~~________________________________________________~~

FORM 10-Q

~~________________________________________________~~



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

For the quarterly period ended ~~December~~March 31, ~~2017~~2019



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

For the transition period from to

Commission File ~~Number~~Number: 001-38289

~~_______________________________________________~~

AVAYA HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

~~________________________________________________~~



Delaware		26-1119726
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4655 Great America Parkway Santa Clara, California		95054
(Address of ~~principal~~Principal executive offices)		(Zip Code)

(908) 953-6000

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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 ¨ ýNo x¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ¨ ýNo ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated ~~filer.~~filer, a smaller reporting company, or an emerging growth company. See ~~definition~~the definitions of ~~“accelerated~~"large accelerated filer," "accelerated filer," "smaller reporting company" and ~~large accelerated filer”~~"emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~



Large accelerated filer ¨		Accelerated filer ¨	Non-accelerated filer x		Smaller Reporting Company ¨
	Emerging growth company ¨			~~(Do not check if a smaller~~ ~~reporting 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 xý

Indicate by check mark whether the registrant has filed all ~~document~~documents and reports required to be filed by ~~Sections~~Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ý No ¨

As of ~~March 2, 2018, 109,794,137~~April 30, 2019, 110,858,478 shares of Common Stock, ~~$0.01~~$.01 par value, of the registrant were outstanding.

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



Title of Each Class	Trading Symbols(s)	Name of each exchange on which registered
Common Stock	AVYA	New York Stock Exchange ("NYSE")

TABLE OF CONTENTS


Item	Description	Page	Description	Page

	PART I—FINANCIAL INFORMATION		PART I—FINANCIAL INFORMATION
1.	Financial Statements	1	Financial Statements	1
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
3.	Quantitative and Qualitative Disclosures About Market Risk	55	Quantitative and Qualitative Disclosures About Market Risk	52
4.	Controls and Procedures	55	Controls and Procedures	53

	PART II—OTHER INFORMATION		PART II—OTHER INFORMATION
1.	Legal Proceedings	57	Legal Proceedings	55
1A.	Risk Factors	57	Risk Factors	55
2.	Unregistered Sales of Equity Securities and Use of Proceeds	57	Unregistered Sales of Equity Securities and Use of Proceeds	55
3.	Defaults Upon Senior Securities	57	Defaults Upon Senior Securities	55
4.	Mine Safety Disclosures	57	Mine Safety Disclosures	56
5.	Other Information	57	Other Information	56
6.	Exhibits	58	Exhibits	56
	Signatures	59	Signatures	57

When we use the terms ~~“we,” “us,” “our,” “Avaya”~~"we," "us," "our," "Avaya" or the ~~“Company,”~~"Company," we mean Avaya Holdings Corp., a Delaware corporation, and its consolidated subsidiaries taken as a whole, unless the context otherwise indicates.

This Quarterly Report on Form 10-Q contains the registered and unregistered ~~Avaya Aura~~^®~~, AvayaLive~~^®~~, Scopia~~^® ~~and other~~ trademarks or service marks of Avaya and are the property of Avaya Holdings Corp. and/or its affiliates. This Quarterly Report on Form 10-Q also contains additional ~~tradenames,~~trade names, trademarks or service marks belonging to us and to other companies. We do not intend our use or display of other parties’ trademarks, ~~tradenames~~trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

PART I—FINANCIAL INFORMATION



Item 1.	Financial Statements.

Avaya Holdings Corp.

Condensed Consolidated Statements of Operations (Unaudited)

(In millions, except per share amounts)

Successor Predecessor
Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
REVENUE
Products $ 71
$ 253
$ 401
Services 77
351
474
148
604
875
COSTS
Products:
Costs 33
84
145
Amortization of technology intangible assets 7
3
5
Services 30
155
190
70
242
340
GROSS PROFIT 78
362
535
OPERATING EXPENSES
Selling, general and administrative 50
264
336
Research and development 9
38
62
Amortization of intangible assets 7
10
57
Restructuring charges, net 10
14
10
76
326
465
OPERATING INCOME 2
36
70
Interest expense (9 ) (14 ) (174 )
Other (expense) income, net (2 ) (2 ) 4
Reorganization items, net —
3,416
—
(LOSS) INCOME BEFORE INCOME TAXES (9 ) 3,436
(100 )
Benefit from (provision for) income taxes 246
(459 ) (3 )
NET INCOME (LOSS) $ 237
$ 2,977
$ (103 )
Net income (loss) per share:
Basic $ 2.16
$ 5.19
$ (0.22 )
Diluted $ 2.15
$ 5.19
$ (0.22 )
Weighted average shares outstanding:
Basic 109.8
497.3
497.0
Diluted 110.3
497.3
497.0

~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.~~

~~Avaya Holdings Corp.~~

~~Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)~~

~~(In millions)~~

Successor Predecessor
Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Net income (loss) $ 237
$ 2,977
$ (103 )
Other comprehensive (loss) income:
Pension, post-retirement and postemployment benefit-related items, net of income taxes of $58 for the period from October 1, 2017 through December 15, 2017 and $6 for the three months ended December 31, 2016 —
655
14
Cumulative translation adjustment, net of income taxes of $(4) for the three months ended December 31, 2016 (13 ) 3
23
Other comprehensive (loss) income (13 ) 658
37
Elimination of Predecessor Company accumulated other comprehensive loss —
790
—
Total comprehensive income (loss) $ 224
$ 4,425
$ (66 )



	Successor												Predecessor
	Three months ended March 31, 2019			Three months ended March 31, 2018			Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
REVENUE
Products	$	287		$	293		$	611		$	364		$	253
Services	422			379			836			456			351
	709			672			1,447			820			604
COSTS
Products:
Costs	105			110			220			143			84
Amortization of technology intangible assets	44			41			87			48			3
Services	174			198			347			228			155
	323			349			654			419			242
GROSS PROFIT	386			323			793			401			362
OPERATING EXPENSES
Selling, general and administrative	251			282			508			332			264
Research and development	52			50			105			59			38
Amortization of intangible assets	41			40			81			47			10
Restructuring charges, net	4			40			11			50			14
	348			412			705			488			326
OPERATING INCOME (LOSS)	38			(89		)	88			(87		)	36
Interest expense	(58		)	(47		)	(118		)	(56		)	(14		)
Other income (expense), net	1			(3		)	23			(5		)	(2		)
Reorganization items, net	—			—			—			—			3,416
(LOSS) INCOME BEFORE INCOME TAXES	(19		)	(139		)	(7		)	(148		)	3,436
Benefit from (provision for) income taxes	6			9			3			255			(459		)
NET (LOSS) INCOME	$	(13	)	$	(130	)	$	(4	)	$	107		$	2,977
(LOSS) EARNINGS PER SHARE
Basic	$	(0.12	)	$	(1.18	)	$	(0.04	)	$	0.97		$	5.19
Diluted	$	(0.12	)	$	(1.18	)	$	(0.04	)	$	0.96		$	5.19
Weighted average shares outstanding
Basic	110.8			109.8			110.5			109.8			497.3
Diluted	110.8			109.8			110.5			110.8			497.3

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

Avaya Holdings Corp.

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(In millions)



	Successor												Predecessor
	Three months ended March 31, 2019			Three months ended March 31, 2018			Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
Net (loss) income	$	(13	)	$	(130	)	$	(4	)	$	107		$	2,977
Other comprehensive income (loss):
Pension, post-retirement and postemployment benefit-related items, net of income taxes of $(58) for the period from October 1, 2017 through December 15, 2017	—			—			—			—			655
Cumulative translation adjustment	18			(12		)	19			(25		)	3
Change in interest rate swaps, net of income taxes of $4 and $11 for the three and six months ended March 31, 2019	(10		)	—			(31		)	—			—
Other comprehensive income (loss)	8			(12		)	(12		)	(25		)	658
Elimination of Predecessor Company accumulated other comprehensive loss	—			—			—			—			790
Total comprehensive (loss) income	$	(5	)	$	(142	)	$	(16	)	$	82		$	4,425

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

Avaya Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and ~~shares~~share amounts)


	Successor			Predecessor
	December 31, 2017			September 30, 2017			March 31, 2019		September 30, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	417		$	876		$	735	$	700
Accounts receivable, net	413			536			300		377
Inventory	124			96			66		81
Contract assets							146		—
Contract costs							127		—
Other current assets	230			269			136		170
TOTAL CURRENT ASSETS	1,184			1,777			1,510		1,328
Property, plant and equipment, net	306			200			236		250
Deferred income taxes, net	31			—			26		29
Intangible assets, net	3,421			311			3,066		3,234
Goodwill	2,632			3,542			2,764		2,764
Other assets	53			68			105		74
TOTAL ASSETS	$	7,627		$	5,898		$	7,707	$	7,679
LIABILITIES
Current liabilities:
Debt maturing within one year	$	—		$	725		$	29	$	29
Long-term debt, current portion	29			—
Accounts payable	304			282			275		266
Payroll and benefit obligations	124			127			117		145
Deferred revenue	384			614
Contract liabilities							500		484
Business restructuring reserve	36			35			42		51
Other current liabilities	153			90			143		148
TOTAL CURRENT LIABILITIES	1,030			1,873			1,106		1,123
Non-current liabilities:
Long-term debt, net of current portion	2,867			—			3,093		3,097
Pension obligations	793			513			622		671
Other post-retirement obligations	215			—			174		176
Deferred income taxes, net	444			32			160		140
Business restructuring reserve	34			34			39		47
Other liabilities	377			170			378		374
TOTAL NON-CURRENT LIABILITIES	4,730			749			4,466		4,505
LIABILITIES SUBJECT TO COMPROMISE	—			7,705
TOTAL LIABILITIES	5,760			10,327			5,572		5,628
Commitments and contingencies (Note 20)
Predecessor equity awards on redeemable shares	—			7
Predecessor preferred stock, $0.001 par value, 250,000 shares authorized at September 30, 2017
Convertible Series B preferred stock; 48,922 shares issued and outstanding at September 30, 2017	—			393
Series A preferred stock; 125,000 shares issued and outstanding at September 30, 2017	—			184
Successor preferred stock, $0.01 par value; 55,000,000 authorized, no shares issued or outstanding at December 31, 2017				—
STOCKHOLDERS' EQUITY (DEFICIT)
Predecessor common stock, $0.001 par value; 750,000,000 shares authorized, 494,768,243 issued and outstanding at September 30, 2017	—			—
Successor common stock, $0.01 par value; 550,000,000 shares authorized, 110,000,000 issued and 109,794,137 outstanding at December 31, 2017	1			—
Commitments and contingencies (Note 19)
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 55,000,000 shares authorized, no shares issued or outstanding at March 31, 2019 and September 30, 2018							—		—
Common stock, $0.01 par value; 550,000,000 shares authorized; 110,730,362 shares issued and 110,717,682 shares outstanding at March 31, 2019; and 110,218,653 shares issued and 110,012,790 shares outstanding at September 30, 2018							1		1
Additional paid-in capital	1,642			2,389			1,750		1,745
Retained earnings (Accumulated deficit)	237			(5,954		)
Accumulated other comprehensive loss	(13		)	(1,448		)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)	1,867			(5,013		)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	7,627		$	5,898
Retained earnings							378		287
Accumulated other comprehensive income							6		18
TOTAL STOCKHOLDERS' EQUITY							2,135		2,051
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY							$	7,707	$	7,679

~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.~~

~~Avaya Holdings Corp.~~

~~Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)~~

~~(In millions)~~

Common Stock
Number Par Value Additional
Paid-in
Capital (Accumulated
Deficit) Retained Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Stockholders'
(Deficit) Equity
Balance as of September 30, 2017 (Predecessor) 494.8
$ —
$ 2,389
$ (5,954 ) $ (1,448 ) $ (5,013 )
Issuance of common stock, net of shares redeemed and cancelled, under employee stock option plan —
Amortization of share-based compensation 3
3
Accrued dividends on Series A preferred stock (2 ) (2 )
Accrued dividends on Series B preferred stock (4 ) (4 )
Reclassifications to equity awards on redeemable shares 1
1
Net income 2,977
2,977
Other comprehensive income 658
658
Balance as of December 15, 2017 (Predecessor) 494.8
—
2,387
(2,977 ) (790 ) (1,380 )
Cancellation of Predecessor equity (494.8 )
(2,387 ) 2,977
790
1,380
Balance as of December 15, 2017 (Predecessor) —
$ —
$ —
$ —
$ —
$ —

Common Stock
Number Par Value Additional
Paid-in
Capital (Accumulated
Deficit) Retained Earnings Accumulated
Other
Comprehensive
(Loss) Income Total
Stockholders'
Equity
(Deficit)
Balance as of December 15, 2017 (Predecessor) —
$ —
$ —
$ —
$ —
$ —
Issuance of Successor common stock

Common stock issued for Predecessor debt 103.7
1
1,548
1,549
Common stock issued for Pension Benefit Guaranty Corporation 6.1
90
90
Common stock issued for general unsecured creditors or Predecessor debt 0.2
3
3
Balance as of December 15, 2017 (Predecessor) 110.0
$ 1
$ 1,641
$ —
$ —
$ 1,642

Balance as of December 15, 2017 (Successor) 110.0
1
1,641
—
—
1,642
Issuance of common stock, net —
Amortization of share-based compensation 1
1
Net income 237
237
Other comprehensive loss (13 ) (13 )
Balance as of December 31, 2017 (Successor) 110.0
$ 1
$ 1,642
$ 237
$ (13 ) $ 1,867

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

Avaya Holdings Corp.

Condensed Consolidated Statements of ~~Cash Flows~~Changes in Stockholders' Equity (Deficit) (Unaudited)

(In millions)



	Common Stock				Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
	Shares		Par Value		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity
Balance as of September 30, 2018 (Successor)	110.2		$	1	$	1,745		$	287		$	18		$	2,051
Issuance of common stock under the equity incentive plan	0.8													—
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(0.3	)			(6		)							(6		)
Amortization of share-based compensation					6									6
Adjustment for adoption of new accounting standard (Note 2)								92						92
Net income								9						9
Other comprehensive loss											(20		)	(20		)
Balance as of December 31, 2018 (Successor)	110.7		1		1,745			388			(2		)	2,132
Amortization of share-based compensation					5									5
Adjustment for adoption of new accounting standard (Note 2)								3						3
Net loss								(13		)				(13		)
Other comprehensive income											8			8
Balance as of March 31, 2019 (Successor)	110.7		$	1	$	1,750		$	378		$	6		$	2,135



	Common Stock				Additional Paid-In Capital			Accumulated						Total Stockholders' (Deficit) Equity
	Shares		Par Value		Additional Paid-In Capital			(Deficit) Retained Earnings			Other Comprehensive (Loss) Income			Total Stockholders' (Deficit) Equity
Balance as of September 30, 2017 (Predecessor)	494.8		$	—	$	2,389		$	(5,954	)	$	(1,448	)	$	(5,013	)
Amortization of share-based compensation					3									3
Accrued dividends on Series A preferred stock					(2		)							(2		)
Accrued dividends on Series B preferred stock					(4		)							(4		)
Reclassifications to equity awards on redeemable shares					1									1
Net income								2,977						2,977
Other comprehensive income											658			658
Balance as of December 15, 2017 (Predecessor)	494.8		$	—	$	2,387		$	(2,977	)	$	(790	)	$	(1,380	)
Cancellation of Predecessor equity	(494.8	)	—		(2,387		)	2,977			790			1,380
Balance as of December 15, 2017 (Predecessor)	—		$	—	$	—		$	—		$	—		$	—

Balance as of December 15, 2017 (Predecessor)	—		$	—	$	—		$	—		$	—		$	—
Common stock issued for settlement of Predecessor debt	103.9		1		1,575									1,576
Common stock issued for Pension Benefit Guaranty Corporation	6.1		—		92									92
Balance as of December 15, 2017 (Predecessor)	110.0		$	1	$	1,667		$	—		$	—		$	1,668


Balance as of December 16, 2017 (Successor)	110.0		$	1	$	1,667		$	—		$	—		$	1,668
Amortization of share-based compensation					1									1
Net income								237						237
Other comprehensive loss											(13		)	(13		)
Balance as of December 31, 2017 (Successor)	110.0		1		1,668			237			(13		)	1,893
Amortization of share-based compensation					5									5
Net loss								(130		)				(130		)
Other comprehensive loss											(12		)	(12		)
Balance as of March 31, 2018 (Successor)	110.0		$	1	$	1,673		$	107		$	(25	)	$	1,756

Successor Predecessor
Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
OPERATING ACTIVITIES:
Net income (loss) $ 237
$ 2,977
$ (103 )
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation and amortization 22
31
90
Share-based compensation 1
—
2
Amortization of debt issuance costs —
—
36
Accretion of debt discount —
—
25
Provision for uncollectible receivables 1
(1 ) 1
Deferred income taxes, net (245 ) 455
(1 )
Post-retirement curtailment —
—
(4 )
Loss on disposal of long-lived assets —
1
—
Unrealized gain on foreign currency exchange (4 ) —
(8 )
Reorganization items:
     Net gain on settlement of Liabilities subject to compromise —
(1,804 ) —
     Payment to PBGC —
(340 ) —
     Payment to pension trust —
(49 ) —
     Payment of unsecured claims —
(58 ) —
     Fresh start adjustments, net —
(1,671 ) —
  Non-cash and financing related reorganization items, net —
26
—
Changes in operating assets and liabilities:
Accounts receivable 5
14
54
Inventory 3
(2 ) 1
Accounts payable 27
(40 ) (22 )
Payroll and benefit obligations (22 ) 16
(56 )
Business restructuring reserve (3 ) (7 ) (18 )
Deferred revenue 44
28
1
Other assets and liabilities —
(16 ) (42 )
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 66
(440 ) (44 )
INVESTING ACTIVITIES:
Capital expenditures (2 ) (13 ) (14 )
Acquisition of businesses, net of cash acquired —
—
(4 )
Restricted cash 10
21
—
Other investing activities, net —
—
3
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 8
8
(15 )
FINANCING ACTIVITIES:
Proceeds from Term Loan Credit Agreement —
2,896
—
Repayment of DIP financing —
(725 ) —
Repayment of first lien debt —
(2,061 ) —
Repayment of Foreign ABL —
—
(5 )
Repayment of Domestic ABL —
—
(22 )
Repayment of long-term debt, including adequate protection payments —
(111 ) (6 )
Debt issuance costs —
(97 ) —
Repayments of borrowings on revolving loans under the Senior Secured Credit Agreement —
—
(18 )
Repayments of borrowings under sale-leaseback transaction —
(4 ) (5 )
Other financing activities, net —
—
(1 )
NET CASH USED FOR FINANCING ACTIVITIES —
(102 ) (57 )
Effect of exchange rate changes on cash and cash equivalents 3
(2 ) (11 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 77
(536 ) (127 )
Cash and cash equivalents at beginning of period 340
876
336
Cash and cash equivalents at end of period $ 417
$ 340
$ 209

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

Avaya Holdings Corp.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)



	Successor						Predecessor
	Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
OPERATING ACTIVITIES:
Net (loss) income	$	(4	)	$	107		$	2,977
Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities:
Depreciation and amortization	225			145			31
Share-based compensation	11			6			—
Amortization of debt issuance costs	8			—			—
Accretion of debt discount	3			1			—
Deferred income taxes, net	3			(240		)	455
Change in fair value of emergence date warrants	(21		)	15			—
Unrealized loss (gain) on foreign currency transactions	12			(7		)	—
Other non-cash charges, net	7			1			—
Reorganization items:
Net gain on settlement of Liabilities subject to compromise	—			—			(1,778		)
Payment to Pension Benefit Guaranty Corporation	—			—			(340		)
Payment to pension trust	—			—			(49		)
Payment of unsecured claims	—			—			(58		)
Fresh start adjustments, net	—			—			(1,697		)
Non-cash and financing related reorganization items, net	—			—			26
Changes in operating assets and liabilities:
Accounts receivable	74			29			40
Inventory	(9		)	22			—
Contract assets	(68		)	—			—
Contract costs	(30		)	—			—
Accounts payable	5			50			(40		)
Payroll and benefit obligations	(63		)	(34		)	16
Business restructuring reserve	(15		)	22			(7		)
Contract liabilities	50			74			28
Other assets and liabilities	(65		)	(97		)	(18		)
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES	123			94			(414		)
INVESTING ACTIVITIES:
Capital expenditures	(47		)	(18		)	(13		)
Acquisition of businesses, net of cash acquired	—			(158		)	—
Other investing activities, net	(1		)	1			—
NET CASH USED FOR INVESTING ACTIVITIES	(48		)	(175		)	(13		)
FINANCING ACTIVITIES:
Proceeds from Term Loan Credit Agreement	—			—			2,896
Repayment of debtor-in-possession financing	—			—			(725		)
Repayment of first lien debt	—			—			(2,061		)
Repayment of long-term debt, including adequate protection payments	(15		)	(7		)	(111		)
Debt issuance costs	—			—			(97		)
Payment of acquisition-related contingent consideration	(9		)	—			—
Payments related to sale-leaseback transactions	(8		)	(4		)	(4		)
Other financing activities, net	(7		)	—			—
NET CASH USED FOR FINANCING ACTIVITIES	(39		)	(11		)	(102		)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1		)	9			(2		)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	35			(83		)	(531		)
Cash, cash equivalents, and restricted cash at beginning of period	704			435			966
Cash, cash equivalents, and restricted cash at end of period	$	739		$	352		$	435

~~AVAYA HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

Avaya Holdings Corp.

Notes to Condensed Consolidated Financial Statements (Unaudited)


1.	~~Background and Basis of Presentation~~

1. Background and Basis of Presentation

Background

Avaya Holdings Corp. (the "Parent" or "Avaya Holdings"), together with its consolidated subsidiaries (collectively, the ~~“Company”~~"Company" or ~~“Avaya”~~"Avaya"), is a ~~leading~~ global ~~provider of software and associated hardware~~leader in digital communications products, solutions and services for ~~contact center~~businesses of all sizes. Avaya builds open, converged and ~~unified~~innovative solutions to enhance and simplify communications ~~offered on-premises,~~and collaboration in the cloud, on-premises or as a hybrid ~~solution. Avaya provides the mission-critical, real-time communication applications for small businesses~~of both. The Company's global team of professionals delivers services from initial planning and design, to ~~large multinational enterprises~~implementation and ~~government organizations.~~integration, to ongoing managed operations, optimization, training and support. Currently, the Company manages its business operations in two segments, ~~Global Communications~~Products & Solutions ~~("GCS") representing the Company's products portfolio,~~ and ~~Avaya Global Services ("AGS") representing the Company's services portfolio.~~Services. The Company sells directly through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, system integrators and business partners that provide sales and services support.

Basis of Presentation

Avaya Holdings has no material assets or standalone operations other than its ownership inof Avaya Inc. and its subsidiaries. The accompanying unaudited interim Condensed Consolidated Financial Statements as of ~~December~~March 31, ~~2017~~2019 and for the six months ended March 31, 2019, the period from December 16, 2017 through ~~December~~March 31, ~~2017,~~2018, and the period from October 1, 2017 through December 15, 2017, ~~and the three months ended December 31, 2016,~~ reflect the operating results of Avaya Holdings and its consolidated subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States of America ~~(“GAAP”~~("GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ~~(“SEC”~~("SEC") for interim financial statements, and should be read in conjunction with the audited Consolidated Financial Statements and other financial information for the fiscal year ended September 30, ~~2017,~~2018, included in ~~Amendment No. 3 to~~ the ~~Company’s~~ Company's Form 1010-K filed with the SEC on ~~January 10,~~December 21, 2018. In ~~management’s~~management's opinion, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to ~~present~~state fairly the results of operations, financial position and cash flows for the periods indicated. The condensed consolidated results of operations for the interim periods reported are not necessarily indicative of ~~our~~the results for the entire fiscal year.

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. These estimates include assessing the collectability of accounts receivable, sales returns and allowances, the use and recoverability of inventory, the realization of deferred tax assets, business restructuring reserves, pension and post-retirement benefit costs, the fair value of equity compensation, the fair value of assets and liabilities in connection with fresh start accounting as well as those acquired in business combinations, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill, the amount of exposure from potential loss contingencies, and fair value measurements, among others. The markets for the ~~Company’s~~Company's products are characterized by intense competition, rapid technological development and frequent new product introductions, all of which could affect the future recoverability of the ~~Company’s~~Company's assets. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statements in the period they are determined to be necessary. Actual results ~~could~~may differ from these estimates.

On January 19, 2017 (the “Petition Date”), Avaya Holdings, together with certain of its affiliates, namely Avaya CALA Inc., Avaya EMEA Ltd., Avaya Federal Solutions, Inc., Avaya Holdings LLC, Avaya Holdings Two, LLC, Avaya Inc., Avaya Integrated Cabinet Solutions Inc., Avaya Management Services Inc., Avaya Services Inc., Avaya World Services Inc., Octel Communications LLC, Sierra Asia Pacific Inc., Sierra Communication International LLC, Technology Corporation of America, Inc., Ubiquity Software Corporation, VPNet Technologies, Inc., and Zang, Inc. (the “Debtors”), filed voluntary petitions for relief (the “Bankruptcy Filing”) under Chapter 11 ofDuring the United States Bankruptcy Code (the “Bankruptcy Code’) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court’). The cases were jointly administered as Case No. 17-10089 (SMB). The Debtors operated their businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 of the Bankruptcy Code and the orders of the Bankruptcy Court until their emergence from bankruptcy on December 15, 2017.

