~~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 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 March 31,				Six months ended March 31,
	2022		2021		2022		2021
Net loss	$	(1)	$	(58)	$	(67)	$	(62)
Other comprehensive income:
Pension, post-retirement and post-employment benefit-related items, net of income taxes of $0 for both the three and six months ended March 31, 2022, and $(1) for both the three and six months ended March 31, 2021	(2)		34		(3)		46
Cumulative translation adjustment	1		21		14		15
Change in interest rate swaps, net of income taxes of $(14) for both the three and six months ended March 31, 2022 and $0 for both the three and six months ended March 31, 2021	40		30		68		41
Other comprehensive income	39		85		79		102
Total comprehensive income	$	38	$	27	$	12	$	40

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

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Avaya Holdings Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except per share and share amounts)


	March 31, 2022		September 30, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	324	$	498
Accounts receivable, net	315		307
Inventory	49		51
Contract assets, net	640		518
Contract costs	115		117
Other current assets	132		100
TOTAL CURRENT ASSETS	1,575		1,591
Property, plant and equipment, net	301		295
Deferred income taxes, net	31		40
Intangible assets, net	2,078		2,235
Goodwill	1,476		1,480
Operating lease right-of-use assets	118		135
Other assets	245		209
TOTAL ASSETS	$	5,824	$	5,985
LIABILITIES
Current liabilities:
Accounts payable	$	306	$	295
Payroll and benefit obligations	128		193
Contract liabilities	315		360
Operating lease liabilities	44		49
Business restructuring reserves	16		19
Other current liabilities	139		181
TOTAL CURRENT LIABILITIES	948		1,097
Non-current liabilities:
Long-term debt	2,827		2,813
Pension obligations	607		648
Other post-retirement obligations	151		153
Deferred income taxes, net	73		53
Contract liabilities	309		305
Operating lease liabilities	87		102
Business restructuring reserves	19		25
Other liabilities	240		267
TOTAL NON-CURRENT LIABILITIES	4,313		4,366
TOTAL LIABILITIES	5,261		5,463
Commitments and contingencies (Note 18)
Preferred stock, $0.01 par value; 55,000,000 shares authorized at March 31, 2022 and September 30, 2021
Convertible series A preferred stock; 125,000 shares issued and outstanding at March 31, 2022 and September 30, 2021	131		130
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value; 550,000,000 shares authorized; 85,677,909 shares issued and outstanding at March 31, 2022; and 84,115,602 shares issued and outstanding at September 30, 2021	1		1
Additional paid-in capital	1,495		1,467
Accumulated deficit	(1,052)		(985)
Accumulated other comprehensive loss	(12)		(91)
TOTAL STOCKHOLDERS' EQUITY	432		392
TOTAL LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY	$	5,824	$	5,985

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

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Avaya Holdings Corp.

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


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Par Value
Balance as of September 30, 2021	84.1	$	1	$	1,467	$	(985)	$	(91)	$	392
Issuance of common stock under the equity incentive plan and the Stock Bonus Program	0.9			5						5
Issuance of common stock under the employee stock purchase plan	0.2			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 expense				14						14
Preferred stock dividends paid				(1)						(1)
Net loss						(66)				(66)
Other comprehensive income								40		40
Balance as of December 31, 2021	84.9	$	1	$	1,481	$	(1,051)	$	(51)	$	380
Issuance of common stock under the equity incentive plan	0.7									—
Issuance of common stock under the employee stock purchase plan	0.3			4						4
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(0.2)			(3)						(3)
Share-based compensation expense				14						14
Preferred stock dividends accrued				(1)						(1)
Net loss						(1)				(1)
Other comprehensive income								39		39
Balance as of March 31, 2022	85.7	$	1	$	1,495	$	(1,052)	$	(12)	$	432

Balance as of September 30, 2020	83.3	$	1	$	1,449	$	(969)	$	(245)	$	236
Issuance of common stock under the equity incentive plan	0.3									—
Issuance of common stock under the employee stock purchase plan	0.3			3						3
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(0.1)			(2)						(2)
Share-based compensation expense				14						14
Preferred stock dividends accrued				(1)						(1)
Adjustment for adoption of new accounting standard						(3)				(3)
Net loss						(4)				(4)
Other comprehensive income								17		17
Balance as of December 31, 2020	83.8	$	1	$	1,463	$	(976)	$	(228)	$	260
Issuance of common stock under the equity incentive plan	1.2			8						8
Issuance of common stock under the employee stock purchase plan	0.2			3						3
Shares repurchased and retired for tax withholding on vesting of restricted stock units	(0.3)			(7)						(7)
Shares repurchased and retired under share repurchase program	(0.2)			(7)						(7)
Share-based compensation expense				13						13
Preferred stock dividends accrued				(1)						(1)
Net loss						(58)				(58)
Other comprehensive income								85		85
Balance as of March 31, 2021	84.7	$	1	$	1,472	$	(1,034)	$	(143)	$	296

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

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~~AVAYA HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~Avaya Holdings Corp.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)


	Six months ended March 31,
	2022		2021
OPERATING ACTIVITIES:
Net loss	$	(67)	$	(62)
Adjustments to reconcile net loss to net cash (used for) provided by operating activities:
Depreciation and amortization	203		209
Share-based compensation	28		27
Amortization of debt discount and issuance costs	14		13
Loss on extinguishment of debt	—		1
Deferred income taxes, net	15		(4)
Gain on post-retirement plan settlement	—		(14)
Change in fair value of emergence date warrants	(8)		27
Unrealized (gain) loss on foreign currency transactions	(3)		12
Other non-cash charges, net	1		1
Changes in operating assets and liabilities:
Accounts receivable	(6)		(12)
Inventory	—		3
Operating lease right-of-use assets and liabilities	(3)		2
Contract assets	(165)		(122)
Contract costs	1		(5)
Accounts payable	12		21
Payroll and benefit obligations	(91)		(76)
Business restructuring reserves	(7)		(8)
Contract liabilities	(38)		(22)
Other assets and liabilities	1		33
NET CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES	(113)		24
INVESTING ACTIVITIES:
Capital expenditures	(52)		(53)
NET CASH USED FOR INVESTING ACTIVITIES	(52)		(53)
FINANCING ACTIVITIES:
Shares repurchased under share repurchase program	—		(7)
Repayment of Term Loan Credit Agreement due to refinancing	—		(743)
Proceeds from Term Loan Credit Agreement due to refinancing	—		743
Repayment of Term Loan Credit Agreement	—		(100)
Principal payments for financing leases	(4)		(8)
Payments for other financing arrangements	(1)		—
Proceeds from other financing arrangements	—		3
Debt issuance costs	—		(2)
Proceeds from Employee Stock Purchase Plan	7		7
Proceeds from exercises of stock options	1		8
Preferred stock dividends paid	(1)		—
Shares repurchased for tax withholdings on vesting of restricted stock units and Stock Bonus Program shares	(10)		(9)
NET CASH USED FOR FINANCING ACTIVITIES	(8)		(108)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(1)		3
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(174)		(134)
Cash, cash equivalents, and restricted cash at beginning of period	502		731
Cash, cash equivalents, and restricted cash at end of period	$	328	$	597

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

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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 hardware~~leader in digital communications products, solutions and services for ~~contact center~~businesses of all sizes delivering its technology predominantly through software and ~~unified~~services. 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 businesses~~of both. The Company's global team of professionals delivers services from initial planning and design, to ~~large multinational enterprises~~implementation and ~~government organizations. Currently, the~~integration, to ongoing managed operations, optimization, training and support. The Company manages its business operations in ~~two~~2 segments, ~~Global Communications~~Products & Solutions ~~("GCS") representing the Company's products portfolio,~~ and ~~Avaya Global Services ("AGS") representing the Company's services portfolio.~~Services. The Company sells directly 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, and~~statements. 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’s~~management'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 ~~our~~the results for the entire fiscal year.

Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. ~~These~~The 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 statements~~Condensed 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’) in~~effects 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.~~

~~Subsequent~~actions required to mitigate its impact have created substantial disruption to the Petition Date, all expenses, gains and losses directly associated with the reorganization proceedings were reported as Reorganization items, net in the accompanying Condensed Consolidated Statements of Operations.global economy. In addition, ~~Liabilities subject~~we have experienced and are experiencing varying levels of inflation resulting in part from various supply chain disruptions, including, but not limited to ~~compromise during Chapter 11 proceedings were distinguished from liabilities of the non-debtors~~increased shipping and

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

~~Upon emergence from bankruptcy on December 15, 2017 (the "Emergence Date"), the Company applied fresh start accounting, which resulted in a new basis of accounting~~ transportation costs 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 filedincreased raw material costs caused by the ~~Debtors on October 24, 2017~~COVID‐19 pandemic and ~~approved by~~general global economic conditions. Furthermore, 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~~military conflict between Russia 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 with the financial and other covenants contained in its debtor-in-possession credit agreement, the Bankruptcy Court's approval 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.

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,~~Ukraine, 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~~sanctions 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~~export controls that have been ~~billed, but~~imposed by the U.S. and other countries in response to the conflict, severely limits commercial activities in Russia and impacts other markets where we do business.These global issues, among others, may affect management’s estimates and assumptions, in particular those that require a projection of our financial results, our cash flows or broader economic conditions. The COVID-19 pandemic and the Russia/Ukraine conflict did not have a material impact on the Company's operating results during the second quarter of fiscal 2022.

We believe that our existing cash and cash equivalents and borrowings available under the ABL Credit Agreement will be sufficient to meet our future cash requirements for ~~which~~at least the ~~related account receivable has not yet been collected. The aggregate amount~~next twelve months from the filing of ~~unrecognized accounts receivable and deferred revenue was $100~~this quarterly report on Form 10-Q. We expect to seek incremental financing to fund the maturity of the $350 million ~~at December 31, 2017.~~Convertible 2.25% Senior Notes due June 15, 2023. There can be no assurance we will be able to obtain such financing on acceptable terms.

