (i.e., both public business entities and other entities) as of the original effective date for public business entities, which was annual reporting periods beginning after December 15, 2016, and the interim periods within that year. Early adoption by public business entities was not permitted under the original effective date guidance.

The Company is currently evaluating the effects of this pronouncement.

In April 2015, the FASB issued ASU 2015-03, Interest — Imputation of Interest. The amendments supersede the Proposed ASU 2014-250. The core principle of Subtopic 835-30 is to simplify presentation of debt issuance costs. The amendments would require that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of debt liability, consistent with debt discounts or premiums. The recognition and measurements for debt issuance costs would be affected by the amendments in this ASU. The amendments in ASU 2015-03 are effective for fiscal years ending after December 15, 2015. Early adoption of the amendment in this update is permitted. The Company is currently evaluating the effects of this pronouncement.

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Cervalis Holdings LLC and Subsidiary

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(amounts in thousands)

Note 4.Property and Equipment

Property and equipment consisted of the following:

	June 30		December 31,
	2015		2014
Furniture and fixtures	$	2,722	$	2,605
Machinery and equipment	103,544		102,880
Computer equipment and software	14,665		13,774
Buildings	64,676		64,676
Leasehold improvements	41,145		40,251
Tenant improvements	7,268		6,660
Construction-in-progress	42,726		35,625
	276,746		266,471
Less accumulated depreciation	94,325		83,291
Net property and equipment	$	182,421	$	183,180

Depreciation expense for the three months ended March 31, 2015 and 2014 was $5,609, and $5,160, respectively. Depreciation expense for the six months ended June 30, 2015 and 2014 was $11,095, and $9,714, respectively.

Note 5.Lease Obligations

The Company presently leases data-centers and recovery-centers located in Stamford, Connecticut; Wappingers Falls, New York; Totowa, New Jersey; and Norwalk, Connecticut. Deemed landlord financing represents leases of real estate in which they are involved in the construction of structural improvements to develop buildings into data centers and recovery centers. As a result of this involvement, the Company is deemed the “owner” for accounting purposes during the construction period and, at the lease inception date, is required to record at fair value the property and associated liability on the balance sheet. Upon completion of the project, the Company must perform a sale-leaseback analysis pursuant to ASC 840 to determine if they can remove the assets from the balance sheet. In many of the Company’s leases, they are not reimbursed for the construction costs, which is generally considered “continuing involvement,” which precludes the Company from derecognizing the constructed assets from the balance sheet when construction is complete. Deemed landlord financing obligations for these facilities as of June 30, 2015 and December 31, 2014 were $100,431 and $99,895, respectively.

The Company also maintains several noncancelable capital leases primarily for computer, telecommunications and other equipment that expire at various times over a three- to five-year period. In addition, the Company maintains several noncancelable operating leases and network contracts primarily for computer equipment and network line access that expire over a three-year period.

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Cervalis Holdings LLC and Subsidiary

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(amounts in thousands)

Note 6.Term Loans and Lines of Credit

At June 30, 2015 and December 31, 2014, the outstanding obligation on the Term Loan was $146,500 and $148,000, respectively. At June 30, 2015 and December 31, 2014, outstanding borrowings on the Revolving Facility were $6,000 and $3,000, respectively. At June 30, 2015 and December 31, 2014, the outstanding borrowings on the Delayed Draw Term Loan were $14,775 and $15,000, respectively. In connection with the transaction noted in Note 10, the Company paid the term loans and lines of credit in full. Accordingly, the balance due has been classified as a current liability on the balance sheet at June 30, 2015.

Interest expense on the Term Loans, Delayed Draw Term Loan and Revolving Credit Facility was $5,807 and $5,478 for the six months ended June 30, 2015 and 2014, respectively and $3,026 and $2,751 for the three months ended June 30, 2015 and 2014, respectively.

Pursuant to the First Lien and Second Lien Agreements, the Company is required to comply with various financial covenants.

Note 7.Fair Value Measurement

The Fair Value Measurements Topic of the FASB Accounting Standards Codification (ASC) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined under this guidance as assumptions market participants would use in pricing an asset or liability.

