8-K

UNITED STATES

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): May 9, 2013

AVAYA INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	001-15951	22-3713430
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification Number)

4655 Great America Parkway Santa Clara, California	95054
(Address of Principal Executive Office)	(Zip Code)

Registrant’s telephone number, including area code: (908) 953-6000

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

On May 9, 2013, Avaya Inc. (the “Company”) issued a press release announcing its financial results for fiscal second quarter 2013 ended March 31, 2013. The full text of the press release is furnished as Exhibit 99.1. As previously announced, the Company will host a conference call to discuss its financial results at 5:00 p.m. EDT on May 9, 2013. A copy of the presentation materials to be referenced in the conference call is furnished as Exhibit 99.2 and will be available on the Company’s investor relations website at http://investors.avaya.com.

This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits

99.1	Press Release, dated May 9, 2013, entitled “Avaya Reports Second Fiscal Quarter 2013 Results”
99.2	Presentation to Investors, dated May 9, 2013, entitled “Avaya Q2 2013 Earnings Call”

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: May 9, 2013	By:	/s/ David Vellequette
		Name:	David Vellequette
		Title:	Chief Financial Officer

EX-99.1

Exhibit 99.1

Media Inquiries:	Investor Inquiries:
Deb Kline	Matthew Booher
908-953-6179 (office)	908-953-7500 (office)
klined@avaya.com	mbooher@avaya.com

AVAYA REPORTS SECOND FISCAL QUARTER 2013 RESULTS

Second Quarter 2013

• Revenue of $1.12 billion

• Non-GAAP Operating Income⁽¹⁾ of $113 Million

• Adjusted EBITDA⁽¹⁾ of $172 Million

Santa Clara, CA. – Avaya Inc., a global provider of business communications and collaboration systems, software and services, today reported results for the second quarter of fiscal 2013. For the second fiscal quarter, revenue was $1.12 billion, down 9.8% compared to the prior quarter, primarily due to seasonality in all four theaters as customers continued to have extended procurement cycles. On a year over year basis revenue was down 11.1% compared to the second quarter of fiscal 2012. Non-GAAP operating income was $113 million compared to non GAAP operating income of $193 million for the prior quarter and $138 million for the second quarter of fiscal 2012. Second quarter adjusted EBITDA was $172 million which compares to adjusted EBITDA of $251 million for the prior quarter and $200 million for the second quarter of fiscal 2012. Cash flow from operations was $82 million for the second quarter. Cash and cash equivalents was $302 million as of March 31, 2013 compared to $285 million as of December 31, 2012.

“Avaya’s second quarter revenue evidenced impacts from a cautious spending environment which extended our sales cycle and as a result, this quarter’s seasonal declines were at the low end of our historical range,” said Kevin Kennedy, President and CEO, Avaya. “Given this environment, we will continue to execute and deliver operational efficiencies and productivity improvements while maintaining our focus on product innovation, new customers and market leadership.”

¹ Refer to Supplemental Financial Information accompanying this press release for a reconciliation of GAAP to non-GAAP numbers and for reconciliation of adjusted EBITDA for the first quarter of fiscal 2013 see our Form 8-K filed with the SEC on February 5,2013 at www.sec.gov.

Second Fiscal Quarter Highlights

• Revenue of $1.12 billion decreased 9.8% compared to the prior quarter and decreased 11.1% compared to the second quarter of fiscal 2012

• Gross margin was 52.4% compared to 53.7% for the prior quarter and 48.8% for the second quarter of fiscal 2012

• Non-GAAP gross margin⁽¹⁾ was 53.7% compared to 55.6% for the prior quarter and 52.8% for the second quarter of fiscal 2012

• Adjusted EBITDA was $172 million or 15.4% of revenue compared to $251 million or 20.2% of revenue for the prior quarter and $200 million or 15.9% of revenue for the second quarter of fiscal 2012

• Product revenue of $529 million declined by 16.2% compared to the prior quarter and 17.0% compared to the second quarter of fiscal 2012.

• Avaya Global Services revenue of $589 million decreased 3.3% compared to the prior quarter and decreased 5.0% compared to the second quarter of fiscal 2012

• For the second fiscal quarter, percentage of revenue by geography was, U.S. with 53%, EMEA with 27%, Asia – Pacific with 10% and Americas International with 10%.

