ý | ANNUAL 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 |
Delaware | 26-1119726 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
4655 Great America Parkway Santa Clara, California | 95054 | |
(Address of Principal executive offices) | (Zip Code) |
Title of Each Class | Name of Each Exchange on Which Registered |
Common Stock, Par Value $.01 | New York Stock Exchange |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller Reporting Company ¨ | Emerging growth company ¨ |
Item | Description | Page |
PART I | ||
1. | ||
1A. | ||
1B. | ||
2. | ||
3. | ||
4. | ||
PART II | ||
5. | ||
6. | ||
7. | ||
7A. | ||
8. | ||
9. | ||
9A. | ||
9B. | ||
PART III | ||
10. | ||
11. | ||
12. | ||
13. | ||
14. | ||
PART IV | ||
15. | ||
16. |
• | Gartner Forecast: PCs, Ultramobiles and Mobile Phones, Worldwide, 2016-2022, 3Q18 Update, Ranjit Atwal, et al., 27 September 2018. |
• | Gartner Magic Quadrant for Unified Communications, Steve Blood, et al., 25 July 2018. |
• | Gartner Magic Quadrant for Contact Center Infrastructure, Worldwide, Drew Kraus, et al., 17 May 2018. |
Item 1. | Business |
• | Unified Communications ("UC"): Avaya unifies communications, helping companies increase employee productivity, improve customer service and reduce costs. Avaya embeds communications directly into the applications, browsers and devices employees use every day to create a single, powerful gateway for voice, video, messaging, conferencing and collaboration. We give people a more natural, efficient, and flexible way to connect, engage, respond, and share - where and how they want - for better business results. |
• | Contact Center ("CC"): Avaya’s industry-leading omnichannel contact center solutions enable customers to build a customized portfolio of applications, driving stronger customer engagement and higher customer lifetime value. Our reliable, secure and scalable communications solutions include voice, email, chat, social media, video, performance management and ease of third-party integration that can improve customer service and help companies compete more effectively. |
• | Global Support Services feature offerings that address the risk of system outages and help businesses protect technology investments. We help our customers maintain their competitiveness through proactive problem prevention, rapid resolution and continual solution optimization. The majority of our revenue in this business is recurring in nature. |
• | Enterprise Cloud and Managed Services (formerly named Avaya private cloud services) enables customers to take advantage of our technology via the cloud, on-premises, or a hybrid of both, depending on the solution and the needs of the customer. The majority of our revenue in this business is recurring in nature and based on multi-year services contracts. |
• | Professional Services enable businesses worldwide to take full advantage of their solution investments to drive measurable business results. Our expert consultants and experienced engineers work with clients as a strategic partner along each step of the solution lifecycle to deliver services that drive business transformation and expand ongoing value. The majority of our revenue in this business is one-time in nature. |
• | Convergence with UC/collaboration and CC becoming less distinct technologies, and more similar with integrated services and capabilities across devices and channels. Avaya already has more than 12,000 customers on a converged UC and CC platform, and we are in a position of strength to lead in bringing customers the power of this convergence. |
• | Increasing remote workers and workforce mobility, with greater use of mobile devices by consumers and employees. This is happening as business leaders also shift priorities to digitally transform their companies, taking advantage of disruptive technologies like big data, IoT, cybersecurity, and Artificial Intelligence. |
• | Increased preference for cloud delivery of applications, and management of multiple and varied devices, all of which must be handled with the security their business demands. |
• | Omnichannel communication customer service will continue to rise, as consumers embrace new technologies and devices in creative ways and at an accelerating pace. |
• | Disrupt - the more an innovation invalidates the status quo, the better; |
• | Reduce adoption friction - make the innovation straightforward to select and deploy, embrace the multi-vendor marketplace; and |
• | Partner intelligently - leverage provocative partner intellectual property and thought leadership to speed market introduction, presenting Avaya as the industry platform. |
1) | We have invested in R&D and new technologies to develop and provide more comprehensive contact center and unified communications products and services, continuing our focus on enterprise customers while expanding the value we can provide to midmarket customers. |
2) | We have evolved our product design philosophy, anticipating demand for applications that are cloud- and mobile-enabled. We design our products to be flexible, extensible, secure and reliable. This approach allows our customers to transition from traditional communications and collaboration technology to newer solutions that are more mobile, manageable and cost-effective. |
3) | We have increased our focus on delivering integrated solutions including: |
Successor | Predecessor | Non-GAAP Combined | Predecessor | ||||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, | |||||||||||||||||||
(In millions) | 2018 | 2017 | 2016 | ||||||||||||||||||
Products: | |||||||||||||||||||||
Unified Communications | $ | 718 | $ | 180 | $ | 898 | $ | 936 | $ | 1,129 | |||||||||||
Contact Center | 271 | 73 | 344 | 361 | 422 | ||||||||||||||||
Networking | — | — | — | 140 | 204 | ||||||||||||||||
989 | 253 | 1,242 | 1,437 | 1,755 | |||||||||||||||||
Services: | |||||||||||||||||||||
Global Support Services | 786 | 244 | 1,030 | 1,267 | 1,345 | ||||||||||||||||
Enterprise Cloud and Managed Services | 245 | 57 | 302 | 296 | 309 | ||||||||||||||||
Professional Services | 227 | 50 | 277 | 272 | 293 | ||||||||||||||||
1,258 | 351 | 1,609 | 1,835 | 1,947 | |||||||||||||||||
$ | 2,247 | $ | 604 | $ | 2,851 | $ | 3,272 | $ | 3,702 |
1) | Manage the reliable and secure integration of an increasing number and variety of devices and endpoints: Today, business users not only use desk-based devices, but also laptops, smartphones and tablets. Gartner reports from a September 2018 forecast that these devices are growing at a compound annual growth rate of 2.9% for smartphones (basic and premium), and 2.1% for tablets (traditional) worldwide from 2018 through 2022(1). |
2) | Leverage existing technology infrastructure while positioning for the future: The speed at which new enterprise technology enters the market is challenging companies to rapidly adopt and install new technology. We believe this pressure creates strong demand for systems that do not require enterprise-wide overhauls of existing technology. Instead, it favors incremental, flexible, extensible technologies that are easy to adopt and compatible with existing infrastructures. |
3) | Shift to cloud-based applications: Companies today seek technology that helps them lower Total Cost of Ownership ("TCO") and increase deployment speed and application agility, including a variety of public, private and hybrid cloud solutions. They also seek to shift away from a complex, proprietary capital-intensive model to one that is more open and efficient. |
1) | Innovate in our core business solutions. As a leader in unified communications and the contact center, our extensive experience and expertise are critical factors in customers' decision-making processes. We will continue to invest in enhancing our core solution areas, delivering secure, scalable and reliable solutions that focus on simplifying and integrating the user experience. |
2) | Bring emerging technologies to market. By innovating in disruptive areas such as AI and mobility, and building an ecosystem with technology partners like Afiniti and others, we will drive new opportunities for our customers. |
3) | Deliver breadth and depth of cloud. Customers need a partner who can help them unlock the benefits of cloud, in a way that works for their specific needs, whether private, public, or hybrid cloud. Avaya is investing and building a cloud ecosystem, and delivering across all fronts with a cloud-first approach that builds on the power, reliability, and security that customers have come to expect from Avaya. |
4) | Deliver high-value services. We provide world-class global services that help customers maximize the value of their investments and drive business value. We will expand offerings and capabilities in managed and professional services to meet the changing needs of our customers. |
1) | Enablement Services: Provide access to expertise and resources for planning, defining and deploying Avaya products to maximize technology potential, simplify business processes, improve security and minimize risk. Avaya integrates and tests equipment, trains employees and deploys a plan to help ensure success. |
2) | Optimization Services: Help drive increased value and improved business results by leveraging customers’ existing technology. Avaya advanced solution architects analyze a communications environment in the context of customer business priorities, recommend enhancements and implement proven best practices. |
3) | Innovation Services: Help identify improved methods for using communications and collaboration to increase business productivity, employee efficiency and customer service levels. Our consultative approach, deep industry experience and custom application services-from business planning through to execution and product integration-create alignment with a customer’s specific business objectives. |
1) | Customer Journey Transformation: We are engaging with our key clients in a highly consultative way to help them better leverage their communications investment. This model has led to an increase in large, complex projects for our top enterprise clients. Our extensive knowledge of our customers' journeys, leveraging reference architectures is a cornerstone of Avaya’s growth strategy going forward. |
2) | Agile Development Business: The increase in large projects has also led to increases in our agile development business. We help clients develop customized, leading-edge applications that fully integrate into their environment to solve key business problems and take advantage of opportunities. |
3) | Professional Services: We have a fully integrated, global professional services team that has grown to more than 1,200 professionals today. This team provides the same high level of technical talent and tool support in all regions of the world. We are in the process of implementing a new professional services automation tool that is expected to enable us to be more efficient in operating and managing as a seamless global business. |
• | A comprehensive suite of support options both directly and through partners to proactively resolve issues and improve uptime. Global Support Services offers capabilities that include 24/7 remote support, proactive remote monitoring, sophisticated diagnostic tools, parts replacement and on-site response. |
• | Our Avaya Support website quickly connects customers to advanced Avaya technicians via live chat, voice or video. The website also provides access to “Ava,” an interactive virtual chat agent based on Avaya Automated Chat that quickly searches our knowledge base and a wide range of “how-to” videos to answer customer support questions. Ava |
• | Enhanced automation to enable our clients to get to the right technical expert in a quicker and more effective way, improving overall customer satisfaction. |
• | Implemented a new Support Services Customer Success team, which we believe has helped enable us to understand our clients' UC and CC strategies, issues, and opportunities. We expect this investment to help our clients further view us as a trusted consultative provider that will result in increased adoption, accelerated momentum and transition to our full-service stack, including the cloud. |
• | Real-time automated evaluation of global clients' solution performance across 30 criteria enabling proactive deep-dives with clients. |
1) | A standard set of “Ready Now” reference architectures that enable quick and effective POC’s and trials, prior to implementing production environments for clients. The cloud platform will be based on Avaya’s industry-leading UC and CC technology that will meet the majority of enterprise client requirements, with the ability to customize. |
2) | A new set of automation platforms to effectively build and deploy solutions for clients that will enable Avaya to replicate a client’s sophisticated premise-based implementations to our cloud solution in an unprecedented level of speed, accuracy, and effectiveness. |
3) | A new Enterprise Communications Cloud Architect team, consisting of some of the best enterprise communications cloud technical talent in the industry, works with clients in the architecture, design, operations and implementation of their secure virtualized private cloud environment. In addition, the Avaya team will stay with the client as their top technical advisor as they move to full production in their new private cloud environment, helping them fully realize the benefit of the solution and driving adoption, growth and retention. |
4) | A set of managed services offers to effectively operate the private cloud environment at a high level of availability, performance and Quality of Service ("QOS") Service Level Agreements ("SLAs"). These offerings will include full multi-vendor support of their current communications technology environment as they begin their migration to cloud. |
5) | A global network of data centers running the same virtualized private cloud architectures, all run with the same industry-leading set of automation, workflow and team. |
1) | Global Service Provider alliances are partnering arrangements with leading telecommunications service providers, such as AT&T, for enterprise communications and collaboration. We pursue sell-to and sell-through opportunities for Avaya products and services. These alliances are integral in selling and implementing our cloud-based services. We also see them as a principal route to market for our UCaaS and CCaaS solutions. |
2) | Global Systems Integrator alliances are identical in nature to our Global Service Provider alliances, except that these are forged with systems integrator partners, such as IBM. |
3) | Ecosystem alliances are partnering arrangements by Avaya with IT and telecommunications industry leaders, such as ConvergeOne, to bring to our joint customers solutions that leverage our combined range of products and services. |
• | Enterprise UC: Cisco, Microsoft, NEC Corporation, Unify GmbH & Co. Kg, Alcatel-Lucent Enterprise and Huawei. |
• | Midmarket UC: Mitel and ShoreTel (acquired by Mitel), Cisco, Microsoft, and NEC. |
• | Cloud Products and Services: Cisco, Broadsoft (now a division of Cisco), Fuze, Twilio, Microsoft, 8x8, RingCentral, Mitel and ShoreTel (acquired by Mitel). |
• | Video Products and Solutions: Cisco, Polycom (now a division of Plantronics), Huawei, Zoom, ZTE, BlueJeans, and LifeSize (now a division of Logitech International S.A.). |
• | Enterprise Contact Center Products and Services: Genesys Telecommunications Laboratories (Genesys), Cisco, Huawei, Enghouse Interactive, Mitel and NICE. |
• | Midmarket Contact Center Products and Services: Amazon, Cisco, Genesys, Five9, NICE and Vonage. |
• | certain provisions of environmental laws governing the cleanup of soil and groundwater contamination; |
• | various local, federal and international laws and regulations regarding the material content and electrical design of our products that require us to be financially responsible for the collection, treatment, recycling and disposal of those products; and |
• | various employee safety and health regulations that are imposed in various countries within which we operate. |
Item 1A. | Risk Factors |
• | Enterprise UC: Cisco, Microsoft, NEC Corporation, Unify GmbH & Co. Kg, Alcatel-Lucent Enterprise and Huawei. |
• | Midmarket UC: Mitel and ShoreTel (acquired by Mitel), Cisco, Microsoft, and NEC. |
• | Cloud Products and Services: Cisco, Broadsoft (now a division of Cisco), Fuze, Twilio, Microsoft, 8x8, RingCentral, Mitel and ShoreTel (acquired by Mitel). |
• | Video Products and Solutions: Cisco, Polycom (now a division of Plantronics), Huawei, Zoom, ZTE, BlueJeans, and LifeSize (now a division of Logitech International S.A.). |
• | Enterprise Contact Center Products and Services: Genesys Telecommunications Laboratories (Genesys), Cisco, Huawei, Enghouse Interactive, Mitel and NICE. |
• | Midmarket Contact Center Products and Services: Amazon, Cisco, Genesys, Five9, NICE and Vonage. |
• | economic conditions and geopolitical developments, including trade sanctions, changes to significant trading relationships such as the United Kingdom’s ongoing process of withdrawal from the EU, and the negotiation of |
• | political or social unrest, or economic instability or corruption, in a specific country or region; |
• | legal and regulatory constraints, such as international and local laws and regulations related to trade compliance, anti-corruption, information security, data privacy and protection, labor and other requirements; |
• | protectionist and local security legislation; |
• | difficulty in enforcing intellectual property rights, such as protecting against the counterfeiting of our products; |
• | 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; |
• | unfavorable tax and currency regulations; |
• | military conflict, terrorist activities and health pandemics or similar issues; |
• | future government shutdowns or uncertainties which could affect the portion of our revenues which comes from the U.S. federal government sector; |
• | 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. |
• | we could fail to meet our financial reporting obligations; |
• | our reputation may be adversely affected and our business and operating results could be harmed; |
• | the market price of our stock could decline; and |
• | we could be subject to litigation and/or investigations or sanctions by the Securities and Exchange Commission (the "SEC"), the New York Stock Exchange or other regulatory authorities. |
• | making it more difficult for us to make payments on our indebtedness; |
• | increasing our vulnerability to general economic and industry conditions; |
• | requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, research and development and future business opportunities; |
• | exposing us to the risk of increased interest rates under Avaya Inc.’s credit facilities to the extent such facilities have variable rates of interest; |
• | limiting our ability to make strategic acquisitions and investments; |
• | limiting our ability to refinance our indebtedness as it becomes due; and |
• | limiting our ability to adjust quickly or at all to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged. |
• | incur or guarantee additional debt and issue or sell certain preferred stock; |
• | pay dividends on, redeem or repurchase our capital stock; |
• | make certain acquisitions or investments; |
• | incur or assume certain liens; |
• | enter into transactions with affiliates; and |
• | sell assets to, or merge or consolidate with, another company. |
• | general economic conditions; |
• | fluctuations in our operating results; |
• | variance in our financial performance from the expectations of equity and/or debt research analysts; |
• | conditions and trends in the markets we serve; |
• | announcements of significant new services or products by us or our competitors; |
• | additions of or changes to key employees; |
• | changes in market valuations or earnings of our competitors; |
• | trading volumes of our common stock and/or Convertible Notes; |
• | future sales of our equity securities and/or future issuances of indebtedness; |
• | changes in the estimation of the future sizes and growth rates of our markets; |
• | legislation or regulatory policies, practices or actions; |
• | hedging or arbitrage trading activity by third parties, including by the counterparties to the note hedge and warrant transactions that we entered into in connection with the issuance of the Convertible Notes; and |
• | dilution that may occur upon any conversion of the Convertible Notes or the exercise of the warrants we issued in connection with the issuance of the Convertible Notes. |
• | authorize our board of directors to create and issue, without stockholder approval, up to 55,000,000 shares of undesignated preferred stock, which could be used to dilute the ownership of a hostile acquirer; |
• | grant the board of directors the exclusive right to fill a vacancy on the board of directors, whether such vacancy is due to an increase in the number of directors or death, resignation or removal of a director, which prevents stockholders from being able to fill such vacancies on the board of directors; and |
• | require stockholders to follow certain advance notice procedures to bring a proposal before an annual meeting, including proposing nominees for election as directors, which may discourage a potential acquirer from soliciting proxies to elect the acquirer’s own director or slate of directors. |
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | Mine Safety Disclosures |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Issuer Purchases of Equity Securities | |||||||||||
(a) | (b) | (c) | (d) | ||||||||
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 | |||||||
July 1 - 31, 2018 | — | $ | — | N/A | N/A | ||||||
August 1 - 31, 2018 | — | $ | — | N/A | N/A | ||||||
September 1 - 30, 2018 | 40,716 | $ | 22.0600 | N/A | N/A | ||||||
Total | 40,716 | N/A | N/A |
12/19/17 | 12/29/17 | 01/31/18 | 02/28/18 | 03/29/18 | 04/30/18 | 05/31/18 | 06/29/18 | 07/31/18 | 08/31/18 | 09/28/18 | |||||||||||||||||||||||
Avaya Holdings Corp. | $ | 100.00 | $ | 106.69 | $ | 126.93 | $ | 127.60 | $ | 136.17 | $ | 139.15 | $ | 134.16 | $ | 122.07 | $ | 125.11 | $ | 142.01 | $ | 134.59 | |||||||||||
Russell 2000 Index | $ | 100.00 | $ | 99.92 | $ | 102.49 | $ | 98.42 | $ | 99.52 | $ | 100.33 | $ | 106.30 | $ | 106.92 | $ | 108.72 | $ | 113.27 | $ | 110.40 | |||||||||||
NASDAQ Computer Index | $ | 100.00 | $ | 98.21 | $ | 104.97 | $ | 104.72 | $ | 100.68 | $ | 100.31 | $ | 108.84 | $ | 107.76 | $ | 110.25 | $ | 117.54 | $ | 116.13 |
Item 6. | Selected Financial Data |
Successor | Predecessor | ||||||||||||||||||||||||
Statement of Operations Data: | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||||||||||
(In millions, except per share amounts) | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Revenue | $ | 2,247 | $ | 604 | $ | 3,272 | $ | 3,702 | $ | 4,081 | $ | 4,371 | |||||||||||||
Income (loss) from continuing operations, net of income taxes | 287 | 2,977 | (182 | ) | (730 | ) | (168 | ) | (315 | ) | |||||||||||||||
Income from discontinued operations, net of income taxes | — | — | — | — | — | 62 | |||||||||||||||||||
Net income (loss) | 287 | 2,977 | (182 | ) | (730 | ) | (168 | ) | (253 | ) | |||||||||||||||
Per share data: | |||||||||||||||||||||||||
Income (loss) from continuing operations - basic | $ | 2.61 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | $ | (0.43 | ) | $ | (0.73 | ) | |||||||||
Income from discontinued operations - basic | — | — | — | — | — | 0.13 | |||||||||||||||||||
Net income (loss) - basic | $ | 2.61 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | $ | (0.43 | ) | $ | (0.60 | ) | |||||||||
Income (loss) from continuing operations - diluted | $ | 2.58 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | $ | (0.43 | ) | $ | (0.73 | ) | |||||||||
Income from discontinued operations - diluted | — | — | — | — | — | 0.13 | |||||||||||||||||||
Net income (loss) - diluted | $ | 2.58 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | $ | (0.43 | ) | $ | (0.60 | ) | |||||||||
Successor | Predecessor | ||||||||||||||||||||||||
Balance Sheet Data: | As of September 30, 2018 | As of September 30, | |||||||||||||||||||||||
(In millions) | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Cash and cash equivalents | $ | 700 | $ | 876 | $ | 336 | $ | 323 | $ | 322 | |||||||||||||||
Total assets | 7,679 | 5,898 | 5,821 | 6,836 | 7,179 | ||||||||||||||||||||
Total debt (including current and long-term portion) | 3,126 | 725 | 6,018 | 5,967 | 5,968 | ||||||||||||||||||||
Liabilities subject to compromise | — | 7,705 | — | — | — | ||||||||||||||||||||
Capital leases | 31 | 26 | 56 | 61 | 59 | ||||||||||||||||||||
Total stockholders' equity (deficit) | 2,051 | (5,013 | ) | (5,023 | ) | (4,001 | ) | (3,621 | ) | ||||||||||||||||
Successor | Predecessor | ||||||||||||||||||||||||
Other Financial Data: | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||||||||||
(In millions) | 2017 | 2016 | 2015 | 2014 | |||||||||||||||||||||
Cash provided by (used for) by operating activities | $ | 202 | $ | (414 | ) | $ | 291 | $ | 113 | $ | 215 | $ | 35 | ||||||||||||
EBITDA | 289 | 3,479 | 370 | 125 | 724 | 627 | |||||||||||||||||||
Adjusted EBITDA(a) | 611 | 135 | 866 | 940 | 900 | 898 |
• | On December 15, 2017, the Company emerged from bankruptcy and applied fresh start accounting, which required the allocation of its reorganization value to its individual assets based on their estimated fair values. 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 Statements as of or prior to that date. See Note 5, "Fresh Start Accounting," to our Consolidated Financial Statements included in Part II, Item 8 and Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations-Emergence from Bankruptcy" to this Annual Report on Form 10-K for a more detailed discussion. |
• | During the period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2017 (Predecessor), the Company recorded pre-tax reorganization, net credits (costs) of $3,416 million and $(98) million, respectively. The period from October 1, 2017 through December 15, 2017 (Predecessor) primarily consists of the net gain from the consummation of the Plan of Reorganization and the related settlement of liabilities. The period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2017 (Predecessor) also include amounts incurred subsequent to the Bankruptcy Filing as a direct result of the Bankruptcy Filing and are comprised of professional service fees and contract rejection fees. |
• | The Company acquired Spoken on March 9, 2018. Spoken has been included in the Company's results of operations starting on the acquisition date. See Note 6, "Business Combinations," to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a more detailed discussion. |
• | The Company sold its Networking business on July 14, 2017, and its Technology Business Unit and IT Professional Services businesses in fiscal 2014 (Predecessor). These sales resulted in pre-tax gains of $2 million and $66 million in fiscal 2017 and 2014 (Predecessor), respectively. See Note 4, "Emergence from Voluntary Reorganization under Chapter 11 Proceedings," to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information on the sale of the Networking business. |
• | In fiscal 2017 (Predecessor) and 2016 (Predecessor), the Company recorded pre-tax impairment charges of $117 million and $542 million, respectively, related to goodwill and indefinite-lived intangible assets. See Note 7, "Goodwill," and Note 8, "Intangible Assets," to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. |
• | On December 22, 2017, the Tax Cuts and Jobs Act was signed into law, which lowered the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. During the period from December 16, 2017 through September 30, 2018 (Successor), the Company recorded an income tax benefit of $245 million to adjust deferred tax balances to reflect the new rates. See Note 14, "Income Taxes," to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. |
• | Restructuring and impairment charges were $81 million, $14 million, $30 million, $105 million, $62 million and $165 million on a pre-tax basis for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017, 2016, 2015 and 2014 (Predecessor), respectively. See Note 10, "Business Restructuring Reserves and Programs," to our Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information. |
• | In fiscal 2017 (Predecessor), the Company recorded non-cash interest expense of $61 million related to the accelerated amortization of debt issuance costs and accretion of debt discount related to the Company’s Bankruptcy Filing. In addition, effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petition debt classified as Liabilities subject to compromise. Contractual interest expense represented 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 (Predecessor) and the period from January 19, 2017 through September 30, 2017 (Predecessor), contractual interest expense of $94 million and $316 million was not recorded as interest expense, as it was not an allowed claim under the Bankruptcy Filing. |
• | As of September 30, 2017 (Predecessor), Liabilities subject to compromise included $5,832 million of Predecessor debt and $12 million of Predecessor capital lease obligations. |