This guidance establishes three levels of the fair value hierarchy as follows:

Level 1Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. The types of investments in Level 1 include available-for-sale securities traded on a national securities exchange. These securities are stated at the last reported sales price on the day of valuation. The Company’s Level 1 investments consist of money market funds.

Level 2Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly, and fair value that is determined through the use of models or other valuation methodologies. Investments in this category generally include less liquid and restricted equity securities, certificates of deposit and certain over-the-counter derivatives. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement.

Level 3Inputs that are unobservable for the asset or liability and that include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation. Investments in this category generally include equity and debt positions in private companies. The Company has no Level 3 investments.

The fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their carrying value because of the maturities of these instruments. The fair value of the long-term debt approximates carrying value based upon the variable interest rate of the debt.

8

Cervalis Holdings LLC and Subsidiary

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(amounts in thousands)

Note 8.Stock-Unit-Based Compensation Plans and Restricted Units

The Cervalis Common Unit Plan (the CUP) and the Cervalis Employee Unit Plan (the EUP) (collectively, the Plans) enable the Managing Company to provide long-term incentive compensation for key employees of Operating LLC who have rendered and continue to render valuable services, and who thereby make important contributions toward its continued growth and success. The Plans provide a means whereby such employees of the Company may be given an opportunity to benefit from growth in the value of the Company via ownership of Common Units.

Units issued under the EUP vest over a three-year period and are forfeited by the employee upon termination. The exercise price of units issued equals the fair value of the units on the date of grant. Units issued are payable only upon a liquidation event as defined by the EUP. As the realization of value of units issued is based upon a performance condition to be determined in the future, the Company has assessed the probability of such event happening as nil as of June 30, 2015 and 2014. As such, no compensation expense was recorded for the issuance of units during the six months ended June 30, 2015 and 2014. Such probability will be reviewed at each reporting period, and if probability of such an event becomes likely, the Company will record compensation expense.

Note 9.Related Party

At June 30, 2015 and December 31, 2014, accounts receivable from a Series B unit holder totaled approximately $367 and $609, respectively. During the six months ended June 30, 2015 and 2014, the Company recorded revenues for data center services totaling approximately $1,583 and $1,553, respectively, to the Series B unit holder.

Note 10.Subsequent Events

The Company has evaluated events occurring between March 31, 2015 and September 30, 2015, the date in which the condensed consolidated financial statements were available to be issued.

On July 1, 2015, Holdings LLC completed its previously announced Agreement and Plan of Merger (the Merger Agreement) by and among Holdings LLC, Jupiter Merger Sub LLC (Merger Sub), LDG Holdings LLC and CyrusOne LP (CyrusOne), a publicly held provider of enterprise data center solutions, pursuant to which Merger Sub merged with and into Holdings LLC, with Holdings LLC continuing as the surviving entity and a wholly-owned subsidiary of CyrusOne. The transaction was consummated with an all-cash sale price of approximately $400 million.

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EX-99.2

Exhibit 99.2

CYRUSONE INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2015 and the Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2015 have been derived from the historical consolidated financial statements of CyrusOne Inc. (together with its subsidiaries, the “Company”) and Cervalis Holdings LLC (“Cervalis”), as adjusted to give effect to the merger of Cervalis with a wholly owned subsidiary of CyrusOne LP (the “Merger”), the incurrence of additional debt under CyrusOne LP’s senior unsecured term loan and the issuance of additional senior notes under its indenture (collectively, the “Transactions”), each of which occurred on July 1, 2015, and are intended to reflect the impact of the Transactions on the Company on a pro forma basis as of and for the six months ended June 30, 2015.

The Unaudited Pro Forma Condensed Combined Financial Information has been prepared by the Company using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. The fair value of identifiable tangible and intangible assets acquired and liabilities assumed from the Merger are based on a preliminary estimate of fair value using assumptions described in the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information that the Company believes are reasonable.

