UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.DC 20549
________________________________________________ 
FORM 10-Q
________________________________________________ 
FORM 10-Q
x
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 20172021
or
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File NumberNumber: 001-38289
_______________________________________________ 
AVAYA HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
________________________________________________ 
Delaware26-1119726
Delaware
26-1119726
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer Identification No.)
4655 Great America2605 Meridian Parkway,
Santa Clara, California Suite 200		9505427713
Durham,North Carolina
(Address of principalPrincipal executive offices)(Zip Code)
(908) 953-6000
(Registrant’sRegistrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act
Title of Each ClassTrading Symbol(s)Name of each exchange on which registered
Common StockAVYANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨ ☒No  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  ¨ ☒No  ¨☐
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 definitionthe 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 filerx
☐
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  x☒
Indicate by check mark whether the registrant has filed all documentdocuments and reports required to be filed by SectionsSection 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  ☒    No  ¨☐
As of March 2, 2018, 109,794,137January 31, 2022, 84,927,867 shares of Common Stock, $0.01common stock, $.01 par value, of the registrant were outstanding.



1

TABLE OF CONTENTS
Item DescriptionPage
    
  
PART I—FINANCIAL INFORMATION
 
1. 
Financial Statements
1
2. 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
40
3. 
Quantitative and Qualitative Disclosures About Market Risk
55
4. 
Controls and Procedures
55
    
  
PART II—OTHER INFORMATION
 
1. 
Legal Proceedings
57
1A. 
Risk Factors
57
2. 
Unregistered Sales of Equity Securities and Use of Proceeds
57
3. 
Defaults Upon Senior Securities
57
4. 
Mine Safety Disclosures
57
5. 
Other Information
57
6. 
Exhibits
58
  
Signatures
59

ItemDescriptionPage
PART I—FINANCIAL INFORMATION
1.
1
2.
25
3.
34
4.
35
PART II—OTHER INFORMATION
1.
36
1A.
36
2.
37
3.
37
4.
37
5.
37
6.
38
7.
39
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’parties' trademarks, tradenamestrade 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.





2
Table of Contents

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
Services77
  351
 474
 148
  604
 875
COSTS      
Products:      
Costs33
  84
 145
Amortization of technology intangible assets7
  3
 5
Services30
  155
 190
 70
  242
 340
GROSS PROFIT78
  362
 535
OPERATING EXPENSES      
Selling, general and administrative50
  264
 336
Research and development9
  38
 62
Amortization of intangible assets7
  10
 57
Restructuring charges, net10
  14
 10
 76
  326
 465
OPERATING INCOME2
  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 taxes246
  (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:      
Basic109.8
  497.3
 497.0
Diluted110.3
  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)

Three months ended
December 31,
20212020
REVENUE
Products$231 $266 
Services482 477 
713 743 
COSTS
Products:
Costs111 105 
Amortization of technology intangible assets42 43 
Services191 179 
344 327 
GROSS PROFIT369 416 
OPERATING EXPENSES
Selling, general and administrative262 255 
Research and development61 55 
Amortization of intangible assets40 40 
Restructuring charges, net7 4 
370 354 
OPERATING (LOSS) INCOME(1)62 
Interest expense(54)(56)
Other income, net7 — 
(LOSS) INCOME BEFORE INCOME TAXES(48)6 
Provision for income taxes(18)(10)
NET LOSS$(66)$(4)
LOSS PER SHARE
Basic$(0.79)$(0.06)
Diluted$(0.79)$(0.06)
Weighted average shares outstanding
Basic84.7 83.8 
Diluted84.7 83.8 
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 amounts)
1
 Successor  Predecessor
 December 31, 2017  September 30, 2017
ASSETS    
Current assets:    
Cash and cash equivalents$417
  $876
Accounts receivable, net413
  536
Inventory124
  96
Other current assets230
  269
TOTAL CURRENT ASSETS1,184
  1,777
Property, plant and equipment, net306
  200
Deferred income taxes, net31
  —
Intangible assets, net3,421
  311
Goodwill2,632
  3,542
Other assets53
  68
TOTAL ASSETS$7,627
  $5,898
LIABILITIES    
Current liabilities:    
Debt maturing within one year$—
  $725
Long-term debt, current portion29
  —
Accounts payable304
  282
Payroll and benefit obligations124
  127
Deferred revenue384
  614
Business restructuring reserve36
  35
Other current liabilities153
  90
TOTAL CURRENT LIABILITIES1,030
  1,873
Non-current liabilities:    
Long-term debt, net of current portion2,867
  —
Pension obligations793
  513
Other post-retirement obligations215
  —
Deferred income taxes, net444
  32
Business restructuring reserve34
  34
Other liabilities377
  170
TOTAL NON-CURRENT LIABILITIES4,730
  749
LIABILITIES SUBJECT TO COMPROMISE—
  7,705
TOTAL LIABILITIES5,760
  10,327
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, 20171
  —
Additional paid-in capital1,642
  2,389
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
Table of Contents
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)Comprehensive (Loss) Income (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

Three months ended
December 31,
20212020
Net loss$(66)$(4)
Other comprehensive income:
Pension, post-retirement and post-employment benefit-related items(1)12 
Cumulative translation adjustment13 (6)
Change in interest rate swaps28 11 
Other comprehensive income40 17 
Total comprehensive (loss) income$(26)$13 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.




2
Table of Contents

Avaya Holdings Corp.
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except per share and share amounts)
December 31, 2021September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents$354 $498 
Accounts receivable, net350 307 
Inventory49 51 
Contract assets, net548 518 
Contract costs121 117 
Other current assets124 100 
TOTAL CURRENT ASSETS1,546 1,591 
Property, plant and equipment, net296 295 
Deferred income taxes, net38 40 
Intangible assets, net2,154 2,235 
Goodwill1,480 1,480 
Operating lease right-of-use assets126 135 
Other assets247 209 
TOTAL ASSETS$5,887 $5,985 
LIABILITIES
Current liabilities:
Accounts payable$339 $295 
Payroll and benefit obligations131 193 
Contract liabilities332 360 
Operating lease liabilities48 49 
Business restructuring reserves18 19 
Other current liabilities201 181 
TOTAL CURRENT LIABILITIES1,069 1,097 
Non-current liabilities:
Long-term debt2,820 2,813 
Pension obligations630 648 
Other post-retirement obligations154 153 
Deferred income taxes, net48 53 
Contract liabilities304 305 
Operating lease liabilities95 102 
Business restructuring reserves22 25 
Other liabilities235 267 
TOTAL NON-CURRENT LIABILITIES4,308 4,366 
TOTAL LIABILITIES5,377 5,463 
Commitments and contingencies (Note 18)
Preferred stock, $0.01 par value; 55,000,000 shares authorized at December 31, 2021 and September 30, 2021
Convertible series A preferred stock; 125,000 shares issued and outstanding at December 31, 2021 and September 30, 2021130 130 
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 550,000,000 shares authorized; 84,927,867 shares issued and outstanding at December 31, 2021; and 84,115,602 shares issued and outstanding at September 30, 20211 1 
Additional paid-in capital1,481 1,467 
Accumulated deficit(1,051)(985)
Accumulated other comprehensive loss(51)(91)
TOTAL STOCKHOLDERS' EQUITY380 392 
TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY$5,887 $5,985 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
3
Table of Contents

Avaya Holdings Corp.
Condensed Consolidated Statements of Cash FlowsChanges in Stockholders' Equity (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
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 amortization22
  31
 90
Share-based compensation1
  —
 2
Amortization of debt issuance costs—
  —
 36
Accretion of debt discount—
  —
 25
Provision for uncollectible receivables1
  (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 receivable5
  14
 54
Inventory3
  (2) 1
Accounts payable27
  (40) (22)
Payroll and benefit obligations(22)  16
 (56)
Business restructuring reserve(3)  (7) (18)
Deferred revenue44
  28
 1
Other assets and liabilities—
  (16) (42)
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES66
  (440) (44)
INVESTING ACTIVITIES:      
Capital expenditures(2)  (13) (14)
Acquisition of businesses, net of cash acquired—
  —
 (4)
Restricted cash10
  21
 —
Other investing activities, net—
  —
 3
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES8
  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 equivalents3
  (2) (11)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS77
  (536) (127)
Cash and cash equivalents at beginning of period340
  876
 336
Cash and cash equivalents at end of period$417
  $340
 $209

Common StockAdditional
Paid-In
Capital		Accumulated DeficitAccumulated
Other
Comprehensive
Loss		Total
Stockholders'
Equity
SharesPar Value
Balance as of September 30, 202184.1 $1 $1,467 $(985)$(91)$392 
Issuance of common stock under the equity incentive plan and the Stock Bonus Program0.9 5 5 
Issuance of common stock under the employee stock purchase plan0.2 3 3 
Shares repurchased and retired for tax withholding on vesting of restricted stock units and Stock Bonus Program shares(0.3)(7)(7)
Share-based compensation expense14 14 
Preferred stock dividends paid(1)(1)
Net loss(66)(66)
Other comprehensive income40 40 
Balance as of December 31, 202184.9 $1 $1,481 $(1,051)$(51)$380 
Balance as of September 30, 202083.3 $1 $1,449 $(969)$(245)$236 
Issuance of common stock under the equity incentive plan0.3 — 
Issuance of common stock under the employee stock purchase plan0.3 3 3 
Shares repurchased and retired for tax withholding on vesting of restricted stock units(0.1)(2)(2)
Share-based compensation expense14 14 
Preferred stock dividends accrued(1)(1)
Adjustment for adoption of new accounting standard(3)(3)
Net loss(4)(4)
Other comprehensive income17 17 
Balance as of December 31, 202083.8 $1 $1,463 $(976)$(228)$260 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

4

Table of Contents
AVAYA HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)Avaya Holdings Corp.

Condensed Consolidated Statements of Cash Flows (Unaudited)
(In millions)
Three months ended
December 31,
20212020
OPERATING ACTIVITIES:
Net loss$(66)$(4)
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:
Depreciation and amortization104 103 
Share-based compensation14 14 
Amortization of debt discount and issuance costs7 7 
Deferred income taxes, net(4)2 
Change in fair value of emergence date warrants(1)5 
Unrealized (gain) loss on foreign currency transactions(2)11 
Other non-cash charges, net2 — 
Changes in operating assets and liabilities:
Accounts receivable(44)23 
Inventory1 2 
Contract assets(57)(32)
Contract costs(1)(8)
Accounts payable46 51 
Payroll and benefit obligations(70)(57)
Business restructuring reserves(3)(4)
Contract liabilities(28)(56)
Other assets and liabilities(9)(9)
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES(111)48 
INVESTING ACTIVITIES:
Capital expenditures(27)(27)
NET CASH USED FOR INVESTING ACTIVITIES(27)(27)
FINANCING ACTIVITIES:
Principal payments for financing leases(2)(7)
Proceeds from other financing arrangements— 1 
Debt issuance costs— (2)
Proceeds from Employee Stock Purchase Plan4 4 
Proceeds from exercises of stock options1 — 
Preferred stock dividends paid(1)— 
Shares repurchased for tax withholdings on vesting of restricted stock units and Stock Bonus Program shares(7)(2)
NET CASH USED FOR FINANCING ACTIVITIES(5)(6)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(1)9 
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(144)24 
Cash, cash equivalents, and restricted cash at beginning of period502 731 
Cash, cash equivalents, and restricted cash at end of period$358 $755 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
5
Table of Contents
1.Background and Basis of Presentation

Avaya Holdings Corp.
Notes to Condensed Consolidated Financial Statements (Unaudited)
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 hardwareleader in digital communications products, solutions and services for contact centerbusinesses of all sizes delivering its technology predominantly through software and unifiedservices. Avaya builds innovative open, converged software solutions to enhance and simplify communications offered on-premises,and collaboration in the cloud, on-premise or as a hybrid solution. Avaya provides the mission-critical, real-time communication applications for small businessesof both. The Company's global team of professionals delivers services from initial planning and design, to large multinational enterprisesimplementation and government organizations. Currently, theintegration, to ongoing managed operations, optimization, training and support. The Company manages its business operations in two2 segments, Global CommunicationsProducts & Solutions ("GCS") representing the Company's products portfolio, and Avaya Global Services ("AGS") representing the Company's services portfolio.Services. The Company sells directly to customers 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 its direct wholly-owned subsidiary Avaya Inc. and its subsidiaries. The accompanying unaudited interim Condensed Consolidated Financial Statements as of December 31, 2017 and for the period from December 16, 2017 through December 31, 2017, 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, andstatements. The unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2017,2021, included in Amendment No. 3 to the Company’s Company's Annual Report on Form 1010-K filed with the SEC on January 10, 2018.November 22, 2021. In management’smanagement's opinion, these unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, necessary to present fairly state 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 ourthe 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. TheseThe Company uses estimates include assessing the collectability of accounts receivable,to assess expected credit losses on its financial assets, 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,annual effective tax rate, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill, business restructuring reserves, pension and post-retirement benefit costs, the fair value of assets and liabilities in business combinations and the amount of exposure from potential loss contingencies, and fair value measurements, among others. The markets for the 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 assets. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the consolidated financial statementsCondensed Consolidated Financial Statements in the period they are determined to be necessary. Actual results could differ from these estimates.
On January 19, 2017 (the “Petition Date”), Avaya Holdings, together with certain The spread 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 ofCOVID-19, the United States Bankruptcy Code (the “Bankruptcy Code’) ineffects on 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 CodeCompany's employees and the orders of the Bankruptcy Court until their emergence from bankruptcy on December 15, 2017.
Subsequentactions required to mitigate its impact have created substantial disruption to the Petition Date, all expenses, gainsglobal economy, which may affect management’s estimates and losses directly associated with the reorganization proceedings were reported as Reorganization items, netassumptions, in the accompanying Condensed Consolidated Statementsparticular those that require a projection 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.our financial results, our cash flows or broader economic conditions. The Company's other subsidiaries that wereCOVID-19 pandemic did not part of the Bankruptcy Filing ("non-debtors") continued to operate in the ordinary course of business.
Upon emergence from bankruptcyhave a material impact on December 15, 2017 (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 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"), the consolidated financial statements after 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.
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 Chapter 11 proceedings, the Company's ability to continue as a going concern was contingent upon its ability to comply withoperating results during the financial and other covenants contained in its debtor-in-possession credit agreement, the Bankruptcy Court's approvalfirst quarter of the Company's Plan of Reorganization and the Company's ability to successfully implement the Plan of Reorganization, among other factors. As a result of the execution of the Plan of Reorganization, there is no longer substantial doubt about the Company's ability to continue as a going concern.fiscal 2022.
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 PronouncementsRecent Standards Not Yet Effective
In March 2016,August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, "Improvements to Employee Share-Based Payment Accounting.2020-06, "Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity." This standard simplifies the accounting for share-based paymentsconvertible instruments and their presentationthe application of the derivatives scope exception for contracts in an entity's own equity. The standard also amends the accounting for convertible instruments in the statementsdiluted earnings per share calculation and requires enhanced disclosures of cash flows as well asconvertible instruments and contracts in an entity's own equity. This standard is effective for the income tax effectsCompany in the first quarter of share-based payments.fiscal 2023. The Company adopted this standard as of October 1, 2017adoption may be applied on a prospectivemodified or fully retrospective basis. TheAn entity may also irrevocably elect the fair value option in accordance with Accounting Standards Codification ("ASC") 825 for any financial instrument that is a convertible security upon adoption of this standard did notstandard. The Company is currently assessing the impact the new guidance will have a material impact on its Condensed Consolidated Financial Statements.


In March 2017,October 2021, the FASB issued ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost2021-08, Business Combinations (Topic 805): “Accounting for Contract Assets and Net Periodic Post-retirement Benefit Cost."Contract Liabilities from Contracts with Customers.” This standard changes how employers that sponsor defined benefit pensionrequires contract assets and other post-retirement benefit plans present net periodic benefit costcontract liabilities acquired in a business combination to be recognized in accordance with Topic 606 as if the acquirer had originated the contracts. This
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standard is effective for the Company in the income statement.first quarter of fiscal 2024, with early adoption permitted. The Company is currently assessing the impact the new guidance will have on its Condensed Consolidated Financial Statements.
3. Contracts with Customers
Disaggregation of Revenue
The following tables provide the Company's disaggregated revenue for the periods presented:
Three months ended
December 31,
(In millions)20212020
Revenue:
Products & Solutions$231 $266 
Services482 477 
Total revenue$713 $743 
Three months ended December 31, 2021Three months ended December 31, 2020
(In millions)Products & SolutionsServicesTotalProducts & SolutionsServicesTotal
Revenue:
U.S.$114 $261 $375 $126 $288 $414 
International:
Europe, Middle East and Africa65 127 192 92 103 195 
Asia Pacific32 49 81 29 46 75 
Americas International - Canada and Latin America20 45 65 19 40 59 
Total International117 221 338 140 189 329 
Total revenue$231 $482 $713 $266 $477 $743 
Transaction Price Allocated to the Remaining Performance Obligations
The transaction price allocated to remaining performance obligations that were wholly or partially unsatisfied as of December 31, 2021 was $2.3 billion, of which 51% and 26% is expected to be recognized within 12 months and 13-24 months, respectively, with the remaining balance expected to be recognized thereafter. This amendment requiresexcludes amounts for remaining performance obligations that are (1) for contracts recognized over time using the service cost component be disaggregated from the other components"right to invoice" practical expedient, (2) related to sales or usage based royalties promised in exchange for a license of pensionintellectual property and post-retirement benefit costs on the income statement. (3) related to variable consideration allocated entirely to a wholly unsatisfied performance obligation.
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Contract Balances
The service cost component is reported in the same line items as other compensationfollowing table provides information about accounts receivable, contract assets, contract costs and contract liabilities for the other componentsperiods presented:
(In millions)December 31, 2021September 30, 2021Increase (Decrease)
Accounts receivable, net$350 $307 $43 
Contract assets, net:
Current$548 $518 $30 
Non-current (Other assets)116 88 28 
$664 $606 $58 
Cost of obtaining a contract:
Current (Contract costs)$91 $89 $2 
Non-current (Other assets)50 53 (3)
$141 $142 $(1)
Cost to fulfill a contract:
Current (Contract costs)$30 $28 $2 
Contract liabilities:
Current$332 $360 $(28)
Non-current304 305 (1)
$636 $665 $(29)
The increase in Accounts receivable is mainly related to the timing of pension and post-retirement benefit costs (including interest cost, expected return on plancustomer payments. The increase in Contract assets amortization and curtailments and settlements) are reported in Other income (expense), netwas mainly driven by growth in the Company's Condensed Consolidated Financial Statements.subscription offerings. The Company early adopted this accounting standarddecrease in Contract liabilities was mainly driven by anticipated declines in hardware maintenance and software support services as of October 1, 2017. Changescustomers continue to transition to the Condensed Consolidated Financial Statements have been applied retrospectively. As a result,Company's subscription hybrid offering. The decrease was also driven by revenue earned from the Company reclassified $(6) million of other pension and post-retirement benefit costs to other income (expense), net forconsideration advance received in connection with the strategic partnership with RingCentral, Inc. ("RingCentral"). During the three months ended December 31, 2016 (Predecessor). For2021 and 2020, the period from December 16, 2017 throughCompany did not record any asset impairment charges related to contract assets.
During the three months ended December 31, 2017 (Successor)2021 and 2020, the period fromCompany recognized revenue of $162 million and $223 million that had been previously recorded as a Contract liability as of October 1, 2017 through2021 and October 1, 2020, respectively. During the three months ended December 15, 2017 (Predecessor),31, 2021 and 2020, the Company recordedrecognized a net (decrease) increase to revenue of $(2) million and $1 million, and $(8) million, respectively, of other pension and post-retirement benefit costsfor performance obligations that were satisfied, or partially satisfied, in other income (expense), net.prior periods.
Recent Standards Not Yet EffectiveContract Costs
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This standard supersedes most of the current 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 FASB issued several standards that clarified certain aspects of the standard but did not change the original standard. This new guidance is effective for the Company beginning in the first quarter of fiscal 2019. The ASU may be applied retrospectively (a) to each reporting period presented or (b) with the cumulative effect in retained earnings at the beginning of the adoption period.
We currently anticipate adoption of the new standard effective October 1, 2018 using the modified retrospective method whereby the cumulative effect 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. The PBGC received 6.1 million shares of Successor Company common stock and $340 million in cash; and
General Unsecured Claims. Holders of the Predecessor Company's general unsecured claims will receive their pro rata share of the general unsecured recovery pool. A liquidating trust was established in the amount of $58 million for the benefit of the general unsecured claims. Included in the 110.0 million Successor Company common stock issued are 0.2 million additional shares 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 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 the 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, maintenance services and product logistics on a fee basis. While the TSA can expire sooner, the agreement terminates after 2 years.
5. Fresh Start Accounting
In connection with the Company's emergence from bankruptcy and 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. 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, 2017 are not comparable 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, pension obligations and the deferred tax impact of the reorganization and fresh start adjustments.


