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Exhibit 99.1
MEDIA INQUIRIES: INVESTOR INQUIRIES:
Lynn Newman Derrick Vializ
908-953-8692 (office) 908-953-7500 (office)
973-993-8033 (home) vializ@avaya.com
lynnnewman@avaya.com ----------------
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AVAYA PROVIDES UPDATE ON SECOND FISCAL QUARTER,
TAKES ACTIONS TO ENHANCE BALANCE SHEET
- --ONGOING RESTRUCTURING ACTIONS EXPECTED TO REDUCE ANNUALIZED EXPENSES
$180-$200 MILLION; 1,900 POSITIONS ELIMINATED
- - WARBURG PINCUS AGREES TO PURCHASE $100 MILLION OF AVAYA COMMON STOCK AND
AGREES TO CONVERT AVAYA PREFERRED STOCK INTO COMMON STOCK
- - COMPANY EXPLORES CAPITAL MARKET OPTIONS TO REPAY EXISTING BANK DEBT
FOR IMMEDIATE RELEASE: MONDAY, MARCH 11, 2002
BASKING RIDGE, N.J. - Avaya Inc. (NYSE:AV), a leading global provider
of voice and data networks, today said it expects revenues for its second fiscal
quarter ending March 31, to be approximately $1.240 billion to $1.275 billion,
compared to the previously stated range of $1.254 billion to $1.358 billion.
The company also said it expects the net loss from ongoing operations
for the second fiscal quarter to be a loss of six cents to 10 cents per diluted
share, compared with a loss of eight cents, as previously stated.
BALANCE SHEET ENHANCEMENTS
Avaya announced a plan designed to enhance its liquidity, strengthen
its balance sheet and simplify its capital structure. The plan includes the
following steps:
o The sale of 14,383,953 shares of common stock to Warburg
Pincus Equity Partners at a price of $6.26 per share, the
closing price of Avaya's common stock on Friday March 8, 2002.
o The conversion of approximately $438 million of Avaya
preferred stock held by Warburg Pincus Equity Partners into
38,329,365 shares of Avaya common stock and the exercise by
Warburg Pincus Equity Partners of warrants to purchase
approximately another 286,000 shares of Avaya common stock.
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As a result of the stock transactions, Warburg Pincus Equity Partners
will own about 53 million shares of Avaya common stock or approximately 15.5
percent of the total outstanding.
Jeffrey Harris, Senior Managing Director of Warburg Pincus LLC,
resigned from Avaya's board prior to the board's approval of the transaction.
Warburg Pincus will retain its right to nominate an unaffiliated director to
Avaya's board.
The agreements with Warburg Pincus Equity Partners are contingent on
receiving Hart-Scott-Rodino anti-trust clearance and other customary conditions.
Avaya also announced it may seek to offer $100 million in common equity
(plus an over allotment option of up to 15 percent) and is evaluating capital
market alternatives to repay its existing bank debt and replace it with
longer-term debt.
Bear Stearns acted as financial advisor to Avaya in connection with the
Warburg transactions.
AS REPORTED RESULTS
On an as reported basis, the company expects a net loss of between 68
cents and 72 cents per diluted share, including the impact of a restructuring
charge of approximately $100 million and a one-time retained earnings charge of
approximately $130 million associated with the conversion of preferred stock and
warrants owned by Warburg Pincus Equity Partners.
The company said the restructuring charge, which it expects to take in
the second fiscal quarter, reflects actions it has taken to date this quarter.
The actions are expected to result in annualized savings of approximately $180
million to $200 million. As part of the restructuring, about 1900 positions are
being eliminated.
CONFERENCE CALL INFORMATION
Avaya will host a 30-minute conference call today starting at 9:00 a.m.
EST that will include a question and answer period.
The live teleconference number in the United States is 888-597-9475
(706-634-2454 outside the United States). For the hearing impaired, please call
800-855-2880. No access codes are required, but dialing into the call 10 to15
minutes prior to the scheduled time is recommended to ensure participation.
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A replay of the call will be available from 1:00 p.m. EST, March 11,
2002 through March 18, 2002. To listen to the replay, please call 800-642-1687
within the United States. Outside the United States, please call (706) 645-9291.
The access code for the replay is 3496010.
ABOUT AVAYA
Avaya Inc., headquartered in Basking Ridge, N.J., is a leading global
provider of voice and data networks as well as communications solutions and
services that help businesses, government agencies and other institutions -
including more than 90 percent of the FORTUNE 500 (R) - excel in the customer
economy. Avaya offers Customer Relationship Management Solutions, Unified
Communication Solutions, Service Provider Solutions, MultiService Networking
Infrastructure, and Converged Voice and Data Networks - including the company's
no-compromise Avaya Enterprise-Class IP Solutions (ECLIPS) - all supported by
Avaya Services and Avaya Labs. Avaya is the worldwide leader in unified
messaging, messaging systems, call centers and structured cabling systems. It is
the U.S. leader in voice communications systems and services. Avaya is an
official sponsor for the 2002 FIFA World Cup(TM), the FIFA Women's World Cup
2003 and the 2006 FIFA World Cup(TM) tournaments. For more information about
Avaya, visit its Web site at http://www.avaya.com.
ABOUT WARBURG PINCUS
Warburg Pincus is one of the largest private equity firms in the world. Working
in partnership with management teams, Warburg Pincus has taken an active role in
building businesses, including companies such as BEA Systems and VERITAS
Software Corp. Since 1971, Warburg Pincus has invested approximately $12 billion
in 450 companies in 29 countries. The firm currently has $10 billion under
management, with an additional $5 billion available for investment in a range of
industries including: financial services, communications, healthcare and life
sciences, information technology, media and energy. Further information is
available at www.warburgpincus.com
This news release contains forward-looking statements regarding the
company's outlook for revenue and earnings based on current expectations,
forecasts and assumptions that involve risks and uncertainties that could cause
actual outcomes and results to differ materially. These risks and uncertainties
include, but are not limited to, general industry market conditions and growth
rates and general domestic and international economic conditions including
interest rate and currency exchange rate fluctuations and the economic,
political, and other risks associated with international sales and operations,
U.S. and foreign government regulation, price and product competition, rapid
technological development, dependence on new product development, the successful
introduction of new products, the mix of our products and services, customer
demand for our products and services, the ability to successfully integrate
acquired companies, control of costs and expenses, the ability to implement in a
timely manner its restructuring plans, and the ability to form and implement
alliances. For a further list and description of such risks and uncertainties,
see the reports filed by Avaya with the Securities and Exchange Commission.
Avaya disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
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