Conference Call and Webcast

Avaya will host a conference call to discuss these results at 5:00 p.m. EDT on Thursday, May 9, 2013. To access the conference call, dial 800-882-9327 in the U.S. or Canada and 706-645-9730 for international callers and provide the operator the conference passcode number of 47490648. To ensure you are on the call from the start, we suggest you access the call 10-15 minutes prior to the start of the call.

For those unable to participate, a replay of the conference call will be available beginning at 8:00 p.m. EDT on May 9 through June 9, by dialing 855-859-2056 within the United States and 404-537-3406 outside the United States. The replay access code is 47490648.

WEBCAST Information: Avaya will webcast this conference call live. To ensure that you are on the webcast, we suggest that you access our website (www.avaya.com/investors) 10-15 minutes prior to the start. Supplementary materials accompanying the conference call are available at the same location. Following the live webcast, a replay will be available on our archives at the same web address.

About Avaya

Avaya is a global provider of business collaboration and communications solutions, providing unified communications, contact centers, networking and related services to companies of all sizes around the world. For more information please visit www.avaya.com.

Certain statements contained in this press release are forward-looking statements. These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “should” or “will” or other similar terminology. We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors 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. For a list and description of such risks and uncertainties, please refer to Avaya’s filings with the SEC that are available at www.sec.gov. 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.

Avaya Inc.

Consolidated Statements of Operations

(Unaudited; in millions)

	For the three months ended						For the six months ended
	March 31,						March 31,
	2013			2012			2013			2012
REVENUE
Products	$	529		$	637		$	1,160		$	1,386
Services		589			620			1,198			1,258
		1,118			1,257			2,358			2,644
COSTS
Products:
Costs (exclusive of amortization of intangibles)		236			280			497			591
Amortization of technology intangible assets		14			49			36			99
Services		282			315			573			637
		532			644			1,106			1,327
GROSS PROFIT		586			613			1,252			1,317
OPERATING EXPENSES
Selling, general and administrative		381			414			765			847
Research and development		113			117			231			228
Amortization of intangible assets		57			56			114			112
Goodwill impairment		89			—			89			—
Restructuring and impairment charges, net		18			90			102			111
Acquisition-related costs		—			2			—			3
		658			679			1,301			1,301
OPERATING (LOSS) INCOME		(72	)		(66	)		(49	)		16
Interest expense		(116	)		(108	)		(224	)		(217	)
Loss on extinguishment of debt		(3	)		—			(6	)		—
Other income (expense), net		2			(12	)		(4	)		(13	)
LOSS BEFORE INCOME TAXES		(189	)		(186	)		(283	)		(214	)
(Provision for) benefit from income taxes		(3	)		24			6			26
NET LOSS	$	(192	)	$	(162	)	$	(277	)	$	(188	)

Avaya Inc.

Consolidated Balance Sheets

(Unaudited; in millions)

	March 31, 2013			September 30, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	302		$	337
Accounts receivable, net		681			782
Inventory		255			255
Deferred income taxes, net		21			18
Other current assets		280			252
TOTAL CURRENT ASSETS		1,539			1,644
Property, plant and equipment, net		353			364
Deferred income taxes, net		44			43
Intangible assets, net		1,625			1,775
Goodwill		4,093			4,188
Other assets		196			180
TOTAL ASSETS	$	7,850		$	8,194
LIABILITIES
Current liabilities:
Debt maturing within one year	$	35		$	37
Accounts payable		409			438
Payroll and benefit obligations		247			262
Deferred revenue		689			616
Business restructuring reserve, current portion		103			84
Other current liabilities		253			302
TOTAL CURRENT LIABILITIES		1,736			1,739
Long-term debt		6,068			6,084
Pension obligations		1,708			1,763
Other postretirement obligations		343			360
Deferred income taxes, net		209			204
Business restructuring reserve, non-current portion		56			51
Other liabilities		443			429
TOTAL NON-CURRENT LIABILITIES		8,827			8,891
Commitments and contingencies
DEFICIENCY
Common stock		—			—
Additional paid-in capital		2,929			2,926
Accumulated deficit		(4,513	)		(4,236	)
Accumulated other comprehensive loss		(1,129	)		(1,126	)
TOTAL DEFICIENCY		(2,713	)		(2,436	)
TOTAL LIABILITIES AND DEFICIENCY	$	7,850		$	8,194

Avaya Inc.