~~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.~~

3.2. Recent Accounting Pronouncements

~~Recently~~Recent Standards Not Yet Adopted ~~Accounting Pronouncements~~

In March ~~2016,~~2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~No. 2016-09, "Improvements~~2020-04, Reference Rate Reform (Topic 848): "Facilitation of the Effects of Reference Rate Reform on Financial Reporting". This standard, along with other guidance subsequently issued by the FASB, contains practical expedients for reference rate reform related activities that impact debt, derivatives and other contracts. The guidance in this standard is optional and may be elected

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at any time as reference rate reform activities occur. The standard may be applied prospectively to ~~Employee Share-Based Payment Accounting.~~contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company intends to use the expedients, if needed, for the reference rate transition. The Company continues to monitor activities related to reference rate reform and does not currently expect this standard to have a material impact on the Company's Condensed Consolidated Financial Statements.

In August 2020, the FASB issued ASU 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 payments~~convertible instruments and ~~their presentation~~the 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 ~~statements~~diluted earnings per share calculation and requires enhanced disclosures of ~~cash flows as well as~~convertible instruments and contracts in an entity's own equity. This standard is effective for the ~~income tax effects~~Company in the first quarter of ~~share-based payments.~~fiscal 2023. The ~~Company adopted this standard as of October 1, 2017~~adoption may be applied on a ~~prospective~~modified or fully retrospective basis. ~~The~~An 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 not~~standard. 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 Cost~~2021-08, Business Combinations (Topic 805): “Accounting for Contract Assets and Net Periodic Post-retirement Benefit Cost." This standard changes how employers that sponsor defined benefit pension and other post-retirement benefit plans present net periodic benefit cost in the income statement. This amendment requires that the service cost component be disaggregated from the other components of pension and post-retirement 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 pension and post-retirement benefit costs (including interest cost, expected return on plan assets, amortization and curtailments and settlements) are reported in Other income (expense), net in the Company's Condensed Consolidated Financial Statements. The Company early adopted this accounting standard as of October 1, 2017. Changes to the Condensed Consolidated Financial Statements have been applied retrospectively. As a result, the Company reclassified $(6) million of other pension and post-retirement benefit costs to other income (expense), net for the three months ended December 31, 2016 (Predecessor). 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 recorded $1 million and $(8) million, respectively, of other pension and post-retirement benefit costs in other income (expense), net.

~~Recent Standards Not Yet Effective~~

~~In May 2014, the FASB issued ASU No. 2014-09, “Revenue~~Contract Liabilities from Contracts with Customers.” This standard ~~supersedes most of the current revenue recognition guidance under GAAP~~requires contract assets 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 customerscontract liabilities acquired in ~~an amount that reflects the consideration to which the entity expects~~a business combination to be ~~entitled~~recognized in ~~exchange for those goods or services. New disclosures about~~accordance with Topic 606 as if the ~~nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. Subsequently,~~acquirer had originated the ~~FASB issued several standards that clarified certain aspects of the~~contracts. This standard ~~but did not change the original standard. This new guidance~~ is effective for the Company ~~beginning~~ in the first quarter of fiscal ~~2019.~~2024, with early adoption permitted. The impact of this standard will depend on the nature of future transactions within its scope.

In March 2022, the FASB issued ASU ~~may be applied retrospectively (a)~~2022-02, “Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures”. This standard requires an entity to ~~each reporting period presented~~disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases measured at amortized cost. The standard also eliminates the existing troubled debt restructuring recognition and measurement guidance and, instead, requires an entity to evaluate whether the modification represents a new loan or ~~(b)~~a continuation of an existing loan in a manner consistent with other loan modifications. This standard is effective for the ~~cumulative effect~~Company in ~~retained earnings at~~ the ~~beginning~~first quarter of fiscal 2024, with early adoption permitted. The Company is currently assessing the ~~adoption period.~~

~~We currently anticipate adoption of~~impact the new ~~standard effective October 1, 2018 using the modified retrospective method whereby the cumulative effect is recorded to retained earnings at the beginning~~guidance will have on its Condensed Consolidated Financial Statements.

Table of ~~the adoption period. Adoption~~Contents

3. Contracts with Customers

Disaggregation of ~~the standard is dependent on completion of a detailed accounting assessment, the success of the design and implementation phase for changes to~~Revenue

The following tables provide 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 expectdisaggregated 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~~periods presented:


	Three months ended March 31,				Six months ended March 31,
(In millions)	2022		2021		2022		2021
Revenue:
Products & Solutions	$	223	$	226	$	454	$	492
Services	493		513		975		990
Unallocated Amounts	—		(1)		—		(1)
Total Revenue	$	716	$	738	$	1,429	$	1,481


	Three months ended March 31, 2022				Three months ended March 31, 2021
(In millions)	Products & Solutions		Services		Total		Products & Solutions		Services		Unallocated		Total
Revenue:
U.S.	$	130	$	292	$	422	$	102	$	311	$	—	$	413
International:
Europe, Middle East and Africa	55		120		175		73		115		(1)		187
Asia Pacific	21		46		67		30		47		—		77
Americas International - Canada and Latin America	17		35		52		21		40		—		61
Total International	93		201		294		124		202		(1)		325
Total Revenue	$	223	$	493	$	716	$	226	$	513	$	(1)	$	738


	Six months ended March 31, 2022				Six months ended March 31, 2021
(In millions)	Products & Solutions		Services		Total		Products & Solutions		Services		Unallocated		Total
Revenue:
U.S.	$	244	$	553	$	797	$	228	$	599	$	—	$	827
International:
Europe, Middle East and Africa	120		247		367		165		218		(1)		382
Asia Pacific	53		95		148		59		93		—		152
Americas International - Canada and Latin America	37		80		117		40		80		—		120
Total International	210		422		632		264		391		(1)		654
Total Revenue	$	454	$	975	$	1,429	$	492	$	990	$	(1)	$	1,481

Unallocated amounts represent 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 distributedfair value adjustment 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~~deferred revenue recognized upon the Company's emergence from bankruptcy in December 2017 and excluded from segment revenue.

Transaction Price Allocated to the Remaining Performance Obligations

The transaction price allocated to remaining performance obligations that were wholly or partially unsatisfied as of March 31, 2022 was $2.3 billion, of which 52% and 25% is expected to be recognized within 12 months and 13-24 months, respectively, with the remaining balance expected to be recognized thereafter. This excludes amounts for remaining performance obligations that are (1) for contracts recognized over time using the "right to invoice" practical expedient, (2) related to sales or usage based royalties promised in ~~accordance~~exchange for a license of intellectual property and (3) related to variable consideration allocated entirely to a wholly unsatisfied performance obligation.

Table of Contents

Contract Balances

The following table provides information about accounts receivable, contract assets, contract costs and contract liabilities for the periods presented:


(In millions)	March 31, 2022		September 30, 2021		Increase (Decrease)
Accounts receivable, net	$	315	$	307	$	8

Contract assets, net:
Current	$	640	$	518	$	122
Non-current (Other assets)	131		88		43
	$	771	$	606	$	165

Cost of obtaining a contract:
Current (Contract costs)	$	88	$	89	$	(1)
Non-current (Other assets)	54		53		1
	$	142	$	142	$	—

Cost to fulfill a contract:
Current (Contract costs)	$	27	$	28	$	(1)

Contract liabilities:
Current	$	315	$	360	$	(45)
Non-current	309		305		4
	$	624	$	665	$	(41)

The increase in Contract assets was mainly driven by growth in the Company's subscription offerings. The decrease in Contract liabilities was mainly driven by anticipated declines in hardware maintenance and software support services as customers continue to transition to the Company's subscription hybrid offering. The decrease was also driven by revenue earned from the consideration advance received in connection with ~~FASB Accounting Standards Codification~~the strategic partnership with RingCentral, Inc. ("~~ASC"~~RingCentral") ~~852, "Reorganizations" ("ASC 852"),~~. During the three and six months ended March 31, 2022 and 2021, the Company ~~applied~~did not record any asset impairment charges related to contract assets.

During 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 entitysix months ended March 31, 2022 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,~~2021, 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~~recognized revenue of ~~the Successor Company's assets before considering liabilities. The excess reorganization value over the fair value of identified tangible~~$321 million and ~~intangible assets is reported~~$402 million that had been previously recorded 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 statementsContract liability as of October 1, 2021 and October 1, 2020, respectively. During the three months ended March 31, 2022, adjustments for performance obligations that were satisfied, or partially satisfied, in prior ~~to that date.~~

~~Reorganization Value~~

~~As set forth in~~periods were not material. During the ~~Plan of Reorganization, the agreed upon enterprise value of~~three months ended March 31, 2021, the Company ~~was $5,721 million. This value is within~~recognized a decrease to revenue of $1 million, for performance obligations that were satisfied, or partially satisfied, in prior periods. During the ~~initial range calculated by~~six months ended March 31, 2022, the Company recognized a decrease to revenue of ~~approximately $5,100~~$2 million, ~~to approximately $7,100 million using an income approach. The $5,721 million enterprise value was selected as it was~~for performance obligations that were satisfied, or partially satisfied, in prior periods. During the ~~transaction price agreed to~~six months ended March 31, 2021, adjustments for performance obligations that were satisfied or partially satisfied, 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.prior periods were not material.

Contract Costs

The following table ~~reconciles~~provides information regarding the ~~enterprise value~~location and amount for amortization of costs to obtain and costs to fulfill customer contracts recognized in the ~~estimated fair value~~Company's Condensed Consolidated Statements of Operations for the ~~Successor stockholders' equity as of the Emergence Date:~~periods

Table of Contents

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


	Three months ended March 31,				Six months ended March 31,
(In millions)	2022		2021		2022		2021
Costs to obtain customer contracts:
Selling, general and administrative	$	36	$	48	$	80	$	91
Revenue	6		3		10		4
Total Amortization	$	42	$	51	$	90	$	95

Costs to fulfill customer contracts:
Costs	$	7	$	10	$	15	$	14


⁽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.~~

Allowance for Credit Losses

The following table ~~reconciles~~presents the ~~enterprise value to~~change in the ~~estimated reorganization value as of~~allowance for credit losses by portfolio segment for the ~~Emergence Date:~~period indicated:


(In millions)	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 provision	1		—		—		1

Allowance for credit loss as of March 31, 2022	$	5	$	1	$	1	$	7

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

(1)Recorded within Accounts receivable, net on the Condensed Consolidated Balance ~~Sheet~~Sheets.