The following table reconcilesprovides information regarding the enterprise valuelocation and amount for amortization of costs to obtain and costs to fulfill customer contracts recognized in the estimated fair valueCompany's Condensed Consolidated Statements of Operations for the Successor stockholders' equity as of the Emergence Date:periods presented:
Three months ended
December 31,
(In millions)20212020
Costs to obtain customer contracts:
Selling, general and administrative$44 $43 
Revenue4 1 
Total Amortization$48 $44 
Costs to fulfill customer contracts:
Costs$8 $4 

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(In millions, except per share amount) 
Enterprise value$5,721
Plus: 
Cash and cash equivalents340
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, 2017110.0
Per share value$14.93
Allowance for Credit Losses
(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 reconcilespresents the enterprise value tochange in the estimated reorganization value as ofallowance for credit losses by portfolio segment for the Emergence Date:period indicated:
Accounts Receivable(1)
Short-term Contract Assets(2)
Long-term Contract Assets(3)
Total
Allowance for credit loss as of September 30, 2021$4 $1 $1 $6 
Adjustment to credit loss provision1 — — 1 
Allowance for credit loss as of December 31, 2021$5 $1 $1 $7 
(In millions) 
Enterprise value$5,721
Plus: 
Non-debt current liabilities955
Non-debt non-current liabilities2,090
Excess cash and cash equivalents220
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
(1)Recorded within Accounts receivable, net on the Condensed Consolidated Balance SheetSheets.
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(2)Recorded within Contract assets, and liabilities, as well as significant assumptions or inputs.


(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, net523
 —
   (106) (21,29) 417
Inventory98
 —
   29
 (22) 127
Other current assets366
 (58) (2) (66) (23) 242
TOTAL CURRENT ASSETS1,731
 (462)   (143)   1,126
Property, plant and equipment, net194
 —
   116
 (24) 310
Deferred income taxes, net—
 48
 (3) (17) (25) 31
Intangible assets, net298
 —
   3,137
 (26) 3,435
Goodwill3,541
 —
   (909) (27) 2,632
Other assets70
 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 payable325
 (49) (6) —
   276
Payroll and benefit obligations123
 23
 (7) —
   146
Deferred revenue627
 50
 (8) (341) (29) 336
Business restructuring reserve35
 3
 (9) —
   38
Other current liabilities97
 65
 (6,10) (3) (30) 159
TOTAL CURRENT LIABILITIES1,932
 (604)   (344)   984
Non-current liabilities:           
Long-term debt, net of current portion—
 2,771
 (11) 96
 (31) 2,867
Pension obligations539
 246
 (12) —
   785
Other post-retirement obligations—
 212
 (13) —
   212
Deferred income taxes, net28
 113
 (14) 548
 (32) 689
Business restructuring reserve26
 4
 (9) 4
 (33) 34
Other liabilities180
 233
 (8,15) (43) (29,34) 370
TOTAL NON-CURRENT LIABILITIES773
 3,579
   605
   4,957
LIABILITIES SUBJECT TO COMPROMISE7,585
 (7,585) (16) —
   —
TOTAL LIABILITIES10,290
 (4,610)   261
   5,941
Commitments and contingencies           
Equity awards on redeemable shares6
 (6) (17) —
   —
Preferred stock:           
Series B397
 (397) (17) —
   —
Series A186
 (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


Reorganization Adjustments
In accordance with the Plan of Reorganization, the following adjustments were made:
1.Sources and Uses of Cash. The following reflects 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$2,896
Release of restricted cash76
Total sources of cash2,972
Uses: 
Repayment of DIP Credit Agreement(725)
Payment of DIP accrued interest(1)
Cash paid to Predecessor first lien debt-holders(2,061)
Cash paid to PBGC(340)
Payment for professional fees escrow account(56)
Funding payment for Avaya represented employee pension plan(49)
Payment of accrued professional & administrative fees(27)
Costs incurred for Term Loan Credit Agreement and ABL Credit Agreement(59)
Payment for general unsecured claims(58)
Total uses of cash(3,376)
Net uses of cash$(404)
2.
Other Current Assets.
(In millions) 
Release of restricted cash$(76)
Reclassification of prepaid debt issuance costs related to the Term Loan Credit Agreement(42)
Payment of fees related to the ABL Credit Agreement5
Restricted cash for bankruptcy related professional fees55
Total other current assets$(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.
6.
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 Benefit 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.



10.Other Current Liabilities.
(In millions) 
Reclassification of accrued bankruptcy related professional fees$50
Reinstatement of other current liabilities16
Payment of accrued interest on the DIP Credit Agreement(1)
Total other current liabilities$65
11.Exit Financing. In accordance with the Plan of Reorganization, the Company entered into the Term Loan Credit Agreement with a principal amount 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 bankruptcy2,842
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 or settled as follows in accordance with the Plan of Reorganization:
(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  $—
(1) In settlement of allowed general unsecured claims, each claimant will receive a pro-rata distribution of $58 million of the general unsecured claims account.
The following table displays the detail on the gain on settlement of liabilities subject to compromise:Condensed Consolidated Balance Sheets.
(In millions) 
Pre-petition first lien debt$734
Pre-petition second lien debt1,357
Avaya pension plan for salaried employees(514)
General unsecured creditors' claims227
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 taxes118
Cancellation of Predecessor equity awards6
Cancellation of Predecessor Preferred stock Series B397
Cancellation of Predecessor Preferred stock Series A186
Cancellation of Predecessor Common stock2,387
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 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(3)Recorded within Other 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 equipment38
Rental equipment85
Assets under construction13
Internal use software92
Total property, plant and equipment310
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 patents905
  12
 893
Trademarks and trade names375
  190
 185
Total$3,435
  $298
 $3,137
The fair value of customer relationships was determined using the excess earnings method, a derivation of the income approach that calculates residual profit attributable to an asset after proper returns are paid to complementary or contributory assets.
The fair value of technology and patents and trademarks and trade names determined using the royalty savings method, a derivation of the income approach that estimates the royalties saved through ownership of the assets.
27.Goodwill. Predecessor goodwill of $3,541 million was eliminated and Successor goodwill of $2,632 million was established based on the calculated reorganization value.Condensed Consolidated Balance Sheets.
4. Goodwill and Intangible Assets, net
(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 assets3,435
   
Establish Successor Goodwill2,632
   
Fair value adjustment to Inventory29
   
Fair value adjustment to Other current assets(66)   
Fair value adjustment to Property, plant and equipment116
   
Fair value adjustment to Other assets(27)   
Fair value adjustment to Deferred revenue235
   
Fair value adjustment to Business restructuring reserves(4)   
Fair value adjustment to Other current liabilities3
   
Fair value adjustment to Long-term debt(96)   
Fair value adjustment to Other liabilities43
   
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
6.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.level. The Company performsCompany's reporting units are subject to impairment testing annually, on July 1st, 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 Company determined that no events occurred or circumstances changed during the period from December 16, 2017 throughthree months ended December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor)2021 that would indicate that it is more likely than not reducethat its goodwill was impaired. To the fair value of any of the Company's reporting units below their respective carrying amounts. However, ifextent that business conditions deteriorate or there is a changeif changes in the business,key assumptions and estimates differ significantly from management's expectations, it may be necessary to record impairment charges in the future.
Intangible Assets, net
The Company adjustedCompany's intangible assets consist of the carrying value of goodwill upon application of fresh start accounting.
The carrying value of goodwill by operating segmentsfollowing for the periods indicated was as follows:indicated:
(In millions)
Technology
and Patents		Customer
Relationships
and Other
Intangibles		Trademarks and Trade NamesTotal
Balance as of December 31, 2021
Finite-lived intangible assets:
Cost$972 $2,154 $42 $3,168 
Accumulated amortization(698)(627)(22)(1,347)
Finite-lived intangible assets, net274 1,527 20 1,821 
Indefinite-lived intangible assets— — 333 333 
Intangible assets, net$274 $1,527 $353 $2,154 
Balance as of September 30, 2021
Finite-lived intangible assets:
Cost$971 $2,154 $42 $3,167 
Accumulated amortization(656)(588)(21)(1,265)
Finite-lived intangible assets, net315 1,566 21 1,902 
Indefinite-lived intangible assets— — 333 333 
Intangible assets, net$315 $1,566 $354 $2,235 
(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 accounting68
 (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, customer relationships, trademarks and trade-names and other intangibles. 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 intangibleassets. 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 performsamortized but are tested for impairment testing annually, on July 1st, or more frequently if events occur or changes in circumstances change that indicate that it is more likely than not that thean 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 throughthree months ended December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor)2021 that would indicate that its long-lived assets, includingfinite-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 areasset, the Avaya Trade Name, was impaired. However, ifTo the extent that business conditions deteriorate or there is a changeif changes in the business,key assumptions and estimates differ significantly from management's expectations, it may be necessary to record impairment charges in the future.
The Company adjusted the carrying value of intangible assets upon application 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:
9
 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
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Amortization expense related to intangible assets was $14 million, $13 million and $62 million
5. Supplementary Financial Information

The following table presents a summary of Other income, net for the period from December 16, 2017 through December 31, 2017 (Successor),periods indicated:
Three months ended
December 31,
(In millions)20212020
OTHER INCOME, NET
Foreign currency losses, net— (2)
Other pension and post-retirement benefit credits, net6 7 
Change in fair value of emergence date warrants1 (5)
Total other income, net$7 $— 

The following table presents supplemental cash flow information for the period from October 1, 2017 through December 15, 2017 (Predecessor) andperiods presented:
Three months ended
December 31,
(In millions)20212020
OTHER PAYMENTS
Interest payments$33 $33 
Income tax payments7 3 
NON-CASH INVESTING ACTIVITIES
Decrease in Accounts payable for Capital expenditures$(2)$(1)
Acquisition of equipment under finance leases— 2 
During the three months ended December 31, 2016 (Predecessor),2021 and 2020, the Company made payments for operating lease liabilities of $15 million and $17 million, respectively, and recorded non-cash additions for operating lease right-of-use assets of $7 million and $11 million, respectively.
The technologyfollowing table presents a reconciliation of cash, cash equivalents, and patents have useful livesrestricted cash that range between 3 years and 10 years with a weighted average remaining useful lifesum to the total of 5.7 years. Customer relationships have useful lives that range between 7 years and 20 years with a weighted average useful lifethe same such amounts shown in the Condensed Consolidated Statements 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
2019326
2020326
2021325
2022298
2023 and thereafter1,566
Total$3,088


7.Supplementary Financial Information
Supplemental Operations Information
A summary of other (expense) income, netCash Flows for the periods indicated is presented inpresented:
(In millions)December 31, 2021September 30, 2021December 31, 2020September 30, 2020
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents$354 $498 $750 $727 
Restricted cash included in other assets4 4 5 4 
Total cash, cash equivalents, and restricted cash$358 $502 $755 $731 

6. Business Restructuring Reserves and Programs
The following table summarizes the following table:
  
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
 $—
Foreign currency gains, net2
  —
 11
Income from transition services agreement, net—
  3
 —
Other pension and post-retirement benefit costs1
  (8) (6)
Change in fair value of the warrant liability(5)  —
 —
Other, net—
  1
 (1)
Total other (expense) income, net$(2)  $(2) $4
A summary of reorganization items, netrestructuring charges by activity for the periods indicated is presented in the following table:presented:
Three months ended
December 31,
(In millions)20212020
Employee separation costs$2 $1 
Facility exit costs5 3 
Total restructuring charges$7 $4 
  
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
REORGANIZATION ITEMS, NET      
Bankruptcy-related professional fees$—
  $(56) $—
Net gain on settlement of liabilities subject to compromise—
  1,804
 —
Net gain on fresh start adjustments—
  1,671
 —
Other items, net—
  (3) —
Reorganization items, net$—
  $3,416
 $—
Cash payments for reorganization items$1
  $2,524
 $—
Costs directly attributable to the implementation of the Plan of Reorganization were reported as 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 subject to compromise and $56 million for bankruptcy-related professional fees, including emergence and success fees paid on the Emergence Date.
8.Business Restructuring Reserves and Programs
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 recognized restructuring charges of $10 million and $14 million, respectively, including adjustments to the restructuring programs of prior fiscal years primarily consisting of the termination/buyout of leases. 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.
Fiscal 2018 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 restructuring charges for the fiscal 2018 restructuring program were forCompany's employee separation costs associated with employeegenerally consist of severance actions primarily in the U.S. and Europe, Middle East and Africa ("EMEA"), primarily the U.K. and forcharges 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, termination payments, pension fund payments, and health care and unemployment insurance costs to be paid to, or on behalf of, the affected employees. Facility exit costs primarily consist of lease obligation charges for exited facilities, including the impact of accelerated lease expense for right-of-use assets and accelerated depreciation expense for leasehold improvements with reductions in their estimated useful lives due to exited facilities. The restructuring charges include changes in estimates for

10
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increases and decreases in costs or changes in the timing of payments related to the restructuring programs of prior fiscal years. The Company does not allocate restructuring reserves to its operating segments.
The following table summarizes the components of the fiscal 2018 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
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
 $—
 $7
(1) Charges incurred in connection with the termination of the Santa Clara lease.
Fiscal 2017 Restructuring Program
During fiscal 2017, the Company identified opportunities to streamline operations and generate costs savings, which included eliminating employee positions. These obligations are primarilyactivity for employee separation costs associated with fiscal 2017 employee severance actionsrecognized under the Company's restructuring programs for the three months ended December 31, 2021:
(In millions)
Fiscal 2022 Restructuring Program(2)
Fiscal 2021 Restructuring Program(3)
Fiscal 2020 and prior Restructuring Programs(3)
Total
Accrual balance as of September 30, 2021$— $14 $30 $44 
Cash payments— (1)(4)(5)
Restructuring charges1 — — 1 
Adjustments(1)
— — 1 1 
Impact of foreign currency fluctuations— — (1)(1)
Accrual balance as of December 31, 2021$1 $13 $26 $40 
(1) Includes changes in estimates for increases and decreases in costs related to the Company's restructuring programs, which are recorded in Restructuring charges, net in the U.S. and EMEA, for whichCondensed Consolidated Statements of Operations in the period of the adjustment.
(2) Payments related paymentsto the fiscal 2022 restructuring program are expected to be completed in fiscal 2023. The separation charges include, but are not limited2022.
(3) Payments related 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)2021 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 operations2020 and generate cost savings, which included eliminating employee positions and exiting facilities. The remaining obligations related to theseprior restructuring programs are for employee severance costs are primarily associated with EMEA plans expected to be completed byin fiscal 2023.2027.
The following table aggregates the components of the fiscal 2008 through 2016 restructuring programs for the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor):
7. Financing Arrangements
(In millions)Employee Separation Costs Lease Obligations Total
Balance as of September 30, 2017 (Predecessor)$51
 $24
 $75
Cash payments(3) (17) (20)
Expense1
 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 fluctuations2
 —
 2
Balance as of December 31, 2017 (Successor)$53
 $7
 $60


9.Financing Arrangements
The following table reflects principal amounts of debt and debt net of discounts and issuance costs asfor the periods presented:
December 31, 2021September 30, 2021
(In millions)Principal amountNet of discounts and issuance costsPrincipal amountNet of discounts and issuance costs
Senior 6.125% Notes due September 15, 2028$1,000 $986 $1,000 $986 
Tranche B-1 Term Loans due December 15, 2027800 781 800 780 
Tranche B-2 Term Loans due December 15, 2027743 737 743 736 
Convertible 2.25% Senior Notes due June 15, 2023350 316 350 311 
Total Long-term debt$2,893 $2,820 $2,893 $2,813 
Term Loan and ABL Credit Agreements
As of December 31, 2017 (Successor)2021 and principal amounts of debt and debt net of discounts and issuance costs as of September 30, 2017 (Predecessor), which includes2021, the impact of adequate protection payments and accrued interest as of January 19, 2017:
 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
(1) Pre-petition long-term debt as of September 30, 2017 (Predecessor) was included in liabilities subject to compromise.
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, Avaya Inc. entered intoCompany maintained (i) theits 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) theits 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 providedprovides 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$200 million from time to time, subject to borrowing base availability (the "ABL Credit Agreement"). The ABL Credit Agreement together withmatures on September 25, 2025.
Prior to February 24, 2021, the Term Loan Credit Agreement the “Credit Agreements”matured in two tranches, with a principal amount of $843 million maturing on December 15, 2024 (the “Tranche B Term Loans”) and a principal amount of $800 million maturing on December 15, 2027 (the “Tranche B-1 Term Loans”). TheOn February 24, 2021, the Company amended the Term Loan Credit Agreement, pursuant to which the Company prepaid, replaced and refinanced the Tranche B Term Loans outstanding with $100 million in the casecash and $743 million in principal amount of ABRnew first lien term loans due December 2027 (the “Tranche B-2 Term Loans”). The Tranche B-2 Term Loans bearsbear interest at a rate with applicable margin of 3.00% per annum equalwith respect to 3.75% plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. primebase rate as publicly announced in the Wall Street Journalborrowings and (iii) the LIBOR Rate for an interest period of one month and in the case of LIBOR Loans, bears interest at a rate4.00% per annum equalwith respect to 4.75% plusLIBOR borrowings.
For the applicable LIBOR Rate, subjectthree months ended December 31, 2021 and 2020, the Company recognized interest expense of $18 million and $20 million, respectively, related 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 of 1:1 that becomes applicable only inincluding the event that the net borrowing availability under the ABL Credit Agreement is less than the greater of $25 million and 10%amortization of the lesser of the total borrowing basedebt discount and the ABL commitments (commonly known as the "line cap").issuance costs.
As of December 31, 2017,2021, the Company was not in defaulthad no borrowings outstanding under any of its debt agreements.
the ABL Credit Agreement. Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At December 31, 2017,2021, the Company had issued and outstanding letters of credit and guarantees of $74 million.$35 million under the ABL Credit Agreement. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $74
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$35 million of outstanding letters of credit and guarantees was $139$119 million at December 31, 2017.2021. For both the three months ended December 31, 2021 and 2020, recognized interest expense related to the ABL Credit Agreement was not material.
Senior Notes
The Company’s Senior 6.125% First Lien Notes have an aggregate principal amount outstanding of $1,000 million and mature on September 15, 2028 (the “Senior Notes”).The Senior Notes were issued on September 25, 2020, pursuant to an indenture among the Company, the Company's subsidiaries that are guarantors of the Senior Notes and party thereto and Wilmington Trust, National Association, as trustee and notes collateral agent.
For both the three months ended December 31, 2021 and 2020, the Company recognized interest expense of $16 million related to the Senior Notes, including the amortization of debt issuance costs.
Convertible Notes
The Company's 2.25% Convertible Notes have an aggregate principal amount outstanding of $350 million (including notes issued in connection with the underwriters' exercise in full of an over-allotment option of $50 million) and 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 both the three months ended December 31, 2021 and 2020, the Company recognized interest expense of $7 million related to the Convertible Notes, which includes $5 million of amortization of the debt discount and issuance costs.
The net carrying amount of the Convertible Notes for the periods indicated was as follows:
(In millions)December 31, 2021September 30, 2021
Principal$350 $350 
Less:
Unamortized debt discount(31)(36)
Unamortized issuance costs(3)(3)
Net carrying amount$316 $311 
The weighted average contractual interest rate of the Company’sCompany's outstanding debt was 6.5% as of both December 31, 2021 and September 30, 2021, including adjustments related to the Company's interest rate swap agreements (see Note 8, "Derivative Instruments and Hedging Activities"). The effective interest rate for the Term Loan Credit Agreement as of December 31, 20172021 and September 30, 2021 was 6.2%.
Predecessor Financing
Debt Covenants and Default. not materially different than its contractual interest rate including adjustments related to interest rate swap agreements designated as highly effective cash flow hedges. The indentures governingeffective interest rate for the Predecessor senior secured notes contained a number of covenants that, among other things and subject to certain exceptions, restricted the ability of the Predecessor and certain 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.