Condensed Statements of Cash Flows

(Unaudited; in millions)

	For the six months ended
	March 31,
	2013			2012
Net cash (used for) provided by:
Net loss	$	(277	)	$	(188	)
Adjustments to net loss		308			324
Changes in operating assets and liabilities		57			(105	)
Operating activities		88			31
Investing activities		(59	)		(63	)
Financing activities		(59	)		(20	)
Effect of exchange rate changes on cash and cash equivalents		(5	)		7
Net decrease in cash and cash equivalents		(35	)		(45	)
Cash and cash equivalents at beginning of period		337			400
Cash and cash equivalents at end of period	$	302		$	355

Avaya Inc.

Supplemental Schedules of Revenue

(Unaudited; in millions)

For the Three Months Ended								For the Three Months Ended March 31,
June 30,			Sept. 30,		Dec. 31,			Revenues					Mix						Change
2012			2012		2012			2013		2012			2013			2012			Amount			Pct.
							Revenue by Segment
	$561		$	588	$	573	Global Communications Solutions	$	473	$	574			42	%		46	%	$	(101	)		-17.6	%
	(1	)		—		—	Purchase accounting adjustments		—		(1	)		0	%		0	%		1			—
	74			64		58	Networking		56		64			5	%		5	%		(8	)		-12.5	%
	634			652		631	Total ECS product revenue		529		637			47	%		51	%		(108	)		-17.0	%
	616			625		609	AGS		589		620			53	%		49	%		(31	)		-5.0	%
	$1,250		$	1,277	$	1,240	Total revenue	$	1,118	$	1,257			100	%		100	%	$	(139	)		-11.1	%
							Revenue by Geography
	$666		$	694	$	670	U.S.	$	592	$	678			53	%		54	%	$	(86	)		-12.7	%
							International:
	330			327		331	EMEA		298		327			27	%		26	%		(29	)		-8.9	%
	128			126		123	APAC - Asia Pacific		116		117			10	%		9	%		(1	)		-0.9	%
	126			130		116	Americas International - Canada and Latin America		112		135			10	%		11	%		(23	)		-17.0	%
	584			583		570	Total International		526		579			47	%		46	%		(53	)		-9.2	%
	$1,250		$	1,277	$	1,240	Total Revenue	$	1,118	$	1,257			100	%		100	%	$	(139	)		-11.1	%

Use of Non-GAAP (Adjusted) Financial Measures

The information furnished in this release includes non-GAAP financial measures that differ from measures calculated in accordance with GAAP, including adjusted EBITDA, Non-GAAP gross margin and Non-GAAP operating income.

EBITDA is defined as net income (loss) before income taxes, interest expense, interest income and depreciation and amortization. Adjusted EBITDA is EBITDA further adjusted to exclude certain charges and other adjustments permitted in calculating covenant compliance under our debt agreements as further described in our SEC filings.

We believe that including supplementary information concerning adjusted EBITDA is appropriate to provide additional information to investors to demonstrate compliance with our debt agreements and because it serves as a basis for determining management compensation. In addition, we believe adjusted EBITDA provides more comparability between our historical results and results that reflect purchase accounting and our current capital structure. Accordingly, adjusted EBITDA measures our financial performance based on operational factors that management can impact in the short-term, namely the company’s pricing strategies, volume, costs and expenses of the organization.