Subsequent to the Petition Date, all expenses, gains and losses directly associated with the reorganization proceedings were reported as Reorganization items, net in the accompanying Condensed Consolidated Statements of Operations. In addition, Liabilities subject to compromise during Chapter 11 proceedings were distinguished from liabilities of the non-debtors and

from post-petition liabilities in the accompanying Condensed Consolidated Balance Sheets. The Company's other subsidiaries that were not part of the Bankruptcy Filing ("non-debtors") continued to operate in the ordinary course of business.

~~Upon emergence from bankruptcy on December 15, 2017 (the "Emergence Date"),~~six months ended March 31, 2019, the Company ~~applied fresh start accounting, which~~recorded an out-of-period adjustment to correct sales and marketing expense. The impact resulted in a ~~new basis~~$5 million increase to Selling, general and administrative expense and a decrease to net income of ~~accounting and~~$3 million for the ~~Company becoming a new entity for financial reporting purposes. As a result of~~six months ended March 31, 2019. Management concluded that the application of fresh start accounting and the effects of the implementation of the Second Amended Joint Plan of Reorganization filed by the Debtors on October 24, 2017 and approved by the Bankruptcy Court on November 28, 2017 (the "Plan of Reorganization"), thecorrection was not material to any previously issued consolidated financial statements ~~after~~or to the ~~Emergence Date, are not comparable with the consolidated financial statements on or before that date. Refer to Note 5, "Fresh Start Accounting," for additional information.~~six months ended March 31, 2019.

The accompanying Condensed Consolidated Financial Statements of the Company have been prepared on a basis that assumes that the Company will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. ~~During the~~

On January 19, 2017 (the "Petition Date"), Avaya Holdings, together with certain of its affiliates, namely Avaya CALA Inc., Avaya EMEA Ltd., Avaya Federal Solutions, Inc., Avaya Holdings LLC, Avaya Holdings Two, LLC, Avaya Inc., Avaya Integrated Cabinet Solutions Inc. (n/k/a Avaya Integrated Cabinet Solutions LLC), Avaya Management Services Inc., Avaya Services Inc., Avaya World Services Inc., Octel Communications LLC, Sierra Asia Pacific Inc., Sierra Communication International LLC, Technology Corporation of America, Inc., Ubiquity Software Corporation, VPNet Technologies, Inc. and Zang, Inc. (n/k/a Avaya Cloud Inc.) (the "Debtors"), filed voluntary petitions for relief (the "Bankruptcy Filing") under Chapter 11 ~~proceedings,~~of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The cases were jointly administered as Case No. 17-10089 (SMB). The Bankruptcy Court confirmed the Company's ability to continue as a going concern was contingent upon its ability to comply with the financial and other covenants contained in its debtor-in-possession credit agreement, the Bankruptcy Court's approval of the Company'sSecond Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and its Debtor Affiliates filed on October 24, 2017 (the "Plan of Reorganization") on November 28, 2017. Confirmation of the Plan of

Reorganization resulted in the discharge of certain claims against the Company that arose before the Petition Date and terminated all rights and interests of equity security holders as provided for in the Plan of Reorganization. The Debtors operated their businesses as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Chapter 11 of the Bankruptcy Code and the ~~Company's ability to successfully implement~~orders of the Bankruptcy Court until the Plan of Reorganization ~~among other factors.~~was substantially consummated and they emerged from bankruptcy on December 15, 2017 (the "Emergence Date").

On the Emergence Date, the Company applied fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the ~~execution~~application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, ~~there is no longer substantial doubt about~~ the ~~Company's ability to continue as a going concern.~~Condensed Consolidated Financial Statements after the Emergence Date, are not comparable with the Condensed Consolidated Financial Statements on or before that date.

References to "Successor" or "Successor Company" relate to the financial position and results of operations of the reorganized Avaya Holdings after the Emergence Date. References to "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of Avaya Holdings on or before the Emergence Date.

2. ~~Accounting Policy Changes~~

The Company emerged from bankruptcy on December 15, 2017, and qualified for fresh start accounting. Fresh start accounting allows a company to set new accounting policies for the successor company independent of those followed by the predecessor company. As such, the following are the accounting policy changes the Successor Company has adopted.

~~Fair Value of Equity Awards~~

~~Successor Accounting Policy:~~ The Black-Scholes-Merton option pricing model ("Black-Scholes") replaced the Cox-Ross-Rubinstein ("CRR") binomial option pricing model in calculating the fair value of equity awards, including the fair value of warrants to purchase common stock. In addition to the change in option pricing models, the Company now accounts for forfeitures as incurred.

~~Predecessor Accounting Policy:~~ The CRR binomial option pricing model was utilized to determine the grant date fair values of the equity awards, including the fair value of the Preferred Series A and B Stock warrants. Forfeitures was an input assumption in the valuation model.

~~Uncollected Deferred Revenue~~

~~Successor Accounting Policy:~~ The Company does not recognize deferred revenue relating to any sales transactions that have been billed, but for which the related account receivable has not yet been collected. The aggregate amount of unrecognized accounts receivable and deferred revenue was $100 million at December 31, 2017.

~~Predecessor Accounting Policy:~~ ~~The Company recorded the deferred revenue and related collectible accounts receivable in its consolidated balance sheets.~~

~~Foreign Currency~~

~~Successor Accounting Policy:~~ ~~Income and expense of non-U.S. dollar functional currency subsidiaries are translated into U.S. dollars using an average rate for the period.~~

~~Predecessor Accounting Policy:~~ ~~Income and expense of non-U.S. dollar functional currency subsidiaries are translated into U.S. dollars at the spot rate for the transaction.~~

3. Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In ~~March 2016,~~January 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. ~~2016-09, "Improvements to Employee Share-Based Payment Accounting.~~2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business." This standard ~~simplifies~~clarifies the ~~accounting~~definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for ~~share-based payments and their presentation in the statements~~as acquisitions (or disposals) of ~~cash flows as well as the income tax effects of share-based payments.~~assets or businesses. The Company adopted this standard as of October 1, ~~2017~~2018 on a prospective basis. The adoption of this standard did not have ~~a material~~an impact on ~~its~~the Company's Condensed Consolidated Financial ~~Statements.~~

Statements, however, the future impact of the standard will depend on the nature of any future acquisitions or dispositions made by the Company.

In ~~March 2017,~~November 2016, the FASB issued ASU No. ~~2017-07, "Improving the Presentation~~2016-18, "Statement of ~~Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost.~~Cash Flows (Topic 230): Restricted Cash." This standard ~~changes how employers that sponsor defined benefit pension and other post-retirement benefit plans present net periodic benefit cost~~requires the statement of cash flows to explain the change during the period in the ~~income statement. This amendment requires that~~total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the ~~service cost component be disaggregated from the other components of pension~~beginning-of-period and ~~post-retirement benefit costs~~end-of-period total amounts shown on the ~~income statement. The service cost component is reported in the same line items as other compensation costs and the other components~~statement of pension and post-retirement benefit costs (including interest cost, expected return on plan assets, amortization and curtailments and settlements) are reported in Other income (expense), net in the Company's Condensed Consolidated Financial Statements.cash flows. The Company ~~early~~ adopted this ~~accounting~~ standard as of October 1, ~~2017. Changes~~2018 applying the retrospective transition method to ~~the Condensed Consolidated Financial Statements have been applied retrospectively. As a result, the Company reclassified $(6)~~each period presented. The adoption resulted in an increase of Net cash used for investing activities of $28 million ~~of other pension~~ and ~~post-retirement benefit costs to other income (expense), net~~$21 million for ~~the three months ended December 31, 2016 (Predecessor). For~~ the period from December 16, 2017 through ~~December~~March 31, ~~2017~~2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), respectively.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments." This standard addresses the appropriate classification of certain cash flows as operating, investing, or financing. The Company ~~recorded $1 million and $(8) million, respectively,~~adopted this standard as of ~~other pension and post-retirement benefit costs in other income (expense), net.~~

~~Recent Standards Not Yet Effective~~October 1, 2018 applying the retrospective transition method to each accounting period presented. The adoption of the standard did not have a material impact on the Company's Condensed Consolidated Financial Statements.

In May 2014, the FASB issued ASU No. 2014-09, ~~“Revenue~~"Revenue from Contracts with ~~Customers.”~~Customers (Topic 606)" ("ASC 606"). This standard ~~supersedes~~superseded most of the ~~current~~previous revenue recognition guidance under GAAP and is intended to improve and converge with international standards the financial reporting requirements for revenue recognition. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of control 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. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. ~~Subsequently,~~The Company adopted ASC 606 as of October 1, 2018 using the modified retrospective transition method applied to all open contracts with customers that were not completed as of September 30, 2018.

Upon adoption of ASC 606, sales that include professional services, are generally recognized as the services are performed as opposed to upon completion and acceptance of the project. When such arrangements include products, products revenue is generally recognized when the products are delivered as opposed to upon completion and acceptance of the project. Additionally, for cloud and managed services arrangements pursuant to which the customer purchases and owns the solution and Avaya provides the software as a service ("SaaS"), control of the software generally transfers to the customer and the related revenue is recognized, at the point-in-time the SaaS commences. Revenue recognition related to stand-alone product shipments, maintenance services, and certain cloud offerings remains substantially unchanged. In addition to the impacts on revenue recognition, the standard requires incremental contract acquisition costs (primarily sales commissions) to be capitalized and amortized on a systematic basis that is consistent with the transfer of goods or services to which the asset relates. These costs were formerly expensed as incurred. The impact of adopting ASC 606 is dependent upon contract-specific

terms and the Company has chosen to use the allowed practical expedient whereby, incremental contract acquisition costs with an amortization period of one year or less are expensed as incurred.

On October 1, 2018, the beginning of the Company's fiscal 2019, the Company recorded a net increase to the opening Retained earnings balance of $92 million, net of tax, due to the cumulative impact of adopting ASC 606. During the three and six months ended March 31, 2019, the Company recorded a $3 million adjustment to correct the ASC 606 impact that was recorded to Retained earnings on October 1, 2018. In connection with this adjustment, the Company also recorded an out-of-period adjustment during the six months ended March 31, 2019 to correct goodwill recognized upon the application of fresh start accounting, which resulted in a $2 million decrease to Contract liabilities and a $2 million decrease to Goodwill. Management concluded that these corrections were not material to previously issued consolidated financial statements and to the three and six months ended March 31, 2019.

The revised net increase to Retained earnings due to the cumulative impact of adopting ASC 606 was $95 million, net of tax. The increase to Retained earnings included $97 million for the portion of the transaction price that would have been recognized as revenue under prior guidance (ASC "605"). These amounts will not be recognized as revenue in future periods and are primarily attributable to open contracts that contained professional services, both on a stand-alone basis and when sold together with hardware and software, for which revenue recognition was deferred until project completion under ASC 605.

The impact of the adoption of ASC 606 on the September 30, 2018 Condensed Consolidated Balance Sheet was as follows:



	September 30, 2018					Upon Adoption of ASC 606
(In millions)	As Reported		Adjustments			Upon Adoption of ASC 606
ASSETS
Accounts receivable, net	$	377	$	(1	)	$	376
Inventory	81		(24		)	57
Contract assets	—		78			78
Contract costs	—		109			109
Other current assets	170		(66		)	104
Property, plant and equipment, net	250		(1		)	249
Deferred income taxes, net	29		(2		)	27
Other assets	74		16			90

LIABILITIES
Contract liabilities	484		(17		)	467
Other current liabilities	148		4			152
Deferred income taxes, net	140		29			169
Other liabilities	374		(2		)	372

STOCKHOLDERS' EQUITY
Retained earnings	287		95			382

For additional information refer to Note 3, "Revenue Recognition," for disclosures related to the adoption of ASC 606 and an updated accounting policy related to revenue recognition and contract costs.

Recent Standards Not Yet Effective

In August 2018, the FASB issued ~~several standards~~ASU 2018-15, "Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that ~~clarified~~is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for the Company in the first quarter of fiscal 2021, with early adoption permitted. The Company is currently assessing the impact the new guidance will have on its Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans." This standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. This update removes disclosures that are not considered cost beneficial, clarifies certain ~~aspects~~required disclosures and adds additional disclosures. This standard is effective for the Company beginning in fiscal 2021, with early adoption permitted. The

amendments in the standard need to be applied on a retrospective basis. The Company is currently assessing the impact of the standard ~~but did not change~~on its disclosures.

In August 2018, the ~~original standard.~~FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement." This ~~new guidance~~standard modifies the disclosure requirements on fair value measurements by removing certain disclosures, modifying certain disclosures and adding additional disclosures. This standard is effective for the Company beginning in the first quarter of fiscal ~~2019. The ASU may~~2021. Certain disclosures in the standard need to be applied ~~retrospectively (a)~~on a retrospective basis and others on a prospective basis. The Company is currently assessing the impact of the standard on its disclosures.

In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This standard allows companies to reclassify from accumulated other comprehensive income to retained earnings any stranded tax benefits resulting from the enactment of the Tax Cuts and Jobs Act. This standard is effective for the Company beginning in the first quarter of fiscal 2020. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This standard, along with other guidance subsequently issued by the FASB, requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This standard is effective for the Company in the first quarter of fiscal 2021 on a prospective basis. The Company is currently evaluating the impact that the adoption of this standard may have on its Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." This standard, along with other guidance subsequently issued by the FASB, requires lessees to recognize lease assets and liabilities for all leases with lease terms of more than 12 months. The standard makes similar changes to lessor accounting and aligns key aspects of the lessor accounting model with the revenue recognition standard. Presentation of leases within the statements of operations and statements of cash flows will primarily depend on its classification as a finance or operating lease. This standard is effective for the Company in the first quarter of fiscal 2020 with early adoption permitted. The Company expects to adopt this standard using a modified retrospective approach in the first quarter of fiscal 2020 and is continuing to evaluate the impact of this standard on its Condensed Consolidated Financial Statements.

3. Revenue Recognition

On October 1, 2018, the Company adopted ASC 606 using the modified retrospective transition method. Accordingly, the impact of adoption is recorded as an adjustment to retained earnings as of October 1, 2018 and represents the difference between ASC 606 and ASC 605 applied to all open contracts with customers that were not completed as of September 30, 2018. Under the modified retrospective method, results for reporting periods beginning after September 30, 2018 are presented under ASC 606 while prior period financial information is not adjusted and continues to be reported in accordance with ASC 605. The Company elected to use the contract modification practical expedient whereby, all contract modifications for each contract before October 1, 2018 are aggregated and evaluated at the adoption date.

Impact of ASC 606 on Financial Statement Line Items

The impact of the adoption of ASC 606 by financial statement line item within the Condensed Consolidated Balance Sheet as of March 31, 2019 is as follows:



	March 31, 2019
(In millions)	As Reported		Adjustments			Without Adoption of ASC 606
ASSETS
Accounts receivable, net	$	300	$	2		$	302
Inventory	66		43			109
Contract assets	146		(146		)	—
Contract costs	127		(127		)	—
Other current assets	136		102			238
Property, plant and equipment, net	236		1			237
Deferred income taxes, net	26		2			28
Other assets	105		(13		)	92

LIABILITIES
Accounts payable	275		(1		)	274
Contract liabilities	500		35			535
Other current liabilities	143		(9		)	134
Deferred income taxes, net	160		(29		)	131
Other liabilities	378		2			380

STOCKHOLDERS' EQUITY
Retained earnings	378		(134		)	244

The impact of the adoption of ASC 606 by financial statement line item within the Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2019 is as follows:



	Three months ended March 31, 2019									Six months ended March 31, 2019
(In millions)	As Reported			Adjustments			Without Adoption of ASC 606			As Reported			Adjustments			Without Adoption of ASC 606
REVENUE
Products	$	287		$	(15	)	$	272		$	611		$	(45	)	$	566
Services	422			(21		)	401			836			(41		)	795
	709			(36		)	673			1,447			(86		)	1,361
COSTS
Products:
Costs	105			(3		)	102			220			(9		)	211
Amortization of technology intangible assets	44			—			44			87			—			87
Services	174			(7		)	167			347			(13		)	334
	323			(10		)	313			654			(22		)	632
GROSS PROFIT	386			(26		)	360			793			(64		)	729
OPERATING EXPENSES
Selling, general and administrative	251			(4		)	247			508			4			512
Research and development	52			—			52			105			—			105
Amortization of intangible assets	41			—			41			81			—			81
Restructuring charges, net	4			—			4			11			—			11
	348			(4		)	344			705			4			709
OPERATING INCOME	38			(22		)	16			88			(68		)	20
Interest expense	(58		)	—			(58		)	(118		)	—			(118		)
Other income, net	1			—			1			23			—			23
LOSS BEFORE INCOME TAXES	(19		)	(22		)	(41		)	(7		)	(68		)	(75		)
Benefit from income taxes	6			11			17			3			29			32
NET LOSS	$	(13	)	$	(11	)	$	(24	)	$	(4	)	$	(39	)	$	(43	)

The adoption of ASC 606 did not impact net cash provided by or used for operating, investing, or financing activities within the Condensed Consolidated Statement of Cash Flows for the six months ended March 31, 2019.

Revenue Recognition Policy

The Company derives revenue primarily from the sale of products and services for communications systems and applications. The Company sells directly through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, systems integrators and business partners that provide sales and services support.

In accordance with ASC 606, the Company accounts for a customer contract when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance and it is at least probable that the Company will collect the consideration to which it is entitled. Revenue is recognized upon the transfer of control of the promised products and services to customers. Judgment is required in instances where the Company’s contracts include multiple products and services to determine whether each should be accounted for as a separate performance obligation. The Company enters into contracts that include various combinations of products and services, each of which is generally capable of being distinct as well as distinct within the context of the contracts.

Customer contracts are typically made pursuant to purchase orders and statements of work based on master purchase or partner agreements. Invoicing typically occurs upon customer acceptance or monthly for a series of services. Payment is due based on the Company’s standard payment terms which is typically within 30 to 60 days of invoice issuance. The Company does not typically provide financing arrangements to customers. For certain services and customer types, customers will remit payment before the services are provided. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company determined that contracts do not include a significant financing component. The primary purpose of the invoicing terms is to provide customers with simplified and predictable ways of purchasing products and services, not to receive financing from or to provide financing to customers. Certain contracts include performance obligations accounted for as a

series which also include variable consideration (primarily usage-based fees). For these arrangements, variable consideration is not estimated and allocated to the entire performance obligation, rather the variable fees are recognized in the period in which the usage occurs in accordance with the "right to invoice" practical expedient.

The total transaction price for each contract is determined based on the total consideration specified in the contract, including variable consideration such as sales incentives and other discounts. The expected value method is generally used when estimating variable consideration, which typically reduces the total transaction price due to the nature of the elements to which the variable consideration relates. These estimates reflect the Company’s historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying patterns. The Company excludes from the transaction price all taxes assessed by governmental authorities that are both (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers. Accordingly, such tax amounts are not included as a component of net sales or cost of sales.The expected value method requires judgment and considers multiple factors that may vary over time depending upon the unique facts and circumstances related to each ~~reporting period presented~~performance obligation. Depending on the facts and circumstances, a change in variable consideration estimate will either be accounted for at the contract level or ~~(b)~~using the portfolio method, in accordance with the ~~cumulative effect~~prescribed practical expedient. Reserves for contractual stock rotation rights to channel partners to support the management of inventory and certain other sales incentives are determined using the portfolio method. The Company also considers the customers’ rights of return in ~~retained earnings~~determining the transaction price where applicable.

The Company allocates the transaction price to each performance obligation based on its relative standalone selling price and recognizes revenue as each performance obligation is satisfied. Judgment is required to determine the standalone selling price for each distinct performance obligation. The Company uses a range of selling prices to estimate standalone selling price when each of the products and services is sold separately. The Company typically has more than one standalone selling price for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, the Company may use information such as the size of the customer and geographic region in determining the standalone selling price. In instances where standalone selling price is not directly observable, such as when we do not sell the product or service separately, the Company determines the standalone selling price using information that may include market conditions and other observable inputs.

Amounts billed to customers for shipping and handling activities are considered contract fulfillment activities and not a separate performance obligation of the contract. Shipping and handling fees are recorded as revenue and the related cost is a cost to fulfill the contract.

Contract modifications are accounted for as separate contracts if the additional products and services are distinct and priced at standalone selling prices. If the additional products and services are distinct, but not priced at standalone selling prices, the modification is treated as a termination of the existing contract and the creation of a new contract. Lastly, if the additional products and services are not distinct within the context of the contract, the modification is combined with the original contract and either an increase or decrease in revenue is recognized on the modification date.

Software

The Company’s software licenses provide users with access to capabilities such as voice, video, conferencing, messaging and collaboration. Software licenses also add functionality to the Company’s hardware. The Company’s software licenses for on-premise customer software provide the customer with a right to use the software as it exists when it is made available to the customer and are accounted for as distinct performance obligations. The Company’s software licenses are sold through both direct and indirect channels with terms that are either perpetual or time based, both of which provide the end-user with the same functionality. The main difference between perpetual and term licenses is the duration over which the customer benefits from the software. Revenue from on-premise customer software licenses is generally recognized at the point-in-time the software is made available to the customer, via direct sale to the end-user or indirect sale to a channel partner, based on the fixed minimum revenue commitment under the arrangement. However, revenue cannot be recognized before the beginning of the ~~adoption period.~~period during which the customer can use and benefit from the license. In instances where the Company’s software licenses include a usage-based fee, revenue associated with the incremental usage is recognized at the point-in-time the incremental usage occurs.

~~We currently anticipate adoption~~Hardware

The Company’s hardware, phones, gateways, and servers, each of which has a stand-alone functionality, are generally considered distinct performance obligations. Hardware is sold through both direct and indirect channels and revenue is recognized at the point-in-time at which control of the ~~new standard effective October 1, 2018 using the modified retrospective method whereby the cumulative effect~~product is recorded to retained earnings at the beginning of the adoption period. Adoption of the standard is dependent on completion of a detailed accounting assessment, the success of the design and implementation phase for changes to the Company's processes, internal controls and system functionality and the completion of our analysis of information necessary to assess the overall impact of adoption of this guidance on our consolidated financial statements.

We continue to make progress on the accounting assessment and implementation phases to identify and implement the required changes to accounting policies and disclosures in our consolidated financial statements. We have reached preliminary conclusions on certain accounting assessments and we will continue to monitor and assess the impact of changes to the standard and interpretations as they become available. We expect revenue recognition related to our stand-alone product shipments and maintenance services to remain substantially unchanged. However, we continue to evaluate our preliminary conclusion and assess the impact on our other sources of revenue recognition.

~~4. Emergence from Voluntary Reorganization under Chapter 11 Proceedings~~

~~Plan of Reorganization~~

On November 28, 2017, the Bankruptcy Court entered an order confirming the Plan of Reorganization. On the Emergence Date, the Plan of Reorganization became effective and the Debtors emerged from bankruptcy.

~~On or following the Emergence Date and pursuant to the terms of the Plan of Reorganization, the following occurred:~~

~~Debtor-in-Possession Credit Agreement.~~ ~~The Company paid in full the debtor-in-possession credit agreement (the "DIP Credit Agreement") in the amount of $725 million;~~

~~Predecessor Equity and Indebtedness.~~ The Debtors' obligations under stock certificates, equity interests, and / or any other instrument or document directly or indirectly evidencing or creating any indebtedness or obligation of, or ownership interest in, the Debtors or giving rise to any claim or equity interest were cancelled, except as provided under the Plan of Reorganization;

~~Successor Equity.~~ The Company's certificate of incorporation was amended and restated to authorize the issuance of 605.0 million shares of Successor Company stock, consisting of 55.0 million shares of preferred stock, par value $0.01 per share, and 550.0 million shares of common stock, par value $0.01 per share, of which 110.0 million shares of common stock were issued (as discussed below);

~~Exit Financing.~~ The Successor Company entered into (1) a term loan credit agreement ("the Term Loan Credit Agreement") for a principal amount of $2,925 million maturing on December 15, 2024, and (2) a $300 million asset-based revolving credit facility (the "ABL Credit Agreement") maturing on December 15, 2022;

~~First Lien Debt Claims.~~ All of the Predecessor Company's outstanding obligations under the variable rate term B-3, B-4, B-6, and B-7 loans and the 7% and 9% senior secured notes (collectively, the "Predecessor first lien obligations") were cancelled, and the holders of claims under the Predecessor first lien obligations received 99.3 million shares of Successor Company common stock. In addition, the holders of the Predecessor first lien obligations received cash in the amount of $2,061 million;

~~Second Lien Debt Claims.~~ All the Predecessor Company's outstanding obligations under the 10.50% senior secured notes (the "Predecessor second lien obligations") were cancelled, and the holders of claims under the Predecessor second lien obligations received 4.4 million shares of Successor Company common stock. In addition, holders of the Predecessor second lien obligations received warrants to purchase 5.6 million shares of Successor Company common stock at an exercise price of $25.55 per warrant (the "Warrants");

~~Claims of Pension Benefit Guaranty Corporation ("PBGC").~~ ~~The Predecessor Company's outstanding obligations under the Avaya Inc. Pension Plan for Salaried Employees ("APPSE") were terminated and~~ transferred to the ~~PBGC.~~ customer, via direct sale to the end-user or indirect sale to a channel partner, generally upon delivery, as defined in the contract.