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Global Support Services feature offerings that address the risk of system outages and also help businesses protect their technology investments. We help our customers maintain their competitiveness through proactive problem prevention, rapid resolution and continual solution optimization. The majority of our revenue in this business is recurring in nature. |
• | Enterprise Cloud and Managed Services enables customers to take advantage of our technology via the cloud, on-premises, or a hybrid of both, depending on the solution and the needs of the customer. The majority of our revenue in this business is recurring in nature and based on multi-year services contracts. |
• | Professional Services enable businesses worldwide to take full advantage of their solution investments to drive measurable business results. Our expert consultants and experienced engineers work with clients as a strategic partner along each step of the solution lifecycle to deliver services that drive business transformation and expand ongoing value. The majority of our revenue in this business is one-time in nature. |
• | The Company paid in full amounts outstanding under the debtor-in-possession credit agreement (the "DIP Credit Agreement"); |
• | 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 canceled, except as provided under the Plan of Reorganization and as noted below; |
• | The Company's certificate of incorporation was amended and restated to authorize the issuance of 605.0 million shares of 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; |
• | The Company entered into a term loan credit agreement (the "Term Loan Credit Agreement") with a principal amount of $2,925 million and a $300 million asset-based revolving credit facility (the "ABL Credit Agreement"); |
• | The Company issued 99.3 million shares of common stock to the holders of the Predecessor's first lien obligations that were extinguished in the bankruptcy. In addition, these holders received $2,061 million in cash; |
• | The Company issued 4.4 million shares of common stock to the holders of the Predecessor's second lien obligations that were extinguished in the bankruptcy. In addition, these holders received warrants to purchase 5.6 million shares of common stock at an exercise price of $25.55 per warrant (the "Emergence Date Warrants"); |
• | The Company issued 6.1 million shares of common stock to the Pension Benefit Guaranty Corporation ("PBGC"). In addition, the PBGC received $340 million in cash; and |
• | The Debtors established a liquidating trust in the amount of $58 million for the benefit of general unsecured creditors. In addition, the Company issued 0.2 million additional shares of common stock for the benefit of its former general unsecured creditors. The general unsecured creditors will receive a total of $58 million in cash and these shares of common stock. Any excess cash and/or common stock not distributed to the general unsecured creditors will be distributed to the holders of the Predecessor first lien obligations. |
Successor | Predecessor | Non-GAAP Combined | Predecessor | ||||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | |||||||||||||||||||
(In millions) | 2018 | 2017 | 2016 | ||||||||||||||||||
REVENUE | |||||||||||||||||||||
Products | $ | 989 | $ | 253 | $ | 1,242 | $ | 1,437 | $ | 1,755 | |||||||||||
Services | 1,258 | 351 | 1,609 | 1,835 | 1,947 | ||||||||||||||||
2,247 | 604 | 2,851 | 3,272 | 3,702 | |||||||||||||||||
COSTS | |||||||||||||||||||||
Products: | |||||||||||||||||||||
Costs | 372 | 84 | 456 | 499 | 629 | ||||||||||||||||
Amortization of technology intangible assets | 135 | 3 | 138 | 20 | 30 | ||||||||||||||||
Services | 597 | 155 | 752 | 745 | 785 | ||||||||||||||||
1,104 | 242 | 1,346 | 1,264 | 1,444 | |||||||||||||||||
GROSS PROFIT | 1,143 | 362 | 1,505 | 2,008 | 2,258 | ||||||||||||||||
OPERATING EXPENSES | |||||||||||||||||||||
Selling, general and administrative | 888 | 264 | 1,152 | 1,261 | 1,401 | ||||||||||||||||
Research and development | 172 | 38 | 210 | 225 | 273 | ||||||||||||||||
Amortization of intangible assets | 127 | 10 | 137 | 204 | 226 | ||||||||||||||||
Impairment of indefinite-lived intangible assets | — | — | — | 65 | 100 | ||||||||||||||||
Goodwill impairment | — | — | — | 52 | 442 | ||||||||||||||||
Restructuring charges, net | 81 | 14 | 95 | 30 | 105 | ||||||||||||||||
1,268 | 326 | 1,594 | 1,837 | 2,547 | |||||||||||||||||
OPERATING (LOSS) INCOME | (125 | ) | 36 | (89 | ) | 171 | (289 | ) | |||||||||||||
Interest expense | (169 | ) | (14 | ) | (183 | ) | (246 | ) | (471 | ) | |||||||||||
Other income (expense), net | 35 | (2 | ) | 33 | (25 | ) | 41 | ||||||||||||||
Reorganization items, net | — | 3,416 | 3,416 | (98 | ) | — | |||||||||||||||
(LOSS) INCOME BEFORE INCOME TAXES | (259 | ) | 3,436 | 3,177 | (198 | ) | (719 | ) | |||||||||||||
Benefit from (provision for) income taxes | 546 | (459 | ) | 87 | 16 | (11 | ) | ||||||||||||||
NET INCOME (LOSS) | $ | 287 | $ | 2,977 | $ | 3,264 | $ | (182 | ) | $ | (730 | ) |
(In millions) | Period from December 16, 2017 through September 30, 2018 | ||
REVENUE | |||
Products | $ | (63 | ) |
Services | (143 | ) | |
(206 | ) | ||
COSTS | |||
Products | 21 | ||
Services | 37 | ||
58 | |||
GROSS PROFIT | (264 | ) | |
OPERATING EXPENSES | |||
Selling, general and administrative | 16 | ||
Research and development | (11 | ) | |
5 | |||
OPERATING LOSS | $ | (259 | ) |
Percentage of Total Revenue | ||||||||||||||||||||||||||||
Successor | Predecessor | Non-GAAP Combined | Predecessor | Non-GAAP Combined | Predecessor | Yr. to Yr. Percentage Change, net of Foreign Currency Impact | ||||||||||||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Yr. to Yr. Percentage Change | |||||||||||||||||||||
Products & Solutions | $ | 1,052 | $ | 253 | $ | 1,305 | $ | 1,297 | 46 | % | 40 | % | 1 | % | 0 | % | ||||||||||||
Networking | — | — | — | 140 | 0 | % | 4 | % | (100 | )% | (100 | )% | ||||||||||||||||
Services | 1,401 | 351 | 1,752 | 1,835 | 61 | % | 56 | % | (5 | )% | (5 | )% | ||||||||||||||||
Unallocated amounts | (206 | ) | — | (206 | ) | — | (7 | )% | 0 | % | (1) | (1) | ||||||||||||||||
Total revenue | $ | 2,247 | $ | 604 | $ | 2,851 | $ | 3,272 | 100 | % | 100 | % | (13 | )% | (14 | )% |
(1) | Not meaningful |
Percentage of Total Revenue | ||||||||||||||||||||||||||||
Successor | Predecessor | Non-GAAP Combined | Predecessor | Non-GAAP Combined | Predecessor | Yr. to Yr. Percentage Change, net of Foreign Currency Impact | ||||||||||||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Yr. to Yr. Percentage Change | |||||||||||||||||||||
U.S. | $ | 1,184 | $ | 331 | $ | 1,515 | $ | 1,798 | 53 | % | 55 | % | (16 | )% | (16 | )% | ||||||||||||
International: | ||||||||||||||||||||||||||||
Europe, Middle East and Africa | 603 | 166 | 769 | 834 | 27 | % | 26 | % | (8 | )% | (11 | )% | ||||||||||||||||
Asia Pacific | 256 | 57 | 313 | 334 | 11 | % | 10 | % | (6 | )% | (7 | )% | ||||||||||||||||
Americas International - Canada and Latin America | 204 | 50 | 254 | 306 | 9 | % | 9 | % | (17 | )% | (16 | )% | ||||||||||||||||
Total International | 1,063 | 273 | 1,336 | 1,474 | 47 | % | 45 | % | (9 | )% | (11 | )% | ||||||||||||||||
Total revenue | $ | 2,247 | $ | 604 | $ | 2,851 | $ | 3,272 | 100 | % | 100 | % | (13 | )% | (14 | )% |
Percentage of Total Products & Solutions and Networking Revenue | ||||||||||||||||||||||||||||
Successor | Predecessor | Non-GAAP Combined | Predecessor | Non-GAAP Combined | Predecessor | Yr. to Yr. Percentage Change, net of Foreign Currency Impact | ||||||||||||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Yr. to Yr. Percentage Change | |||||||||||||||||||||
Direct | $ | 300 | $ | 80 | $ | 380 | $ | 382 | 29 | % | 27 | % | (1 | )% | (2 | )% | ||||||||||||
Indirect | 752 | 173 | 925 | 1,055 | 71 | % | 73 | % | (12 | )% | (13 | )% | ||||||||||||||||
Total Products & Solutions and Networking revenue | $ | 1,052 | $ | 253 | $ | 1,305 | $ | 1,437 | 100 | % | 100 | % | (9 | )% | (10 | )% |
Gross Margin | |||||||||||||||||||||||||||||
Successor | Predecessor | Non-GAAP Combined | Predecessor | Non-GAAP Combined | Predecessor | Change | |||||||||||||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Amount | Percent | |||||||||||||||||||||
Products & Solutions | $ | 696 | $ | 169 | $ | 865 | $ | 890 | 66.3 | % | 68.6 | % | $ | (25 | ) | (2.8 | )% | ||||||||||||
Networking | — | — | — | 48 | — | % | 34.3 | % | (48 | ) | (100 | )% | |||||||||||||||||
Services | 843 | 196 | 1,039 | 1,091 | 59.3 | % | 59.5 | % | (52 | ) | (4.8 | )% | |||||||||||||||||
Unallocated amounts | (396 | ) | (3 | ) | (399 | ) | (21 | ) | (1 | ) | (1) | (378 | ) | (1) | |||||||||||||||
Total | $ | 1,143 | $ | 362 | $ | 1,505 | $ | 2,008 | 52.8 | % | 61.4 | % | $ | (503 | ) | (25 | )% |
(1) | Not meaningful |
Percentage of Total Revenue | |||||||||||||||||||||||||||||
Successor | Predecessor | Non-GAAP Combined | Predecessor | Non-GAAP Combined | Predecessor | Change | |||||||||||||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2018 | Fiscal year ended September 30, 2017 | Amount | Percent | |||||||||||||||||||||
Selling, general and administrative | $ | 888 | $ | 264 | $ | 1,152 | $ | 1,261 | 40.4 | % | 38.5 | % | $ | (109 | ) | (9 | )% | ||||||||||||
Research and development | 172 | 38 | 210 | 225 | 7.4 | % | 6.9 | % | (15 | ) | (7 | )% | |||||||||||||||||
Amortization of intangible assets | 127 | 10 | 137 | 204 | 4.8 | % | 6.2 | % | (67 | ) | (33 | )% | |||||||||||||||||
Impairment of indefinite-lived intangible assets | — | — | — | 65 | — | % | 2.0 | % | (65 | ) | (100 | )% | |||||||||||||||||
Goodwill impairment | — | — | — | 52 | — | % | 1.6 | % | (52 | ) | (100 | )% | |||||||||||||||||
Restructuring charges, net | 81 | 14 | 95 | 30 | 3.3 | % | 0.9 | % | 65 | 217 | % | ||||||||||||||||||
Total operating expenses | $ | 1,268 | $ | 326 | $ | 1,594 | $ | 1,837 | 55.9 | % | 56.1 | % | $ | (243 | ) | (13 | )% |
• | the impact of applying fresh start accounting upon emergence from bankruptcy on December 15, 2017; |
• | impairment charges for indefinite-lived intangible assets and goodwill recognized during fiscal 2017; |
• | higher restructuring charges for fiscal 2018, primarily related to employee separation charges and lease termination agreements associated with vacated facilities particularly in Europe and the U.S.; |
• | lower advisory fees incurred to assist in the assessment of strategic and financial alternatives to improve the Company’s capital structure during fiscal 2018 of $62 million; |
• | costs incurred in connection with certain legal matters of $37 million for fiscal 2018; |
• | operating results from the Networking business for fiscal 2017; and |
• | operating results from the Spoken acquisition completed in March 2018. |
Percentage of Total Revenue | Yr. to Yr. Percent Change | Yr. to Yr. Percent Change, net of Foreign Currency Impact | ||||||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Products & Solutions | $ | 1,297 | $ | 1,536 | 40 | % | 41 | % | (16 | )% | (15 | )% | ||||||||
Networking(1) | 140 | 219 | 4 | % | 6 | % | (36 | )% | (36 | )% | ||||||||||
Services | 1,835 | 1,947 | 56 | % | 53 | % | (6 | )% | (6 | )% | ||||||||||
Total revenue | $ | 3,272 | $ | 3,702 | 100 | % | 100 | % | (12 | )% | (11 | )% |
Percentage of Total Revenue | Yr. to Yr. Percent Change | Yr. to Yr. Percent Change, net of Foreign Currency Impact | ||||||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
U.S. | $ | 1,798 | $ | 2,072 | 55 | % | 56 | % | (13 | )% | (13 | )% | ||||||||
International: | ||||||||||||||||||||
EMEA | 834 | 880 | 26 | % | 24 | % | (5 | )% | (4 | )% | ||||||||||
APAC-Asia Pacific | 334 | 416 | 10 | % | 11 | % | (20 | )% | (20 | )% | ||||||||||
Americas International-Canada and Latin America | 306 | 334 | 9 | % | 9 | % | (8 | )% | (9 | )% | ||||||||||
Total International | 1,474 | 1,630 | 45 | % | 44 | % | (10 | )% | (9 | )% | ||||||||||
Total revenue | $ | 3,272 | $ | 3,702 | 100 | % | 100 | % | (12 | )% | (11 | )% |
Percentage of Total Products & Solutions and Networking Revenue | Yr. to Yr. Percent Change | Yr. to Yr. Percent Change, net of Foreign Currency Impact | ||||||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||
Direct | $ | 382 | $ | 453 | 27 | % | 26 | % | (16 | )% | (15 | )% | ||||||||
Indirect | 1,055 | 1,302 | 73 | % | 74 | % | (19 | )% | (19 | )% | ||||||||||
Total Products & Solutions and Networking revenue | $ | 1,437 | $ | 1,755 | 100 | % | 100 | % | (18 | )% | (18 | )% |
Gross Profit | Gross Margin | Change | |||||||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | Amount | Percentage | |||||||||||||||
Products & Solutions | $ | 890 | $ | 1,047 | 68.6 | % | 68.2 | % | $ | (157 | ) | (15 | )% | ||||||||
Networking | 48 | 80 | 34.3 | % | 36.5 | % | (32 | ) | (40 | )% | |||||||||||
Services | 1,091 | 1,160 | 59.5 | % | 59.6 | % | (69 | ) | (6 | )% | |||||||||||
Unallocated amounts | (21 | ) | (29 | ) | (1) | (1) | 8 | (1) | |||||||||||||
Total | $ | 2,008 | $ | 2,258 | 61.4 | % | 61.0 | % | $ | (250 | ) | (11 | )% |
(1) | Not meaningful |
Percentage of Total Revenue | Change | |||||||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | Amount | Percent | ||||||||||||||
Selling, general and administrative | $ | 1,261 | $ | 1,401 | 38.5 | % | 37.9 | % | $ | (140 | ) | (10 | )% | |||||||
Research and development | 225 | 273 | 6.9 | % | 7.4 | % | (48 | ) | (18 | )% | ||||||||||
Amortization of intangible assets | 204 | 226 | 6.2 | % | 6.1 | % | (22 | ) | (10 | )% | ||||||||||
Impairment of indefinite-lived intangible assets | 65 | 100 | 2.0 | % | 2.7 | % | (35 | ) | (35 | )% | ||||||||||
Goodwill impairment | 52 | 442 | 1.6 | % | 11.9 | % | (390 | ) | (88 | )% | ||||||||||
Restructuring charges, net | 30 | 105 | 0.9 | % | 2.8 | % | (75 | ) | (71 | )% | ||||||||||
Total operating expenses | $ | 1,837 | $ | 2,547 | 56.1 | % | 68.8 | % | $ | (710 | ) | (28 | )% |
Successor | Predecessor | Non-GAAP Combined | Predecessor | ||||||||||||||||||
Revised | |||||||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2018 | Fiscal years ended September 30, | ||||||||||||||||||
(In millions) | 2017 | 2016 | |||||||||||||||||||
Net cash provided by (used for): | |||||||||||||||||||||
Operating activities | $ | 202 | $ | (414 | ) | $ | (212 | ) | $ | 291 | $ | 113 | |||||||||
Investing activities | (134 | ) | 8 | (126 | ) | (70 | ) | (100 | ) | ||||||||||||
Financing activities | 273 | (102 | ) | 171 | 314 | 9 | |||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (7 | ) | (2 | ) | (9 | ) | 5 | (9 | ) | ||||||||||||
Net increase (decrease) in cash and cash equivalents | 334 | (510 | ) | (176 | ) | 540 | 13 | ||||||||||||||
Cash and cash equivalents at beginning of period | 366 | 876 | 876 | 336 | 323 | ||||||||||||||||
Cash and cash equivalents at end of period | $ | 700 | $ | 366 | $ | 700 | $ | 876 | $ | 336 |
• | proceeds of $2,896 million from the Term Loan Credit Agreement entered into on the Emergence Date; |
• | proceeds of $350 million from the issuance of 2.25% Convertible Notes; and |
• | proceeds from the issuance of call spread warrants (the "Call Spread Warrants") of $58 million; partially offset by: |
• | repayment of the Company's Term Loan Credit Agreement of $2,918 million as part of the refinancing discussed below, net of proceeds received under the refinancing of $2,911 million; |
• | repayments to the Predecessor Company first lien debt holders of $2,061 million; |
• | repayment of the Predecessor Company DIP Credit Agreement of $725 million; |
• | adequate protection payments related to the bankruptcy of $111 million; |
• | payment of debt issuance costs of $107 million; |
• | the purchase of a bond hedge of $84 million; |
• | scheduled debt repayments under the Term Loan Credit Agreement of $22 million; and |
• | repayments in connection with financing the use of equipment for the performance of services under our agreement with HP of $13 million. |
• | proceeds from the Predecessor Company DIP Credit Agreement of $712 million, partially offset by: |
• | scheduled debt repayments of $223 million, inclusive of adequate protection payments; |
• | repayments in excess of borrowings under the Predecessor Company revolving credit facilities of $150 million; and |
• | repayments under our agreement with HP of $19 million. |
• | borrowings in excess of repayments under the Predecessor Company revolving credit facilities of $57 million, partially offset by: |
• | scheduled debt repayments of $25 million; and |
• | repayments under our agreement with HP of $19 million. |
Payments due by period | ||||||||||||||||||||
(In millions) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Total debt(1) | $ | 3,253 | $ | 29 | $ | 58 | $ | 408 | $ | 2,758 | ||||||||||
Interest payments due on debt(2) | 1,356 | 216 | 440 | 438 | 262 | |||||||||||||||
Purchase obligations with contract manufacturers and suppliers(3) | 138 | 138 | — | — | — | |||||||||||||||
Other purchase obligations(4) | 625 | 411 | 166 | 47 | 1 | |||||||||||||||
Operating lease obligations(5) | 194 | 48 | 68 | 39 | 39 | |||||||||||||||
Capital lease obligations (6) | 29 | 14 | 14 | 1 | — | |||||||||||||||
Pension benefit obligations(7) | 537 | 65 | 108 | 136 | 228 | |||||||||||||||
Total | $ | 6,132 | $ | 921 | $ | 854 | $ | 1,069 | $ | 3,288 |
(1) | The contractual obligations for debt represent principal payments only. |
(2) | The interest payments due on debt include the impact of the Company's interest rate swap agreements. The interest payments for the unhedged portion of the Company's Term Loan Credit Agreement were calculated by applying an applicable margin to a projected LIBOR rate. The interest payments for the Company's Convertible 2.25% senior notes were based on the contractual 2.25% coupon rate. An estimated unused facility fee was calculated for the ABL Credit Agreement using the contract rate. |
(3) | During the normal course of business, in order to manage manufacturing lead times and to help assure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that allow them to produce and procure inventory based upon forecasted requirements. If the Company does not meet the specified minimum purchase commitments under these agreements, it could be required to purchase the inventory. |
(4) | Other purchase obligations represent an estimate of contractual obligations in the ordinary course of business, other than commitments with contract manufacturers and suppliers, for which the Company had not received the goods or services as of September 30, 2018. Although contractual obligations are considered enforceable and legally binding, the terms generally allow the Company the option to cancel, reschedule and adjust its requirements based on the Company's business needs prior to the delivery of goods or performance of services. |
(5) | Contractual obligations for operating leases include future minimum lease payments, net of remaining sublease income of $10 million. |
(6) | The payments due for capital lease obligations do not include $2 million in future payments for interest. |
(7) | The Company sponsors non-contributory defined pension and post-retirement plans covering certain employees and retirees. The Company's general funding policy with respect to qualified pension plans is to contribute amounts at least sufficient to satisfy the minimum amount required by applicable law and regulations, or to directly pay benefits where appropriate. Most post-retirement medical benefits are not pre-funded. Consequently, the Company makes payments as these retiree medical benefits are disbursed. Upon emergence, the APPSE was transferred to the PBGC and the Avaya Supplemental Pension Plan was terminated. The amounts presented represent estimated minimum funding requirements through fiscal 2028. |
• | Debt service—We expect to make payments of approximately $245 million during fiscal 2019 in principal and interest associated with the Term Loan Credit Agreement, and interest and fees associated with our ABL Credit Agreement and 2.25% Convertible Notes due 2023. In the ordinary course of business, we may from time to time borrow and repay amounts under our ABL Credit Agreement. |
• | Restructuring payments—We expect to make payments of approximately $45 million to $50 million during fiscal 2019 for employee separation costs and lease termination obligations associated with restructuring actions we have taken through September 30, 2018. The Company continues to evaluate opportunities to streamline its operations and identify additional cost savings globally. |
• | Capital expenditures—We expect to spend approximately $75 million to $85 million for capital expenditures and capitalized software development costs during fiscal 2019. |
• | Benefit obligations—We estimate we will make payments under our pension and post-retirement benefit obligations totaling $65 million during fiscal 2019. These payments include: $26 million to satisfy the minimum statutory funding requirements of our U.S. qualified pension plans; $25 million for our non-U.S. benefit plans, which are predominantly not pre-funded; and $14 million for represented retiree post-retirement benefits. See discussion in Note 15, “Benefit Obligations,” to our Consolidated Financial Statements for further details. |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||
(In millions) | 2017 | 2016 | ||||||||||||||
Net income (loss) | $ | 287 | $ | 2,977 | $ | (182 | ) | $ | (730 | ) | ||||||
Interest expense (a) | 169 | 14 | 246 | 471 | ||||||||||||
Interest income | (5 | ) | (2 | ) | (4 | ) | (1 | ) | ||||||||
(Benefit from) provision for income taxes | (546 | ) | 459 | (16 | ) | 11 | ||||||||||
Depreciation and amortization | 384 | 31 | 326 | 374 | ||||||||||||
EBITDA | 289 | 3,479 | 370 | 125 | ||||||||||||
Impact of fresh start accounting adjustments (b) | 196 | — | — | — | ||||||||||||
Restructuring charges, net | 81 | 14 | 30 | 105 | ||||||||||||
Advisory fees (c) | 18 | 3 | 85 | 43 | ||||||||||||
Acquisition-related costs (d) | 15 | — | 1 | 2 | ||||||||||||
Reorganization items, net | — | (3,416 | ) | 98 | — | |||||||||||
Third-party sales transformation costs (e) | — | — | — | 5 | ||||||||||||
Non-cash share-based compensation | 19 | — | 11 | 19 | ||||||||||||
Impairment of indefinite-lived intangible assets | — | — | 65 | 100 | ||||||||||||
Goodwill impairment | — | — | 52 | 442 | ||||||||||||
Impairment of long-lived assets | — | — | 3 | — | ||||||||||||
Loss on sale/disposal of long-lived assets, net | 4 | 1 | — | 1 | ||||||||||||
Gain on sale of Networking business | — | — | (2 | ) | — | |||||||||||
Loss on equity investment | — | — | — | 11 | ||||||||||||
Resolution of certain legal matters (f) | — | 37 | 64 | 106 | ||||||||||||
Change in fair value of Preferred Series B embedded derivative (g) | — | — | — | (73 | ) | |||||||||||
Change in fair value of Emergence Date Warrants | 17 | — | — | — | ||||||||||||
Securities registration fees (h) | — | — | — | 1 | ||||||||||||
Gain on foreign currency transactions | (28 | ) | — | (2 | ) | (10 | ) | |||||||||
Pension/OPEB/nonretirement postemployment retirement benefits and long-term disability costs(i) | — | 17 | 90 | 63 | ||||||||||||
Other | — | — | 1 | — | ||||||||||||
Adjusted EBITDA | $ | 611 | $ | 135 | $ | 866 | $ | 940 |
(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 periods from October 1, 2017 through December 15, 2017 and January 19, 2017 through September 30, 2017, contractual interest expense related to debt subject to compromise of $94 million and $316 million, respectively, had not been recorded as interest expense, as it was not 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) | Advisory fees represent costs incurred to assist in the assessment of strategic and financial alternatives to improve the Company's capital structure. Also included in advisory fees for the prior year periods were sponsors’ fees, which represented 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. Effective as of emergence from bankruptcy, the Company ceased being an affiliate of the Sponsors and the management services agreement and related monitoring fees no longer exist. |
(d) | In fiscal 2018, acquisition-related costs include investment banking, legal and other costs related to the acquisition of Spoken, including the accelerated vesting of certain Spoken stock options in connection with the acquisition. |
(e) | Third-party sales transformation costs are consulting fees incurred in support of the Company’s sales initiatives and the realignment of its sales organization. |
(f) | Costs in connection with the resolution of certain legal matters include reserves and settlements, as well as associated legal costs. |
(g) | Represents the gain on changes in the fair value of certain embedded derivative features of the Predecessor Company’s Series B preferred stock. Under GAAP, these embedded features must be recognized at fair value at each balance sheet date with the changes in the fair value recognized in operations. The Predecessor Company's Series B preferred stock was canceled upon the Company's emergence from bankruptcy. |
(h) | Represents third-party fees incurred in connection with the Company’s registration statement filed with the SEC on Form S-1, Amendment No. 8, which was subsequently withdrawn on January 23, 2017. |
(i) | Represents that portion of our pension and post-retirement benefit costs which represent the amortization of prior service costs and net actuarial gain (loss) associated with these benefits. |
Item 7A. | Quantitative and Qualitative Disclosures About Market Risk |
Item 8. | Financial Statements and Supplementary Data |
Page | |
Report of Independent Registered Public Accounting Firm | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations | |
Consolidated Statements of Comprehensive Income (Loss) | |
Consolidated Balance Sheets | |
Consolidated Statements of Changes in Stockholders' Equity (Deficit) | |
Consolidated Statements of Cash Flows | |
Notes to Consolidated Financial Statements |
Successor | Predecessor | ||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | |||||||||||||||
2017 | 2016 | ||||||||||||||||
REVENUE | |||||||||||||||||
Products | $ | 989 | $ | 253 | $ | 1,437 | $ | 1,755 | |||||||||
Services | 1,258 | 351 | 1,835 | 1,947 | |||||||||||||
2,247 | 604 | 3,272 | 3,702 | ||||||||||||||
COSTS | |||||||||||||||||
Products: | |||||||||||||||||
Costs | 372 | 84 | 499 | 629 | |||||||||||||
Amortization of technology intangible assets | 135 | 3 | 20 | 30 | |||||||||||||
Services | 597 | 155 | 745 | 785 | |||||||||||||
1,104 | 242 | 1,264 | 1,444 | ||||||||||||||
GROSS PROFIT | 1,143 | 362 | 2,008 | 2,258 | |||||||||||||
OPERATING EXPENSES | |||||||||||||||||
Selling, general and administrative | 888 | 264 | 1,261 | 1,401 | |||||||||||||
Research and development | 172 | 38 | 225 | 273 | |||||||||||||
Amortization of intangible assets | 127 | 10 | 204 | 226 | |||||||||||||
Impairment of indefinite-lived intangible assets | — | — | 65 | 100 | |||||||||||||
Goodwill impairment | — | — | 52 | 442 | |||||||||||||
Restructuring charges, net | 81 | 14 | 30 | 105 | |||||||||||||
1,268 | 326 | 1,837 | 2,547 | ||||||||||||||
OPERATING (LOSS) INCOME | (125 | ) | 36 | 171 | (289 | ) | |||||||||||
Interest expense | (169 | ) | (14 | ) | (246 | ) | (471 | ) | |||||||||
Other income (expense), net | 35 | (2 | ) | (25 | ) | 41 | |||||||||||
Reorganization items, net | — | 3,416 | (98 | ) | — | ||||||||||||
(LOSS) INCOME BEFORE INCOME TAXES | (259 | ) | 3,436 | (198 | ) | (719 | ) | ||||||||||
Benefit from (provision for) income taxes | 546 | (459 | ) | 16 | (11 | ) | |||||||||||
NET INCOME (LOSS) | $ | 287 | $ | 2,977 | $ | (182 | ) | $ | (730 | ) | |||||||
NET INCOME (LOSS) PER SHARE | |||||||||||||||||
Basic | $ | 2.61 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | |||||||
Diluted | $ | 2.58 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | |||||||
Weighted average shares outstanding | |||||||||||||||||
Basic | 109.9 | 497.3 | 497.1 | 500.7 | |||||||||||||
Diluted | 111.1 | 497.3 | 497.1 | 500.7 |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||
2017 | 2016 | |||||||||||||||
Net income (loss) | $ | 287 | $ | 2,977 | $ | (182 | ) | $ | (730 | ) | ||||||
Other comprehensive income (loss): | ||||||||||||||||
Pension, post-retirement and postemployment benefit-related items, net of income taxes of $(19) for the period from December 15, 2017 through September 30, 2018; $(58) for the period from October 1, 2017 through December 15, 2017; and $(19) for fiscal 2017 | 51 | 655 | 252 | (259 | ) | |||||||||||
Cumulative translation adjustment | (31 | ) | 3 | (39 | ) | (18 | ) | |||||||||
Change in interest rate swaps, net of income taxes of $1 for the period from December 16, 2017 through September 30, 2018 | (2 | ) | — | — | — | |||||||||||
Other comprehensive income (loss) | 18 | 658 | 213 | (277 | ) | |||||||||||
Elimination of Predecessor Company accumulated other comprehensive loss | — | 790 | — | — | ||||||||||||
Total comprehensive income (loss) | $ | 305 | $ | 4,425 | $ | 31 | $ | (1,007 | ) |
Successor | Predecessor | |||||||
September 30, 2018 | September 30, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 700 | $ | 876 | ||||
Accounts receivable, net | 377 | 536 | ||||||
Inventory | 81 | 90 | ||||||
Other current assets | 170 | 275 | ||||||
TOTAL CURRENT ASSETS | 1,328 | 1,777 | ||||||
Property, plant and equipment, net | 250 | 200 | ||||||
Deferred income taxes, net | 29 | — | ||||||
Intangible assets, net | 3,234 | 311 | ||||||
Goodwill | 2,764 | 3,542 | ||||||
Other assets | 74 | 68 | ||||||