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

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


2.	~~Other Current Assets.~~

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


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


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


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

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


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


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


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

~~10.Other Current Liabilities.~~

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

~~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 bankruptcy 2,842
Reclassification of debt issuance cost incurred prior to emergence from bankruptcy (42 )
Current portion of Long-term debt (29 )
Long-term debt, net of current portion $ 2,771


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


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


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


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

~~16.Liabilities Subject to Compromise.~~ ~~Liabilities subject to compromise were reinstated 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 debt 1,357
Avaya pension plan for salaried employees (514 )
General unsecured creditors' claims 227
Net gain on settlement of Liabilities subject to compromise $ 1,804


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

~~18.~~

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


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

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


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

~~Fresh Start Adjustments~~

At the Emergence Date, the Company met the requirements under ASC 852 for fresh start accounting as (i) the holders of existing voting shares 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 equipment 38
Rental equipment 85
Assets under construction 13
Internal use software 92
Total property, plant and equipment 310
Less: accumulated depreciation and amortization —
Property, plant and equipment, net $ 310


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


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

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

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.

(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.

Table of Contents

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

Establish Successor Goodwill 2,632

Fair value adjustment to Inventory 29

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

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

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

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

Release Predecessor Accumulated comprehensive loss (790 )
Fresh start adjustments included in Reorganization items, net $ 1,671
Tax impact of fresh start adjustments (565 )
Gain on fresh start accounting $ 1,106
4. Goodwill and Intangible Assets, net


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 performs~~Company'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 through December~~six months ended March 31, ~~2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor)~~2022 that would indicate that it is more likely than not ~~reduce~~that its goodwill was impaired. To the ~~fair value of any of the Company's reporting units below their respective carrying amounts. However, if~~extent that business conditions deteriorate or ~~there is a change~~if 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 adjusted~~Company's intangible assets consist of the ~~carrying value of goodwill upon application of fresh start accounting.~~

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


(In millions)	Technology and Patents		Customer Relationships and Other Intangibles		Trademarks and Trade Names		Total
Balance as of March 31, 2022
Finite-lived intangible assets:
Cost	$	971	$	2,153	$	42	$	3,166
Accumulated amortization	(732)		(666)		(23)		(1,421)
Finite-lived intangible assets, net	239		1,487		19		1,745
Indefinite-lived intangible assets	—		—		333		333
Intangible assets, net	$	239	$	1,487	$	352	$	2,078
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, net	315		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 accounting 68
(977 ) (909 )
December 15, 2017 (Predecessor) $ 1,160
$ 1,472
$ 2,632

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

~~Intangible Assets~~

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

Intangible assets determined to have indefinite useful lives are not ~~amortized. The Company performs~~amortized but are tested for impairment ~~testing~~ annually, on July 1st, or more frequently if events occur or ~~changes in~~ circumstances change that indicate ~~that it is more likely than not that the~~an asset ismay be impaired. ~~The Avaya trade name is expected to generate cash flow indefinitely. Consequently, this asset is classified as an indefinite-lived intangible.~~

The Company determined that no events ~~had~~ occurred or circumstances changed during the ~~period from December 16, 2017 through December~~six months ended March 31, ~~2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor)~~2022 that would indicate that its ~~long-lived assets, including~~finite-lived intangible assets ~~with finite lives,~~ may not be recoverable or that it is more likely than not that its indefinite-lived intangible ~~assets with indefinite lives are~~asset, the Avaya Trade Name, was impaired. ~~However, if~~To the extent that business conditions deteriorate or ~~there is a change~~if 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:~~

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 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), respectively.

The technology and patents have useful lives that range between 3 years and 10 years with a weighted average remaining useful life of 5.7 years. Customer relationships have useful lives that range between 7 years and 20 years with a weighted average useful life of 14.5 years. Amortizable product trade names have useful lives of 10 years. The Avaya trade name is expected to generate cash flows indefinitely and, consequently, this asset is classified as an indefinite-lived intangible.

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

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


7.	5. Supplementary Financial ~~Information~~

~~Supplemental Operations~~ Information

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


	Three months ended March 31,				Six months ended March 31,
(In millions)	2022		2021		2022		2021
OTHER INCOME, NET
Interest income	$	1	$	1	$	1	$	1
Foreign currency gains (losses), net	2		1		2		(1)

Gain on post-retirement plan settlement	—		14		—		14
Other pension and post-retirement benefit credits, net	6		7		12		14
Change in fair value of emergence date warrants	7		(22)		8		(27)
Sublease income	—		1		—		1
Other, net	1		(1)		1		(1)
Total other income, net	$	17	$	1	$	24	$	1

The gain on post-retirement plan settlement for the three and six months ended March 31, 2021 is ~~presented~~further described in ~~the~~Note 11, "Benefit Obligations."

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, net 2
—
11
Income from transition services agreement, net —
3
—
Other pension and post-retirement benefit costs 1
(8 ) (6 )
Change in fair value of the warrant liability (5 ) —
—
Other, net —
1
(1 )
Total other (expense) income, net $ (2 ) $ (2 ) $ 4

~~A summary of reorganization items, net~~table presents supplemental cash flow information for the periods ~~indicated is presented~~presented:


	Three months ended March 31,				Six months ended March 31,
(In millions)	2022		2021		2022		2021
OTHER PAYMENTS
Interest payments	$	60	$	59	$	93	$	92
Income tax payments	6		6		13		9

NON-CASH INVESTING ACTIVITIES
Increase (Decrease) in Accounts payable for Capital expenditures	$	1	$	(1)	$	(1)	$	(2)
Acquisition of equipment under finance leases	4		4		4		6

During both the three months ended March 31, 2022 and 2021, the Company made payments for operating lease liabilities of $16 million, and recorded non-cash additions for operating lease right-of-use assets of $4 million and $5 million, respectively. During the six months ended March 31, 2022 and 2021, the Company made payments for operating lease liabilities of $31 million and $33 million, respectively, and recorded non-cash additions for operating lease right-of-use assets of $11 million and $16 million, respectively.

The following table presents a reconciliation of cash, cash equivalents, and restricted cash that sum to the total of the same such amounts shown in the ~~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
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~~Condensed Consolidated Statements of ~~the Plan of Reorganization were reported as reorganization items, net. The cash payments for reorganization items~~Cash Flows for the ~~period from October 1, 2017 through December 15, 2017 (Predecessor) included~~ ~~$2,468 million~~periods presented:


(In millions)	March 31, 2022		September 30, 2021		March 31, 2021		September 30, 2020
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	324	$	498	$	593	$	727
Restricted cash included in other assets	4		4		4		4
Total cash, cash equivalents, and restricted cash	$	328	$	502	$	597	$	731

Table of ~~claims paid related to liabilities subject to compromise~~Contents

6. Business Restructuring Reserves and ~~$56 million~~ ~~for bankruptcy-related professional fees, including emergence and success fees paid on~~Programs

The following table summarizes 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~~by activity for the ~~fiscal 2018 restructuring program were for~~periods presented:


	Three months ended March 31,				Six months ended March 31,
(In millions)	2022		2021		2022		2021
Employee separation costs	$	2	$	1	$	4	$	2
Facility exit costs	1		7		6		10
Total restructuring charges	$	3	$	8	$	10	$	12

The Company's employee separation costs ~~associated with employee~~generally consist of severance ~~actions primarily in the U.S. and Europe, Middle East and Africa ("EMEA"), primarily the U.K. and for~~charges 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.~~employees and other associated costs. 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 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 primarily~~activity for employee separation costs ~~associated with~~recognized under the Company's restructuring programs for the six months ended March 31, 2022:


(In millions)	Fiscal 2022 Restructuring Program(1)		Fiscal 2021 Restructuring Program(2)		Fiscal 2020 and prior Restructuring Programs(2)		Total
Accrual balance as of September 30, 2021	$	—	$	14	$	30	$	44
Cash payments	(3)		(2)		(7)		(12)
Restructuring charges	4		—		—		4

Impact of foreign currency fluctuations	1		(1)		(1)		(1)
Accrual balance as of March 31, 2022	$	2	$	11	$	22	$	35

(1) Payments related to the fiscal ~~2017 employee severance actions in the U.S. and EMEA, for which the related payments~~2022 restructuring program are expected to be completed in fiscal ~~2023. The separation charges include, but are not limited~~2022.