Capital Lease Obligations
Included in other liabilities is $22 million and $14 million of capital lease obligations, net of imputed interestSenior Notes as of December 31, 2017 (Successor)2021 and September 30, 2017 (Predecessor), respectively, and excluded amounts included in liabilities subject to compromise of $12 million2021 was not materially different than its contractual interest rate. The effective interest rate for the Convertible Notes as of both December 31, 2021 and September 30, 2017.2021 was 9.2%, reflecting the separation of the conversion feature in equity. The effective interest rates include interest on the debt and amortization of discounts and issuance costs.
As of December 31, 2021, the Company was not in default under any of its debt agreements.
8. Derivative Instruments and 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 outstanding variable rate loans.
On May 16, 2018, the Company entered into interest rate swap agreements with 6 counterparties, which fix a portion of the variable interest due under its Term Loan Credit Agreement (the "Original Swap Agreements"). Under the terms of the Original 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. Through September 23, 2020, the total $1,800 million notional amount of the Original Swap Agreements were designated as cash flow hedges and deemed highly effective as defined under ASC 815.
On September 23, 2020, the Company entered into an interest rate swap agreement to outsource certain delivery services associated withfor a notional amount of $257 million (the “Offsetting Swap Agreement”). Under the Avaya Private Cloud Services business. That agreement also includedterms of the sale of specified assets owned byOffsetting Swap Agreement, which matures on December 15, 2022, the Company which are being leased-back bypays a variable rate of interest based on one-month LIBOR and receives a fixed rate of 0.1745%. The Company
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entered into the Company and accountedOffsetting Swap Agreement to maintain a net notional amount less than the amount of the Company’s variable rate loans outstanding. The Offsetting Swap Agreement was not designated for ashedge accounting treatment. On September 23, 2020, Original Swap Agreements with a capital lease.notional amount of $257 million were also de-designated from hedge accounting treatment. As of December 31, 2017 (Successor)2021, Original Swap Agreements with a notional amount of $1,543 million continue to be designated as cash flow hedges and deemed highly effective as defined under ASC 815.
On July 1, 2020, the Company entered into interest rate swap agreements with 4 counterparties, which fix a portion of the variable interest due on its Term Loan Credit Agreement (the "Forward Swap Agreements") from December 15, 2022 (the maturity date of the Original Swap Agreements) through December 15, 2024. Under the terms of the Forward Swap Agreements, the Company will pay a fixed rate of 0.7047% and receive a variable rate of interest based on one-month LIBOR. The total notional amount of the Forward Swap Agreements is $1,400 million. Since their execution, the Forward Swap Agreements have been designated as cash flow hedges and deemed highly effective as defined by ASC 815.
The Company records changes in the fair value of interest rate swap agreements designated as cash flow hedges initially within Accumulated other comprehensive loss 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 cash flow hedge is reclassified from Accumulated other comprehensive loss to Interest expense in the Condensed Consolidated Statements of Operations. The Company records changes in the fair value of interest rate swap agreements not designated for hedge accounting within Interest expense. On September 30, 2017 (Predecessor), capital lease obligations23, 2020, the Company froze a $15 million deferred loss within Accumulated other comprehensive loss for the de-designated Original Swap Agreements, which is reclassified to Interest expense over the term of the Original Swap Agreements.
Based on the amount in Accumulated other comprehensive loss at December 31, 2021, approximately $43 million would be reclassified to Interest expense in the next twelve months.
It is management's intention that the net notional amount of interest rate swap agreements be less than or equal to the variable rate loans outstanding during the life of the derivatives.
Foreign Currency Forward Contracts
The Company, from time to time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with this agreement were $21certain monetary assets and liabilities including receivables, payables and certain intercompany balances. 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, net to offset the change in the value of the hedged assets and liabilities. As of December 31, 2021, the Company maintained open foreign currency forward contracts with a total notional value of $190 million, primarily hedging the British Pound Sterling, Japanese Yen, Mexican Peso, Czech Koruna, and $24 million, respectively, and include $10 million within liabilities subject to compromise asIndian Rupee. As of September 30, 2017.2021, the Company maintained open foreign currency forward contracts with a total notional value of $191 million, primarily hedging the British Pound Sterling, Indian Rupee, Czech Koruna and Mexican Peso.
Emergence Date Warrants
10.Derivative Warrant Liability
In accordance with the Planbankruptcy plan of Reorganization,reorganization adopted in connection with the Company's emergence from bankruptcy on the Emergence DateDecember 15, 2017 (the "Plan of Reorganization"), the Company issued Warrantswarrants to purchase 5,645,200 shares of Successorthe Company's common stock to the holders of the Predecessor second lien obligations extinguished pursuant to a warrant agreement (“Warrant Agreement”the Plan of Reorganization (the "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."on December 15, 2022. The Emergence Date Warrants contain certain derivative features that require the Warrantsthem 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 SuccessorOn November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company had no other derivative instruments atto repurchase up to $15 million worth of the Emergence Date Warrants. None of the Emergence Date Warrants have been exercised or repurchased as of December 31, 2017.2021.
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 and atWarrants as of December 31, 2017,2021 and September 30, 2021 was determined by using the Black-Scholes option pricing model with the input assumptions summarized below. Accordingly, we recorded a lossbelow:
December 31,
2021		September 30, 2021
Expected volatility52.53 %49.63 %
Risk-free interest rates0.37 %0.13 %
Contractual remaining life (in years)0.961.21
Price per share of common stock$19.80$19.79
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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 on its common stock throughout the term of the warrants.
Financial Statement Information Related to Derivative Instruments
The following table summarizes the fair value loss was recognized in Other (expense) income, net inof the Company's derivatives on a gross basis, including accrued interest, segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:
December 31, 2021September 30, 2021
(In millions)Balance Sheet CaptionAssetLiabilityAssetLiability
Derivatives Designated as Hedging Instruments:
Interest rate contractsOther assets$18 $— $6 $— 
Interest rate contractsOther current liabilities— 39 — 43 
Interest rate contractsOther liabilities— — — 10 
18 39 6 53 
Derivatives Not Designated as Hedging Instruments:
Interest rate contractsOther current liabilities— 7 — 7 
Interest rate contractsOther liabilities— — — 2 
Foreign exchange contractsOther current assets1 — — — 
Foreign exchange contractsOther current liabilities— — — 2 
Emergence Date WarrantsOther current liabilities— 8 — — 
Emergence Date WarrantsOther liabilities— — — 9 
1 15 — 20 
Total derivative fair value$19 $54 $6 $73 
The following table provides information regarding the location and amount of pre-tax gains (losses) for interest rate swaps designated as cash flow hedges:
Three months ended
December 31,
20212020
(In millions)Interest ExpenseOther Comprehensive IncomeInterest ExpenseOther Comprehensive Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded$(54)$40 $(56)$17 
Impact of cash flow hedging relationships:
Gain (loss) recognized in AOCI on interest rate swaps— 15 — (1)
Interest expense reclassified from AOCI(13)13 (12)12 


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:
Three months ended
December 31,
(In millions)Location of Derivative Pre-tax Gain (Loss)20212020
Emergence Date WarrantsOther income, net$1 $(5)
Foreign exchange contractsOther income, net— 5 


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
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 December 31, 2017 December 15, 2017
Expected volatility52.38% 54.57%
Risk free interest rates2.20% 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
the right to offset by counterparty per the master netting agreements:
December 31, 2021September 30, 2021
(In millions)AssetLiabilityAssetLiability
Gross amounts recognized in the Condensed Consolidated Balance Sheets$19 $54 $6 $73 
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheets(19)(19)(6)(6)
Net amounts$— $35 $— $67 

11.Fair Value Measures
9. 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.Considerable judgment was required in developing certain of the estimates of fair value and accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
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’sinstrument'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.


AssetAssets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 (Successor)2021 and September 30, 2017 (Predecessor)2021 were as follows:
 December 31, 2021September 30, 2021
 Fair Value Measurements UsingFair Value Measurements Using
(In millions)TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Assets:
Interest rate contracts$18 $— $18 $— $6 $— $6 $— 
Foreign exchange contracts1 — 1 — — — — — 
Total assets$19 $— $19 $— $6 $— $6 $— 
Liabilities:
Interest rate contracts$46 $— $46 $— $62 $— $62 $— 
Foreign exchange contracts— — — — 2 — 2 — 
Emergence Date Warrants8 — — 8 9 — — 9 
Total liabilities$54 $— $46 $8 $73 $— $64 $9 
 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
 Fair Value Measurements Using
(In millions)Total Level 1 Level 2 Level 3
Other Non-Current Assets:       
Investments$1
 $1
 $—
 $—
Investments
InvestmentsInterest rate and foreign exchange contracts classified as Level 12 assets and liabilities are pricednot actively traded and are valued using quoted market prices for identical assets in active marketspricing models that are observable.use observable inputs.
Warrants
Emergence Date Warrants classified as Level 3 liabilities are pricedvalued using thea probability weighted Black-Scholes option pricing model.model which is further described in Note 8, "Derivative Instruments and Hedging Activities."
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During the three months ended December 31, 2021 and 2020, there were 0 transfers into or out of Level 3. The activity related to the Company's Level 3 liability, the Emergence Date Warrants, relates to a change in fair value of the Warrants is recognizedwhich was recorded in Other (expense) income, net in the Condensed Consolidated Statements of Operations.net.
Fair Value of Financial Instruments
The estimated fair values of amounts borrowed under the Company’s financing arrangements at Company's Senior Notes, Term Loans and Convertible Notes as of December 31, 2017 (Successor)2021 and September 30, 2017 (Predecessor)2021 were as follows:
December 31, 2021September 30, 2021
(In millions)Principal amountFair valuePrincipal amountFair value
Senior 6.125% Notes due September 15, 2028$1,000 $1,064 $1,000 $1,053 
Tranche B-1 Term Loans due December 15, 2027800 803 800 802 
Tranche B-2 Term Loans due December 15, 2027743 744 743 745 
Convertible 2.25% Senior Notes due June 15, 2023350 373 350 368 
Total$2,893 $2,984 $2,893 $2,968 
The estimated based on afair value of the Company's Senior Notes and Term Loans was determined using Level 2 inputinputs based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices.
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 fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the amounts borrowed underextent the Company’s financing agreements at underlying liability will be settled in cash, approximate their carrying values because of the short-term nature of these instruments.
10. Income Taxes
The Company's effective income tax rate for the three months ended December 31, 2017 (Successor)2021 and September 30, 2017 (Predecessor) 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.
12.Income Taxes


For the Predecessor period ended December 15, 2017, the difference between the Company’s recorded provision and the provision that would result2020 differed from applying the U.S. statutoryfederal tax rate of 35% is primarily attributable to: (1) incomeby 59% or $28 million and losses taxed at different foreign tax rates, (2) losses146% or $9 million, respectively, principally related to deferred taxes (including 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. staterealized; and local income taxes, and (6) the impact of reorganization and fresh start adjustments.certain nondeductible expenses.
For the Successor period ended December 31, 2017, the difference between the Company’s recorded benefit and the benefit that would result from applying the new U.S. statutory rate of 24.5%, is primarily attributable 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 and Jobs Act (“the Act”), as more fully described below.
For the three months ended December 31, 2016, the difference between the Company’s recorded provision and the benefit that would result from applying the U.S. statutory rate of 35% is primarily attributable 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.11. Benefit Obligations
Under the Plan of Reorganization a substantial amount of the Company’s debt 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 concluded it is more likely than not that the related deferred tax assets will be realized. The remaining U.S. valuation allowance in the amount of $461 million was reversed as part of the fresh start adjustments because management concluded it is more likely than not that the deferred tax assets will be realized primarily due to future sources of taxable income that will be generated by the reversal of deferred tax liabilities established in the fresh start adjustments.
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 30th tax year-end and therefore the U.S. federal tax rate for the year ending September 30, 2018 is 24.5%.
The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) 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 th


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
16
Table 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”).Contents
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 tablestable below:
Three months ended
December 31,
(In millions)20212020
Pension Benefits - U.S.
Components of net periodic benefit credit
Service cost$1 $1 
Interest cost5 5 
Expected return on plan assets(12)(13)
Net periodic benefit credit$(6)$(7)
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost$2 $2 
Interest cost1 1 
Net periodic benefit cost$3 $3 
Post-retirement Benefits - U.S.
Components of net periodic benefit cost
Interest cost1 2 
Expected return on plan assets— (2)
Amortization of prior service credit(1)(1)
Amortization of actuarial loss— 1 
Net periodic benefit cost$— $— 
 Successor  Predecessor
(In millions)Period from December 16, 2017 through December 31, 2017  Period from October 1, 2017 through December 15, 2017 Three months ended December 31, 2016
Pension Benefits - U.S.      
Components of Net Periodic Benefit Cost      
Service cost$—
  $1
 $1
Interest cost1
  22
 24
Expected return on plan assets(2)  (38) (45)
Amortization of previously unrecognized net actuarial loss—
  20
 26
Settlement loss(1)
—
  —
 —
Net periodic benefit cost$(1)  $5
 $6

(1) Excludes PlanThe service components of Reorganization related settlements discussed below thatnet periodic benefit (credit) cost were recorded similar to compensation expense, while all other components 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 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 due 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, 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 lawslaw and regulations, or to directly pay benefits where appropriate. In March 2021, the American Rescue Plan Act (the "ARP Act") was signed into law, providing limited interest-rate relief provisions and an extended shortfall amortization period for pension funding and retirement plan distributions. As a result, of the Bankruptcy Filing in January 2017, there was an automatic stay on the Company'sCompany did not make any contributions to the U.S. pension plans during fiscal 2017. Therefore, the minimum funding requirements forthree months ended December 31, 2021 and does not expect to make any contributions to 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 for the APP, a qualified plan, of $49 million.
Remeasurement as a result of fresh start accounting increased the APP and other post-retirement benefit plan obligations by $3 million on December 15, 2017.


The Company made no contributions to satisfy minimum statutory funding requirements for its U.S. funded defined benefit pension plans for the period from December 16, 2017 through December 31, 2017 (Successor) and for 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 payments to satisfy minimum statutory funding requirements for the remainder of fiscal 2018 are $43 million.2022.
The Company providedContributions to the non-U.S. pension benefitsplans were $4 million for U.S. employees, which were not pre-funded. Consequently, the Company made payments as the benefits were disbursed or claims were paid. For the period from December 16, 2017 throughthree months ended 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 amounts 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 for2021. For the remainder of fiscal 2018 are $24 million.
During the period from December 16, 2017 through December 31, 2017 (Successor),2022, the Company was reimbursed $3 million from the represented employees’ post-retirement health trust for claims paidestimates 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 $12it will make contributions totaling $21 million for the remainder of fiscal 2018.non-U.S. plans.
The Company also provides certain retireeMost 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 benefitsretiree medical benefit claims are disbursed. ForThese payments are funded by the periodCompany up to the maximum contribution amounts specified in the plan documents and contract with the Communications Workers of America and the International Brotherhood of Electrical Workers, and contributions from December 16, 2017 throughthe participants, if required. During the three months ended December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor),2021, the Company made payments in each of the periods totaling less than $1 million for these retiree medical benefits. Estimatedand dental benefits of $2 million and received reimbursements from the represented employees' post-retirement health trust of $2 million related to payments in prior periods. The Company estimates it will make payments for these retiree medical and dental benefits totaling $9 million for the remainder of fiscal 2018 are less than $1 million.2022.
14.12. Share-based Compensation
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 existingCompany maintains share-based compensation awards were also cancelled,plans 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 Successorthe Company's common stock, as well as certain cash-based awards. Pre-tax share-based compensation expense for both the three months ended December 31, 2021 and 2020 was $14 million.
The maximum number of shares of common stock that may be issued or granted underRestricted Stock Units
During the 2017 Equity Incentive Plan is 7.4 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 available for the purpose of awards under the 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 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 bythree months ended December 31, 2021, 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 aggregategranted 2,643,376 RSUs with a 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$19.47 per RSU, and there were 637,550 RSUs that vested with a weighted average grant date fair value of all or a portion$17.56 per RSU.
17
Table of cash retainers and any dividends payable in respect of outstanding awards) may not exceed $750,000.Contents
On
Performance Restricted Stock Units
During the Emergence Date,three months ended December 31, 2021, the Company granted 3.4 million restricted stock units669,228 PRSUs with a grant date fair value of $21.89 per PRSU. These PRSUs will vest based on the attainment of specified performance metrics for each of the next three separate fiscal years (collectively the "Performance Period"), as well as the achievement of total shareholder return over the Performance Period for the Company as compared to the total shareholder return for a specified index of companies over the same period. During the Performance Period, the Company will adjust compensation expense for the PRSUs based on its best estimate of attainment of the specified annual performance metrics. The cumulative effect on current and 1.2 million stock options to executives and other employees. The awardsprior periods of a change in the estimated number of PRSUs that are subject to time based vesting. There are 2.8 million shares remaining under the 2017 Equity Incentive Plan availableexpected to be granted.earned during the Performance Period will be recognized as an adjustment to earnings in the period of the revision.
The grant date fair value of the premium-priced stock options granted on the Emergence DatePRSUs was determined using a lattice option pricingMonte Carlo simulation model withthat incorporated multiple valuation assumptions, including the probability of achieving the total shareholder return market condition and the following assumptions:
Three months ended December 31, 2021
Expected volatility(1)
67.59 %
Risk-free interest rate(2)
0.76 %
Dividend yield(3)
— %
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)(1)Expected termvolatility based on the vesting terms of the option and a contractual life of ten years.Company's historical data.
(2)Volatility based on peer group companies adjusted for the Company's leverage.
(3)Risk-free interest rate based on U.S. Treasury yields with a term equal to the expected option term.remaining Performance Period as of the grant date.
(4)(3)Dividend yield was assumed to be zero as the Company does not anticipate paying dividends.dividends on its common stock.
At December 31, 2017, all share-based awards granted byStock Bonus Program
In November 2021, the Successor Company adopted the Avaya Holdings Corp. Stock Bonus Program ("Stock Bonus Program") under which certain employees can elect to receive a specified percentage of their annual incentive bonus in the form of fully vested shares of the Company’s common stock in lieu of cash. Annually, the Company's Board of Directors will approve the maximum number of shares that can be issued under the Stock Bonus Program. For fiscal 2022, a maximum of 250,000 shares were unvestedapproved for issuance under the Stock Bonus Program. The number of shares issuable under the Stock Bonus Program will be determined based on the attainment of specified annual performance targets and the relatedaverage closing price of the Company's common stock over a specified 5-trading day period. The Stock Bonus Program is classified as a liability. The Company records compensation cost for the expected dollar value of the award and will adjust compensation expense for the awards based on its best estimate of attainment of its performance conditions. The cumulative effect of a change in the estimated value of the award will be recognized as an adjustment to earnings in the period of the revision. Pre-tax share-based compensation expense recordedrelated to the Stock Bonus Program for the period from December 16, 2017 throughthree months ended December 31, 2017 (Successor)2021 was not material.
Stock Options
During the three months ended December 31, 2021, there were 81,832 stock options exercised with an exercise price of $11.38. The intrinsic value of a stock option is the difference between the Company's common stock price and the option exercise price. The total pre-tax intrinsic value of stock options exercised during the three months ended December 31, 2021 was $1 million.
PredecessorEmployee Stock Purchase Plan
PriorDuring the three months ended December 31, 2021, the Company withheld $4 million of eligible employee compensation for purchases of common stock and issued 174,199 shares of common stock under its employee stock purchase plan (the "ESPP").
The grant date fair value for shares issued under the ESPP is measured on the date that each offering period commences. The grant date fair value for the offering period that commenced during the three months ended December 31, 2021 was $5.33 per share. The grant date fair value was determined using a Black-Scholes option pricing model with the following assumptions:
Three months ended December 31, 2021
Expected volatility(1)
62.43 %
Risk-free interest rate(2)
0.06 %
Dividend yield(3)
— %
(1)Expected volatility based on the Company's historical data.
(2)Risk-free interest rate based on U.S. Treasury yields with a term equal to the Emergence Date,length of the Predecessoroffering period.
(3)Dividend yield was assumed to be zero as the Company had granted share-based awards thatdoes not anticipate paying dividends on its common stock.
18
Table of Contents

13. Preferred Stock
There were cancelled upon emergence from bankruptcy. In conjunction with125,000 shares of the cancellation,Company's 3% Series A Convertible Preferred Stock, par value $0.01 per share ("Series A Preferred Stock") issued and outstanding as of December 31, 2021. The Series A Preferred Stock is convertible into shares of the Predecessor Company accelerated the unrecognized share-based compensation expense and recorded $3 millionCompany's common stock at an initial conversion price of compensation expense$16.00 per share, which represents an approximately 9% interest in the period from October 1, 2017 throughCompany's common stock on an as-converted basis as of December 15, 2017.

