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): August 8, 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 August 8, 2013, Avaya Inc. (the “Company”) issued a press release announcing its financial results for fiscal third quarter 2013 ended June 30, 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 August 8, 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 August 8, 2013, entitled “Avaya Reports Third Fiscal Quarter 2013 Results”
99.2	Presentation to Investors, dated August 8, 2013, entitled “Avaya Q3 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: August 8, 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	John Nunziati
908-953-6179 (office)	908-953-7500 (office)	408-562-3780 (office)
klined@avaya.com	mbooher@avaya.com	jfnunziati@avaya.com

AVAYA REPORTS THIRD FISCAL QUARTER 2013 RESULTS

Third Quarter 2013

• Revenue of $1.15 billion

• Operating Income of $14 million, Non-GAAP Operating Income⁽¹⁾ of $171 Million

• Adjusted EBITDA⁽¹⁾ of $225 Million

Santa Clara, CA. – Thursday, August 8, 2013 – Avaya Inc., a global provider of business communications and collaboration systems, software and services, today reported results for the third quarter of fiscal 2013. For the third fiscal quarter, revenue was $1.15 billion, up 2.9% compared to the prior quarter, primarily due to increases in demand in the U.S. and the U.S. federal government sectors. On a year over year basis revenue was down 8% compared to the third quarter of fiscal 2012. Non-GAAP operating income was $171 million compared to non GAAP operating income of $113 million for the prior quarter and $159 million for the third quarter of fiscal 2012. Third quarter adjusted EBITDA was $225 million which compares to adjusted EBITDA of $172 million for the prior quarter and $225 million for the third quarter of fiscal 2012. Cash flow from operations was $11 million for the third quarter. Cash and cash equivalents totaled $271 million as of June 30, 2013.

“Avaya’s third quarter results reflected growth in product revenue from unified communications, contact centers, IP Office and networking. Avaya Global Services revenue also benefited from growth in cloud services,” said Kevin Kennedy, president and CEO, Avaya. “We continue to execute our transformational initiatives which include expanding into the mid-market and advancing our business model.”

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 second quarter of fiscal 2013 see our Form 10-Q filed with the SEC on May 10, 2013 at www.sec.gov.

Third Fiscal Quarter Highlights

• Revenue of $1.15 billion increased 2.9% compared to the prior quarter and decreased 8.0% compared to the third quarter of fiscal 2012

• Gross margin was 54.5% compared to 52.4% for the prior quarter and 49.8% for the third quarter of fiscal 2012

• Non-GAAP gross margin⁽¹⁾ was 56.0% compared to 53.7% for the prior quarter and 53.9% for the third quarter of fiscal 2012

• Adjusted EBITDA was $225 million or 19.5% of revenue compared to $172 million or 15.4% of revenue for the prior quarter and $225 million or 18.0% of revenue for the third quarter of fiscal 2012

• Product revenue of $560 million increased by 5.9% compared to the prior quarter and decreased by 11.7% compared to the third quarter of fiscal 2012.

• Avaya Global Services revenue of $590 million increased 0.2% compared to the prior quarter and decreased 4.2% compared to the third quarter of fiscal 2012

• For the third fiscal quarter, percentage of revenue by geography was, U.S. with 56%, EMEA with 26%, Asia – Pacific with 9% and Americas International with 9%.

Conference Call and Webcast

Avaya will host a conference call to discuss these results at 5:00 p.m. EDT on Thursday, August 8, 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 22323223. 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 August 9 through September 9, by dialing 855-859-2056 within the United States and 404-537-3406 outside the United States. The replay access code is 22323223.

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 may be 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 are reasonable, such forward looking statements involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors may cause our actual results to differ materially from any future results 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.

Avaya Inc.

Consolidated Statements of Operations

(Unaudited; in millions)

	For the three months ended June 30,						For the nine months ended June 30,
	2013			2012			2013			2012
REVENUE
Products	$	560		$	634		$	1,720		$	2,020
Services		590			616			1,788			1,874
		1,150			1,250			3,508			3,894
COSTS
Products:
Costs (exclusive of amortization of intangibles)		234			271			731			862
Amortization of technology intangible assets		13			47			49			146
Services		276			309			849			946
		523			627			1,629			1,954
GROSS PROFIT		627			623			1,879			1,940
OPERATING EXPENSES
Selling, general and administrative		380			405			1,145			1,252
Research and development		112			116			343			344
Amortization of intangible assets		57			57			171			169
Goodwill impairment		—			—			89			—
Restructuring and impairment charges, net		63			21			165			132
Acquisition-related costs		1			1			1			4
		613			600			1,914			1,901
OPERATING INCOME (LOSS)		14			23			(35	)		39
Interest expense		(122	)		(107	)		(346	)		(324	)
Loss on extinguishment of debt		—			—			(6	)		—
Other (expense) income, net		(5	)		6			(9	)		(7	)
LOSS BEFORE INCOME TAXES		(113	)		(78	)		(396	)		(292	)
Benefit from (provision for) income taxes		3			(88	)		9			(62	)
NET LOSS	$	(110	)	$	(166	)	$	(387	)	$	(354	)