Adjusted EBITDA has limitations as an analytical tool. Adjusted EBITDA does not represent net income (loss) or cash flow from operations as those terms are defined by GAAP and does not necessarily indicate whether cash flows will be sufficient to fund cash needs. While adjusted EBITDA and similar measures are frequently used as measures of operations and the ability to meet debt service requirements, these terms are not necessarily comparable to other similarly titled captions of other companies due to the potential inconsistencies in the method of calculation. Adjusted EBITDA does not reflect the impact of earnings or charges resulting from matters that we consider not to be indicative of our ongoing operations. In particular, based on our debt agreements the definition of adjusted EBITDA allows us to add back certain non-cash charges that are deducted in calculating net income (loss). Our debt agreements also allow us to add back restructuring charges, certain fees payable to our private equity sponsors and other specific cash costs and expenses as defined in the agreements and that portion of our pension costs, other post-employment benefits costs, and non-retirement post-employment benefits costs representing the amortization of pension service costs and actuarial gain or loss associated with these employment benefits. However, these are expenses that may recur, may vary and are difficult to predict. Further, our debt agreements require that adjusted EBITDA be calculated for the most recent four fiscal quarters. As a result, the measure can be disproportionately affected by a particularly strong or weak quarter. Further, it may not be comparable to the measure for any subsequent four-quarter period or any complete fiscal year.

Non-GAAP gross margin excludes the amortization of technology intangible assets, impairment of long lived assets, transition services agreement costs incurred in connection with the acquisition of Nortel’s enterprise solutions business, share based compensation and purchase accounting adjustments. We have included Non-GAAP gross margin because we believe it provides additional useful information to investors regarding our operations by excluding those charges that management does not believe are reflective of the company’s ongoing operating results when assessing the performance of the business.

Non-GAAP operating income excludes the amortization of technology intangible assets, restructuring and impairment charges, acquisition and integration related costs, share based compensation, impairment of long lived assets and purchase accounting adjustments. We have included Non-GAAP operating income because we believe it provides additional useful information to investors regarding our operations by excluding those charges that management does not believe are reflective of the company’s ongoing operating results when assessing the performance of the business.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and have limitations as analytical tools in that they do not reflect all of the amounts associated with Avaya’s results of operations as determined in accordance with GAAP. As such, these measures should only be used to evaluate Avaya’s results of operations in conjunction with the corresponding GAAP measures.

The following tables reconcile GAAP measures to non-GAAP measures:

Avaya Inc.

Supplemental Schedule of Non-GAAP Adjusted EBITDA

(Unaudited; in millions)

	For the three months ended March 31,						For the six months ended March 31,
	2013			2012			2013			2012
Net loss	$	(192	)	$	(162	)	$	(277	)	$	(188	)
Interest expense		116			108			224			217
Interest income		—			(1	)		(1	)		(2	)
Provision for (benefit from) income taxes		3			(24	)		(6	)		(26	)
Depreciation and amortization		107			143			221			286
EBITDA		34			64			161			287
Impact of purchase accounting adjustments		—			1			—			1
Restructuring charges, net		18			90			102			111
Sponsors’ fees		2			2			4			4
Acquisition-related costs		—			2			—			3
Integration-related costs		5			3			9			8
Loss on extinguishment of debt		3			—			6			—
Third-party fees expensed in connection with the debt modification		14			—			18			—
Non-cash share-based compensation		1			2			3			5
Loss on investments and sale of long-lived assets, net		—			2			—			3
Goodwill impairment		89			—			89			—
Venezuela hyperinflationary and devaluation charges		1			—			1			—
(Gain) loss on foreign currency transactions		(17	)		11			(15	)		12
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs		22			23			45			45
Adjusted EBITDA	$	172		$	200		$	423		$	479

Avaya Inc.

Supplemental Schedules of Non-GAAP Reconciliations

(Unaudited; in millions)

	For the Three Months Ended
	Mar. 31, 2012			June 30 2012			Sept. 30, 2012			Dec. 31 2012			Mar. 31 2013
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin
GAAP Gross Profit	$	613		$	623		$	646		$	666		$	586
GAAP Gross Margin		48.8	%		49.8	%		50.6	%		53.7	%		52.4	%
Items excluded:
Amortization of technology intangible assets		49			47			46			22			14
Impairment of capitalized software development costs		—			2			4			—			—
Share-based compensation		1			1			1			1			—
Purchase accounting adjustments		1			1			1			—			—
Non-GAAP Gross Profit	$	664		$	674		$	698		$	689		$	600
Non-GAAP Gross Margin		52.8	%		53.9	%		54.7	%		55.6	%		53.7	%
Reconciliation of Non-GAAP Operating Income
GAAP Operating (Loss) Income	$	(66	)	$	23		$	76		$	23		$	(72	)
Percentage of Revenue		-5	%		2	%		6	%		2	%		-6	%
Items excluded:
Amortization of acquired assets		105			104			103			79			71
Restructuring and impairment charges, net		90			21			15			84			18
Acquisition/integration-related costs		6			6			6			5			6
Share-based compensation		2			2			1			2			1
Impairment of capitalized software development costs		—			2			4			—			—
Goodwill impairment		—			—			—			—			89
Purchase accounting adjustments		1			1			1			—			—
Non-GAAP Operating Income	$	138		$	159		$	206		$	193		$	113
Percentage of Revenue		11.0	%		12.7	%		16.1	%		15.6	%		10.1	%