31, 2021, assuming no holders of options, warrants, convertible notes or similar instruments exercise their exercise or conversion rights.

15. Capital Stock
Successor
Preferred Stock. The Successor Company's certificate of incorporation authorizes it to issue up to 55.0 million shares of preferred stock with a par value of $0.01 per share. As of December 31, 2017, there were no preferred shares issued or outstanding.
Common Stock. The Successor Company's certificate of incorporation authorizes it to issue up to 550.0 million shares of common stock with a par2021, the carrying value of $0.01 per share. Asthe Series A Preferred Stock was $130 million, which includes $5 million of December 31, 2017, there were 110.0 million shares issued and 109.8 million outstanding. The outstanding shares were issued to (1) holdersaccreted dividends paid in kind.

19
Table 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).Contents
Predecessor
In connection with the Company's Plan of Reorganization and emergence from bankruptcy, all equity interests in the Predecessor Company were cancelled, including preferred and common stock, warrants and equity-based awards.
16. Earnings (Loss)14. Loss Per Common Share
All outstanding shares of common stock and common stock equivalents of the Predecessor Company were cancelled pursuant to the Plan of Reorganization.
Upon emergence, the Successor Company authorized and issued 110.0 million shares of common stock of which 109.8 million shares were outstanding at December 31, 2017 and used as the basis for determining earnings per share.
Basic earnings (loss) per share areis calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share reflectreflects 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 Series A Preferred Stock were converted into shares of the Company's common stock; 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 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. In periods with net losses, no incremental shares are reflected as their effect would be anti-dilutive.

The Company's Series A Preferred Stock are participating securities, which requires the application of the two-class method to calculate basic and diluted earnings (loss) per share. Under the two-class method, undistributed earnings are allocated to common stock and participating securities according to their respective participating rights in undistributed earnings, as if all the earnings for the period had been distributed. Basic earnings (loss) per common share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Net income (loss) attributable to common stockholders is reduced for preferred stock dividends earned and accretion recognized during the period. No allocation of undistributed earnings to participating securities was performed for periods with net losses as such securities do not have a contractual obligation to share in the losses of the Company.

The following table sets forth the calculation of net incomeloss attributable to common shareholdersstockholders and the computation of basic and diluted earnings (loss)loss per share for the periods indicated:
Three months ended
December 31,
(In millions, except per share amounts)20212020
Loss per share:
Numerator
Net loss$(66)$(4)
Dividends to preferred stockholders(1)(1)
Undistributed loss(67)(5)
Percentage allocated to common stockholders(1)
100.0 %100.0 %
Numerator for basic and diluted loss per common share$(67)$(5)
Denominator for basic and diluted loss per common share84.7 83.8 
Loss per common share
Basic$(0.79)$(0.06)
Diluted$(0.79)$(0.06)
(1) Basic weighted average common stock outstanding
84.7 83.8 
 Basic weighted average common stock and common stock equivalents (preferred shares)84.7 83.8 
 Percentage allocated to common stockholders100.0 %100.0 %

  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
Net income (loss) per share:       
Numerator       
Net income (loss) $237
  $2,977
 $(103)
Dividends to preferred stockholders —
  (6) (8)
Undistributed earnings 237
  2,971
 (111)
Percentage allocated to common stockholders(1)
 100.0%  86.9% 100.0%
Numerator for basic and diluted earnings per common share $237
  $2,582
 $(111)
        
Denominator       
Denominator for basic earnings per weighted average common shares 109.8
  497.3
 497.0
Effect of dilutive securities       
Restricted stock units 0.5
  —
 —
Stock options —
  —
 —
Warrants —
  —
 —
Denominator for diluted earnings per weighted average common shares 110.3
  497.3
 497.0
        
Per common share net income (loss)       
Basic $2.16
  $5.19
 $(0.22)
Diluted $2.15
  $5.19
 $(0.22)
        
(1) Basic weighted average common stock outstanding
 109.8
  497.3
 497.0
  Basic weighted average common stock and common stock equivalents (preferred shares) 109.8
  572.4
 497.0
  Percentage allocated to common stockholders 100.0%  86.9% 100.0%
There were 0.5 million dilutive securities forFor the period from December 16, 2017 throughthree months ended December 31, 2017 (Successor).
17.Operating Segments
On July 14, 2017,2021, the Company sold its Networking business to Extreme. Prior toexcluded 4.6 million RSUs, 0.3 million stock options, 0.2 million shares issuable under the sale,ESPP, 5.6 million Emergence Date Warrants and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 2.1 million PRSUs and 0.3 million shares authorized under the Company's Stock Bonus Program from the diluted loss per share calculation as either their performance metrics have not yet been attained or their effect would have been anti-dilutive.
For the three months ended December 31, 2020, the Company excluded 3.8 million RSUs, 0.9 million stock options, 0.1 million shares issuable under the ESPP, 5.6 million Emergence Date Warrants and 0.1 million shares of Series A Preferred Stock from the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 1.6 million PRSUs from the diluted loss per share calculation as either their performance metrics had three separate operating segments. After the sale, the Company has two operating segments, GCS representing the Company's products portfolio and AGS representing the Company's services portfolio. Both GCS and Networking made up the Company’s Enterprise Collaboration Solutions ("ECS") products portfolio.not yet been attained or their effect would have been anti-dilutive.
20
Table of Contents

The GCSCompany's Convertible Notes and Call Spread Warrants were excluded from the diluted loss per share calculation for all periods presented as their effect would have been anti-dilutive.
15. Operating Segments
The Products & Solutions segment primarily develops, markets, and sells unified communications and collaboration and contact center solutions, offered on premises,on-premise, in the cloud, or as a hybrid solution. These integrate multiple forms of communications, including telephony, e-mail,email, instant messaging and video. The AGSServices 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 softwareRevenue from customers who upgrade and hardware products offered integrated networking products.acquire new technology through the Company's subscription offerings is reported within the Services segment.
The Company’sCompany's chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the Company’sCompany'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, and 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’sCompany's operating segments is shown in the following table for the periods indicated:
Three months ended
December 31,
(In millions)20212020
REVENUE
Products & Solutions$231 $266 
Services482 477 
$713 $743 
GROSS PROFIT
Products & Solutions$120 $161 
Services291 298 
Unallocated Amounts (1)
(42)(43)
369 416 
OPERATING EXPENSES
Selling, general and administrative262 255 
Research and development61 55 
Amortization of intangible assets40 40 
Restructuring charges, net7 4 
370 354 
OPERATING (LOSS) INCOME(1)62 
INTEREST EXPENSE AND OTHER INCOME, NET(47)(56)
(LOSS) INCOME BEFORE INCOME TAXES$(48)$6 
  
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 Solutions71
  253
 401
Avaya Global Services77
  351
 474
 $148
  $604
 $875
GROSS PROFIT      
Global Communications Solutions$41
  $169
 $231
Avaya Networking (1)
—
  —
 25
Enterprise Collaboration Solutions41
  169
 256
Avaya Global Services50
  196
 284
Unallocated Amounts (2)
(13)  (3) (5)
 78
  362
 535
OPERATING EXPENSES      
Selling, general and administrative50
  264
 336
Research and development9
  38
 62
Amortization of intangible assets7
  10
 57
Restructuring charges, net10
  14
 10
 76
  326
 465
OPERATING INCOME2
  36
 70
INTEREST EXPENSE, OTHER (EXPENSE) INCOME, NET AND REORGANIZATION ITEMS, NET(11)  3,400
 (170)
(LOSS) INCOME BEFORE INCOME TAXES$(9)  $3,436
 $(100)
(1)The Networking business was sold on July 14, 2017.
(2) Unallocated Amountsamounts in Gross Profit include the effect of the amortization of technology intangibles and costs that are not core to the measurementintangible assets.
21
Table of segment management’s performance, but rather are controlled at the corporate level.Contents

18.Accumulated Other Comprehensive Loss
16.     Accumulated Other Comprehensive Loss
The components of accumulatedAccumulated other comprehensive income (loss)loss for the periods indicated are summarizedwere as follows:
(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Interest Rate SwapsAccumulated Other Comprehensive Loss
Balance as of September 30, 2021$(20)$(37)$(34)$(91)
Other comprehensive income before reclassifications— 13 15 28 
Amounts reclassified to earnings(1)— 13 12 
Balance as of December 31, 2021$(21)$(24)$(6)$(51)
(In millions)Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related ItemsForeign Currency TranslationUnrealized Loss on Interest Rate SwapsAccumulated Other Comprehensive Loss
Balance as of September 30, 2020$(108)$(46)$(91)$(245)
Other comprehensive income (loss) before reclassifications12 (6)(1)5 
Amounts reclassified to earnings— — 12 12 
Balance as of December 31, 2020$(96)$(52)$(80)$(228)
(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) $(1,661)
Other comprehensive income before reclassifications—
 19
 —
 19
Amounts reclassified to earnings20
 —
 —
 20
(Provision for) benefit from income taxes(6) 4
 —
 (2)
Ending balance December 31, 2016 (Predecessor)$(1,613) $(10) $(1) $(1,624)


(In millions)Change in unamortized pension, post-retirement and postemployment benefit-related items Foreign Currency Translation Other Accumulated Other Comprehensive Income (Loss)
Beginning balance October 1, 2017 (Predecessor)$(1,375) $(72) $(1) $(1,448)
Other comprehensive (loss) income before reclassifications(24) 3
 —
 (21)
Amounts reclassified to earnings16
 —
 —
 16
Pension settlement721
 —
 —
 721
Provision for income taxes(58) —
 —
 (58)
Ending balance December 15, 2017 (Predecessor)(720) (69) (1) (790)
Elimination of Predecessor Company accumulated other comprehensive loss720
 69
 1
 790
Ending balance December 15, 2017 (Predecessor)$—
 $—
 $—
 $—
        
        
Beginning balance December 15, 2017 (Successor)$—
 $—
 $—
 $—
Other comprehensive loss before reclassifications—
 (13) —
 (13)
Ending balance December 31, 2017 (Successor)$—
 $(13) $—
 $(13)
The amounts reclassified out of accumulatedReclassifications from Accumulated other comprehensive loss related to changes in unamortized pension, post-retirement and postemployment benefit-related items are reclassified torecorded in Other (expense) income, net in the Condensed Consolidated Statements of Operations priornet. Reclassifications from Accumulated other comprehensive loss related to the impact of income taxes.unrealized loss on interest rate swap agreements are recorded in Interest expense.
19.17. Related Party Transactions
Pursuant to the Plan of Reorganization confirmed by the Bankruptcy Court, the SuccessorThe Company's Board of Directors is comprised of seven8 directors, including the Successor Company's Chief Executive Officer James M. Chirico, Jr., and six7 non-employee directors, William D. Watkins, Ronald A. Rittenmeyer, Stephan Scholl, Susan L. Spradley, Stanley J. Sutula, III and Scott D. Vogel.directors.
Specific Arrangements Involving the Company’sCompany's Current Directors and Executive Officers
Laurent Philonenko is a Senior Vice President of Avaya Holdings and became an Advisor to Koopid, Inc., a software development company specializing in mobile applications, in February 2017. 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 purchased goods and services from Koopid, Inc. for each of the periods for less than $1 million.
Ronald A. Rittenmeyer isStephan Scholl, a Director of Avaya Holdings. Mr. Rittenmeyerthe Company, is the Chief Executive Officer of Alight Solutions LLC ("Alight"), a provider of integrated benefits, payroll and cloud solutions, and he also serves on theAlight's board of directors of Tenet Healthcare Corporation (“Tenet Healthcare”), a healthcare services company, and serves ondirectors. During both the board of directors of American International Group, Inc. (“AIG”), a global insurance organization. For the period from December 16, 2017 throughthree months ended December 31, 2017 (Successor)2021 and the period from October 1, 2017 through December 15, 2017 (Predecessor), sales of the Company’s products and services to Tenet Healthcare for each of the periods were less than $1 million. For the period from December 16, 2017 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), sales of the Company’s products and services to AIG were less than $1 million and $2 million, respectively.
Stanley J. Sutula III is a director of Avaya Holdings and he is Executive Vice President and Chief Financial Officer of Pitney Bowes Inc., a business-to-business provider of equipment, software and services. For the period from December 16, 2017 through December 31, 2017 (Successor), there were no sales of the Company's products and services to Pitney Bowes Inc. For the period from October 1, 2017 through December 15, 2017 (Predecessor) and for fiscal 2017 (Predecessor), sales of the Company’s products and services to Pitney Bowes Inc. for each of the periods were less than $1 million.
William D. Watkins is a director and Chair of the Board of Directors of Avaya Holdings. Mr. Watkins currently serves on the board of directors of Flex Ltd., an electronics design manufacturer. For the period from December 16, 2017 through December 31, 2017 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and for fiscal 2017,2020, the Company purchased goods and services from subsidiaries of Flex Ltd.Alight of $2 million, $6 million$1 million. As of both December 31, 2021 and $38 million, respectively.September 30, 2021, outstanding accounts payable due to Alight were not material.
Specific Arrangements Among the Predecessor Company, Silver Lake Partners and TPG Capital and their Affiliates
In connection with the Plan of Reorganization, all agreements between the Predecessor Company and Silver Lake Partners, TPG Capital and their affiliates (collectively, the "Predecessor Sponsors") were terminated on the Emergence Date, including the stockholders' agreement, registration rights agreement and management services agreement. In addition, all Predecessor


Company equity held by the Predecessor Sponsors was cancelled. Predecessor Sponsor fees paid were less than $1 million for the period from October 1, 2017 through December 15, 2017 (Predecessor).
20.18. Commitments and Contingencies
Legal Proceedings
General
The Company records accruals for legal contingencies to the extent that it has concluded it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described below because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes.
In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings including, but not limited to, those identified below, relating to intellectual property, commercial, employment, environmental indemnity and regulatory matters.
The Company believesrecords accruals for legal contingencies to the extent that it has meritorious defenses in connection with its current lawsuitsconcluded that it is probable that a liability has been incurred and material claims and disputes, and intends to vigorously contest each of them.
Based on the Company's experience, management believes that the damages amounts claimed in a case are not a meaningful indicatoramount of the potential liability. Claims, suits, investigationsloss can be reasonably estimated. When a material loss contingency is reasonably possible but not probable, we do not record a liability, but instead disclose the nature and proceedings are inherently uncertainthe amount of the claim, and it is not possible to predictan estimate of the ultimate outcomeloss or range of cases.loss, if such an estimate can be made.
Other than as described below, in the opinion of the Company's management, based upon information currently available to the Company, while the outcome of these lawsuits, claims and disputes is uncertain, the likely results of these lawsuits, claims and disputesmatters are not expected, either individually or in the aggregate, to have a material adverse effect on the Company's financial position, results of operations or cash flows, although theflows. However, an unfavorable resolution could have a material adverse effect could be material toon the Company's consolidatedfinancial position, results of operations or consolidated cash flows for any interim reporting period.
During the period December 16, 2017 through December 31, 2017 (Successor), October 1, 2017 through December 15, 2017 (Predecessor) and the three months ended December 31, 2016 (Predecessor), costs incurred in connection with certain legal matters was $0 million, $37 million and $0 million, respectively.
Antitrust Litigation
In 2006, the Company instituted an action in the U.S. District Court, Districtperiods in which the matters are ultimately resolved, or in the periods in which more information is obtained that changes management's opinion of New Jersey, against defendants Telecom Labs,the ultimate disposition.
On January 14, 2020, Solaborate Inc., TeamTLI.com Corp. and Continuant Technologies, Inc. (“TLI/Continuant”Solaborate LLC (collectively, “Solaborate”) and subsequently amended its complaint to include certain individual officers of these companies as defendants. Defendants purportedly provide maintenance services to customers who have purchased or leased the Company's communications equipment. The Company asserted in its amended complaint that, among other things, defendants, or each of them, engaged in tortious conduct by improperly accessing and utilizing the Company's proprietary software, including passwords, logins and maintenance service permissions, to perform certain maintenance services on the Company's customers' equipment. TLI/Continuant filed counterclaimssuit against the Company alleging thatin California Superior Court in San Bernardino County. The dispute concerns activities related to the Company’s development of the CU360 collaboration unit. Solaborate alleges breach of contract, trade secret misappropriation, and unfair business practices, among other causes of action. The Company has violatedcross-claimed, alleging promissory fraud and negligent misrepresentation by Solaborate. As of December 31, 2021, the Sherman Act's prohibitions against anticompetitive conduct throughsuit remains in the manner in which the Company sells its productsdiscovery phase and services. TLI/Continuant sought to recover the profits they claim they would have earned from maintaining Avaya's products, and askeda trial is scheduled for injunctive relief prohibiting the conduct they claim is anticompetitive. 
The trial commenced on September 9, 2013. On January 7, 2014, the Court issued an order dismissing the Company's affirmative claims. With respect to TLI/Continuant’s counterclaims, on March 27, 2014, a jury found against the Company on two
22
Table of eight claims and awarded damages of $20 million. Under the federal antitrust laws, the jury’s award is subject to automatic trebling, or $60 million.Contents
Following the jury verdict, TLI/Continuant sought an injunction regarding the Company’s ongoing business operations. On June 30, 2014, a federal judge rejected the demands of TLI/Continuant’s proposed injunction and stated that “only a narrow injunction is appropriate.” Instead, the judge issued an order relating to customers who purchased an Avaya PBX system between January 1, 1990 and
April 30, 2008 only. Those customers and their agents will have free access to the on demand maintenance commands that were installed on their systems at the time of the purchase transaction. The court specified that this right “does11, 2022. Solaborate has not extend to access on a system purchased after April 30, 2008.” Consequently, the injunction affected only