The Company has not finalized the final purchase price allocation for the Merger, which will depend on final asset and liability valuations that may depend in part on prevailing market rates and conditions. These final valuations will be based on the actual net tangible and intangible assets that existed as of the closing of the Merger. Any final adjustments may change the allocations of the purchase price, which could affect the fair value assigned to the assets acquired and liabilities assumed and could result in a change to the Unaudited Pro Forma Condensed Combined Financial Information, including the amount of goodwill. Therefore, the result of the final purchase price allocation could be materially different from the preliminary allocation set forth herein.

The following Unaudited Pro Forma Condensed Combined Financial Information is based on, and should be read in conjunction with:

·The accompanying notes to unaudited pro forma condensed combined financial information;

·The historical audited consolidated and combined financial statements of the Company and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the Securities and Exchange Commission (“SEC”) on February 27, 2015;

·The historical unaudited condensed consolidated interim financial statements of the Company and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in its Quarterly Report on Form 10-Q for the three months ended June 30, 2015, as filed with the SEC on August 10, 2015;

·The historical unaudited condensed consolidated balance sheet of Cervalis as of June 30, 2015 and the condensed consolidated statements of operations, members’ deficit and cash flows for the six months ended June 30, 2015 (included as Exhibit 99.1 to the Current Report on Form 8-K of which this financial information forms an exhibit);

·The unaudited pro forma condensed combined financial information of the Company and its subsidiaries as of and for the three months ended March 31, 2015 and for the year ended December 31, 2014 (included as Exhibit 99.3 in its Current Report on Form 8-K, as filed with the SEC on June 22, 2015);

·The historical unaudited condensed consolidated interim financial statements of the Company and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in its Quarterly Report on Form 10-Q for the three months ended March 31, 2015, as filed with the SEC on May 8, 2015;

·The historical audited consolidated balance sheet of Cervalis as of December 31, 2014 and the consolidated statements of operations, members’ deficit and cash flows for the year ended December 31, 2014 (included as Exhibit 99.2 to the Current Report on Form 8-K, as filed by the Company with the SEC on June 22, 2015); and,

·The historical unaudited condensed consolidated balance sheet of Cervalis as of March 31, 2015 and the condensed consolidated statements of operations, members’ deficit and cash flows the three months ended March 31, 2015 (included as Exhibit 99.1 to the Current Report on Form 8-K, as filed by the Company with the SEC on June 22, 2015).

The Unaudited Pro Forma Condensed Combined Balance Sheet reflects the Transactions as if they had been consummated on June 30, 2015 and includes pro forma adjustments for the preliminary allocation of the purchase price.

The Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2015 combines the Company’s historical results for the six months ended June 30, 2015 with Cervalis’ historical results for the six months ended June 30, 2015. The Unaudited Pro Forma Condensed Combined Statement of Operations gives effect to the Transactions as if they had been consummated on January 1, 2014.

The Unaudited Pro Forma Condensed Combined Financial Information has been prepared to reflect adjustments to the Company’s historical consolidated financial information that are (i) directly attributable to the Transactions, (ii) factually supportable and (iii) with respect to the Unaudited Pro Forma Condensed Combined Statement of Operations, expected to have a continuing impact on the combined results. The differences between the actual valuations reflected in the Company’s future balance sheets and the current estimated valuations used in preparing the Unaudited Pro Forma Condensed Combined Financial Information may be material and may affect amounts, including depreciation and amortization expense, which the Company will recognize in future statements of operations for periods following the Merger.

The Unaudited Pro Forma Condensed Combined Financial Information is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that actually would have been achieved if the Transactions had occurred on the dates indicated or that may be achieved in future periods. The Unaudited Pro Forma Condensed Combined Financial Information should be read in conjunction with the financial statements of the Company and Cervalis. It also does not reflect any cost savings, operating synergies or revenue enhancements that the Company may achieve with respect to combining the companies or costs to integrate the business or the impact of any non-recurring activity and any one-time transaction related costs. Synergies and integration costs have been excluded from consideration because they do not meet the criteria for unaudited pro forma adjustments.