TOTAL ASSETS | $ | 7,679 | $ | 5,898 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Debt maturing within one year | $ | 29 | $ | 725 | ||||
Accounts payable | 266 | 282 | ||||||
Payroll and benefit obligations | 145 | 127 | ||||||
Deferred revenue | 484 | 614 | ||||||
Business restructuring reserve | 51 | 35 | ||||||
Other current liabilities | 148 | 90 | ||||||
TOTAL CURRENT LIABILITIES | 1,123 | 1,873 | ||||||
Non-current liabilities: | ||||||||
Long-term debt, net of current portion | 3,097 | — | ||||||
Pension obligations | 671 | 513 | ||||||
Other post-retirement obligations | 176 | — | ||||||
Deferred income taxes, net | 140 | 32 | ||||||
Business restructuring reserve | 47 | 34 | ||||||
Other liabilities | 374 | 170 | ||||||
TOTAL NON-CURRENT LIABILITIES | 4,505 | 749 | ||||||
LIABILITIES SUBJECT TO COMPROMISE | — | 7,705 | ||||||
TOTAL LIABILTIES | 5,628 | 10,327 | ||||||
Commitments and contingencies (Note 22) | ||||||||
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 | ||||||
STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
Successor preferred stock, $0.01 par value; 55,000,000 shares authorized, no shares issued or outstanding at September 30, 2018 | — | — | ||||||
Predecessor common stock, $0.001 par value; 750,000,000 shares authorized, 494,768,243 shares issued and outstanding at September 30, 2017 | — | — | ||||||
Successor common stock, $0.01 par value; 550,000,000 shares authorized, 110,218,653 shares issued and 110,012,790 shares outstanding at September 30, 2018 | 1 | — | ||||||
Additional paid-in capital | 1,745 | 2,389 | ||||||
Retained earnings (accumulated deficit) | 287 | (5,954 | ) | |||||
Accumulated other comprehensive income (loss) | 18 | (1,448 | ) | |||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 2,051 | (5,013 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 7,679 | $ | 5,898 |
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Deficit | |||||||||||||||||||
Shares | Par Value | ||||||||||||||||||||||
Balance as of September 30, 2015 (Predecessor) | 491.8 | $ | — | $ | 2,425 | $ | (5,042 | ) | $ | (1,384 | ) | $ | (4,001 | ) | |||||||||
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan | 2.8 | (3 | ) | (3 | ) | ||||||||||||||||||
Amortization of share-based compensation | 16 | 16 | |||||||||||||||||||||
Accrued dividends on Series A preferred stock | (8 | ) | (8 | ) | |||||||||||||||||||
Accrued dividends on Series B preferred stock | (20 | ) | (20 | ) | |||||||||||||||||||
Accretion on Series B preferred stock | (13 | ) | (13 | ) | |||||||||||||||||||
Reclassifications to equity awards on redeemable shares | 13 | 13 | |||||||||||||||||||||
Net loss | (730 | ) | (730 | ) | |||||||||||||||||||
Other comprehensive loss | (277 | ) | (277 | ) | |||||||||||||||||||
Balance as of September 30, 2016 (Predecessor) | 494.6 | $ | — | $ | 2,410 | $ | (5,772 | ) | $ | (1,661 | ) | $ | (5,023 | ) | |||||||||
Issuance of common stock, net of shares redeemed and canceled, under employee stock option plan | 0.2 | — | — | ||||||||||||||||||||
Amortization of share-based compensation | 11 | 11 | |||||||||||||||||||||
Accrued dividends on Series A preferred stock | (9 | ) | (9 | ) | |||||||||||||||||||
Accrued dividends on Series B preferred stock | (22 | ) | (22 | ) | |||||||||||||||||||
Reclassifications to equity awards on redeemable shares | (1 | ) | (1 | ) | |||||||||||||||||||
Net loss | (182 | ) | (182 | ) | |||||||||||||||||||
Other comprehensive income | 213 | 213 | |||||||||||||||||||||
Balance as of September 30, 2017 (Predecessor) | 494.8 | $ | — | $ | 2,389 | $ | (5,954 | ) | $ | (1,448 | ) | $ | (5,013 | ) | |||||||||
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 | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total Stockholders' Equity | |||||||||||||||||||
Shares | Par Value | ||||||||||||||||||||||
Balance as of December 15, 2017 (Predecessor) | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Issuance of Successor common stock | |||||||||||||||||||||||
Common stock issued for Predecessor debt | 103.9 | 1 | 1,575 | 1,576 | |||||||||||||||||||
Common stock issued for Pension Benefit Guaranty Corporation | 6.1 | — | 92 | 92 | |||||||||||||||||||
Balance as of December 15, 2017 (Predecessor) | 110.0 | $ | 1 | $ | 1,667 | $ | — | $ | — | $ | 1,668 | ||||||||||||
Balance as of December 16, 2017 (Successor) | 110.0 | $ | 1 | $ | 1,667 | $ | — | $ | — | $ | 1,668 | ||||||||||||
Issuance of common stock under the equity incentive plan | 0.2 | — | |||||||||||||||||||||
Shares repurchased and retired for tax withholding on vesting of restricted stock units | (2 | ) | (2 | ) | |||||||||||||||||||
Equity component of convertible notes, net of issuance costs and income taxes | 67 | 67 | |||||||||||||||||||||
Purchase of convertible note bond hedge, net of income taxes | (64 | ) | (64 | ) | |||||||||||||||||||
Issuance of call spread warrants | 58 | 58 | |||||||||||||||||||||
Amortization of share-based compensation | 19 | 19 | |||||||||||||||||||||
Net income | 287 | 287 | |||||||||||||||||||||
Other comprehensive income | 18 | 18 | |||||||||||||||||||||
Balance as of September 30, 2018 (Successor) | 110.2 | $ | 1 | $ | 1,745 | $ | 287 | $ | 18 | $ | 2,051 |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||
2017 | 2016 | |||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net income (loss) | $ | 287 | $ | 2,977 | $ | (182 | ) | $ | (730 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: | ||||||||||||||||
Depreciation and amortization | 384 | 31 | 326 | 374 | ||||||||||||
Share-based compensation | 19 | — | 11 | 16 | ||||||||||||
Amortization of debt issuance costs | 4 | — | 36 | 12 | ||||||||||||
Accretion of debt discount | 4 | — | 25 | 8 | ||||||||||||
Change in fair value of Preferred Series B derivative | — | — | — | (73 | ) | |||||||||||
Deferred income taxes, net | (588 | ) | 455 | (39 | ) | (53 | ) | |||||||||
Gain on sale of Networking business | — | — | (2 | ) | — | |||||||||||
Impairment of indefinite-lived intangible assets | — | — | 65 | 100 | ||||||||||||
Goodwill impairment | — | — | 52 | 442 | ||||||||||||
Loss on investment | — | — | — | 11 | ||||||||||||
Post-retirement and pension curtailments | — | — | (8 | ) | 1 | |||||||||||
Change in fair value of emergence date warrants | 17 | — | — | — | ||||||||||||
Unrealized gain on foreign currency transactions | (36 | ) | — | (4 | ) | (12 | ) | |||||||||
Other non-cash charges, net | 3 | — | 4 | 3 | ||||||||||||
Reorganization items: | ||||||||||||||||
Net gain on settlement of Liabilities subject to compromise | — | (1,778 | ) | — | — | |||||||||||
Payment to PBGC | — | (340 | ) | — | — | |||||||||||
Payment to pension trust | — | (49 | ) | — | — | |||||||||||
Payment of unsecured claims | — | (58 | ) | — | — | |||||||||||
Fresh start adjustments, net | — | (1,697 | ) | — | — | |||||||||||
Non-cash and financing related reorganization items, net | — | 26 | 52 | — | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | 13 | 40 | 24 | 94 | ||||||||||||
Inventory | 36 | — | 24 | 17 | ||||||||||||
Accounts payable | (16 | ) | (40 | ) | (27 | ) | (37 | ) | ||||||||
Payroll and benefit obligations | (71 | ) | 16 | (34 | ) | (188 | ) | |||||||||
Business restructuring reserve | 29 | (7 | ) | (51 | ) | (19 | ) | |||||||||
Deferred revenue | 160 | 28 | (44 | ) | 28 | |||||||||||
Other assets and liabilities | (43 | ) | (18 | ) | 63 | 119 | ||||||||||
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES | 202 | (414 | ) | 291 | 113 | |||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Capital expenditures | (61 | ) | (13 | ) | (57 | ) | (94 | ) | ||||||||
Capitalized software development costs | — | — | (2 | ) | (2 | ) | ||||||||||
Acquisition of businesses, net of cash acquired | (157 | ) | — | (4 | ) | (20 | ) | |||||||||
Proceeds from sale of Networking business | — | — | 70 | — | ||||||||||||
Proceeds from sale-leaseback transactions | 17 | — | — | 14 | ||||||||||||
Restricted cash | 65 | 21 | (80 | ) | — | |||||||||||
Other investing activities, net | 2 | — | 3 | 2 | ||||||||||||
NET CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES | (134 | ) | 8 | (70 | ) | (100 | ) | |||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from Term Loan Credit Agreement | — | 2,896 | — | — | ||||||||||||
Repayment of debtor-in-possession financing | — | (725 | ) | — | — | |||||||||||
Repayment of first lien debt | — | (2,061 | ) | — | — | |||||||||||
Proceeds from debtor-in-possession financing | — | — | 712 | — | ||||||||||||
Repayment of Term Loan Credit Agreement due to refinancing | (2,918 | ) | — | — | — | |||||||||||
Proceeds from Term Loan Credit Agreement due to refinancing | 2,911 | — | — | — | ||||||||||||
Proceeds from issuance of convertible notes | 350 | — | — | — | ||||||||||||
Proceeds from issuance of call spread warrants | 58 | — | — | — | ||||||||||||
Purchase of convertible note bond hedge | (84 | ) | — | — | — | |||||||||||
Proceeds from foreign asset-based revolving credit facility | — | — | — | 53 | ||||||||||||
Repayment of foreign asset-based revolving credit facility | — | — | (55 | ) | (18 | ) | ||||||||||
Proceeds from domestic asset-based revolving credit facility | — | — | — | 260 | ||||||||||||
Repayment of domestic asset-based revolving credit facility | — | — | (77 | ) | (238 | ) | ||||||||||
Repayment of long-term debt, including adequate protection payments | (22 | ) | (111 | ) | (223 | ) | (25 | ) | ||||||||
Debt issuance costs | (10 | ) | (97 | ) | (1 | ) | — | |||||||||
Proceeds from borrowings on revolving loans under the senior secured credit agreement | — | — | — | 35 | ||||||||||||
Repayments of borrowings on revolving loans under the senior secured credit agreement | — | — | (18 | ) | (35 | ) | ||||||||||
Payments related to sale-leaseback transactions | (9 | ) | (4 | ) | (19 | ) | (19 | ) | ||||||||
Other financing activities, net | (3 | ) | — | (5 | ) | (4 | ) | |||||||||
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES | 273 | (102 | ) | 314 | 9 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | (7 | ) | (2 | ) | 5 | (9 | ) | |||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 334 | (510 | ) | 540 | 13 | |||||||||||
Cash and cash equivalents at beginning of period | 366 | 876 | 336 | 323 | ||||||||||||
Cash and cash equivalents at end of period | $ | 700 | $ | 366 | $ | 876 | $ | 336 |
December 16, 2017 (Successor) | |||||||||||
(In millions, except per share amounts) | As Previously Reported | Adjustments | Revised | ||||||||
Consolidated Balance Sheet: | |||||||||||
Cash | $ | 340 | $ | 26 | $ | 366 | |||||
Accounts receivable | 417 | (26 | ) | 391 | |||||||
Goodwill | 2,632 | 26 | 2,658 | ||||||||
Total Assets | 7,583 | 26 | 7,609 | ||||||||
Additional paid-in capital (Successor) | 1,641 | 26 | 1,667 | ||||||||
Total Stockholders' Equity | 1,642 | 26 | 1,668 | ||||||||
Total Liabilities and Stockholders' Equity | 7,583 | 26 | 7,609 | ||||||||
Successor common stock value per share | $ | 14.93 | $ | 0.23 | $ | 15.16 |
Period from October 1, 2017 through December 15, 2017 (Predecessor) | |||||||||||
(In millions) | As Previously Reported | Adjustments | Revised | ||||||||
Consolidated Statement of Cash Flows: | |||||||||||
Change in Accounts receivable | $ | 14 | $ | 26 | $ | 40 | |||||
Net gain on settlement of Liabilities subject to compromise | (1,804 | ) | 26 | (1,778 | ) | ||||||
Fresh start adjustments | (1,671 | ) | (26 | ) | (1,697 | ) | |||||
Net Cash Used from Operating Activities | (440 | ) | 26 | (414 | ) | ||||||
Net decrease in cash and cash equivalents | (536 | ) | 26 | (510 | ) |
• | 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 canceled, 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 canceled, 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 canceled, 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 |
• | 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 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 distributed to the general unsecured creditors will be distributed to the holders of the Predecessor first lien obligations. |
(In millions, except per share amount) | As Previously Reported | Adjustments | Revised | ||||||||
Enterprise value | $ | 5,721 | $ | — | $ | 5,721 | |||||
Plus: | |||||||||||
Cash and cash equivalents | 340 | 26 | 366 | ||||||||
Less: | |||||||||||
Minimum cash required for operations | (120 | ) | — | (120 | ) | ||||||
Fair value of Term Loan Credit Agreement(1) | (2,896 | ) | — | (2,896 | ) | ||||||
Fair value of capitalized leases | (20 | ) | — | (20 | ) | ||||||
Fair value of pension and other post-retirement obligations, net of tax(2) | (856 | ) | — | (856 | ) | ||||||
Change in net deferred tax liabilities from reorganization | (510 | ) | — | (510 | ) | ||||||
Fair value of Successor Emergence Date Warrants(3) | (17 | ) | — | (17 | ) | ||||||
Fair value of Successor common stock | $ | 1,642 | $ | 26 | $ | 1,668 | |||||
Shares issued at December 15, 2017 upon emergence | 110.0 | — | 110.0 | ||||||||
Successor common stock value per share | $ | 14.93 | $ | 0.23 | $ | 15.16 |
(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 Emergence Date Warrants was estimated using the Black-Scholes pricing model. |
(In millions) | As Previously Reported | Adjustments | Revised | ||||||||
Enterprise value | $ | 5,721 | $ | — | $ | 5,721 | |||||
Plus: | |||||||||||
Non-debt current liabilities | 955 | — | 955 | ||||||||
Non-debt non-current liabilities | 2,090 | — | 2,090 | ||||||||
Excess cash and cash equivalents | 220 | 26 | 246 | ||||||||
Less: | |||||||||||
Pension and other post-retirement obligations, net of deferred taxes | (856 | ) | — | (856 | ) | ||||||
Capital lease obligations | (20 | ) | — | (20 | ) | ||||||
Change in net deferred tax liabilities from reorganization | (510 | ) | — | (510 | ) | ||||||
Emergence Date Warrants issued | (17 | ) | — | (17 | ) | ||||||
Reorganization value of Successor assets | $ | 7,583 | $ | 26 | $ | 7,609 |
As Previously Reported | |||||||||||||||||||
(In millions) | Predecessor Company December 15, 2017 | Reorganization Adjustments | Fresh Start Adjustments | Successor Company December 16, 2017 | |||||||||||||||
ASSETS | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 744 | $ | (404 | ) | (1) | $ | — | $ | 340 | |||||||||
Accounts receivable, net | 523 | — | (106 | ) | (21) | 417 | |||||||||||||
Inventory | 90 | — | 29 | (22) | 119 | ||||||||||||||
Other current assets | 374 | (58 | ) | (2) | (66 | ) | (23) | 250 | |||||||||||
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 |
Adjustments | |||||||||||||||||||
(In millions) | Predecessor Company December 15, 2017 | Reorganization Adjustments | Fresh Start Adjustments | Successor Company December 16, 2017 | |||||||||||||||
ASSETS | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 26 | $ | — | $ | — | $ | 26 | |||||||||||
Accounts receivable, net | (26 | ) | — | — | (26 | ) | |||||||||||||
Inventory | — | — | — | — | |||||||||||||||
Other current assets | — | — | — | — | |||||||||||||||
TOTAL CURRENT ASSETS | — | — | — | — | |||||||||||||||
Property, plant and equipment, net | — | — | — | — | |||||||||||||||
Deferred income taxes, net | — | — | — | — | |||||||||||||||
Intangible assets, net | — | — | — | — | |||||||||||||||
Goodwill | — | — | 26 | (27) | 26 | ||||||||||||||
Other assets | — | — | — | — | |||||||||||||||
TOTAL ASSETS | $ | — | $ | — | $ | 26 | $ | 26 | |||||||||||
LIABILITIES | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Debt maturing within one year | $ | — | $ | — | $ | — | $ | — | |||||||||||
Accounts payable | — | — | — | — | |||||||||||||||
Payroll and benefit obligations | — | — | — | — | |||||||||||||||
Deferred revenue | — | — | — | — | |||||||||||||||
Business restructuring reserve | — | — | — | — | |||||||||||||||
Other current liabilities | — | — | — | — | |||||||||||||||
TOTAL CURRENT LIABILITIES | — | — | — | — | |||||||||||||||
Non-current liabilities: | |||||||||||||||||||
Long-term debt | — | — | — | — | |||||||||||||||
Pension obligations | — | — | — | — | |||||||||||||||
Other post-retirement obligations | — | — | — | — | |||||||||||||||
Deferred income taxes, net | — | — | — | — | |||||||||||||||
Business restructuring reserve | — | — | — | — | |||||||||||||||
Other liabilities | — | — | — | — | |||||||||||||||
TOTAL NON-CURRENT LIABILITIES | — | — | — | — | |||||||||||||||
LIABILITIES SUBJECT TO COMPROMISE | — | — | — | — | |||||||||||||||
TOTAL LIABILITIES | — | — | — | — | |||||||||||||||
Commitments and contingencies | |||||||||||||||||||
Equity awards on redeemable shares | — | — | — | — | |||||||||||||||
Preferred stock: | |||||||||||||||||||
Series B | — | — | — | — | |||||||||||||||
Series A | — | — | — | — | |||||||||||||||
STOCKHOLDERS' (DEFICIT) EQUITY | |||||||||||||||||||
Common stock (Successor) | — | — | — | — | |||||||||||||||
Additional paid-in capital (Successor) | — | 26 | (18) | — | 26 | ||||||||||||||
Common stock (Predecessor) | — | — | — | — | |||||||||||||||
Additional paid-in capital (Predecessor) | — | — | — | — | |||||||||||||||
(Accumulated deficit) retained earnings | — | (26 | ) | (19) | 26 | (36) | — | ||||||||||||
Accumulated other comprehensive (loss) income | — | — | — | — | |||||||||||||||
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY | — | — | 26 | 26 | |||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | $ | — | $ | — | $ | 26 | $ | 26 |
Revised | |||||||||||||||||||
(In millions) | Predecessor Company December 15, 2017 | Reorganization Adjustments | Fresh Start Adjustments | Successor Company December 16, 2017 | |||||||||||||||
ASSETS | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 770 | $ | (404 | ) | (1) | $ | — | $ | 366 | |||||||||
Accounts receivable, net | 497 | — | (106 | ) | (21) | 391 | |||||||||||||
Inventory | 90 | — | 29 | (22) | 119 | ||||||||||||||
Other current assets | 374 | (58 | ) | (2) | (66 | ) | (23) | 250 | |||||||||||
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 | — | (883 | ) | (27) | 2,658 | |||||||||||||
Other assets | 70 | 6 | (4) | (27 | ) | (28) | 49 | ||||||||||||
TOTAL ASSETS | $ | 5,834 | $ | (408 | ) | $ | 2,183 | $ | 7,609 | ||||||||||
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) | — | 1,667 | (18) | — | 1,667 | ||||||||||||||
Common stock (Predecessor) | — | — | — | — | |||||||||||||||
Additional paid-in capital (Predecessor) | 2,387 | (2,387 | ) | (17) | — | — | |||||||||||||
(Accumulated deficit) retained earnings | (5,978 | ) | 4,846 | (19) | 1,132 | (36) | — | ||||||||||||
Accumulated other comprehensive (loss) income | (1,454 | ) | 664 | (20) | 790 | (35) | — | ||||||||||||
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY | (5,045 | ) | 4,791 | 1,922 | 1,668 | ||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | $ | 5,834 | $ | (408 | ) | $ | 2,183 | $ | 7,609 |
(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 Credit Agreement 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 and 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 foreign prepaid taxes. |
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. |
6. | 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 a payment of $3 million of bankruptcy related professional fees, partially offset by reinstatement of $4 million contract cure costs from liabilities subject to compromise. |
7. | Payroll and Benefit 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. |
(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 costs 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 Emergence Date Warrants issued to the holders of the Predecessor second lien obligations. |
(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 | $ | — |
(In millions) | As Previously Reported | Adjustments | Revised | ||||||||
Pre-petition first lien debt | $ | 734 | $ | (23 | ) | $ | 711 | ||||
Pre-petition second lien debt | 1,357 | (1 | ) | 1,356 | |||||||
Avaya pension plan for salaried employees | (514 | ) | (2 | ) | (516 | ) | |||||
General unsecured creditors' claims | 227 | — | 227 | ||||||||
Net gain on settlement of Liabilities subject to compromise | $ | 1,804 | $ | (26 | ) | $ | 1,778 |
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 canceled on the Emergence Date without any recovery on account thereof. |
18. | Issuance of Successor Common Stock and Emergence Date 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 $1,509 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 $67 million) and 5.6 million Emergence Date Warrants to purchase a like amount of 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 a stipulation settlement with the PBGC, the PBGC received $340 million in cash and 6.1 million shares of common stock (fair value of $92 million). |
19. | Accumulated Deficit. |
(In millions) | As Previously Reported | Adjustments | Revised | ||||||||
Accumulated deficit: | |||||||||||
Net gain on settlement of liabilities subject to compromise | $ | 1,804 | $ | (26 | ) | $ | 1,778 | ||||
Expense for certain professional fees | (26 | ) | — | (26 | ) | ||||||
Benefit from income taxes | 118 | — | 118 | ||||||||
Cancellation of Predecessor equity awards | 6 | — | 6 | ||||||||
Cancellation of Predecessor Preferred stock Series B | 397 | — | 397 | ||||||||
Cancellation of Predecessor Preferred stock Series A | 186 | — | 186 | ||||||||
Cancellation of Predecessor Common stock | 2,387 | — | 2,387 | ||||||||
Total | $ | 4,872 | $ | (26 | ) | $ | 4,846 |
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. |
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. |
(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: |
Successor | Predecessor | |||||||||||
(In millions) | 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 |
(In millions) | As Previously Reported | Adjustments | Revised | ||||||||
Reorganization value of Successor Company | $ | 7,583 | $ | 26 | $ | 7,609 | |||||
Less: Fair value of Successor Company assets | (4,951 | ) | — | (4,951 | ) | ||||||
Reorganization value of Successor Company assets in excess of fair value - Goodwill | $ | 2,632 | $ | 26 | $ | 2,658 |
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 Company 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 recognizes deferred revenue relating to sales transactions that have been billed, but for which the related account receivable has not yet been collected. |
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: |
(In millions) | As Previously Reported | Adjustments | Revised | ||||||||
Eliminate Predecessor Intangible assets | $ | (298 | ) | $ | — | $ | (298 | ) | |||
Eliminate Predecessor Goodwill | (3,541 | ) | — | (3,541 | ) | ||||||
Establish Successor Intangible assets | 3,435 | — | 3,435 | ||||||||
Establish Successor Goodwill | 2,632 | 26 | 2,658 | ||||||||
Fair value adjustment to Inventory | 29 | — | 29 | ||||||||
Fair value adjustment to Other current assets | (66 | ) | — | (66 | ) | ||||||
Fair value adjustment to Property, plant and equipment | 116 | — | 116 | ||||||||
Fair value adjustment to Other assets | (27 | ) | — | (27 | ) | ||||||
Fair value adjustment to Deferred revenue | 235 | — | 235 | ||||||||
Fair value adjustment to Business restructuring reserves | (4 | ) | — | (4 | ) | ||||||
Fair value adjustment to Other current liabilities | 3 | — | 3 | ||||||||
Fair value adjustment to Long-term debt | (96 | ) | — | (96 | ) | ||||||
Fair value adjustment to Other liabilities | 43 | — | 43 | ||||||||
Release Predecessor Accumulated comprehensive loss | (790 | ) | — | (790 | ) | ||||||
Fresh start adjustments included in Reorganization items, net | 1,671 | 26 | 1,697 | ||||||||
Tax impact of fresh start adjustments | (565 | ) | — | (565 | ) | ||||||
Gain on fresh start accounting, net | $ | 1,106 | $ | 26 | $ | 1,132 |
(In millions) | Products & Solutions | Services | Total | ||||||||
Cost | $ | 2,668 | $ | 2,537 | $ | 5,205 | |||||
Accumulated impairment losses | (1,576 | ) | — | (1,576 | ) | ||||||
Balance as of September 30, 2016 (Predecessor) | 1,092 | 2,537 | 3,629 | ||||||||
Sale of Networking business | — | (36 | ) | (36 | ) | ||||||
Impairment loss | — | (52 | ) | (52 | ) | ||||||
Adjustments | 1 | — | 1 | ||||||||
Balance as of September 30, 2017 (Predecessor) | $ | 1,093 | $ | 2,449 | $ | 3,542 |
As Previously Reported | |||||||||||
(In millions) | Products & Solutions | Services | Total | ||||||||
Cost | $ | 2,669 | $ | 2,501 | $ | 5,170 | |||||
Accumulated impairment losses | (1,576 | ) | (52 | ) | (1,628 | ) | |||||
Balance as of September 30, 2017 (Predecessor) | 1,093 | 2,449 | 3,542 | ||||||||
Adjustments | (1 | ) | — | (1 | ) | ||||||
Impact of fresh start accounting | 68 | (977 | ) | (909 | ) | ||||||
Balance as of December 15, 2017 (Predecessor) | $ | 1,160 | $ | 1,472 | $ | 2,632 | |||||
Balance as of December 16, 2017 (Successor) | $ | 1,160 | $ | 1,472 | $ | 2,632 |
Adjustments | |||||||||||
(In millions) | Products & Solutions | Services | Total | ||||||||
Cost | $ | — | $ | — | $ | — | |||||
Accumulated impairment losses | — | — | — | ||||||||
Balance as of September 30, 2017 (Predecessor) | — | — | — | ||||||||
Adjustments | — | — | — | ||||||||
Impact of fresh start accounting | 11 | 15 | 26 | ||||||||
Balance as of December 15, 2017 (Predecessor) | $ | 11 | $ | 15 | $ | 26 | |||||
Balance as of December 16, 2017 (Successor) | $ | 11 | $ | 15 | $ | 26 |
Revised | |||||||||||
(In millions) | Products & Solutions | Services | Total | ||||||||
Cost | $ | 2,669 | $ | 2,501 | $ | 5,170 | |||||
Accumulated impairment losses | (1,576 | ) | (52 | ) | (1,628 | ) | |||||
Balance as of September 30, 2017 (Predecessor) | 1,093 | 2,449 | 3,542 | ||||||||
Adjustments | (1 | ) | — | (1 | ) | ||||||
Impact of fresh start accounting | 79 | (962 | ) | (883 | ) | ||||||
Balance as of December 15, 2017 (Predecessor) | $ | 1,171 | $ | 1,487 | $ | 2,658 | |||||
Balance as of December 16, 2017 (Successor) | $ | 1,171 | $ | 1,487 | $ | 2,658 | |||||
Spoken acquisition | 116 | — | 116 | ||||||||
Foreign currency fluctuations | (4 | ) | (6 | ) | (10 | ) | |||||
Balance as of September 30, 2018 (Successor) | $ | 1,283 | $ | 1,481 | $ | 2,764 |
(In millions) | Technology and Patents | Customer Relationships and Other Intangibles | Trademarks and Trade Names | Total | |||||||||||
Balance as of September 30, 2018 (Successor) | |||||||||||||||
Finite-lived intangible assets: | |||||||||||||||
Cost | $ | 959 | $ | 2,157 | $ | 43 | $ | 3,159 | |||||||
Accumulated amortization | (135 | ) | (124 | ) | (3 | ) | (262 | ) | |||||||
Finite-lived intangible assets, net | 824 | 2,033 | 40 | 2,897 | |||||||||||
Indefinite-lived intangible assets | 5 | — | 332 | 337 | |||||||||||
Intangible assets, net | $ | 829 | $ | 2,033 | $ | 372 | $ | 3,234 | |||||||
Balance as of September 30, 2017 (Predecessor) | |||||||||||||||
Finite-lived intangible assets: | |||||||||||||||
Cost | $ | 1,427 | $ | 2,196 | $ | — | $ | 3,623 | |||||||
Accumulated amortization | (1,411 | ) | (2,091 | ) | — | (3,502 | ) | ||||||||
Finite-lived intangible assets, net | 16 | 105 | — | 121 | |||||||||||
Indefinite-lived intangible assets: | |||||||||||||||
Cost | — | — | 545 | 545 | |||||||||||
Accumulated impairment | — | — | (355 | ) | (355 | ) | |||||||||
Indefinite-lived intangible assets, net | — | — | 190 | 190 | |||||||||||
Intangible assets, net | $ | 16 | $ | 105 | $ | 190 | $ | 311 |
(In millions) | |||
2019 | $ | 333 | |
2020 | 333 | ||
2021 | 332 | ||
2022 | 305 | ||
2023 and thereafter | 1,594 | ||
Total | $ | 2,897 |
Successor | Predecessor | ||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | |||||||||||||||
(In millions) | 2017 | 2016 | |||||||||||||||
DEPRECIATION AND AMORTIZATION | |||||||||||||||||
Amortization of software development costs (included in Costs) | $ | — | $ | — | $ | 1 | $ | 1 | |||||||||
Amortization of intangible assets (included in Costs and Operating expenses) | 262 | 13 | 224 | 256 | |||||||||||||
Depreciation and amortization of property, plant and equipment and internal use software (included in Costs and Operating expenses) | 122 | 18 | 101 | 117 | |||||||||||||
Total depreciation and amortization | $ | 384 | $ | 31 | $ | 326 | $ | 374 | |||||||||
OTHER INCOME (EXPENSE), NET | |||||||||||||||||
Interest income | $ | 5 | $ | 2 | $ | 4 | $ | 1 | |||||||||
Foreign currency gains, net | 28 | — | 2 | 10 | |||||||||||||
Income from TSA, net | 5 | 3 | 3 | — | |||||||||||||
Gain on sale of Networking business | — | — | 2 | — | |||||||||||||
Loss on investment | — | — | — | (11 | ) | ||||||||||||
Change in fair value of Preferred B embedded derivative | — | — | — | 73 | |||||||||||||
Other pension and post-retirement benefit credits (costs), net | 13 | (8 | ) | (34 | ) | (27 | ) | ||||||||||
Change in fair value of Emergence Date Warrants | (17 | ) | — | — | — | ||||||||||||
Gain on sale of long-lived assets | 1 | — | — | — | |||||||||||||
Other, net | — | 1 | (2 | ) | (5 | ) | |||||||||||
Total other income (expense), net | $ | 35 | $ | (2 | ) | $ | (25 | ) | $ | 41 |
Successor | Predecessor | ||||||||||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | As Previously Reported | Adjustments | Revised | ||||||||||||||||||||||
Period from October 1, 2017 through December 15, 2017 | Period from October 1, 2017 through December 15, 2017 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||||||||||
(In millions) | 2017 | 2016 | |||||||||||||||||||||||
REORGANIZATION ITEMS, NET | |||||||||||||||||||||||||
Net gain on settlement of Liabilities subject to compromise | $ | — | $ | 1,804 | $ | (26 | ) | $ | 1,778 | $ | — | $ | — | ||||||||||||
Net gain on fresh start adjustments | — | 1,671 | 26 | 1,697 | — | — | |||||||||||||||||||