systems sold prior to April 30, 2008. The judge denied all other requests TLI/Continuant made in its injunction filing. The Company complied with the injunction although it has now been vacated by the September 30, 2016 decision discussed below.
The Company and TLI/Continuant filed post-trial motions seeking to overturn the jury’s verdict, which motions were denied. In September 2014, the Court entered judgment inyet disclosed the amount of $63 million,damages it seeks, which included the jury's award of $20 million, subject to automatic trebling, or $60 million, plus prejudgment interest in the amount of $3 million. On October 10, 2014,may include actual and punitive damages and equitable relief. While the Company filed a Notice of Appeal,intends to vigorously defend its interests and on October 23, 2014, TLI/Continuant filed a Notice of Conditional Cross-Appeal. On October 23, 2014, the Company filed its supersedeas bond with the Court in the amount of $63 million. The Company secured posting of the bond through the issuance of a letter of credit under its then existing credit facilities.
On November 10, 2014, TLI/Continuant made an application for attorney's fees, expenses and costs, which the Company contested. TLI/Continuant’s application for attorneys’ fees, expenses and costs was approximately $71 million and represented activity through February 28, 2015. On February 22, 2016, the Company posted a bond in the amount of $8 million in connection with TLC/Continuant's attorneys' fees application.
In September 2016, a Special Master appointed by the trial court to assist in evaluating TLI/Continuant's application rendered a Recommendation, finding that TLI/Continuant should receive approximately $61 million in attorneys' fees, expenses and costs. Subsequently, the parties submitted letters to the Special Master seeking an Amended Recommendation. However, in light of the Third Circuit's favorable opinion, outlined below, the trial court proceedings relating to TLI/Continuant's application have not proceeded. TLI/Continuant is no longer entitled to attorneys' fees, expenses and costs, because it no longer is a prevailing party, subject to further proceedings on appeal or retrial.
On September 30, 2016, the Third Circuit issued a favorable ruling for the Company, which included: (1) reversing the mid-trial decision to dismiss four ofpursue the Company’s affirmative claims and reinstated them; (2) vacating the jury verdict on the two claims decided in TLI/Continuant’s favor; (3) entering judgment in the Company’s favor on a portion of TLI/Continuant’s claim relating to attempted monopolization; (4) dismissing TLI/Continuant’s PDS patches claim as a matter of law; (5) vacating the damages award to TLI/Continuant; (6) vacating the award of prejudgment interest to TLI/Continuant; and (7) vacating the injunction. On October 28, 2016, TLI/Continuant sought panel rehearing or rehearing en banc review of the opinion, which was denied on November 16, 2016. On November 22, 2016, TLI/Continuant filed a Motion for Stay of Mandate, which was denied. On December 5, 2016, the Third Circuit issued a certified judgment in lieu of a formal mandate, returning jurisdiction to the trial court.
As a result of the Third Circuit’s opinion, on November 23, 2016, the Company filed a Notice of Motion to Release the Supersedeas Bonds, which the court granted on December 23, 2016. On December 12, 2016, the Court issued an Order Upon Mandate and For Status Conference, which i) vacated the Court’s January 7, 2014 order dismissing Avaya’s claims against TLI/Continuant and the order of judgment entered on September 17, 2014 and ii) scheduled a status conference for January 6, 2017 to discuss the Joint Plan for Retrial. On January 13, 2017, the Court entered an Order staying the matter pending mediation. On January 20, 2017, the Company filed a Notice of Suggestion on Pendency of Bankruptcy For Avaya Inc., et. al. and Automatic Stay of Proceedings. TLI/Continuant filed a proof of claim in the Bankruptcy Court. On November 30, 2017, the Company filed a motion in the Bankruptcy Court seeking to estimate TLI/Continuant’s claim.
A loss reserve has been provided for this matter. The Company continues to believe that TLI/Continuant’s claims are without merit and unsupported by the facts and law, and the Company continues to defend this matter. AtSolaborate, at this time an outcome cannot be predicted and, as a result, the Company cannot be assured that this case will not have a material adverse effect on the manner in which it does business, its financial position, results of operations, or cash flows.
Patent Infringement
In July 2016, BlackBerry Limited (“BlackBerry”) filed a complaint for patent infringement against the Company in the Northern District of Texas, alleging infringement of multiple patents with respect to a variety of technologies including user interface design, encoding/decoding and call routing. In September 2016, the Company filed a motion to dismiss these claims and in October 2016, the Company also filed a motion to transfer this matter to the Northern District of California. In January 2017, the Company filed a notice of Suggestion of Pendency of Bankruptcy, which initially stayed the proceedings. The stay was partially lifted to allow the court in Texas to rule on the two pending motions. The Company’s motion to transfer the case from Texas to California has been denied. The Company’s motion to dismiss BlackBerry’s indirect infringement and willfulness claims was granted, although BlackBerry was provided an opportunity to file an Amended Complaint to cure the deficiencies, which it did on October 19, 2017. BlackBerry filed a proof of claim in the Bankruptcy Court. On February 20, 2018, the Company and BlackBerry entered into a settlement agreement resolving this dispute, and the Company shortly expects the Court in the Northern District of Texas to enter an order dismissing the lawsuit, with prejudice. A loss reserve has been established for this matter. The Company considers this matter closed, except for distribution of the pre-petition allowed claim in accordance with the general unsecured claims procedure pursuant to the Company's Plan of Reorganization.


In September 2011, Network-1 Security Solutions, Inc. (“Network-1”) filed a complaint for patent infringement against the Company and other corporations in the Eastern District of Texas (Tyler Division), alleging infringement of its patent with respect to power over Ethernet technology. Network-1 seeks to recover for alleged reasonable royalties, enhanced damages and attorneys’ fees. In January 2017, the Company filed a Notice of Suggestion of Pendency of Bankruptcy, which informed the Court of the Company’s voluntary bankruptcy petition filing and stay of proceedings. On October 16, 2017, the Bankruptcy Court entered an order approving a settlement agreement with Network-1 and on November 7, 2017 the Tyler Division district court entered an order dismissing the lawsuit, with prejudice. The Company considers this matter closed, except for distribution of the pre-petition allowed claim in accordance with the general unsecured claims procedure in the Company's Plan of Reorganization.
Intellectual Property and Commercial Disputes
In January 2010, SAE Power Incorporated and SAE Power Company (“SAE”) filed a complaint in the New Jersey Superior Court asserting various claims including breach of contract, unjust enrichment, promissory estoppel, and breach of the covenant of good faith and fair dealing arising out of Avaya’s relationship with SAE as a supplier of various power supply products. SAE has since asserted additional claims against Avaya for fraud, negligent misrepresentation, misappropriation of trade secrets, and civil conspiracy. SAE seeks to recover for alleged losses stemming from Avaya’s termination of its power supply purchases from SAE, including for Avaya’s alleged disclosure of SAE’s alleged trade secret and/or confidential information to another power supply vendor. On July 19, 2016, the Court entered an order granting Avaya’s motion for partial summary judgment, dismissing certain of SAE’s claims regarding the alleged disclosure of trade secrets. In January 2017, the Company filed a Notice of Suggestion of Pendency of Bankruptcy, which informed the Court of the Company’s voluntary bankruptcy petition filing and stay of proceedings. SAE filed a proof of claim in the Bankruptcy Court. On September 28, 2017, the Company filed a motion in the Bankruptcy Court seeking to estimate SAE’s claim, and the estimation hearing took place on February 15, 2018. The Bankruptcy Court has(i) discovery is not yet decidedcomplete; (ii) the estimation motion. A loss reserve has been established for this matter. At this time an outcome cannot be predictedmatter presents legal uncertainties; (iii) there are significant facts in dispute; and as(iv) there is a result, the Company cannot be assured that this case will not have a material adverse effect on the manner in which it does business, its financial position, resultswide range of operations or cash flows.
In the ordinary course of business, the Company is involved in litigation alleging it has infringed upon third parties’ intellectual property rights, including patents and copyrights; some litigation may involve claims for infringement against customers, distributors and resellers by third parties relating to the use of Avaya’s products, as to which the Company may provide indemnifications of varying scope to certain parties. The Company is also involved in litigation pertaining to general commercial disputes with customers, suppliers, vendors and other third parties including royalty disputes. Much of the pending litigation against the Debtors has been stayed as result of the Chapter 11 filing and will be subject to resolution in accordance with the Bankruptcy Code and the orders of the Bankruptcy Court. Based on discussions with parties that have filed claims against the Debtors, the Company provided loss provisions for certain matters. However, these matters are on-going and the outcomes are subject to inherent uncertainties.potential outcomes. As a result, the Company cannot be assured that any such matter willis not have a material adverse effect on its financial position, resultsable to reasonably estimate the possible loss, or range of operations or cash flows.loss.
Product Warranties
The Company recognizes a liability for the estimated costs that may be incurred to remedy certain deficiencies of quality or performance of the Company’sCompany's products. These product warranties extend over a specified period of time, generally ranging up to two years from the date of sale depending upon the product subject to the warranty. The Company accrues a provision for estimated future warranty costs based upon the historical relationship of warranty claims to sales. The Company periodically reviews the adequacy of its product warranties and adjusts, if necessary, the warranty percentage and accrued warranty reserve, which is included in other current and non-current liabilities in the Condensed Consolidated Balance Sheets, for actual experience.


(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 period1
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 period1
Accrued warranty obligations as of December 31, 2017 (Successor)$2
 As of both December 31, 2021 and September 30, 2021, the amount reserved for product warranties was $2 million.
Guarantees of Indebtedness and Other Off-Balance Sheet Arrangements
Letters of Credit and Guarantees
The Company provides guarantees, letters of credit and surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company's performance in accordance with contractual or legal obligations. As of December 31, 2017 (Successor),2021, the maximum potential payment obligation with regards to letters of credit, guarantees and surety bonds was $61$68 million. The outstanding letters of credit are collateralized by restricted cash of $4 million, which is included in otherOther assets on the Condensed Consolidated Balance Sheets as of December 31, 2017 (Successor).2021.
Purchase Commitments and Termination Fees
The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and to help assure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that allow them to produce and procure inventory based upon forecasted requirements provided by the Company. If the Company does not meet these specified purchase commitments, it could be required to purchase the inventory, or in the case of certain agreements, pay an early termination fee. Historically, the Company has not been required to pay a charge for not meeting its designated purchase commitments with these suppliers but has been obligated to purchase certain excess inventory levels from its outsourced manufacturers due to actual sales of product varying from forecast and due to transition of manufacturing from one vendor to another.
The Company’sCompany's outsourcing agreements with its most significant contract manufacturers automatically renew in July and September for successive periods of twelve months each, subject to specific termination rights for the Company and the contract manufacturers. All manufacturing of the Company’sCompany's products is performed in accordance with either detailed requirements or specifications and product designs furnished by the Company and is subject to rigorous quality control standards.
Long-Term Incentive Cash Bonus Plan
The Predecessor Company had established a long-term incentive cash bonus plan (“LTIP”). Under the LTIP, the Predecessor Company would pay cash awards and recognize compensation expense to certain key employees upon specific triggering events. As of the Emergence Date, no triggering event had occurred, therefore no cash awards were paid and no compensation expense recognized. Upon emergence from bankruptcy, all awards to persons deemed "insiders" for purposes of Chapter 11 proceedings were cancelled.
Credit Facility Indemnification
In connection with the Successor Company's obligations under its post-emergence credit facilities, the Company has agreed to indemnify the third-party lending institutions for costs incurred by the institutions related to non-compliance with environmental law and other liabilities that may arise with respect to the execution, delivery, enforcement, performance and administration of the financing documentation. As of December 31, 2017 (Successor), no amounts were paid or accrued pursuant to this indemnity.
Transactions with Nokia
Pursuant to the Contribution and Distribution Agreement effective October 1, 2000 (the "Contribution and Distribution Agreement"), Nokia Corporation ("Nokia", formerly known as Lucent Technologies, Inc. (now Nokia)("Lucent")) contributed to the Company substantially all of the assets, liabilities and operations associated with its enterprise networking businesses (the “Company’s Businesses”"Contributed Businesses") and distributed the Company’sCompany's stock pro-rata to the shareholders of Lucent (“distribution”("distribution"). The Contribution and Distribution Agreement, among other things, provides that, in general, the Company will indemnify Nokia for all liabilities including certain pre-distribution tax obligations of Nokia relating to the Company’sContributed Businesses and all contingent liabilities primarily relating to the Company’sContributed Businesses or otherwise assigned to the Company. In addition, the Contribution and Distribution Agreement provides that certain contingent liabilities not allocated to one of the


parties will be shared by Nokia and the Company in prescribed percentages. The Contribution and Distribution Agreement also provides that each party will share specified portions of contingent liabilities based upon agreed percentages related to the business of the other party that exceed $50 million. The Company is unable to determine the maximum potential amount of other future payments, if any, that it could be required to make under this agreement.
In addition, in connection with the distribution, the Company and Lucent entered into a Tax Sharing Agreement effective October 1, 2000 (the "Tax Sharing Agreement") that governs Nokia’sNokia's and the Company’sCompany's respective rights, responsibilities and obligations after the distribution with respect to taxes for the periods ending on or before the distribution. Generally, pre-distribution taxes or benefits that are clearly attributable to the business of one party will be borne solely by that party and other pre-distribution taxes or benefits will be shared by the parties based on a formula set forth in the Tax Sharing Agreement. The
23
Table of Contents

Company may be subject to additional taxes or benefits pursuant to the Tax Sharing Agreement related to future settlements of audits by state and local and foreign taxing authorities for the periods prior to the Company’sCompany's separation from Nokia.
21.Condensed Financial Information of Parent Company
Avaya Holdings has no material assets or stand-alone operations other than its ownership in Avaya Inc. and its subsidiaries.
These condensed financial statements have been presented on a "Parent Company only" basis. Under a Parent Company only presentation, the Company's investments in its consolidated subsidiaries are presented using the equity method of accounting. These Parent Company only condensed financial statements should be read in conjunction with the Company's Condensed Consolidated Financial Statements.
The following present:
(1) the Successor Company, Parent Company only, statements of financial position as of December 31, 2017, and the statements of operations, comprehensive income (loss) and cash flows for the period from December 16, 2017 through December 31, 2017, and;
(2) the Predecessor Company, Parent Company only, statements of financial position as of September 30, 2017, and the statements of operations, comprehensive income (loss) and cash flows for the period from October 1, 2017 through December 15, 2017 and for the three months ended December 31, 2016.
Avaya Holdings Corp.
Parent Company Only
Condensed Balance Sheets (unaudited)
(In millions)
24
 Successor  Predecessor
 December 31, 2017  September 30, 2017
ASSETS    
Investment in Avaya Inc.$1,867
  $—
TOTAL ASSETS$1,867
  $—
     
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)    
LIABILITIES    
Deficit in excess of investment in Avaya Inc.$—
  $4,429
TOTAL LIABILITIES—
  4,429
Commitments and contingencies
  
Predecessor equity awards on redeemable shares—
  7
Preferred stock, Series B—
  393
Preferred stock, Series A—
  184
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)1,867
  (5,013)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)$1,867
  $—
Table of Contents



Avaya Holdings Corp.
Parent Company Only
Condensed 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
Equity in net income (loss) of Avaya Inc.$237
  $2,977
 $(103)
NET INCOME (LOSS)$237
  $2,977
 $(103)
NET INCOME (LOSS) PER SHARE AVAILABLE TO COMMON STOCKHOLDERS      
Basic$2.16
  $5.19
 $(0.22)
Diluted$2.15
  $5.19
 $(0.22)
Weighted average shares outstanding      
Basic109.8
  497.3
 497.0
Diluted110.3
  497.3
 497.0
Avaya Holdings Corp.
Parent Company Only
Condensed 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)
Equity in other comprehensive (loss) income of Avaya Inc.(13)  658
 37
Elimination of Predecessor Company accumulated other comprehensive loss—
  790
 —
Comprehensive income (loss)$224
  $4,425
 $(66)
Avaya Holdings Corp.
Parent Company Only
Condensed Statements of Cash Flows (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
 $(103)
Adjustments to reconcile net loss to net cash used for operating activities:      
Equity in net income (loss) of Avaya Inc.(237)  (2,977) 103
Net cash provided by (used for) operating activities—
  —
 —
Net cash provided by (used for) investing activities—
  —
 —
Net cash provided by (used for) financing activities—
  —
 —
Net increase (decrease) in cash and cash equivalents—
  —
 —
Cash and cash equivalents at beginning of period—
  —
 —
Cash and cash equivalents at end of period$—
  $—
 $—


22.Subsequent Events
On January 29, 2018, the Company entered into a definitive agreement to acquire Intellisist, Inc., doing business as Spoken Communications, a Contact Center as a Service (CCaaS) solutions company. The acquisition is expected to close within the next two months and be funded by cash on hand, however the ultimate purchase price and certain other terms are subject to further negotiation.




Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 2.Management’sUnless the context otherwise indicates, as used in this "Management's Discussion and Analysis of Financial Condition and Results of Operations.
Unless the context otherwise indicates, as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”" the terms “we,” “us,” “our,” “the"we," "us," "our," "the Company,” “Avaya”" "Avaya" and similar terms refer to Avaya Holdings Corp. and its consolidated subsidiaries. “Management’s"Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" should be read in conjunction with the unaudited interim Condensed Consolidated Financial Statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and our Consolidated Financial Statements and other financial information for the fiscal year ended September 30, 2017, which were2021, included in our Registration StatementAnnual Report on Form 10 Amendment No. 310-K for the fiscal year ended September 30, 2021 filed with the SECSecurities and Exchange Commission on January 10, 2018.November 22, 2021.
Our accompanying unaudited interim Condensed Consolidated Financial Statements as of December 31, 2017 and for the period from December 16, 2017 through December 31, 2017 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and the three months ended December 31, 2016 (Predecessor) 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 United States Securities and Exchange Commission ("SEC") for interim financial statements. In our opinion, the unaudited interim Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, as well as fresh start and reorganization adjustments, necessary to presentstate fairly the financial position, results of operations and cash flows for the periods indicated.
The matters discussed in “Management’sthis "Management's Discussion and Analysis of Financial Condition and Results of Operations”Operations" contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See “Cautionary"Cautionary Note Regarding Forward-Looking Statements”Statements" at the end of this discussion.
Overview
Avaya is a global leader in digital communications software,products, solutions and services and devices for businesses of all sizes.sizes delivering its technology predominantly through software and services. We enable organizations around the globe to succeed by creating intelligent communications experiences for our clients, their employees and their customers. Avaya builds innovative open, converged unified communications and collaboration ("UCC") and contact center ("CC") solutions to enhance and simplify communications and collaboration in the cloud, on-premise or a hybrid of both. Our global, experienced team of professionals delivers award-winning services from initial planning and design, to seamless implementation and integration, to ongoing managed operations, optimization, training and support.
Avaya shifted its entire comprehensive portfolio of capabilities to Avaya OneCloud, which offers significant capabilities across contact center (OneCloud CCaaS), unified communications and collaboration (OneCloud UCaaS), and communications platform as a service (OneCloud CPaaS). We believe the Avaya OneCloud open, intelligentcomposable platform approach uniquely positions us to address a customer's needs in creating a digital workplace for their campus-based and customizable solutionsremote employees through Unified Communications and Collaboration and the Customer Experience Center, our name for contact centers, helping clients deliver tangible business results.
Avaya also offers one of the broadest portfolios of business devices in the industry, including handsets, video conferencing units and unified communications offerheadsets to meet the flexibilityneeds of Cloud, on-premisesevery type of worker across a customer’s organization and hybrid deployments. Avaya shapes intelligent connections and creates seamless communication experiences forhelp our customers get the most out of their communications investments. Avaya IP-enabled handsets, multimedia devices and their customers. conferencing systems enhance collaboration and productivity, and position organizations to incorporate future technological advancements.
Our professional planning, support and management services teams help optimize solutions, for highly reliable and efficient deployments. Our solutions fall underbusiness has two operating segments:Products & Solutions and Services.
Global CommunicationProducts & Solutions ("GCS")
Products & Solutions encompasses our real-time collaborationUCC and CC software platforms, applications and devices.
Avaya OneCloud UCaaS solutions for unified communicationsenable organizations to reimagine collaborative work environments and contact center offerings to drive exceptionalhelp companies increase employee productivity, improve customer experiences. We take a cloud-first approachservice and reduce costs. With Avaya OneCloud UCaaS, organizations can provide their workers with a fully open architecture that supports flexibility, reliability, securitysingle app for all-channel calling, messaging, meetings and scaling so customers can moveteam collaboration with the same ease of use as existing consumer applications ("apps"). Avaya embeds communications directly into the apps, browsers and devices employees use every day, giving them a more natural, efficient and flexible way to theconnect, engage, respond and share where and how they want. We continue to integrate Artificial Intelligence ("AI") within our cloud in a way that best meets their specific needs. Avaya omnichannelbased solutions to create enhanced user experience and improve performance.
Avaya's industry-leading digital contact center solutions, thatAvaya OneCloud CCaaS, enable customersclients to build a customized portfolio of applications to drive stronger customer engagement and promote higher customer lifetime value. Our highly reliable, secure and scalable communications-centriccommunications solutions include voice, e-mail,email, chat, social media, video, performance management and ease of third-party integration that can improve customer service and help companies compete more effectively. Avaya is delivering OneCloud CCaaS solutions for cloud deployment and we continue to aggressively integrate AI, machine learning and leading-edge cybersecurity capabilities into our portfolio, providing our clients a deeper understanding of their customers' needs with a robust and secure platform.
Our unified
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Avaya OneCloud CPaaS combines the cloud with our communications solutions help companies increase employee productivity, improve customer serviceplatforms, providing a development platform and reduce costs by integrating multiple forms ofthe application programming interfaces that enable developers to easily integrate both UCC and CC communications including telephony, e-mail, instant messaging and video. Avaya embeds communicationscapabilities directly into the applications, browsersinternal and devices employees use every day to create a single, powerful gateway for voice, video, messaging, conferencing and collaboration. We free people from their desktop and give them a more natural and efficient way to connect, communicate and share when, where and how they want. 
This operating segment also includes an open, extensible development platform, so that our customers and third parties can easily adapt our technology by creating customcustomer-facing applications and automated workflows forworkflows. Organizations can quickly deliver modular, composable apps and experiences that meet ever-changing customer and operational needs.
Services
Complementing our product and solutions portfolio is a global, award-winning services portfolio, delivered by Avaya and our extensive partner ecosystem. Our services portfolio, which includes solution upgrades and provides new technology through our Avaya OneCloud subscription offerings, consists of:
•Global Support Services provide offerings that help businesses protect their unique needs, integrating Avaya’s capabilities into their existing infrastructuretechnology investments and business applications.
Avaya Global Services ("AGS") includes professional and support services designed toaddress the risk of system outages. We help our customers maximize the benefitsgain a competitive edge through proactive problem prevention, rapid resolution and continual solution optimization. Global support services also provide software solutions delivered through a subscription model to provide our customers an improved user experience and solution enhancements. Most of our solutions. Our global experienced professionalsupport services team helps maximize customer investments in collaborative communications, with services from initial planning and design, to seamless implementation, to integration and ongoing optimization. We help customers use communications to help minimize risk, enable people, and deliver a differentiated customer experience.
Avaya also offers every level of support for communications solutions, with award-winning services for implementation, deployment, training, monitoring, troubleshooting and optimization, and more. Our pro-active, preventative monitoring of system performance and the ability to quickly find and fix problems help keep customer communications running optimally. Remote diagnostics and resolutions help us rapidly resolve potential problems, saving time and reducing risk of an outage.