Global Support Services

The ~~PBGC received 6.1 million shares of Successor Company common stock and $340 million~~Company’s global support services provide supplemental maintenance options to end-users in ~~cash; and~~

~~General Unsecured Claims.~~ ~~Holders~~support of the ~~Predecessor Company's general unsecured claims will~~Company’s products and solutions, including when and if available upgrade rights and maintenance for hardware. These services are typically accounted for as distinct performance obligations. Given that global support services consist of a series of distinct promises that are satisfied over time in the form of a single performance obligation comprised of a stand-ready obligation, these services are generally recognized ratably over the period during which the services are performed as customers simultaneously consume and receive ~~their pro rata share~~benefits. Maintenance contracts typically have terms that range from one to five years.

Professional Services

The Company’s professional services include the design, implementation and development of communication solutions. Professional services are sold through the Company’s direct and indirect channels either on a stand-alone basis or with other hardware, software and services and are generally accounted for as distinct performance obligations. Revenue for professional services is generally recognized over time based on the cost of effort incurred to date relative to the total cost of effort expected to be incurred as customers simultaneously consume and receive benefits. Effort incurred generally represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contracts for professional services typically have terms that range from four to six weeks for simple engagements and from six months to one year for more complex engagements.

Cloud and Managed Services

The Company’s managed services provide additional support options to end-users on top of the ~~general unsecured recovery pool. A liquidating trust was established~~Company’s supplemental maintenance services, including hardware support, help-desk routing and system monitoring services. The Company’s managed services are sold either on a stand-alone basis or together with the Company’s hardware, software and other services, and are generally accounted for as distinct performance obligations. The Company’s managed services are provided through both direct and indirect channels. Managed services consist of a series of distinct promises that are satisfied over time in the ~~amount~~form of ~~$58 million~~a single performance obligation comprised of a stand-ready obligation. Contracts for managed services typically have terms that range from one to five years.

The Company’s cloud offerings enable customers to take advantage of our technology via the ~~benefit~~cloud, on-premises, or a hybrid of both. The software that enables the ~~general unsecured claims. Included in the 110.0 million Successor Company common stock issued are 0.2 million additional shares~~core communications functionality is offered both as a sale of ~~common stock that have been issued (but are not outstanding) for the benefit of the general unsecured creditors. The general unsecured creditors will receive~~perpetual or time based licenses or through a total of $58 million in cash and common stock. Any excess cash and / or common stock not distributed to the general unsecured creditors will be distributed to the holders of the Predecessor first lien obligations.

~~Section 363 Asset Sales~~

In July 2017, the Company sold its networking business ("Networking" or the "Networking business") to Extreme Networks, Inc. ("Extreme"). The Networking business was comprised primarily of certain assets of the Company's Networking segment (which prior to the sale was a separate operating segment), along with theSaaS. Cloud offerings can include supplemental maintenance and professional services of the Networking business, which were part of the AGS segment. Under a Transition Services Agreement ("TSA"), the Company provides administrative services to Extreme for process support, maintenancemanaged services and ~~product logistics~~are sold through the Company’s direct and indirect channels.

Cloud and managed services offerings consist of a series of distinct promises that are satisfied over time as a single performance obligation and are generally recognized ratably over the period during which the services are performed as customers simultaneously consume and receive the benefits. The amount allocated to each performance obligation is based on athe fixed contractual amount, which is recognized ratably over the period during which the services are performed as customers simultaneously consume and receive benefits. Variable consideration from incremental usage above the fixed fee ~~basis. While~~is recognized at the ~~TSA can expire sooner,~~point-in-time at which the ~~agreement terminates after 2 years.~~usage occurs.

Warranties

~~5. Fresh Start Accounting~~

~~In connection~~The Company offers standard limited warranties that provide the customer with ~~the Company's emergence from bankruptcy and~~assurance that its products will function in accordance with FASB Accounting Standards Codification ("ASC") 852, "Reorganizations" ("ASC 852"), the Company applied the provisions of fresh start accounting to its Condensed Consolidated Financial Statements on the Emergence Date.contract specifications. The Company was required to use fresh start accounting since (i) the holders of existing voting shares of the Predecessor Company received less than 50% of the voting shares of the emerging entity and (ii) the reorganization value of the Company's assets immediately prior to confirmation of the Plan of Reorganization was less than the post-petition liabilities and allowed claims.

ASC 852 prescribes that with the application of fresh start accounting, the Company allocated its reorganization value to its individual assets based on their estimated fair values in conformity with ASC 805, "Business Combinations". The reorganization value represents the fair value of the Successor Company's assets before considering liabilities. The excess reorganization value over the fair value of identified tangible and intangible assets is reported as goodwill. As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the consolidated financial statements after December 15, 2017Company’s standard limited warranties are not ~~comparable~~sold separately but are included with ~~the consolidated financial statements as of or prior to that date.~~

~~Reorganization Value~~

As set forth in the Plan of Reorganization, the agreed upon enterprise value of the Company was $5,721 million. This value is within the initial range calculated by the Company of approximately $5,100 million to approximately $7,100 million using an income approach. The $5,721 million enterprise value was selected as it was the transaction price agreed to in the global settlement agreement with the Company’s creditor constituencies, including the PBGC. The reorganization value was then determined by adding back liabilities other than interest bearing debt, pensioneach customer purchase. Warranties are not considered separate performance obligations, and therefore, warranty expense is accrued at the ~~deferred tax impact~~time the related revenue is recognized.

Disaggregation of ~~the reorganization and fresh start adjustments.~~

Revenue

The following ~~table reconciles~~tables provide the ~~enterprise value to~~Company's disaggregated revenue for the ~~estimated fair value of the Successor stockholders' equity as of the Emergence Date:~~three and six months ended March 31, 2019:

(In millions, except per share amount)
Enterprise value $ 5,721
Plus:
Cash and cash equivalents 340
Less:
Minimum cash required for operations (120 )
Fair value of Term Loan Credit Agreement⁽¹⁾
(2,896 )
Fair value of capitalized leases (20 )
Fair value of pension and other post-retirement obligations, net of tax⁽²⁾
(856 )
Change in net deferred tax liabilities from reorganization (510 )
Fair value of Successor warrants⁽³⁾
(17 )
Fair value of Successor common stock $ 1,642
Shares issued at December 15, 2017 110.0
Per share value $ 14.93


⁽¹⁾	The fair value of the Term Loan Credit Agreement was determined based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices and was estimated to be 99% of par value.


⁽²⁾	The following assumptions were used when measuring the fair value of the U.S. pension, non-U.S. pension, and post-retirement benefit plans: weighted-average return on assets of 7.75%, 3.80% and 5.90%, and weighted-average discount rate to measure plan obligations of 3.70%, 1.52% and 3.77%, respectively.


⁽³⁾	~~The fair value of the Warrants was estimated using the Black-Scholes pricing model.~~

~~The following table reconciles the enterprise value to the estimated reorganization value as of the Emergence Date:~~

(In millions)
Enterprise value $ 5,721
Plus:
Non-debt current liabilities 955
Non-debt non-current liabilities 2,090
Excess cash and cash equivalents 220
Less:
Pension and other post-retirement obligations, net of deferred taxes (856 )
Capital lease obligations (20 )
Change in net deferred tax liabilities from reorganization (510 )
Warrants issued upon emergence (17 )
Reorganization value of Successor assets $ 7,583

~~Consolidated Balance Sheet~~

The adjustments set forth in the following consolidated balance sheet as of December 15, 2017 reflect the effect of the consummation of the transactions contemplated by the Plan of Reorganization (reflected in the column "Reorganization Adjustments") as well as fair value adjustments as a result of applying fresh start accounting (reflected in the column "Fresh Start Adjustments"). The explanatory notes highlight methods used to determine fair values or other amounts of the assets and liabilities, as well as significant assumptions or inputs.



(In millions)	Three months ended March 31, 2019			Six months ended March 31, 2019
REVENUE
Products & Solutions	$	289		$	615
Services	425			847
Unallocated Amounts	(5		)	(15		)
	$	709		$	1,447

(In millions) Predecessor Company Reorganization Adjustments Fresh Start Adjustments Successor Company December 15, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 744
$ (404 ) (1) $ —
$ 340
Accounts receivable, net 523
—
(106 ) (21,29) 417
Inventory 98
—
29
(22) 127
Other current assets 366
(58 ) (2) (66 ) (23) 242
TOTAL CURRENT ASSETS 1,731
(462 ) (143 ) 1,126
Property, plant and equipment, net 194
—
116
(24) 310
Deferred income taxes, net —
48
(3) (17 ) (25) 31
Intangible assets, net 298
—
3,137
(26) 3,435
Goodwill 3,541
—
(909 ) (27) 2,632
Other assets 70
6
(4) (27 ) (28) 49
TOTAL ASSETS $ 5,834
$ (408 ) $ 2,157
$ 7,583
LIABILITIES
Current liabilities:
Debt maturing within one year $ 725
$ (696 ) (5) $ —
$ 29
Accounts payable 325
(49 ) (6) —
276
Payroll and benefit obligations 123
23
(7) —
146
Deferred revenue 627
50
(8) (341 ) (29) 336
Business restructuring reserve 35
3
(9) —
38
Other current liabilities 97
65
(6,10) (3 ) (30) 159
TOTAL CURRENT LIABILITIES 1,932
(604 ) (344 ) 984
Non-current liabilities:
Long-term debt, net of current portion —
2,771
(11) 96
(31) 2,867
Pension obligations 539
246
(12) —
785
Other post-retirement obligations —
212
(13) —
212
Deferred income taxes, net 28
113
(14) 548
(32) 689
Business restructuring reserve 26
4
(9) 4
(33) 34
Other liabilities 180
233
(8,15) (43 ) (29,34) 370
TOTAL NON-CURRENT LIABILITIES 773
3,579
605
4,957
LIABILITIES SUBJECT TO COMPROMISE 7,585
(7,585 ) (16) —
—
TOTAL LIABILITIES 10,290
(4,610 ) 261
5,941
Commitments and contingencies
Equity awards on redeemable shares 6
(6 ) (17) —
—
Preferred stock:
Series B 397
(397 ) (17) —
—
Series A 186
(186 ) (17) —
—
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock (Successor) —
1
(18) —
1
Additional paid-in capital (Successor) —
1,641
(18) —
1,641
Common stock (Predecessor) —
—
—
—
Additional paid-in capital (Predecessor) 2,387
(2,387 ) (17) —
—
(Accumulated deficit) retained earnings (5,978 ) 4,872
(19) 1,106
(36) —
Accumulated other comprehensive (loss) income (1,454 ) 664
(20) 790
(35) —
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY (5,045 ) 4,791
1,896
1,642
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 5,834
$ (408 ) $ 2,157
$ 7,583



	Three months ended March 31, 2019
(In millions)	Products & Solutions		Services		Unallocated			Total
Revenue:
U.S.	$	130	$	248	$	(3	)	$	375
International:
Europe, Middle East and Africa	93		96		(1		)	188
Asia Pacific	37		43		(1		)	79
Americas International - Canada and Latin America	29		38		—			67
Total International	159		177		(2		)	334
Total revenue	$	289	$	425	$	(5	)	$	709



	Six months ended March 31, 2019
(In millions)	Products & Solutions		Services		Unallocated			Total
Revenue:
U.S.	$	280	$	499	$	(10	)	$	769
International:
Europe, Middle East and Africa	199		190		(2		)	387
Asia Pacific	75		84		(2		)	157
Americas International - Canada and Latin America	61		74		(1		)	134
Total International	335		348		(5		)	678
Total revenue	$	615	$	847	$	(15	)	$	1,447

~~Reorganization Adjustments~~Unallocated amounts represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.

~~In accordance~~Transaction Price Allocated to the Remaining Performance Obligations

Transaction price allocated to remaining performance obligations that are wholly or partially unsatisfied as of March 31, 2019 is $2.7 billion, of which 55% and 27% is expected to be recognized within 12 months and 13-24 months, respectively, with the ~~Plan~~remaining balance recognized thereafter. This excludes amounts for remaining performance obligations that are (1) for contracts recognized over time using the "right to invoice" practical expedient, (2) related to sales or usage based royalties promised in exchange for a license of ~~Reorganization,~~intellectual property, and (3) related to variable consideration allocated entirely to a wholly unsatisfied performance obligation.

Contract Balances

The Company records a contract asset when revenue is recognized in advance of the ~~following adjustments were made:~~

1.~~Sources~~right to bill, pursuant to customer contract terms. The contract asset decreases when the Company has the right to bill the customer which is generally triggered by the satisfaction of additional performance obligations or contract milestones. The Company records a contract liability when payment is received from the customer in advance of the Company satisfying a performance obligation and ~~Uses of Cash.~~the contract liability is reduced as performance obligations are satisfied and revenue is recognized. The ~~following reflects~~Company records the net ~~cash payments recorded as of the Emergence Date as a result of implementing the Plan of Reorganization:~~

(In millions)
Sources:
Proceeds from Term Loan Credit Agreement, net of original issue discount $ 2,896
Release of restricted cash 76
Total sources of cash 2,972
Uses:
Repayment of DIP Credit Agreement (725 )
Payment of DIP accrued interest (1 )
Cash paid to Predecessor first lien debt-holders (2,061 )
Cash paid to PBGC (340 )
Payment for professional fees escrow account (56 )
Funding payment for Avaya represented employee pension plan (49 )
Payment of accrued professional & administrative fees (27 )
Costs incurred for Term Loan Credit Agreement and ABL Credit Agreement (59 )
Payment for general unsecured claims (58 )
Total uses of cash (3,376 )
Net uses of cash $ (404 )


2.	~~Other Current Assets.~~

(In millions)
Release of restricted cash $ (76 )
Reclassification of prepaid debt issuance costs related to the Term Loan Credit Agreement (42 )
Payment of fees related to the ABL Credit Agreement 5
Restricted cash for bankruptcy related professional fees 55
Total other current assets $ (58 )


3.	~~Deferred Income Taxes.~~ The adjustment represents the release of the valuation allowance on deferred tax assets for certain non-U.S. subsidiaries which management believes more likely than not will be realized as a result of the bankruptcy reorganization.


4.	~~Other Assets.~~ ~~The adjustment represents the re-establishment of a foreign prepaid tax.~~


5.	~~Debt Maturing Within One Year.~~ The adjustment represents the net effect of the Company’s repayment of $725 million for the DIP Credit Agreement and Term Loan Credit Agreement principal payments of $29 million due over the next year.

~~Accounts Payable~~. The net decrease of $49 million includes $50 million for professional fees that were reclassified to Other current liabilities for accrued bankruptcy related professional fees that will be paid from an escrow account and the payment of $3 million of bankruptcy related professional fees, partially offset by reinstatement of $4 million contact cure costs from liabilities subject to compromise.


7.	~~Payroll and Benefi~~t ~~Obligations.~~ ~~The Company reinstated $23 million of liabilities subject to compromise related to the post-employment and post-retirement benefit obligations.~~


8.	~~Deferred Revenue.~~ ~~The reinstatement of liabilities subject to compromise was $79 million of which $50 million is included in deferred revenue and $29 million in other liabilities.~~


9.	~~Business Restructuring Reserve.~~ ~~The reinstatement of liabilities subject to compromise was $7 million, of which $3 million is current and $4 million is non-current.~~

contract asset or liability position for each customer contract.

~~10.Other Current Liabilities.~~The following table provides information about accounts receivable, contract assets and contract liabilities for the periods presented:

(In millions)
Reclassification of accrued bankruptcy related professional fees $ 50
Reinstatement of other current liabilities 16
Payment of accrued interest on the DIP Credit Agreement (1 )
Total other current liabilities $ 65



(In millions)	March 31, 2019		October 1, 2018		Increase (Decrease)
Accounts receivable, net	$	300	$	376	$	(76	)

Contract assets:
Current	$	146	$	78	$	68
Non-current (Other assets)	3		3		—
	$	149	$	81	$	68

Cost of obtaining a contract:
Current (Contract costs)	$	84	$	64	$	20
Non-current (Other assets)	48		36		12
	$	132	$	100	$	32

Cost to fulfill a contract:
Current (Contract costs)	$	43	$	45	$	(2	)

Contract liabilities:
Current	$	500	$	467	$	33
Non-current (Other liabilities)	69		52		17
	$	569	$	519	$	50

~~11.Exit Financing.~~ ~~In accordance~~The change in contract assets and contract liabilities primarily results from the timing difference between the Company’s satisfaction of a performance obligation and the timing of the payment from the customer. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. The Company recognizes a contract asset when it transfers products and services to a customer in advance of scheduled billings. Contract assets decrease when the Company invoices the customer or the right to receive consideration is unconditional. The Company did not record any asset impairment charges related to contract assets during the six months ended March 31, 2019. Contract liabilities are recorded when the Company receives payment from the customer in advance of the Company’s completion of performance obligation(s). During the six months ended March 31, 2019, the Company recognized revenue of $396 million that had been recorded as a Contract liability at October 1, 2018.

Contract Costs

The Company capitalizes direct and incremental costs incurred to obtain and to fulfill a contract, such as sales commissions and products and services, respectively. These costs are recognized as an asset if the Company expects to recover them and are amortized consistent with the ~~Plan~~transfer to the customer of ~~Reorganization,~~ the ~~Company entered into~~underlying performance obligations. Costs to obtain a contract are amortized using the ~~Term Loan Credit Agreement~~portfolio approach over the average term of the customer contracts, which corresponds to the period of benefit. Costs incurred to obtain a contract with ~~a principal amount~~an amortization period of $2,925 million maturing seven years from the date of issuance, and the ABL Credit Agreement, which allows borrowings up to an aggregate principal amount of $300 million, subject to borrowing base availability, maturing five years from the date of issuance.

(In millions)
Term Loan Credit Agreement $ 2,925
Less:
Discount (29 )
Upfront and underwriting fees (54 )
Cash received upon emergence from bankruptcy 2,842
Reclassification of debt issuance cost incurred prior to emergence from bankruptcy (42 )
Current portion of Long-term debt (29 )
Long-term debt, net of current portion $ 2,771


~~12.~~	~~Pension Obligations.~~ In accordance with the Plan of Reorganization, the Company reinstated from liabilities subject to compromise $295 million related to the Avaya Pension Plan for represented employees and also contributed $49 million to the related pension trust.


~~13.~~	~~Other Post-retirement Obligations.~~ ~~Other post-retirement benefit obligations of $212 million were reinstated from liabilities subject to compromise.~~


~~14.~~	~~Deferred Income Taxes. The adjustment represents the reinstatement of the deferred tax liability that was included in liabilities subject to compromise.~~


~~15.~~	~~Other Liabilities~~. The increase of $233 million primarily relates to the reinstatement of employee benefits, tax liabilities and deferred revenue from liabilities subject to compromise. Also included is the value of the Warrants issued to the holders of the Predecessor second lien obligations on the Emergence Date.

~~16.Liabilities Subject to Compromise.~~ ~~Liabilities subject to compromise were reinstated~~one year or ~~settled~~less are expensed as ~~follows~~incurred, in accordance with the ~~Plan~~prescribed practical expedient. For the three months ended March 31, 2019, the Company recognized $24 million for amortization of ~~Reorganization:~~

costs to obtain customer contracts, of which $23 million was included in Selling, general and administrative expense and the remaining $1 million was a reduction to Revenue. For the six months ended March 31, 2019, the Company recognized $46 million for amortization of costs to obtain customer contracts, of which $43 million was included in Selling, general and administrative expense and the remaining $3 million was a reduction to Revenue.

(In millions)
Liabilities subject to compromise $ 7,585
Less amounts settled per the Plan of Reorganization
Pre-petition first lien debt (4,281 )
Pre-petition second lien debt (1,440 )
Avaya Pension Plan for Salaried Employees (620 )
Amounts reinstated:
Accounts payable (4 )
Payroll and benefit obligations (23 )
Deferred revenue (50 )
Business restructuring reserves (7 )
Other current liabilities (16 )
Pension obligations (295 )
Other post-retirement obligations (212 )
Deferred income taxes, net (118 )
Other liabilities (216 )
Total liabilities reinstated at emergence (941 )
General unsecured credit claims⁽¹⁾
(303 )
Liabilities subject to compromise $ —
Contract fulfillment costs are recognized consistent with the transfer to the customer of the underlying performance obligations based on the specific contracts to which they relate. For the three and six months ended March 31, 2019, the Company recognized $6 million and $20 million of contract fulfillment costs within Costs, respectively.

⁽¹⁾In

4. Business Combinations

Spoken Communications

On March 9, 2018 (the "Acquisition Date"), the Company acquired Intellisist, Inc. ("Spoken"), a United States-based private technology company, which provides cloud-based Contact Center as a Service solutions and customer experience management and automation applications. The total purchase price was $172 million, consisting of $157 million in cash, $14 million in

contingent consideration and a $1 million settlement of ~~allowed general unsecured claims, each claimant will receive~~Spoken’s net payable to the Company which mainly related to services provided by the Company to Spoken under a ~~pro-rata distribution~~co-development partnership prior to the acquisition.

Upon the achievement of ~~$58~~three specified performance targets ("Earn-outs"), the Company is required to pay up to $16 million of contingent consideration to Spoken's former owners and employees and up to $4 million in discretionary earn-out bonuses ("Earn-out Bonuses") to Spoken employees who have contributed to the ~~general unsecured claims account.~~

~~The following table displays the detail on the gain on settlement of liabilities subject to compromise:~~

(In millions)
Pre-petition first lien debt $ 734
Pre-petition second lien debt 1,357
Avaya pension plan for salaried employees (514 )
General unsecured creditors' claims 227
Net gain on settlement of Liabilities subject to compromise $ 1,804


~~17.~~	~~Cancellation of Predecessor Preferred and Common Stock.~~ ~~All common stock, Series A and B preferred stock and all other equity awards of the Predecessor Company were cancelled on the Emergence Date without any recovery on account thereof.~~

~~18.~~

~~Issuance of Successor Common Stock and Warrants.~~ In settlement of the Company's $5,721 million Predecessor first lien obligations and Predecessor second lien obligations, the holders of the Predecessor first lien obligations received a total of 99.3 million shares of common stock (fair value of $1,486 million) and $2,061 million in cash and the holders of the Predecessor second lien obligations received a total of 4.4 million shares of common stock (fair value of $66 million) and 5.6 million of Warrants to purchase additional common shares (fair value of $17 million). In addition, as part of the Plan of Reorganization, the Company completed a distressed termination of the APPSE in accordance with the Stipulation Settlement with the PBGC, the PBGC received $340 million in cash and 6.1 million shares of common stock (fair value of $90 million).


~~19.~~	~~Accumulated Deficit.~~

(In millions)
Accumulated deficit:
Net gain on settlement of liabilities subject to compromise $ 1,804
Expense for certain professional fees (26 )
Benefit from income taxes 118
Cancellation of Predecessor equity awards 6
Cancellation of Predecessor Preferred stock Series B 397
Cancellation of Predecessor Preferred stock Series A 186
Cancellation of Predecessor Common stock 2,387
Total $ 4,872


~~20.~~	~~Accumulated Comprehensive Loss.~~ ~~The changes to Accumulated comprehensive loss relate to the settlement of the APPSE and the Avaya Supplemental Pension Plan ("ASPP") and the associated taxes.~~

~~Fresh Start Adjustments~~

~~At the Emergence Date, the Company met the requirements under ASC 852 for fresh start accounting as (i) the holders of existing voting shares~~achievement of the Predecessor Company received less than 50% of the voting shares of the emerging entity and (ii) the reorganization value of the Company's assets immediately prior to confirmation was less than the post-petition liabilities and allowed claims. These adjustments reflect actual amounts recorded as of the Emergence Date.


~~21.~~	~~Accounts Receivable.~~ This adjustment relates to a change in accounting policy for the way the Company will present uncollected deferred revenue upon emergence from bankruptcy. The Company will offset such deferred revenue against the related account receivable.


~~22.~~	~~Inventory. This adjustment relates to the write-up of inventory to fair value based on estimated selling prices, less costs of disposal.~~


~~23.~~	~~Other Current Assets. This adjustment reflects the write-off of certain prepaid commissions, deferred installation costs and debt issuance costs that do not meet the definition of an asset upon emergence.~~


~~24.~~	~~Property, Plant and Equipment~~. An adjustment of $116 million was recorded to increase the net book value of property, plant and equipment to its estimated fair value based on estimated current acquisition price, plus costs to make the property fully operational.