CYRUSONE INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2015

	Historical
				Cervalis Holdings							Pro Forma
				LLC			Pro Forma				Combined
(in millions, except for shares and per share amounts)	CyrusOne Inc.			(See Note 3)			Adjustments			Note Ref	Company
Assets
Investment in real estate:
Land	$	93.0		$	—		$	—			$	93.0
Buildings and improvements	824.2			113.2			(45.3		)	4(b)	892.1
Equipment	423.4			114.7			(16.0		)	4(b)	522.1
Construction in progress	125.8			42.7			(11.1		)	4(b)	157.4
Subtotal	1,466.4			270.6			(72.4		)		1,664.6
Accumulated Depreciation	(375.4		)	(89.7		)	89.7			4(b)	(375.4		)
Net investment in real estate	1,091.0			180.9			17.3				1,289.2
Cash and cash equivalent	413.5			1.1			(152.7		)	4(a), 4(c)	261.9
Restricted cash	—			—			7.1			4(d)	7.1
Rent and other receivables, net of allowance for doubtful accounts	56.3			9.0			0.1			4(b)	65.4
Goodwill	276.2			—			177.2			4(b)	453.4
Intangible assets, net of accumulated amortization	61.6			—			119.7			4(b)	181.3
Due from affiliates	1.7			0.4			—				2.1
Other assets	91.4			15.3			(3.5		)	4(b), 4(c), 4(d)	103.2
Total assets	$	1,991.7		$	206.7		$	165.2			$	2,363.6
Liabilities and Equity
Accounts payable and accrued expenses	$	90.0		$	9.6		$	(0.1	)	4(b)	$	99.5
Deferred revenue	66.5			8.8			(1.2		)	4(b)	74.1
Due to affiliates	174.9			—			—				174.9
Capital lease obligations	12.1			1.7			—				13.8
Long-term debt	729.8			167.3			85.7			4(c)	982.8
Other financing arrangements	52.8			100.4			0.9			4(b)	154.1
Total liabilities	1,126.1			287.8			85.3				1,499.2
Equity
Common stock	0.6			—			—				0.6
Additional paid in capital	908.2			—			—				908.2
Accumulated deficit	(124.0		)	(81.1		)	80.2			4(e)	(124.9		)
Accumulated other comprehensive loss	(0.3		)	—			—				(0.3		)
Total shareholder’s equity	784.5			(81.1		)	80.2				783.6
Noncontrolling Interest	81.1			—			(0.3		)	4(f)	80.8
Total equity	865.6			(81.1		)	79.9				864.4
Total liabilities and equity	$	1,991.7		$	206.7		$	165.2			$	2,363.6

CYRUSONE INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2015

	Historical
				Cervalis Holdings							Pro Forma
				LLC			Pro Forma				Combined
(in millions, except for shares and per share amounts)	CyrusOne Inc.			(See Note 3)			Adjustments			Note Ref	Company
Revenue	$	174.8		$	39.5		$	(0.2	)	5(a)	$	214.1
Costs and expenses:
Property operating expenses	65.1			16.9			—				82.0
Sales and marketing	5.7			1.5			—				7.2
General and administrative	19.0			2.2			—				21.2
Depreciation and amortization	62.5			11.7			0.4			5(b)	74.6
Transaction costs	9.7			1.1			(10.8		)	5(c)	—
Asset impairments	8.6			—			—				8.6
Total costs and expenses	170.6			33.4			(10.4		)		193.6
Operating income	4.2			6.1			10.2				20.5
Interest expense	17.1			9.0			(2.4		)	5(d), 5(e)	23.7
Net (loss) income before taxes	(12.9		)	(2.9		)	12.6				(3.2		)
Income tax expense	(0.8		)	—			(0.3		)	5(f)	(1.1		)
Net loss	(13.7		)	(2.9		)	12.3				(4.3		)
Noncontrolling interest in net loss	(3.9		)	—			2.7			5(g)	(1.2		)
Net loss attributed to common shareholders	$	(9.8	)	$	(2.9	)	$	9.6			$	(3.1	)
Basic weighted average common shares outstanding	44.1										44.1
Diluted weighted average common shares outstanding	44.1										44.1
Loss per share - basic and diluted	(0.23		)								(0.08		)
Dividend declared per share	0.630										0.630

