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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 12, 2002
AVAYA INC.
(Exact name of registrant as specified in its charter)
Delaware 1-15951 22-3713430
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
211 Mount Airy Road
Basking Ridge, NJ 07920
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 953-6000
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Item 9. Regulation FD Disclosure
Subsequent to the issuance on July 22, 2002 of the earnings press
release of Avaya Inc., a Delaware corporation (the "Company" or "Avaya"), for
the fiscal quarter ended June 30, 2002, the Company recorded adjustments to
its financial statements as of and for the three and nine months ended June 30,
2002 in connection with certain developments in two litigation matters that
occurred after the issuance of its earnings press release. The Company
recently entered into a settlement of a purported class action originally
filed against Lucent Technologies Inc. ("Lucent"), its former parent, in
1998, alleging the improper administration of a coupon program resulting from
the settlement of a prior class action. The period for submitting a claim in
connection with the settlement expired on July 15, 2002. In late July, the
Company made a final determination of its obligations in this matter by
aggregating all claim notifications received with a postmark dated on or
before the July 15, 2002 deadline. Based on this review, the Company
determined the estimated reserve for this matter recorded in the other
liabilities section of its balance sheet as of June 30, 2002 exceeded the
amount of actual aggregate claims received by approximately $4 million and
accordingly, the Company reversed this amount to other income (expense), net
in its statements of operations for the three and nine months ended June 30,
2002.
In addition, in August 2002, the Company was advised that a settlement
had been reached by Lucent, AT&T and the plaintiffs in several class actions
alleging fraud and deceit by Lucent and AT&T in connection with the leasing
of residential telephones to consumers without adequate notice that the
consumers would pay well in excess of the purchase price of a telephone by
continuing to lease. The proposed settlement has been preliminarily approved
by the Illinois state court. Any liability borne by Lucent in connection
with these class action cases will be considered an exclusive Lucent
liability under the Contribution and Distribution Agreement entered into by
Lucent and the Company in connection with the Company's spin-off from Lucent
in September 2000 and, as a result, the Company is responsible for 10% of any
such liability in excess of $50 million. The Company recorded an estimated
liability in the other liabilities section of its balance sheet as of June
30, 2002 of approximately $6 million in connection with this settlement. The
expense for such liability was recorded to other income (expense), net in the
Company's statements of operations for the three and nine months ended June
30, 2002. The $6 million represents the Company's current estimate of its
liability in this matter, although the amount for which Avaya may ultimately
be responsible will not be finally determined until the claims period expires.
The net effect of these two adjustments on Avaya's financial results
for the three months ended June 30, 2002 is to increase net loss for the
period as reported in its July 22, 2002 earnings release from $37 million, or
10 cents per diluted share, to $39 million, or 11 cents per diluted share.
The net effect of the adjustments increase net loss from ongoing operations
as reported in the July 22, 2002 earnings release from $32 million to $33
million. Diluted loss per share on an ongoing basis remained unchanged at 9
cents. Net loss from ongoing operations excludes the effect of $9 million in
pre-tax charges for one-time expenses and an asset impairment, both
associated with Avaya's prior restructuring initiatives.
Note: the information in this report is furnished pursuant to Item 9 and
shall not be deemed to be "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities of
that Section. This report will not be deemed an admission as to the
materiality of any information in the report that is required to be disclosed
solely by Regulation FD.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
AVAYA INC.
Date: August 12, 2002 By: /s/ Garry K. McGuire
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Name: Garry K. McGuire
Title: Chief Financial Officer and
Senior Vice President,
Operations