This operating segment also includes our private cloud and managed services, which enable customers to take advantage of our technology on-premises or in a private, public or hybrid (i.e., mix of on-premises, private and/or public) cloud environment, depending on solution and customer needs. The majority of our revenue in this reporting segment is recurring in nature and based on multi-year services contracts.
On July 14, 2017,•Enterprise Cloud and Managed Services enable customers to take advantage of our technology via the cloud, on-premise, or a hybrid of both, depending on the solution and the needs of the customer. Most of our enterprise cloud and managed services revenue is recurring in nature and based on multi-year services contracts.
•Professional Services enable our customers to take full advantage of their IT and communications solution investments to drive measurable business results. Our experienced consultants and engineers partner with customers along each step of the solution lifecycle to deliver services that add value and drive business transformation. Most of our professional services revenue is non-recurring in nature.
With these comprehensive services, customers can leverage communications technology to help them maximize their business results. We help our customers use communications to minimize the risk of outages, drive employee productivity and deliver a differentiated customer experience.
Our services teams also help our customers transition at their desired pace to next-generation communications solutions. Customers can choose the level of support for their communications solutions best suited for their needs, which may include deployment, training, monitoring, solution management, optimization and more. Our systems and service team's performance monitoring can quickly identify and address issues before they arise. Remote diagnostics and resolutions focus on fixing existing problems and avoiding potential issues in order to help our customers save time and reduce the risk of an outage.
OneCloud Business Highlight
During the three months ended December 31, 2021, the Company sold its former networking businessexecuted a OneCloud arrangement for a large global financial institution with an estimated total contract value in excess of $400 million over a term of up to Extreme Networks, Inc. (“Extreme”). Prior7 years. The contract includes a series of distinct performance obligations that are satisfied over time. Total consideration for the project is allocated to the
sale,each performance obligation, and revenue will be primarily recognized ratably over the networking business was a separate operating segment comprised of certain assets ofperiod during which the Company’s Networking
segment, along with the maintenance and professional services of the networking business, which were part of the AGS
segment. Networking included advanced fabric networking technology, which offered a unique end-to-end virtualized
architecture network designed to be simple to deploy. This operating segment also included software and hardware products
such as ethernet switches, wireless networking, access control, and unified management and orchestration solutions, which
provided network and device management. Accordingly, after the sale of the networking business, our operating segments
consist solely of GCS and AGS.
are performed.
Factors and Trends Affecting Our Results of Operations
There are a number ofseveral trends and uncertainties affecting our business. For example,Most importantly, we are dependent on general economic conditions, and the willingness of our customers to invest in technology. In addition, instability in the geopolitical environment of our customers, instability in the global credit markets and other disruptions put pressure on the global economy causing uncertainties. We are also affected by the impact of foreign currency exchange rates on our business. We believe these uncertainties have impacted our customers’ willingness to spend on ITtechnology and the manner in which theyour customers procure such technologiestechnology and services. This includes delays or rejection
Industry Trends
•UCC, CC and CPaaS are converging to become part of capital projects, includingan integrated services offering delivering next-generation communications capabilities across a host of devices and channels.
•Preference for cloud delivery of applications and management of multiple and varied devices continues to grow, all of which must be handled with the implementationsecurity that business demands.
•The experience economy continues to grow. The experience economy is based on the concept that experience is a key source of ourvalue — it is a differentiator that creates competitive advantage for products and services. In addition, as further explained below,As consumers embrace new technologies and devices in creative ways and at an accelerating pace, Avaya is continuing to invest in AI-powered solutions delivered through cloud and subscription models to create “Experiences that Matter” for customers, employees and agents. This increased adoption and deployment of AI is providing significant new opportunities for enhanced UCC and CC solutions that improve the customer experience and transform the Digital Workplace.
Coronavirus ("COVID-19") Update
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The COVID-19 pandemic has had widespread and unprecedented impacts on regional, national and global economies. The COVID-19 pandemic and its related economic effects have not had a material impact on our business or liquidity. However, the ultimate impact of the pandemic on our business, including our ability to execute our near-term and long-term business strategies and initiatives in the expected time frame, will depend on future pandemic related developments, including the duration and severity of the pandemic, the implementation or re-implementation of governmental and employer requirements to limit the spread of the virus, the speed with which vaccines can be distributed globally, the pace of acceptance of vaccines and booster shots by the public and the emergence of new variants, which are uncertain and cannot be predicted.
Our focus throughout the pandemic has been and remains on promoting employee health and safety, serving our customers and ensuring business continuity.
We believe that the current macroeconomic environment caused by the COVID-19 pandemic has accelerated what was already a developing trend in the way people work, with more employees working remotely, and we believe there is a growing market trend around cloud consumption preferences with more customers exploring operating expense models as opposed to capital expenditure (“CapEx”) modelsthis could increase demand for procuring technology. We believecertain of the market trend toward cloud models will continue as customers seek ways of reducing their fixed overhead and other costs.
We continue to evolve into a software and services business and focus our go-to-market efforts by introducing new solutions and innovations, particularly on workflow automation, multi-channel customer engagement and cloud-enabled communications applications. These include Avaya Oceana®, Avaya Oceanalytics™, Avaya Equinox®, Avaya® Enterprise Private Cloud and Zang® Cloud. We also launched a next-generation desktop device, Avaya Vantage™.
As a result of a growing market trend preferring cloud consumption, more customers are exploring subscription and pay-per-use based models, rather than CapEx models, for procuring technology. The shift to subscription and pay-per-use models enables customers to manage costs and efficiencies by paying a subscription or per minute or per message fee for business communications services rather than purchasing the underlyingCompany's products and services, infrastructure and personnel, which are owned and managed by the equipment vendor or a cloud and managed services provider. We believe the market trend toward these flexible consumption models will continue as we see an increasing number of opportunities and requests for proposal based on subscription and pay-per-use models. This trend has driven an increase in the proportion of total Company revenues attributable to software and services.
In addition, we believe customers are moving away from owned and operated infrastructure, preferring cloud offerings and virtualized server defined networks, which provide us with reduced associated maintenance support opportunities. Despite the benefits of a robust indirect channel, which include expanding our sales reach, our channel partners have direct contact with our customers that may foster independent relationships between them and a loss of certain services agreements for us. We have been able to offset these impacts by focusing on utilizing partners in a sales agent relationship, whereby partners perform selling activities but the contract remains with Avaya. We are also offering higher-value services in support of our software offerings, such as professional services and cloud-managed services, which are not traditionally provided by our channel partners.
The Company has maintained its focus on profitability levels and investing in future results. As the Company continues its transformation to a software and service-led organization, it has implemented programs designed to streamline its operations, generate cost savings and eliminate overlapping processes and resources. These cost savings programs include: (1) reducing headcount, (2) eliminating real estate costs associated with unused or under-utilized facilities and (3) implementing gross margin improvement and other cost reduction initiatives. The Company continues to evaluate opportunities to streamline its operations and identify cost savings globally and may take additional restructuring actions in the future. The costs of those actions could be material.
Emergence from Bankruptcy
On January 19, 2017 (the "Petition Date"), Avaya Holdings Corp., together with certain of its affiliates (collectively, the "Debtors"), filed voluntary petitions for relief (the "Bankruptcy Filing") under Chapter 11 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").
On November 28, 2017, the Bankruptcy Court entered an order confirming the Second Amended Joint Plan of Reorganization filed by the Debtors on October 24, 2017 (the "Plan of Reorganization"). On December 15, 2017 (the "Emergence Date"), the Plan of Reorganization became effective and the Debtors emerged from bankruptcy.
In accordance with the Plan of Reorganization, the following significant transactions occurred on the Emergence Date:
The Company paid in full amounts outstanding under the debtor-in-possession credit agreement (the "DIP Credit Agreement").
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;
The Company's certificate of incorporation was amended and restated to authorize the issuance of 605.0 million shares of 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;
The Company entered into a term loan credit agreement (the "Term Loan Credit Agreement") with a principal amount of $2,925 million and a $300 million asset-based revolving credit facility (the "ABL Credit Agreement");
The Company issued 99.3 million shares of Successor Company common stock to the holders of the Predecessor's first lien obligations that was extinguished in the bankruptcy. In addition, these holders received $2,061 million in cash;
The Company issued 4.4 million shares of Successor Company common stock to the holders of the Predecessor's second lien obligations that was extinguished in the bankruptcy. In addition, these holders received warrants to purchase 5.6 million shares of Successor Company common stock at an exercise price of $25.55 per warrant (the "Warrants");
The Company issued 6.1 million shares of Successor Company common stock to the Pension Benefit Guaranty Corporation ("PBGC"). In addition, the PBGC received $340 million in cash; and
The Debtors established a liquidating trust in the amount of $58 million for the benefit of general unsecured creditors. In addition, the Company issued 0.2 million additional shares of Successor Company common stock for the benefit of its former general unsecured creditors. The general unsecured creditors will receive a total of $58 million in cash and these shares of 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.
Upon emergence from bankruptcy on December 15, 2017, 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 application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the consolidated financial statements after December 15, 2017 are not comparable with the consolidated financial statements on or prior to that date. Refer to Note 5, "Fresh Start Accounting," to our unaudited interim Condensed Consolidated Financial Statements for further details.
Financial Results Summary
Our financial results for the period October 1, 2017 through December 15, 2017 are referred to as those of the “Predecessor” period. Our financial results for the period December 16, 2017 through December 31, 2017 are referred to as those of the “Successor” period. Our results of operations as reported inThe following table displays our Condensed Consolidated Financial Statements for these periods are in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Although GAAP requires that we report on our results for the periods October 1, 2017 through December 15, 2017 and December 16, 2017 through December 31, 2017 separately, management views the Company’s operating resultsconsolidated net loss for the three months ended December 31, 2017 by combining the results of the Predecessor2021 and Successor periods because such presentation provides the most meaningful comparison of our results to prior periods.2020:
Three months ended
December 31,
(In millions)20212020
REVENUE
Products$231 $266 
Services482 477 
713 743 
COSTS
Products:
Costs111 105 
Amortization of technology intangible assets42 43 
Services191 179 
344 327 
GROSS PROFIT369 416 
OPERATING EXPENSES
Selling, general and administrative262 255 
Research and development61 55 
Amortization of intangible assets40 40 
Restructuring charges, net7 4 
370 354 
OPERATING (LOSS) INCOME(1)62 
Interest expense(54)(56)
Other income, net7 — 
(LOSS) INCOME BEFORE INCOME TAXES(48)6 
Provision for income taxes(18)(10)
NET LOSS$(66)$(4)
The Company cannot adequately benchmark the operating results of the 16-day period

Three months ended December 31, 2017 against any of the previous periods reported in its Condensed Consolidated Financial Statements and does not believe that reviewing the results of this period in isolation would be useful in identifying any trends in or reaching any conclusions regarding the Company’s overall operating performance. Management believes that the key performance metrics such as revenue, gross margin and operating income for the Successor period when combined2021 compared with the Predecessor period from October 1, 2017 throughThree months ended December 15, 2017 provide more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our Condensed Consolidated Financial Statements in accordance with GAAP, the table below also presents the combined results31, 2020
Revenue
Revenue for the three months ended December 31, 2017, which is considered non-GAAP.


The combined results2021 was $713 million compared to $743 million for the three months ended December 31, 2017 represent2020. The decrease was primarily driven by the sum ofcontinuing shift away from on-premise product solutions and associated hardware maintenance and software support services to the reported amounts forCompany's OneCloud portfolio (including OneCloud subscription hybrid). The decrease was partially offset by higher revenue from the Predecessor period from October 1, 2017 through December 15, 2017Company's OneCloud subscription hybrid offering, devices and the Successor period from December 16, 2017 throughother hardware during three months ended December 31, 2017. These combined results do not comply with GAAP and have not been prepared as pro forma results under applicable regulations, but are presented because we believe they provide the most meaningful comparison2021.
27
Table of our results to prior periods. The combined operating results may not reflect the actual results we would have achieved absent our emergence from bankruptcy and may not be indicative of future results.Contents
The following table displays our consolidated net income (loss) for the periods indicated:

 Successor  Predecessor Non-GAAP Combined 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, 2017 Three months ended December 31, 2016
REVENUE        
Products$71
  $253
 $324
 $401
Services77
  351
 428
 474
 148
  604
 752
 875
COSTS        
Products:        
Costs33
  84
 117
 145
Amortization of technology intangible assets7
  3
 10
 5
Services30
  155
 185
 190
 70
  242
 312
 340
GROSS PROFIT78
  362
 440
 535
OPERATING EXPENSES        
Selling, general and administrative50
  264
 314
 336
Research and development9
  38
 47
 62
Amortization of intangible assets7
  10
 17
 57
Restructuring charges, net10
  14
 24
 10
 76
  326
 402
 465
OPERATING INCOME2
  36
 38
 70
Interest expense(9)  (14) (23) (174)
Other (expense) income, net(2)  (2) (4) 4
Reorganization items, net—
  3,416
 3,416
 —
(LOSS) INCOME BEFORE INCOME TAXES(9)  3,436
 3,427
 (100)
Benefit from (provision for) income taxes246
  (459) (213) (3)
NET INCOME (LOSS)$237
  $2,977
 $3,214
 $(103)

Three Months Ended December 31, 2017 combined results compared to the Three Months Ended December 31, 2016
Revenue
Revenue decreased in the first three months of fiscal 2018 primarily as the result of lower demand for products and services due to extended procurement cycles resulting from the Bankruptcy Filing, the sale of the Networking business in July 2017 and the impact of fresh start accounting following the Emergence Date. The lower demand for our unified communications, contact center and networking products has contributed, in part, to lower maintenance services revenue and private cloud and managed services revenue.


The following table displays revenue and the percentage of revenue to total sales by operating segment for the periods indicated:
Percentage of Total RevenueYr. to Yr. Percentage ChangeYr. to Yr. Percentage Change, net of Foreign Currency Impact
Three months ended
December 31,		Three months ended
December 31,
(In millions)2021202020212020
Products & Solutions$231 $266 32 %36 %(13)%(13)%
Services482 477 68 %64 %1 %1 %
Total revenue$713 $743 100 %100 %(4)%(4)%
          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 revenue71
  253
 324
 401
 43% 46% (19)% (20)%
AGS77
  351
 428
 474
 57% 54% (10)% (11)%
Total revenue$148
  $604
 $752
 $875
 100% 100% (14)% (15)%
OurProducts & Solutions revenue for the three months ended December 31, 20172021 was $752$231 million compared to $875$266 million for the three months ended December 31, 2016.2020. The decrease was primarily attributable to the continuing shift away from on-premise product solutions, partially offset by an increase in the revenue from devices and other hardware products.
GCSServices revenue for the three months ended December 31, 20172021 was $324$482 million compared to $343$477 million for the three months ended December 31, 2016.2020. The decrease in GCS revenueincrease was primarily attributable to uncertainties, procurement slowdowns and extended procurement cycles resultingdriven by higher revenue from the Bankruptcy Filing. As a result, there was a lower demand for endpoints, gateways, legacy NortelCompany's OneCloud subscription hybrid offering, partially offset by the anticipated declines in hardware maintenance and Tenovis products, SME Telephony products and servers. The decrease in GCS revenue was also duesoftware support services which continue to face headwinds driven by the impact of fresh start accounting on the balance of deferred revenue upon emergencecontinuing shift away from bankruptcy and subsequently the recognition of revenue in the Successor period.on-premise product solutions.
Networking revenue for the three months ended December 31, 2016 was $58 million. The Networking business was sold to Extreme in July 2017.
AGS revenue for the three months ended December 31, 2017 was $428 million compared to $474 million for the three months ended December 31, 2016. The decrease in AGS revenue was primarily due to lower maintenance services revenue as a result of the lower product sales discussed above and lower professional services revenue. The decrease in AGS revenue was also due to the impact of fresh start accounting on the balance of deferred revenue upon emergence from bankruptcy and subsequently the recognition of related revenue in the Successor period.
The following table displays revenue and the percentage of revenue to total sales by location for the periods indicated:
          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 
U.S.$71
  $331
 $402
 $466
 53% 53% (14)% (14)%
International:                
EMEA42
  166
 208
 234
 28% 27% (11)% (15)%
APAC - Asia Pacific19
  57
 76
 90
 10% 10% (16)% (17)%
Americas International - Canada and Latin America16
  50
 66
 85
 9% 10% (22)% (25)%
Total International77
  273
 350
 409
 47% 47% (14)% (17)%
Total revenue$148
  $604
 $752
 $875
 100% 100% (14)% (15)%
Percentage of Total RevenueYr. to Yr. Percentage ChangeYr. to Yr. Percentage Change, net of Foreign Currency Impact
Three months ended
December 31,		Three months ended
December 31,
(In millions)2021202020212020
U.S.$375 $414 53 %56 %(9)%(9)%
International:
Europe, Middle East and Africa192 195 27 %26 %(2)%— %
Asia Pacific81 75 11 %10 %8 %8 %
Americas International - Canada and Latin America65 59 9 %8 %10 %10 %
Total international338 329 47 %44 %3 %4 %
Total revenue$713 $743 100 %100 %(4)%(4)%
Revenue in the U.S. for the three months ended December 31, 2017 was $402 million compared to $466$375 million for the three months ended December 31, 2016. The decrease in U.S. revenue was primarily attributable to the impact of fresh start accounting on the balance of deferred revenue upon emergence from bankruptcy and subsequently the recognition of related revenue in the Successor period, a decrease in global support services and lower sales of unified communications products including endpoints, SME Telephony, and gateways, as well as the impact of the sale of the Networking business in July 2017.