CYRUSONE INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

1. Description of Transaction

On July 1, 2015, CyrusOne LP completed its acquisition (the “Merger”) of Cervalis Holdings LLC (“Cervalis”). As a result of the Merger, Cervalis is an indirect, wholly owned subsidiary of CyrusOne LP. In consideration for the Merger, CyrusOne LP paid approximately $400.0 million, subject to working capital and net debt adjustments and excluding transaction-related expenses, in an all cash transaction. In addition, the Company assumed approximately $103.0 million of indebtedness and financing obligations. The Unaudited Pro Forma Condensed Combined Financial Information is intended to reflect that the net purchase price was paid using cash on hand as well as cash obtained under CyrusOne LP’s senior unsecured term loan and the issuance of additional senior notes under its indenture.

2. Basis of Presentation

The Unaudited Pro Forma Condensed Combined Financial Information should be read in conjunction with the condensed consolidated financial statements of Cervalis included as an exhibit to this Current Report on Form 8-K, as well as the Company’s audited and unaudited consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2015 and June 30, 2015 and the audited and unaudited consolidated financial statements of Cervalis and unaudited pro forma condensed combined financial statements of the Company included as exhibits to our Current Report on Form 8-K filed on June 22, 2015.

The Unaudited Pro forma Condensed Combined Financial Information has been prepared by the Company using the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. The fair value of identifiable tangible and intangible assets acquired and liabilities assumed from the Merger are based on a preliminary estimate of fair value using assumptions described in the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information that the Company believes are reasonable.

The Company has not finalized the final purchase price allocation for the Merger, which will depend on final asset and liability valuations that may depend in part on prevailing market rates and conditions. These final valuations will be based on the actual net tangible and intangible assets that existed as of the closing of the Merger. Any final adjustments may change the allocations of the purchase price, which could affect the fair value assigned to the assets acquired and liabilities assumed and could result in a change to the Unaudited Pro Forma Condensed Combined Financial Information, including the amount of goodwill. Therefore, the result of the final purchase price allocation could be materially different from the preliminary allocation set forth herein.

The Unaudited Pro Forma Condensed Combined Financial Information included herein has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading.

The Unaudited Pro Forma Condensed Combined Balance Sheet and Statement of Operations as of and for the six months ended June 30, 2015 were derived from CyrusOne Inc.’s unaudited condensed consolidated financial statements as of and for the six months ended June 30, 2015 and from Cervalis’ unaudited condensed consolidated financial statements as of and for the six months ended June 30, 2015, respectively.

3. Reclassifications of Historical Cervalis

Financial information presented in the “Historical Cervalis Holdings LLC” columns in the Unaudited Pro Forma Condensed Combined Balance Sheet and Statement of Operations represents the historical balance sheet of Cervalis as of June 30, 2015 and the historical statement of operations of Cervalis for the six months ended June 30, 2015, respectively. Such financial information has been reclassified or classified to conform to the historical presentation in the Company’s consolidated financial statements as set forth below. Unless otherwise indicated, defined line items included in the footnotes have the meanings given to them in the historical financial statements of Cervalis.