EX-99.2

May 9, 2013

Avaya Q2 2013 Earnings Call

Exhibit 99.2

©

2013 Avaya –

Proprietary. Use pursuant to your signed agreement or Avaya policy.

2

Forward -

Looking Statements

Certain statements contained in this presentation are forward-looking statements, including

statements regarding our future financial and operating performance, as well as statements

regarding our future growth plans and drivers. These statements may be identified by the

use of forward-looking terminology such as "anticipate," "believe," "continue,"

"could,"

"estimate," "expect," "intend," "may," "might," "plan," "potential," "predict," "should" or "will"

or other similar terminology. We have based these forward-looking statements on our

current expectations, assumptions, estimates and projections. While we believe these

expectations, assumptions, estimates and projections are reasonable, such forward looking

statements are only predictions and involve known and unknown risks and uncertainties,

many of which are beyond our control. These and other important factors 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.

For a list and description of such risks and uncertainties, please refer to our filings with the

SEC that are available at www.sec.gov

and in particular, our 2012 Form 10-K and our

Form 10-Q filed with the SEC on February 8, 2013. We disclaim any intention or obligation

to update or revise any forward-looking statements, whether as a result of new information,

future events or otherwise.

This presentation should be read in conjunction with our Form 8-K filed with the SEC on

May 9, 2013.

Within this presentation, we refer to certain non-GAAP financial measures that

involve adjustments to GAAP measures.  A reconciliation between our non-GAAP financial

measures and GAAP financial measures is included on the last two

slides of this

presentation, which will be available on our web site at www.avaya.com/investors.

©

2013 Avaya –

Proprietary. Use pursuant to your signed agreement or Avaya policy.

3

Fiscal Q2 2013 Financial Highlights

(Amounts other than Revenue and Cash Balance are non-GAAP unless specified)

Revenue of $1.12 billion declined 9.8% over the prior quarter

–

Revenue decrease comprised of:

–

Product revenue a 16.2% decline; Service revenue a 3.3% decline

Gross margin declined over the prior quarter to 53.7%

Operating income of $113 million

–

Operating margin of 10.1%

Adjusted EBITDA  of $172 million or 15.4% of revenue

Cash and cash equivalents balance of $302 million as of 3/31/13

©

2013 Avaya –

Proprietary. Use pursuant to your signed agreement or Avaya policy.

4

Income Statement

(Amounts non-GAAP (other than Revenue) and dollars in millions)

FQ2 2013

FQ1 2013

FQ2 2012

Revenue

$1,118

$1,240

$1,257

Gross Margin

53.7%

55.6%

52.8%

Operating Margin

10.1%

15.6%

11.0%

Adjusted EBITDA

$172

$251

$200

* For reconciliation of adjusted EBITDA for the first quarter of 2013 see our

Form 8-K filed with the SEC on February 5,2013 at www.sec.gov.

.

©

2013 Avaya –

Proprietary. Use pursuant to your signed agreement or Avaya policy.

5

Revenue by Geographic Region

(Amounts GAAP and dollars in millions)

FQ2 2013

FQ1 2013

FQ2 2012

Revenue

U.S.

$592

$670

$678

EMEA

$298

$331

$327

APAC

$116

$123

$117

AI

$112

$116

$135

Total

$1,118

$1,240

$1,257

% of Total Revenue

U.S.