Revenue in EMEA (Europe, Middle East, Africa) for the three months ended December 31, 2017 was $208 million2021 compared to $234$414 million for the three months ended December 31, 2016.2020. The decrease in EMEA revenuethe U.S. was primarily attributable todriven by the impact of the sale of the Networking business in July 2017,continuing shift away from on-premise product solutions and associated hardware maintenance and software support services, partially offset by higher revenue from the favorable impact of foreign currency. Company's OneCloud subscription hybrid offering.
Revenue in APACEurope, Middle East and Africa ("EMEA") for the three months ended December 31, 20172021 was $76$192 million compared to $90$195 million for the three months ended December 31, 2016.2020. The decrease in EMEA was mainly driven by the continuing shift away from on-premise product solutions and associated hardware maintenance and software support services; and the unfavorable impact of foreign currency exchange rates, partially offset by higher revenue from the Company's OneCloud subscription hybrid offering.
Revenue in Asia Pacific ("APAC") for the three months ended December 31, 2021 was $81 million compared to $75 million for the three months ended December 31, 2020. The increase in APAC revenue was primarily attributable to higher revenue from the impact of the sale of the Networking business in July 2017 and lower revenue associated with professional and support services. Company's OneCloud subscription hybrid offering.
Revenue in Americas International for the three months ended December 31, 20172021 was $66$65 million compared to $85$59 million for the three months ended December 31, 2016.2020. The decreaseincrease in Americas International revenue was primarily attributable to the sale of the Networking business in July 2017 and lower sales of unified communications products including endpoints, SME Telephony, and gateways.
We sell our products directly to end users and through an indirect sales channel. The following table sets forth a comparison ofdriven by higher revenue from sales of products by channelthe Company's OneCloud subscription hybrid offering; and the percentage of producthigher revenue from salesthe Company's professional services, partially offset by the continuing shift away from on-premise product solutions and associated hardware maintenance and software support services.
28
Table of products by channel for the periods indicated:Contents

          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 
Direct$17
  $80
 $97
 $99
 30% 25% (2)% (5)%
Indirect54
  173
 227
 302
 70% 75% (25)% (25)%
Total ECS product revenue$71
  $253
 $324
 $401
 100% 100% (19)% (20)%
Gross Profit
The following table sets forth gross profit and gross margin by operating segment for the periods indicated:
Gross MarginChange
Three months ended
December 31,		Three months ended
December 31,
(In millions)2021202020212020AmountPercent
Products & Solutions$120 $161 51.9 %60.5 %$(41)(25)%
Services291 298 60.4 %62.5 %(7)(2)%
Unallocated amounts(42)(43)(1)(1)1 (1)
Total$369 $416 51.8 %56.0 %$(47)(11)%
(1)Not meaningful.
          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)%
  ECS41
  169
 210
 256
 64.8% 63.8% (46) (18.0)%
AGS50
  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)%
(1)Not meaningful
Gross profit for the three months ended December 31, 2017 was $440 million compared to $535 million for the three months ended December 31, 2016. The decrease was attributable to the impact of the sale of the Networking business in July 2017, the decrease in sales of global support services, the impact of applying fresh start accounting upon emergence from bankruptcy and lower sales of unified communications products including endpoints, SME Telephony, and gateways.
GCSProducts & Solutions gross profit for the three months ended December 31, 20172021 was $210$120 million compared to $231$161 million for the three months ended December 31, 2016.2020, which results in a decrease of gross margin from 60.5% for the three months ended December 31, 2020 to 51.9% for the three months ended December 31, 2021. The decrease was attributable to the lower salesdecrease in revenue described above; an increase in hardware costs as a result of unified communications products including endpoints, SME Telephony,supply chain costs, the continued shift to cloud offerings where the Company incurs higher cloud delivery costs; and gateways, as well asa less favorable product mix due to the impactcontinued shift in consumption of applying fresh start accounting upon emergencehigher margin on-premise software from bankruptcy.a perpetual license model to a subscription model, which is reflected within our Services segment.
NetworkingServices gross profit for the three months ended December 31, 20162021 was $25 million. The Networking business was sold to Extreme in July 2017.
AGS gross profit for the three months ended December 31, 2017 was $246$291 million compared to $284$298 million for the three months ended December 31, 2016.2020. Services gross margin decreased from 62.5% for the three months ended December 31, 2020 to 60.4% for the three months ended December 31, 2021. The decrease was mainly driven by an increase in AGS gross profit was due tocosts associated with a decreasehigher mix of cloud and partner offerings, partially offset by the increase in sales of global support services andrevenue from the impact of applying fresh start accounting upon emergence from bankruptcy.


Company's OneCloud subscription hybrid offering.
Unallocated amounts for the three months ended December 31, 20172021 and 2016 included the effect of2020 represent the amortization of technology intangibles and costs that are not core to the measurement of segment performance, but rather are controlled at the corporate level.intangible assets.
Operating Expenses
The following table sets forth operating expenses and the percentage of operating expenses to total revenue for the periods indicated:
Percentage of Total RevenueChange
Three months ended
December 31,		Three months ended
December 31,
(In millions)2021202020212020AmountPercent
Selling, general and administrative$262 $255 36.7 %34.3 %$7 3 %
Research and development61 55 8.6 %7.4 %6 11 %
Amortization of intangible assets40 40 5.6 %5.4 %— — %
Restructuring charges, net7 4 1.0 %0.5 %3 75 %
Total operating expenses$370 $354 51.9 %47.6 %$16 5 %
          Percentage of Revenue    
 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
Selling, general and administrative$50
  $264
 $314
 $336
 41.7% 38.4% $(22) (7)%
Research and development9
  38
 47
 62
 6.3% 7.1% (15) (24)%
Amortization of intangible assets7
  10
 17
 57
 2.3% 6.5% (40) (70)%
Restructuring charges, net10
  14
 24
 10
 3.2% 1.1% 14
 140 %
Total operating expenses$76
  $326
 $402
 $465
 53.5% 53.1% $(63) (14)%
SG&ASelling, general and administrative expenses for the three months ended December 31, 2017 was $3142021 were $262 million compared to $336$255 million for the three months ended December 31, 2016.2020. The decreaseincrease was primarily attributable to advisory fees incurredhigher investment in the prior year period to assist in the assessment of strategiccloud go-to-market, marketing and financial alternatives to improve the Company’s capital structuretravel expenses associated with conferences, mainly Avaya Engage and results from the Networking business, that was sold to Extreme in July 2017, as well as an unfavorable impact of foreign currency.Gitex; and higher employee benefit costs, partially offset by lower accrued incentive compensation and lower facility related costs.
R&DResearch and development expenses for the three months ended December 31, 2017 was $472021 were $61 million compared to $55 million for the three months ended December 31, 2020. The increase was primarily attributable to investments in cloud technology development, partially offset by lower accrued incentive compensation.
Amortization of intangible assets were $40 million for both the three months ended December 31, 2021 and 2020.
Restructuring charges, net were $7 million for the three months ended December 31, 2021 compared to $4 million for the three months ended December 31, 2020. Restructuring charges during the three months ended December 31, 2021 consisted of $5 million for facility exit costs and $2 million for employee separation actions primarily in the U.S. and EMEA. Restructuring charges for the three months ended December 31, 2020 consisted of $3 million for facility exit costs primarily in the U.S. and $1 million for employee separation actions in EMEA.
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Operating (Loss) Income
Operating loss for the three months ended December 31, 2021 was $1 million compared to an operating income of $62 million for the three months ended December 31, 2016. The decrease was primarily attributable to the results from the Networking business incurred in the prior year period as that business was sold to Extreme in July 2017.
Amortization of acquired intangible assets for the three months ended December 31, 2017 was $17 million compared to $57 million for the three months ended December 31, 2016. The decrease was primarily attributable to certain customer relationships and other intangible assets that were fully amortized during the Predecessor period. The carrying value of intangible assets was adjusted upon the application of fresh start accounting. See Note 6, “Goodwill and Intangible Assets - Intangible Assets” to our unaudited interim Condensed Consolidated Financial Statements for further details, including potential future amortization expense related to intangible assets.
Restructuring charges, net, for the three months ended December 31, 2017 was $24 million compared to $10 million for the three months ended December 31, 2016. Restructuring charges recorded during the three months ended December 31, 2017 included employee separation costs of $13 million primarily associated with employee severance actions in the U.S. and EMEA and lease obligations of $11 million primarily in the U.S. and EMEA. The increase was primarily related to charges for employee separation costs and payments made under lease termination agreements associated with vacated facilities, particularly in EMEA and the U.S. Restructuring charges recorded during the three months ended December 31, 2016 included employee separation costs of $8 million primarily associated with employee severance actions in the U.S. and EMEA and lease obligations of $2 million primarily in EMEA.
Operating Income
Operating income for the three months ended December 31, 2017 was $38 million compared to $70 million for the three months ended December 31, 2016.2020. Our operating results for the three months ended December 31, 20172021 as compared to the three months ended December 31, 20162020 reflect, among other things:things, the following items which are described in more detail above:
the impact of applying fresh start accounting upon emergence from bankruptcy on December 15, 2017;
during the three months ended December 31, 2016, the Company recognized $49 million in advisory fees incurred to assist in the assessment of strategic•lower revenue and financial alternatives to improve the Company’s capital structure;
operating results from the Networking businessgross profit for the three months ended December 31, 2016;2021;

•higher selling, general and administrative costs for the three months ended December 31, 2021;

•higher research and development costs for the three months ended December 31, 2021; and
•higher net restructuring charges for the three months ended December 31, 2017 primarily related to employee separation charges and lease termination agreements associated with vacated facilities particularly in Europe and the U.S.;
a favorable impact of foreign currency on our operating results; and
Operating income includes depreciation and amortization of $53 million and non-cash share-based compensation of $1 million for the three months ended December 31, 2017 compared to depreciation and amortization of $90 million and non-cash share-based compensation of $2 million for the three months ended December 31, 2016.2021.
Interest Expense
Interest expense for the three months ended December 31, 20172021 was $23$54 million as compared to $174$56 million for the three months ended December 31, 2016.2020. The three months ended December 31, 2016 included non-cashdecrease was mainly driven by lower average principal amounts outstanding and lower average interest expense of $61 million relatedrates primarily attributable to the accelerated amortization of debt issuance costs and accretion of debt discount. Our Bankruptcy Filing, which constituted an event of default under our Predecessor first lien obligations and Predecessor second lien obligations, accelerated the Company's payment obligations under those instruments. Consequently, all debt outstanding under our Predecessor first lien obligations and Predecessor second lien obligations were classified as liabilities subject to compromise and related unamortized deferred financing costs and debt discountschanges in the amount of $61 million were expensed during the three months ended December 31, 2016. Effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petitionCompany’s debt classified as liabilities subjectportfolio described in Note 7 “Financing Arrangements” 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 of $94 million has not been recorded, as it was not expected to be an allowed claim under the Bankruptcy Filing. Cash interest expense for the three months ended December 31, 2017 and 2016 was $23 million and $113 million, respectively, a decrease of $90 million.our unaudited interim Condensed Consolidated Financial Statements.
Other (Expense) Income, Net
Other (expense) income, net for the three months ended December 31, 2017 was $(4) million as compared to $4 million for the three months ended December 31, 2016. Other expense, net for the three months ended December 31, 2017 includes other pension and post-retirement benefit costs of $7 million and a change in fair value of the Warrant liability of $5 million, partially offset by income from the Extreme Transition Services Agreement of $3 million, interest income of $2 million and foreign currency gains of $2 million. Other income, net for the three months ended December 31, 2016 includes net foreign currency gains of $112021 was $7 million partially offset by other pension and post-retirement benefit costs of $6 million.
Beginning in fiscal 2018, the Company adopted ASU No. 2017-07, "Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost." This amendment requires that the service cost component be disaggregated from the other components of net benefit costs on the income statement. The service cost component is reported in the same line items as other compensation costs and the other components of net benefit costs are reported in Other (expense) income, net in the Company's Condensed Consolidated Financial Statements. Changescompared to the Company's Condensed Financial Statements have been applied retrospectively. As a result, the Company reclassified $6$0 million of other pension and post-retirement benefit costs to Other (expense) income, net for the three months ended December 31, 2016. For2020. The increase was mainly driven by the three months ended December 31, 2017, the Company recorded $7 million of other pension and post-retirement benefit costschange in Other (expense) income, net. See Note 3, "Recent Accounting Pronouncements - Recently Adopted Accounting Pronouncements," to our unaudited interim Condensed Consolidated Financial Statements for further details.
Reorganization Items, Net
Reorganization items, net for the three months ended December 31, 2017 was $3,416 million. Reorganization items, net consistsfair value of the net gain from the consummation of the Plan of Reorganization and the related settlement of liabilities. Reorganization items, net also represent amounts incurred subsequent to the Bankruptcy Filing as a direct result of the Bankruptcy Filing and is comprised of professional service fees, DIP Credit Agreement financing costs and contract rejection fees.Emergence Date Warrants.
Provision for Income Taxes
The provision for income taxes was $213$18 million for the three months ended December 31, 20172021 compared withto a provision for income taxes of $3$10 million for the three months ended December 31, 2016.2020.
ForThe Company's effective income tax rate for the Successor periodthree months ended December 31, 2017,2021 differed from the difference between the Company’s recorded provision and the benefit that would result from applying the new U.S. statutoryfederal tax rate of 24.5%, is primarily attributable to: (1) income and losses taxed at different foreign tax rates, (2) lossesby 59% or $28 million principally related to deferred taxes (including 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 unrecognizedrealized; and nondeductible expenses.
The Company's effective income tax positions, (5) U.S. state and local income taxes, and (6)rate for the impact of the Tax Cuts and Jobs  Act.
For the Predecessor periodthree months ended December 15, 2017, the difference between the Company’s recorded provision and the provision that would result31, 2020 differed from applying the U.S. statutoryfederal tax rate of 35% is primarily attributable to: (1) income and losses taxed


at different foreign tax rates, (2) lossesby 146% or $9 million principally related to deferred taxes (including 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. staterealized; and local income taxes, and (6) the impact of reorganization and fresh start adjustments.
The Company’s effective income tax rate for fiscal 2016 differs from the statutory U.S. Federal income tax rate primarily due to (1) the effect of tax rate differentials on foreign income/loss, (2) changes in the valuation allowance established against the Company’s deferred tax assets, and (3) tax positions taken during the current period offset by reductions for unrecognized tax benefits resulting from the lapse of statute of limitations.nondeductible expenses.
Net Income (Loss)Loss
Net incomeloss was $3,214$66 million for the three months ended December 31, 20172021 compared to a net loss of $103$4 million for the three months ended December 31, 2016, primarily due to2020 as a result of the reorganization gain of $3,416 million resulting from our emergence from bankruptcy.items discussed above.
Liquidity and Capital Resources
We expect our existing cash balances,balance, cash generated by operations and borrowings available under our ABL Credit Agreement to be our primary sources of short-term liquidity. Based on our current level of operations, we believe these sources will be adequate to meet our liquidity needs for at least the next twelve months. Our ability to meet our cash requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. However, there can be no assurance thatBased on our business will generate sufficient cash flow fromcurrent level of operations, or that future borrowingswe believe these sources will be availableadequate to us undermeet our credit facilities in an amount sufficient to enable us to repay our indebtedness, or to fund our other liquidity needs.
Sources and Uses of Cash
The following reflectsneeds for at least the net cash payments recorded as of the Emergence Date as a result of implementing the Plan of Reorganization:next twelve months.
30
(In millions) 
Sources: 
Proceeds from Term Loan Credit Agreement, net of original issue discount$2,896
Release of restricted cash76
Total sources of cash2,972
Uses: 
Repayment of DIP Credit Agreement(725)
Payment of DIP accrued interest(1)
Cash paid to Predecessor first lien debt-holders(2,061)
Cash paid to PBGC(340)
Payment for professional fees escrow account(56)
Funding payment for Avaya represented employee pension plan(49)
Payment of accrued professional & administrative fees(27)
Payments of debt issuance costs(59)
Payment for general unsecured claims(58)
Total uses of cash(3,376)
Net uses of cash$(404)
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Cash Flow Activity
The following table provides a summary of the condensed statements of cash flows for the periods indicated:
  Successor  Predecessor Non-GAAP Combined 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, 2017 Three months ended December 31, 2016
Net cash provided by (used for):         
Net income (loss) $237
  $2,977
 3,214
 $(103)
Adjustments to net income (loss) for non-cash items (225)  (3,410) (3,635) 141
Changes in operating assets and liabilities 54
  (7) 47
 (82)
Operating activities 66
  (440) (374) (44)
Investing activities 8
  8
 16
 (15)
Financing activities —
  (102) (102) (57)
Effect of exchange rate changes on cash and cash equivalents 3
  (2) 1
 (11)
Net increase (decrease) in cash and cash equivalents 77
  (536) (459) (127)
Cash and cash equivalents at beginning of period 340
  876
 876
 336
Cash and cash equivalents at end of period $417
  $340
 417
 $209
Three months ended
December 31,
(In millions)20212020
Net cash (used for) provided by:
Operating activities$(111)$48 
Investing activities(27)(27)
Financing activities(5)(6)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(1)9 
Net (decrease) increase in cash, cash equivalents, and restricted cash(144)24 
Cash, cash equivalents, and restricted cash at beginning of period502 731 
Cash, cash equivalents, and restricted cash at end of period$358 $755 
Operating Activities
Cash (used for)used for operating activities for the three months ended December 31, 2021 was $(374)$111 million and $(44)compared to cash provided by operating activities of $48 million for the three months ended December 31, 20172020. The change was primarily due to the timing of customer cash payments as the Company continues its transition to a cloud and 2016, respectively.subscription model; lower cash earnings; and higher income tax payments, partially offset by lower incentive compensation payments.
Adjustments to reconcile net income (loss) to net cash (used for) operations forInvesting Activities
For both the three months ended December 31, 20172021 and 2016 were $(3,635) million and $141 million, respectively. The adjustments in the current period primarily consisted of the gain related to fresh start accounting of $1,671 million, a non-cash reorganization gain of $1,804 million and2020, cash payments to the PBGC,used for general unsecured creditor claims and to the APP pension trust of $340 million, $58 million and $49 million, respectively. For the three months ended December 31, 2017, other adjustments included deferred income taxes of $210 million, depreciation and amortization of $53 million, unrealized gain on foreign currency exchange of $4 million, and share-based compensation of $1 million. For the three months ended December 31, 2016, other adjustments included depreciation and amortization of $90 million, non-cash interest expense of $61 million, unrealized gain on foreign currency exchange of $8 million, share-based compensation of $2 million and deferred income taxes of $(1) million.
During the three months ended December 31, 2017, changes in our operating assets and liabilities resulted in a net increase in cash and cash equivalents of $47 million. The net increase was driven by increases in deferred revenue and the timing of payments to our vendors, partially offset by timing of collection of accounts receivable and payments associated with our business restructuring reserves established in previous periods.
During the three months ended December 31, 2016, changes in our operating assets and liabilities resulted in a net decrease in cash and cash equivalents of $(82) million. The net decreases were driven by payments associated with the timing of payments to vendors, our employee incentive programs, and business restructuring reserves. These decreases were partially offset by collection of accounts receivable, increases in accrued interest, increases in deferred revenues and lower inventory.
Investing Activities
Cash provided by (used for) investing activities for the three months ended December 31, 2017 and 2016 was $16 million and $(15) million, respectively. During the three months ended December 31, 2017, cash provided by investing activities included the release of restricted cash of $21$27 million, as a result of implementing the Plan of Reorganization, partially offset by capital expenditures of $15 million. During the three months ended December 31, 2016, cash used for investing activities included capital expenditures of $14 million and acquisitions of businesses, net of cash acquired of $4 million, as we continue to enhance our technology portfolio.