	Before Reclassification			Reclassification Amount			#	After Reclassification
Balance Sheet
Buildings and improvements	$	—		$	113.2		(1)	$	113.2
Equipment	—			114.7			(1)	114.7
Construction in progress	—			42.7			(1)	42.7
Accumulated Depreciation	—			(89.7		)	(1)	(89.7		)
Net investment in real estate	182.4			(1.5		)	(1)	180.9
Rent and other receivables, net of allowance for doubtful accounts	6.8			2.2			(2)	9.0
Note receivable	0.3			(0.3		)	(2)	—
Due from affiliates	—			0.4			(2)	0.4
Prepaid expenses	1.4			(1.4		)	(3)	—
Other assets	0.3			15.0			(1), (3)	15.3
Deferred costs	1.2			(1.2		)	(3)	—
Long-term portion of other assets	2.3			(2.3		)	(3)	—
Long-term portion of note receivable	2.3			(2.3		)	(2)	—
Rental security deposits	7.5			(7.5		)	(3)	—
Long-term portion of deferred costs	1.1			(1.1		)	(3)	—
Accounts payable and accrued expenses	2.3			7.3			(4)	9.6
Accrued expenses	4.1			(4.1		)	(4)	—
Customer deposits	0.1			(0.1		)	(4)	—
Accrued fixed assets	1.7			(1.7		)	(4)	—
Note payable	167.3			(167.3		)	(5)	—
Deemed landlord financing	1.3			(1.3		)	(6)	—
Deferred revenue	8.2			0.6			(7)	8.8
Capital lease obligations	0.6			1.1			(8)	1.7
Long-term portion of accrued expenses	1.4			(1.4		)	(4)	—
Long-term debt	—			167.3			(5)	167.3
Other financing arrangements	—			100.4			(6)	100.4
Long-term portion of deemed landlord financing	99.1			(99.1		)	(6)	—
Long-term portion of capital leases	1.1			(1.1		)	(8)	—
Long-term portion of deferred revenue	0.6			(0.6		)	(7)	—
Statement of Operations - For the Six Months Ended June 30, 2015
Cost of Services	$	28.3		$	(28.3	)	(1)	$	—
Property operating expenses	—			16.9			(1)	16.9
Depreciation and amortization	—			11.7			(1), (2)	11.7
Interest expense	9.5			(0.5		)	(2), (3)	9.0
Interest income	(0.2		)	0.2			(3)	—

Reclassification and classification of the Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2015:

(1)Represents disaggregation of “Net investment in real estate” of $180.9 million into “Buildings and improvements” of $113.2 million, “Equipment” of $114.7 million, “Construction in progress” of $42.7 million, “Accumulated depreciation” of $89.7 million and reclassification of Net investment in real estate” of $1.5 million to “Other assets.”

(2)Represents reclassification of “Rent and other receivables, net of allowance for doubtful accounts” of $0.4 million to “Due from affiliates” and reclassification of “Note receivable” of $0.3 million and “Long-term portion of note receivable” of $2.3 million to “Rent and other receivables, net of allowance for doubtful accounts.”

(3)Represents reclassification of “Prepaid expenses” of $1.4 million, “Deferred costs” of $1.2 million, “Long-term portion of other assets” of $2.3 million, “Rental security deposits” of $7.5 million and “Long-term portion of deferred costs” of $1.1 million to “Other assets” of $13.5 million.

(4)Represents reclassification of “Accrued expenses” of $4.1 million, “Customer deposits” of $0.1 million, “Accrued fixed assets” of $1.7 million and “Long-term portion of accrued expenses” of $1.4 million to “Accounts payable and accrued expenses” of $7.3 million.

(5)Represents reclassification of “Note payable” of $167.3 million to “Long-term debt.”

(6)Represents reclassification of “Deemed landlord financing” of $1.3 million and “Long-term portion of deemed landlord financing” of $99.1 million to “Other financing arrangements.”

(7)Represents reclassification of “Long-term portion of deferred revenue” of $0.6 million to “Deferred revenue.”

(8)Represents reclassification of “Long-term portion of capital leases” of $1.1 million to “Capital lease obligations.”

Reclassification and classification of the Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2015:

(1)Represents reclassification of “Cost of services” of $16.9 million to “Property operating expenses” and $11.4 million to “Depreciation and amortization.”

(2)Represents reclassification of “Interest expense” of $0.3 million to “Depreciation and amortization.”

(3)Represents reclassification of “Interest income” of $0.2 million to “Interest expense.”

4. Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

The Unaudited Pro Forma Condensed Combined Balance Sheet reflects the effect of the following pro forma adjustments:

(a)Adjustment reflects a decrease in cash and cash equivalents of $163.5 million according to the following sources and uses:

Sources of funds:
New Term Loan A(1)	$	150.0
Senior Notes due 2022(1)	103.0
Cash on hand	163.5
Total sources of funds	$	416.5
Uses of Funds:
Cash paid to sellers at closing	$	399.4
Accordion deferred financing	5.1
Transaction costs(2)	12.0
Total uses of funds	$	416.5

(1)This adjustment reflects that, to consummate the Merger, CyrusOne LP borrowed $150.0 million under its senior unsecured term loan, which bears interest at LIBOR plus 1.65% (estimated to be 1.98%) and issued an additional $100.0 million of its 6.375% senior notes due 2022, which were offered and sold at a price of 103.0% of their principal amount. CyrusOne used $2.0 million of the premium to pay debt issuance costs, which is presented as deferred financing costs within "Other assets."

(2)This adjustment includes $10.8 million of transaction costs already incurred and reflected in the historical financial statements of Cervalis and CyrusOne and $1.2 million of transaction costs expected to be incurred but not yet reflected in the historical financial statements.

(b)Adjustment reflects that the excess of purchase price over the estimated fair value of the net assets acquired. Under the acquisition method of accounting, the total estimated purchase price is allocated to Cervalis’ net tangible and intangible assets based on their estimated fair values at the date of the completion of the Merger. Below is a preliminary estimate of the purchase consideration for Cervalis and the adjustments to Cervalis’ book values to reflect the allocation of that purchase consideration to acquired identifiable assets and assumed liabilities.

Preliminary purchase consideration				$	400.0
Working capital adjustment				(1.6		)
Other purchase price adjustments				1.0
Adjusted preliminary purchase consideration				$	399.4
Historical book value of net assets acquired
Book value of Cervalis’s historical net assets acquired as of June 30, 2015	$	(81.1	)
Paydown of Cervalis historical debt	167.3
Adjusted value of net assets acquired				86.2
Excess purchase price over book value of net assets acquired				$	313.2
Adjustments to reflect preliminary fair value of net assets acquired
Write off of Cervalis allowance for doubtful accounts in “Rent and other receivables, net of allowance for doubtful accounts”	$	0.1
Write off of Cervalis deferred costs in “Other assets”	(1.5		)
Write off of certain Cervalis accrued liabilities in “Accounts payable and accrued expenses”	0.1
Adjustment of investment in real estate gross amounts to fair value
Buildings and improvements				$	(45.3	)
Equipment				(16.0		)
Construction in progress				(11.1		)
Remove accumulated depreciation	$	89.7
Intangible assets acquired	119.7
Reduction to deferred revenue	1.2
Increase in fair value of financing obligation	(0.9		)
Preliminary fair value adjustments				$	136.0
Estimated goodwill				$	177.2
Pro forma goodwill adjustment				$	177.2

Upon completion of the fair value assessment, the final purchase price allocation may differ from the preliminary assessment provided above. Any changes to the initial estimates of the fair value of the assets and liabilities will be recorded as adjustments to those assets and liabilities and the residual amounts will be allocated as an increase or decrease to goodwill.  The goodwill recorded is due primarily to the synergies expected to be realized between the two companies and the assembled workforce acquired in connection with the Merger.

Investment in real estate acquired consists of building and improvements with an estimated fair value of $67.9 million, equipment with an estimated fair value of $98.7 million and construction in process with an estimated fair value of $31.6 million. Investment in real estate is expected to be amortized on a straight-line basis over estimated useful lives of 2 – 48 years.

The components of investment in real estate have been valued using a combination of the income approach, the market approach and the cost approach, which is based on current replacement and/or reproduction cost of the asset as new, less depreciation attributable to physical, functional and economic factors.

The fair value of intangible assets acquired of $119.7 million consist of customer relationships (including the value of in-place customer contracts) with an estimated fair value of $117.4 million and the Cervalis tradename with an estimated fair value of $2.3 million. The customer relationship intangible assets are expected to be amortized on a straight-line basis over an estimated useful life of 15 years, while the Cervalis tradename is expected to have an indefinite useful life.