Avaya Inc.

Consolidated Balance Sheets

(Unaudited; in millions)

	June 30, 2013			September 30, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	271		$	337
Accounts receivable, net		662			782
Inventory		256			255
Deferred income taxes, net		17			18
Other current assets		267			252
TOTAL CURRENT ASSETS		1,473			1,644
Property, plant and equipment, net		354			364
Deferred income taxes, net		48			43
Intangible assets, net		1,554			1,775
Goodwill		4,092			4,188
Other assets		181			180
TOTAL ASSETS	$	7,702		$	8,194
LIABILITIES
Current liabilities:
Debt maturing within one year	$	35		$	37
Accounts payable		410			438
Payroll and benefit obligations		232			262
Deferred revenue		663			616
Business restructuring reserve, current portion		119			84
Other current liabilities		272			302
TOTAL CURRENT LIABILITIES		1,731			1,739
Long-term debt		6,059			6,084
Pension obligations		1,648			1,763
Other postretirement obligations		325			360
Deferred income taxes, net		218			204
Business restructuring reserve, non-current portion		62			51
Other liabilities		456			429
TOTAL NON-CURRENT LIABILITIES		8,768			8,891
Commitments and contingencies
DEFICIENCY
Common stock		—			—
Additional paid-in capital		2,932			2,926
Accumulated deficit		(4,623	)		(4,236	)
Accumulated other comprehensive loss		(1,106	)		(1,126	)
TOTAL DEFICIENCY		(2,797	)		(2,436	)
TOTAL LIABILITIES AND DEFICIENCY	$	7,702		$	8,194

Avaya Inc.

Condensed Statements of Cash Flows

(Unaudited; in millions)

	For the nine months ended June 30,
	2013			2012
Net cash (used for) provided by:
Net loss	$	(387	)	$	(354	)
Adjustments to net loss		428			478
Changes in operating assets and liabilities		58			(184	)
Operating activities		99			(60	)
Investing activities		(89	)		(237	)
Financing activities		(68	)		167
Effect of exchange rate changes on cash and cash equivalents		(8	)		1
Net decrease in cash and cash equivalents		(66	)		(129	)
Cash and cash equivalents at beginning of period		337			400
Cash and cash equivalents at end of period	$	271		$	271

Avaya Inc.

Supplemental Schedules of Revenue

(Unaudited; in millions)

For the Three Months Ended							For the Three Months Ended June 30,
Sept.  30, 2012		Dec.  31, 2012		Mar.  31, 2013			Revenues						Mix						Change
							2013			2012			2013			2012			Amount			Pct.
						Revenue by Segment
$	588	$	573	$	473	Global Communications Solutions	$	497		$	561			43	%		45	%	$	(64	)		-11.4	%
	—		—		—	Purchase accounting adjustments		(1	)		(1	)		0	%		0	%		—			—
	64		58		56	Networking		64			74			6	%		6	%		(10	)		-13.5	%
	652		631		529	Total ECS product revenue		560			634			49	%		51	%		(74	)		-11.7	%
	625		609		589	AGS		590			616			51	%		49	%		(26	)		-4.2	%
$	1,277	$	1,240	$	1,118	Total revenue	$	1,150		$	1,250			100	%		100	%	$	(100	)		-8.0	%
						Revenue by Geography
$	694	$	670	$	592	U.S.	$	639		$	666			56	%		53	%	$	(27	)		-4.1	%
						International:
	327		331		298	EMEA		297			330			26	%		27	%		(33	)		-10.0	%
	126		123		116	APAC - Asia Pacific		105			128			9	%		10	%		(23	)		-18.0	%
	130		116		112	Americas International - Canada and Latin America		109			126			9	%		10	%		(17	)		-13.5	%
	583		570		526	Total International		511			584			44	%		47	%		(73	)		-12.5	%
$	1,277	$	1,240	$	1,118	Total Revenue	$	1,150		$	1,250			100	%		100	%	$	(100	)		-8.0	%