(2) 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 operations~~2020 and ~~generate cost savings, which included eliminating employee positions and exiting facilities. The remaining obligations related to these~~prior 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 )
Expense 1
1
2
Adjustments - fresh start and reorganization items $ 4
$ (1 ) $ 3
Balance as of December 15, 2017 (Predecessor) $ 53
$ 7
$ 60

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


9.	~~Financing Arrangements~~

The following table reflects principal amounts of debt and debt net of discounts and issuance costs asfor the periods presented:


	March 31, 2022				September 30, 2021
(In millions)	Principal amount		Net of discounts and issuance costs		Principal amount		Net of discounts and issuance costs
Senior 6.125% Notes due September 15, 2028	$	1,000	$	987	$	1,000	$	986
Tranche B-1 Term Loans due December 15, 2027	800		781		800		780
Tranche B-2 Term Loans due December 15, 2027	743		737		743		736
Convertible 2.25% Senior Notes due June 15, 2023	350		322		350		311
Total Long-term debt	$	2,893	$	2,827	$	2,893	$	2,813

Term Loan and ABL Credit Agreements

As of ~~December~~March 31, ~~2017 (Successor)~~2022 and ~~principal amounts of debt and debt net of discounts and issuance costs as of~~ September 30, ~~2017 (Predecessor), which includes~~2021, 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 into~~Company maintained (i) ~~the~~its Term Loan Credit Agreement among Avaya Inc., as borrower, Avaya Holdings, the lending institutions from time to time party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent ~~which provided a $2,925 million term loan facility maturing on December 15, 2024~~(the “Term Loan Credit Agreement”), and (ii) ~~the~~its ABL Credit Agreement, ~~maturing on December 15, 2022,~~ among Avaya Inc., as borrower, Avaya Holdings, the several other borrowers party thereto, the several lenders from time to time party thereto, and Citibank, N.A., as administrative agent and collateral agent, which ~~provided~~provides 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 with~~matures 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”). ~~The~~On February 24, 2021, the Company amended the Term Loan Credit Agreement

Table of Contents

("Amendment No. 3"), pursuant to which the Company prepaid, replaced and refinanced the Tranche B Term Loans outstanding with $100 million in ~~the case~~cash and $743 million in principal amount of ~~ABR~~new first lien term loans due December 2027 (the “Tranche B-2 Term Loans”). The Tranche B-2 Term Loans ~~bears~~bear interest at a rate with applicable margin of 3.00% per annum ~~equal~~with respect to ~~3.75% plus~~base rate borrowings and 4.00% per annum with respect to LIBOR borrowings. Amendment No. 3 was primarily accounted for as a loan modification at the ~~highest~~syndicated lender level. Based on the application of ~~(i)~~ the ~~Federal Funds Rate plus 0.50%, (ii)~~loan modification guidance within ASC 470, the ~~U.S. prime rate as publicly announced~~Company recorded $3 million of new debt issuance costs within Interest expense in the ~~Wall Street Journal~~Condensed Consolidated Statements of Operations during the three and ~~(iii) the LIBOR Rate for an interest period of one month and~~six months ended March 31, 2021. Loans from lenders who exited their positions in the ~~case~~Tranche B Term Loans as a result of ~~LIBOR Loans, bears~~Amendment No. 3 were accounted for as a loan extinguishment. Accordingly, the Company wrote-off a portion of the original underwriting discount of $1 million within Interest expense during the three and six months ended March 31, 2021.

For the three months ended March 31, 2022 and 2021, the Company recognized interest ~~at a rate per annum equal~~expense of $17 million and $22 million, respectively, related to ~~4.75% plus~~ the ~~applicable LIBOR Rate, subject to a 1% floor. The ABL Credit Agreement bears interest:~~


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


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


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


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


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


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


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

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

~~The~~ Term Loan Credit Agreement, ~~does not contain any financial covenants. The ABL~~including the amortization of the debt discount and issuance costs and the expenses associated with Amendment No. 3 described above. For the six months ended March 31, 2022 and 2021, the Company recognized interest expense of $35 million and $42 million, respectively, related to the Term Loan Credit Agreement, ~~does not contain any financial covenants other than a requirement to maintain a minimum fixed charge coverage ratio~~including the amortization of ~~1:1 that becomes applicable only in~~ the ~~event that~~debt discount and issuance costs and the ~~net borrowing availability~~expenses associated with Amendment No. 3 described above.

As of March 31, 2022, the Company had no borrowings outstanding under the ABL Credit ~~Agreement is less than the greater of $25 million and 10% of the lesser of the total borrowing base and the ABL commitments (commonly known as the "line cap").~~

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

Agreement. Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At ~~December~~March 31, ~~2017,~~2022, the Company had issued and outstanding letters of credit and guarantees of ~~$74 million.~~$32 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~~$32 million of outstanding letters of credit and guarantees was ~~$139~~$118 million at ~~December~~March 31, ~~2017.~~2022. For each of the three and six months ended March 31, 2022 and 2021, 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 March 31, 2022 and 2021, the Company recognized interest expense of $16 million related to the Senior Notes, including the amortization of debt issuance costs. For both the six months ended March 31, 2022 and 2021, the Company recognized interest expense of $32 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 the three months ended March 31, 2022 and 2021, the Company recognized interest expense of $8 million and $7 million related to the Convertible Notes, respectively, which includes $6 million and $5 million of amortization of the debt discount and issuance costs, respectively. For the six months ended March 31, 2022 and 2021, the Company recognized interest expense of $15 million and $14 million related to the Convertible Notes, respectively, which includes $11 million and $10 million of amortization of the debt discount and issuance costs, respectively.

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


(In millions)	March 31, 2022		September 30, 2021
Principal	$	350	$	350
Less:
Unamortized debt discount	(26)		(36)
Unamortized issuance costs	(2)		(3)
Net carrying amount	$	322	$	311

The weighted average contractual interest rate of the ~~Company’s~~Company's outstanding debt was 6.5% as of ~~December~~both March 31, ~~2017~~2022 and September 30, 2021, including adjustments related to the Company's interest rate swap agreements (see Note 8, "Derivative

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Instruments and Hedging Activities"). The effective interest rate for the Term Loan Credit Agreement as of March 31, 2022 and September 30, 2021 was ~~6.2%.~~

~~Predecessor Financing~~

~~Debt Covenants~~not materially different than its contractual interest rate including adjustments related to interest rate swap agreements designated as highly effective cash flow hedges. The effective interest rate for the Senior Notes as of March 31, 2022 and ~~Default.~~ September 30, 2021 was not materially different than its contractual interest rate. The ~~indentures governing~~effective interest rate for the ~~Predecessor senior secured notes contained a number~~Convertible Notes as of ~~covenants that, among other things~~both March 31, 2022 and ~~subject to certain exceptions, restricted~~September 30, 2021 was 9.2%, reflecting the ~~ability~~separation of the ~~Predecessor~~conversion feature in equity. The effective interest rates include interest on the debt and ~~certain~~amortization of discounts and issuance costs.

As of March 31, 2022, the Company was not in default under any of its ~~subsidiaries to (a) incur or guarantee additional~~ debt agreements.

8. Derivative Instruments 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)~~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 ~~transactions~~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 ~~affiliates, (f) merge or consolidate with another company, (g) transfer or otherwise dispose~~6 counterparties, which fix a portion of ~~assets, (h) redeem subordinated debt, (i) incur obligations that restricted~~ the ~~ability~~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 for a notional amount of $257 million (the “Offsetting Swap Agreement”). Under the terms of the Offsetting Swap Agreement, which matures on December 15, 2022, the Company pays a variable rate of interest based on one-month LIBOR and receives a fixed rate of 0.1745%. The Company entered into the Offsetting Swap Agreement to maintain a net notional amount less than the amount of the Company’s ~~subsidiaries~~variable rate loans outstanding. The Offsetting Swap Agreement was not designated for hedge accounting treatment. On September 23, 2020, Original Swap Agreements with a notional amount of $257 million were also de-designated from hedge accounting treatment. As of March 31, 2022, Original Swap Agreements with a notional amount of $1,543 million continue to ~~pay dividends or make other payments to~~be designated as cash flow hedges and deemed highly effective as defined under ASC 815.

On July 1, 2020, 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~~entered into interest rate swap agreements ~~and the senior secured notes. As~~with 4 counterparties, which fixed a ~~result~~portion of the ~~Bankruptcy Filing,~~variable interest due under its Term Loan Credit Agreement (the "Forward Swap Agreements") from December 15, 2022 (the maturity date of the ~~principal~~Original Swap Agreements) through December 15, 2024. Under the terms of the Forward Swap Agreements, the Company would 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 was $1,400 million. Since their execution, the Forward Swap Agreements were designated as cash flow hedges and deemed highly effective as defined by ASC 815.

On March 23, 2022, the Company restructured its Forward Swap Agreements resulting in the receipt of $52 million of net cash proceeds which is reflected within cash used for operating activities in the Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2022. As part of the restructuring, the Company terminated the Forward Swap Agreements and simultaneously entered into new interest rate swap agreements with 4 counterparties (the "New Forward Swap Agreements"). The New Forward Swap Agreements fix a portion of the variable interest due under the ~~Predecessor’s debt~~Company's Term Loan Credit Agreement from December 15, 2022 through June 15, 2027. Under the terms of the New Forward Swap Agreements, the Company will pay a fixed rate of 2.5480% and receive a variable rate of interest based on one-month SOFR. The Company's intends to transition its Term Loan Credit Agreement from one-month LIBOR to one-month SOFR effective December 15, 2022. The total notional amount of the New Forward Swap Agreements is $1,000 million. The New Forward Swap Agreements were 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 ~~became due~~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 23, 2020, the Company froze a $15 million deferred loss within Accumulated other comprehensive loss related to the de-designated Original Swap Agreements, which is reclassified to Interest expense over the term of the Original Swap Agreements. On March 23, 2022, the Company froze a $52 million deferred gain within Accumulated other comprehensive loss related to the termination of the Forward Swap Agreements, which will be reclassified to Interest expense over the term of the original Forward Swap Agreements.

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Based on the amount in Accumulated other comprehensive loss at March 31, 2022, approximately $13 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 certain monetary assets and ~~payable. However, any efforts to enforce such payment obligations were automatically stayed~~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 ~~result~~component of Other income, net to offset the change in the value of the ~~Bankruptcy Filing,~~hedged assets and liabilities. As of March 31, 2022, the ~~creditors’ rights~~Company maintained open foreign currency forward contracts with a total notional value of ~~enforcement were subject to~~$156 million, hedging the ~~applicable provisions of the Bankruptcy Code~~British Pound Sterling, Mexican Peso, Czech Koruna 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 interest as of December 31, 2017 (Successor) and September 30, 2017 (Predecessor), respectively, and excluded amounts included in liabilities subject to compromise of $12 million asJapanese Yen. As of September 30, ~~2017.~~

The Company entered into an agreement to outsource certain delivery services associated with the Avaya Private Cloud Services business. That agreement also included the sale of specified assets owned by2021, the Company ~~which are being leased-back by~~maintained open foreign currency forward contracts with a total notional value of $191 million, primarily hedging the ~~Company~~British Pound Sterling, Indian Rupee, Czech Koruna and accounted for as a capital lease. As of December 31, 2017 (Successor) and September 30, 2017 (Predecessor), capital lease obligations associated with this agreement were $21 million and $24 million, respectively, and include $10 million within liabilities subject to compromise as of September 30, 2017.Mexican Peso.