Bankruptcy-related professional fees | — | (56 | ) | — | (56 | ) | (66 | ) | — | ||||||||||||||||
Contract rejection fees / lease terminations | — | — | — | — | (18 | ) | — | ||||||||||||||||||
DIP Credit Agreement financing costs | — | — | — | — | (14 | ) | — | ||||||||||||||||||
Other items, net | — | (3 | ) | — | (3 | ) | — | — | |||||||||||||||||
Reorganization items, net | $ | — | $ | 3,416 | $ | — | $ | 3,416 | $ | (98 | ) | $ | — | ||||||||||||
Cash payments for reorganization items | $ | 1 | $ | 2,524 | $ | — | $ | 2,524 | $ | 47 | $ | — |
Successor | Predecessor | ||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | |||||||||||||||
(In millions) | 2017 | 2016 | |||||||||||||||
VALUATION AND QUALIFYING ACCOUNTS | |||||||||||||||||
Allowance for Doubtful Accounts Receivable: | |||||||||||||||||
Balance at beginning of period | $ | — | $ | 13 | $ | 16 | $ | 15 | |||||||||
Increase (decrease) in expense | 2 | 1 | (3 | ) | 1 | ||||||||||||
Reductions | — | (1 | ) | — | — | ||||||||||||
Impact of fresh start accounting | — | (13 | ) | — | — | ||||||||||||
Balance at end of period | $ | 2 | $ | — | $ | 13 | $ | 16 | |||||||||
Deferred Tax Asset Valuation Allowance: | |||||||||||||||||
Balance at beginning of period | $ | 836 | $ | 2,152 | $ | 2,256 | $ | 1,976 | |||||||||
Increase (decrease) in expense | 105 | (452 | ) | (65 | ) | 203 | |||||||||||
(Reductions) additions | (22 | ) | (393 | ) | (39 | ) | 77 | ||||||||||
Impact of fresh start accounting | — | (471 | ) | — | — | ||||||||||||
Balance at end of period | $ | 919 | $ | 836 | $ | 2,152 | $ | 2,256 |
Successor | Predecessor | ||||||||
(In millions) | As of September 30, 2018 | As of September 30, 2017 | |||||||
PROPERTY, PLANT AND EQUIPMENT, NET | |||||||||
Leasehold improvements | $ | 105 | $ | 142 | |||||
Machinery and equipment | 65 | 173 | |||||||
Rental equipment | 125 | 241 | |||||||
Assets under construction | 14 | 13 | |||||||
Internal use software | 112 | 240 | |||||||
Total property, plant and equipment | 421 | 809 | |||||||
Less: Accumulated depreciation and amortization | (171 | ) | (609 | ) | |||||
Property, plant and equipment, net | $ | 250 | $ | 200 |
Successor | Predecessor | ||||||||
(In millions) | As of September 30, 2018 | As of September 30, 2017 | |||||||
LIABILITIES SUBJECT TO COMPROMISE | |||||||||
Accounts payable | $ | — | $ | 40 | |||||
Debt subject to compromise including accrued interest(1) | — | 5,832 | |||||||
Pension obligations | — | 1,012 | |||||||
Payroll and benefit obligations | — | 45 | |||||||
Other post-retirement obligations | — | 211 | |||||||
Deferred revenue | — | 95 | |||||||
Deferred income taxes | — | 113 | |||||||
Other liabilities | — | 357 | |||||||
Consolidated Liabilities subject to compromise | — | 7,705 | |||||||
Payables to non-debtor subsidiaries | — | 100 | |||||||
Debtors’ Liabilities subject to compromise | $ | — | $ | 7,805 |
Successor | Predecessor | ||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | |||||||||||||||
(In millions) | 2017 | 2016 | |||||||||||||||
OTHER PAYMENTS | |||||||||||||||||
Interest payments | $ | 149 | $ | 15 | $ | 138 | $ | 425 | |||||||||
Income tax payments | $ | 22 | $ | 7 | $ | 33 | $ | 51 | |||||||||
NON-CASH INVESTING ACTIVITIES | |||||||||||||||||
Acquisition of equipment under capital lease | $ | 2 | $ | — | $ | — | $ | 4 | |||||||||
Increase (decrease) in Accounts payable for Capital expenditures | $ | 1 | $ | — | $ | (1 | ) | $ | (4 | ) |
(In millions) | Employee Separation Costs | Lease Obligations | Total | ||||||||
Restructuring charges | $ | 12 | $ | — | $ | 12 | |||||
Cash payments | (3 | ) | — | (3 | ) | ||||||
Balance as of December 15, 2017 (Predecessor) | $ | 9 | $ | — | $ | 9 | |||||
Balance as of December 16, 2017 (Successor) | $ | 9 | $ | — | $ | 9 | |||||
Restructuring charges | 70 | 10 | 80 | ||||||||
Cash payments | (23 | ) | (10 | ) | (33 | ) | |||||
Impact of foreign currency fluctuations | (2 | ) | — | (2 | ) | ||||||
Balance as of September 30, 2018 (Successor) | $ | 54 | $ | — | $ | 54 |
(In millions) | Employee Separation Costs | Lease Obligations | Total | ||||||||
Restructuring charges | $ | 18 | $ | 1 | $ | 19 | |||||
Cash payments | (14 | ) | — | (14 | ) | ||||||
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 16, 2017 (Successor) | $ | 3 | $ | — | $ | 3 | |||||
Cash payments | (1 | ) | — | (1 | ) | ||||||
Impact of foreign currency fluctuations | (1 | ) | — | (1 | ) | ||||||
Balance as of September 30, 2018 (Successor) | $ | 1 | $ | — | $ | 1 |
(In millions) | Employee Separation Costs | Lease Obligations | Total | ||||||||
Restructuring charges | $ | 98 | $ | — | $ | 98 | |||||
Cash payments | (47 | ) | — | (47 | ) | ||||||
Balance as of September 30, 2016 (Predecessor) | 51 | — | 51 | ||||||||
Cash payments | (25 | ) | — | (25 | ) | ||||||
Adjustments(1) | 2 | — | 2 | ||||||||
Impact of foreign currency fluctuations | 2 | — | 2 | ||||||||
Balance as of September 30, 2017 (Predecessor) | 30 | — | 30 | ||||||||
Restructuring charges | 1 | — | 1 | ||||||||
Cash payments | (2 | ) | — | (2 | ) | ||||||
Adjustments - fresh start items | 4 | — | 4 | ||||||||
Balance as of December 15, 2017 (Predecessor) | $ | 33 | $ | — | $ | 33 | |||||
Balance as of December 16, 2017 (Successor) | $ | 33 | $ | — | $ | 33 | |||||
Cash payments | (8 | ) | — | (8 | ) | ||||||
Balance as of September 30, 2018 (Successor) | $ | 25 | $ | — | $ | 25 |
(1) | Includes changes in estimates for increases and decreases in costs related to the fiscal 2016 restructuring program, which are recorded in Restructuring charges, net in the Consolidated Statements of Operations in the period of the adjustment. |
(In millions) | Employee Separation Costs | Lease Obligations | Total | ||||||||
Balance as of September 30, 2015 (Predecessor) | $ | 95 | $ | 62 | $ | 157 | |||||
Cash payments | (55 | ) | (20 | ) | (75 | ) | |||||
Adjustments(1) | 3 | 2 | 5 | ||||||||
Impact of foreign currency fluctuations | (1 | ) | (3 | ) | (4 | ) | |||||
Balance as of September 30, 2016 (Predecessor) | 42 | 41 | 83 | ||||||||
Cash payments | (22 | ) | (16 | ) | (38 | ) | |||||
Adjustments(1)(2) | 1 | (1 | ) | — | |||||||
Balance as of September 30, 2017 (Predecessor) | 21 | 24 | 45 | ||||||||
Restructuring charges | — | 1 | 1 | ||||||||
Cash payments | (1 | ) | (17 | ) | (18 | ) | |||||
Adjustments - reorganization items | — | (1 | ) | (1 | ) | ||||||
Balance as of December 15, 2017 (Predecessor) | $ | 20 | $ | 7 | $ | 27 | |||||
Balance as of December 16, 2017 (Successor) | $ | 20 | $ | 7 | $ | 27 | |||||
Restructuring charges | — | 1 | 1 | ||||||||
Cash payments | (8 | ) | (2 | ) | (10 | ) | |||||
Balance as of September 30, 2018 (Successor) | $ | 12 | $ | 6 | $ | 18 |
(1) | Includes changes in estimates for increases and decreases in costs related to fiscal 2009 through 2015 restructuring programs, which are recorded in Restructuring charges, net in the Consolidated Statements of Operations in the period of the adjustment. Also, includes changes in estimates whereby all increases in costs related to the fiscal 2008 (Predecessor) |
(2) | Includes a transfer of reserve of $6 million associated with the sale of the Networking business in July 2017 related to lease obligations. |
Successor | Predecessor | |||||||||||||||
September 30, 2018 | 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 due December 15, 2024 | $ | 2,903 | $ | 2,870 | $ | — | $ | — | ||||||||
Convertible 2.25% senior notes due June 15, 2023 | 350 | 256 | — | — | ||||||||||||
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 | $ | 3,253 | 3,126 | $ | 6,557 | 6,557 | ||||||||||
Debt maturing within one year | (29 | ) | (725 | ) | ||||||||||||
Long-term debt, net of current portion(1) | $ | 3,097 | $ | 5,832 |
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 $3,570 million) and the Company canceled $4,281 million of the Predecessor first lien obligations; and |
4. | the holders of the Predecessor second lien obligations received Successor Company common stock and Emergence Date Warrants to purchase common stock (aggregate fair value of $84 million) and the Company canceled $1,440 million of the Predecessor second lien obligations. |
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 rate of interest per annum equal to the average rate applicable to Canadian Dollar Bankers Rate ("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 Euro Interbank Offered Rate ("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. |
• | during any calendar quarter commencing after the calendar quarter ending on September 30, 2018 (and only during such calendar quarter), if the last reported sale price of the Company's common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; |
• | during the five days business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price per $1,000 principal amount of the Convertible Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sales price of the Company's common stock and the conversion rate on each such trading day; or |
• | upon the occurrence of specified corporate events. |
(In millions) | September 30, 2018 | |||
Principal | $ | 350 | ||
Less: | ||||
Unamortized debt discount | (87 | ) | ||
Unamortized issuance costs | (7 | ) | ||
Net carrying amount | $ | 256 |
(In millions) | September 30, 2018 | |||
Debt discount for conversion option | $ | 92 | ||
Less: | ||||
Issuance costs | (3 | ) | ||
Net carrying amount | $ | 89 |
(In millions) | ||||
2019 | $ | 29 | ||
2020 | 29 | |||
2021 | 29 | |||
2022 | 29 | |||
2023 and thereafter | 3,137 | |||
Total | $ | 3,253 |
• | Senior Secured Term Loans - The term B-3 loans, term B-4 loans, term B-6 loans and term B-7 loans each bore interest at a rate per annum equal to either a base rate (subject to a floor of 2.25% in the case of the term B-4 loans and 2.00% in the case of the term B-6 loans and term B-7 loans) or a LIBOR rate (subject to a floor of 1.25% in the case of the term B-4 loans and 1.00% in the case of the term B-6 loans and term B-7 loans), in each case plus an applicable margin. Subject to the floor described in the immediately preceding sentence, the base rate was determined by reference to the higher of (1) the prime rate of Citibank, N.A. and (2) the federal funds effective rate plus 1/2 of 1%. The applicable margin for borrowings of term B-3 loans, term B-4 loans, term B-6 loans and term B-7 loans was 3.50%, 5.25%, 4.50% and 4.25% per annum, respectively, with respect to base rate borrowings and 4.50%, 6.25%, 5.50% and 5.25%, per annum, respectively, with respect to LIBOR borrowings. The applicable margin on the term B-4 loans, term B-6 loans and term B-7 loans was subject to increase pursuant to the Company's senior secured credit agreement in connection with the making of certain refinancing, extended or replacement term loans under the senior secured credit agreement with an effective yield (as defined in the senior secured credit agreement) greater than the applicable effective yield payable in respect of the applicable loans at such time plus 50 basis points. |
• | 7% Senior Secured Notes - The 7% senior secured notes bore interest at a rate of 7% per annum and were scheduled to mature on April 1, 2019. The 7% senior secured notes were redeemable at 101.75% of the principal amount redeemed, which decreased to 100% on or after April 1, 2017. Upon the occurrence of specific kinds of changes of control, the Company would have been required to make an offer to purchase the 7% senior secured notes at 101% of their principal amount. If the Company or any of its restricted subsidiaries engaged in certain asset sales, under certain circumstances the Company would have been required to use the net proceeds to make an offer to purchase the 7% senior secured notes at 100% of their principal amount. |
• | 9% Senior Secured Notes - The 9% senior secured notes bore interest at a rate of 9% per annum and were scheduled to mature on April 1, 2019. The 9% senior secured notes were redeemable at 102.25% of the principal amount redeemed, which decreased to 100% on or after April 1, 2017. Upon the occurrence of specific kinds of changes of control, the Company would have been required to make an offer to purchase the 9% senior secured notes at 101% of their principal amount. If the Company or any of its restricted subsidiaries engaged in certain asset sales, under certain circumstances the Company would have been required to use the net proceeds to make an offer to purchase the 9% senior secured notes at 100% of their principal amount. |
• | 10.50% Senior Secured Notes - The 10.50% senior secured notes bore interest at a rate of 10.50% per annum and were scheduled to mature on March 1, 2021. The 10.50% senior secured notes were redeemable at 107.875% of the principal amount redeemed commencing March 1, 2017, which decreased to 105.250% on March 1, 2018, to 102.625% on March 1, 2019 and to 100% on or after March 1, 2020. The Company could have redeemed all or part of the notes at any time prior to March 1, 2017 at 100% of the principal amount redeemed plus a “make-whole” premium. Upon the occurrence of specific kinds of changes of control, the Company would have been required to make an offer to purchase the 10.50% senior secured notes at 101% of their principal amount. If the Company or any of its restricted subsidiaries engaged in certain asset sales, under certain circumstances the Company would have been required to use the net proceeds to make an offer to purchase the 10.50% senior secured notes at 100% of their principal amount. |
As Previously Reported | Revised | |||||||
September 30, 2018 | December 15, 2017 | December 15, 2017 | ||||||
Expected volatility | 50.14 | % | 54.57 | % | 54.38 | % | ||
Risk-free interest rates | 2.90 | % | 2.20 | % | 2.20 | % | ||
Expected remaining life (in years) | 4.21 | 5.00 | 5.00 | |||||
Price per share of common stock | $22.14 | $14.93 | $15.16 |
Successor | Predecessor | ||||||||||||||||||
September 30, 2018 | September 30, 2017 | ||||||||||||||||||
(In millions) | Balance Sheet Caption | Asset | Liability | Asset | Liability | ||||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||
Interest rate contracts | Other assets | $ | 3 | $ | — | $ | — | $ | — | ||||||||||
Interest rate contracts | Other current liabilities | — | 7 | — | — | ||||||||||||||
3 | 7 | — | — | ||||||||||||||||
Derivatives Not Designated as Hedging Instruments: | |||||||||||||||||||
Emergence Date Warrants | Other liabilities | — | 34 | — | — | ||||||||||||||
Total derivative fair value | $ | 3 | $ | 41 | $ | — | $ | — |
Successor | Predecessor | ||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | ||||||||||||||||
(In millions) | Interest Expense | Other Comprehensive Income (Loss) | Interest Expense | Other Comprehensive Income (Loss) | |||||||||||||
Financial Statement Line Item in which Cash Flow Hedges are Recorded | $ | (169 | ) | $ | — | $ | (14 | ) | $ | 658 | |||||||
Impact of cash flow hedging relationships: | |||||||||||||||||
Loss recognized in AOCI - on interest rate swaps | — | (9 | ) | — | — | ||||||||||||
Interest expense reclassified from AOCI | (6 | ) | 6 | — | — |
Successor | Predecessor | ||||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, | |||||||||||||||||
(In millions) | Location of Derivative Pre-tax Gain (Loss) | 2017 | 2016 | ||||||||||||||||
Emergence Date Warrants | Other income (expense), net | $ | (17 | ) | $ | — | $ | — | $ | — | |||||||||
Preferred Series B embedded derivative | Other income (expense), net | — | — | — | 73 | ||||||||||||||
Foreign currency forward contracts | Other income (expense), net | — | — | — | 1 |
Successor | Predecessor | ||||||||||||||||
September 30, 2018 | September 30, 2017 | ||||||||||||||||
(In millions) | Asset | Liability | Asset | Liability | |||||||||||||
Gross amounts recognized in the consolidated balance sheet | $ | 3 | $ | 41 | $ | — | $ | — | |||||||||
Gross amount subject to offset in master netting arrangements not offset in the Consolidated Balance Sheet | (3 | ) | (3 | ) | — | — | |||||||||||
Net amounts | $ | — | $ | 38 | $ | — | $ | — |
Successor | Predecessor | |||||||||||||||||||||||||||||||
September 30, 2018 | September 30, 2017 | |||||||||||||||||||||||||||||||
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: | ||||||||||||||||||||||||||||||||
Investments | $ | 2 | $ | 2 | $ | — | $ | — | $ | 1 | $ | 1 | $ | — | $ | — | ||||||||||||||||
Interest rate contracts | 3 | — | 3 | — | — | — | — | — | ||||||||||||||||||||||||
Total assets | $ | 5 | $ | 2 | $ | 3 | $ | — | $ | 1 | $ | 1 | $ | — | $ | — | ||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Interest rate contracts | $ | 7 | $ | — | $ | 7 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Spoken acquisition Earn-outs | 15 | — | — | 15 | — | — | — | — | ||||||||||||||||||||||||
Emergence Date Warrants | 34 | — | — | 34 | — | — | — | — | ||||||||||||||||||||||||
Total liabilities | $ | 56 | $ | — | $ | 7 | $ | 49 | $ | — | $ | — | $ | — | $ | — |
(In millions) | Emergence Date Warrants | Spoken Acquisition Earn-outs | Total | ||||||||
September 30, 2017 (Predecessor) | $ | — | $ | — | $ | — | |||||
Issuance of Emergence Date Warrants | 17 | — | 17 | ||||||||
December 15, 2017 (Predecessor) | $ | 17 | $ | — | $ | 17 | |||||
December 16, 2017 (Successor) | $ | 17 | $ | — | $ | 17 | |||||
Contingent consideration | — | 14 | 14 | ||||||||
Accretion of interest(1) | — | 1 | 1 | ||||||||
Change in fair value(1) | 17 | — | 17 | ||||||||
September 30, 2018 (Successor) | $ | 34 | $ | 15 | $ | 49 |
Successor | Predecessor | |||||||||||||||
September 30, 2018 | September 30, 2017 | |||||||||||||||
(In millions) | Principal amount | Fair value | Principal amount | Fair value | ||||||||||||
Term Loan Credit Agreement due December 15, 2024 | 2,903 | 2,932 | $ | — | $ | — | ||||||||||
Convertible 2.25% senior notes due June 15, 2023 | 350 | 357 | — | — | ||||||||||||
DIP Credit Agreement due January 19, 2018 | — | — | 725 | 732 | ||||||||||||
First lien debt: | ||||||||||||||||
Senior secured term B-3 loans | — | — | 594 | 503 | ||||||||||||
Senior secured term B-4 loans | — | — | 1 | 1 | ||||||||||||
Senior secured term B-6 loans | — | — | 519 | 440 | ||||||||||||
Senior secured term B-7 loans | — | — | 2,012 | 1,709 | ||||||||||||
7% senior secured notes | — | — | 982 | 832 | ||||||||||||
9% senior secured notes | — | — | 284 | 241 | ||||||||||||
Second lien debt: | ||||||||||||||||
10.50% senior secured notes | — | — | 1,440 | 67 | ||||||||||||
Total debt | $ | 3,253 | $ | 3,289 | $ | 6,557 | $ | 4,525 |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||
(In millions) | 2017 | 2016 | ||||||||||||||
(LOSS) INCOME BEFORE INCOME TAXES: | ||||||||||||||||
U.S. | $ | (165 | ) | $ | 3,353 | $ | (275 | ) | $ | (769 | ) | |||||
Foreign | (94 | ) | 83 | 77 | 50 | |||||||||||
(Loss) income before income taxes | $ | (259 | ) | $ | 3,436 | $ | (198 | ) | $ | (719 | ) | |||||
BENEFIT FROM (PROVISION FOR) INCOME TAXES: | ||||||||||||||||
CURRENT | ||||||||||||||||
Federal | $ | — | $ | — | $ | 2 | $ | 3 | ||||||||
State and local | 4 | — | 1 | (1 | ) | |||||||||||
Foreign | (40 | ) | (4 | ) | (27 | ) | (65 | ) | ||||||||
(36 | ) | (4 | ) | (24 | ) | (63 | ) | |||||||||
DEFERRED | ||||||||||||||||
Federal | 530 | (453 | ) | 34 | 72 | |||||||||||
State and local | 34 | (19 | ) | 5 | 7 | |||||||||||
Foreign | 18 | 17 | 1 | (27 | ) | |||||||||||
582 | (455 | ) | 40 | 52 | ||||||||||||
Benefit from (provision for) income taxes | $ | 546 | $ | (459 | ) | $ | 16 | $ | (11 | ) |
Successor | Predecessor | |||||||
(In millions) | As of September 30, 2018 | As of September 30, 2017 | ||||||
DEFERRED INCOME TAX ASSETS: | ||||||||
Benefit obligations | $ | 205 | $ | 624 | ||||
Net operating losses/credit carryforwards | 951 | 1,452 | ||||||
Property, plant and equipment | 21 | 43 | ||||||
Other | — | 35 | ||||||
Valuation allowance | (919 | ) | (2,152 | ) | ||||
Gross deferred income tax assets | 258 | 2 | ||||||
DEFERRED INCOME TAX LIABILITIES: | ||||||||
Goodwill and intangible assets | (290 | ) | (29 | ) | ||||
Other/accrued liabilities | (79 | ) | (118 | ) | ||||
Gross deferred income tax liabilities | (369 | ) | (147 | ) | ||||
Net deferred income tax liabilities | $ | (111 | ) | $ | (145 | ) |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||
(In millions) | 2017 | 2016 | ||||||||||||||
Income tax benefit (provision) computed at the U.S. Federal statutory rate | $ | 64 | $ | (1,203 | ) | $ | 69 | $ | 252 | |||||||
State and local income taxes, net of federal income tax effect | (12 | ) | 10 | 6 | 8 | |||||||||||
Tax differentials on foreign earnings | (12 | ) | 182 | 12 | (15 | ) | ||||||||||
Loss on foreign subsidiaries | 43 | — | 7 | 24 | ||||||||||||
Taxes on unremitted foreign earnings and profits | 4 | 7 | 7 | 12 | ||||||||||||
Non-deductible portion of goodwill | — | — | (17 | ) | (100 | ) | ||||||||||
Non-deductible loss on sale of Networking business | — | — | (12 | ) | — | |||||||||||
Non-deductible reorganization items | — | (11 | ) | (18 | ) | — | ||||||||||
Adjustment to deferred taxes | 4 | (1 | ) | 5 | 39 | |||||||||||
Audit settlements and accruals | (48 | ) | (6 | ) | (5 | ) | (7 | ) | ||||||||
Credits and other taxes | (5 | ) | (1 | ) | (11 | ) | (24 | ) | ||||||||
Impact of Tax Cuts and Jobs Act | 245 | — | — | — | ||||||||||||
NOL recognition / intellectual property | 366 | — | — | — | ||||||||||||
Warrants | (4 | ) | — | — | — | |||||||||||
Debt refinancing | (8 | ) | — | — | — | |||||||||||
Non-deductible impact of fresh start accounting | — | (555 | ) | — | — | |||||||||||
Non-taxable cancellation of debt income | — | 313 | — | — | ||||||||||||
Attribute reduction | — | (452 | ) | — | — | |||||||||||
Rate changes | (3 | ) | — | (68 | ) | (2 | ) | |||||||||
U.S. tax on foreign source income | (10 | ) | (2 | ) | (2 | ) | (34 | ) | ||||||||
Non-taxable income (non-deductible expense) on derivative | — | — | — | 26 | ||||||||||||
Valuation allowance | (85 | ) | 1,199 | 45 | (187 | ) | ||||||||||
Other differences—net | 7 | 61 | (2 | ) | (3 | ) | ||||||||||
Benefit from (provision for) income taxes | $ | 546 | $ | (459 | ) | $ | 16 | $ | (11 | ) |
(In millions) | ||||
Gross UTB balance at October 1, 2015 (Predecessor) | $ | 252 | ||
Additions based on tax positions relating to the period | 24 | |||
Change to tax positions relating to prior periods | (3 | ) | ||
Statute of limitations expirations | (10 | ) | ||
Gross UTB balance at September 30, 2016 (Predecessor) | 263 | |||
Additions based on tax positions relating to the period | 23 | |||
Change to tax positions relating to prior periods | (10 | ) | ||
Statute of limitations expirations | (8 | ) | ||
Gross UTB balance at September 30, 2017 (Predecessor) | 268 | |||
Additions based on tax positions relating to the period | 4 | |||
Gross UTB balance at December 15, 2017 (Predecessor) | $ | 272 | ||
Gross UTB balance at December 16, 2017 (Successor) | $ | 272 | ||
Additions based on tax positions relating to the period | 57 | |||
Changes based on tax positions relating to prior periods | (143 | ) | ||
Statute of limitations expirations | (12 | ) | ||
Gross UTB balance at September 30, 2018 (Successor) | $ | 174 |
Successor | Predecessor | ||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2017 | ||||||||||
Pension Benefits - U.S. | |||||||||||||
Change in benefit obligation | |||||||||||||
Projected benefit obligation at beginning of period | $ | 1,136 | $ | 3,415 | $ | 3,558 | |||||||
Service cost | 3 | 1 | 4 | ||||||||||
Interest cost | 28 | 22 | 98 | ||||||||||
Actuarial (gain) loss | (56 | ) | 19 | (18 | ) | ||||||||
Benefits paid | (61 | ) | (39 | ) | (227 | ) | |||||||
Reorganization adjustments | — | (2,282 | ) | — | |||||||||
Projected benefit obligation at end of period | $ | 1,050 | $ | 1,136 | $ | 3,415 | |||||||
Change in plan assets | |||||||||||||
Fair value of plan assets at beginning of period | $ | 889 | $ | 2,395 | $ | 2,370 | |||||||
Actual return on plan assets | 10 | 57 | 229 | ||||||||||
Employer contributions | 43 | 49 | 23 | ||||||||||
Benefits paid | (61 | ) | (39 | ) | (227 | ) | |||||||
Reorganization adjustments | — | (1,573 | ) | — | |||||||||
Fair value of plan assets at end of period | $ | 881 | $ | 889 | $ | 2,395 | |||||||
Underfunded status at end of period | $ | (169 | ) | $ | (247 | ) | $ | (1,020 | ) | ||||
Amount recognized in the Consolidated Balance Sheets consists of: | |||||||||||||
Accrued benefit liability, current | $ | — | $ | (9 | ) | $ | (10 | ) | |||||
Accrued benefit liability, noncurrent | (169 | ) | (238 | ) | (1,010 | ) | |||||||
Net amount recognized | $ | (169 | ) | $ | (247 | ) | $ | (1,020 | ) | ||||
Amount recognized in Accumulated other comprehensive loss (pre-tax) consists of: | |||||||||||||
Net prior service cost | $ | — | $ | — | $ | 1 | |||||||
Net actuarial (gain) loss | (15 | ) | — | 1,166 | |||||||||
Net amount recognized | $ | (15 | ) | $ | — | $ | 1,167 | ||||||
Weighted average assumptions used to determine benefit obligations | |||||||||||||
Discount rate | 4.22 | % | 3.70 | % | 3.73 | % | |||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % |
Successor | Predecessor | ||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2017 | ||||||||||
Pension Benefits - Non-U.S. | |||||||||||||
Change in benefit obligation | |||||||||||||
Projected benefit obligation at beginning of period | $ | 575 | $ | 551 | $ | 651 | |||||||
Service cost | 5 | 2 | 7 | ||||||||||
Interest cost | 7 | 3 | 8 | ||||||||||
Actuarial gain | (19 | ) | (2 | ) | (67 | ) | |||||||
Benefits paid | (22 | ) | (3 | ) | (23 | ) | |||||||
Foreign currency exchange rate changes | (10 | ) | — | 28 | |||||||||
Curtailments, settlements and other | — | — | (53 | ) | |||||||||
Reorganization adjustments | — | 24 | — | ||||||||||
Projected benefit obligation at end of period | $ | 536 | $ | 575 | $ | 551 | |||||||
Change in plan assets | |||||||||||||
Fair value of plan assets at beginning of period | $ | 15 | $ | 15 | $ | 67 | |||||||
Employer contributions | 22 | 3 | 25 | ||||||||||
Benefits paid | (22 | ) | (3 | ) | (23 | ) | |||||||
Curtailments, settlements and other | — | — | (54 | ) | |||||||||
Fair value of plan assets at end of period | $ | 15 | $ | 15 | $ | 15 | |||||||
Underfunded status at end of period | $ | (521 | ) | $ | (560 | ) | $ | (536 | ) | ||||
Amount recognized in the Consolidated Balance Sheets consists of: | |||||||||||||
Noncurrent assets | $ | 1 | $ | 1 | $ | 1 | |||||||
Accrued benefit liability, current | (20 | ) | (23 | ) | (22 | ) | |||||||
Accrued benefit liability, noncurrent | (502 | ) | (538 | ) | (515 | ) | |||||||
Net amount recognized | $ | (521 | ) | $ | (560 | ) | $ | (536 | ) | ||||
Amount recognized in Accumulated other comprehensive loss (pre-tax) consists of: | |||||||||||||
Net actuarial (gain) loss | $ | (19 | ) | $ | — | $ | 143 | ||||||
Net amount recognized | $ | (19 | ) | $ | — | $ | 143 | ||||||
Weighted average assumptions used to determine benefit obligations | |||||||||||||
Discount rate | 1.92 | % | 1.92 | % | 1.92 | % | |||||||
Rate of compensation increase | 4.46 | % | 3.66 | % | 3.66 | % |
Successor | Predecessor | ||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2017 | ||||||||||
Post-retirement Benefits - U.S. | |||||||||||||
Change in benefit obligation | |||||||||||||
Benefit obligation at beginning of period | $ | 407 | $ | 404 | $ | 436 | |||||||
Service cost | 1 | — | 2 | ||||||||||
Interest cost | 11 | 3 | 13 | ||||||||||
Employee contributions | — | — | 7 | ||||||||||
Actuarial (gain) loss | (40 | ) | 4 | (26 | ) | ||||||||
Benefits paid | (11 | ) | (3 | ) | (28 | ) | |||||||
Reorganization adjustments | — | (1 | ) | — | |||||||||
Projected benefit obligation at end of period | $ | 368 | $ | 407 | $ | 404 | |||||||
Change in plan assets | |||||||||||||
Fair value of plan assets at beginning of period | $ | 180 | $ | 178 | $ | 172 | |||||||
Actual return on plan assets | 2 | 3 | 12 | ||||||||||
Employer contributions | 7 | 2 | 15 | ||||||||||
Employee contributions | — | — | 7 | ||||||||||
Benefits paid | (11 | ) | (3 | ) | (28 | ) | |||||||
Fair value of plan assets at end of period | $ | 178 | $ | 180 | $ | 178 | |||||||
Underfunded status at end of period | $ | (190 | ) | $ | (227 | ) | $ | (226 | ) | ||||
Amount recognized in the Consolidated Balance Sheets consists of: | |||||||||||||
Accrued benefit liability, current | $ | (14 | ) | $ | (12 | ) | $ | (15 | ) | ||||
Accrued benefit liability, noncurrent | (176 | ) | (215 | ) | (211 | ) | |||||||
Net amount recognized | $ | (190 | ) | $ | (227 | ) | $ | (226 | ) | ||||
Amount recognized in Accumulated other comprehensive loss (pre-tax) consists of: | |||||||||||||
Net prior service credit | $ | — | $ | — | $ | (58 | ) | ||||||
Net actuarial (gain) loss | (34 | ) | — | 97 | |||||||||
Net amount recognized | $ | (34 | ) | $ | — | $ | 39 | ||||||
Weighted average assumptions used to determine benefit obligations | |||||||||||||
Discount rate | 4.26 | % | 3.77 | % | 3.83 | % | |||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % |
Pension Benefits - U.S. | Pension Benefits - Non-U.S. | |||||||||||||||||
Successor | Predecessor | Successor | Predecessor | |||||||||||||||
(In millions) | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | ||||||||||||||
Accumulated benefit obligation for all plans | $ | 1,050 | $ | 3,415 | $ | 521 | $ | 536 | ||||||||||
Plans with accumulated benefit obligation in excess of plan assets | ||||||||||||||||||
Projected benefit obligation | $ | 1,050 | $ | 3,415 | $ | 531 | $ | 546 | ||||||||||
Accumulated benefit obligation | $ | 1,050 | $ | 3,415 | $ | 516 | $ | 531 | ||||||||||