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 June 30,						For the nine months ended June 30,
	2013			2012			2013			2012
Net loss	$	(110	)	$	(166	)	$	(387	)	$	(354	)
Interest expense		122			107			346			324
Interest income		(1	)		(1	)		(2	)		(3	)
(Benefit from) provision for income taxes		(3	)		88			(9	)		62
Depreciation and amortization		110			140			331			426
EBITDA		118			168			279			455
Impact of purchase accounting adjustments		1			1			1			2
Restructuring charges, net		63			17			165			128
Sponsors’ fees		1			1			5			5
Acquisition-related costs		1			1			1			4
Integration-related costs		3			6			12			14
Loss on extinguishment of debt		—			—			6			—
Third-party fees expensed in connection with the debt modification		—			—			18			—
Non-cash share-based compensation		4			2			7			7
Write-down of assets held for sale to net realizable value		—			4			—			4
(Gain) loss on investments and sale of long-lived assets, net		(1	)		—			(1	)		3
Goodwill impairment		—			—			89			—
Impairment of long-lived assets		1			2			1			2
Venezuela hyperinflationary and devaluation charges		—			—			1			—
Resolution of legal matters		10			—			10			—
Loss (gain) on foreign currency transactions		5			(5	)		(10	)		7
Pension/OPEB/nonretirement postemployment benefits and long-term disability costs		19			28			64			73
Adjusted EBITDA	$	225		$	225		$	648		$	704

Avaya Inc.

Supplemental Schedules of Non-GAAP Reconciliations

(Unaudited; in millions)

	For the Three Months Ended
	June 30, 2012			Sept. 30, 2012			Dec. 31, 2012			Mar. 31, 2013			June 30, 2013
Reconciliation of Non-GAAP Gross Profit and Non-GAAP Gross Margin
GAAP Gross Profit	$	623		$	646		$	666		$	586		$	627
GAAP Gross Margin		49.8	%		50.6	%		53.7	%		52.4	%		54.5	%
Items excluded:
Amortization of technology intangible assets		47			46			22			14			13
Impairment of capitalized software development costs		2			4			—			—			1
Share-based compensation		1			1			1			—			2
Purchase accounting adjustments		1			1			—			—			1
Non-GAAP Gross Profit	$	674		$	698		$	689		$	600		$	644
Non-GAAP Gross Margin		53.9	%		54.7	%		55.6	%		53.7	%		56.0	%
Reconciliation of Non-GAAP Operating Income
GAAP Operating Income (Loss)	$	23		$	76		$	23		$	(72	)	$	14
Percentage of Revenue		2	%		6	%		2	%		-6	%		1	%
Items excluded:
Amortization of acquired assets		104			103			79			71			70
Restructuring and impairment charges, net		21			15			84			18			63
Acquisition/integration-related costs		6			6			5			6			5
Share-based compensation		2			1			2			1			4
Impairment of capitalized software development costs		2			4			—			—			1
Incremental accelerated depreciation		—			—			—			—			3
Goodwill impairment		—			—			—			89			—
Resolution of legal matters		—			—			—			—			10
Purchase accounting adjustments		1			1			—			—			1
Non-GAAP Operating Income	$	159		$	206		$	193		$	113		$	171
Percentage of Revenue		12.7	%		16.1	%		15.6	%		10.1	%		14.9	%

EX-99.2

The Power of We

™

Aug 8, 2013  

Avaya Q3 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 May 10, 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 Aug 8,

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.

3

©

2013 Avaya –

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

Fiscal Q3 2013 Financial Highlights

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

Revenue of $1.15 billion increased 2.9% over the prior quarter

–

Revenue increase comprised of:

–

Product revenue a 5.9% increase; Service revenue a 0.2% increase

–

Product Book-to-Bill was greater than 1.0

Gross margin increased over the prior quarter to a record of 56.0%

Operating income of $171 million

–

Operating margin of 14.9%

Adjusted EBITDA  of $225 million or 19.5% of revenue

Cash and cash equivalents balance of $271 million as of 6/30/13

©

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)

FQ3 2013

FQ2 2013

FQ3 2012

Revenue

$1,150

$1,118

$1,250

Gross Margin

56.0%

53.7%

53.9%

Operating Margin

14.9%

10.1%

12.7%

Adjusted EBITDA

$225

$172

$225

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

Form 10-Q filed with the SEC on May 10, 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)

FQ3 2013

FQ2 2013

FQ3 2012

Revenue

U.S.