Emergence Date Warrants


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

In accordance with the ~~Plan~~bankruptcy plan of ~~Reorganization,~~reorganization adopted in connection with the Company's emergence from bankruptcy on ~~the Emergence Date~~December 15, 2017 (the "Plan of Reorganization"), the Company issued ~~Warrants~~warrants to purchase 5,645,200 shares of ~~Successor~~the 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 Warrants~~them to be classified as a liability and for changes in the fair value of the liability to be recognized in earnings each reporting period. ~~The Successor~~On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company ~~had no other derivative instruments at December~~to repurchase up to $15 million worth of the Emergence Date Warrants. None of the Emergence Date Warrants have been exercised or repurchased as of March 31, ~~2017.~~2022.

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

The fair value of the ~~Warrants, on the~~ Emergence Date Warrants as of March 31, 2022 and ~~at December 31, 2017,~~September 30, 2021 was determined by using ~~the Black-Scholes option pricing model with~~ the input assumptions summarized ~~below. Accordingly, we recorded a loss of $5 million for~~below:


	March 31, 2022		September 30, 2021
Expected volatility	62.41	%	49.63	%
Risk-free interest rates	1.29	%	0.13	%
Contractual remaining life (in years)	0.71		1.21
Price per share of common stock	$12.67		$19.79

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.

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Financial Statement Information Related to Derivative Instruments

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


		March 31, 2022				September 30, 2021
(In millions)	Balance Sheet Caption	Asset		Liability		Asset		Liability
Derivatives Designated as Hedging Instruments:
Interest rate contracts	Other assets	$	—	$	—	$	6	$	—
Interest rate contracts	Other current liabilities	—		17		—		43
Interest rate contracts	Other liabilities	—		4		—		10
		—		21		6		53
Derivatives Not Designated as Hedging Instruments:
Interest rate contracts	Other current liabilities	—		5		—		7
Interest rate contracts	Other liabilities	—		—		—		2

Foreign exchange contracts	Other current liabilities	—		1		—		2
Emergence Date Warrants	Other current liabilities	—		1		—		—
Emergence Date Warrants	Other liabilities	—		—		—		9
		—		7		—		20
Total derivative fair value		$	—	$	28	$	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 March 31,
	2022				2021
(In millions)	Interest Expense		Other Comprehensive Income		Interest Expense		Other Comprehensive Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded	$	(54)	$	39	$	(59)	$	85

Impact of cash flow hedging relationships:
Gain recognized in AOCI on interest rate swaps	—		42		—		17
Interest expense reclassified from AOCI	(12)		12		(13)		13


	Six months ended March 31,
	2022				2021
(In millions)	Interest Expense		Other Comprehensive Income		Interest Expense		Other Comprehensive Income
Financial Statement Line Item in which Cash Flow Hedges are Recorded	$	(108)	$	79	$	(115)	$	102

Impact of cash flow hedging relationships:
Gain recognized in AOCI on interest rate swaps	—		57		—		16
Interest expense reclassified from AOCI	(25)		25		(25)		25

The following table provides information regarding the pre-tax gains (losses) for derivatives not designated as hedging

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instruments on the Condensed Consolidated Statements of ~~Operations.~~Operations:


		Three months ended March 31,				Six months ended March 31,
(In millions)	Location of Derivative Pre-tax Gain (Loss)	2022		2021		2022		2021
Emergence Date Warrants	Other income, net	$	7	$	(22)	$	8	$	(27)
Foreign exchange contracts	Other income, net	(1)		1		(1)		6

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


	March 31, 2022				September 30, 2021
(In millions)	Asset		Liability		Asset		Liability
Gross amounts recognized in the Condensed Consolidated Balance Sheets	$	—	$	28	$	6	$	73
Gross amount subject to offset in master netting arrangements not offset in the Condensed Consolidated Balance Sheets	—		—		(6)		(6)
Net amounts	$	—	$	28	$	—	$	67

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

Fair value of warrant liability $22 million $17 million
9. Fair Value Measurements


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

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’s~~instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The inputs are prioritized into three levels that may be used to measure fair value:

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

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

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

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

Assets and liabilities measured at fair value on a recurring basis as of ~~December~~March 31, ~~2017~~ ~~(Successor)~~2022 and September 30, ~~2017~~ ~~(Predecessor)~~2021 were as follows:


	March 31, 2022								September 30, 2021
	Fair Value Measurements Using								Fair Value Measurements Using
(In millions)	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets:
Interest rate contracts	$	—	$	—	$	—	$	—	$	6	$	—	$	6	$	—

Total assets	$	—	$	—	$	—	$	—	$	6	$	—	$	6	$	—

Liabilities:
Interest rate contracts	$	26	$	—	$	26	$	—	$	62	$	—	$	62	$	—
Foreign exchange contracts	1		—		1		—		2		—		2		—
Emergence Date Warrants	1		—		—		1		9		—		—		9
Total liabilities	$	28	$	—	$	27	$	1	$	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~~

~~Investments~~Interest rate and foreign exchange contracts classified as Level 12 assets and liabilities are ~~priced~~not actively traded and are valued using ~~quoted market prices for identical assets in active markets~~pricing models that ~~are observable.~~use observable inputs.

~~Warrants~~

Emergence Date Warrants classified as Level 3 liabilities are ~~priced~~valued using ~~the~~a probability weighted Black-Scholes option pricing ~~model.~~model which is further described in Note 8, "Derivative Instruments and Hedging Activities."

During the three and six months ended March 31, 2022 and 2021, 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 recognized~~which 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~~ ~~December~~Company's Senior Notes, Term Loans and Convertible Notes as of March 31, ~~2017~~ ~~(Successor)~~2022 and September 30, ~~2017~~ ~~(Predecessor)~~2021 were as follows:


	March 31, 2022				September 30, 2021
(In millions)	Principal amount		Fair value		Principal amount		Fair value
Senior 6.125% Notes due September 15, 2028	$	1,000	$	986	$	1,000	$	1,053
Tranche B-1 Term Loans due December 15, 2027	800		795		800		802
Tranche B-2 Term Loans due December 15, 2027	743		737		743		745
Convertible 2.25% Senior Notes due June 15, 2023	350		343		350		368
Total	$	2,893	$	2,861	$	2,893	$	2,968

The estimated ~~based on a~~fair value of the Company's Senior Notes and Term Loans was determined using Level 2 ~~input~~inputs 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 under~~extent the ~~Company’s financing agreements at~~ ~~December 31, 2017~~ ~~(Successor) and~~ ~~September 30, 2017~~ ~~(Predecessor) are as follows:~~underlying liability will be settled in cash, approximate their carrying values because of the short-term nature of these instruments.

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
10. Income Taxes

The ~~Company adjusted~~Company's effective income tax rate for the ~~carrying value of debt to fair value upon application of fresh start accounting.~~


~~12.~~	~~Income Taxes~~

~~For the Predecessor period~~three and six months ended ~~December 15, 2017, the difference between the Company’s recorded provision and the provision that would result~~March 31, 2022 differed from ~~applying~~ the U.S. ~~statutory~~federal tax rate ~~of 35% is primarily attributable to: (1) income~~by 72% or $10 million and ~~losses taxed at different foreign tax rates, (2) losses~~29% or $18 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~~the release of reserves from statute of limitation expirations, and nondeductible expenses.

The Company's effective income tax rate for the three and six months ended March 31, 2021 differed from the U.S. federal tax rate by 335% or $47 million and 696% or $56 million, respectively, principally related to nondeductible expenses, including expenses related to the change in fair value of the Emergence Date Warrants, and deferred taxes ~~on foreign earnings, (4) current period changes to unrecognized tax positions, (5) U.S. state and local income taxes, and (6) the impact of reorganization and fresh start adjustments.~~

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(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. state and local income taxes, and (6) the impact~~realized.

Table of ~~the Tax Cuts and Jobs Act (“the Act”), as more fully described below.~~Contents

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.

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, 2018.11. Benefit Obligations

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

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

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


	Three months ended March 31,				Six months ended March 31,
(In millions)	2022		2021		2022		2021
Pension Benefits - U.S.
Components of net periodic benefit credit
Service cost	$	1	$	1	$	2	$	2
Interest cost	5		5		10		10
Expected return on plan assets	(13)		(13)		(25)		(26)
Amortization of actuarial loss	—		1		—		1
Net periodic benefit credit	$	(7)	$	(6)	$	(13)	$	(13)
Pension Benefits - Non-U.S.
Components of net periodic benefit cost
Service cost	$	1	$	2	$	3	$	4
Interest cost	2		1		3		2
Net periodic benefit cost	$	3	$	3	$	6	$	6
Post-retirement Benefits - U.S.
Components of net periodic benefit credit
Service cost	$	—	$	1	$	—	$	1
Interest cost	1		2		2		4
Expected return on plan assets	—		(2)		—		(4)
Amortization of prior service credit	(2)		(1)		(3)		(2)
Amortization of actuarial loss	1		—		1		1
Settlement gain	—		(14)		—		(14)
Net periodic benefit credit	$	—	$	(14)	$	—	$	(14)

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 cost 1
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 Plan~~The service components of ~~Reorganization related settlements discussed below that~~net 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 ~~laws~~law 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's~~Company did not make any contributions to the U.S. pension plans during ~~fiscal 2017. Therefore,~~ the ~~minimum funding requirements for~~six months ended March 31, 2022 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 provided~~Contributions to the non-U.S. pension ~~benefits for U.S. employees, which~~plans 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 through December 31, 2017 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company made payments$14 million 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 Decembersix months ended March 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 for2022. 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~~estimates that it will make contributions totaling $11 million ~~from the represented employees’ post-retirement health trust~~ for ~~claims paid that exceeded the Company's obligations. During the period from October 1, 2017 through December 15, 2017 (Predecessor),~~non-U.S. plans.