~~The following table reflects the components of property, plant and equipment, net as of December 15, 2017:~~

(In millions)
Buildings and improvements $ 82
Machinery and equipment 38
Rental equipment 85
Assets under construction 13
Internal use software 92
Total property, plant and equipment 310
Less: accumulated depreciation and amortization —
Property, plant and equipment, net $ 310


~~25.~~	~~Deferred Income Tax.~~The adjustment represents the release of the valuation allowance on deferred tax assets for certain non-U.S. subsidiaries which management believes more likely than not will be realized as a result of future taxable income from the reversal of deferred tax liabilities that were established as part of fresh start accounting.


~~26.~~	~~Intangible Assets.~~ ~~The Company recorded an adjustment to intangible assets for $3,137 million as follows:~~

(In millions) Successor Predecessor
December 15, 2017 Post-emergence December 15, 2017 Pre-emergence Difference
Customer relationships and other intangible assets $ 2,155
$ 96
$ 2,059
Technology and patents 905
12
893
Trademarks and trade names 375
190
185
Total $ 3,435
$ 298
$ 3,137

Earn-outs. The fair value of ~~customer relationships~~the Earn-outs at the Acquisition Date was ~~determined~~$14 million, which was calculated using a probability-weighted discounted cash flow model and is remeasured to fair value at each subsequent reporting period. The Earn-out Bonuses, which are intended to incentivize continuing employees to assist in achieving the ~~excess earnings method, a derivation~~Earn-outs, are excluded from the acquisition consideration and are recognized as compensation expense in the Company's Condensed Consolidated Financial Statements ratably over the estimated Earn-out periods. During the six months ended March 31, 2019, the Company paid $11 million and $2 million for Earn-outs and Earn-out Bonuses, respectively, related to the achievement of two of the ~~income approach that calculates residual profit attributable~~three Earn-out targets. The third Earn-out target is expected to ~~an asset after proper returns~~be completed and the corresponding Earn-out and Earn-out Bonuses are expected to be paid ~~to complementary or contributory assets.~~

~~The~~by the Company during the remainder of fiscal 2019. As of March 31, 2019, the fair value of the Earn-out liability was $5 million.

In connection with this acquisition, the Company recorded goodwill of $117 million, which has been assigned to the Products & Solutions segment, identifiable intangible assets with a fair value of $64 million, and other net liabilities of $9 million. The goodwill recognized is attributable primarily to the potential that the Spoken technology, cloud platform and assembled workforce will accelerate the Company's growth in cloud-based solutions. The Company has determined that the goodwill is not deductible for tax purposes.

The acquired intangible assets of $64 million included technology and patents of $56 million with a weighted average useful life of 4.9 years, $5 million of in-process research and ~~trademarks~~development ("IPR&D") activities, which are considered indefinite lived until projects are completed or abandoned, and ~~trade names determined using~~customer relationships of $3 million with a weighted average useful life of 7.5 years. During the ~~royalty savings method,~~six months ended March 31, 2019, certain IPR&D activities have been completed and are being amortized over a ~~derivation~~weighted average useful life of 5.0 years.

Spoken became a wholly-owned subsidiary of the ~~income approach that estimates~~Company on March 9, 2018. The Company's Condensed Consolidated Financial Statements reflect the ~~royalties saved through ownership~~financial results of the ~~assets.~~

~~27.Goodwill.~~ ~~Predecessor goodwill~~operations of ~~$3,541~~Spoken beginning on March 9, 2018. Spoken’s revenue and operating loss included in the Company’s results for the six months ended March 31, 2019, was $5 million ~~was eliminated~~ and ~~Successor goodwill~~$13 million, respectively. As of ~~$2,632 million was established based on~~March 31, 2019, the ~~calculated reorganization value.~~

(In millions)
Reorganization value of Successor Company $ 7,583
Less: Fair value of Successor Company assets (4,951 )
Reorganization value of Successor Company assets in excess of fair value - goodwill $ 2,632


~~28.~~	~~Other Assets.~~ ~~The $27 million decrease to other assets is related to prepaid commissions that do not meet the definition of an asset upon emergence as there is no future benefit to the Successor Company.~~

~~29.~~

~~Deferred Revenue.~~ The fair value of deferred revenue, which principally relates to payments on annual maintenance contracts, was determined by deducting selling costs and associated profit from the Predecessor deferred revenue balance to arrive at the costs and profit associated with fulfilling the liability. Additionally, the decrease includes the impact of an accounting policy change whereby the Successor Company no longer presents uncollected deferred revenue.


~~30.~~	~~Other Current Liabilities.~~ The decrease of $3 million to other current liabilities is related to the fair value of real estate leases determined to be above or below market using the income approach based on the difference between the contractual rental rate and the estimated market rental rate, discounted utilizing a risk-related discount rate.


~~31.~~	~~Long-term Debt. The fair value of the Term Loan Credit Agreement was determined based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.~~

~~32.~~

~~Deferred Income Taxes.~~ The adjustment represents the establishment of deferred tax liabilities related to book/tax differences created by fresh start accounting adjustments. The amount is net of the release of the valuation allowance on deferred tax assets, which management believes more likely than not will be realized as a result of future taxable income from the reversal of such deferred tax liabilities.


~~33.~~	~~Business Restructuring Reserve.~~ ~~The Company recorded an increase to its non-current business restructuring reserves based on estimated future cash flows applied to a current discount rate at emergence.~~


~~34.~~	~~Other Liabilities.~~ ~~A decrease in other liabilities of $43 million relates to deferred revenue and real estate leases as previously discussed.~~


~~35.~~	~~Accumulated Other Comprehensive Loss.~~ ~~The remaining balance in Accumulated comprehensive loss was reversed to Reorganization expenses, net.~~


~~36.~~	~~Fresh Start Adjustments.~~ The following table reflects the cumulative impact of the fresh start adjustments as discussed above, the elimination of the Predecessor Company's accumulated other comprehensive loss and the adjustments required to eliminate accumulated deficit.

(In millions)
Eliminate Predecessor Intangible assets $ (298 )
Eliminate Predecessor Goodwill (3,541 )
Establish Successor Intangible assets 3,435

Establish Successor Goodwill 2,632

Fair value adjustment to Inventory 29

Fair value adjustment to Other current assets (66 )
Fair value adjustment to Property, plant and equipment 116

Fair value adjustment to Other assets (27 )
Fair value adjustment to Deferred revenue 235

Fair value adjustment to Business restructuring reserves (4 )
Fair value adjustment to Other current liabilities 3

Fair value adjustment to Long-term debt (96 )
Fair value adjustment to Other liabilities 43

Release Predecessor Accumulated comprehensive loss (790 )
Fresh start adjustments included in Reorganization items, net $ 1,671
Tax impact of fresh start adjustments (565 )
Gain on fresh start accounting $ 1,106
Company finalized its purchase accounting for the Spoken acquisition.


6.	~~Goodwill and Intangible Assets~~

5. Goodwill and Intangible Assets

Goodwill

Goodwill is not amortized but is subject to periodic testing for impairment in accordance with GAAP at the reporting unit level, which is one level below the Company’s operating segments. The Company ~~performs~~has five reporting units, all of which are subject to impairment testing annually or more frequently if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

~~The~~As a result of lower than planned financial results for the three and six months ended March 31, 2019, the Company determined that no events occurred or circumstances changed during the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) that wouldevaluated whether it is more likely than not ~~reduce~~that the fair value of ~~any of the Company's~~one or more reporting units is below ~~their~~the respective carrying ~~amounts.~~amount. As a result of this evaluation, the Company determined that an interim impairment test was not required. However, if conditions deteriorate further or ~~there is a change~~if changes in key assumptions and estimates differ significantly from management’s expectations, the ~~business,~~Company will reassess its conclusion and it may be necessary to record impairment charges in the future.

~~The Company adjusted the carrying value of goodwill upon application of fresh start accounting.~~

~~The carrying value of goodwill by operating segments for the periods indicated was as follows:~~

(In millions)
Global
Communications
Solutions
Avaya Global Services Total
September 30, 2017 (Predecessor) $ 1,093
$ 2,449
$ 3,542
Adjustments (1 ) —
(1 )
Impact of fresh start accounting 68
(977 ) (909 )
December 15, 2017 (Predecessor) $ 1,160
$ 1,472
$ 2,632

December 31, 2017 (Successor) $ 1,160
$ 1,472
$ 2,632

Intangible Assets

Intangible assets include technology and patents, customer relationships and trademarks and ~~trade-names and other intangibles.~~trade names. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the ~~assets, which range from three years to twenty years.~~

~~Long-lived assets, including intangible~~assets. Intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Intangible assets determined to have indefinite useful lives are not ~~amortized. The Company performs~~amortized but are tested for impairment ~~testing~~ annually orand more frequently if events occur or ~~changes in~~ circumstances change that indicate ~~that it is more likely than not that the~~an asset ismay be impaired. ~~The Avaya trade name is expected to generate cash flow indefinitely. Consequently, this asset is classified as an indefinite-lived intangible.~~

The Company determined that no events ~~had~~ occurred or circumstances changed during the ~~period from December 16, 2017 through December~~six months ended March 31, ~~2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor)~~2019 that would indicate that its ~~long-lived assets, including~~finite-lived intangible assets ~~with finite lives,~~ may not be recoverable or that it is more likely than not that its indefinite-lived intangible assets ~~with indefinite lives~~ are impaired. However, if conditions deteriorate or there is a change in the business, it may be necessary to record impairment charges in the future.

The ~~Company adjusted the carrying value of~~Company's intangible assets ~~upon application~~consist of ~~fresh start accounting.~~

~~The gross carrying amount and accumulated amortization by major intangible asset category as of December 31, 2017 (Successor) and September 30, 2017 (Predecessor) were as follows:~~

the following for the periods indicated:

Successor
As of December 31, 2017
(In millions) Technology and patents Customer relationships and other intangibles Trademarks
and trade
names Total
Gross Carrying Amount $ 905
$ 2,155
$ 375
$ 3,435
Accumulated Amortization (7 ) (7 ) —
(14 )
Net $ 898
$ 2,148
$ 375
$ 3,421

Predecessor
As of September 30, 2017
(In millions) Technology and patents Customer relationships and other intangibles Trademarks
and trade
names Total
Gross Carrying Amount $ 1,427
$ 2,196
$ 545
$ 4,168
Accumulated Amortization (1,411 ) (2,091 ) —
(3,502 )
Accumulated Impairment —
—
(355 ) (355 )
Net $ 16
$ 105
$ 190
$ 311



(In millions)	Technology and Patents			Customer Relationships and Other Intangibles			Trademarks and Trade Names			Total
Balance as of March 31, 2019
Finite-lived intangible assets:
Cost	$	962		$	2,157		$	43		$	3,162
Accumulated amortization	(222		)	(202		)	(6		)	(430		)
Finite-lived intangible assets, net	740			1,955			37			2,732
Indefinite-lived intangible assets	2			—			332			334
Intangible assets, net	$	742		$	1,955		$	369		$	3,066
Balance as of September 30, 2018
Finite-lived intangible assets:
Cost	$	959		$	2,157		$	43		$	3,159
Accumulated amortization	(135		)	(124		)	(3		)	(262		)
Finite-lived intangible assets, net	824			2,033			40			2,897
Indefinite-lived intangible assets	5			—			332			337
Intangible assets, net	$	829		$	2,033		$	372		$	3,234

Amortization expense ~~related to intangible assets~~for the three months ended March 31, 2019 and 2018 (Successor) was ~~$14 million, $13~~$85 million and ~~$62~~$81 million, respectively. Amortization expense for the six months ended March 31, 2019 (Successor), the period from December 16, 2017 through ~~December~~March 31, ~~2017~~2018 (Successor), and the period from October 1, 2017 through December 15, 2017 (Predecessor) was $168 million, $95 million and ~~the three months ended December 31, 2016 (Predecessor),~~$13 million, respectively.

~~The technology and patents have useful lives that range between 3 years and 10 years with a weighted average remaining useful life~~

6. Supplementary Financial Information

Condensed Consolidated Statements of 5.7 years. Customer relationships have useful lives that range between 7 years and 20 years with a weighted average useful life of 14.5 years. Amortizable product trade names have useful lives of 10 years. The Avaya trade name is expected to generate cash flows indefinitely and, consequently, this asset is classified as an indefinite-lived intangible.

~~Future amortization expense related to intangible assets as of December 31, 2017 are as follows:~~

(In millions)
Remainder of fiscal 2018 $ 247
2019 326
2020 326
2021 325
2022 298
2023 and thereafter 1,566
Total $ 3,088


7.	~~Supplementary Financial Information~~

~~Supplemental~~ Operations Information

AThe following table presents a summary of ~~other~~Other income (expense) ~~income,~~, net for the periods ~~indicated is presented in the following table:~~

indicated:

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
OTHER (EXPENSE) INCOME, NET
Interest income $ —
$ 2
$ —
Foreign currency gains, net 2
—
11
Income from transition services agreement, net —
3
—
Other pension and post-retirement benefit costs 1
(8 ) (6 )
Change in fair value of the warrant liability (5 ) —
—
Other, net —
1
(1 )
Total other (expense) income, net $ (2 ) $ (2 ) $ 4



	Successor												Predecessor
(In millions)	Three months ended March 31, 2019			Three months ended March 31, 2018			Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
OTHER INCOME (EXPENSE), NET
Interest income	$	4		$	1		$	7		$	1		$	2
Foreign currency losses, net	(6		)	(3		)	(7		)	(1		)	—
Income from transition services agreement, net	—			4			—			4			3
Other pension and post-retirement benefit credits (costs), net	2			4			4			5			(8		)
Change in fair value of emergence date warrants	3			(10		)	21			(15		)	—
Other, net	(2		)	1			(2		)	1			1
Total other income (expense), net	$	1		$	(3	)	$	23		$	(5	)	$	(2	)

A summary of ~~reorganization~~Reorganization items, net for the periods indicated is presented in the following table:


	Successor		Predecessor					Predecessor
(In millions)	Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017			Three months ended December 31, 2016		Period from October 1, 2017 through December 15, 2017
REORGANIZATION ITEMS, NET
Net gain on settlement of Liabilities subject to compromise								$	1,778
Net gain on fresh start adjustments								1,697
Bankruptcy-related professional fees	$	—	$	(56	)	$	—	(56		)
Net gain on settlement of liabilities subject to compromise	—		1,804			—
Net gain on fresh start adjustments	—		1,671			—
Other items, net	—		(3		)	—		(3		)
Reorganization items, net	$	—	$	3,416		$	—	$	3,416
Cash payments for reorganization items	$	1	$	2,524		$	—	$	2,524

Costs directly attributable to the implementation of the Plan of Reorganization were reported as ~~reorganization~~Reorganization items, net. The cash payments for reorganization items for the period from October 1, 2017 through December 15, 2017 (Predecessor) included $2,468 million of claims paid related to ~~liabilities~~Liabilities subject to compromise and $56 million for bankruptcy-related professional fees, including emergence and success fees paid on the Emergence Date.

Supplemental Cash Flow Information


8.	~~Business Restructuring Reserves and Programs~~



	Successor									Predecessor
(In millions)	Three months ended March 31, 2019		Three months ended March 31, 2018			Six months ended March 31, 2019		Period from December 16, 2017 through March 31, 2018		Period from October 1, 2017 through December 15, 2017
OTHER PAYMENTS
Interest payments	$	51	$	47		$	99	$	47	$	15
Income tax payments	28		7			35		9		7

NON-CASH INVESTING ACTIVITIES
Increase (decrease) in Accounts payable for Capital expenditures	$	1	$	(1	)	$	5	$	—	$	—

The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows for the periods presented:



	Successor						Predecessor
(In millions)	March 31, 2019		September 30, 2018		March 31, 2018		December 15, 2017		September 30, 2017
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	735	$	700	$	311	$	366	$	876
Restricted cash included in other current assets	—		—		37		65		85
Restricted cash included in other assets	4		4		4		4		5
Total cash, cash equivalents, and restricted cash	$	739	$	704	$	352	$	435	$	966

As of March 31, 2018 (Successor) and December 15, 2017 (Predecessor), restricted cash in other current assets consisted primarily of funds held for bankruptcy-related professional fees and funds held related to the sale of the Company's Networking business in July 2017. As of September 30, 2017 (Predecessor), restricted cash in other current assets consisted primarily of cash that was drawn from term loans under the Debtor-in-Possession credit agreement to cash collateralize existing letters of credit.

7. Business Restructuring Reserves and Programs

For the three months ended March 31, 2019 and 2018 (Successor), the Company recognized restructuring charges of $4 million and $40 million, respectively. For the six months ended March 31, 2019 (Successor), the period from December 16, 2017 through ~~December~~March 31, ~~2017~~2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company recognized restructuring charges of ~~$10~~$11 million, $50 million and $14 million, ~~respectively, including adjustments~~respectively. The restructuring charges include changes in estimates for increases and decreases in costs or changes in the timing of payments related to the restructuring programs of prior fiscal ~~years primarily consisting~~years. The Company's restructuring charges generally include separation charges which include, but are not limited to, termination payments, pension fund payments, and health care and unemployment insurance costs to be paid to, or on behalf of, the ~~termination/buyout of leases.~~affected employees; and lease obligation charges. As the Company continues to evaluate opportunities to streamline its operations, it may identify cost savings globally and take additional restructuring actions in the future and the costs of those actions could be material. The Company does not allocate restructuring reserves to its operating segments.

Fiscal ~~2018~~2019 Restructuring Program

~~During the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), recognized~~Recognized restructuring charges for the fiscal ~~2018~~2019 restructuring program ~~were for~~included employee separation costs associated with employee severance actions primarily in the U.S. ~~and~~, Europe, Middle East and Africa ("EMEA"), and Canada, for which the related payments are expected to be completed by fiscal 2021.

The following table summarizes the components of the fiscal 2019 restructuring program for the six months ended March 31, 2019:



(In millions)	Employee Separation Costs			Lease Obligations		Total
Restructuring charges	$	10		$	1	$	11
Cash payments	(4		)	—		(4		)
Impact of foreign currency fluctuations	(1		)	—		(1		)
Balance as of March 31, 2019	$	5		$	1	$	6

Fiscal 2018 Restructuring Program

Fiscal 2018 restructuring obligations include employee separation costs associated with employee severance actions primarily ~~the U.K. and~~in EMEA, for which the related payments are expected to be completed by the beginning of fiscal 2020. These actions include workforce reductions of 206 employees including 120 in the U.S. and 25 in EMEA. The separation charges include, but are not limited to, pension fund payments and health care and unemployment insurance costs to be paid to or on behalf of the affected employees.

2027.

The following table summarizes the components of the fiscal 2018 restructuring program for the ~~period from December 16, 2017 through December~~six months ended March 31, ~~2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor):~~2019:

(In millions) Employee Separation Costs Lease Obligations Total
2018 restructuring charges $ 12
$ —
$ 12
Cash payments (3 ) —
(3 )
Balance as of December 15, 2017 (Predecessor) $ 9
$ —
$ 9

2018 restructuring charges⁽¹⁾
$ —
$ 10
$ 10
Cash payments (2 ) (10 ) (12 )
Balance as of December 31, 2017 (Successor) $ 7
$ —
$ 7



(In millions)	Employee Separation Costs			Lease Obligations		Total
Balance as of September 30, 2018	$	54		$	—	$	54
Adjustments ⁽¹⁾	(1		)	—		(1		)
Cash payments	(10		)	—		(10		)
Impact of foreign currency fluctuations	(1		)	—		(1		)
Balance as of March 31, 2019	$	42		$	—	$	42

⁽¹⁾~~Charges incurred in connection with the termination of the Santa Clara lease.~~


⁽¹⁾	Includes changes in estimates for increases and decreases in costs related to the fiscal 2018 restructuring program, which are recorded in Restructuring charges, net in the Consolidated Statements of Operations in the period of the adjustment.

Fiscal 2008 through 2017 Restructuring ~~Program~~Programs

~~During fiscal 2017, the Company identified opportunities to streamline operations and generate costs savings, which included eliminating employee positions.~~ These obligations are primarily for ~~employee separation~~ costs associated with fiscal 2017 employee severance actions in the U.S. and EMEA, for which the related payments are expected to be completed in fiscal 2023. The separation charges include, but are not limited to, pension fund payments and health care and unemployment insurance costs to be paid to or on behalf of the affected employees.

The following table summarizes the components of the fiscal 2017 restructuring program for the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor):

(In millions) Employee Separation Costs Lease Obligations Total
Balance as of September 30, 2017 (Predecessor) $ 4
$ 1
$ 5
Cash payments (1 ) (1 ) (2 )
Balance as of December 15, 2017 (Predecessor) $ 3
$ —
$ 3

Balance as of December 31, 2017 (Successor) $ 3
$ —
$ 3

~~Fiscal 2008 through 2016 Restructuring Programs~~

~~During fiscal years 2008 through 2016, the Company identified opportunities to streamline operations and generate cost savings, which included~~ eliminating employee positions and exiting facilities. The ~~remaining obligations~~payments related to the headcount reductions identified in these ~~restructuring~~ programs are ~~for employee severance costs are primarily associated with EMEA plans~~ expected to be substantially completed by fiscal 2023. Future rental payments, net of estimated sublease income, related to operating lease obligations for unused space in connection with the closing or consolidation of facilities are expected to continue through fiscal 2021.

The following table aggregates the remaining components of the fiscal 2008 through ~~2016~~2017 restructuring programs for the ~~period from December 16, 2017 through December~~six months ended March 31, ~~2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor):~~2019:

(In millions) Employee Separation Costs Lease Obligations Total
Balance as of September 30, 2017 (Predecessor) $ 51
$ 24
$ 75
Cash payments (3 ) (17 ) (20 )
Expense 1
1
2
Adjustments - fresh start and reorganization items $ 4
$ (1 ) $ 3
Balance as of December 15, 2017 (Predecessor) $ 53
$ 7
$ 60

Cash Payments (2 ) —
(2 )
Impact of foreign currency fluctuations 2
—
2
Balance as of December 31, 2017 (Successor) $ 53
$ 7
$ 60



(In millions)	Employee Separation Costs			Lease Obligations			Total
Balance as of September 30, 2018	$	38		$	6		$	44
Adjustments ⁽¹⁾	1			—			1
Cash payments	(9		)	(2		)	(11		)
Impact of foreign currency fluctuations	(1		)	—			(1		)
Balance as of March 31, 2019	$	29		$	4		$	33


9. ⁽¹⁾	~~Financing Arrangements~~ Includes changes in estimates for increases and decreases in costs related to the fiscal 2008 through 2017 restructuring programs, which are recorded in Restructuring charges, net in the Consolidated Statements of Operations in the period of the adjustment.

8. Financing Arrangements

The following table reflects principal amounts of debt and debt net of discounts and issuance costs ~~as of December 31, 2017 (Successor) and principal amounts of debt and debt net of discounts and issuance costs as of September 30, 2017 (Predecessor), which includes~~for the ~~impact of adequate protection payments and accrued interest as of January 19, 2017:~~

periods presented:

Successor Predecessor
December 31, 2017 September 30, 2017
(In millions) Principal amount Net of discounts and issuance costs Principal amount Net of discounts and issuance costs
Term Loan Credit Agreement $ 2,925
$ 2,896
$ —
$ —
DIP Credit Agreement due January 19, 2018 —
—
725
725
First lien debt:
     Senior secured term B-3 loans —
—
594
594
     Senior secured term B-4 loans —
—
1
1
     Senior secured term B-6 loans —
—
519
519
     Senior secured term B-7 loans —
—
2,012
2,012
     7% senior secured notes —
—
982
982
     9% senior secured notes —
—
284
284
Second lien debt:
     10.50% senior secured notes —
—
1,440
1,440
Total debt $ 2,925
2,896
$ 6,557
6,557
Debt maturing within one year (29 ) (725 )
Long-term debt, net of current portion⁽¹⁾
$ 2,867
$ 5,832



	March 31, 2019					September 30, 2018
(In millions)	Principal amount		Net of discounts and issuance costs			Principal amount		Net of discounts and issuance costs
Term Loan Credit Agreement due December 15, 2024	$	2,888	$	2,858		$	2,903	$	2,870
Convertible 2.25% senior notes due June 15, 2023	350		264			350		256
Total debt	$	3,238	3,122			$	3,253	3,126
Debt maturing within one year			(29		)			(29		)
Long-term debt, net of current portion			$	3,093				$	3,097

⁽¹⁾ ~~Pre-petition long-term debt as of September 30, 2017 (Predecessor) was included in liabilities subject to compromise.~~Term Loan and ABL Credit Agreements

On ~~the Emergence Date:~~


1.	~~the Successor Company entered into the Term Loan Credit Agreement and the ABL Credit Agreement;~~


2.	~~the DIP Credit Agreement was paid in full;~~


3.	the holders of the Predecessor first lien obligations received cash and Successor Company common stock (aggregate fair value of $3,547 million) and the Company cancelled $4,281 million of the Predecessor Company first lien obligations; and


4.	the holders of the Predecessor second lien obligations received Successor Company common stock and Warrants to purchase common stock (aggregate fair value of $83 million) and the Company cancelled $1,440 million of the Predecessor Company second lien obligations.