Fair value of plan assets | $ | 881 | $ | 2,395 | $ | 9 | $ | 9 |
Pension Benefits | Post-retirement Benefits | |||||||||||
(In millions) | U.S. | Non-U.S. | ||||||||||
2019 | $ | 74 | $ | 24 | $ | 20 | ||||||
2020 | 73 | 23 | 21 | |||||||||
2021 | 73 | 24 | 21 | |||||||||
2022 | 73 | 26 | 21 | |||||||||
2023 | 72 | 25 | 21 | |||||||||
2024 - 2028 | 351 | 139 | 109 | |||||||||
Total | $ | 716 | $ | 261 | $ | 213 |
Successor | Predecessor | ||||||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2016 | |||||||||||||
Pension Benefits - U.S. | |||||||||||||||||
Components of net periodic benefit (credit) cost | |||||||||||||||||
Service cost | $ | 3 | $ | 1 | $ | 4 | $ | 4 | |||||||||
Interest cost | 28 | 22 | 98 | 110 | |||||||||||||
Expected return on plan assets | (51 | ) | (38 | ) | (179 | ) | (183 | ) | |||||||||
Amortization of prior service cost | — | — | 1 | 1 | |||||||||||||
Amortization of actuarial loss | — | 20 | 102 | 91 | |||||||||||||
Curtailment, settlement loss(1) | — | — | — | 3 | |||||||||||||
Net periodic benefit (credit) cost | $ | (20 | ) | $ | 5 | $ | 26 | $ | 26 | ||||||||
Weighted average assumptions used to determine net periodic benefit cost | |||||||||||||||||
Discount rate | 3.29 | % | 3.19 | % | 2.86 | % | 4.23 | % | |||||||||
Expected return on plan assets | 7.65 | % | 7.75 | % | 7.75 | % | 8.00 | % | |||||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % | 4.00 | % | |||||||||
Pension Benefits - Non-U.S. | |||||||||||||||||
Components of net periodic benefit cost (credit) | |||||||||||||||||
Service cost | $ | 5 | $ | 2 | $ | 7 | $ | 6 | |||||||||
Interest cost | 7 | 3 | 8 | 14 | |||||||||||||
Expected return on plan assets | — | (1 | ) | (1 | ) | (2 | ) | ||||||||||
Amortization of actuarial loss | — | 2 | 16 | 7 | |||||||||||||
Curtailment, settlement gain | — | — | (4 | ) | — | ||||||||||||
Net periodic benefit cost | $ | 12 | $ | 6 | $ | 26 | $ | 25 | |||||||||
Weighted average assumptions used to determine net periodic benefit cost | |||||||||||||||||
Discount rate | 1.92 | % | 1.22 | % | 1.22 | % | 2.53 | % | |||||||||
Expected return on plan assets | 3.68 | % | 1.82 | % | 1.82 | % | 3.09 | % | |||||||||
Rate of compensation increase | 3.62 | % | 3.45 | % | 3.45 | % | 3.11 | % | |||||||||
Post-retirement Benefits - U.S. | |||||||||||||||||
Components of net periodic benefit cost (credit) | |||||||||||||||||
Service cost | $ | 1 | $ | — | $ | 2 | $ | 2 | |||||||||
Interest cost | 11 | 3 | 13 | 13 | |||||||||||||
Expected return on plan assets | (8 | ) | (2 | ) | (10 | ) | (10 | ) | |||||||||
Amortization of prior service cost | — | (3 | ) | (18 | ) | (19 | ) | ||||||||||
Amortization of actuarial loss | — | 2 | 12 | 4 | |||||||||||||
Curtailment, settlement gain(1) | — | — | (4 | ) | (2 | ) | |||||||||||
Net periodic benefit cost (credit) | $ | 4 | $ | — | $ | (5 | ) | $ | (12 | ) | |||||||
Weighted average assumptions used to determine net periodic benefit cost | |||||||||||||||||
Discount rate | 3.39 | % | 3.37 | % | 3.11 | % | 4.35 | % | |||||||||
Expected return on plan assets | 5.50 | % | 5.90 | % | 5.90 | % | 5.90 | % | |||||||||
Rate of compensation increase | 4.00 | % | 4.00 | % | 4.00 | % | 4.00 | % |
Successor | Predecessor | ||||||||||||||||
(In millions) | Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2016 | |||||||||||||
Pension Benefits - U.S. | |||||||||||||||||
Net (gain) loss | $ | (15 | ) | $ | — | $ | (68 | ) | $ | 124 | |||||||
Amortization of prior service cost | — | — | (1 | ) | (1 | ) | |||||||||||
Amortization of actuarial loss | — | (20 | ) | (102 | ) | (91 | ) | ||||||||||
Reorganization adjustments | — | (1,147 | ) | — | — | ||||||||||||
Total recognized in Other comprehensive income (loss) | $ | (15 | ) | $ | (1,167 | ) | $ | (171 | ) | $ | 32 | ||||||
Total recognized in net periodic benefit cost and Other comprehensive income (loss)(1) | $ | (35 | ) | $ | (722 | ) | $ | (145 | ) | $ | 58 | ||||||
Pension Benefits - Non-U.S. | |||||||||||||||||
Net (gain) loss | $ | (19 | ) | $ | 22 | $ | (68 | ) | $ | 95 | |||||||
Amortization of actuarial loss | — | (2 | ) | (16 | ) | (7 | ) | ||||||||||
Net gain recognition due to settlement | — | — | 4 | — | |||||||||||||
Reorganization adjustments | — | (163 | ) | — | — | ||||||||||||
Total recognized in Other comprehensive income (loss) | $ | (19 | ) | $ | (143 | ) | $ | (80 | ) | $ | 88 | ||||||
Total recognized in net periodic benefit cost and Other comprehensive income (loss)(1) | $ | (7 | ) | $ | (137 | ) | $ | (54 | ) | $ | 113 | ||||||
Post-retirement Benefits - U.S. | |||||||||||||||||
Net (gain) loss | $ | (34 | ) | $ | — | $ | (28 | ) | $ | 71 | |||||||
Amortization of prior service credit | — | 3 | 18 | 19 | |||||||||||||
Amortization of actuarial loss | — | (2 | ) | (12 | ) | (4 | ) | ||||||||||
Prior service cost (credit) and net gain (loss) recognition due to curtailment | — | — | 4 | 2 | |||||||||||||
Reorganization adjustments | — | (40 | ) | — | — | ||||||||||||
Total recognized in Other comprehensive income (loss) | $ | (34 | ) | $ | (39 | ) | $ | (18 | ) | $ | 88 | ||||||
Total recognized in net periodic benefit cost and Other comprehensive income (loss)(1) | $ | (30 | ) | $ | 2 | $ | (23 | ) | $ | 76 |
Successor | Predecessor | Long-term Target | ||||||||
Asset Category | September 30, 2018 | September 30, 2017 | ||||||||
Pension Benefits - U.S. | ||||||||||
Equity Securities | 37 | % | 44 | % | 39 | % | ||||
Debt Securities | 39 | % | 37 | % | 45 | % | ||||
Hedge Funds | 8 | % | 8 | % | 7 | % | ||||
Private Equity | 1 | % | 1 | % | — | % | ||||
Real Estate | 6 | % | 5 | % | 7 | % | ||||
Commodities | 2 | % | 2 | % | 2 | % | ||||
Other(1) | 7 | % | 3 | % | — | % | ||||
Total | 100 | % | 100 | % | 100 | % | ||||
Pension Benefits - Non-U.S. | ||||||||||
Debt Securities | 27 | % | 27 | % | ||||||
Asset Allocation Fund | 13 | % | 13 | % | ||||||
Insurance Contracts | 60 | % | 60 | % | ||||||
Total | 100 | % | 100 | % | ||||||
Post-retirement Benefits - U.S. | ||||||||||
Equity Securities | 40 | % | 40 | % | 40 | % | ||||
Debt Securities | 60 | % | 60 | % | 60 | % | ||||
Total | 100 | % | 100 | % | 100 | % |
(1) | Other includes cash/cash equivalents, derivative financial instruments, and payables/receivables for pending transactions. |
Successor | Predecessor | ||||||||||||||||||||||||||||||||
As of September 30, 2018 | As of September 30, 2017 | ||||||||||||||||||||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
U.S. Government debt securities (a) | $ | — | $ | 93 | $ | — | $ | 93 | $ | — | $ | 159 | $ | — | $ | 159 | |||||||||||||||||
Derivative instruments (b) | (2 | ) | — | — | (2 | ) | (4 | ) | — | — | (4 | ) | |||||||||||||||||||||
Total assets in the fair value hierarchy | (2 | ) | 93 | — | 91 | (4 | ) | 159 | — | 155 | |||||||||||||||||||||||
Investments measured at net asset value: (c) | |||||||||||||||||||||||||||||||||
Real estate (d) | 49 | 112 | |||||||||||||||||||||||||||||||
Private equity (e) | 7 | 23 | |||||||||||||||||||||||||||||||
Multi-strategy hedge funds (f) | 73 | 190 | |||||||||||||||||||||||||||||||
Investment funds: (g) | |||||||||||||||||||||||||||||||||
Cash equivalents | 62 | 63 | |||||||||||||||||||||||||||||||
Long duration fixed income | 231 | 636 | |||||||||||||||||||||||||||||||
High-yield debt | 26 | 97 | |||||||||||||||||||||||||||||||
U.S. equity | 179 | 541 | |||||||||||||||||||||||||||||||
Non-U.S. equity | 112 | 395 | |||||||||||||||||||||||||||||||
Emerging market equity | 35 | 127 | |||||||||||||||||||||||||||||||
Commodities | 15 | 41 | |||||||||||||||||||||||||||||||
Total investment measured at net asset value | 789 | 2,225 | |||||||||||||||||||||||||||||||
Other plan assets, net | 1 | 15 | |||||||||||||||||||||||||||||||
Total plan assets at fair value | $ | (2 | ) | $ | 93 | $ | — | $ | 881 | $ | (4 | ) | $ | 159 | $ | — | $ | 2,395 |
(a) | Includes U.S. Treasury STRIPS, which are generally valued using institutional bid evaluations from various contracted pricing vendors. Institutional bid evaluations are estimated prices that represent the price a dealer would pay for a security. Pricing inputs to the institutional bid evaluation vary by security and include benchmark yields, reported trades, unadjusted broker/dealer quotes, issuer spreads, bids, offers or other observable market data. |
(b) | Includes future contracts that are generally valued using the last trade price at which a specific contract/security was last traded on the primary exchange, which is provided by a contracted vendor. If pricing is not available from the contracted vendor, then pricing is obtained from other sources such as Bloomberg, broker bid, ask/offer quotes or the investment manager. |
(c) | Certain investments that are measured at fair value using the net asset value per share or its equivalent (“NAV”) have not been classified in the fair value hierarchy. |
(d) | Includes open ended real estate commingled funds, close ended real estate limited partnerships, and insurance company separate accounts that invest primarily in U.S. office, lodging, retail and residential real estate. The insurance company separate accounts and the commingled funds account for their portfolio of assets at fair value and calculate the NAV on either a monthly or quarterly basis. Shares can be redeemed at the NAV on a quarterly basis, provided a written redemption request is received in advance (generally 45-91 days) of the redemption date. Therefore, the undiscounted NAV is used as the fair value measurement. For limited partnerships, the fair value of the underlying assets and the capital account for each investor is determined by the General Partner (“GP”). The valuation techniques used by the GP generally consist of unobservable inputs such as discounted cash flow analysis, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties. The partnerships are typically funded over time as capital is needed to fund asset purchases, and distributions from the partnerships are received as the partnerships liquidate their underlying asset holdings. Therefore, the life cycle for a typical investment in a real estate limited partnership is expected to be approximately 10 years from initial funding. |
(e) | Includes limited partner interests in various limited partnerships (“LPs”) that invest primarily in U.S. and non-U.S. investments either directly, or through other partnerships or funds with a focus on venture capital, buyouts, expansion capital, or companies undergoing financial distress or significant restructuring. The NAV of the LPs and of the capital |
(f) | Includes hedge funds and funds of funds that pursue multiple strategies to diversify risks and reduce volatility. The funds account for their portfolio of assets at fair value and calculate the NAV of their fund on a monthly basis. The funds limit the frequency of redemptions to manage liquidity and protect the interests of the funds and its shareholders. |
(g) | Includes open-end funds and unit investment trusts that invest in various asset classes including: U.S. and non-U.S. corporate debt, U.S. government debt, municipal bonds, U.S. equity, non-U.S. developed and emerging markets equity, and commodities. The funds account for their portfolio of assets at fair value and calculate the NAV of the funds on a daily basis, and shares can be redeemed at the NAV. Therefore, the undiscounted NAV as reported by the funds is used as the fair value measurement. |
Successor | Predecessor | ||||||||
(In millions) | September 30, 2018 | September 30, 2017 | |||||||
Investments measured at net asset value: (a) | |||||||||
Investment funds: (b) | |||||||||
Debt securities | $ | 4 | $ | 4 | |||||
Asset allocation | 2 | 2 | |||||||
Insurance contracts (c) | 9 | 9 | |||||||
Total plan assets at fair value | $ | 15 | $ | 15 |
(a) | Certain investments that are measured at fair value using the NAV have not been classified in the fair value hierarchy. |
(b) | Includes collective investment funds that invest in various asset classes including U.S. and non-U.S. corporate debt and equity, and derivatives. The funds account for their portfolio of assets at fair value and calculate the NAV of the funds on a daily basis, and shares can be redeemed at the NAV. Therefore, the undiscounted NAV as reported by the funds is used as the fair value measurement. |
(c) | Most non-U.S. pension plans are funded through insurance contracts, which provide for a guaranteed interest credit and a profit-sharing adjustment based on the actual performance of the underlying investment assets of the insurer. The fair value of the contract is determined by the insurer based on the premiums paid by the Company plus interest credits plus the profit-sharing adjustment less benefit payments. The underlying assets of the insurer are invested in compliance with local rules or law, which tend to require a high allocation to fixed income securities. |
Successor | Predecessor | ||||||||
(In millions) | September 30, 2018 | September 30, 2017 | |||||||
Investments measured at net asset value: (a) | |||||||||
Group life insurance contract measured at net asset value (b) | $ | 178 | $ | 178 | |||||
Total plan assets at fair value | $ | 178 | $ | 178 |
(a) | Certain investments that are measured at fair value using the NAV have not been classified in the fair value hierarchy. |
(b) | The group life insurance contracts are held in a reserve of an insurance company that provides for investment of pre-funding amounts in a family of pooled separate accounts. The fair value of each group life insurance contract is primarily determined by the value of the units it owns in the pooled separate accounts that back the policy. Each of the pooled separate accounts provides a unit NAV on a daily basis, which is based on the fair value of the underlying assets owned by the account. The post-retirement benefit plans can transact daily at the unit NAV without restriction. As of September 30, 2018 (Successor), the asset allocation of the pooled separate accounts in which the contracts invest was approximately 60% fixed income securities, 22% U.S. equity securities and 18% non-U.S. equity securities. |
Period from December 16, 2017 through September 30, 2018 | Emergence Date Grants | ||||||
Exercise price | $ | 21.66 | $ | 19.46 | |||
Expected volatility(1) | 49.67 | % | 56.59 | % | |||
Expected life (in years)(2) | 5.86 | 6.65 | |||||
Risk-free interest rate(3) | 2.72 | % | 2.35 | % | |||
Dividend yield(4) | — | % | — | % |
Options (In thousands) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (In thousands) | ||||||||||
Granted | 1,255 | $ | 19.65 | ||||||||||
Exercised | (3 | ) | $ | 19.46 | |||||||||
Forfeited or expired | (134 | ) | $ | 19.71 | |||||||||
Outstanding at September 30, 2018 (Successor) | 1,118 | $ | 19.64 | 8.9 | $ | 2,794 | |||||||
Exercisable at September 30, 2018 (Successor) | 106 | $ | 19.69 | 5.6 | $ | 260 |
Restricted Stock Units (In thousands) | |||
Granted | 4,048 | ||
Vested | (379 | ) | |
Forfeited | (427 | ) | |
Non-vested at September 30, 2018 (Successor) | 3,243 |
Fiscal year ended September 30, 2016 (Predecessor) | ||||
Exercise price | $ | 1.83 | ||
Expected volatility(1) | 83.09 | % | ||
Expected life (in years)(2) | 5.00 | |||
Risk-free interest rate(3) | 1.53 | % | ||
Dividend yield(4) | — | % |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, | ||||||||||||||
(In millions, except per share amounts) | 2017 | 2016 | ||||||||||||||
Net income (loss) per share: | ||||||||||||||||
Numerator | ||||||||||||||||
Net income (loss) | $ | 287 | $ | 2,977 | $ | (182 | ) | $ | (730 | ) | ||||||
Dividends and accretion to preferred stockholders | — | (6 | ) | (31 | ) | (41 | ) | |||||||||
Undistributed earnings | 287 | 2,971 | (213 | ) | (771 | ) | ||||||||||
Percentage allocated to common stockholders(1) | 100.0 | % | 86.9 | % | 100.0 | % | 100.0 | % | ||||||||
Numerator for basic and diluted earnings (loss) per common share | $ | 287 | $ | 2,582 | $ | (213 | ) | $ | (771 | ) | ||||||
Denominator | ||||||||||||||||
Denominator for basic earnings (loss) per weighted average common shares | 109.9 | 497.3 | 497.1 | 500.7 | ||||||||||||
Effect of dilutive securities | ||||||||||||||||
Restricted stock units | 1.2 | — | — | — | ||||||||||||
Stock options | — | — | — | — | ||||||||||||
Convertible Notes | — | — | — | — | ||||||||||||
Call Spread Warrants | — | — | — | — | ||||||||||||
Emergence Date Warrants | — | — | — | — | ||||||||||||
Denominator for diluted earnings (loss) per weighted average common shares | 111.1 | 497.3 | 497.1 | 500.7 | ||||||||||||
Net income (loss) per common share | ||||||||||||||||
Basic | $ | 2.61 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | ||||||
Diluted | $ | 2.58 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | ||||||
(1) Basic weighted average common stock outstanding | 109.9 | 497.3 | 497.1 | 500.7 | ||||||||||||
Basic weighted average common stock and common stock equivalents (preferred shares) | 109.9 | 572.4 | 497.1 | 500.7 | ||||||||||||
Percentage allocated to common stock holders | 100.0 | % | 86.9 | % | 100.0 | % | 100.0 | % |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | ||||||||||||||
(In millions) | 2017 | 2016 | ||||||||||||||
REVENUE | ||||||||||||||||
Products & Solutions | $ | 1,052 | $ | 253 | $ | 1,297 | $ | 1,536 | ||||||||
Avaya Networking (1) | — | — | 140 | 219 | ||||||||||||
Services | 1,401 | 351 | 1,835 | 1,947 | ||||||||||||
Unallocated Amounts (2) | (206 | ) | — | — | — | |||||||||||
$ | 2,247 | $ | 604 | $ | 3,272 | $ | 3,702 | |||||||||
GROSS PROFIT | ||||||||||||||||
Products & Solutions | $ | 696 | $ | 169 | $ | 890 | $ | 1,047 | ||||||||
Avaya Networking (1) | — | — | 48 | 80 | ||||||||||||
Services | 843 | 196 | 1,091 | 1,160 | ||||||||||||
Unallocated Amounts (3) | (396 | ) | (3 | ) | (21 | ) | (29 | ) | ||||||||
1,143 | 362 | 2,008 | 2,258 | |||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Selling, general and administrative | 888 | 264 | 1,261 | 1,401 | ||||||||||||
Research and development | 172 | 38 | 225 | 273 | ||||||||||||
Amortization of intangible assets | 127 | 10 | 204 | 226 | ||||||||||||
Impairment of indefinite-lived intangible assets | — | — | 65 | 100 | ||||||||||||
Goodwill impairment | — | — | 52 | 442 | ||||||||||||
Restructuring charges, net | 81 | 14 | 30 | 105 | ||||||||||||
1,268 | 326 | 1,837 | 2,547 | |||||||||||||
OPERATING (LOSS) INCOME | (125 | ) | 36 | 171 | (289 | ) | ||||||||||
INTEREST EXPENSE, OTHER INCOME (EXPENSE), NET AND REORGANIZATION ITEMS, NET | (134 | ) | 3,400 | (369 | ) | (430 | ) | |||||||||
(LOSS) INCOME BEFORE INCOME TAXES | $ | (259 | ) | $ | 3,436 | $ | (198 | ) | $ | (719 | ) |
(1) | The Networking business was sold on July 14, 2017. |
(2) | Unallocated amounts in Revenue represent the fair value adjustment to deferred revenue recognized upon emergence from bankruptcy and excluded from segment revenue. |
(3) | Unallocated amounts in Gross Profit include the fair value adjustments recognized upon emergence from bankruptcy and excluded from segment gross profit; the effect of the amortization of technology intangibles; and costs that are not core to the measurement of segment management’s performance, but rather are controlled at the corporate level. |
Successor | Predecessor | |||||||
(In millions) | September 30, 2018 | September 30, 2017 | ||||||
ASSETS: | ||||||||
Products & Solutions | $ | 1,336 | $ | 1,133 | ||||
Services | 1,509 | 2,499 | ||||||
Unallocated Assets (1) | 4,834 | 2,266 | ||||||
Total | $ | 7,679 | $ | 5,898 |
(1) | Unallocated Assets consist of cash and cash equivalents, accounts receivable, deferred income tax assets, property, plant and equipment, acquired intangible assets and other assets. Unallocated Assets are managed at the corporate level and are not identified with a specific segment. |
Successor | Predecessor | ||||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal years ended September 30, | |||||||||||||||
(In millions) | 2017 | 2016 | |||||||||||||||
REVENUE(1): | |||||||||||||||||
U.S. | $ | 1,184 | $ | 331 | $ | 1,798 | $ | 2,072 | |||||||||
International: | |||||||||||||||||
EMEA | 603 | 166 | 834 | 880 | |||||||||||||
APAC—Asia Pacific | 256 | 57 | 334 | 416 | |||||||||||||
Americas International—Canada and Latin America | 204 | 50 | 306 | 334 | |||||||||||||
Total International | 1,063 | 273 | 1,474 | 1,630 | |||||||||||||
Total | $ | 2,247 | $ | 604 | $ | 3,272 | $ | 3,702 |
Successor | Predecessor | |||||||
(In millions) | September 30, 2018 | September 30, 2017 | ||||||
LONG-LIVED ASSETS(2) | ||||||||
U.S. | $ | 169 | $ | 132 | ||||
International: | ||||||||
EMEA | 61 | 50 | ||||||
APAC—Asia Pacific | 12 | 11 | ||||||
Americas International—Canada and Latin America | 8 | 7 | ||||||
Total International | 81 | 68 | ||||||
Total | $ | 250 | $ | 200 |
(1) | Revenue is attributed to geographic areas based on the location of customers. |
(2) | Represents property, plant and equipment, net. |
20. | Accumulated Other Comprehensive (Loss) Income |
(In millions) | Change in Unamortized Pension, Post-retirement and Postemployment Benefit-related Items | Foreign Currency Translation | Unrealized Loss on Term Loan Interest Rate Swap | Other | Accumulated Other Comprehensive (Loss) Income | ||||||||||||||
Balance as of October 1, 2015 (Predecessor) | $ | (1,368 | ) | $ | (15 | ) | $ | — | $ | (1 | ) | $ | (1,384 | ) | |||||
Other comprehensive loss before reclassifications | (319 | ) | (18 | ) | — | — | (337 | ) | |||||||||||
Amounts reclassified to earnings | 60 | — | — | — | 60 | ||||||||||||||
Balance as of September 30, 2016 (Predecessor) | (1,627 | ) | (33 | ) | — | (1 | ) | (1,661 | ) | ||||||||||
Other comprehensive income (loss) before reclassifications | 181 | (39 | ) | — | — | 142 | |||||||||||||
Amounts reclassified to earnings | 90 | — | — | — | 90 | ||||||||||||||
Provision for income taxes | (19 | ) | — | — | — | (19 | ) | ||||||||||||
Balance as of September 30, 2017 (Predecessor) | (1,375 | ) | (72 | ) | — | (1 | ) | (1,448 | ) | ||||||||||
Other comprehensive (loss) income before reclassifications | (24 | ) | 3 | — | — | (21 | ) | ||||||||||||
Amounts reclassified to earnings | 16 | — | — | — | 16 | ||||||||||||||
Pension settlement | 721 | — | — | — | 721 | ||||||||||||||
Provision for income taxes | (58 | ) | — | — | — | (58 | ) | ||||||||||||
Balance as of December 15, 2017 (Predecessor) | (720 | ) | (69 | ) | — | (1 | ) | (790 | ) | ||||||||||
Elimination of Predecessor Company Accumulated other comprehensive loss | 720 | 69 | — | 1 | 790 | ||||||||||||||
Balance as of December 15, 2017 (Predecessor) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Balance as of December 16, 2017 (Successor) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
Other comprehensive income (loss) before reclassifications | 70 | (31 | ) | (3 | ) | — | 36 | ||||||||||||
(Provision for) benefit from income taxes | (19 | ) | — | 1 | — | (18 | ) | ||||||||||||
Balance as of September 30, 2018 (Successor) | $ | 51 | $ | (31 | ) | $ | (2 | ) | $ | — | $ | 18 |
(In millions) | |||
2019 | $ | 48 | |
2020 | 40 | ||
2021 | 28 | ||
2022 | 24 | ||
2023 | 15 | ||
2024 and thereafter | 39 | ||
Future minimum lease payments | $ | 194 |
(In millions) | |||
2019 | $ | 15 | |
2020 | 10 | ||
2021 | 5 | ||
2022 | 1 | ||
Future minimum lease payments | $ | 31 | |
Less: Imputed interest | (2 | ) | |
Present value of net minimum lease payments | $ | 29 |
Successor | Predecessor | ||||||||||||||||||||
(In millions, except per share amounts) | Fourth Quarter | Third Quarter | Second Quarter | Period from December 16, 2017 through December 31, 2017 | Period from October 1, 2017 through December 15, 2017 | ||||||||||||||||
Fiscal Year Ended September 30, 2018 | |||||||||||||||||||||
Revenue | $ | 735 | $ | 692 | $ | 672 | $ | 148 | $ | 604 | |||||||||||
Gross profit | 390 | 352 | 323 | 78 | 362 | ||||||||||||||||
Operating income (loss) | 11 | (49 | ) | (89 | ) | 2 | 36 | ||||||||||||||
Benefit from (provision for) income taxes | 311 | (20 | ) | 9 | 246 | (459 | ) | ||||||||||||||
Net income (loss) | 268 | (88 | ) | (130 | ) | 237 | 2,977 | ||||||||||||||
Net income (loss) attributable to common stockholders | 268 | (88 | ) | (130 | ) | 237 | 2,582 | ||||||||||||||
Net income (loss) per common share - basic | $ | 2.44 | $ | (0.80 | ) | $ | (1.18 | ) | $ | 2.16 | $ | 5.19 | |||||||||
Net income (loss) per common share - diluted | $ | 2.41 | $ | (0.80 | ) | $ | (1.18 | ) | $ | 2.15 | $ | 5.19 |
Predecessor | ||||||||||||||||
(In millions, except per share amounts) | Fourth Quarter | Third Quarter | Second Quarter | First Quarter | ||||||||||||
Fiscal Year Ended September 30, 2017 | ||||||||||||||||
Revenue | $ | 790 | $ | 803 | $ | 804 | $ | 875 | ||||||||
Gross profit | 496 | 493 | 484 | 535 | ||||||||||||
Operating income (loss) | 69 | (43 | ) | 75 | 70 | |||||||||||
(Provision for) benefit from income taxes | (6 | ) | 6 | 19 | (3 | ) | ||||||||||
Net income (loss) | 27 | (98 | ) | (8 | ) | (103 | ) | |||||||||
Net income (loss) attributable to common stockholders | 19 | (106 | ) | (15 | ) | (111 | ) | |||||||||
Net income (loss) per common share - basic | $ | 0.04 | $ | (0.22 | ) | $ | (0.03 | ) | $ | (0.22 | ) | |||||
Net income (loss) per common share - diluted | $ | 0.04 | $ | (0.22 | ) | $ | (0.03 | ) | $ | (0.22 | ) |
(1) | the Successor Company, Parent Company only, statements of financial position as of September 30, 2018, the statements of operations, comprehensive income (loss) and cash flows for the period from December 16, 2017 through September 30, 2018, and; |
(2) | the Predecessor Company, Parent Company only, statements of financial position as of September 30, 2017, the statements of operations, comprehensive income (loss) and cash flows for the period from October 1, 2017 through December 15, 2017 and for fiscal years ended September 30, 2017 and 2016. |
Successor | Predecessor | |||||||
September 30, 2018 | September 30, 2017 | |||||||
ASSETS | ||||||||
Investment in Avaya Inc. | $ | 2,344 | $ | — | ||||
TOTAL ASSETS | $ | 2,344 | $ | — | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
LIABILITIES | ||||||||
Deficit in excess of investment in Avaya Inc. | $ | — | $ | 4,429 | ||||
Long-term debt | 256 | — | ||||||
Other liabilities | 37 | — | ||||||
TOTAL LIABILITIES | 293 | 4,429 | ||||||
Commitments and contingencies | ||||||||
Predecessor equity awards on redeemable shares | — | 7 | ||||||
Preferred stock, Series B | — | 393 | ||||||
Preferred stock, Series A | — | 184 | ||||||
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | 2,051 | (5,013 | ) | |||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 2,344 | $ | — |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2016 | |||||||||||||
Equity in net income (loss) of Avaya Inc. | $ | 311 | $ | 2,977 | $ | (182 | ) | $ | (801 | ) | ||||||
Interest expense | (3 | ) | — | — | — | |||||||||||
Change in fair value of Preferred Series B derivative | — | — | — | 73 | ||||||||||||
Other expense | (21 | ) | — | — | (2 | ) | ||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | 287 | 2,977 | (182 | ) | (730 | ) | ||||||||||
Provision for income taxes | — | — | — | — | ||||||||||||
NET INCOME (LOSS) | 287 | 2,977 | (182 | ) | (730 | ) | ||||||||||
Less: Accretion and accrued dividends on Series A and Series B preferred stock | — | — | (31 | ) | (41 | ) | ||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 287 | $ | 2,977 | $ | (213 | ) | $ | (771 | ) | ||||||
NET INCOME (LOSS) PER SHARE AVAILABLE TO COMMON STOCKHOLDERS | ||||||||||||||||
Basic | $ | 2.61 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | ||||||
Diluted | $ | 2.58 | $ | 5.19 | $ | (0.43 | ) | $ | (1.54 | ) | ||||||
Weighted average shares outstanding | ||||||||||||||||
Basic | 109.9 | 497.3 | 497.1 | 500.7 | ||||||||||||
Diluted | 111.1 | 497.3 | 497.1 | 500.7 |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2016 | |||||||||||||
Net income (loss) | $ | 287 | $ | 2,977 | $ | (182 | ) | $ | (730 | ) | ||||||
Equity in other comprehensive income (loss) of Avaya Inc. | 18 | 658 | 213 | (277 | ) | |||||||||||
Elimination of Predecessor Company accumulated other comprehensive loss | — | 790 | — | — | ||||||||||||
Comprehensive income (loss) | $ | 305 | $ | 4,425 | $ | 31 | $ | (1,007 | ) |
Successor | Predecessor | |||||||||||||||
Period from December 16, 2017 through September 30, 2018 | Period from October 1, 2017 through December 15, 2017 | Fiscal year ended September 30, 2017 | Fiscal year ended September 30, 2016 | |||||||||||||
Net income (loss) | $ | 287 | $ | 2,977 | $ | (182 | ) | $ | (730 | ) | ||||||
Adjustments to reconcile net income (loss) to net cash used for operating activities: | ||||||||||||||||
Equity in net (income) loss of Avaya Inc. | (311 | ) | (2,977 | ) | 182 | 801 | ||||||||||
Change in fair value of Preferred Series B derivative | — | — | — | (73 | ) | |||||||||||
Changes in operating assets and liabilities | 24 | — | — | 2 | ||||||||||||
Net cash used for operating activities | — | — | — | — | ||||||||||||
Net cash used for investing activities | (314 | ) | — | — | — | |||||||||||
Net cash provided by financing activities | 314 | — | — | — | ||||||||||||
Net increase (decrease) in cash and cash equivalents | — | — | — | — | ||||||||||||
Cash and cash equivalents at beginning of period | — | — | — | — | ||||||||||||
Cash and cash equivalents at end of period | $ | — | $ | — | $ | — | $ | — |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