In March 2021, the Company ~~contributed $2~~entered into an irrevocable buy-out agreement with an insurance company to settle $209 million of its post-retirement life insurance projected benefit obligations related to certain salaried and represented retirees and their beneficiaries who had retired as of March 26, 2021. The transaction was funded with post-retirement life insurance plan assets with a value of $190 million. As a result of this transaction, a settlement gain of $14 million was recognized within Other income, net in the ~~represented employees’~~Condensed Consolidated Statements of Operations during the three and six months ended March 31, 2021.

Most post-retirement health trust to fund current benefit claims and costs of administration in compliance with the terms of the CBA, as extended through September 21, 2019. Estimated payments under the terms of the 2009 agreement as extended are $12 million for the remainder of fiscal 2018.

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

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ended March 31, 2022, the Company made payments ~~in each of the periods totaling less than $1 million~~ for ~~these~~ retiree medical ~~benefits. Estimated~~and dental benefits of $3 million which is net of reimbursements received 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 $6 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~~As of March 2, 2022, the ~~Emergence Date. Accordingly, the Predecessor Company's then existing share-based compensation awards were also cancelled, which resulted in the recognition~~Board 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~~Directors of the ~~Plan~~Company and the stockholders of ~~Reorganization,~~the Company approved an amendment to the Avaya Holdings Corp. ~~2017~~2019 Equity Incentive Plan ~~("2017 Equity Incentive Plan") became effective on~~(as amended, 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“2019 Plan”), which increased 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, performance awards and other forms of awards granted or denominated in shares of Successor common stock, as well as certain cash-based awards.

~~The maximum number of shares of~~Company's common stock that may be issued or granted under the ~~2017 Equity Incentive~~2019 Plan ~~is 7.4 million~~by 6,500,000 shares. ~~If any option or other stock-based award~~Awards granted under the ~~2017 Equity Incentive~~2019 Plan ~~expires, terminates~~reduce the aggregate number of shares of the Company's common stock that may be granted or ~~is cancelled~~issued under the 2019 Plan as follows:


2019 Plan Award			Reduction to the 2019 Plan Capacity
Restricted stock units granted prior to March 2, 2022			1.7 shares
Restricted stock units granted on or after March 2, 2022			1.5 shares
Stock options and stock appreciation rights (regardless of grant date)			1 share

If any awards expire, terminate or are canceled or forfeited for any reason without having been exercised or vested in full, the number of shares of common stock underlying any ~~unexercised~~such award (as described above) 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 by 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~~2019 Plan.

~~The aggregate~~Pre-tax share-based compensation expense for the three months ended March 31, 2022 and 2021 was $14 million and $13 million, respectively, and $28 million and $27 million for the six months ended March 31, 2022 and 2021, respectively.

Restricted Stock Units

During the six months ended March 31, 2022, the Company granted 2,845,320 restricted stock units ("RSUs") with a weighted average grant date fair value of ~~all awards granted to any non-employee director during any calendar year (excluding awards made pursuant to deferred compensation arrangements made in lieu~~$19.05 per RSU, and there were 1,084,705 RSUs that vested with a weighted average grant date fair value of ~~all or a portion of cash retainers and any dividends payable in respect of outstanding awards) may not exceed $750,000.~~$16.58 per RSU.

OnPerformance Restricted Stock Units

During the ~~Emergence Date,~~six months ended March 31, 2022, the Company granted ~~3.4 million restricted stock units~~669,228 performance awards ("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 awards~~prior 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 available~~expected 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 Date~~PRSUs was determined using a ~~lattice option pricing~~Monte Carlo simulation model ~~with~~that incorporated multiple valuation assumptions, including the probability of achieving the total shareholder return market condition and the following assumptions:


	Six months ended March 31, 2022
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 ~~term~~volatility 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~~

During the six months ended March 31, ~~2017, all share-based awards granted by~~2022, there were 274,223 PRSUs that vested with a grant date fair value of $11.18 per PRSU.

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Stock 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 ~~unvested~~approved 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 ~~related~~average 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 ~~recorded~~related to the Stock Bonus Program for the ~~period from December 16, 2017 through December~~three and six months ended March 31, ~~2017 (Successor)~~2022 was not material.

Stock Options

During the six months ended March 31, 2022, 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 six months ended March 31, 2022 was $1 million.

~~Predecessor~~Employee Stock Purchase Plan

~~Prior to~~During the ~~Emergence Date,~~six months ended March 31, 2022, the ~~Predecessor~~ Company had granted share-based awards that were cancelled upon emergence from bankruptcy. In conjunction with the cancellation, the Predecessor Company accelerated the unrecognized share-based compensation expense and recorded $3withheld $7 million of eligible employee compensation ~~expense in the period from October 1, 2017 through December 15, 2017.~~

~~15. Capital Stock~~

~~Successor~~

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

~~Common Stock.~~ ~~The Successor Company's certificate of incorporation authorizes it to issue up to 550.0 million~~531,339 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 average grant date fair value for the offering periods that commenced during the six months ended March 31, 2022 was $4.74 per share. The grant date fair value was determined using a Black-Scholes option pricing model with the following average grant date assumptions:


	Six months ended March 31, 2022
Expected volatility(1)	69.22	%
Risk-free interest rate(2)	0.19	%
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 length of the offering period.

(3)Dividend yield was assumed to be zero as the Company does not anticipate paying dividends on its common stock.

13. Preferred Stock

There were 125,000 shares of the Company's 3% Series A Convertible Preferred Stock, par value of $0.01 per ~~share.~~ share ("Series A Preferred Stock") issued and outstanding as of March 31, 2022. The Series A Preferred Stock is convertible into shares of the Company's common stock at an initial conversion price of $16.00 per share, which represents an approximately 9% interest in the Company's common stock on an as-converted basis as of March 31, 2022, assuming no holders of options, warrants, convertible notes or similar instruments exercise their exercise or conversion rights.

As of ~~December~~March 31, 2017, there were 110.0 million shares issued and 109.8 million outstanding. The outstanding shares were issued to (1) holders of Predecessor first lien obligations (99.3 million shares); (2) holders of Predecessor second lien obligations (4.4 million shares); and (3) PBGC (6.1 million shares). Issued but not outstanding are2022, the ~~shares held on behalf~~carrying value of the ~~general unsecured creditor reserve or~~Series A Preferred Stock was $131 million, which includes $6 million of accreted dividends paid in kind. During the ~~holders~~six months ended March 31, 2022, the carrying value of ~~Predecessor first lien debt obligations (0.2~~the Series A Preferred Stock increased $1 million ~~shares).~~due to accreted dividends paid in kind.

~~Predecessor~~

~~In connection with the Company's Plan~~

Table 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.~~Contents

~~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 ~~are~~is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share ~~reflect~~reflects the potential dilution that would occur if equity awards granted under the Company's various share-based compensation plans were vested or exercised; if the Company's 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 ~~income~~loss attributable to common ~~shareholders~~stockholders and the computation of basic and diluted ~~earnings (loss)~~loss per share for the periods indicated:


	Three months ended March 31,						Six months ended March 31,
(In millions, except per share amounts)	2022			2021			2022			2021
Loss per share:
Numerator
Net loss	$	(1)		$	(58)		$	(67)		$	(62)
Dividends to preferred stockholders	(1)			(1)			(2)			(2)
Undistributed loss	(2)			(59)			(69)			(64)
Percentage allocated to common stockholders(1)	100.0		%	100.0		%	100.0		%	100.0		%
Numerator for basic and diluted loss per common share	$	(2)		$	(59)		$	(69)		$	(64)

Denominator for basic and diluted loss per common share	85.6			84.6			85.1			84.2

Loss per common share
Basic	$	(0.02)		$	(0.70)		$	(0.81)		$	(0.76)
Diluted	$	(0.02)		$	(0.70)		$	(0.81)		$	(0.76)

(1) Basic weighted average common stock outstanding	85.6			84.6			85.1			84.2
Basic weighted average common stock and common stock equivalents (preferred shares)	85.6			84.6			85.1			84.2
Percentage allocated to common stockholders	100.0		%	100.0		%	100.0		%	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 %
For the three and six months ended March 31, 2022, the Company excluded 4.1 million RSUs, 0.3 million stock options, 0.2 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 1.8 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.

~~There were~~For the three and six months ended March 31, 2021, the Company excluded 3.1 million RSUs, 0.5 million ~~dilutive securities for~~stock options, 0.1 million shares issuable under the ~~period~~ESPP, 5.6 million Emergence Date Warrants and 0.1 million shares of Series A Preferred Stock from ~~December 16, 2017 through December 31, 2017 (Successor).~~the diluted loss per share calculation as their effect would have been anti-dilutive. The Company also excluded 1.6

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

~~On July 14, 2017,~~

million PRSUs from the ~~Company sold its Networking business to Extreme. Prior to the sale, the Company~~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.