53.0%

54.0%

53.9%

EMEA

26.7%

26.7%

26.0%

APAC

10.3%

9.9%

9.3%

AI

10.0%

9.4%

10.7%

Total

100.0%

100.0%

100.0%

©

2013 Avaya –

Proprietary. Use pursuant to your signed agreement or Avaya policy.

6

Balance Sheet and Operating Metrics

(Dollars in millions, Balance sheet items as of the end of the period indicated)

FQ2 2013

FQ1 2013

FQ2 2012

Total Cash and Cash

Equivalents

$302

$285

$355

Cash from Operations

$82

$6

$41

Capital Expenditures and

Capitalized Software

$27

$30

$31

Days Sales Outstanding

55

55

53

Inventory Turns

8

9

9

Headcount

15,953

16,393

18,025

©

2013 Avaya –

Proprietary. Use pursuant to your signed agreement or Avaya policy.

7

Adjusted EBITDA Reconciliation

2013

2012

2013

2012

Net loss

(192)

$           

(162)

$           

(277)

$           

(188)

$           

Interest expense

116

108

224

217

Interest income

-

(1)

(1)

(2)

Provision for (benefit from) income taxes

3

(24)

(6)

(26)

Depreciation and amortization

107

143

221

286

34

64

161

287

Impact of purchase accounting adjustments

-

1

-

1

Restructuring charges, net

18

90

102

111

Sponsors' fees

2

2

4

4

Acquisition-related costs

-

2

-

3

Integration-related costs

5

3

9

8

Loss on extinguishment of debt

3

-

6

-

Third-party fees expensed in connection with the debt modification

14

-

18

-

Non-cash share-based compensation

1

2

3

5

Loss on investments and sale of long-lived assets, net

-

2

-

3

Goodwill impairment

89

-

89

-

Venezuela hyperinflationary and devaluation charges

1

-

1

-

(Gain) loss on foreign currency transactions

(17)

11

(15)

12

Pension/OPEB/nonretirement postemployment benefits and

  long-term disability costs

22

23

45

45

Adjusted EBITDA

172

$             

200

$             

423

$             

479

$             

Avaya Inc.

Supplemental Schedule of Non-GAAP Adjusted EBITDA

(Unaudited; in millions)

EBITDA

For the three months ended

March 31,

For the six months ended

March 31,

©

2013 Avaya –

Proprietary. Use pursuant to your signed agreement or Avaya policy.

8

Non-GAAP Reconciliation

Mar. 31,

June 30

Sept. 30,

Dec. 31

Mar. 31

2012

2012

2012

2012

2013

GAAP Gross Profit

613

$     

623

$     

646

$     

666

$     

586

$     

GAAP Gross Margin

48.8%

49.8%

50.6%

53.7%

52.4%

Items excluded:

Amortization of technology intangible assets

49

47

46

22

14

Impairment of capitalized software development costs

-

2

4

-

-

Share-based compensation

1

1

1

1

-

Purchase accounting adjustments

1

1

1

-

-

Non-GAAP Gross Profit

664

$     

674

$     

698

$     

689

$     

600

$     

Non-GAAP Gross Margin

52.8%

53.9%

54.7%

55.6%

53.7%

Reconciliation of Non-GAAP Operating Income

GAAP Operating (Loss) Income

(66)

$     

23

$       

76

$       

23

$       

(72)

$     

Percentage of Revenue

-5%

2%

6%

2%

-6%

Items excluded:

Amortization of acquired assets

105

104

103

79

71

Restructuring and impairment charges, net

90

21

15

84

18

Acquisition/integration-related costs

6

6

6

5

6

Share-based compensation

2

2

1

2

1

Impairment of capitalized software development costs

-

2

4

-

-

Goodwill impairment

-

-

-

-

89

Purchase accounting adjustments

1

1

1

-

-

Non-GAAP Operating Income

138

$     

159

$     

206

$     

193

$     

113

$     

Percentage of Revenue

11.0%

12.7%

16.1%

15.6%

10.1%

Reconciliation of Non-GAAP Gross Profit

   and Non-GAAP Gross Margin

Avaya Inc.

Supplemental Schedules of Non-GAAP Reconciliations

(Unaudited; in millions)

For the Three Months Ended