• | The appropriate complement of resources in our tax department commensurate with the volume and complexity of accounting for income taxes subsequent to the Company’s Bankruptcy Filing were not maintained, which 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. |
• | 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. |
• | Implemented 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. |
• | Hired additional personnel, including a Vice President of Tax, with the appropriate experience and technical expertise in income taxes. |
• | Provided additional training for employees involved in the cash and accounts receivable reconciliation processes, as well as certain other reconciliation processes, and supplemented existing reviewers with higher skilled resources. |
• | Provided additional training to ensure that the control designed to ensure that appropriate segregation of duties related to recording journal entries is achieved and performed on a timely basis as designed. |
Item 9B. | Other Information |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits, Financial Statement Schedules |
(a) (1) | Financial Statements - The information required by this item is included in Part II Item 8. of this Annual Report on Form 10-K. |
(2) | Financial Statement Schedules - The information required by this item is included in Note 9, "Supplementary Financial Information," to our Consolidated Financial Statements included in Part II Item 8 of this Annual Report on Form 10-K. |
(3) | Exhibits - See Index to Exhibits, which is incorporated by reference in this Item. The Exhibits listed in the accompanying Index to Exhibits are filed herewith or incorporated by reference as part of this Annual Report on Form 10-K. |
Exhibit Number | Exhibit Description | |
2.1 | ||
3.1 | ||
3.2 | ||
4.1 | ||
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4.3 | ||
4.4 | ||
4.5 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4* |
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10.6* | ||
10.7* | ||
10.8* | ||
10.9* | ||
10.10* | ||
10.11* | ||
10.12* | ||
10.13* | ||
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10.24 |
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10.28* | ||
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10.30* | ||
21.1 | ||
23.1 | ||
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | XBRL Instance 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 |
Item 16. | Form 10-K Summary |
AVAYA HOLDINGS CORP. | ||
By: | /s/ L. DAVID DELL'OSSO | |
Name: | L. David Dell'Osso | |
Title: | Vice President, Controller & Chief Accounting Officer |
Signature | Title | Date | ||
/s/ JAMES M. CHIRICO, JR. | Director, President and Chief Executive Officer (Principal Executive Officer) | December 21, 2018 | ||
James M. Chirico, Jr. | ||||
/s/ PATRICK J. O'MALLEY, III | Senior Vice President, Chief Financial Officer (Principal Financial Officer) | December 21, 2018 | ||
Patrick J. O'Malley, III | ||||
/s/ L. DAVID DELL'OSSO | Vice President, Controller and Chief Accounting Officer | December 21, 2018 | ||
L. David Dell'Osso | ||||
/s/ WILLIAM D. WATKINS | Chairman of the Board of Directors | December 21, 2018 | ||
William D. Watkins | ||||
/s/ STEPHAN SCHOLL | Director | December 21, 2018 | ||
Stephan Scholl | ||||
/s/ SUSAN L. SPRADLEY | Director | December 21, 2018 | ||
Susan L. Spradley | ||||
/s/ STANLEY J. SUTULA, III | Director | December 21, 2018 | ||
Stanley J. Sutula, III | ||||
/s/ SCOTT D. VOGEL | Director | December 21, 2018 | ||
Scott D. Vogel |
Subsidiaries of Avaya Holdings Corp. | ||
Company Name | State or Other Jurisdiction of Incorporation or Organization | |
3102455 Nova Scotia Company | Nova Scotia | |
Aurix Limited | United Kingdom | |
Avaya (China) Communication Co. Ltd. | China | |
Avaya (Dalian) Intelligent Communications Co., Ltd. | China | |
Avaya (Gibraltar) Investments Limited | Gibraltar | |
Avaya (Malaysia) Sdn. Bhd. | Malaysia | |
Avaya (Shanghai) Enterprise Management Co., Ltd. | China | |
Avaya Argentina S.R.L. | Argentina | |
Avaya Australia Pty Ltd | Australia | |
Avaya Austria GmbH | Austria | |
Avaya Belgium SPRL | Belgium | |
Avaya Beteiligungs GmbH | Germany | |
Avaya Brasil LTDA. | Brazil | |
Avaya CALA Inc. | Delaware | |
Avaya Canada Corp. | Nova Scotia | |
Avaya Capital Ireland | England & Wales | |
Avaya Capital Ireland Unlimited Company | Ireland | |
Avaya Chile Limitada | Chile | |
Avaya CIS LLC | Russian Federation | |
Avaya Cloud Inc. | Delaware | |
Avaya Cloud Limited | Ireland | |
Avaya Communication de Colombia S.A. | Colombia | |
Avaya Communication de Mexico, S.A. de C.V. | Mexico | |
Avaya Communication Israel Ltd. | Israel | |
Avaya Comunicación España S.L.U. | Spain | |
Avaya Cyprus Investments Limited | Cyprus | |
Avaya Czech Republic s.r.o. | Czech Republic | |
Avaya d.o.o. | Croatia | |
Avaya Denmark ApS | Denmark | |
Avaya Deutschland GmbH | Germany | |
Avaya Dutch Holdco B.V. | Netherlands | |
Avaya ECS Limited | England & Wales | |
Avaya Egypt LLC | Egypt | |
Avaya EMEA Ltd. | Delaware | |
Avaya Enterprises S.R.L. | Romania | |
Avaya Federal Solutions, Inc. | Delaware | |
Avaya Finland Oy | Finland | |
Avaya France SAS | France | |
Avaya GCM Sales Limited | Ireland | |
Avaya German Holdco GmbH | Germany | |
Avaya Germany GmbH | Germany | |
Avaya GmbH & Co. KG | Germany | |
Avaya Holding EMEA BV | Netherlands | |
Avaya Holdings Limited | Ireland | |
Avaya Holdings LLC | Delaware |
Avaya Holdings Two, LLC | Delaware | |
Avaya Hong Kong Company Limited | Hong Kong | |
Avaya Hungary Ltd./Avaya Hungary Communication Limited Liability Company | Hungary | |
Avaya Iletisim Sistemleri Ticaret Anonim Sirketi (Turkey JSC) | Turkey | |
Avaya Inc. | Delaware | |
Avaya India (SEZ) Pvt Ltd | India | |
Avaya India Private Limited | India | |
Avaya Integrated Cabinet Solutions LLC | Delaware | |
Avaya International Enterprises Ltd. | Ireland | |
Avaya International Holdings Limited | England & Wales | |
Avaya International Sales Limited | Ireland | |
Avaya Ireland Limited | Ireland | |
Avaya Italia S.p.A. | Italy | |
Avaya Japan Ltd. | Japan | |
Avaya Korea Ltd. | Korea, Republic Of | |
Avaya Limited | England & Wales | |
Avaya Luxembourg Investments S.a.r.l. | Luxembourg | |
Avaya Luxembourg Sarl | Luxembourg | |
Avaya Macau Limitada | China | |
Avaya Management L.P. | Delaware | |
Avaya Management Services Inc. | Delaware | |
Avaya Mauritius Ltd | Mauritius | |
Avaya Nederland B.V. | Netherlands | |
Avaya New Zealand Limited | New Zealand | |
Avaya Nigeria Limited | Nigeria | |
Avaya Norway AS | Norway | |
Avaya Panama Ltda. | Panama | |
Avaya Peru S.R.L. | Peru | |
Avaya Philippines, Inc. | Philippines | |
Avaya Poland Sp. z.o.o. | Poland | |
Avaya Puerto Rico, Inc. | Puerto Rico | |
Avaya Services Inc. | New York | |
Avaya Singapore Pte Ltd | Singapore | |
Avaya Sweden AB | Sweden | |
Avaya Switzerland GmbH | Switzerland | |
Avaya Training and Service Centre FZE | United Arab Emirates | |
Avaya UK | England & Wales | |
Avaya UK Holdings Limited | England & Wales | |
Avaya Venezuela S.R.L. | Venezuela | |
Avaya Verwaltungs GmbH | Germany | |
Avaya World Services Inc. | Delaware | |
CAAS Technologies, LLC | Nevada | |
Esna Technologies Inc. | Ontario | |
Esna Technologies Ltd | United Kingdom | |
Global Horizon Holdings Ltd | Israel | |
Harmatis Ltd. | Israel | |
Hyper Quality (India) Private Limited | India | |
HyperQuality II, LLC | Washington | |
HyperQuality, Inc. | Delaware | |
Intellisist, Inc. | Washington |
KnoahSoft Technologies Private Limited | India | |
KnoahSoft, Inc. | Delaware | |
Konftel AB | Sweden | |
Nimcat Networks General Partnership | Canada | |
Octel Communications LLC | Delaware | |
Persony, Inc. | Delaware | |
PT Sierra Communication Indonesia | Indonesia | |
Radvision Communication Development Beijing Co. Ltd. (RCD) | Bejing | |
Radvision Government Services, Inc. | Delaware | |
Sierra Asia Pacific Inc. | Delaware | |
Sierra Communication International LLC | Delaware | |
Sipera Systems Private Limited | India | |
Spectel Limited | Ireland | |
Spectel Operations Limited | Ireland | |
Spectel Research Limited | Ireland | |
Spoken Communications Japan K.K. | Japan | |
Technology Corporation of America, Inc. | Delaware | |
Tenovis Direct GmbH | Germany | |
Tenovis Telecom Frankfurt GmbH & Co. KG | Germany | |
Ubiquity Software Corporation | Delaware | |
Ubiquity Software Corporation Limited | England & Wales | |
VPNet Technologies, Inc. | Delaware | |
Windward Corp. | Cayman Islands |
/s/ JAMES M. CHIRICO, JR. | |
James M. Chirico, Jr. Director, President and Chief Executive Officer (Principal Executive Officer) |
/s/ PATRICK J. O'MALLEY, III | |
Patrick J. O'Malley, III Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
/s/ JAMES M. CHIRICO, JR. | |
James M. Chirico, Jr. Director, President and Chief Executive Officer (Principal Executive Officer) |
/s/ PATRICK J. O'MALLEY, III | |
Patrick J. O'Malley, III Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
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Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2018 |
Nov. 30, 2018 |
Mar. 29, 2018 |
|
Document And Entity Information [Abstract] | |||
Entity Registrant Name | AVAYA HOLDINGS CORP. | ||
Entity Central Index Key | 0001418100 | ||
Current Fiscal Year End Date | --09-30 | ||
Entity Filer Category | Non-accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Sep. 30, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 110,151,240 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Public Float | $ 2,459 | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | false |
Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended |
---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | |||
Pension, post-retirement and postemployment benefit-related items, tax | $ (58) | $ (19) | $ (19) |
Change in interest rate swaps, tax | $ 1 |
Background and Basis of Presentation |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Background and Basis of Presentation | Background and Basis of Presentation Background Avaya Holdings Corp. (the "Parent" or "Avaya Holdings"), together with its consolidated subsidiaries (collectively, the “Company” or “Avaya”), is a global leader in digital communications products, solutions and services for businesses of all sizes. Avaya builds open, converged and innovative solutions to enhance and simplify communications and collaboration in the cloud, on-premises or a hybrid of both. Our global, experienced team of professionals delivers services from initial planning and design, to seamless implementation and integration, to ongoing managed operations, optimization, training and support. Currently, the Company manages its business operations in two segments, Products & Solutions and Services. The Company sells directly 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 in Avaya Inc. and its subsidiaries. The accompanying Consolidated Financial Statements 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”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). On January 19, 2017 (the “Petition Date”), Avaya Holdings, together with certain 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. (n/k/a Avaya Integrated Cabinet Solutions LLC), 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. (n/k/a Avaya Cloud Inc.) (the “Debtors”), filed voluntary petitions for relief (the “Bankruptcy Filing”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code") in 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 Bankruptcy Court confirmed the Company's Second Amended Joint Chapter 11 Plan of Reorganization of Avaya Inc. and its Debtor Affiliates filed on October 24, 2017 (the "Plan of Reorganization") on November 28, 2017. Confirmation of the plan resulted in the discharge of certain claims against the Company that arose before the Petition Date and terminates all rights and interests of equity security holders as provided for in the Plan of Reorganization, as further discussed in Note 4, "Emergence from Voluntary Reorganization under Chapter 11 Proceedings." 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 Code and the orders of the Bankruptcy Court until the Plan of Reorganization was substantially consummated and they emerged from bankruptcy on December 15, 2017 (the "Emergence Date"). Upon the Emergence Date, the Company applied fresh start accounting, which resulted in a new basis of accounting 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 filed by the Debtors on October 24, 2017 and approved by 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 Consolidated Financial Statements of the Company have been prepared on a basis that assumes that the Company will continue as a going concern 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. 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. Revision of Prior Period Amounts Subsequent to filing the first quarter fiscal 2018 Form 10-Q, the Company identified certain amounts that should have been recorded in the Predecessor Company's consolidated financial statements as of the Emergence Date. Such errors resulted in a $26 million understatement of cash and cash equivalents and cash flows from operating activities with a corresponding overstatement of accounts receivable. Because of the application of fresh start accounting as of December 15, 2017, Stockholders’ Equity and Goodwill were also each understated by the same amount at December 15, 2017 and December 31, 2017. These errors had no effect on the reported consolidated net income (loss) for the Predecessor and Successor periods. The Company assessed the materiality of the above errors individually and in the aggregate on the December 31, 2017 interim Consolidated Financial Statements in accordance with SEC Staff Accounting Bulletin No. 99 and, based on an analysis of quantitative and qualitative factors, determined that the errors were not material to the Company's Predecessor and Successor periods in the interim Consolidated Financial Statements for the quarter ended December 31, 2017. The Consolidated Balance Sheet as of December 16, 2017, the Consolidated Statement of Cash Flows for the Predecessor period from October 1, 2017 through December 15, 2017, and the notes thereto have been revised to include the effects of these errors and the cash flow reclassification as follows:
For additional information refer to Notes: 5. “Fresh Start Accounting”; 7. “Goodwill”; 9. “Supplementary Financial Information”; and 12. “Derivative Instruments and Hedging Activities”. |
Summary of Significant Accounting Policies |
12 Months Ended |
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Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies 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 Successor Company adopted certain accounting policy changes which have been detailed in the “Revenue Recognition”, “Share-based Compensation” and “Foreign Currency Translation” accounting policies below. Use of Estimates 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 estimates include assessing the collectability of accounts receivable, 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 acquired in business combinations, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill, the amount of exposure from potential loss contingencies, fair value measurements, the application of fresh start accounting, 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 in the period they are determined to be necessary. Actual results could differ from these estimates. Principles of Consolidation The Consolidated Financial Statements include the accounts of Avaya Holdings Corp. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation. Acquisition Accounting The Company accounts for business combinations using the acquisition method, which requires an allocation of the purchase price of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired. Revenue Recognition The Company derives revenue primarily from the sale of products and services for communications systems and applications. The Company’s products are sold directly through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, systems integrators and business partners that provide sales and services support. Services include (i) supplemental maintenance services, including services provided under contracts to monitor and optimize customers’ communications network performance; (ii) professional services for implementation and integration of converged voice and data networks, network security and unified communications; and (iii) private cloud and managed services. Maintenance contracts have terms that range from one to five years. Contracts for professional services typically have terms that range from four to six weeks for simple engagements and from six months to one year for strategic engagements. Contracts for private cloud and managed services generally have terms that range from one to five years. In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605, "Revenue Recognition" ("ASC 605"), revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. For arrangements that require acceptance of the product, system, or solution as specified by the customer, revenue is deferred until the acceptance criteria have been met. The Company’s indirect sales to channel partners are generally recognized at the time of shipment if all contractual obligations have been satisfied. The Company accrues a provision for estimated sales returns and other allowances, including promotional marketing programs and other incentives as a reduction of revenue at the time of sale. When estimating returns, the Company considers customary inventory levels held by third-party distributors. The Company enters into multiple deliverable arrangements, which may include various combinations of products, software and services. Most product and service deliverables qualify as separate units of accounting and can be sold on a standalone basis. A deliverable constitutes a separate unit of accounting when it has standalone value and, where return rights exist, delivery or performance of the undelivered items is considered probable and substantially within the Company’s control. When the Company sells products with implementation services, they are generally combined as one or more units of accounting, depending on the nature of the services and the customer's acceptance requirements. The Company’s products may have both software and non-software components that function together to deliver the products’ essential functionality. For these multiple deliverable arrangements, the Company allocates revenue to the deliverables based on their relative selling prices. To the extent that a deliverable is subject to specific guidance on whether and/or how to allocate the consideration in a multiple element arrangement, that deliverable is accounted for in accordance with such specific guidance. The Company limits the amount of revenue recognition for delivered items to the amount that is not contingent on the future delivery of products or services or meeting other future performance obligations. The Company allocates revenue based on a selling price hierarchy of vendor-specific objective evidence, third-party evidence, and then estimated selling price. Vendor-specific objective evidence is based on the price charged when the deliverable is sold separately. Third-party evidence is based on largely interchangeable competitor products or services in standalone sales to similarly situated customers. As the Company is unable to reliably determine what competitor products’ selling prices are on a standalone basis, the Company is not typically able to determine third-party evidence. Estimated selling price is based on the Company’s best estimates of what the selling prices of deliverables would be if they were sold regularly on a standalone basis. Estimated selling price is established considering multiple factors including, but not limited to, pricing practices in different geographies and through different sales channels, major product and services groups, and customer classifications. Once the Company allocates revenue to each deliverable, the Company recognizes revenue in accordance with its policies when all revenue recognition criteria are met. Product revenue is generally recognized upon delivery and maintenance services revenue is generally recognized ratably over the period during which the services are performed, whereas revenue from private cloud and managed services is generally recognized based on usage, subject to contractual minimums. Revenue for professional services arrangements is generally recognized upon completion of performance and revenue for arrangements that require acceptance of the product, system or solution, is recognized when the acceptance criteria have been met. Standalone or subsequent sales of software or software-related items are recognized in accordance with the software revenue recognition guidance. For multiple deliverable arrangements that only include software items, the Company generally uses the residual method to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered items equals the total arrangement consideration, less the fair value of the undelivered items. Where vendor-specific objective evidence of fair value for the undelivered items cannot be determined, the Company generally defers revenue until all items are delivered and services have been performed, or until such evidence of fair value can be determined for the undelivered items. Amounts billed to customers related to shipping and handling are recorded as revenue, and the Company's shipping and handling costs are classified as cost of sales. Upon emergence from bankruptcy, the Company changed its accounting policy related to uncollected deferred revenue. Prior to the Emergence Date, the Predecessor Company recorded deferred revenue and related collectible accounts receivable in its Consolidated Balance Sheets. Subsequent to the Emergence Date, the Successor Company does not recognize deferred revenue relating to any sales transactions that have been billed, but for which the related account receivable has not yet been collected. The aggregate amount of unrecognized accounts receivable and deferred revenue was $113 million as of September 30, 2018 (Successor). The Company will adopt FASB Accounting Standards Update ("ASU") No. 2014-09, “Revenue from Contracts with Customers (Topic 606,)” effective October 1, 2018. The standard supersedes most existing revenue recognition guidance and will have an impact on the Company’s revenue recognition accounting policies. Refer to Note 3, “Recent Accounting Pronouncements,” for additional information. Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less at the date of purchase are classified as cash equivalents. Concentrations of Risk The Company’s cash and cash equivalents are maintained with several financial institutions. Deposits held at banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate such risks by spreading its risk across multiple counterparties and monitoring the risk profiles of these counterparties. The Company, from time to time, may enter into derivative financial instruments with high credit quality financial institutions to manage foreign exchange rate and interest rate risk and is exposed to losses in the event of non-performance by the counterparties to these contracts. To date, no counterparty has failed to meet its obligations to the Company. The Company relies on a limited number of contract manufacturers and suppliers to provide manufacturing services for its products. The inability of a contract manufacturer or supplier to fulfill supply requirements of the Company could materially impact future operating results. The Company's largest distributor is also its largest customer and represented 12% of the Company's total annual consolidated revenue for the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor). Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded net of reserves for sales returns and allowances and provisions for doubtful accounts. The Company performs ongoing credit evaluations of its customers and generally does not require collateral from its customers. The allowances are based on analyses of historical trends, aging of accounts receivable balances and the creditworthiness of customers as determined by credit checks, analyses, and payment history. At September 30, 2018 (Successor) and September 30, 2017 (Predecessor), one distributor accounted for approximately 13% and 13% of accounts receivable, respectively and a second distributor accounted for approximately 11% and 10% of accounts receivable, respectively. Inventory Inventory includes goods awaiting sale (finished goods), equipment that is being installed at customer locations for various installations that are not yet complete and goods to be used in connection with providing maintenance services. Inventory is stated at net realizable value, determined on a first-in, first-out method. Reserves to reduce the inventory cost to net realizable value are based on current inventory levels, assumptions about future demand and product life cycles for the various inventory types. The Company has outsourced the manufacturing of substantially all of its products and may be obligated to purchase certain excess inventory levels from its outsourced manufacturers if actual sales of product are lower than forecast, in which case additional inventory provisions may need to be recorded in the future. Research and Development Costs Research and development costs are charged to expense as incurred. The costs incurred for the development of communications software that will be sold, leased or otherwise marketed, however, are capitalized when technological feasibility has been established in accordance with FASB ASC Topic 985, “Software” (“ASC 985”). These capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and costs and changes in hardware and software technologies. Costs that are capitalized include direct labor and related overhead. Capitalized costs were not material during the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) as the software development process was essentially completed concurrently with the establishment of technological feasibility. Capitalized costs during fiscal 2017 and 2016 (Predecessor) were $2 million for both periods. Amortization of capitalized software development costs begins when the product is available for general release to customers. Amortization is recognized on a product-by-product basis generally on the straight-line method over a period of up to two years. Unamortized software development costs determined to be in excess of net realizable value of the product are expensed immediately. There were no unamortized software development costs at September 30, 2018 (Successor) and September 30, 2017 (Predecessor). Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is determined using a straight-line method over the estimated useful lives of the assets. Estimated lives range from two to ten years for machinery and equipment, up to five years for rental equipment, and the remaining lease term for equipment acquired under a capital lease. Improvements that extend the useful life of assets are capitalized and maintenance and repairs are charged to expense as incurred. Capitalized improvements to facilities subject to operating leases are depreciated over the lesser of the estimated useful life of the asset or the duration of the lease. Upon retirement or disposal of assets, the cost and related accumulated depreciation are removed from the Consolidated Balance Sheets and any gain or loss is reflected in the Consolidated Statements of Operations. The Company capitalizes costs associated with software developed or obtained for internal use when the preliminary project stage is completed and it is determined that the software will provide enhanced capabilities. Internal use software is amortized on a straight-line basis generally over five to seven years. Costs capitalized include payroll and related benefits, third party development fees and acquired software and licenses. General and administrative costs, overhead, maintenance and training, and the cost of the software that does not add functionality to existing systems, are expensed as incurred. The Company had unamortized internal use software costs included in Property, Plant and Equipment, net in the Consolidated Balance Sheets of $80 million and $56 million as of September 30, 2018 (Successor) and September 30, 2017 (Predecessor), respectively. Depreciation expense related to internal use software recognized in the Consolidated Statements of Operations for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2017 and 2016 (Predecessor) was $31 million, $5 million, $31 million and $30 million, respectively. Goodwill Goodwill is not amortized but is subject to periodic testing for impairment in accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Other” (“ASC 350”) at the reporting unit level, which is one level below the Company’s operating segments. The assessment of goodwill impairment is conducted by estimating and comparing the fair value of the Company’s reporting units, as defined in ASC 350, to their carrying amounts as of that date. The test for impairment is conducted annually and 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. Intangible and Long-lived Assets Intangible assets include technology and patents, customer relationships and trademarks and trade names. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from one to twenty years. Long-lived assets, including 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 in accordance with FASB ASC Topic 360, “Property, Plant, and Equipment.” Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the estimated fair value of the asset. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired. Long-lived assets to be disposed of are reported at the lower of carrying amount or estimated fair value less costs to sell. The estimated useful lives of intangible and long-lived assets are based on many factors including assumptions regarding the effects of obsolescence, demand, competition and other economic factors, expectations regarding the future use of the asset, and the Company's historical experience with similar assets. The assumptions used to determine the estimated useful lives could change due to numerous factors including product demand, market conditions, technological developments, economic conditions and competition. Derivative Financial Instruments All derivatives are recognized as assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as cash flow hedges under FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"), the change in fair value of the derivative is initially recorded in Accumulated other comprehensive (loss) income in the Consolidated Balance Sheets and is subsequently recognized in earnings when the hedged exposure impacts earnings. For derivative instruments that are not designated as hedges, gains (losses) from changes in fair values are recognized in earnings. The Company does not use financial instruments for trading or speculative purposes. Restructuring Programs The Company accounts for exit or disposal activities in accordance with FASB ASC Topic 420, “Exit or Disposal Cost Obligations” (“ASC 420”). A business restructuring is defined as an exit or disposal activity that includes, but is not limited to, a program that is planned and controlled by management and materially changes either the scope of a business or the manner in which that business is conducted. Business restructuring charges include (i) one-time termination benefits related to employee separations, (ii) contract termination costs and (iii) other related costs associated with exit or disposal activities including, but not limited to, costs for consolidating or closing facilities and relocating employees. A liability is recognized and measured at its fair value for one-time termination benefits once the plan of termination meets all of the following criteria: (i) management commits to a plan of termination, (ii) the plan identifies the number of employees to be terminated and their job classifications or functions, locations and the expected completion date, (iii) the plan establishes the terms of the benefit arrangement and (iv) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. Contract termination costs include costs to terminate a contract or costs that will continue to be incurred under the contract without benefit to the Company. A liability is recognized and measured at its fair value when the Company either terminates the contract or ceases using the rights conveyed by the contract. A liability is recognized and measured at its fair value for other related costs in the period in which the liability is incurred. Pension and Post-retirement 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. These pension and other post-retirement benefits are accounted for in accordance with FASB ASC Topic 715, “Compensation—Retirement Benefits” (“ASC 715”). ASC 715 requires that plan assets and obligations be measured as of the reporting date and the over-funded, under-funded or unfunded status of plans be recognized as of the reporting date as an asset or liability in the Consolidated Balance Sheets. In addition, ASC 715 requires costs and related obligations and assets arising from pensions and other post-retirement benefit plans to be accounted for based on actuarially-determined estimates. The Company’s pension and post-retirement benefit costs are developed from actuarial valuations. Inherent in these valuations are key assumptions, including the discount rate and expected long-term rate of return on plan assets. Material changes in pension and post-retirement benefit costs may occur in the future due to changes in these assumptions, in the number of plan participants, in the level of benefits provided, in asset levels and in legislation. The market-related value of the Company’s plan assets as of the measurement date is developed using a five-year smoothing technique. First, a preliminary market-related value is calculated by adjusting the market-related value at the beginning of the year for payments to and from plan assets and the expected return on assets during the year. The expected return on assets represents the expected long-term rate of return on plan assets adjusted up to plus or minus 2% based on the actual ten-year average rate of return on plan assets. A final market-related value is determined as the preliminary market-related value, plus 20% of the difference between the actual return and expected return for each of the past five years. The plans use different factors based on plan provisions and participant census data, including years of service, eligible compensation and age, to determine the benefit amount for eligible participants. The Company funds its U.S. pension plans in compliance with applicable laws. Advertising Costs The Company expenses advertising costs as incurred. Advertising costs were $27 million, $9 million, $44 million and $59 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and during fiscal 2017 and 2016 (Predecessor), respectively. Share-based Compensation The Company accounts for share-based compensation in accordance with FASB Topic ASC 718, “Compensation—Stock Compensation,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee directors including stock options, restricted stock units and stock purchases based on estimated fair values. Upon emergence from bankruptcy, the Company changed its accounting policy related to determining the fair value of equity awards. Prior to the Emergence Date, the Predecessor Company used the Cox-Ross-Rubenstein (“CRR”) binomial option pricing model to determine the grant date fair values of equity awards, including the fair value of its Preferred Series A and B Stock warrants. Forfeitures were an input assumption in the valuation model. Subsequent to the Emergence Date, the Successor Company uses the Black-Scholes-Merton option pricing model (“Black-Scholes”) to calculate the fair value of equity awards, including the fair value of warrants to purchase common stock. In addition to the change in option pricing models, the Successor Company accounts for forfeitures as incurred. Predecessor Equity Awards on Redeemable Shares The Predecessor Company issued equity awards, including restricted stock units and stock options, to employees of the Company that had a provision allowing, upon the employees' death or disability during employment, their estates to sell any shares obtained as a result of the equity award to the Company at an amount equal to the then current fair value per share as long as the sale was done pursuant to the terms and conditions of the Management Stockholders' Agreement. As a result of this provision, the Company classified the vested portion of the intrinsic value of these stock options and restricted stock units in the mezzanine section between debt and stockholders' deficit in the Consolidated Balance Sheets. Income Taxes Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized. Additionally, the accounting for income taxes requires the Company to evaluate and make an assertion as to whether undistributed foreign earnings will be indefinitely reinvested or repatriated. FASB ASC Subtopic 740-10, “Income Taxes—Overall” (“ASC 740-10”) prescribes a comprehensive model for the financial statement recognition, measurement, classification, and disclosure of uncertain tax positions. ASC 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, based on the technical merits of the position. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Significant judgment is required in evaluating uncertain tax positions and determining the provision for income taxes. Although the Company believes its reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in the historical income tax provision and accruals. The Company adjusts its estimated liability for uncertain tax positions periodically due to new information discovered from ongoing examinations by, and settlements with various taxing authorities, as well as changes in tax laws, regulations and interpretations. The Company's policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense. As part of the Company's accounting for business combinations, some of the purchase price is allocated to goodwill and intangible assets. Impairment expenses associated with goodwill are generally not tax deductible and will result in an increased effective income tax rate in the fiscal period any impairment is recorded. The income tax benefit from future releases of the acquisition date valuation allowances or income tax contingencies, if any, are reflected in the income tax provision in the Consolidated Statements of Operations, rather than as an adjustment to the purchase price allocation. Net Income (Loss) Per Share Basic net income (loss) per 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) for the Predecessor Company attributable to common stockholders was adjusted (increased) for preferred stock dividends earned during the period. Diluted income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding plus potentially dilutive common shares. Deferred Financing Costs Deferred financing costs are amortized using the effective interest method as interest expense over the contractual lives of the related credit facilities. Deferred financing costs related to a debt liability are presented on the Consolidated Balance Sheets as a reduction of the carrying amount of that debt liability and deferred financing costs related to revolving credit facilities are included within other assets. Foreign Currency Translation Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where the local currency is the functional currency, are translated from foreign currencies into U.S. dollars at period-end exchange rates. Upon emergence from bankruptcy, the Company changed its accounting policy related to translating the income and expense of non-U.S. dollar functional currency subsidiaries into U.S. dollars. Prior to the Emergence Date, the Predecessor Company translated the income and expense of non-U.S. dollar functional currency subsidiaries into U.S. dollars at the spot rate for the transaction. Subsequent to the Emergence Date, the Successor Company translates the income and expense of non-U.S. dollar functional currency subsidiaries into U.S. dollars using an average rate for the period. Translation gains or losses related to net assets located outside the U.S. are shown as a component of Accumulated other comprehensive income (loss) in the Consolidated Statements of Changes in Stockholders' Equity (Deficit). Gains and losses resulting from foreign currency transactions, which are denominated in currencies other than the functional currency, are included in other income (expense), net in the Consolidated Statements of Operations. Other Comprehensive Income (Loss) Other comprehensive income (loss) is recorded in Accumulated other comprehensive loss within stockholders' equity (deficit) on the Consolidated Balance Sheets and primarily includes unrealized gains and losses excluded from the Consolidated Statements of Operations. These unrealized gains and losses consist of changes in foreign currency translation, and changes in unamortized pension, post-retirement and postemployment actuarial gains and losses. |
Recent Accounting Pronouncements |
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Sep. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements In August 2017, the FASB issued ASU No. 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." This standard sets forth targeted improvements to accounting for hedging activities and will make more financial and non-financial hedging strategies eligible for hedge accounting. It also modifies the presentation and disclosure requirements for hedging activities and changes how companies assess hedge effectiveness. The Company elected to early adopt this standard as of April 1, 2018, applying the updated provisions retrospectively to the beginning of the current fiscal year. As the Company did not maintain any hedging instruments prior to April 1, 2018, there was no retrospective impact due to this interim adoption. The new guidance was applied to all hedging transactions entered into on or after April 1, 2018. In March 2017, the FASB issued ASU No. 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement 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 Consolidated Financial Statements. The Company early adopted this accounting standard as of October 1, 2017. Changes to the Consolidated Financial Statements have been applied retrospectively. As a result, the Company reclassified $34 million and $27 million of other pension and post-retirement benefit costs to other income (expense), net for fiscal 2017 and 2016 (Predecessor), respectively. For the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor), the Company recorded $13 million and $(8) million, respectively, of other pension and post-retirement benefit credits (costs) in Other income (expense), net. In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." This standard simplifies the accounting for share-based payments and their presentation in the statements of cash flows as well as the income tax effects of share-based payments. The Company adopted this standard as of October 1, 2017 on a prospective basis. The adoption of this standard did not have a material impact on the Company's Consolidated Financial Statements. Recent Standards Not Yet Effective In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other Internal-Use Software (Subtopic 350-40); Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract." This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for the Company in fiscal year 2021, with early adoption permitted. The Company is currently assessing the impact the new guidance will have on its Consolidated Financial Statements. In August 2018, the FASB issued ASU No. 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” This standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. This update removes disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. This standard is effective for the Company beginning in fiscal year 2021, with early adoption permitted. The amendments in the standard need to be applied on a retrospective basis. The Company is currently assessing the impact of the standard on its disclosures. In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This standard modifies the disclosure requirements on fair value measurements by removing certain disclosures, modifying certain disclosures and adding additional disclosures. This standard is effective for the Company beginning in the first quarter of fiscal year 2021. Certain disclosures in the standard need to be applied on a retrospective basis and others on a prospective basis. The Company is currently assessing the impact of the standard on its disclosures. In February 2018, the FASB issued ASU No. 2018-02, "Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This standard allows companies to reclassify from accumulated other comprehensive income to retained earnings any stranded tax benefits resulting from the enactment of the Tax Cuts and Jobs Act. This standard is effective for the Company beginning in the first quarter of fiscal 2020. The Company is currently evaluating the impact that the adoption of this standard may have on its Consolidated Financial Statements. In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This standard will be effective for the Company beginning in the first quarter of fiscal 2019. The future impact of this standard will be dependent upon the nature of future acquisitions or dispositions made by the Company. In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.” This standard requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This standard will be effective for the Company beginning in the first quarter of fiscal 2019 using the retrospective transition method to each period presented. The Company held $4 million and $91 million of restricted cash at September 30, 2018 (Successor) and September 30, 2017 (Predecessor), respectively. Accordingly, the standard will change the presentation of the Consolidated Statements of Cash Flows. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This standard addresses the appropriate classification of certain cash flows as operating, investing, or financing. This standard will be effective for the Company in the first quarter of fiscal 2019. The standard must be applied retrospectively to each accounting period presented and is not expected to have a material effect on its Consolidated Financial Statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This standard, which requires entities to estimate all expected credit losses for certain types of financial instruments, including trade receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The standard also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. This standard is effective for the Company in the first quarter of fiscal 2021 on a prospective basis. The Company is currently evaluating the impact that the adoption of this standard may have on its Consolidated Financial Statements. In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)." The standard requires the recognition of assets and liabilities for all leases with lease terms of more than 12 months. Subsequently, the FASB issued other standards that clarified certain aspects of the standard. This standard is effective for the Company in the first quarter of fiscal 2020 with early adoption permitted. The Company is currently evaluating the method of adoption and the effect that the adoption of the standard may have on its Consolidated Financial Statements. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” This standard supersedes most of the current revenue recognition guidance under GAAP 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 customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. New disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers are also required. The Company will adopt the new standard on a prospective basis effective October 1, 2018 using the modified retrospective method, whereby the cumulative effect of adoption will be recorded to retained earnings on the adoption date. We currently expect revenue recognition related to stand-alone product shipments, maintenance services, and certain cloud offerings to remain substantially unchanged. The most significant changes are expected for sales that include professional services, which will generally be recognized as the services are performed as opposed to upon completion and acceptance of the promised services. Additionally, when such arrangements also include products, certain products revenue will be recognized when the products are delivered as opposed to upon completion and acceptance of the related services. In addition to the impacts on revenue recognition, the standard requires incremental contract acquisition costs (primarily sales commissions) to be capitalized and amortized over the term of the related performance obligation as opposed to expensed as incurred. Nonetheless, the actual impacts are dependent upon contract-specific terms. The Company will finalize its accounting assessment and quantitative impact of adoption during the first quarter of fiscal 2019. |
Emergence from Voluntary Reorganization under Chapter 11 Proceedings |
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Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Emergence from Voluntary Reorganization under Chapter 11 Proceedings | 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:
Section 363 Asset Sale In July 2017, the Company sold its networking business ("Networking" or the "Networking business") to Extreme Networks, Inc. ("Extreme"). As part of the sale, Extreme paid the Company $70 million, deposited $10 million in an indemnity escrow account and assumed certain liabilities, primarily lease obligations, of $20 million. A $2 million gain was recognized and included in Other income (expense), net in the Consolidated Statements of Operations during fiscal 2017 (Predecessor). The deficit of revenues over direct expenses for the sold business was $4 million for the nine months ended June 30, 2017 (Predecessor) and $13 million for fiscal 2016 (Predecessor). The Networking business provided wired, WLAN and Fabric technology, and included the related customers, personnel, software and technology assets. 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 was part of the Services segment. Under a transition services agreement (the "TSA"), the Company provided administrative services to Extreme for process support, maintenance services and product logistics on a fee basis. As of September 30, 2018, all activities required to be provided under the TSA were completed and the TSA was terminated. The $10 million indemnity escrow was distributed in September 2018, with the Successor Company receiving $7 million and Extreme receiving the remaining $3 million as final settlement. The Company recorded income from the TSA, net of $5 million, $3 million and $3 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 (Predecessor), respectively. Fresh Start Accounting In connection with the Company's emergence from bankruptcy and in accordance with FASB ASC 852, "Reorganizations" ("ASC 852"), the Company applied the provisions of fresh start accounting to its 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 entity 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, 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 of the Successor Company's assets before considering liabilities. The excess reorganization value over the fair value of identified tangible and intangible assets is reported 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 statements as of or prior to that date. As discussed in Note 1, "Background and Basis of Presentation - Revision of Prior Period Amounts," prior period amounts as reported have been revised, where applicable. Reorganization Value As set forth in the Plan of Reorganization, the agreed upon enterprise value of the Company was $5,721 million. This value was within the initial range calculated by the Company of approximately $5,100 million to approximately $7,100 million using an income approach. The $5,721 million enterprise value was selected as it was the transaction price agreed to in the global settlement agreement with the Company’s creditor constituencies, including the PBGC. The reorganization value was then determined by adding liabilities other than interest bearing debt, pension obligations and the deferred tax impact of the reorganization and fresh start adjustments. The following table reconciles the enterprise value to the estimated fair value of the Successor stockholders' equity as of the Emergence Date:
The following table reconciles the enterprise value to the estimated reorganization value as of the Emergence Date:
Consolidated Balance Sheet The adjustments set forth in the following consolidated balance sheet as of December 16, 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 assets and liabilities, as well as significant assumptions or inputs.
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:
10.Other Current Liabilities.
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.
16.Liabilities Subject to Compromise. Liabilities subject to compromise were reinstated or settled as follows in accordance with the Plan of Reorganization:
(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:
Fresh Start Adjustments At the Emergence Date, the Company met the requirements under ASC 852 for the adoption of fresh start accounting. These adjustments reflect actual amounts recorded as of the Emergence Date.
The following table reflects the components of property, plant and equipment, net as of December 15, 2017:
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 was 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 Company goodwill of $3,541 million was eliminated and Successor Company goodwill of $2,658 million was established based on the calculated reorganization value.
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Fresh Start Accounting |
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Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fresh Start Accounting | 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:
Section 363 Asset Sale In July 2017, the Company sold its networking business ("Networking" or the "Networking business") to Extreme Networks, Inc. ("Extreme"). As part of the sale, Extreme paid the Company $70 million, deposited $10 million in an indemnity escrow account and assumed certain liabilities, primarily lease obligations, of $20 million. A $2 million gain was recognized and included in Other income (expense), net in the Consolidated Statements of Operations during fiscal 2017 (Predecessor). The deficit of revenues over direct expenses for the sold business was $4 million for the nine months ended June 30, 2017 (Predecessor) and $13 million for fiscal 2016 (Predecessor). The Networking business provided wired, WLAN and Fabric technology, and included the related customers, personnel, software and technology assets. 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 was part of the Services segment. Under a transition services agreement (the "TSA"), the Company provided administrative services to Extreme for process support, maintenance services and product logistics on a fee basis. As of September 30, 2018, all activities required to be provided under the TSA were completed and the TSA was terminated. The $10 million indemnity escrow was distributed in September 2018, with the Successor Company receiving $7 million and Extreme receiving the remaining $3 million as final settlement. The Company recorded income from the TSA, net of $5 million, $3 million and $3 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 (Predecessor), respectively. Fresh Start Accounting In connection with the Company's emergence from bankruptcy and in accordance with FASB ASC 852, "Reorganizations" ("ASC 852"), the Company applied the provisions of fresh start accounting to its 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 entity 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, 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 of the Successor Company's assets before considering liabilities. The excess reorganization value over the fair value of identified tangible and intangible assets is reported 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 statements as of or prior to that date. As discussed in Note 1, "Background and Basis of Presentation - Revision of Prior Period Amounts," prior period amounts as reported have been revised, where applicable. Reorganization Value As set forth in the Plan of Reorganization, the agreed upon enterprise value of the Company was $5,721 million. This value was within the initial range calculated by the Company of approximately $5,100 million to approximately $7,100 million using an income approach. The $5,721 million enterprise value was selected as it was the transaction price agreed to in the global settlement agreement with the Company’s creditor constituencies, including the PBGC. The reorganization value was then determined by adding liabilities other than interest bearing debt, pension obligations and the deferred tax impact of the reorganization and fresh start adjustments. The following table reconciles the enterprise value to the estimated fair value of the Successor stockholders' equity as of the Emergence Date:
The following table reconciles the enterprise value to the estimated reorganization value as of the Emergence Date:
Consolidated Balance Sheet The adjustments set forth in the following consolidated balance sheet as of December 16, 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 assets and liabilities, as well as significant assumptions or inputs.
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:
10.Other Current Liabilities.
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.
16.Liabilities Subject to Compromise. Liabilities subject to compromise were reinstated or settled as follows in accordance with the Plan of Reorganization:
(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:
Fresh Start Adjustments At the Emergence Date, the Company met the requirements under ASC 852 for the adoption of fresh start accounting. These adjustments reflect actual amounts recorded as of the Emergence Date.
The following table reflects the components of property, plant and equipment, net as of December 15, 2017:
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 was 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 Company goodwill of $3,541 million was eliminated and Successor Company goodwill of $2,658 million was established based on the calculated reorganization value.