The ~~GCS~~Company'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 ~~AGS~~Services segment develops, markets and sells comprehensive end-to-end global service offerings that enable customers to evaluate, plan, design, implement, monitor, manage and optimize ~~even~~ complex enterprise communications networks. ~~The Networking segment portfolio of software~~Revenue 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’s~~Company's chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the ~~Company’s~~Company's internal management systems. Management does not include in its segment measures of profitability selling, general and administrative expenses, research and development expenses, amortization of intangible assets, and certain discrete items, such as fair value adjustments recognized upon emergence from bankruptcy, charges relating to restructuring actions, 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’s~~Company's operating segments is shown in the following table for the periods indicated:


	Three months ended March 31,				Six months ended March 31,
(In millions)	2022		2021		2022		2021
REVENUE
Products & Solutions	$	223	$	226	$	454	$	492
Services	493		513		975		990
Unallocated Amounts (1)	—		(1)		—		(1)
	$	716	$	738	$	1,429	$	1,481
GROSS PROFIT
Products & Solutions	$	104	$	134	$	224	$	295
Services	302		322		593		620
Unallocated Amounts (2)	(35)		(44)		(77)		(87)
	371		412		740		828
OPERATING EXPENSES
Selling, general and administrative	245		264		507		519
Research and development	60		57		121		112
Amortization of intangible assets	40		39		80		79
Restructuring charges, net	3		8		10		12
	348		368		718		722
OPERATING INCOME	23		44		22		106
INTEREST EXPENSE AND OTHER INCOME, NET	(37)		(58)		(84)		(114)
LOSS BEFORE INCOME TAXES	$	(14)	$	(14)	$	(62)	$	(8)

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

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

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

⁽²⁾Unallocated ~~Amounts~~amounts in Gross Profit include the effect of the amortization of technology ~~intangibles~~intangible assets and ~~costs that~~the fair value adjustments recognized upon the Company's emergence from bankruptcy which are ~~not core to the measurement~~excluded from segment gross profit.

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


(In millions)	Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation		Unrealized Gain (Loss) on Interest Rate Swaps		Accumulated Other Comprehensive Loss
Balance as of December 31, 2021	$	(21)	$	(24)	$	(6)	$	(51)
Other comprehensive income before reclassifications	—		1		42		43
Amounts reclassified to earnings	(2)		—		12		10
Provision for income taxes	—		—		(14)		(14)
Balance as of March 31, 2022	$	(23)	$	(23)	$	34	$	(12)


(In millions)	Change in unamortized pension, post-retirement and postemployment benefit-related items			Foreign Currency Translation			Other			Accumulated Other Comprehensive Income (Loss)			(In millions)	Pension, Post-retirement and Postemployment Benefit-related Items		Foreign Currency Translation		Unrealized Gain (Loss) on Interest Rate Swaps		Accumulated Other Comprehensive Loss
Beginning balance September 30, 2016 (Predecessor)	$	(1,627	)	$	(33	)	$	(1	)	$	(1,661	)
Balance as of September 30, 2021													Balance as of September 30, 2021	$	(20)	$	(37)	$	(34)	$	(91)
Other comprehensive income before reclassifications	—			19			—			19			Other comprehensive income before reclassifications	—		14		57		71
Amounts reclassified to earnings	20			—			—			20			Amounts reclassified to earnings	(3)		—		25		22
(Provision for) benefit from income taxes	(6		)	4			—			(2		)
Ending balance December 31, 2016 (Predecessor)	$	(1,613	)	$	(10	)	$	(1	)	$	(1,624	)
Provision for income taxes													Provision for income taxes	—		—		(14)		(14)
Balance as of March 31, 2022													Balance as of March 31, 2022	$	(23)	$	(23)	$	34	$	(12)

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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 key~~Risks, uncertainties and other factors that ~~could~~may cause ~~actual results~~these forward-looking statements to ~~differ from our expectations include:~~

~~we face formidable competition from providers~~be inaccurate include, among others: the risks and factors discussed in Part I, Item 2 "Management's Discussion and Analysis of ~~unified communications~~Financial Condition and ~~contact center products~~Results of Operations" and ~~related services;~~

~~market opportunity for business communications products and services may not develop~~Part II, Item 1A "Risk Factors" in ~~the ways that we anticipate;~~

~~our ability to rely~~this 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 ~~warehousing~~Part I, Item 1A "Risk Factors" and ~~distribution logistics providers;~~

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



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

Interest Rate Risk

The Company has exposure to changing interest rates primarily under the Term Loan Credit Agreement and ABL Credit Agreement, each of which ~~bear~~bears interest at variable rates based on LIBOR. As of March 31, 2022, the Company had interest rate swap agreements, which mature on December 15, 2022, to pay a fixed rate of 2.935% on its $1,543 million of variable rate loans outstanding (the "Original Swap Agreements").

As of March 31, ~~2017~~,2022, the Company also has forward starting swap agreements to fix a ~~25 bps increase~~portion of the variable rate interest due on its Term Loan Credit Agreement from December 15, 2022 (the maturity date of the Original Swap Agreements) through June 15, 2027. Under the terms of the forward starting swap agreements, the Company will pay a fixed rate of 2.5480% and receive a variable rate of interest based on one-month SOFR. The Company's intends to transition its Term Loan Credit Agreement from one-month LIBOR to one-month SOFR effective December 15, 2022. The forward swap agreements have a total notional amount of $1,000 million. Over the twelve months following March 31, 2022, a hypothetical one percent change in ~~LIBOR~~interest rates would ~~result in a $7 million increase in our annual~~affect interest expense by approximately $2 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 March 31, 2022 and 2021, the Company recognized a ~~25bps decrease~~loss on the interest rate swap agreements of $12 million and $13 million, respectively, which is reflected in ~~LIBOR would result~~Interest expense in the Condensed Consolidated Statements of Operations. For both the six months ended March 31, 2022 and 2021, the Company recognized a $7loss on the interest rate swap agreements of $25 million ~~decrease~~which is also reflected in Interest expense. At March 31, 2022, the Company maintained a $34 million deferred gain on its interest rate swap agreements within Accumulated other comprehensive loss in the Condensed Consolidated Balance Sheets.

See Note 8, “Derivative Instruments and Hedging Activities,” to our ~~annual~~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 ~~expense.~~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

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location consistent with local regulatory guidelines. Each foreign operation may conduct business in its local currency, as well as the currency of other countries in which it operates. The primary foreign currency exposures for these foreign operations are Euros, Canadian Dollars, British Pound Sterling, Chinese Renminbi, Australian Dollar, Indian Rupee, Japanese Yen, and Brazilian Reals.

Non-U.S. denominated revenue was $147 million and $307 million for the three and six months ended March 31, 2022, respectively. 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 and six months ended March 31, 2022 by $15 million and $31 million, respectively.

The Company, from time-to-time, utilizes foreign currency forward contracts primarily to hedge fluctuations associated with certain monetary assets and liabilities including receivables, payables and certain intercompany 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 underlying assets and liabilities. As of March 31, 2022, the Company maintained open foreign exchange contracts with a total notional value of $156 million, hedging the British Pound Sterling, Mexican Peso, Czech Koruna and Japanese Yen. As of March 31, 2022, the fair value of open foreign exchange contracts was an unrealized loss of $1 million which was recorded within Other current liabilities in the Condensed Consolidated Balance Sheets. For the three months ended March 31, 2022 and 2021, the Company's (loss) gain on foreign exchange contracts was $(1) million and $1 million, respectively, and was recorded within Other income, net in the Condensed Consolidated Statements of Operations. For the six months ended March 31, 2022 and 2021, the Company's (loss) gain on foreign exchange contracts was $(1) million and $6 million, respectively, which was also recorded within Other income, net.



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

~~Evaluation of~~ Disclosure Controls and ~~Procedures.~~Procedures

As of March 31, 2022, 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’s~~Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as ~~amended.)~~amended). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the ~~Company’s~~Company's disclosure controls and procedures were ~~not~~ effective as of ~~December~~March 31, ~~2017, because of~~2022 to provide reasonable assurance that information required to be disclosed by the ~~material weaknesses~~Company 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 of~~Securities 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 a~~management, 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

~~There~~During the second quarter of fiscal 2022, the Company implemented 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 transition to the new accounting module necessitated changes in the design and operation of the Company's 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 March 31, 2022 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 in~~set forth under Note ~~20, “Commitments~~18, "Commitments and Contingencies,”" to the unaudited interim Condensed Consolidated Financial Statements is incorporated herein by reference.



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

There have been no material changes during the quarterly period ended ~~December~~March 31, ~~2017~~2022 to the risk factors previously disclosed in the ~~Company’s Registration Statement on~~ Company's Form ~~10 Amendment No. 3~~10-K filed with the ~~SEC~~Securities and Exchange Commission on November 22, 2021 other than as shown below:

Risks Related to Our Business

Intellectual Property and Information Security

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 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. In come cases the attacks have been sponsored by state actors with significant financial and technological means. 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.

Global Operations and Regulations

Since we operate internationally, operational, logistical, economic and/or political challenges in a specific country or region could negatively affect our revenue, costs, expenses and financial condition or those of our channel partners and distributors.

We do business in approximately 190 countries. We conduct significant sales, customer support operations and a significant portion of our research and development activities in countries outside of the U.S., and we depend on non-U.S. operations of

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our contract manufacturers and our channel partners. For fiscal 2021, we derived 43% of our revenue from sales outside of the U.S., with the most significant portions generated from Germany, the United Kingdom and Canada. In addition, we intend to continue to grow our business internationally. The vast majority of our contract manufacturing also takes place outside the U.S., primarily in southern China.

Accordingly, our results could be materially and adversely affected by a variety of uncontrollable and changing factors relating to international business operations, including:

•economic conditions and geopolitical developments, such as the Russia/Ukraine conflict and the sanctions and export controls recently imposed by the U.S., UK and the EU on certain industries and Russian parties as a result of the conflict, as well as any counter responses by the governments of Russia or other jurisdictions, along with tariffs, changes to significant trading relationships, the negotiation of new or revised international trade agreements and retaliatory efforts from such trade restrictions, constraints and prohibitions, such as the U.S. China trade dispute and the EU's position on humanitarian rights towards countries in the Middle East, Africa and Asian territories;

•political or social unrest, economic instability or corruption or sovereign debt risks in a specific country or region;

•laws and regulations, both international and local, related to trade compliance, anti-corruption, anti-bribery, information security, data privacy and protection, labor, the environment, climate change and other topics and requirements;

•protectionist and local security legislation;

•difficulty in enforcing intellectual property rights, such as protecting against the counterfeiting of our products;

•less established legal and judicial systems necessary to enforce our rights;

•relationships with employees and works councils,as well as difficulties in finding qualified employees, including skilled design and technical employees, as companies expand their operations offshore;

•high levels of inflation and currency fluctuations;

•unfavorable tax and currency regulations;

•military conflict, terrorist activities and health pandemics or similar issues, such as the current conflict and military action between Russia and Ukraine;

•future government shutdowns or uncertainties which could affect the portion of our revenues which comes from the U.S. federal government sector;

•differing responses to the COVID-19 pandemic;

•natural disasters, such as earthquakes, hurricanes or floods, anywhere we and/or our channel partners and distributors have business operations; and

•other matters in any of the countries or regions in which we and our contract manufacturers and business partners currently operate or intend to operate, including in the U.S.