$639

$592

$666

EMEA

$297

$298

$330

APAC

$105

$116

$128

AI

$109

$112

$126

Total

$1,150

$1,118

$1,250

% of Total Revenue

U.S.

55.6%

53.0%

53.3%

EMEA

25.8%

26.7%

26.4%

APAC

9.1%

10.3%

10.2%

AI

9.5%

10.0%

10.1%

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)

FQ3 2013

FQ2 2013

FQ3 2012

Total Cash and Cash

Equivalents

$271

$302

$271

Cash from Operations

$11

$82

($91)

Capital Expenditures and

Capitalized Software

$33

$27

$33

Days Sales Outstanding

52

55

52

Inventory Turns

8

8

9

Headcount

15,431

15,953

17,773

©

2013 Avaya –

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

7

Adjusted EBITDA Reconciliation

2013

2012

2013

2012

Net loss

(110)

$           

(166)

$           

(387)

$           

(354)

$           

Interest expense

122

107

346

324

Interest income

(1)

(1)

(2)

(3)

(Benefit from) provision for income taxes

(3)

88

(9)

62

Depreciation and amortization

110

140

331

426

118

168

279

455

Impact of purchase accounting adjustments

1

1

1

2

Restructuring charges, net

63

17

165

128

Sponsors' fees

1

1

5

5

Acquisition-related costs

1

1

1

4

Integration-related costs

3

6

12

14

Loss on extinguishment of debt

-

-

6

-

Third-party fees expensed in connection with the debt modification

-

-

18

-

Non-cash share-based compensation

4

2

7

7

Write-down of assets held for sale to net realizable value

-

4

-

4

(Gain) loss on investments and sale of long-lived assets, net

(1)

-

(1)

3

Goodwill impairment

-

-

89

-

Impairment of long-lived assets

1

2

1

2

Venezuela hyperinflationary and devaluation charges

-

-

1

-

Resolution of legal matters

10

-

10

-

Loss (gain) on foreign currency transactions

5

(5)

(10)

7

Pension/OPEB/nonretirement postemployment benefits and

  long-term disability costs

19

28

64

73

Adjusted EBITDA

225

$             

225

$             

648

$             

704

$             

Avaya Inc.

Supplemental Schedule of Non-GAAP Adjusted EBITDA

(Unaudited; in millions)

EBITDA

For the three months ended

June 30,

For the nine months ended

June 30,

©

2013 Avaya –

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

8

Non-GAAP Reconciliation

June 30,

Sept. 30,

Dec. 31,

Mar. 31,

June 30,

2012

2012

2012

2013

2013

GAAP Gross Profit

$    

$    

$    

$    

$    

GAAP Gross Margin

Items excluded:

Amortization of technology intangible assets

Impairment of capitalized software development costs

-

-

Share-based compensation

-

Purchase accounting adjustments

-

-

Non-GAAP Gross Profit

$    

$    

$    

$    

$    

Non-GAAP Gross Margin

Reconciliation of Non-GAAP Operating Income

GAAP Operating Income (Loss)

$      

$      

$      

$    

$      

Percentage of Revenue

Items excluded:

Amortization of acquired assets

Restructuring and impairment charges, net

Acquisition/integration-related costs

Share-based compensation

Impairment of capitalized software development costs

-

-

Incremental accelerated depreciation

-

-

-

-

Goodwill impairment

-

-

-

-

Resolution of legal matters

-

-

-

-

Purchase accounting adjustments

-

-

Non-GAAP Operating Income

$    

$    

$    

$    

$    

Percentage of Revenue

Reconciliation of Non-GAAP Gross Profit

and Non-GAAP Gross Margin

For the Three Months Ended

49.8%

47

2

1

674

53.9%

2%

104

21

6

2

2

1

159

12.7%

623

1

23

646

50.6%

46

4

1

698

76

1

54.7%

6%

103

15

6

1

4

1

206

16.1%

666

53.7%

689

55.6%

23

2%

79

84

193

15.6%

22

1

5

2

586

52.4%

600

53.7%

(72)

-6%

18

6

1

113

10.1%

14

71

89

56.0%

627

54.5%

13

644

14

1%

70

63

5

4

1

3

10

1

171

14.9%

1

2

1

Avaya Inc.

Supplemental Schedules of Non-GAAP Reconciliations

(Unaudited; in millions)