~~Successor Financing~~

~~On the Emergence Date,~~December 15, 2017, Avaya Inc. entered into (i) the Term Loan Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the lending institutions from time to time party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent, which provided a $2,925 million term loan facility maturing on December 15, 2024 (the "Term Loan Credit Agreement") and (ii) the ABL Credit Agreement maturing on December 15, 2022, among Avaya Inc., as borrower, Avaya Holdings, the several other borrowers party thereto, the several lenders from time to time party thereto, and Citibank, N.A., as administrative agent and collateral agent, which provided a revolving credit facility consisting of a U.S. tranche and a foreign tranche allowing for borrowings of up to an aggregate principal amount of $300 million from time to time, subject to borrowing base availability (the ~~ABL~~"ABL Credit ~~Agreement~~Agreement" and, together with the Term Loan Credit Agreement, the ~~“Credit Agreements”~~"Credit Agreements"). ~~The~~On June 18, 2018, the Company amended the Term Loan Credit Agreement into reduce interest rates and to reduce the ~~case~~London Inter-bank Offered Rate ("LIBOR") floor that existed under the original agreement from 1.00% to 0.00%.

For the three and six months ended March 31, 2019, the three months ended March 31, 2018 and the period from December 16, 2017 through March 31, 2018, the Company recognized interest expense of ~~ABR Loans, bears interest at a rate per annum equal~~$50 million, $100 million, $47 million and $56 million, respectively, related to ~~3.75% plus~~ the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. prime rate as publicly announced in the Wall Street Journal and (iii) the LIBOR Rate for an interest period of one month and in the case of LIBOR Loans, bears interest at a rate per annum equal to 4.75% plus the applicable LIBOR Rate, subject to a 1% floor. The ABL Credit Agreement bears interest:


1.	In the case of Base Rate Loans denominated in U.S. dollars, at a rate per annum equal to 0.75% (subject to a 0.25% step-up or step-down based on availability) plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. prime rate as publicly announced by Citibank, N.A. and (iii) the LIBOR Rate for an interest period of one month;


2.	~~In the case of LIBOR Rate Loans denominated in U.S. dollars, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable LIBOR Rate;~~


3.	In the case of Canadian Prime Rate Loans denominated in Canadian dollars, at a rate per annum equal to 0.75% (subject to a 0.25% step-up or step-down based on availability) plus the highest of (i) the “Base Rate” as publicly announced by Citibank, N.A., Canadian branch and (ii) the CDOR Rate for an interest period of 30 days;


4.	~~In the case of CDOR Rate Loans denominated in Canadian dollars, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable CDOR Rate;~~


5.	~~In the case of LIBOR Rate Loans denominated in Sterling, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable LIBOR Rate;~~


6.	~~In the case of EURIBOR Rate Loans denominated in Euro, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable LIBOR Rate; and~~


7.	~~In the case of Overnight LIBOR Rate Loans, at a rate per annum equal to 1.75% (subject to a 0.25% step-up or step-down based on availability) plus the applicable Overnight LIBOR Rate.~~

The Credit Agreements limit, among other things, Avaya Inc.’s ability to (i) incur indebtedness, (ii) incur liens, (iii) dispose of assets, (iv) make investments, (v) make dividends, or conduct redemptions and repurchases of capital stock, (vi) prepay junior indebtedness or amend junior indebtedness documents, (vii) enter into restricted agreements, (viii) enter into transactions with affiliates and (ix) modify the terms of any of its organizational documents.

~~The~~ Term Loan Credit Agreement, ~~does not contain any financial covenants. The ABL Credit Agreement does not contain any financial covenants other than a requirement to maintain a minimum fixed charge coverage ratio~~including the amortization of ~~1:1 that becomes applicable only in the event that the net borrowing availability under the ABL Credit Agreement is less than the greater of $25 million~~discounts and ~~10% of the lesser of the total borrowing base and the ABL commitments (commonly known as the "line cap").~~

~~As of December 31, 2017, the Company was not in default under any of its debt agreements.~~issuance costs.

Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At ~~December~~March 31, ~~2017,~~2019, the Company had issued and outstanding letters of credit and guarantees of ~~$74~~$46 million. As of March 31, 2019, the Company had no borrowings outstanding under the ABL. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less ~~$74~~$46 million of outstanding letters of credit and guarantees, was ~~$139~~$142 million at ~~December~~March 31, ~~2017.~~2019.

Convertible Notes

On June 11, 2018, the Company issued its 2.25% Convertible Notes in an aggregate principal amount of $350 million (including the underwriters’ exercise in full of an over-allotment option of $50 million), which mature on June 15, 2023 (the "Convertible Notes"). The Convertible Notes were issued under an indenture, by and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee. For the three and six months ended March 31, 2019, the Company recognized interest expense of $6 million and $12 million related to the Convertible Notes, which includes $4 million and $8 million of amortization of the underwriting discount and issuance costs, respectively.

The net carrying amount of the Convertible Notes for the periods indicated was as follows:



(In millions)	March 31, 2019			September 30, 2018
Principal	$	350		$	350
Less:
Unamortized debt discount	(80		)	(87		)
Unamortized issuance costs	(6		)	(7		)
Net carrying amount	$	264		$	256

The weighted average contractual interest rate of the Company’s outstanding debt as of ~~December~~March 31, ~~2017~~2019 and September 30, 2018 was ~~6.2%.~~

~~Predecessor Financing~~

~~Debt Covenants~~6.5% and ~~Default.~~ 6.4%, respectively. The ~~indentures governing~~effective interest rate for the ~~Predecessor senior secured notes contained a number~~Term Loan Credit Agreement as of ~~covenants that, among other things and subject~~March 31, 2019 was not materially different than its contractual interest rate including adjustments related to ~~certain exceptions, restricted~~hedging. The effective interest rate for the ~~ability~~Convertible Notes as of March 31, 2019 was 9.2% reflecting the separation of the ~~Predecessor~~conversion feature in equity. The effective interest rates include interest on the debt and ~~certain~~amortization of discounts and issuance costs.

For the period from October 1, 2017 through December 15, 2017 (Predecessor), contractual interest expense of $94 million was not recorded as interest expense, as it was not an allowed claim under the Bankruptcy Filing.

As of March 31, 2019, the Company was not in default under any of its ~~subsidiaries to (a) incur or guarantee additional~~ debt and issue or sell certain preferred stock, (b) pay dividends on, redeem or repurchase capital stock, (c) make certain acquisitions or investments, (d) incur or assume certain liens, (e) enter into transactions with affiliates, (f) merge or consolidate with another company, (g) transfer or otherwise dispose of assets, (h) redeem subordinated debt, (i) incur obligations that restricted the ability of the Company’s subsidiaries to pay dividends or make other payments to the Company, and (j) create or designate unrestricted subsidiaries. They also contained customary affirmative covenants and events of default.

The Bankruptcy Filing constituted an event of default that accelerated the Predecessor’s payment obligations under the senior secured credit agreements and the senior secured notes. As a result of the Bankruptcy Filing, the principal and interest due under the Predecessor’s debt agreements became due and payable. However, any efforts to enforce such payment obligations were automatically stayed as a result of the Bankruptcy Filing, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Consequently, all debt outstanding was classified as liabilities subject to compromise and all unamortized debt issuance costs and unaccreted debt discounts were expensed.

~~DIP Credit Agreement.~~ In connection with the Bankruptcy Filing, on the Petition Date, the Predecessor entered into the DIP Credit Agreement, which provided a $725 million term loan facility due January 2018, and a cash collateralized letter of credit facility in an aggregate amount equal to $150 million. All letters of credit were cash collateralized in an amount equal to 101.5% of the face amount of such letters of credit denominated in U.S. dollars and 103% of the face amount of letters of credit denominated in alternative currencies. The DIP Credit Agreement, in the case of the Base Rate Loans, bore interest at a rate per annum equal to 6.5% plus the highest of (i) Citibank, N.A.’s prime rate, (ii) the Federal Funds Rate plus 0.5% and (iii) the Eurocurrency Rate for an interest period of one month, subject to a 2% floor, and in the case of the Eurocurrency Loans, bore interest at a rate per annum equal to 7.5% plus the applicable Eurocurrency Rate, subject to a 1% floor.

agreements.

Capital Lease Obligations

Included in ~~other~~Other liabilities is ~~$22~~$23 million and ~~$14~~$31 million of capital lease obligations, net of imputed interest as of ~~December~~March 31, ~~2017 (Successor)~~2019 and September 30, ~~2017 (Predecessor), respectively, and excluded amounts included in liabilities subject to compromise of $12 million as of September 30, 2017.~~2018, respectively.

The Company ~~entered into an agreement to outsource~~outsources certain delivery services associated with ~~the~~ Avaya ~~Private Cloud Services business. That agreement also included~~private cloud services, which include the sale of specified assets owned by the Company ~~which~~that are ~~being~~ leased-back by the Company and accounted for as a capital lease. As of ~~December~~March 31, ~~2017 (Successor)~~2019 and September 30, ~~2017 (Predecessor),~~2018, capital lease obligations associated with this agreement were ~~$21~~$19 million and ~~$24~~$26 million, ~~respectively,~~respectively.

9. Derivative Instruments and ~~include~~Hedging Activities

The Company accounts for derivative financial instruments in accordance with FASB ASC Topic 815, "Derivatives and Hedging," ("ASC 815") and does not enter into derivatives for trading or speculative purposes.

Interest Rate Contracts

The Company, from time-to-time, enters into interest rate swap contracts as a hedge against changes in interest rates on its variable rate loans outstanding.

On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fixed a portion of the variable interest due under its Term Loan Credit Agreement (the "Swap Agreements"). Under the terms of the Swap Agreements, which mature on December 15, 2022, the Company pays a fixed rate of 2.935% and receives a variable rate of interest based on one-month LIBOR. As of March 31, 2019, the total notional amount of the six Swap Agreements was $1,800 million.

The Swap Agreements are designated as cash flow hedges as they are deemed highly effective as defined under ASC 815. As a result, the unrealized gains or losses on these contracts are initially recorded as Accumulated other comprehensive income in the Condensed Consolidated Balance Sheets. As interest expense is recognized on the Term Loan Credit Agreement, the corresponding deferred gain or loss on the interest rate swaps is reclassified from Accumulated other comprehensive income to Interest expense in the Condensed Consolidated Statements of Operations. Based on the amount in Accumulated other comprehensive income at March 31, 2019, approximately $10 million ~~within~~would be reclassified into net income in the next twelve months as interest expense.

It is management's intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives.

Foreign Exchange Contracts

The Company, from time-to-time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with certain monetary assets and liabilities ~~subject~~including receivables, payables and certain intercompany obligations. These foreign currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these contracts are recorded as a component of Other income (expense), net to ~~compromise as~~offset the change in the value of ~~September 30, 2017.~~the hedged assets and liabilities. As of March 31, 2019, the Company maintained open foreign exchange contracts with a total notional value of $87


~~10.~~	~~Derivative Warrant Liability~~

million, hedging the British Pound Sterling, Czech Koruna, Australian Dollar and Hungarian Forint. The Company did not maintain any foreign currency forward contracts during the period from December 16, 2017 through March 31, 2018 (Successor) or the period from October 1, 2017 through December 15, 2017 (Predecessor).

Emergence Date Warrants

In accordance with the Plan of Reorganization, ~~on the Emergence Date~~ the Company issued ~~Warrants~~warrants to purchase 5,645,200 shares of ~~Successor~~Company common stock to the holders of the Predecessor second lien obligations pursuant to a warrant agreement ~~(“Warrant Agreement”~~("Emergence Date Warrants"). Each Emergence Date Warrant has an exercise price of $25.55 per share and expires ~~five years from the date of issuance. We account for derivative financial instruments in accordance with FASB ASC 815, "Derivatives and Hedging."~~December 15, 2022. The Emergence Date Warrants contain certain derivative features that require ~~the Warrants~~them to be classified as a liability and for changes in the fair value of the liability to be recognized in earnings each reporting period. ~~The Successor~~On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company ~~had no other derivative instruments at December~~to repurchase up to $15 million worth of the Emergence Date Warrants. None of the Emergence Date Warrants have been exercised or repurchased as of March 31, ~~2017.~~2019.

The fair value of the Emergence Date Warrants was determined using a probability weighted Black-Scholes option pricing model. This model requires certain input assumptions including risk-free interest rates, volatility, expected life and dividend rates. Selection of these inputs involves significant judgment.

The fair value of the ~~Warrants, on the~~ Emergence Date Warrants as of March 31, 2019 and ~~at December 31, 2017,~~September 30, 2018 was determined by using ~~the Black-Scholes option pricing model with~~ the input assumptions summarized ~~below. Accordingly, we recorded a loss of $5 million for~~below:



	March 31, 2019		September 30, 2018
Expected volatility	56.10	%	50.14	%
Risk-free interest rates	2.20	%	2.90	%
Expected remaining life (in years)	3.71		4.21
Price per share of common stock	$16.83		$22.14

In determining the ~~period from December 16, 2017 through December 31, 2017 (Successor) related to the change in~~ fair value of the ~~warrant liability~~. Emergence Date Warrants, the dividend yield was assumed to be zero as the Company does not anticipate paying dividends.

The following table summarizes the fair value ~~loss was recognized in Other (expense) income, net in~~of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:



		March 31, 2019				September 30, 2018
(In millions)	Balance Sheet Caption	Asset		Liability		Asset		Liability
Derivatives Designated as Hedging Instruments:
Interest rate contracts	Other assets	$	—	$	—	$	3	$	—
Interest rate contracts	Other current liabilities	—		10		—		7
Interest rate contracts	Other liabilities	—		36		—		—
		—		46		3		7

Derivatives Not Designated as Hedging Instruments:
Foreign exchange contracts	Other current liabilities	—		1		—		—
Emergence Date Warrants	Other liabilities	—		13		—		34
		—		14		—		34
Total derivative fair value		$	—	$	60	$	3	$	41

The following table provides information regarding the location and amount of pre-tax losses for derivatives designated as cash flow hedges:



	Three months ended March 31, 2019						Six months ended March 31, 2019
(In millions)	Interest Expense			Other Comprehensive Income (Loss)			Interest Expense			Other Comprehensive Income (Loss)
Financial Statement Line Item in which Cash Flow Hedges are Recorded	$	(58	)	$	8		$	(118	)	$	(12	)

Impact of cash flow hedging relationships:
Loss recognized in AOCI - on interest rate swaps	—			(16		)	—			(47		)
Interest expense from AOCI reclassified	(2		)	2			(5		)	5

The following table provides information regarding the pre-tax gains (losses) for derivatives not designated as hedging instruments on the Condensed Consolidated Statements of ~~Operations.~~Operations:

December 31, 2017 December 15, 2017
Expected volatility 52.38 % 54.57 %
Risk free interest rates 2.20 % 2.20 %
Expected life (in years) 4.96
5.00
Price per share of common stock $17.55 $14.93

Fair value of warrant liability $22 million $17 million



		Successor										Predecessor
		Three months ended March 31, 2019		Three months ended March 31, 2018			Six months ended March 31, 2019		Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
(In millions)	Location of Derivative Pre-tax Gain (Loss)	Three months ended March 31, 2019		Three months ended March 31, 2018			Six months ended March 31, 2019		Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
Emergence Date Warrants	Other income (expense), net	$	3	$	(10	)	$	21	$	(15	)	$	—
Foreign exchange contracts	Other income (expense), net	—		—			—		—			—

The Company records its derivatives on a gross basis in the Condensed Consolidated Balance Sheets. The Company has master netting agreements with several of its financial institution counterparties. The following table provides information on the Company's derivative positions as if those subject to master netting arrangements were presented on a net basis, allowing for the right to offset by counterparty per the master netting agreements:



	March 31, 2019				September 30, 2018
(In millions)	Asset		Liability		Asset			Liability
Gross amounts recognized in the Condensed Consolidated Balance Sheet	$	—	$	60	$	3		$	41
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheet	—		—		(3		)	(3		)
Net amounts	$	—	$	60	$	—		$	38


~~11.~~	~~Fair Value Measures~~

10. Fair Value Measurements

Pursuant to the accounting guidance for fair value measurements, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The accounting guidance for fair value measurements also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs are prioritized into three levels that may be used to measure fair value:

Level 1: Inputs that reflect quoted prices for identical assets or liabilities in active markets that are observable.

Level 2: Inputs that reflect quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Inputs that are unobservable to the extent that observable inputs are not available for the asset or liability at the measurement date.

~~Asset~~Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of ~~December~~March 31, ~~2017~~ ~~(Successor)~~2019 and September 30, ~~2017~~ ~~(Predecessor)~~2018 were as follows:

Successor
December 31, 2017
Fair Value Measurements Using
(In millions) Total Level 1 Level 2 Level 3
Other Non-Current Assets:
Investments $ 1
$ 1
$ —
$ —
Other Non-Current Liabilities:
Warrants $ 22
$ —
$ —
$ 22


	Predecessor
	September 30, 2017								March 31, 2019								September 30, 2018
	Fair Value Measurements Using								Fair Value Measurements Using								Fair Value Measurements Using
(In millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Other Non-Current Assets:
Assets:
Investments	$	1	$	1	$	—	$	—	$	2	$	2	$	—	$	—	$	2	$	2	$	—	$	—
Interest rate contracts									—		—		—		—		3		—		3		—
Total assets									$	2	$	2	$	—	$	—	$	5	$	2	$	3	$	—

Liabilities:
Interest rate contracts									$	46	$	—	$	46	$	—	$	7	$	—	$	7	$	—
Foreign exchange contracts									1		—		1		—		—		—		—		—
Spoken acquisition Earn-outs									5		—		—		5		15		—		—		15
Emergence Date Warrants									13		—		—		13		34		—		—		34
Total liabilities									$	65	$	—	$	47	$	18	$	56	$	—	$	7	$	49

Investments

Investments classified as Level 1 assets are priced using quoted market prices for identical assets in active markets that are observable. Investments are recorded in Other assets in the Condensed Consolidated Balance Sheets.

Interest rate and foreign exchange contracts

Interest rate and foreign exchange contracts classified as Level 2 assets and liabilities are not actively traded and are valued using pricing models that use observable inputs.

Spoken acquisition Earn-outs

The Spoken acquisition Earn-outs classified as Level 3 liabilities are measured using a probability-weighted discounted cash flow model. Significant unobservable inputs, which included probability of the achievement of the earn out targets and discount rate assumption, reflected the assumptions market participants would use in valuing these liabilities.

Emergence Date Warrants

Emergence Date Warrants classified as Level 3 liabilities are priced using the Black-Scholes option pricing model.

During the three months ended March 31, 2019 and 2018 (Successor), the six months ended March 31, 2019 (Successor), the period from December 16, 2017 through March 31, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), there were no transfers between Level 1 and Level 2, or into and out of Level 3.

The ~~change~~following table summarizes the activity for the Company's Level 3 liabilities measured at fair value on a recurring basis:



(In millions)	Emergence Date Warrants			Spoken Acquisition Earn-outs			Total
Balance as of September 30, 2018	$	34		$	15		$	49
Change in fair value⁽¹⁾	(21		)	1			(20		)
Settlement	—			(11		)	(11		)
Balance as of March 31, 2019	$	13		$	5		$	18

⁽¹⁾ Changes in fair value of the Emergence Date Warrants ~~is recognized~~are included in Other ~~(expense)~~ income ~~net~~(expense), net. Changes in fair value of the ~~Condensed Consolidated Statements of Operations.~~Spoken acquisition Earn-outs are included in Selling, general and administrative expense.

Fair Value of Financial Instruments

The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximate their carrying values because of the short-term nature of these instruments.

As of March 31, 2019 and September 30, 2018, the estimated fair value of the Convertible Notes was determined based on the quoted price of the Convertible Notes in an inactive market on the last trading day of the reporting period and has been classified as Level 2.

The estimated fair values of amounts borrowed under the ~~Company’s~~Company's other financing arrangements at ~~December~~March 31, ~~2017~~ ~~(Successor)~~2019 and September 30, ~~2017~~ ~~(Predecessor)~~2018 were estimated based on a Level 2 input based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.

The estimated fair values of the amounts borrowed under the Company’s financing agreements at ~~December~~March 31, ~~2017~~ ~~(Successor)~~2019 and September 30, ~~2017~~ ~~(Predecessor)~~2018 are as follows:

Successor Predecessor
December 31, 2017 September 30, 2017
(In millions)
Principal
Amount

Fair
Value

Principal
Amount

Fair
Value
Term Loan Credit Agreement due December 15, 2024 $ 2,925
$ 2,896
$ —
$ —
DIP Credit Agreement due January 19, 2018 —
—
725
732
Variable rate Term B-3 Loans due October 26, 2017 —
—
594
503
Variable rate Term B-4 Loans due October 26, 2017 —
—
1
1
Variable rate Term B-6 Loans due March 31, 2018 —
—
519
440
Variable rate Term B-7 Loans due May 29, 2020 —
—
2,012
1,709
7% senior secured notes due April 1, 2019 —
—
982
832
9% senior secured notes due April 1, 2019 —
—
284
241
10.50% senior secured notes due March 1, 2021 —
—
1,440
67
Total $ 2,925
$ 2,896
$ 6,557
$ 4,525

~~The Company adjusted the carrying value of debt to fair value upon application of fresh start accounting.~~



	March 31, 2019				September 30, 2018
(In millions)	Principal amount		Fair value		Principal amount		Fair value
Term Loan Credit Agreement due December 15, 2024	$	2,888	$	2,881	$	2,903	$	2,932
Convertible 2.25% senior notes due June 15, 2023	350		324		350		357
Total debt	$	3,238	$	3,205	$	3,253	$	3,289


~~12.~~	11. Income Taxes

~~For~~The Company's effective income tax rate for the ~~Predecessor period~~three and six months ended ~~December 15, 2017, the difference between the Company’s recorded provision and the provision that would result~~March 31, 2019 differed from ~~applying~~ the U.S. ~~statutory~~federal tax rate ~~of 35% is~~ primarily ~~attributable~~due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, ~~and~~ (6) the impact of ~~reorganization~~the Tax Cuts and ~~fresh start adjustments.~~Jobs Act ("the Act") relating to Global Intangible Low-Taxed Income ("GILTI") and Foreign-Derived Intangible Income ("FDII"), (7) a limitation on the deductibility of interest expense under IRC Section 163(j), and (8) foreign tax credits.

~~For~~The Company's effective income tax rate for the ~~Successor period~~three months ended ~~December~~March 31, ~~2017,~~2018 differed from the ~~difference between the Company’s recorded benefit and the benefit that would result from applying the new~~ U.S. ~~statutory~~federal tax rate ~~of 24.5%, is~~ primarily ~~attributable~~due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because it is more likely than not that the tax benefits would not be realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, ~~and~~ (6) the impact of the ~~Tax Cuts~~Act relating to GILTI and ~~Jobs Act (“~~FDII, and (7) foreign tax credits.

The Company's effective income tax rate for the ~~Act”), as more fully described below.~~

~~For the three months ended~~period from December 16, 2017 through March 31, ~~2016, the difference between the Company’s recorded provision and the benefit that would result~~2018 (Successor) differed from ~~applying~~ the U.S. ~~statutory~~federal tax rate ~~of 35% is~~ primarily ~~attributable~~due to: (1) income and losses taxed at different foreign tax rates, (2) ~~changes in the valuation allowance established against the Company’s deferred tax assets, and (3) current period changes to unrecognized tax positions.~~

~~Under the Plan of Reorganization a substantial amount of the Company’s debt~~losses generated within certain foreign jurisdictions for which no benefit was extinguished. Absent an exception, a debtor recognizes cancellation of indebtedness income (“CODI”) upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Internal Revenue Code of 1986, as amended, provides that a debtor in a bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of any CODI recognized as a result of the consummation of a plan of reorganization. The amount of CODI recognized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any other consideration, including equity, issued. The reduction in tax attributes does not occur until the first day of the Company’s first tax year subsequent to the date of emergence, which is October 1, 2018. The Company estimates that the U.S. federal net operating loss (“NOL”) and tax credits disclosed in its September 30, 2017 Condensed Consolidated Financial Statements and the tax loss generated during the September 30, 2018 tax year will be entirely eliminated on October 1, 2018. The Company estimates that $196 million of the tax loss generated during the Predecessor period ended December 15, 2017 will be absorbed by taxable income generated during the Successor period ending September 30, 2018. These estimates are subject to revision and any changes in the estimates will affect income or loss from continuing operations in the Successor period ending September 30, 2018.

Prior to September 30, 2017, a full valuation allowance was established in any jurisdiction that had a net deferred tax asset. A portion of the U.S. valuation allowance in the amount of $787 million was reversed as part of the reorganization adjustments as it was previously established against (i) the NOL and tax credits which will be eliminated as a result of the CODI rules and (ii) other deferred tax assets that were previously established for liabilities that were discharged in the Plan of Reorganization and eliminated as part of the reorganization adjustments. The valuation allowance in the amount of $47 million was reversed in certain non U.S. jurisdictions as part of the reorganization adjustments as management concludedrecorded because it is more likely than not that the ~~related deferred~~ tax ~~assets will~~benefits would not be ~~realized. The remaining~~realized, (3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. ~~valuation allowance~~state and local income taxes, (6) an increase in ~~the amount of $461 million was reversed~~estimated current year tax loss, which is eliminated as part of the ~~fresh start adjustments~~attribute reduction related to the cancellation of indebtedness income ("CODI"), and (7) the impact of the Act.