Any or all of these factors could materially adversely affect our business, operating results or financial condition.

The military operation launched by Russia against Ukraine created economic and security concerns that have had and will likely continue to have an impact on regional and global economies and, in turn, our business. Sanctions and other retaliatory measures have been taken, and could be taken in the future, by the U.S., EU, and other jurisdictions which severely limit our ability to conduct commercial activities with Russian companies, organizations and individuals on the U.S.'s List of Specially Designated Nationals, some of which are Avaya customers. Under current restrictions we cannot provide certain services to customers in Russia, and as a result, as we comply with all applicable sanctions, we are unable to fulfill certain of our existing contractual obligations to customers in Russia, nor can we commence new maintenance and support arrangements in Russia.

Although the Company's financial results were not materially impacted by the conflict and related retaliatory measures during the three months ended March 31, 2022, the Company expects that they will have a negative effect during the remainder of fiscal 2022 of approximately $45 million on anticipated revenue in Russia and, as companies in EMEA (other than Russia) shift priorities, an additional $15 million across EMEA. However, prolonged hostilities could exacerbate the overall effects of the conflict on our Company, both in that region and in other markets where we do business. While it is impossible to predict for how long the ongoing conflict will impact regional and global economies, these conditions and restrictions could materially and adversely affect our operations, supply chain and financial results.

Table of Contents

General Risk Factors

Business and/or supply chain interruptions, whether due to catastrophic disasters or other events, could adversely affect our operations.

Our operations and those of our contract manufacturers and outsourced service providers are vulnerable to interruption by fire, earthquake, hurricane, flood or other natural disasters, power loss, computer viruses, computer systems failure, telecommunications failure, pandemics, quarantines, national catastrophe, terrorist activities, war and other events beyond our control. For instance, we have operations in the Silicon Valley area of California near known earthquake fault zones, which are vulnerable to damage from earthquakes. Our disaster recovery plans may not be sufficient to address these interruptions. If any disaster were to occur, our ability and the ability of our contract manufacturers and outsourced service providers to operate could be seriously impaired and we could experience material harm to our business, operating results and financial condition. Because our ability to attract and retain customers depends on our ability to provide customers with highly reliable service, even minor interruptions in our operations could harm our reputation as a reliable solutions provider. In addition, the coverage or limits of our business interruption insurance may not be sufficient to compensate for any losses or damages that may occur.

In addition, these catastrophic disasters or other events, such as the global shortage of semiconductor chips and the military conflict between Russia and Ukraine, related export controls and possible counter responses to such sanctions, could lead to supply chain disruptions, restrictions on our ability to distribute our products and restrictions on our ability to provide services in the regions affected. Any prolonged and significant supply chain disruption that impacts us or our customers, partners, vendors and/or suppliers, or an inability to provide products or services, would likely impact our sales in the affected region, increase our costs and negatively affect our operating results. For instance, the COVID-19 pandemic, which adversely affected the global economy and financial markets in fiscal 2021 and fiscal 2020, resulted in an economic downturn that affected demand for our products and services and likely impacted our operating results. Similarly, the decrease in the availability of global shipping has led to an increase in freight and shipping costs and there are no assurances that such shipping disruptions and higher logistics costs will not continue or increase, which may adversely affect our operating results and financial condition.



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 March 31, 2022:


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)
January 1 - 31, 2022	—	$	—	—	$	147,473,425
February 1 - 28, 2022	216,529	$	14.9989	—	$	147,473,425
March 1 - 31, 2022	2,154	$	13.2500	—	$	147,473,425
Total	218,683	$	14.9816	—

(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.

Table of Contents



~~Item 6.~~	~~Exhibits.~~



~~Exhibit Number~~Item 6.			Exhibits


~~10.1~~Exhibit Number						~~Transition and Consulting Services Agreement dated January 12, 2018, between Kevin J. Kennedy and Avaya Inc.~~ Exhibit Description
~~10.2~~10.1						~~Form of Restricted Stock Unit Award Agreement pursuant~~Amendment No. 1 to the Avaya Holdings ~~Corp. 2017~~Corp 2019 Equity Incentive Plan ~~for Non-Employee Directors~~(incorporated herein by reference to Annex B of the Company’s Definitive Proxy Statement on Schedule 14A filed on January 18, 2022)
31.1						Certification of James M. Chirico, Jr. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of ~~Patrick~~Kieran J. ~~O'Malley, III~~McGrath pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certification of James M. Chirico, Jr. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2						Certification of ~~Patrick~~Kieran J. ~~O'Malley, III~~McGrath pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema
101.CAL						XBRL Taxonomy Extension Calculation Linkbase
101.DEF						XBRL Taxonomy Extension Definition Linkbase
101.LAB						XBRL Taxonomy Extension Labels Linkbase
101.PRE						XBRL Taxonomy Extension Presentation Linkbase
104						Cover Page Interactive Data File (formatted as Inline XBRL in Exhibit 101)

Table of Contents

SIGNATURES

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



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

By:	/s/ ~~L. DAVID~~ D~~ELL'Osso~~KEVIN SPEED
Name:	~~L. David Dell'Osso~~ Kevin Speed
Title:	Global Vice President, ~~Corporate~~ Controller &and Chief Accounting Officer ~~(Principal Accounting Officer)~~

May 10, 2022

~~March 2, 2018~~

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

~~4655 Great America~~2605 Meridian Parkway, ~~Santa Clara, California~~ Suite 200			~~95054~~27713
Durham,		North Carolina
(Address of ~~principal~~Principal executive offices)			(Zip Code)


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


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



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



Item	Description	Page

	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



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



	Successor			Predecessor
	December 31, 2017			September 30, 2017
ASSETS
Current assets:
Cash and cash equivalents	$	417		$	876
Accounts receivable, net	413			536
Inventory	124			96
Other current assets	230			269
TOTAL CURRENT ASSETS	1,184			1,777
Property, plant and equipment, net	306			200
Deferred income taxes, net	31			—
Intangible assets, net	3,421			311
Goodwill	2,632			3,542
Other assets	53			68
TOTAL ASSETS	$	7,627		$	5,898
LIABILITIES
Current liabilities:
Debt maturing within one year	$	—		$	725
Long-term debt, current portion	29			—
Accounts payable	304			282
Payroll and benefit obligations	124			127
Deferred revenue	384			614
Business restructuring reserve	36			35
Other current liabilities	153			90
TOTAL CURRENT LIABILITIES	1,030			1,873
Non-current liabilities:
Long-term debt, net of current portion	2,867			—
Pension obligations	793			513
Other post-retirement obligations	215			—
Deferred income taxes, net	444			32
Business restructuring reserve	34			34
Other liabilities	377			170
TOTAL NON-CURRENT LIABILITIES	4,730			749
LIABILITIES SUBJECT TO COMPROMISE	—			7,705
TOTAL LIABILITIES	5,760			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, 2017	1			—
Additional paid-in capital	1,642			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



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

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


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



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



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



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



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



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



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



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



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



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



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



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



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


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



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


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



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



(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



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

Fair value of warrant liability	$22 million		$17 million



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



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


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


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


Item 2.			Management's Discussion and Analysis of Financial Condition and Results of Operations



	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
Services	77			351			428			474
	148			604			752			875
COSTS
Products:
Costs	33			84			117			145
Amortization of technology intangible assets	7			3			10			5
Services	30			155			185			190
	70			242			312			340
GROSS PROFIT	78			362			440			535
OPERATING EXPENSES
Selling, general and administrative	50			264			314			336
Research and development	9			38			47			62
Amortization of intangible assets	7			10			17			57
Restructuring charges, net	10			14			24			10
	76			326			402			465
OPERATING INCOME	2			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 taxes	246			(459		)	(213		)	(3		)
NET INCOME (LOSS)	$	237		$	2,977		$	3,214		$	(103	)


					Percentage of Total Revenue				Yr. to Yr. Percentage Change		Yr. to Yr. Percentage Change, net of Foreign Currency Impact
	Three months ended March 31,				Three months ended March 31,
(In millions)	2022		2021		2022		2021
Products & Solutions	$	223	$	226	31	%	31	%	(1)	%	(1)	%
Services	493		513		69	%	69	%	(4)	%	(3)	%
Unallocated amounts	—		(1)		—	%	—	%	(1)		(1)
Total revenue	$	716	$	738	100	%	100	%	(3)	%	(2)	%


					Gross Margin				Change
	Three months ended March 31,				Three months ended March 31,
(In millions)	2022		2021		2022		2021		Amount		Percent
Products & Solutions	$	104	$	134	46.6	%	59.3	%	$	(30)	(22)	%
Services	302		322		61.3	%	62.8	%	(20)		(6)	%
Unallocated amounts	(35)		(44)		(1)		(1)		9		(1)
Total	$	371	$	412	51.8	%	55.8	%	$	(41)	(10)	%



									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 development	9		38		47		62		6.3	%	7.1	%	(15		)	(24	)%
Amortization of intangible assets	7		10		17		57		2.3	%	6.5	%	(40		)	(70	)%
Restructuring charges, net	10		14		24		10		3.2	%	1.1	%	14			140	%
Total operating expenses	$	76	$	326	$	402	$	465	53.5	%	53.1	%	$	(63	)	(14	)%