in each period.
Financing Activities
Cash used for financing activities was $102 million and $57 million for the three months ended December 31, 2017 and 2016, respectively.
Cash flows from financing activities for the three months ended December 31, 2017 included proceeds of $2,896 million from the Term Loan Credit Agreement, offset by repayments of the DIP Credit Agreement of $725 million and the first lien debt holders of $2,061 million.
Cash used for financing activities for the three months ended December 31, 2016 included $452021 was $5 million of repayments in excess of borrowings under our revolving credit facilities,compared to $6 million of scheduled debt repayments and $5 million repayment in connection with financing the use of equipment for the performancethree months ended December 31, 2020. Cash used for financing activities in each period primarily consisted of services under our agreement with HP Enterprise Services, LLC ("HP").repurchases of shares for tax withholding on the vesting of restricted stock units and principal payments for financing leases, partially offset by proceeds from the Employee Stock Purchase Plan.
Credit Facilities
See Note 9, “Financing Arrangements,” to our unaudited interim Condensed Consolidated Financial Statements for a discussion of our Term Loan Credit Agreement and ABL Credit Agreement. As of December 31, 2017,2021, the Company was not in defaultcompliance with all covenants and other requirements under any of its debt agreements.
Future Cash Requirements
Our primary future cash requirements will be to fund operations, debt service, restructuring payments, capital expenditures, benefit obligations and benefit obligations.restructuring payments. In addition, we may use cash in the future to make strategic acquisitions.acquisitions or investments.
Specifically, we expect our primary cash requirements for the remainder of fiscal 20182022 to be as follows:
•Debt service—We expect to make payments of $160approximately $150 million to $155 million during the remainder of fiscal 20182022 in principal and interest associated with the Term Loan Credit Agreement, Senior Notes and interestConvertible Notes, and fees associated with our ABL Credit Agreement. In the ordinary course of business, we may from time to time borrow and repay amounts under our ABL Credit Agreement.
•Capital expenditures—We expect to spend approximately $85 million for capital expenditures during the remainder of fiscal 2022.
•Benefit obligations—We estimate we will make payments under our pension and post-retirement benefit obligations of approximately $30 million during the remainder of fiscal 2022. These payments include $21 million for our non-U.S. benefit plans, which are predominantly not pre-funded, and $9 million for salaried and represented retiree post-retirement benefits. As a result of the American Rescue Plan Act, we do not expect to make any contributions to satisfy the minimum statutory funding requirements of our U.S. qualified pension plans during fiscal 2022. See discussion in Note 11, "Benefit Obligations," to our unaudited interim Condensed Consolidated Financial Statements for further details.
•Restructuring payments—We expect to make payments of approximately $25 million to $30$15 million during the remainder of fiscal 20182022 for employee separation costs and lease termination obligations associated with restructuring actions we have taken through December 31, 2017 and additional actions we may take in fiscal 2018.actions. The Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally.
Capital expenditures—We expect to spend approximately $50 million to $60 million for capital expenditures and capitalized software development costs during the remainder
31
Table of fiscal 2018.
Contents
Benefit obligations—We estimate we will make payments in respect of our pension and post-retirement benefit obligations totaling $80 million during the remainder of fiscal 2018. These payments include $43 million for the Avaya Pension Plan for represented employees; $24 million for our non-U.S. benefit plans, which are predominately not pre-funded; $1 million for our U.S. retiree medical benefit plan, which is not pre-funded and $12 million for represented retiree post-retirement health trusts. See discussion in Note 13, “Benefit Obligations” to our unaudited interim Condensed Consolidated Financial Statements for further details of our benefit obligations.
Acquisitions—The acquisition of Spoken Communications is expected to close within the next two months and be funded by cash on hand, however the ultimate purchase price and certain other terms are subject to further negotiation.
In addition to the matters identified above, in the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings, relating to intellectual property, commercial, employment, environmental and regulatory matters, including but not limited to those identifieda suit filed by Solaborate Inc. and Solaborate LLC described in Note 20,18, "Commitments and Contingencies," to our unaudited interim Condensed Consolidated Financial Statements, relating to intellectual property, commercial, employment, environmental and regulatory matters.
These andStatements. An unfavorable resolution in this or other legal matters could have a material adverse effect on the mannerCompany's future cash requirements.
We and our subsidiaries and affiliates may from time to time seek to repurchase or prepay our outstanding equity (common stock and warrants) and/or debt (including our Term Loans, Senior Notes and Convertible Notes) through cash purchases and/or exchanges, in whichopen market purchases, privately negotiated transactions, tender offers, redemptions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors. 
As part of the Company's strategic partnership with RingCentral, Inc. ("RingCentral"), the Company does businessreceived certain consideration for future fees ("the Consideration Advance"). Beginning in fiscal 2024, RingCentral shall have the right, but not the obligation, to convert a portion of the outstanding Consideration Advance, if any, into shares of either the Company’s Series A 3% Convertible Preferred Stock or the Company’s common stock. The Company has the intent and the Company's financial position, results of operations,ability to repay outstanding amounts, if any, in cash flows and liquidity.
For the three months ended December 31, 2017, the Company recognized $37 million of costs incurred in connection with the resolution of certain legal matters.prior to its conversion.
Future Sources of Liquidity
We expect our cash balances,balance, cash generated by operations and borrowings available under our ABL Credit Agreement to be our primary sources of short-term liquidity.



As of December 31, 20172021 and September 30, 2017,2021, our cash and cash equivalent balances held outside the U.S. were $149$174 million and $246$195 million, respectively. As of December 31, 2017,2021, the Company's cash and cash equivalents held outside the U.S. in excess of in-country needs and, which couldare not expected to be distributedneeded to be repatriated to fund the Company's operations in the U.S. without restriction, were not material.based on our expected future sources of liquidity.
Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At December 31, 2017,2021, the Company had issued and outstanding letters of credit and guarantees of $74 million.$35 million under the ABL Credit Agreement and had no borrowings outstanding. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $74$35 million of outstanding letters of credit and guarantees, was $139$119 million at December 31, 2017.2021.
We believe that our existing cash and cash equivalents of $417$354 million as of December 31, 2017,2021, expected future cash provided by operating activities and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash requirements for at least the next twelve months.months from the filing of this quarterly report on Form 10-Q. Our ability to meet these requirements will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We also believe that our financial resources, along with appropriate management of discretionary expenses, will allow us to manage the anticipated impact of COVID-19 on our business operations, and specifically our liquidity, for the foreseeable future.
Off-Balance Sheet Arrangements
See discussion in Note 20, “Commitments18, "Commitments and Contingencies,”" to our unaudited interim Condensed Consolidated Financial Statements for further details.
Debt Ratings
On the Emergence Date, the Company obtained ratings from Moody’s Investors Service (“Moody’s”), Standard and Poor's ("S&P") and Fitch Ratings Inc. (“Fitch”). Moody’s issued a corporate family rating of “B2” with a stable outlook and a rating of the 7-year $2,925 million Term Loan Credit Agreement of “B2”. S&P issued a definitive corporate credit rating of "B" with a stable outlook and a rating of the Term Loan Credit Agreement of "B". Fitch issued a Long-Term Issuer Default Rating of “B” with a stable outlook and a rating of the Term Loan Credit Agreement of “B+”.
Our ability to obtain additional external financing and the related cost of borrowing may be affected by our ratings, which are periodically reviewed by the major credit rating agencies. The ratings are subject to change or withdrawal at any time by the respective credit rating agencies.
As of December 31, 2021, the Company’s debt ratings were as follows:
•Standard and Poor's issued a definitive corporate credit rating and a rating applicable to the Company's Senior Notes and the Term Loan Credit Agreement of "B+" with a stable outlook.
•Fitch Ratings Inc. (“Fitch”) issued a definitive corporate credit rating of “B” with a positive outlook and a rating of “BB” applicable to the Senior Notes and the Term Loan Credit Agreement.
•Moody's Investors Service issued a corporate family rating of "B2" with a stable outlook and a rating of "B2" applicable to the Senior Notes and the Term Loan Credit Agreement.
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Critical Accounting Policies and Estimates
Management has reassessed the critical accounting policies asand estimates disclosed in our Registration Statementthe Company's Annual Report on Form 10 Amendment No. 310-K filed with the SECSecurities and Exchange Commission on January 10, 2018November 22, 2021 and determined that there were no significant changes to our critical accounting policies forand estimates during the period from December 16, 2017 throughthree months ended December 31, 2017 and the period from October 1, 2017 through December 15, 2017, except for recently adopted accounting policy changes as discussed2021.
New Accounting Pronouncements
See discussion in Note 2, “Accounting Policy Changes,”"Recent Accounting Pronouncements," to our unaudited interim Condensed Consolidated Financial Statements.
New Accounting Pronouncements
See discussion in the Company's Notes to the Consolidated Financial Statements for the fiscal year ended September 30, 2017, included in Amendment No. 3 to the Company’s Form 10 filed with the SEC on January 10, 2018, for further details.


EBITDA and Adjusted EBITDA
We present below the Company's EBITDA and Adjusted EBITDA, each of which is a non-GAAP measure.
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 measuresprovides 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 that still affect our net income (loss). In particular, our formulation of Adjusted EBITDA allows adjustmentadjusts 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, certain fees payable to our Predecessor private equity sponsors and other advisors,impairment charges, resolution of certain legal matters and a portion of our pension costs and post-employmentpost-retirement benefits costs, which represents the amortization of pensionprior service costs (credits) and actuarial gain (loss)(gains) losses associated with these benefits. However, these are expenses that may recur, may vary and areand/or may be difficult to predict.
The unaudited reconciliation of net income (loss),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:
Three months ended
December 31,
(In millions)20212020
Net loss$(66)$(4)
Interest expense54 56 
Provision for income taxes18 10 
Depreciation and amortization104 103 
EBITDA110 165 
Restructuring charges(a)
7 4 
Share-based compensation14 14 
Pension and post-retirement benefit costs(1)— 
 Change in fair value of Emergence Date Warrants(1)5 
Loss on foreign currency transactions— 2 
Adjusted EBITDA$129 $190 
(a)Restructuring charges represent employee separation costs and facility exit costs (excluding the impact of accelerated depreciation expense) related to the Company's restructuring programs.

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 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
Net income (loss)$237
  $2,977
 $(103)
Interest expense (a)
9
  14
 174
Interest income—
  (2) —
(Benefit from) provision for income taxes(246)  459
 3
Depreciation and amortization22
  31
 90
EBITDA22
  3,479
 164
Impact of fresh start accounting adjustments (b)
27
  —
 —
Restructuring charges, net10
  14
 10
Sponsors’ and other advisory fees (c)
8
  3
 51
Reorganization items, net—
  (3,416) —
Non-cash share-based compensation1
  —
 2
Loss on disposal of long-lived assets—
  1
 —
Resolution of certain legal matters (d)
—
  37
 —
Change in fair value of warrant liability5
  —
 —
Gain on foreign currency transactions(2)  —
 (11)
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs (e)
—
  17
 21
Other—
  —
 1
Adjusted EBITDA$71
  $135
 $238
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(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 not been recorded, 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 advisory 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 certain legal matters includes reserves and settlements, as well as associated legal costs.
(e)
Represents that portion of our pension and post-employment 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 keyRisks, uncertainties and other factors that couldmay cause actual resultsthese forward-looking statements to differ from our expectations include:
we face formidable competition from providersbe inaccurate include, among others: the risks and factors discussed in Part I, Item 2 "Management's Discussion and Analysis of unified communicationsFinancial Condition and contact center productsResults of Operations" and related services;
market opportunity for business communications products and services may not developPart II, Item 1A "Risk Factors" in the ways that we anticipate;
our ability to relythis Quarterly Report 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,Form 10-Q as well as warehousingPart I, Item 1A "Risk Factors" and distribution logistics providers;
recently completed bankruptcy proceedings may adversely affectPart II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our operations in the future;
our actual financial results may vary significantly from the financial projectionsAnnual Report on Form 10-K filed with the Bankruptcy Court;SEC on November 22, 2021.
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;
we have entered into many related party transactions with a significant number of our foreign subsidiaries, which could adversely affect us in the event of their bankruptcy or similar insolvency proceeding; and
environmental, health and safety, laws, regulations, costs and other liabilities.
Any of the assumptions underlying forward-looking statements could be inaccurate. All forward-looking statements are made as of the date of this quarterly reportQuarterly Report on Form 10-Q and the risk that actual results will differ materially from the expectations expressed in this quarterly reportQuarterly 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 reportQuarterly 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 bearbears interest at variable rates based on LIBOR. As of December 31, 2017,2021, the Company had interest rate swap agreements, which mature on December 15, 2022, to pay a 25 bps increasefixed rate of 2.935% on its $1,543 million of variable rate loans outstanding (the "Swap Agreements").
The Company maintains additional interest rate swap agreements to fix a portion of the variable rate interest due on its Term Loan Credit Agreement (the "Forward Swap Agreements") from December 15, 2022 (the maturity date of the Swap Agreements) through December 15, 2024. Under the terms of the Forward Swap Agreements, the Company will pay a fixed rate of 0.7047% and receive a variable rate of interest based on one-month LIBOR. The Forward Swap Agreements have a total notional amount of $1,400 million.
It is management's intention that the net notional amount of interest rate swap agreements be less than or equal to the variable rate loans outstanding during the life of the derivatives. For the three months ended December 31, 2021 and 2020, the Company recognized a loss on the Swap Agreements and Forward Swap Agreements of $13 million and $12 million, respectively, which is reflected in LIBORInterest expense in the Condensed Consolidated Statements of Operations. At December 31, 2021, the Company maintained a $6 million deferred loss on its swap agreements within Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets.
See Note 8, “Derivative Instruments and Hedging Activities,” to our Condensed Consolidated Financial Statements included in Part I, Item I of this quarterly report on Form 10-Q for additional information related to the Company’s interest rate swap agreements.
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
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Euros, Canadian Dollars, British Pound Sterling, Chinese Renminbis, Indian Rupees, Australian Dollars, United Arab Emirates Dirhams, and Brazilian Reals.
Non-U.S. denominated revenue was $160 million for the three months ended December 31, 2021. We estimate a 10% change in the value of the U.S. dollar relative to all foreign currencies would have affected our revenue for the three months ended December 31, 2021 by $16 million.
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 balances. 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, net to offset the change in the value of the underlying assets and liabilities. As of December 31, 2021, the Company maintained open foreign exchange contracts with a total notional value of $190 million, increaseprimarily hedging the British Pound Sterling, Japanese Yen, Mexican Peso, Czech Koruna, and Indian Rupee. At December 31, 2021, the fair value of open foreign exchange contracts was an unrealized gain of $1 million which was recorded within Other current assets in our annual interest expensethe Condensed Consolidated Balance Sheet. For the three months ended December 31, 2021, the Company's loss on foreign exchange contracts was not material. For the three months ended December 31, 2020, the Company's gain on foreign exchange contracts was $5 million and a 25bps decrease in LIBOR would result in a $7 million decrease in our annual interest expense.was recorded within Other income, net.
Item 4.Controls and Procedures.Procedures

Evaluation of Disclosure Controls and Procedures.Procedures
As of December 31, 2021, the end of the period covered by this report, management,the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Chief Financial Officer, that evaluated the effectiveness of the design and operation of the Company’sCompany'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’sCompany's disclosure controls and procedures were not effective as of December 31, 2017, because of2021 to provide reasonable assurance that information required to be disclosed by the material weaknessesCompany in reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Company's internal control over financial reporting described below.
Material Weaknesses in Internal Control Over Financial Reporting
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 ofSecurities and Exchange Commission's rules and forms and (ii) accumulated and communicated to the Company's annual or interim financial statements will not be prevented or detected on amanagement, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely basis.
In connection with the preparation of the Company’s consolidated financial statements for the quarter ended June 30, 2017, the Company identified control deficiencies that constituted material weaknesses in its internal control over financial reporting. Specifically, the Company did not maintain 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 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 to the Company’s income tax provision for the quarter ended June 30, 2017.
These control deficiencies resulted in material adjustments to our income tax provision for the quarter ended June 30, 2017. These adjustments were detected 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 determined 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:
Implementing 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 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.decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
ThereDuring the first quarter of fiscal 2022, the Company was in the process of implementing a new enterprise resource planning accounting module designed to simplify and streamline the accounting process for certain contracts with customers and to provide enhanced operational information to management. The Company will utilize the new module during the second quarter of fiscal 2022. As updated processes were rolled out in connection with the transition to the new accounting module, the Company considered whether these process changes necessitated changes in the design and operation of its internal controls over financial reporting. Certain controls that were previously determined to be effective as of September 30, 2021 were replaced with new or modified controls. Other than those controls impacted by the implementation of the new accounting module, there have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the most recent fiscal quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION
Item 1.Legal Proceedings.Proceedings
The information included inset forth under Note 20, “Commitments18, "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 31, 20172021 to the risk factors previously disclosed in the Company’s Registration Statement on Company's Form 10 Amendment No. 310-K for the year ended September 30, 2021 filed with the SECSecurities and Exchange Commission on November 22, 2021 other than as shown below:
A breach of the security of our information systems, products or services or of the information systems of our third-party providers could adversely affect our business, operating results and financial condition.
We rely on the security of our information systems and, in certain circumstances, those of our third-party providers, such as channel partners, vendors, consultants and contract manufacturers, to protect our proprietary information and information of our customers. In addition, the growth of bring your own device ("BYOD") programs has increased the need for enhanced security measures. IT security system failures, including a breach of our or our third-party providers' data security systems, could disrupt our ability to function in the normal course of business by potentially causing, among other things, delays in the fulfillment or cancellation of customer orders, disruptions in the manufacture or shipment of products or delivery of services or an unintentional disclosure of customer, employee or our information. Additionally, despite our security procedures or those of our third-party providers, information systems and our products and services may be vulnerable to threats such as computer hacking, cyber-terrorism or other unauthorized attempts by third parties to access, modify or delete our or our customers' proprietary information.
We take cybersecurity seriously and devote significant resources and tools to protect our systems, products and data and the data of our customers from intrusions and to ensure compliance with our contractual and regulatory obligations. However, these security efforts are costly to implement and may not be successful. Cyberattacks and similar threats are constantly evolving, increasing the difficulty of detecting and successfully defending against them. Computer malware, viruses, scraping and general hacking have become more prevalent in our industry, have occurred on our systems in the past, and may occur on our systems in the future. There can be no assurance that we will be able to prevent, detect and adequately insure against and address or mitigate cyberattacks or security breaches. We investigate potential data breach issues identified through our security procedures and terminate, mitigate and remediate such issues as appropriate. Past incidents have involved outside actors and issues stemming from certain internal configuration, vulnerabilities in third-party software which may impact our systems, applications, products and offerings and migration issues of our applications to other platforms. A breach of our systems could have a material adverse effect on our reputation as a provider of business communications products and services and could cause irreparable damage to us or our systems regardless of whether we or our third-party providers are able to adequately recover critical systems following a systems failure, either or both of which could, in turn, have a material adverse effect on our operating results and financial conditions.
In addition, regulatory or legislative action related to cybersecurity, privacy and data protection worldwide, such as the EU GDPR, which went into effect in May 2018, and the UK GDPR, which went into effect in January 10, 2018.2021, may increase the costs to develop, implement or secure our products and services. We expect cybersecurity regulations to continue to evolve and be costly to implement. Furthermore, we may need to increase or change our cybersecurity systems and expenditures to support expansion of sales into new industry segments or new geographic markets. If we violate or fail to comply with such regulatory or legislative requirements, we could be fined, which fines could be substantial, or otherwise sanctioned. Any such fines or penalties could have a material adverse effect on our business and operations.

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Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds
None.Purchases of Equity Securities by the Issuer
The following table provides information with respect to purchases by the Company of shares of common stock during the three months ended December 31, 2021:
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)(3)
October 1 - 31, 2021— $— — $147,473,425 
November 1 - 30, 202177,764 $21.0000 — $147,473,425 
December 1 - 31, 2021253,537 $18.9338 — $147,473,425 
Total331,301 $19.4188 — 
(1) All purchases represent shares of common stock withheld for taxes on restricted stock units that vested.
(2) The Company maintains a warrant repurchase program authorizing it 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.
(3) The Company maintains a share repurchase program authorizing it to repurchase the Company's common stock for an aggregate expenditure of up to $500 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.

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Item 6.Exhibits.
Exhibit NumberItem 6.Exhibits
10.1Exhibit Number
Transition and Consulting Services Agreement dated January 12, 2018, between Kevin J. Kennedy and Avaya Inc.
Exhibit Description
10.231.1
31.1
Certification of James M. Chirico, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
32.1
32.2
101.INSXBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Labels Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase
104Cover Page Interactive Data File (formatted as Inline XBRL in Exhibit 101)




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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AVAYA HOLDINGS CORP.
AVAYA HOLDINGS CORP.
By:
/s/ L. DAVID DELL'OssoKEVIN SPEED
Name:
L. David Dell'Osso
Kevin Speed
Title:Global Vice President, Corporate Controller &and Chief Accounting Officer
(Principal Accounting Officer)

February 9, 2022
March 2, 2018



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