The Company's effective income tax rate for the period from October 1, 2017 through December 15, 2017 (Predecessor) differed from the U.S. federal tax rate primarily due to: (1) income and losses taxed at different foreign tax rates, (2) losses generated within certain foreign jurisdictions for which no benefit was recorded because ~~management concluded~~ it is more likely than not that the ~~deferred~~ tax ~~assets will~~benefits would not be realized, ~~primarily~~(3) non-U.S. withholding taxes on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local taxes, and (6) the impact of reorganization and fresh start adjustments.

The Company's U.S. federal net operating loss ("NOL") and tax credits have been eliminated due to ~~future sources~~the recognition of ~~taxable income that will be generated~~CODI in fiscal 2018.

During fiscal 2018, the Company centralized the management and ownership of certain intellectual property in a U.S. limited partnership, some of which was previously managed and owned by a Bermuda tax resident corporation. This action resulted in the utilization and recognition of previously unrecognized NOLs, the reversal of deferred tax liabilities established as part of fresh start accounting and the recognition of a deferred tax asset, cumulatively in the ~~fresh start adjustments.~~amount of $366 million.

On December 22, 2017, the Act was signed into law. The Act lowered the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. Corporations with a fiscal year-end that is not a calendar year but includes January 1, 2018 are subject to a blended tax rate based on the number of days in the fiscal year before and after January 1, 2018. The Company has a September 30^th30th tax year-end and therefore many of the ~~U.S. federal~~ tax ~~rate for~~law changes became effective in the ~~year ending September 30,~~first quarter of fiscal 2019. The Company has made a policy decision to treat GILTI income as a period cost. The Company benefits from the deduction attributable to FDII and has taxable income attributable to GILTI, both of which impact the effective tax rate. During the three months ended December 31, 2018, ~~is 24.5%.~~

~~The SEC issued~~Avaya completed its analysis of the impact of the Act as required by Staff Accounting Bulletin No. 118 ~~(“SAB 118”)~~issued by the SEC on December 22, 2017 which provided guidance to registrants on the accounting for tax related impacts under the Act. The guidance provides a measurement period of up to one year after the enactment date for companies to complete the tax accounting implications of the Act. As of the first quarter, the Company has provided a provisional estimate related to the revaluation of its deferred taxes and the deemed repatriation of unremitted foreign earnings. We will continue to refine our estimate, which could result in a material adjustment, given additional guidance under the Act, interpretations, available information and assumptions made by the Company. As a fiscal year-end tax filer, we are subject to various provisions under the Act for fiscal year 2018, including the change to the U.S. federal statutory tax rate and the mandatory deemed repatriation of unremitted foreign earnings. Beginning in our 2019 fiscal year, various other newly enacted provisions will become effective, including provisions that may result in the current U.S. taxation of certain income earned by the Company’s foreign subsidiaries. The FASB has published guidance (Topic 740, No. 5), regarding how to account for the Global Intangible Low-Taxed Income (“GILTI”) provisions included in the Act. The guidance states th2017.

12. Benefit Obligations

at a company may make a policy decision with respect to the accounting for taxes related to GILTI and whether deferred taxes should be established. The Company estimates that it will generate income that may be taxed as GILTI beginning in fiscal 2019. On a provisional basis, no deferred taxes have been established for GILTI as of December 31, 2018.

The Company does not expect to incur a cash tax liability with respect to the one-time tax on foreign earnings due to historical foreign deficits. The Company previously established a deferred tax liability for non-U.S. withholding taxes to be incurred upon the remittance of foreign earnings. The Condensed Consolidated Financial Statements for the Predecessor and Successor periods include an adjustment for such withholding taxes attributable to current period earnings. In prior periods, the Company established a U.S. deferred income tax liability for certain foreign earnings under the assumption that such earnings would be remitted to the U.S. This deferred tax liability has been adjusted in the Successor period based on the taxation of such earnings under the Act.

A net deferred tax liability was established at the U.S. federal tax rates in effect on December 15, 2017 as part of fresh start accounting for U.S. book-to-tax differences. These deferred taxes are primarily related to differences arising from recording intangible and other assets at fair market value. As of the December 22, 2017 enactment date of the Act, deferred taxes were adjusted to reflect the new tax rates in effect as of the date the deferred tax amounts are expected to be realized.

The provisional amount of the reduction to the net deferred tax liability as a result of the ACT is $245 million and has been recorded as an income tax benefit from continuing operations in the Successor period.


~~13.~~	~~Benefit Obligations~~

The Company sponsors non-contributory defined benefit pension plans covering a portion of its U.S. employees and retirees, and post-retirement benefit plans covering a portion of its U.S. employees and retirees that include healthcare benefits and life insurance coverage. Certain non-U.S. operations have various retirement benefit programs covering substantially all of their employees. Some of these programs are considered to be defined benefit pension plans for accounting purposes.

Effective January 25, 2018, the Company and the Communications Workers of America (“CWA”) and the International Brotherhood of Electrical Workers (“IBEW”), agreed to extend the 2009 Collective Bargaining Agreement (“CBA”), previously extended through June 14, 2018, until September 21, 2019. The contract extensions did not affect the Company’s obligation for pension and post-retirement benefits available to U.S. employees of the Company who are represented by the CWA or IBEW (“represented employees”).

In September 2015, the Company amended the post-retirement medical plan for represented retirees effective January 1, 2017, to replace medical coverage through the Company’s group plan for represented retirees who are retired as of October 15, 2015 and their eligible dependents, with medical coverage through the private and public insurance marketplace. The change allows the existing retirees to choose insurance from the marketplace and receive financial support from the Company toward the cost of coverage through a Health Reimbursement Arrangement ("HRA").

The components of the pension and post-retirement net periodic benefit (credit) cost ~~(credit)~~ for the periods indicated are provided in the ~~tables~~table below:


	Successor			Predecessor						Successor												Predecessor⁽¹⁾
(In millions)	Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three months ended December 31, 2016			Three months ended March 31, 2019			Three months ended March 31, 2018			Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
Pension Benefits - U.S.
Components of Net Periodic Benefit Cost
Components of net periodic benefit (credit) cost
Service cost	$	—		$	1		$	1		$	1		$	1		$	2		$	1		$	1
Interest cost	1			22			24			9			9			19			10			22
Expected return on plan assets	(2		)	(38		)	(45		)	(15		)	(16		)	(30		)	(18		)	(38		)
Amortization of previously unrecognized net actuarial loss	—			20			26
Settlement loss⁽¹⁾	—			—			—
Amortization of actuarial loss										—			—			—			—			20
Net periodic benefit (credit) cost										$	(5	)	$	(6	)	$	(9	)	$	(7	)	$	5

Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost										$	1		$	2		$	3		$	2		$	2
Interest cost										3			2			5			2			3
Expected return on plan assets										—			—			—			—			(1		)
Amortization of actuarial loss										—			—			—			—			2
Net periodic benefit cost	$	(1	)	$	5		$	6		$	4		$	4		$	8		$	4		$	6

Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Service cost										$	1		$	—		$	1		$	—		$	—
Interest cost										4			3			7			3			3
Expected return on plan assets										(3		)	(2		)	(5		)	(2		)	(2		)
Amortization of prior service cost										—			—			—			—			(3		)
Amortization of actuarial loss										—			—			—			—			2
Net periodic benefit cost										$	2		$	1		$	3		$	1		$	—

⁽¹⁾⁽¹⁾Excludes Plan of Reorganization related settlements ~~discussed below~~ that were recorded in Reorganization items, net in the Condensed Consolidated Statements of Operations.

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Pension Benefits - Non-U.S.
Components of Net Periodic Benefit Cost
Service cost $ —
$ 2
$ 2
Interest cost —
3
2
Amortization of previously unrecognized net actuarial loss —
1
3
Net periodic benefit cost $ —
$ 6
$ 7

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Post-retirement Benefits - U.S.
Components of Net Periodic Benefit Cost
Interest cost $ —
$ 3
$ 3
Expected return on plan assets —
(2 ) (2 )
Amortization of unrecognized prior service cost —
(3 ) (4 )
Amortization of previously unrecognized net actuarial loss —
2
3
Curtailment —
—
(4 )
Net periodic benefit cost $ —
$ —
$ (4 )

~~On December 15, 2017, the APPSE, a qualified pension plan, was settled with the PBGC. At that time, the Company and the PBGC executed a termination and trusteeship agreement~~The service components of net periodic benefit (credit) cost were recorded similar to terminate the APPSE and to appoint the PBGC as the statutory trustee of the plan. The Company also paid settlement consideration to the PBGC consisting of $340 million in cash and 6.1 million shares of Successor Company common stock (fair value of $90 million). With this payment, any accrued but unpaid minimum funding contributions duecompensation expense, while all other components were deemed to have been paid in full. As a result of the plan termination on December 15, 2017, the Company's projected benefit obligation and pension trust assets were reduced by $2,192 million and $1,573 million, respectively. Including the settlement consideration and $703 million of Accumulated other comprehensive loss recorded in ~~the Condensed Consolidated Balance Sheet, a settlement loss of $514 million was recorded in Reorganization items, net in the Condensed Consolidated Statement of Operations.~~

On December 15, 2017, the unfunded ASPP, a non-qualified excess benefit pension plan, was also terminated and settled. Benefit liabilities for ASPP participants were included as allowed claims in the general unsecured recovery pool. Settlement consideration of $17 million in the form of allowed claims payable to ASPP participants was estimated based upon claims data as of the Emergence Date as amounts due to individual general unsecured creditors had not been finalized and paid. As a result of the termination, the Company's projected benefit obligation was reduced by $88 million. Including the settlement consideration and $18 million of Accumulated other comprehensive loss recorded in the Condensed Consolidated Balance Sheet, a settlement gain of $53 million was recorded in Reorganization items, net in the Condensed Consolidated Statements of Operations.Other income (expense), net.

The Company's general funding policy with respect to its U.S. qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable ~~laws~~law and regulations, or to directly pay benefits where appropriate. ~~As a result of the Bankruptcy Filing in January 2017, there was an automatic stay on the Company's contributions~~Contributions to ~~the U.S. pension plans during fiscal 2017. Therefore, the minimum funding requirements for the~~ U.S. pension plans were ~~not met during fiscal 2017.~~

The Plan of Reorganization included contributions to or settlements of all U.S. pension plans, which are the Avaya Pension Plan for Represented Employees ("APP"), the APPSE and the ASPP. On December 15, 2017, the Company paid the aggregate unpaid required minimum funding$18 million for the ~~APP, a qualified plan, of $49 million.~~

~~Remeasurement as a result of fresh start accounting increased~~six months ended March 31, 2019, which represented the ~~APP and other post-retirement benefit plan obligations by $3 million on December 15, 2017.~~

~~The Company made no contributions~~amounts required to satisfy the minimum statutory funding requirements ~~for its~~in the U.S. ~~funded defined benefit pension plans for~~For the ~~period from December 16, 2017 through December 31, 2017 (Successor) and for~~remainder of fiscal 2019, the period from October 1, 2017 through December 15, 2017 (Predecessor), exclusive of the payments discussed above as part of the Plan of Reorganization for the APP and settlement consideration to the PBGC for the APPSE. Estimated paymentsCompany estimates that it will make contributions totaling $9 million to satisfy the minimum statutory funding requirements in the U.S.

Contributions to the non-U.S. pension plans were $16 million for the six months ended March 31, 2019. For the remainder of fiscal ~~2018 are $43 million.~~

~~The Company provided pension benefits for U.S. employees, which were not pre-funded. Consequently,~~2019, the Company made payments as the benefits were disbursed or claims were paid. For the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company made payments for the U.S. pension benefits in each of the periods of amountsestimates that it will make contributions totaling ~~less than $1 million.~~

The Company provides for certain pension benefits for non-U.S. employees, the majority of which are not pre-funded. The Company made payments for these non-U.S. pension benefits for the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) totaling $1 million and $3 million, respectively. Estimated payments for these non-U.S. pension benefits for the remainder of fiscal ~~2018~~ ~~are $24 million.~~

During the period from December 16, 2017 through December 31, 2017 (Successor), the Company was reimbursed $3 million from the represented employees’ post-retirement health trust for claims paid that exceeded the Company's obligations. During the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company contributed $2 million to the represented employees’ post-retirement health trust to fund current benefit claims and costs of administration in compliance with the terms of the CBA, as extended through September 21, 2019. Estimated payments under the terms of the 2009 agreement as extended are $12$9 million for ~~the remainder of fiscal 2018.~~its non-U.S. plans.

~~The Company also provides certain retiree~~Most post-retirement medical benefits ~~for U.S. employees through an HRA, which~~ are not pre-funded. Consequently, the Company makes payments directly to the claims administrator as ~~these benefits~~retiree medical benefit claims are disbursed. ~~For~~These payments are funded by the ~~period from December 16, 2017 through December 31, 2017 (Successor)~~Company up to the maximum contribution amounts specified in the plan documents and contract with the Communications Workers of America and the ~~period~~International Brotherhood of Electrical Workers, and contributions from ~~October 1, 2017 through December 15, 2017 (Predecessor),~~the participants, if required. During the six months

ended March 31, 2019, the Company made payments ~~in each of the periods totaling less than $1 million~~ for ~~these~~ retiree medical ~~benefits. Estimated~~and dental benefits of $7 million and received a $3 million reimbursement from the represented employees' post-retirement health trust related to payments in prior periods. The Company estimates it will make contributions for ~~these~~ retiree medical and dental benefits totaling $7 million for the remainder of fiscal ~~2018 are less than $1 million.~~2019.

~~14.~~13. Share-based Compensation

Successor

The ~~Predecessor Company's common and preferred stock were cancelled and new common stock was issued on the Emergence Date. Accordingly, the Predecessor Company's then existing~~Company has a share-based compensation ~~awards were also cancelled,~~plan under which ~~resulted in the recognition of any previously unamortized expense on the date of cancellation. Share-based compensation for the Successor and Predecessor periods are not comparable.~~

~~Successor~~

~~Pursuant to terms of the Plan of Reorganization, the Avaya Holdings Corp. 2017 Equity Incentive Plan ("2017 Equity Incentive Plan") became effective on the Emergence Date.~~

The Successor Company's Board of Directors or any committee duly authorized thereby, will administer the 2017 Equity Incentive Plan. The administrator has broad authority to, among other things: (i) select participants; (ii) determine the types of awards that participants are to receive and the number of shares that are to be granted under such awards; and (iii) establish the terms and conditions of awards, including the price to be paid for the shares or the award.

~~Persons eligible to receive awards under the 2017 Equity Incentive Plan include~~ non-employee directors, employees of the ~~Successor~~ Company or any of its affiliates, and certain consultants and advisors ~~to the Successor Company or any of its affiliates. The types of awards that~~ may be granted ~~under the 2017 Equity Incentive Plan include~~ stock options, restricted stock, restricted stock units ("RSUs"), performance awards ("PRSUs") and other forms of awards granted or denominated in shares of ~~Successor~~the Company's common stock, as well as certain cash-based awards. Stock options and RSUs granted to employees generally vest ratably over a period of three years. PRSUs granted to certain senior executive employees vest at the end of the service period of three years. Awards granted to non-employee directors during fiscal 2019 vest immediately, while those granted during fiscal 2018 vested ratably over one year. As of the Emergence Date, forfeitures are accounted for as incurred.

~~The maximum number of shares of common stock that may be issued or granted under the 2017 Equity Incentive Plan is 7.4~~Pre-tax share-based compensation expense for three months ended March 31, 2019 and 2018 was $5 million shares. If any option or other stock-based award granted under the 2017 Equity Incentive Plan expires, terminates or is cancelled for any reason without having been exercised in full, the number of shares of common stock underlying any unexercised award will again be availableand $5 million, respectively. Pre-tax share-based compensation expense for the ~~purpose of awards under~~six months ended March 31, 2019 and the period from December 16, 2017 ~~Equity Incentive Plan. If any shares of restricted stock, performance awards or other stock-based awards denominated in shares of common stock awarded under~~through March 31, 2018 was $11 million and $6 million, respectively.

During the 2017 Equity Incentive Plan to a participant are forfeited for any reason, the number of forfeited shares of restricted stock, performance awards or other stock-based awards denominated in shares of common stock will again be available for purposes of awards under the 2017 Equity Incentive Plan. Any award under the 2017 Equity Incentive Plan settled in cash will not be counted against the foregoing maximum share limitations. Shares withheld bysix months ended March 31, 2019, the Company in satisfaction of the applicable exercise price or withholding taxes upon the issuance, vesting or settlement of awards, in each case, shall not be available for future issuance under the 2017 Equity Incentive Plan.

~~The aggregate~~granted 1,464,125 RSUs with a weighted average grant date fair value of ~~all awards granted to any non-employee director during any calendar year (excluding awards made pursuant to deferred compensation arrangements made in lieu~~$15.21 per RSU. During the six months ended March 31, 2019, there were 899,097 RSUs that vested with a weighted average grant date fair value of ~~all or a portion of cash retainers and any dividends payable in respect of outstanding awards) may not exceed $750,000.~~$15.47.

~~On the Emergence Date,~~In February 2019, the Company granted ~~3.4 million restricted stock units and 1.2 million stock options~~274,223 PRSUs with a grant date fair value of $11.18 per PRSU. These PRSUs will become eligible to ~~executives and other employees.~~vest if prior to the vesting date of February 11, 2022, the average closing price of one share of the Company’s Common Stock for sixty consecutive days equals or exceeds $23.50. The ~~awards are subject to time based vesting. There are 2.8 million shares remaining under the 2017 Equity Incentive Plan available to be granted.~~

~~The~~grant date fair value of the ~~premium-priced stock options granted on the Emergence Date~~award was ~~determined~~estimated using a ~~lattice option pricing~~Monte Carlo simulation model ~~with~~that incorporated multiple valuation assumptions, including the ~~following assumptions:~~

Exercise price $ 19.46
Expected term (in years)⁽¹⁾
8.54
Volatility⁽²⁾
65.37 %
Risk-free rate⁽³⁾
2.35 %
Dividend yield⁽⁴⁾
— %

⁽¹⁾ ~~Expected term~~probability of achieving the specified market condition. Additional assumptions used in the valuation included an expected volatility of 53.76% based on ~~the vesting terms~~a blend of ~~the option~~Company and ~~a contractual life of ten years.~~

⁽²⁾~~Volatility based on~~ peer group ~~companies~~company historical data adjusted for the ~~Company's leverage.~~

⁽³⁾ ~~Risk-free~~Company’s leverage, and a risk-free interest rate of 2.45% based on U.S. Treasury yields with a term equal to the vesting period. The grant date fair value of these PRSUs will be recognized as expense ratably over the vesting period and will not be adjusted in future periods for the success or failure to achieve the specified market condition.

In February 2019, the Company also granted 182,020 PRSUs which will vest based on the attainment of specified performance metrics for each of the next three separate fiscal years (collectively the "Performance Period"), and the Company's total shareholder return over the Performance Period as compared to the total shareholder return for a specified index of companies over the same period. The grant date fair value of the awards was estimated using a Monte Carlo simulation model that incorporated multiple valuation assumptions, including the probability of achieving the total shareholder return market condition. Other key assumptions used in the valuation included an expected ~~option term.~~

⁽⁴⁾ ~~Dividend yield was assumed~~volatility of 53.00% based on a blend of Company and peer group company historical data adjusted for the Company’s leverage, and a risk free interest rate of 2.46% based on U.S. Treasury yields with a term equal to the remaining Performance Period as of the grant date. During the Performance Period, the Company will adjust compensation expense for the awards based on its best estimate of attainment of the specified annual performance metrics. The cumulative effect on current and prior periods of a change in the estimated number of PRSUs that are expected to be ~~zero~~earned during the Performance Period will be recognized as ~~the Company does not anticipate paying dividends.~~

~~At December 31, 2017, all share-based awards granted by the Successor Company were unvested and the related share-based compensation expense recorded for~~an adjustment to earnings in the period ~~from December 16, 2017 through December~~of the revision. Based on the Company's most recent forecast as of March 31, ~~2017 (Successor)~~2019, the aggregate grant date fair value of the awards was $1$3 million.

Predecessor

Prior to the Emergence Date, the Predecessor Company had granted share-based awards that were ~~cancelled~~canceled upon emergence from bankruptcy. In conjunction with the cancellation, the Predecessor Company accelerated the unrecognized share-based compensation expense and recorded $3 million of compensation expense in the period from October 1, 2017 through December 15, ~~2017.~~2017, principally reflected in Reorganization costs, net.

~~15.~~14. Capital Stock

~~Successor~~Preferred Stock

~~Preferred Stock.~~ The ~~Successor~~ Company's certificate of incorporation authorizes it to issue up to ~~55.0 million~~55,000,000 shares of preferred stock with a par value of $0.01 per share. As of ~~December~~March 31, ~~2017,~~2019 and September 30, 2018, there were no preferred shares issued or outstanding.

Common ~~Stock.~~ Stock

The ~~Successor~~ Company's certificate of incorporation authorizes it to issue up to ~~550.0 million~~550,000,000 shares of common stock with a par value of $0.01 per share. As of ~~December~~March 31, ~~2017,~~2019, there were ~~110.0 million~~110,730,362 shares issued and ~~109.8 million outstanding. The~~110,717,682 shares outstanding shares were issued to (1) holders of Predecessor first lien obligations (99.3 million shares); (2) holders of Predecessor second lien obligations (4.4 million shares); and (3) PBGC (6.1 million shares). Issued but not outstanding are the shares held on behalf of the general unsecured creditor reserve or the holders of Predecessor first lien debt obligations (0.2 million shares).

~~Predecessor~~

~~In connection~~ with the ~~Company's~~remaining 12,680 shares distributable in accordance with the Plan of ~~Reorganization~~Reorganization. As of September 30, 2018, there were 110,218,653 shares issued and ~~emergence from bankruptcy, all equity interests~~110,012,790 shares outstanding with the remaining 205,863 shares distributable in ~~the Predecessor Company were cancelled, including preferred and common stock, warrants and equity-based awards.~~

~~16. Earnings (Loss) Per Common Share~~

~~All outstanding shares of common stock and common stock equivalents of the Predecessor Company were cancelled pursuant to~~accordance with the Plan of Reorganization.

~~Upon emergence,~~On November 14, 2018, the ~~Successor~~Company's Board of Directors approved a warrant repurchase program, authorizing the Company ~~authorized~~to repurchase Emergence Date Warrants for an aggregate expenditure of up to $15 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions. The Company may adopt one or more purchase plans pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in order to implement the warrant repurchase program. The warrant repurchase program does not obligate the Company to purchase any warrants and ~~issued 110.0 million shares~~may be terminated, increased or decreased by the Board of ~~common stock~~Directors in its discretion at any time. As of ~~which 109.8 million shares~~March 31, 2019, there were ~~outstanding at December 31, 2017 and used as~~no warrant repurchases under the ~~basis for determining earnings per share.~~program.

15. (Loss) Earnings Per Common Share

Basic (loss) earnings per share ~~are~~is calculated by dividing net (loss) income attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share ~~reflect~~reflects the potential dilution that would occur if equity awards granted under the Company's various share-based compensation plans were vested or exercised; if the Company's Convertible Notes or the warrants the Company sold to purchase up to 12.6 million shares of its common stock in connection with the issuance of the Convertible Notes ("Call Spread Warrants") were exercised; and/or if the Emergence Date Warrants were exercised, resulting in the issuance of common shares that would participate in the earnings of the Company.

The following table sets forth the calculation of net (loss) income attributable to common shareholders and the computation of basic and diluted (loss) earnings ~~(loss)~~ per share for the periods indicated:


	Successor			Predecessor						Successor												Predecessor
(In millions, except per share amounts)	Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three months ended December 31, 2016			Three months ended March 31, 2019			Three months ended March 31, 2018			Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
Net income (loss) per share:
(Loss) earnings per share:
Numerator
Net income (loss)	$	237		$	2,977		$	(103	)
Dividends to preferred stockholders	—			(6		)	(8		)
Undistributed earnings	237			2,971			(111		)
Net (loss) income										$	(13	)	$	(130	)	$	(4	)	$	107		$	2,977
Dividends and accretion to preferred stockholders										—			—			—			—			(6		)
Undistributed (loss) income										(13		)	(130		)	(4		)	107			2,971
Percentage allocated to common stockholders⁽¹⁾	100.0		%	86.9		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	86.9		%
Numerator for basic and diluted earnings per common share	$	237		$	2,582		$	(111	)
Numerator for basic and diluted (loss) earnings per common share										$	(13	)	$	(130	)	$	(4	)	$	107		$	2,582

Denominator
Denominator for basic earnings per weighted average common shares	109.8			497.3			497.0
Denominator for basic (loss) earnings per weighted average common shares										110.8			109.8			110.5			109.8			497.3
Effect of dilutive securities
Restricted stock units	0.5			—			—			—			—			—			1.0			—
Stock options	—			—			—
Warrants	—			—			—
Denominator for diluted earnings per weighted average common shares	110.3			497.3			497.0
Denominator for diluted (loss) earnings per weighted average common shares										110.8			109.8			110.5			110.8			497.3

Per common share net income (loss)
(Loss) earnings per common share
Basic	$	2.16		$	5.19		$	(0.22	)	$	(0.12	)	$	(1.18	)	$	(0.04	)	$	0.97		$	5.19
Diluted	$	2.15		$	5.19		$	(0.22	)	$	(0.12	)	$	(1.18	)	$	(0.04	)	$	0.96		$	5.19

⁽¹⁾ Basic weighted average common stock outstanding	109.8			497.3			497.0			110.8			109.8			110.5			109.8			497.3
Basic weighted average common stock and common stock equivalents (preferred shares)	109.8			572.4			497.0			110.8			109.8			110.5			109.8			572.4
Percentage allocated to common stockholders	100.0		%	86.9		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	86.9		%

~~There were~~For the three and six months ended March 31, 2019, the Company excluded 1.0 million stock options, 3.5 million RSUs, 0.5 million ~~dilutive securities~~PRSUs and 5.6 million Emergence Date Warrants from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company’s Convertible Notes and Call Spread Warrants were also excluded for the three and six months ended March 31, 2019 as discussed in more detail below. For the three months ended March 31, 2018, the Company excluded 1.1 million stock options, 3.5 million restricted stock units and 5.6 million Emergence Date Warrants from the diluted loss per share calculation as their effect would have been anti-dilutive. For the period from December 16, 2017 through ~~December~~March 31, ~~2017 (Successor).~~


~~17.~~	~~Operating Segments~~

~~On July 14, 2017,~~2018, the Company ~~sold its Networking business to Extreme. Prior to~~excluded 1.1 million stock options, 0.1 million restricted stock units and 5.6 million Emergence Date Warrants from the ~~sale,~~diluted earnings per share calculation as their effect would have been anti-dilutive.