The fair value of intangible assets is determined primarily using the “income approach,” which is a valuation technique that provides an estimate of the fair value of an asset based on market participants’ expectations of the cash flows an asset would generate over its remaining useful life. Some of the more significant assumptions inherent in the development of the valuations include the estimated annual net cash flows for each indefinite lived or definite lived intangible asset (including net revenues, operating expenses, selling and marketing costs and working capital asset/contributory asset charges), the appropriate discount rate that appropriately reflects the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, competitive trends as well as other factors.

(c)Adjustments related to long-term debt are as follows:

Long Term Debt
New Term Loan A	150.0
Senior Notes due 2022	103.0
New long term debt	$	253.0
Paydown of Cervalis historical debt	(167.3		)
Net change in long term debt	$	85.7

Deferred financing costs of $0.8 million relating to Cervalis debt that was paid off in connection with the Merger have been eliminated from other assets, with a corresponding decrease to accumulated deficit. No adjustment has been made to the Unaudited Pro Forma Condensed Combined Statement of Operations for these costs as they are non-recurring.

(d)Adjustment represents reclassification of other assets of $7.1 million to restricted cash.

(e)Adjustment eliminates Cervalis accumulated deficit of $81.1 million, net of $0.9 million of the Company’s transaction costs expected to be incurred but not yet reflected in the historical financial statements.

(f)Adjustment reflects the noncontrolling interest portion of the Company’s transaction costs expected to be incurred but not yet reflected in the historical financial statements of $0.3 million.

5. Unaudited Pro Forma Condensed Combined Statement of Operations Adjustments

The Unaudited Pro Forma Condensed Combined Statement of Operations reflects the effect of the following pro forma adjustments:

(a)Cervalis revenue includes the amortization of deferred set up fees. Those deferred set up fees are written off in acquisition accounting, and this adjustment removes the impact of the amortization of those fees, resulting in a decrease in revenue of $0.4 million for the six months ended June 30, 2015. In addition, certain Cervalis contracts have pricing that increases each year; revenue under those contracts is recognized on a straight-line basis over the contract period. Upon the application of acquisition accounting, the amount of revenue recognized on a straight-line basis under these contracts would have been higher by $0.2 million for the six months ended June 30, 2015.

(b)Adjustment reflects a decrease to depreciation and amortization expense of $3.6 million for the six months ended June 30, 2015 as a result of fair value accounting for investment in real estate and other fixed assets acquired and an increase to depreciation and amortization expense of $4.0 million for the six months ended June 30, 2015 as a result of fair value accounting for definite-lived intangible assets acquired.

(c)Adjustment reflects the removal of direct, incremental transaction costs of $10.8 million, which were incurred during the six months ended June 30, 2015. These costs are removed from the pro forma statement of operations as a non-recurring charge directly related to the transaction that is already reflected in the historical financial statements of Cervalis and CyrusOne.

(d)Adjustment reflects the fact, to consummate the Merger, CyrusOne LP borrowed $150.0 million under its senior unsecured term loan, which bears interest at LIBOR plus 1.65% (estimated to be 1.98%) and issued an additional $100.0 million of its 6.375% senior notes due 2022. This adjustment reflects the increase in interest expense associated with this additional debt of $4.4 million and the increase in source fees of $0.5 million, in each case for the six months ended June 30, 2015. A hypothetical 0.125% increase or decrease in the expected weighted average interest rate under the senior unsecured term loan would increase or decrease interest expense associated with the Transactions by $0.2 million for a six month period.

(e)Adjustment reflects the reduction of interest expense of $1.5 million for the six months ended June 30, 2015 as a result of acquisition accounting for assumed capital leases and financing obligations of Cervalis and a reduction of interest expense of $5.8 million for the six months ended June 30, 2015 due to the settlement of Cervalis debt in connection with the Merger.

(f)Adjustment reflects the income tax effect for Unaudited Pro Forma Condensed Combined Statement of Operations adjustments using a 43% statutory tax rate applied to Cervalis managed services revenue. The statutory tax rate was determined using a 35% federal tax rate and a blended average state tax rate of 8% based on the jurisdictions in which Cervalis is located.

(g)Adjustment reflects the noncontrolling interest portion of Unaudited Pro Forma Condensed Combined Statement of Operations adjustments.