For purposes of considering the ~~Company had three separate operating segments. After the sale,~~Convertible Notes in determining diluted (loss) earnings per share, the Company has ~~two operating segments, GCS representing~~the ability and current intent to settle conversions of the Convertible Notes through combination settlement by repaying the principal portion in cash and any excess of the conversion value over the principal amount (the "Conversion Premium") in shares of the Company's ~~products portfolio~~common stock. Therefore, only the impact of the Conversion Premium will be included in diluted weighted average shares outstanding using the treasury stock method. Since the Convertible Notes were out of the money and ~~AGS representing~~anti-dilutive as of March 31, 2019, they were excluded from the ~~Company's services portfolio. Both GCS~~diluted loss per share calculation for the three and ~~Networking made up~~six months ended March 31, 2019. The Call Spread Warrants will not be considered in calculating diluted weighted average shares outstanding until the price per share of the Company’s ~~Enterprise Collaboration Solutions ("ECS") products portfolio.~~common stock exceeds the strike price of $37.3625 per share. When the price per share of the Company’s common stock exceeds the strike price per share of the Call Spread Warrants, the effect of the additional shares that may be issued upon exercise of the Call Spread Warrants will be included in diluted weighted average shares outstanding using the treasury stock method.

16. Operating Segments

The ~~GCS~~Products & Solutions segment primarily develops, markets, and sells unified communications and contact center solutions, offered on premises, in the cloud, or as a hybrid solution. These integrate multiple forms of communications, including telephony, ~~e-mail,~~email, instant messaging and video. The ~~AGS~~Services segment develops, markets and sells comprehensive end-to-end global service offerings that enable customers to evaluate, plan, design, implement, monitor, manage and optimize ~~even~~ complex enterprise communications networks. ~~The Networking segment portfolio of software and hardware products offered integrated networking products.~~

The Company’s chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the Company’s internal management systems. Management does not include in its segment measures of profitability selling, general, and administrative expenses, research and development expenses, amortization of intangible assets, and certain discrete items, such as fair value adjustments recognized upon emergence from bankruptcy, charges relating to restructuring actions, impairment charges, and merger-related costs as these costs are not core to the measurement of segment performance, but rather are controlled at the corporate level.

Summarized financial information relating to the ~~Company’s~~Company's operating segments is shown in the following table for the periods indicated:

Successor Predecessor
(In millions) Period from December 16, 2017 through December 31, 2017 Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
REVENUE
Global Communications Solutions $ 71
$ 253
$ 343
Avaya Networking ⁽¹⁾
—
—
58
Enterprise Collaboration Solutions 71
253
401
Avaya Global Services 77
351
474
$ 148
$ 604
$ 875
GROSS PROFIT
Global Communications Solutions $ 41
$ 169
$ 231
Avaya Networking ⁽¹⁾
—
—
25
Enterprise Collaboration Solutions 41
169
256
Avaya Global Services 50
196
284
Unallocated Amounts⁽²⁾
(13 ) (3 ) (5 )
78
362
535
OPERATING EXPENSES
Selling, general and administrative 50
264
336
Research and development 9
38
62
Amortization of intangible assets 7
10
57
Restructuring charges, net 10
14
10
76
326
465
OPERATING INCOME 2
36
70
INTEREST EXPENSE, OTHER (EXPENSE) INCOME, NET AND REORGANIZATION ITEMS, NET (11 ) 3,400
(170 )
(LOSS) INCOME BEFORE INCOME TAXES $ (9 ) $ 3,436
$ (100 )

⁽¹⁾~~The Networking business was sold on July 14, 2017.~~

⁽²⁾Unallocated Amounts in Gross Profit include the effect of the amortization of technology intangibles and costs that are not core to the measurement of segment management’s performance, but rather are controlled at the corporate level.



	Successor												Predecessor
(In millions)	Three months ended March 31, 2019			Three months ended March 31, 2018			Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
REVENUE
Products & Solutions	$	289		$	317		$	615		$	394		$	253
Services	425			440			847			534			351
Unallocated Amounts⁽¹⁾	(5		)	(85		)	(15		)	(108		)	—
	$	709		$	672		$	1,447		$	820		$	604
GROSS PROFIT
Products & Solutions	$	184		$	214		$	398		$	263		$	169
Services	255			255			510			325			196
Unallocated Amounts⁽²⁾	(53		)	(146		)	(115		)	(187		)	(3		)
	386			323			793			401			362
OPERATING EXPENSES
Selling, general and administrative	251			282			508			332			264
Research and development	52			50			105			59			38
Amortization of intangible assets	41			40			81			47			10
Restructuring charges, net	4			40			11			50			14
	348			412			705			488			326
OPERATING INCOME (LOSS)	38			(89		)	88			(87		)	36
INTEREST EXPENSE, OTHER INCOME (EXPENSE), NET AND REORGANIZATION ITEMS, NET	(57		)	(50		)	(95		)	(61		)	3,400
(LOSS) INCOME BEFORE INCOME TAXES	$	(19	)	$	(139	)	$	(7	)	$	(148	)	$	3,436


~~18.~~ ⁽¹⁾	Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue.


⁽²⁾	Unallocated amounts in Gross Profit include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment management’s performance, but rather are controlled at the corporate level.


17.	Accumulated Other Comprehensive ~~Loss~~(Loss) Income

The components of accumulated other comprehensive (loss) income ~~(loss)~~ for the periods indicated ~~are summarized~~were as follows:

(In millions) Change in unamortized pension, post-retirement and postemployment benefit-related items Foreign Currency Translation Other Accumulated Other Comprehensive Income (Loss)
Beginning balance September 30, 2016 (Predecessor) $ (1,627 ) $ (33 ) $ (1 ) $ (1,661 )
Other comprehensive income before reclassifications —
19
—
19
Amounts reclassified to earnings 20
—
—
20
(Provision for) benefit from income taxes (6 ) 4
—
(2 )
Ending balance December 31, 2016 (Predecessor) $ (1,613 ) $ (10 ) $ (1 ) $ (1,624 )



(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap			Other		Accumulated Other Comprehensive (Loss) Income
Balance as of December 31, 2018 (Successor)	$	51	$	(30	)	$	(23	)	$	—	$	(2	)
Other comprehensive loss before reclassifications	—		18			(16		)	—		2
Amounts reclassified to earnings	—		—			2			—		2
Benefit from income taxes	—		—			4			—		4
Balance as of March 31, 2019 (Successor)	$	51	$	(12	)	$	(33	)	$	—	$	6



(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap			Other		Accumulated Other Comprehensive Income
Balance as of September 30, 2018 (Successor)	$	51	$	(31	)	$	(2	)	$	—	$	18
Other comprehensive income (loss) before reclassifications	—		19			(47		)	—		(28		)
Amounts reclassified to earnings	—		—			5			—		5
Benefit from income taxes	—		—			11			—		11
Balance as of March 31, 2019 (Successor)	$	51	$	(12	)	$	(33	)	$	—	$	6



(In millions)	Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap		Other		Accumulated Other Comprehensive Loss
Balance as of December 31, 2017 (Successor)	$	—	$	(13	)	$	—	$	—	$	(13	)
Other comprehensive loss before reclassifications	—		(12		)	—		—		(12		)
Balance as of March 31, 2018 (Successor)	$	—	$	(25	)	$	—	$	—	$	(25	)


(In millions)	Change in unamortized pension, post-retirement and postemployment benefit-related items			Foreign Currency Translation			Other			Accumulated Other Comprehensive Income (Loss)			Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items			Foreign Currency Translation			Unrealized Loss on Term Loan Interest Rate Swap		Other			Accumulated Other Comprehensive (Loss) Income
Beginning balance October 1, 2017 (Predecessor)	$	(1,375	)	$	(72	)	$	(1	)	$	(1,448	)
Balance as of September 30, 2017 (Predecessor)													$	(1,375	)	$	(72	)	$	—	$	(1	)	$	(1,448	)
Other comprehensive (loss) income before reclassifications	(24		)	3			—			(21		)	(24		)	3			—		—			(21		)
Amounts reclassified to earnings	16			—			—			16			16			—			—		—			16
Pension settlement	721			—			—			721			721			—			—		—			721
Provision for income taxes	(58		)	—			—			(58		)	(58		)	—			—		—			(58		)
Ending balance December 15, 2017 (Predecessor)	(720		)	(69		)	(1		)	(790		)
Elimination of Predecessor Company accumulated other comprehensive loss	720			69			1			790
Ending balance December 15, 2017 (Predecessor)	$	—		$	—		$	—		$	—
Balance as of December 15, 2017 (Predecessor)													(720		)	(69		)	—		(1		)	(790		)
Elimination of Predecessor Company Accumulated other comprehensive loss													720			69			—		1			790
Balance as of December 15, 2017 (Predecessor)													$	—		$	—		$	—	$	—		$	—


Beginning balance December 15, 2017 (Successor)	$	—		$	—		$	—		$	—
Balance as of December 16, 2017 (Successor)													$	—		$	—		$	—	$	—		$	—
Other comprehensive loss before reclassifications	—			(13		)	—			(13		)	—			(25		)	—		—			(25		)
Ending balance December 31, 2017 (Successor)	$	—		$	(13	)	$	—		$	(13	)
Balance as of March 31, 2018 (Successor)													$	—		$	(25	)	$	—	$	—		$	(25	)

EBITDA and Adjusted EBITDA

EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization and excludes the results of discontinued operations. EBITDA provides us with a measure of operating performance that excludes ~~items that are outside the control of management,~~certain non-operating and/or non-cash expenses, which can differ significantly from company to company depending on capital structure, the tax jurisdictions in which companies operate and capital investments.

Adjusted EBITDA is EBITDA as further adjusted by the items noted in the reconciliation table below. We believe Adjusted EBITDA ~~measures~~provides a measure of our financial performance based on operational factors that management can impact in the short-term, such as our pricing strategies, volume, costs and expenses of the organization, and ittherefore presents our financial performance in a way that can be more easily compared to prior quarters or fiscal years. In addition, Adjusted EBITDA serves as a basis for determining certain management and employee compensation. We also present EBITDA and Adjusted EBITDA because we believe analysts and investors utilize these measures in analyzing our results. Under the Company's debt agreements, the ability to engage in activities such as incurring additional indebtedness, making investments and paying dividends is tied in part to ratios based on a measure of Adjusted EBITDA.

EBITDA and Adjusted EBITDA have limitations as analytical tools. EBITDA measures do not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and do not necessarily indicate whether cash flows will be

sufficient to fund cash needs. While EBITDA measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. ~~Generally,~~Further, Adjusted EBITDA excludes the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing ~~operations.~~operations but could be substantial. In particular, our formulation of Adjusted EBITDA ~~allows adjustment~~adjusts for certain amounts that are included in calculating net income (loss) as set forth in the following table including, but not limited to, restructuring charges, impairment charges, certain fees payable to our Predecessor private equity sponsors and other advisors, resolution of certain legal matters and a portion of our pension costs and ~~post-employment~~post-retirement benefits costs, which represents the amortization of pension service costs and actuarial gain (loss) associated with these benefits. However, these are expenses that may recur, may vary ~~and are~~and/or may be difficult to predict.

The unaudited reconciliation of net (loss) income, ~~(loss),~~ which is a GAAP measure, to EBITDA and Adjusted EBITDA, which are non-GAAP measures, is presented below for the periods ~~indicated, is presented below:~~ indicated:


	Successor			Predecessor							Successor												Predecessor
(In millions)	Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three months ended December 31, 2016				Three months ended March 31, 2019			Three months ended March 31, 2018			Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017
Net income (loss)	$	237		$	2,977		$	(103	)
Net (loss) income											$	(13	)	$	(130	)	$	(4	)	$	107		$	2,977
Interest expense ^(a)	9			14			174			(a)	58			47			118			56			14
Interest income	—			(2		)	—				(4		)	(1		)	(7		)	(1		)	(2		)
(Benefit from) provision for income taxes	(246		)	459			3				(6		)	(9		)	(3		)	(255		)	459
Depreciation and amortization	22			31			90				108			123			225			145			31
EBITDA	22			3,479			164				143			30			329			52			3,479
Impact of fresh start accounting adjustments ^(b)	27			—			—			(b)	6			86			9			113			—
Restructuring charges, net	10			14			10				4			40			11			50			14
Sponsors’ and other advisory fees ^(c)	8			3			51
Advisory fees										(c)	1			4			2			12			3
Acquisition-related costs											4			7			7			7			—
Reorganization items, net	—			(3,416		)	—				—			—			—			—			(3,416		)
Non-cash share-based compensation	1			—			2				5			5			11			6			—
Loss on disposal of long-lived assets	—			1			—
Resolution of certain legal matters ^(d)	—			37			—
Change in fair value of warrant liability	5			—			—
Gain on foreign currency transactions	(2		)	—			(11		)
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs ^(e)	—			17			21
Other	—			—			1
Loss on sale/disposal of long-lived assets, net											—			2			—			2			1
Resolution of certain legal matters										(d)	—			—			—			—			37
Change in fair value of Emergence Date Warrants											(3		)	10			(21		)	15			—
Loss on foreign currency transactions											6			3			7			1			—
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs										(e)	—			—			—			—			17
Adjusted EBITDA	$	71		$	135		$	238			$	166		$	187		$	355		$	258		$	135

^(a)

Effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petition debt classified as liabilities subject to compromise. Contractual interest expense represents amounts due under the contractual terms of outstanding debt, including debt subject to compromise. For the period from October 1, 2017 through December 15, 2017, contractual interest expense related to debt subject to compromise of $94 million ~~has~~had not been recorded as interest expense, as it was not ~~expected to be~~ an allowed claim under the Bankruptcy Filing.


^(b)	The impact of fresh start accounting adjustments in connection with the Company's emergence from bankruptcy.

^(c)

Sponsors’ fees represent monitoring fees payable to affiliates of two private equity firms, Silver Lake Partners (“Silver Lake”) and TPG Capital (“TPG”, together with Silver Lake, the “Sponsors”) that each had an ownership interest in the Predecessor Company and their designees pursuant to a management services agreement. Upon emergence, the Company no longer has affiliations with the Sponsors. Other advisoryAdvisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure.


^(d)	Costs in connection with the resolution of certain legal matters ~~includes~~include reserves and settlements, as well as associated legal costs.


^(e)	Represents that portion of our pension and ~~post-employment~~post-retirement benefit costs which represent the amortization of prior service costs and net actuarial gain (loss) associated with these benefits.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this ~~quarterly report,~~Quarterly Report on Form 10-Q, including statements containing words such as ~~“anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would”~~"anticipate," "believe," "estimate" "expect," "intend," "plan," "project," "target," "model," "can," "could," "may," "should," "will," "would" or similar words or the negative thereof, constitute ~~“forward-looking~~"forward-looking statements.”" These forward-looking statements, which are based on our current plans, expectations, estimates and projections about future events, should not be unduly relied upon. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed or implied by such forward-looking statements. We caution you therefore against relying on any of these forward-looking statements.

The forward-looking statements included herein are based upon our assumptions, estimates and beliefs and involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and may be affected by a variety of risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. ~~Some of the key~~Risks, uncertainties and other factors that ~~could~~may cause ~~actual results~~these forward-looking statements to ~~differ from our expectations include:~~

~~we face formidable competition from providers of unified communications and contact center products and related services;~~

~~market opportunity for business communications products and services may not develop in~~be inaccurate include, among others: the ~~ways~~announcement that ~~we anticipate;~~

~~our ability to rely on our indirect sales channel;~~

~~our products and services may fail to keep pace with rapidly changing technology and evolving industry standards;~~

~~we rely on third-party contract manufacturers and component suppliers, some of which are sole source and limited source suppliers, as well as warehousing and distribution logistics providers;~~

~~recently completed bankruptcy proceedings may adversely affect our operations in the future;~~

~~our actual financial results may vary significantly from the financial projections filed with the Bankruptcy Court;~~

~~our historical financial information may not be indicative of our future financial performance;~~

~~our quarterly and annual revenues and operating results have historically fluctuated and the results of one period may not provide a reliable indicator of our future performance;~~

~~operational and logistical challenges as well as changes in economic or political conditions, in a specific country or region;~~

~~our revenues are dependent on general economic conditions and the willingness of enterprises to invest in technology;~~

~~the potential that we may not be able to protect our proprietary rights or that those rights may be invalidated or circumvented;~~

~~certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences;~~

~~changes in our tax rates, the adoption of new U.S. or international tax legislation or exposure to additional tax liabilities;~~

~~cancellation of indebtedness income is expected to result in material reductions in, or elimination of, tax attributes;~~

~~tax examinations and audits;~~

~~fluctuations in foreign currency exchange rates;~~

~~business communications products are complex, and design defects, errors, failures or “bugs” may be difficult to detect and correct;~~

~~if we are unable to integrate acquired businesses effectively;~~

~~failure to realize the benefits we expect from our cost-reduction initiatives;~~

liabilities incurred as a result of our obligation to indemnify, and to share certain liabilities with, Lucent Technologies, Inc. ("Lucent") (now Nokia Corporation) in connection with our spin-off from Lucent in September 2000;

~~transfers or issuances of our equity may impair or reduce our ability to utilize our net operating loss carryforwards and certain other tax attributes in the future;~~

~~our ability to retain and attract key personnel;~~

~~our ability to establish and maintain proper and effective internal control over financial reporting;~~

~~if we do not adequately remediate our material weaknesses, or if we experience additional material weaknesses in the future;~~

~~potential litigation in connection with our emergence from bankruptcy;~~

~~breach of the security of our information systems, products or services or of the information systems of our third-party providers;~~

~~business interruptions, whether due to catastrophic disasters or other events;~~

~~claims that were not discharged in the Plan of Reorganization could have a material adverse effect on our results of operations and profitability;~~

~~potential litigation and infringement claims, which could cause us to incur significant expenses or prevent us from selling our products or services;~~

~~the composition of~~ our board of directors ~~has changed significantly;~~

weis exploring strategic alternatives and the potential impact of such announcement on our current or potential customers, partners or personnel; the cost of such exploration and the disruption it may have ~~entered into many related party transactions with a significant number~~on our operations, including diverting the attention of our ~~foreign subsidiaries, which could adversely affect us in the event of their bankruptcy or similar insolvency proceeding;~~management and

~~environmental, health and safety, laws, regulations, costs~~ employees; and other ~~liabilities.~~risks and factors discussed in Part I, Item 1A "Risk Factors" and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" to our Annual Report on Form 10-K filed with the SEC on December 21, 2018.

~~Any of the assumptions underlying forward-looking statements could be inaccurate.~~ All forward-looking statements are made as of the date of this ~~quarterly report~~Quarterly Report on Form 10-Q and the risk that actual results will differ materially from the expectations expressed in this ~~quarterly report~~Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this ~~quarterly report,~~Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this ~~quarterly report,~~Quarterly Report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this ~~quarterly report~~Quarterly Report will be achieved.



Item 3.	Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk

Interest Rate Risk

The Company has exposure to changing interest rates primarily under the Term Loan Credit Agreement and ABL Credit Agreement, each of which ~~bear~~bears interest at variable rates based on LIBOR. The Company had $2,888 million of variable rate loans outstanding as of March 31, 2019.

On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fixed a portion of the variable interest due under its Term Loan Credit Agreement (the "Swap Agreements"). Under the terms of the Swap Agreements, which mature on December 15, 2022, the Company pays a fixed rate of 2.935% and receives a variable rate of interest based on one-month LIBOR. As of ~~December~~March 31, ~~2017~~,2019, the total notional amount of the six Swap Agreements was $1,800 million.

It is management’s intention that the notional amount of the Swap Agreements be less than the variable rate loans outstanding during the life of the derivatives. For the six months ended March 31, 2019, the Company recognized a ~~25 bps increase~~loss on its hedge contracts of $5 million, which is reflected in ~~LIBOR~~Interest expense in the Condensed Consolidated Statements of Operations. At March 31, 2019, the fair value of the outstanding Swap Agreements was a deferred loss of $46 million. Based on the payment dates of the contracts, $10 million and $36 million was recorded in Other current liabilities and Other liabilities in the Condensed Consolidated Balance Sheets, respectively. On an annual basis, a hypothetical one percent change in interest rates for the $1,088 million of unhedged variable rate debt as of March 31, 2019 would ~~result in a $7 million increase in our annual~~affect interest expense by approximately $11 million.

Foreign Currency Risk

Foreign currency risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates. Each of our non-U.S. ("foreign") operations maintains capital in the currency of the country of its geographic location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are Euros, Canadian Dollars, British Pound Sterling, Chinese Renminbi, Indian Rupee, Australian Dollars, and Brazilian Real.

Non-U.S. denominated revenue was $161 million and $319 million for the three and six months ended March 31, 2019, respectively. We estimate a ~~25bps decrease~~10% change in ~~LIBOR~~the value of the U.S. dollar relative to all foreign currencies would affect our revenue for the three and six months ended March 31, 2019 by $16 million and $32 million, respectively.

The Company, from time-to-time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with certain monetary assets and liabilities including receivables, payables and certain intercompany obligations. These foreign currency forward contracts are not designated for hedge accounting treatment. As a result, changes in the fair value of these contracts are recorded as a $7component of Other income (expense), net to offset the change in the value of the underlying assets and liabilities. As of March 31, 2019, the Company maintained open foreign exchange contracts with a total notional value of $87 million, ~~decrease~~hedging British Pounds Sterling, Czech Koruna, Australian Dollars and Hungarian Forint. At March 31, 2019, the fair value of the open foreign exchange contracts was $1 million and recorded in ~~our annual interest expense.~~Other current liabilities in the Condensed Consolidated Balance Sheets. For the six months ended March 31, 2019, the Company's recognized loss on open foreign exchange contracts was offset by gains on foreign exchange contracts that settled during the period.



Item 4.	Controls and ~~Procedures.~~Procedures

~~Evaluation of Disclosure Controls and Procedures.~~

As of the end of the period covered by this report, management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as ~~amended.)~~amended). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of ~~December~~March 31, ~~2017,~~2019 solely because of the material weaknesses in the ~~Company's~~Company’s internal control over financial reporting described below.

Material Weaknesses in Internal Control Over Financial Reporting Existing as of March 31, 2019

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the ~~Company's~~Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Company identified a material weakness in connection with the preparation of the Company’s Condensed Consolidated Financial Statements for the quarter ended March 31, 2018 related to the reconciliation of cash and accounts receivable upon the adoption of fresh start accounting. Specifically, the Company’s internal controls with respect to the mid-month reconciliation of cash receipts and accounts receivable, which were required in connection with the adoption of fresh start accounting in accordance with GAAP, did not operate effectively to record certain cash receipts that were received on December 15, 2017, the date the Company emerged from bankruptcy. This internal control deficiency resulted in an adjustment in the financial statements of the Company’s cash and accounts receivable as of December 15, 2017, the Company’s cash flow statements, and the revision of the Company’s consolidated financial statements for the predecessor period ended December 15, 2017 and the successor period ended December 31, 2017.

In connection with the preparation of the Company’s consolidated financial statements for the successor period from December 16, 2017 through September 30, 2018, the Company identified an additional material weakness in the Company’s internal control over financial reporting related to the review of certain journal entries. Specifically, the Company did not maintain effective controls to ensure that there was appropriate segregation of duties related to recording journal entries. This material weakness did not result in a misstatement.

Each of the above material weaknesses could result in a misstatement of the aforementioned account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

Notwithstanding the material weaknesses identified above, management believes the Condensed Consolidated Financial Statements as included in Part I of this Quarterly Report on Form 10-Q fairly represent, in all material respects, the Company’s financial condition, results of operations and cash flows as of and for the periods presented in accordance with generally accepted accounting principles in the United States.

Remediation Efforts to Address Material Weaknesses Existing as of March 31, 2019

Management has implemented a remediation plan to address the control deficiencies that led to the material weaknesses referenced above. The remediation plan includes the following:

Providing additional training for employees involved in the cash and accounts receivable reconciliation processes, as well as certain other reconciliation processes, and supplement existing reviewers with higher skilled resources.

Implementing changes to posting rights and responsibilities to eliminate segregation of duties conflicts.

Providing additional training so that appropriate segregation of duties related to recording journal entries is achieved and performed on a timely basis as designed.

Remediation of Previously Reported Material Weaknesses

In connection with the preparation of the Company’s Condensed Consolidated Financial Statements for the quarter ended June 30, 2017, the Company identified the following control deficiencies that constituted material weaknesses in its internal control over financial ~~reporting. Specifically, the Company did not maintain the~~reporting:

The appropriate complement of resources in its tax department commensurate with the volume and complexity of accounting for income taxes subsequent to the Company’s Bankruptcy ~~Filing. This material weakness~~Filing were not maintained, which contributed to the following control deficiencies, each of which are individually considered to be material weaknesses, relating to the completeness and accuracy of the Company’s accounting for income taxes, including the related tax assets and liabilities:

Control activities over the completeness and accuracy of interim forecasts by tax jurisdiction used in accounting for the Company’s interim income tax provision were not performed at the appropriate level of precision. ~~This control deficiency resulted in an adjustment to the Company’s income tax provision for the quarter ended June 30, 2017.~~

Control activities over the completeness and accuracy of the allocation of the tax provision calculations (the “intraperiod allocation”) were insufficient to ensure that the intraperiod allocation balances were accurately determined. ~~This control deficiency resulted in an adjustment~~

Management took the following steps to ~~the Company’s income tax provision for the quarter ended June 30, 2017.~~

~~These control deficiencies resulted in~~remediate these material ~~adjustments to our income tax provision for the quarter ended June 30, 2017. These adjustments were detected~~weaknesses and corrected prior to the release of the related financial statements. However, the existence of these control deficiencies could result in misstatement of the aforementioned accounts and disclosures in the future that could result in a material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, our management has determinedconcluded that these ~~control deficiencies constitute material weaknesses.~~

~~Plan for Remediation~~

~~Management has begun implementing a remediation plan to address the control deficiencies that led to the~~ material weaknesses ~~referenced above. The remediation plan includes the following:~~were remediated as of March 31, 2019:

~~Implementing~~Implemented specific additional review procedures over the income tax provision calculations for interim quarters to ensure that the results of such calculations are not inconsistent with the actual results and trends ~~being~~ observed in the business. The deficiency, and the related remediation, applies only to interim quarters in which the income tax provision is based on forecast results for the year. The controls and processes related to the income tax provision for our fiscal year-end are not affected as they are based on actual results for the year.

~~Hiring~~Hired additional personnel, including a Vice President of Tax, with the appropriate experience and technical expertise in income taxes.

Notwithstanding the identified material weaknesses, management believes the Condensed Consolidated Financial Statements as included in Part I of the Quarterly Report on Form 10-Q fairly represent, in all material respects, the Company's financial condition, results of operations and cash flows as of and for the periods presented in accordance with generally accepted accounting principles in the United States.

Changes inIn Internal Control Over Financial Reporting

There ~~were~~have been no changes in the ~~Company's~~Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the ~~most recent~~ fiscal quarter ended March 31, 2019 that have materially affected, or are reasonably likely to materially affect, the ~~Company's~~Company’s internal control over financial reporting.

PART II. OTHER INFORMATION



Item 1.	Legal ~~Proceedings.~~Proceedings

The information ~~included in~~set forth under Note ~~20, “Commitments~~19, "Commitments and Contingencies,”" to the unaudited interim Condensed Consolidated Financial Statements is incorporated herein by reference.



Item 1A.	Risk ~~Factors.~~Factors

There have been no material changes during the quarterly period ended ~~December~~March 31, ~~2017~~2019 to the risk factors previously disclosed in the ~~Company’s Registration Statement on~~Company's Form ~~10 Amendment No. 3~~10-K filed with the ~~SEC~~Securities and Exchange Commission on ~~January 10, 2018.~~December 21, 2018 other than as shown below:

The United Kingdom’s withdrawal from the EU may adversely impact our operations in the United Kingdom and elsewhere.

In June 2016, voters in the United Kingdom approved an advisory referendum to withdraw from the EU, commonly referred to as "Brexit". The political and economic instability created by the Brexit vote has caused and may continue to cause significant volatility in global financial markets and the value of the Pound Sterling currency and other currencies, including the Euro. Depending on the terms reached regarding the United Kingdom’s exit from the EU, it is possible that there may be adverse practical and/or operational implications on our business.

Currently, the most immediate impact may be to the relevant regulatory regimes under which our United Kingdom subsidiaries operate, including the offering of communications services, as well as data privacy. Since the vote to withdraw from the EU, negotiations and arrangements between the United Kingdom, the EU and other countries outside of the EU have been, and will continue to be, complex and time consuming. The potential withdrawal could adversely impact our United Kingdom subsidiaries and add operational complexities that did not previously exist.

The timing of the proposed exit was recently extended and is now scheduled for October 31, 2019, with a transition period running through December 2020. However, the impact on regulatory regimes remains uncertain. At this time, we cannot predict the impact that an actual exit from the EU will have on our business generally and our United Kingdom subsidiaries more specifically, and no assurance can be given that our operating results, financial condition and prospects would not be adversely impacted by the result.



Item 2.	Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds

~~None.~~Issuer Purchases of Equity Securities

The following table provides information with respect to purchases by the Company of shares of common stock during the three months ended March 31, 2019:



	Issuer Purchases of Equity Securities
	(a)	(b)		(c)	(d)
Period	Total Number of Shares (or Units) Purchased⁽¹⁾	Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under Plans or Programs⁽²⁾
January 1 - 31, 2019	—	$	—	—	$	15,000,000
February 1 - 28, 2019	—	$	—	—	15,000,000
March 1 - 31, 2019	10,361	$	14.6940	—	15,000,000
Total	10,361	$	14.6940	—	$	15,000,000

⁽¹⁾ Represents shares of common stock withheld for taxes on restricted stock units that vested.

⁽²⁾On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase the Company’s outstanding warrants to purchase shares of the Company’s common stock for an aggregate expenditure of up to $15 million. The repurchases may be made from time to time in the open market, through block trades or in privately negotiated transactions.



Item 3.	Defaults Upon Senior ~~Securities.~~Securities

~~Not Applicable.~~None.



Item 4.	Mine Safety ~~Disclosures.~~Disclosures

Not ~~Applicable.~~applicable.



Item 5.	Other ~~Information.~~Information

None.



Item 6.	~~Exhibits.~~Exhibits



Exhibit Number
~~10.1~~		~~Transition and Consulting Services Agreement dated January 12, 2018, between Kevin J. Kennedy and Avaya Inc.~~
~~10.2~~		~~Form of Restricted Stock Unit Award Agreement pursuant to the Avaya Holdings Corp. 2017 Equity Incentive Plan for Non-Employee Directors~~ Exhibit Description
31.1		Certification of James M. Chirico, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of ~~Patrick~~Kieran J. ~~O'Malley, III~~McGrath pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of James M. Chirico, Jr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of ~~Patrick~~Kieran J. ~~O'Malley, III~~McGrath pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Labels Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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, thereunto duly authorized.



A~~VAYA~~ H~~OLDINGS~~ C~~ORP.~~		AVAYA HOLDINGS CORP.

By:	/s/ L. DAVID D~~ELL'~~ELL~~Osso~~'OSSO
Name:	L. David Dell'Osso
Title:	Vice President ~~Corporate Controller~~ & Chief Accounting Officer ~~(Principal Accounting Officer)~~

~~March 2, 2018~~May 13, 2019

5957



	Common Stock
	Number		Par Value		Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' (Deficit) Equity
Balance as of September 30, 2017 (Predecessor)	494.8		$	—	$	2,389		$	(5,954	)	$	(1,448	)	$	(5,013	)
Issuance of common stock, net of shares redeemed and cancelled, under employee stock option plan														—
Amortization of share-based compensation					3									3
Accrued dividends on Series A preferred stock					(2		)							(2		)
Accrued dividends on Series B preferred stock					(4		)							(4		)
Reclassifications to equity awards on redeemable shares					1									1
Net income								2,977						2,977
Other comprehensive income											658			658
Balance as of December 15, 2017 (Predecessor)	494.8		—		2,387			(2,977		)	(790		)	(1,380		)
Cancellation of Predecessor equity	(494.8	)			(2,387		)	2,977			790			1,380
Balance as of December 15, 2017 (Predecessor)	—		$	—	$	—		$	—		$	—		$	—

	Common Stock
	Number		Par Value		Additional Paid-in Capital			(Accumulated Deficit) Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total Stockholders' Equity (Deficit)
Balance as of December 15, 2017 (Predecessor)	—		$	—	$	—		$	—		$	—		$	—
Issuance of Successor common stock
Common stock issued for Predecessor debt	103.7		1		1,548									1,549
Common stock issued for Pension Benefit Guaranty Corporation	6.1				90									90
Common stock issued for general unsecured creditors or Predecessor debt	0.2				3									3
Balance as of December 15, 2017 (Predecessor)	110.0		$	1	$	1,641		$	—		$	—		$	1,642


Balance as of December 15, 2017 (Successor)	110.0		1		1,641			—			—			1,642
Issuance of common stock, net														—
Amortization of share-based compensation					1									1
Net income								237						237
Other comprehensive loss											(13		)	(13		)
Balance as of December 31, 2017 (Successor)	110.0		$	1	$	1,642		$	237		$	(13	)	$	1,867



(In millions, except per share amount)
Enterprise value	$	5,721
Plus:
Cash and cash equivalents	340
Less:
Minimum cash required for operations	(120		)
Fair value of Term Loan Credit Agreement⁽¹⁾	(2,896		)
Fair value of capitalized leases	(20		)
Fair value of pension and other post-retirement obligations, net of tax⁽²⁾	(856		)
Change in net deferred tax liabilities from reorganization	(510		)
Fair value of Successor warrants⁽³⁾	(17		)
Fair value of Successor common stock	$	1,642
Shares issued at December 15, 2017	110.0
Per share value	$	14.93



(In millions)	Predecessor Company			Reorganization Adjustments				Fresh Start Adjustments				Successor Company December 15, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	744		$	(404	)	(1)	$	—			$	340
Accounts receivable, net	523			—				(106		)	(21,29)	417
Inventory	98			—				29			(22)	127
Other current assets	366			(58		)	(2)	(66		)	(23)	242
TOTAL CURRENT ASSETS	1,731			(462		)		(143		)		1,126
Property, plant and equipment, net	194			—				116			(24)	310
Deferred income taxes, net	—			48			(3)	(17		)	(25)	31
Intangible assets, net	298			—				3,137			(26)	3,435
Goodwill	3,541			—				(909		)	(27)	2,632
Other assets	70			6			(4)	(27		)	(28)	49
TOTAL ASSETS	$	5,834		$	(408	)		$	2,157			$	7,583
LIABILITIES
Current liabilities:
Debt maturing within one year	$	725		$	(696	)	(5)	$	—			$	29
Accounts payable	325			(49		)	(6)	—				276
Payroll and benefit obligations	123			23			(7)	—				146
Deferred revenue	627			50			(8)	(341		)	(29)	336
Business restructuring reserve	35			3			(9)	—				38
Other current liabilities	97			65			(6,10)	(3		)	(30)	159
TOTAL CURRENT LIABILITIES	1,932			(604		)		(344		)		984
Non-current liabilities:
Long-term debt, net of current portion	—			2,771			(11)	96			(31)	2,867
Pension obligations	539			246			(12)	—				785
Other post-retirement obligations	—			212			(13)	—				212
Deferred income taxes, net	28			113			(14)	548			(32)	689
Business restructuring reserve	26			4			(9)	4			(33)	34
Other liabilities	180			233			(8,15)	(43		)	(29,34)	370
TOTAL NON-CURRENT LIABILITIES	773			3,579				605				4,957
LIABILITIES SUBJECT TO COMPROMISE	7,585			(7,585		)	(16)	—				—
TOTAL LIABILITIES	10,290			(4,610		)		261				5,941
Commitments and contingencies
Equity awards on redeemable shares	6			(6		)	(17)	—				—
Preferred stock:
Series B	397			(397		)	(17)	—				—
Series A	186			(186		)	(17)	—				—
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock (Successor)	—			1			(18)	—				1
Additional paid-in capital (Successor)	—			1,641			(18)	—				1,641
Common stock (Predecessor)	—			—				—				—
Additional paid-in capital (Predecessor)	2,387			(2,387		)	(17)	—				—
(Accumulated deficit) retained earnings	(5,978		)	4,872			(19)	1,106			(36)	—
Accumulated other comprehensive (loss) income	(1,454		)	664			(20)	790			(35)	—
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY	(5,045		)	4,791				1,896				1,642
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	5,834		$	(408	)		$	2,157			$	7,583



(In millions)
Sources:
Proceeds from Term Loan Credit Agreement, net of original issue discount	$	2,896
Release of restricted cash	76
Total sources of cash	2,972
Uses:
Repayment of DIP Credit Agreement	(725		)
Payment of DIP accrued interest	(1		)
Cash paid to Predecessor first lien debt-holders	(2,061		)
Cash paid to PBGC	(340		)
Payment for professional fees escrow account	(56		)
Funding payment for Avaya represented employee pension plan	(49		)
Payment of accrued professional & administrative fees	(27		)
Costs incurred for Term Loan Credit Agreement and ABL Credit Agreement	(59		)
Payment for general unsecured claims	(58		)
Total uses of cash	(3,376		)
Net uses of cash	$	(404	)



(In millions)
Release of restricted cash	$	(76	)
Reclassification of prepaid debt issuance costs related to the Term Loan Credit Agreement	(42		)
Payment of fees related to the ABL Credit Agreement	5
Restricted cash for bankruptcy related professional fees	55
Total other current assets	$	(58	)



(In millions)
Reclassification of accrued bankruptcy related professional fees	$	50
Reinstatement of other current liabilities	16
Payment of accrued interest on the DIP Credit Agreement	(1		)
Total other current liabilities	$	65



(In millions)
Term Loan Credit Agreement	$	2,925
Less:
Discount	(29		)
Upfront and underwriting fees	(54		)
Cash received upon emergence from bankruptcy	2,842
Reclassification of debt issuance cost incurred prior to emergence from bankruptcy	(42		)
Current portion of Long-term debt	(29		)
Long-term debt, net of current portion	$	2,771



(In millions)
Pre-petition first lien debt	$	734
Pre-petition second lien debt	1,357
Avaya pension plan for salaried employees	(514		)
General unsecured creditors' claims	227
Net gain on settlement of Liabilities subject to compromise	$	1,804



(In millions)
Accumulated deficit:
Net gain on settlement of liabilities subject to compromise	$	1,804
Expense for certain professional fees	(26		)
Benefit from income taxes	118
Cancellation of Predecessor equity awards	6
Cancellation of Predecessor Preferred stock Series B	397
Cancellation of Predecessor Preferred stock Series A	186
Cancellation of Predecessor Common stock	2,387
Total	$	4,872



(In millions)
Buildings and improvements	$	82
Machinery and equipment	38
Rental equipment	85
Assets under construction	13
Internal use software	92
Total property, plant and equipment	310
Less: accumulated depreciation and amortization	—
Property, plant and equipment, net	$	310



(In millions)
Reorganization value of Successor Company	$	7,583
Less: Fair value of Successor Company assets	(4,951		)
Reorganization value of Successor Company assets in excess of fair value - goodwill	$	2,632



(In millions)
Eliminate Predecessor Intangible assets	$	(298	)
Eliminate Predecessor Goodwill	(3,541		)
Establish Successor Intangible assets	3,435
Establish Successor Goodwill	2,632
Fair value adjustment to Inventory	29
Fair value adjustment to Other current assets	(66		)
Fair value adjustment to Property, plant and equipment	116
Fair value adjustment to Other assets	(27		)
Fair value adjustment to Deferred revenue	235
Fair value adjustment to Business restructuring reserves	(4		)
Fair value adjustment to Other current liabilities	3
Fair value adjustment to Long-term debt	(96		)
Fair value adjustment to Other liabilities	43
Release Predecessor Accumulated comprehensive loss	(790		)
Fresh start adjustments included in Reorganization items, net				$	1,671
Tax impact of fresh start adjustments				(565		)
Gain on fresh start accounting				$	1,106



(In millions)	Global Communications Solutions			Avaya Global Services			Total
September 30, 2017 (Predecessor)	$	1,093		$	2,449		$	3,542
Adjustments	(1		)	—			(1		)
Impact of fresh start accounting	68			(977		)	(909		)
December 15, 2017 (Predecessor)	$	1,160		$	1,472		$	2,632


December 31, 2017 (Successor)	$	1,160		$	1,472		$	2,632



	Successor
	As of December 31, 2017
(In millions)	Technology and patents			Customer relationships and other intangibles			Trademarks and trade names			Total
Gross Carrying Amount	$	905		$	2,155		$	375		$	3,435
Accumulated Amortization	(7		)	(7		)	—			(14		)
Net	$	898		$	2,148		$	375		$	3,421


	Predecessor
	As of September 30, 2017
(In millions)	Technology and patents			Customer relationships and other intangibles			Trademarks and trade names			Total
Gross Carrying Amount	$	1,427		$	2,196		$	545		$	4,168
Accumulated Amortization	(1,411		)	(2,091		)	—			(3,502		)
Accumulated Impairment	—			—			(355		)	(355		)
Net	$	16		$	105		$	190		$	311



(In millions)
Remainder of fiscal 2018	$	247
2019	326
2020	326
2021	325
2022	298
2023 and thereafter	1,566
Total	$	3,088



Exercise price	$	19.46
Expected term (in years)⁽¹⁾	8.54
Volatility⁽²⁾	65.37		%
Risk-free rate⁽³⁾	2.35		%
Dividend yield⁽⁴⁾	—		%



(In millions)
Accrued warranty obligations as of September 30, 2017 (Predecessor)	$	2
Reductions for payments and costs to satisfy claims	(1		)
Accruals for warranties issued during the period	1
Accrued warranty obligations as of December 15, 2017 (Predecessor)	$	2


Reductions for payments and costs to satisfy claims	$	(1	)
Accruals for warranties issued during the period	1
Accrued warranty obligations as of December 31, 2017 (Successor)	$	2


~~21.~~	~~Condensed Financial Information of Parent Company~~


	Successor			Predecessor			Non-GAAP Combined			Predecessor			Successor												Predecessor			Non-GAAP Combined
(In millions)	Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three Months Ended December 31, 2017			Three months ended December 31, 2016			Three months ended March 31, 2019			Three months ended March 31, 2018			Six months ended March 31, 2019			Period from December 16, 2017 through March 31, 2018			Period from October 1, 2017 through December 15, 2017			Six months ended March 31, 2018
REVENUE
Products	$	71		$	253		$	324		$	401		$	287		$	293		$	611		$	364		$	253		$	617
Services	77			351			428			474			422			379			836			456			351			807
	148			604			752			875			709			672			1,447			820			604			1,424
COSTS
Products:
Costs	33			84			117			145			105			110			220			143			84			227
Amortization of technology intangible assets	7			3			10			5			44			41			87			48			3			51
Services	30			155			185			190			174			198			347			228			155			383
	70			242			312			340			323			349			654			419			242			661
GROSS PROFIT	78			362			440			535			386			323			793			401			362			763
OPERATING EXPENSES
Selling, general and administrative	50			264			314			336			251			282			508			332			264			596
Research and development	9			38			47			62			52			50			105			59			38			97
Amortization of intangible assets	7			10			17			57			41			40			81			47			10			57
Restructuring charges, net	10			14			24			10			4			40			11			50			14			64
	76			326			402			465			348			412			705			488			326			814
OPERATING INCOME	2			36			38			70
OPERATING INCOME (LOSS)													38			(89		)	88			(87		)	36			(51		)
Interest expense	(9		)	(14		)	(23		)	(174		)	(58		)	(47		)	(118		)	(56		)	(14		)	(70		)
Other (expense) income, net	(2		)	(2		)	(4		)	4
Other income (expense), net													1			(3		)	23			(5		)	(2		)	(7		)
Reorganization items, net	—			3,416			3,416			—			—			—			—			—			3,416			3,416
(LOSS) INCOME BEFORE INCOME TAXES	(9		)	3,436			3,427			(100		)	(19		)	(139		)	(7		)	(148		)	3,436			3,288
Benefit from (provision for) income taxes	246			(459		)	(213		)	(3		)	6			9			3			255			(459		)	(204		)
NET INCOME (LOSS)	$	237		$	2,977		$	3,214		$	(103	)
NET (LOSS) INCOME													$	(13	)	$	(130	)	$	(4	)	$	107		$	2,977		$	3,084



									Percentage of Total Revenue
	Successor		Predecessor		Non-GAAP Combined		Predecessor		Non-GAAP Combined		Predecessor				Yr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions)	Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017		Three Months Ended December 31, 2017		Three Months Ended December 31, 2016		Three Months Ended December 31, 2017		Three Months Ended December 31, 2016		Yr. to Yr. Percentage Change
GCS	$	71	$	253	$	324	$	343	43	%	39	%	(6	)%	(7	)%
Networking	—		—		—		58		0	%	7	%	(100	)%	(100	)%
Total ECS product revenue	71		253		324		401		43	%	46	%	(19	)%	(20	)%
AGS	77		351		428		474		57	%	54	%	(10	)%	(11	)%
Total revenue	$	148	$	604	$	752	$	875	100	%	100	%	(14	)%	(15	)%



													Gross Margin
	Successor			Predecessor			Non-GAAP Combined			Predecessor			Non-GAAP Combined		Predecessor		Change
(In millions)	Period from December 16, 2017 through December 31, 2017			Period from October 1, 2017 through December 15, 2017			Three Months Ended December 31, 2017			Three Months Ended December 31, 2016			Three Months Ended December 31, 2017		Three months ended December 31, 2016		Amount			Percent
GCS	$	41		$	169		$	210		$	231		64.8	%	67.3	%	$	(21	)	(9.1	)%
Networking	—			—			—			25			—		43.1	%	(25		)	(100.0	)%
ECS	41			169			210			256			64.8	%	63.8	%	(46		)	(18.0	)%
AGS	50			196			246			284			57.5	%	59.9	%	(38		)	(13.4	)%
Unallocated amounts	(13		)	(3		)	(16		)	(5		)	⁽¹⁾		⁽¹⁾		(11		)	⁽¹⁾
Total	$	78		$	362		$	440		$	535		58.5	%	61.1	%	$	(95	)	(17.8	)%


									Percentage of Revenue
	Successor		Predecessor		Non-GAAP Combined		Predecessor		Non-GAAP Combined		Predecessor		Change									Percentage of Total Revenue				Change
(In millions)	Period from December 16, 2017 through December 31, 2017		Period from October 1, 2017 through December 15, 2017		Three Months Ended December 31, 2017		Three Months Ended December 31, 2016		Three Months Ended December 31, 2017		Three months ended December 31, 2016		Amount			Percent		Three months ended March 31, 2019		Three months ended March 31, 2018		Three months ended March 31, 2019		Three months ended March 31, 2018		Amount			Percent
Selling, general and administrative	$	50	$	264	$	314	$	336	41.7	%	38.4	%	$	(22	)	(7	)%	$	251	$	282	35.4	%	41.9	%	$	(31	)	(11	)%
Research and development	9		38		47		62		6.3	%	7.1	%	(15		)	(24	)%	52		50		7.3	%	7.4	%	2			4	%
Amortization of intangible assets	7		10		17		57		2.3	%	6.5	%	(40		)	(70	)%	41		40		5.8	%	6.0	%	1			3	%
Restructuring charges, net	10		14		24		10		3.2	%	1.1	%	14			140	%	4		40		0.6	%	6.0	%	(36		)	(90	)%
Total operating expenses	$	76	$	326	$	402	$	465	53.5	%	53.1	%	$	(63	)	(14	)%	$	348	$	412	49.1	%	61.3	%	$	(64	)	(16	)%



									Percentage of Total Products & Solutions Revenue
	Successor				Predecessor		Non-GAAP Combined		Successor		Non-GAAP Combined				Yr. to Yr. Percentage Change, net of Foreign Currency Impact
(In millions)	Six months ended March 31, 2019		Period from December 16, 2017 through March 31, 2018		Period from October 1, 2017 through December 15, 2017		Six months ended March 31, 2018		Six months ended March 31, 2019		Six months ended March 31, 2018		Yr. to Yr. Percentage Change
Direct	$	186	$	116	$	80	$	196	30	%	30	%	(5	)%	(4	)%
Indirect	429		278		173		451		70	%	70	%	(5	)%	(4	)%
Total Products & Solutions revenue	$	615	$	394	$	253	$	647	100	%	100	%	(5	)%	(4	)%