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Business Combinations |
12 Months Ended |
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Sep. 30, 2018 | |
Business Combinations [Abstract] | |
Business Combinations | Business Combinations Spoken Communications On March 9, 2018 (the “Acquisition Date”), the Company acquired Intellisist, Inc. (“Spoken”), a United States-based private technology company, which provides cloud-based Contact Center as a Service ("CCaaS") solutions and customer experience management and automation applications. The total purchase price was $172 million, consisting of $157 million in cash, $14 million in contingent consideration and a $1 million settlement of Spoken’s net payable to the Company. Prior to the acquisition, the Company and Spoken had been working in a co-development partnership for more than a year pursuant to which the Company had recorded a net receivable from Spoken for services provided. Upon the achievement of three specified performance targets ("Earn-outs"), the Company may be required to pay up to $16 million of contingent consideration to Spoken's former owners and employees and up to $4 million in discretionary earn-out bonuses ("Earn-out Bonuses") to Spoken employees who are believed to have contributed to the achievement of the Earn-outs. The fair value of the Earn-outs at the Acquisition Date was $14 million, which was calculated using a probability-weighted discounted cash flow model and is remeasured to fair value at each subsequent reporting period. The Earn-out Bonuses, which are intended to incentivize remaining employees to assist in achieving the Earn-outs, are excluded from the acquisition consideration and are recognized as compensation expense in the Company's Consolidated Financial Statements ratably over the estimated Earn-out periods. During the period from December 16, 2017 through September 30, 2018 (Successor), there was no significant change to the fair value of the Earn-out liability other than interest accretion. The fair value of the Earn-out liability, including interest accretion, as of September 30, 2018 was $15 million. In connection with this acquisition, the Company recorded goodwill of $116 million, which has been assigned to the Products & Solutions (formerly known as GCS) segment, identifiable intangible assets with a fair value of $64 million, and other net liabilities of $8 million. The goodwill recognized is attributable primarily to the potential that the Spoken technology, cloud platform and assembled workforce will accelerate the Company's growth in cloud-based solutions. The Company has determined that the goodwill is not deductible for tax purposes. Since the Acquisition Date, the Company adjusted the initial purchase price allocation resulting in a decrease in goodwill, from $122 million to $116 million and a decrease of $4 million related to tax liabilities. The acquired intangible assets of $64 million included technology and patents of $56 million with a weighted average useful life of 4.9 years, $5 million of in-process research and development ("IPR&D") activities, which are considered indefinite lived until projects are completed or abandoned, and customer relationships of $3 million with a weighted average useful life of 7.5 years. The Company recorded $3 million of acquisition-related costs, which included investment banking, legal and other third-party costs, and $7 million of compensation expense resulting from the accelerated vesting of certain unvested Spoken stock option awards because post-combination service requirements were eliminated. The acquisition-related costs and the compensation expense were recorded in Selling, general and administrative expense in the Consolidated Statements of Operations. Spoken became a wholly-owned subsidiary of the Company on March 9, 2018. The Company's Consolidated Financial Statements reflect the financial results of the operations of Spoken beginning on March 9, 2018. Spoken’s revenue and operating loss included in the Company’s results for the period from December 16, 2017 through September 30, 2018 (Successor), was $8 million and $31 million, respectively. |
Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | Goodwill The changes in the carrying amount of goodwill by segment for the periods indicated were as follows:
The Company adjusted the carrying value of goodwill upon application of fresh start accounting. As discussed in Note 1, "Background and Basis of Presentation - Revision of Prior Period Amounts," prior period amounts have been revised, where applicable. 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. The Company identified five reporting units, all of which are subject to impairment testing annually 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. With the adoption of ASU 2017-04 in fiscal 2017 (Predecessor), the impairment test for goodwill consists of a one-step process. This process consists of a comparison of the fair value of a reporting unit with its carrying amount, including the goodwill allocated to that reporting unit. If the carrying value of a reporting unit exceeds its fair value, the Company will recognize an impairment loss equal to the amount of the excess. Prior to adoption of ASU 2017-04, the impairment test for goodwill was a two-step process. Under this method if the carrying value of a reporting unit exceeded its fair value, a second step of the goodwill impairment test was performed to measure the amount of impairment, if any. The second step compared the implied fair value of the reporting unit’s goodwill to the carrying amount of the goodwill. If the carrying amount of the reporting unit’s goodwill exceeded the implied fair value of the goodwill, an impairment loss was recognized in an amount equal to the excess. The implied fair value was determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit was allocated to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. This allocation was performed only for the purpose of assessing goodwill for impairment. Application of the impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units and the determination of the fair value of each reporting unit. The Company estimates the fair value of each reporting unit using a weighting of fair values derived from an income and a market approach. Under the income approach, the fair value of a reporting unit is based on the future cash flows expected from that reporting unit. Future cash flows are based on forward-looking information regarding market share and costs for each reporting unit and are discounted using an appropriate discount rate in a discounted cash flows model. The discounted cash flows model relies on assumptions regarding revenue growth rates, gross profit, projected working capital needs, selling, general and administrative expenses, research and development expenses, business restructuring costs, capital expenditures, income tax rates, discount rates and terminal growth rates. The discount rate the Company uses represents the estimated weighted average cost of capital, which reflects the overall level of inherent risk involved in its reporting unit operations and the rate of return an outside investor would expect to earn. To estimate cash flows beyond the final year of its model, the Company uses a terminal value approach. Under this approach, the Company applies a perpetuity growth assumption to determine the terminal value. The Company incorporates the present value of the resulting terminal value into its estimate of fair value. Forecasted cash flows for each reporting unit consider current economic conditions and trends, estimated future operating results, the Company’s view of growth rates and anticipated future economic conditions. Revenue growth rates inherent in this forecast are based on input from internal and external market intelligence research sources that compare factors such as growth in global economies, regional trends in the telecommunications industry and product evolution from a technological segment basis. Macroeconomic factors such as changes in economies, product evolutions, industry consolidations and other changes beyond the Company’s control could have a positive or negative impact on achieving its targets. The market approach estimates the fair value of a reporting unit by applying multiples of operating performance measures to the reporting unit's operating performance (the "Guideline Public Company Method"). These multiples are derived from comparable publicly-traded companies in the same or similar line of business with similar investment characteristics to the reporting unit. The key estimates and assumptions that are used to determine the fair value under this market approach include current and forward 12-month operating performance results, as applicable, and the selection of the relevant multiples to be applied. The Period from December 16, 2017 through September 30, 2018 (Successor) and the Period from October 1, 2017 through December 15, 2017 (Predecessor) The Company performed its annual goodwill impairment test on July 1, 2018 and determined that the carrying amounts of each of the Company's reporting units did not exceed their estimated fair values and therefore no impairment existed. The Avaya Professional Services reporting unit within the Services segment includes $22 million of goodwill and had a negative carrying amount at July 1, 2018. The fair value of the Avaya Professional Services reporting unit was positive at July 1, 2018. At July 1, 2018, the level of excess fair value over carrying value exceeds 10% for each of the Company's five reporting units, except for the Global Support Services ("GSS") reporting unit which has an excess fair value over carrying value of 7%. The goodwill assigned to GSS is $1,448 million. An increase in the discount rate of 1.1% used in the most recent goodwill impairment testing calculation would result in an estimated fair value below the carrying value for this reporting unit. During the fourth quarter of 2018, the Company closely monitored the key variables and other market factors for all of its reporting units and determined that it is not required to perform an interim impairment test. To the extent that changes in business conditions occur or other management decisions are made that result in adjusted management projections, it may be necessary to record impairment charges in the future. Fiscal 2017 (Predecessor) As a result of the sale of certain assets and liabilities of the Company’s Networking business to Extreme, it was determined that the fair value of the Networking services component was less than its carrying value. As a result, the Company recorded a goodwill impairment charge of $52 million during the third quarter of fiscal year 2017 (Predecessor). In addition to the goodwill impairment charge associated with the sale of the Company’s Networking business, the Company filed for bankruptcy and updated its five-year forecast during the nine month period ended June 30, 2017 (Predecessor). As a result of the decline in revenue and the updated forecast, the Company determined that an interim impairment test of its goodwill and long-lived assets should be performed as of June 30, 2017 (Predecessor). Using the revised five-year forecast, the results of the goodwill impairment test indicated that the respective carrying values of each reporting unit did not exceed their respective fair values and therefore, no impairment existed. At July 1, 2017, the Company performed its annual goodwill impairment test and determined that the respective carrying amounts of the Company’s reporting units did not exceed their estimated fair values and therefore no impairment existed. Fiscal 2016 (Predecessor) At July 1, 2016, the Company performed its annual goodwill impairment test for all of its reporting units. The results of step one of the goodwill impairment test indicated that the estimated fair value of the Unified Communication (“UC”) reporting unit was less than the carrying amount of its net assets (including goodwill) and as such, the Company performed step two of the impairment test for the UC reporting unit. All of the Company’s other reporting units passed step one of the goodwill impairment test. In the application of step two of the goodwill impairment test performed on the UC reporting unit, the Company estimated the implied fair value of the goodwill to be $504 million as compared to a carrying amount of $946 million and recorded an impairment to goodwill of $442 million associated with the UC reporting unit within the Products & Solutions segment. |
Intangible Assets |
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Intangible Assets | Intangible Assets The Company's intangible assets consist of the following for the periods indicated:
Amortizable technology and patents have useful lives that range between 1 year and 10 years with a weighted average remaining useful life of 4.9 years. IPR&D activities are considered indefinite-lived until projects are completed or abandoned. Customer relationships have useful lives that range between 1 year and 19 years with a weighted average remaining useful life of 13.8 years. Amortizable product trade names have useful lives of 10 years with a weighted average remaining useful life of 9.2 years. The Avaya trade name is expected to generate cash flows indefinitely and, consequently, this asset is classified as an indefinite-lived intangible and is therefore not amortized. Amortization expense for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), was $262 million, $13 million, $224 million and $256 million, respectively. Future amortization expense of intangible assets as of September 30, 2018 for the fiscal years ending September 30, is as follows:
The Period from December 16, 2017 through September 30, 2018 (Successor) and the Period from October 1, 2017 through December 15, 2017 (Predecessor) At July 1, 2018, the Company performed its annual impairment test of indefinite-lived intangible assets. The Company determined that the respective carrying amounts of the indefinite-lived intangible assets did not exceed their estimated fair values and therefore no impairment existed. The Company assessed whether there were any triggering events that would indicate a potential impairment of its finite-lived intangible assets and did not identify any such triggering events or impairment indicators. Fiscal 2017 (Predecessor) Prior to the goodwill impairment testing on June 30, 2017, the Company performed an impairment test of indefinite-lived intangible assets and other long-lived assets as of June 30, 2017. The Company estimated the fair values of its indefinite-lived intangible assets using the royalty savings method, which values an asset by estimating the royalties saved through ownership of the asset. As a result of the impairment test, the Company estimated the fair value of its trademarks and trade names to be $190 million as compared to a carrying amount of $255 million and recorded an impairment charge of $65 million. At July 1, 2017, the Company performed its annual test of impairment of indefinite-lived intangible assets. The Company determined that the respective carrying amounts of the indefinite-lived intangible assets did not exceed their estimated fair values and therefore no impairment existed. Fiscal 2016 (Predecessor) Prior to the annual goodwill impairment testing, the Company performed its annual test of impairment of indefinite-lived intangible assets at July 1, 2016. Using the Company forecasts, the Company estimated the fair values of its indefinite-lived intangible assets using the royalty savings method, which values an asset by estimating the royalties saved through ownership of the asset. As a result of the impairment test, the Company estimated the fair value of the indefinite-lived intangible assets to be $255 million as compared to a carrying amount of $355 million and recorded an impairment charge of $100 million related to trademark and trade name indefinite-lived intangible assets. |
Supplementary Financial Information |
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Supplementary Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplementary Financial Information | Supplementary Financial Information Consolidated Statements of Operations Information The following table presents a summary of depreciation and amortization and Other income (expense), net for the periods indicated:
As discussed in Note 3, “Recent Accounting Pronouncements - Recently Adopted Accounting Pronouncements,” the adoption of ASU 2017-07 resulted in the recognition of Other pension and post-retirement benefit credits (costs), net (including the interest cost, expected return on plan assets, amortization and curtailments and settlements) in Other income (expense), net. Prior period amounts have been reclassified to conform to the current period presentation. The Foreign currency gains, net for the period from December 16, 2017 through September 30, 2018 (Successor) was principally due to the strengthening of the U.S. dollar compared to certain foreign exchange rates on U.S. dollar denominated receivables maintained in non-U.S. locations, mainly Argentina, India and Mexico. As of July 1, 2018, we concluded that Argentina represents a hyperinflationary economy as its projected three-year cumulative inflation rate exceeds 100%. As a result, we changed the local functional currency for our Argentinian operations from the Argentine Peso to the U.S. Dollar effective July 1, 2018 and remeasured the financial statements for those operations to the U.S. Dollar as of July 1, 2018 in accordance with ASC 830 “Foreign Currency Matters.” Although the remeasurement on July 1, 2018 did not have an impact on our Consolidated Financial Statements, foreign exchange transaction gains and losses recognized on or after July 1, 2018 will be based on Argentina’s new U.S. dollar functional currency. A summary of Reorganization items, net for the periods indicated is presented in the following table:
Costs directly attributable to the implementation of the Plan of Reorganization were reported as Reorganization items, net. The cash payments for reorganization items for the period from October 1, 2017 through December 15, 2017 (Predecessor) included $2,468 million of claims paid related to Liabilities subject to compromise and $56 million for bankruptcy-related professional fees, including emergence and success fees paid on the Emergence Date. As discussed in Note 1, "Background and Basis of Presentation - Revision of Prior Period Amounts," prior period amounts have been revised, where applicable. Consolidated Balance Sheet Information
As of September 30, 2018, Machinery and equipment, Rental equipment and Accumulated depreciation and amortization include $4 million, $19 million and $(10) million, respectively, for assets acquired under capital leases. As of September 30, 2017, Machinery and equipment, Rental equipment and Accumulated depreciation and amortization include $6 million, $38 million and $(35) million, respectively, for assets acquired under capital leases. The decrease in the gross Property, plant and equipment cost and Accumulated depreciation and amortization amounts mainly reflect the impact of the Company applying fresh start accounting on the Emergence Date. See Note 5, "Fresh Start Accounting," for additional information.
During the Chapter 11 proceedings, all expenses, gains and losses directly associated with the reorganization proceedings were reported as Reorganization items, net in the accompanying Consolidated Statements of Operations. In addition, Liabilities subject to compromise during Chapter 11 proceedings were distinguished from liabilities of the non-debtors and from post-petition liabilities in the accompanying 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. Supplemental Cash Flow Information
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Restructuring Reserve [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Restructuring Reserves and Programs | Business Restructuring Reserves and Programs During the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), the Company recognized restructuring charges of $81 million, $14 million, $30 million, and $105 million, respectively. 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's restructuring charges generally include separation charges which 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; and lease obligation charges. 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. The Company does not allocate restructuring reserves to its operating segments. Fiscal 2018 Restructuring Program Recognized restructuring charges for the fiscal 2018 restructuring program included employee separation costs associated with employee severance actions primarily in Europe, Middle East and Africa ("EMEA"), the U.S. and Asia-Pacific ("APAC"), for which the related payments are expected to be completed by the beginning of fiscal 2025. Lease obligation charges were also incurred in connection with the termination of certain U.S. real estate leases. The following table summarizes the components of the fiscal 2018 restructuring program for the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor):
Fiscal 2017 Restructuring Program These obligations are primarily for employee separation costs associated with fiscal 2017 (Predecessor) employee severance actions in the U.S. and EMEA, for which the related payments are expected to be completed in fiscal 2024. The following table summarizes the components of the fiscal 2017 restructuring program:
Fiscal 2016 Restructuring Program These obligations are primarily for employee separation costs associated with employee severance actions in EMEA and Canada for which the related payments are expected to be completed in fiscal 2023 and a voluntary headcount reduction plan initiated in the U.S. The following table summarizes the components of the fiscal 2016 restructuring program:
Fiscal 2008 through 2015 Restructuring Programs These obligations are primarily for costs associated with eliminating employee positions and exiting facilities. The payments related to the headcount reductions identified in those programs are expected to be completed by fiscal 2022. Future rental payments, net of estimated sublease income, related to operating lease obligations for unused space in connection with the closing or consolidation of facilities are expected to continue through fiscal 2021. The following table aggregates the remaining components of the fiscal 2008 through 2015 restructuring programs:
As of September 30, 2017, the Business restructuring reserve of $80 million included $11 million that was recorded in Liabilities subject to compromise in the Consolidated Balance Sheets. |
Financing Arrangements |
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Financing Arrangements | Financing Arrangements The following table reflects principal amounts of debt and debt net of discounts and issuance costs as of September 30, 2018 (Successor) and September 30, 2017 (Predecessor), which includes the impact of adequate protection payments and accrued interest as of January 19, 2017, the date the Company filed for bankruptcy:
(1) Pre-petition long-term debt as of September 30, 2017 (Predecessor) was included in Liabilities subject to compromise. On the Emergence Date:
Successor Financing Term Loan and ABL Credit Agreements On the Emergence Date, Avaya Inc. entered into (i) the 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 and (ii) the 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 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 million from time to time, subject to borrowing base availability (the ABL Credit Agreement together with the Term Loan Credit Agreement, the “Credit Agreements”). On June 18, 2018, the Company amended the Term Loan Credit Agreement to reduce interest rates and to reduce the London Inter-bank Offered Rate ("LIBOR") floor that existed under the original agreement from 1.00% to 0.00%. After the amendment, the Term Loan Credit Agreement (a) in the case of alternative base rate ("ABR") Loans, bears interest at a rate per annum equal to 3.25% plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. prime rate as publicly announced in the Wall Street Journal and (iii) the LIBOR Rate for an interest period of one month and (b) in the case of LIBOR Loans, bears interest at a rate per annum equal to 4.25% plus the applicable LIBOR rate, subject to a 0.00% floor. Prior to the amendment, the Term Loan Credit Agreement, in the case of ABR Loans, bore interest at a rate per annum equal to 3.75% plus the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the U.S. prime rate as publicly announced in the Wall Street Journal and (iii) the LIBOR Rate for an interest period of one month and in the case of LIBOR Loans, bore interest at a rate per annum equal to 4.75% plus the applicable LIBOR rate, subject to a 1.00% floor. As a result of the amendment, outstanding loan balances under the original Term Loan Credit Agreement were paid in full and new debt was issued for the same outstanding principal amount. The amendment was accounted for as a loan modification under ASC 470, "Debt". For the period from December 16, 2017 through September 30, 2018 (Successor), the Company recognized interest expense of $154 million related to the Term Loan Credit Agreement, including the amortization of discounts and issuance costs. The ABL Credit Agreement bears interest:
The Credit Agreements limit, among other things, the ability of Avaya Inc. and certain of its subsidiaries 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 their organizational documents. The Term Loan Credit Agreement does not contain any financial covenants. The ABL Credit Agreement does not contain any financial covenants other than a requirement to maintain a minimum fixed charge coverage ratio of 1:1 that becomes applicable only in the event that the net borrowing availability 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 September 30, 2018 (Successor), the Company was not in default under any of its debt agreements. Under the terms of the ABL Credit Agreement, the Company can issue letters of credit up to $150 million. At September 30, 2018 (Successor), the Company had issued and outstanding letters of credit and guarantees of $46 million. The aggregate additional principal amount that may be borrowed under the ABL Credit Agreement, based on the borrowing base less $46 million of outstanding letters of credit and guarantees, was $153 million at September 30, 2018 (Successor). Convertible Notes On June 11, 2018, the Company issued its 2.25% Convertible Notes in an aggregate principal of $350 million (including the underwriters’ exercise in full of an over-allotment option of $50 million), which mature on June 15, 2023 (the “Convertible Notes”). The Convertible Notes were issued under an indenture (the “Indenture”), by and between the Company and the Bank of New York Mellon Trust Company N.A., as Trustee. The Company received net proceeds from the offering of $314 million after giving effect to debt issuance costs, including the underwriting discount, the net cash used to purchase a bond hedge and the proceeds from the issuance of warrants, which are discussed below. The Convertible Notes accrue interest at a rate of 2.25% per annum, payable semi-annually on June 15 and December 15 of each year beginning on December 15, 2018. On or after March 15, 2023, and until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert the Convertible Notes at the holders' option. The Convertible Notes are convertible at an initial rate of 36.0295 shares per $1,000 of principal (equivalent to an initial conversion price of $27.76 per share of the Company's common stock). The conversion rate is subject to customary adjustments for certain events as described in the Indenture. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company's election. It is the Company’s current intent to settle conversions of the Convertible Notes through combination settlement, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares of its common stock. Holders may convert the Convertible Notes, at the holders' option, prior to March 15, 2023 only under the following circumstances:
The Company may not redeem the Convertible Notes prior to their maturity date, and no sinking fund is provided for them. If the Company undergoes a fundamental change, as described in the Indenture, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of the Convertible Notes. The fundamental change repurchase price is equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest up to, but excluding, the fundamental change repurchase date. If holders elect to convert the Convertible Notes in connection with a make-whole fundamental change, as described in the Indenture, the Company will, to the extent provided in the Indenture, increase the conversion rate applicable to the Convertible Notes. The Indenture does not contain any financial or operating covenants or restrictions on the payment of dividends, the incurrence of indebtedness, or the issuance or repurchase of securities by the Company or any of its subsidiaries. The Indenture contains customary events of default with respect to the Convertible Notes. In accounting for the issuance of the Convertible Notes, the Company separated the Convertible Notes into liability and equity components. The Company allocated $258 million of the Convertible Notes to the liability component, and $92 million to the equity component. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component, which represents the conversion option and does not meet the criteria for separate accounting as a derivative as it is indexed to the Company's own stock, was determined by deducting the fair value of the liability component from the par value of the Convertible Notes. The excess of the principal amount of the liability component over its carrying amount represents a debt discount, which is recorded as a direct deduction from the related debt liability in the Consolidated Balance Sheets and is amortized to interest expense over the term of the Convertible Notes using the effective interest method. The equity component is included in Additional paid-in capital in the Consolidated Balance Sheets and will not be remeasured as long as it continues to meet the conditions for equity classification. The Company incurred issuance costs of $10 million related to the Convertible Notes. Issuance costs were allocated to the liability and equity components based on the same proportion used to allocate the proceeds. Issuance costs attributable to the liability component are being amortized to interest expense over the term of the Convertible Notes, and issuance costs attributable to the equity component are included along with the equity component in stockholders' equity. For the period from December 16, 2017 through September 30, 2018 (Successor), the Company recognized interest expense of $7 million related to the Convertible Notes, which mainly consisted of amortization of the underwriting discount. The net carrying amount of the Convertible Notes for the period indicated was as follows:
The net carrying amount of the equity component of the Convertible Notes for the period indicated was as follows:
Bond Hedge and Call Spread Warrants In connection with the issuance of the Convertible Notes, the Company also entered into privately negotiated transactions to purchase hedge instruments (“Bond Hedge”), covering 12.6 million shares of its common stock at a cost of $84 million. The Bond Hedge is subject to anti-dilution provisions substantially similar to those of the Convertible Notes, has a strike price of $27.76 per share, is exercisable by the Company upon any conversion under the Convertible Notes, and expires on June 15, 2023. The Bond Hedge was recorded in equity and the cost of the Bond Hedge was recorded as a reduction of Additional paid-in capital in the accompanying Consolidated Balance Sheets. The Company also sold warrants for the purchase of up to 12.6 million shares of its common stock for aggregate proceeds of $58 million (“Call Spread Warrants”). The Call Spread Warrants have a strike price of $37.3625 per share and are subject to customary anti-dilution provisions. The Call Spread Warrants will expire in ratable portions on a series of expiration dates commencing on September 15, 2023. The Call Spread Warrants were recorded in equity and the proceeds from the issuance of the Call Spread Warrants were recorded as an increase to Additional paid-in capital. The Bond Hedge and Call Spread Warrants are intended to reduce the potential dilution with respect to the Company’s common stock and/or reduce the Company’s exposure to potential cash payments that the Company may be required to make upon conversion of the Convertible Notes by, in effect, increasing the conversion price, from the Company’s economic standpoint, to $37.3625 per share. However, the Call Spread Warrants could have a dilutive effect with respect to the Company's common stock or, if the Company so elects, obligate the Company to make cash payments to the extent that the market price of common stock exceeds $37.3625 per share on any date upon which the Call Spread Warrants are exercised. Debt Maturity The stated annual maturity of total debt for the fiscal years ended September 30, consist of:
Predecessor Financing The Bankruptcy Filing constituted an event of default that accelerated the Predecessor’s payment obligations under the senior secured credit agreements and the senior secured notes. As a result of the Bankruptcy Filing, the principal and interest due under the Predecessor’s debt agreements became due and payable. However, any efforts to enforce such payment obligations were automatically stayed as a result of the Bankruptcy Filing, and the creditors’ rights of enforcement were subject to the applicable provisions of the Bankruptcy Code 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 in 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. Debt Included in Liabilities Subject to Compromise. As of September 30, 2017 (Predecessor), the debt outstanding that was included in Liabilities subject to compromise was as follows:
In fiscal 2017 (Predecessor), the Company recorded non-cash interest expense of $61 million related to the accelerated amortization of debt issuance costs and accretion of debt discount related to the Company’s Bankruptcy Filing. In addition, effective January 19, 2017, the Company ceased recording interest expense on outstanding pre-petition debt classified as Liabilities subject to compromise. Contractual interest expense represented 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 (Predecessor) and the period from January 19, 2017 through September 30, 2017 (Predecessor), contractual interest expense of $94 million and $316 million was not recorded as interest expense, as it was not an allowed claim under the Bankruptcy Filing. The weighted average contractual interest rate of the Company’s outstanding debt as of September 30, 2018 (Successor) and September 30, 2017 (Predecessor) was 6.4% and 7.7%, respectively. The effective interest rate for the Term Loan as of September 30, 2018 (Successor) was not materially different than its contractual interest rate including adjustments related to hedging. The effective interest rate for the Convertible Notes as of September 30, 2018 (Successor) was 9.2% reflecting the separation of the conversion feature in equity. The effective interest rates include interest on the debt and amortization of discounts and issuance costs. Capital Lease Obligations Included in Other liabilities is $31 million and $14 million of capital lease obligations, net of imputed interest as of September 30, 2018 (Successor) and September 30, 2017 (Predecessor), respectively, and excluded amounts included in Liabilities subject to compromise of $12 million as of September 30, 2017 (Predecessor). The Company outsources certain delivery services associated with the Avaya private cloud business, which include the sale of specified assets owned by the Company, which are being leased-back by the Company and accounted for as a capital lease. As of September 30, 2018 (Successor) and September 30, 2017 (Predecessor), capital lease obligations associated with this agreement were $26 million and $24 million, respectively, and include $10 million within Liabilities subject to compromise as of September 30, 2017 (Predecessor). |
Derivative Instruments and Hedging Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | The Company accounts for derivative financial instruments in accordance with ASC 815 and does not enter into 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 variable rate loans outstanding. On May 16, 2018, the Company entered into interest rate swap agreements with six counterparties, which fixed a portion of the variable interest due under its Term Loan Credit Agreement. Under the terms of the interest rate 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. As of September 30, 2018 (Successor), the total notional amount of the six interest rate swap agreements was $1,800 million. The interest rate swaps are designated as cash flow hedges as they are deemed highly effective as defined under ASC 815. As a result, the unrealized gains or losses on these contracts are initially recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets. As interest expense is recognized on the Term Loan Credit Agreement, the corresponding deferred gain or loss on the interest rate swaps is reclassified from Accumulated other comprehensive loss to Interest expense in the Consolidated Statements of Operations. Based on the amount in Accumulated other comprehensive loss at September 30, 2018 (Successor), approximately $6 million would be reclassified into net income in the next twelve months as interest expense. It is management's intention that the notional amount of interest rate swaps be less than the variable rate loans outstanding during the life of the derivatives. Emergence Date Warrants In accordance with the Plan of Reorganization, the Company issued Emergence Date Warrants to purchase 5,645,200 shares of Successor Company common stock to the holders of the Predecessor second lien obligations pursuant to a warrant agreement. Each Emergence Date Warrant has an exercise price of $25.55 per share and expires December 15, 2022. The Emergence Date Warrants contain certain derivative features that require them to be classified as a liability and for changes in fair value of the liability to be recognized in earnings each reporting period. None of the Emergence Date Warrants have been exercised as of September 30, 2018 (Successor). As discussed in Note 1, "Background and Basis of Presentation - Revision of Prior Period Amounts," prior period amounts as reported have been revised, where applicable. 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 Emergence Date Warrants upon emergence and as of September 30, 2018 (Successor) was recorded in Non-current liabilities - Other liabilities in the Consolidated Balance Sheets, and was determined by using the Black-Scholes option pricing model with the input assumptions summarized below:
In determining the fair value of the Emergence Date Warrants, the dividend yield was assumed to be zero as the Company does not anticipate paying dividends. On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase the Company’s outstanding warrants to purchase shares of the Company’s common stock. See Note 25, "Subsequent Event," for additional information. Preferred Series B Embedded Derivative The Predecessor Company had issued preferred series B stock containing certain features, which were considered an embedded derivative. This embedded derivative was separated from the host contract (i.e. the preferred stock) and recognized as a current liability on the Consolidated Balance Sheets at fair value. When the embedded derivative was revalued at each balance sheet date, the changes in the fair value were recognized in the Consolidated Statements of Operations as Other income (expense), net. In fiscal 2017 and 2016 (Predecessor), the gain on the preferred series B embedded derivative included in Other income (expense), net was $0 million and $73 million, respectively. As a result of the Bankruptcy filing on January 19, 2017, the series B embedded derivative had no value since the Company did not have sufficient resources to satisfy its debt obligations. The Predecessor Company Series B preferred stock was canceled in connection with the Company's emergence from bankruptcy. 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 liabilities including receivables, payables and certain intercompany obligations. These foreign currency forward contracts are not designated for hedge accounting treatment. Changes in fair value of these contracts are recorded as a component of Other income (expense), net to offset the change in the value of the underlying assets and liabilities. As the Company did not maintain any foreign currency forward contracts in fiscal 2018 and 2017, there were no gains or (losses) from foreign currency forward contracts included in Other income (expense), net for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2017. The gain from foreign currency forward contracts included in Other income (expense), net was $1 million for fiscal 2016. The following table summarizes the fair value of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:
The following table provides information regarding the location and amount of pre-tax (losses) gains for derivatives designated as cash flow hedges:
The following table provides information regarding the pre-tax (losses) gains for derivatives not designated as hedging instruments on the Consolidated Statements of Operations:
The Company records its derivatives on a gross basis in the 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:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements 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. 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 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. Assets and Liabilities Measured at Fair Value on a Recurring Basis Assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 (Successor) and September 30, 2017 (Predecessor) were as follows:
Investments Investments classified as Level 1 assets are priced using quoted market prices for identical assets in active markets that are observable. Investments are recorded in Other assets in the Consolidated Balance Sheets. Interest rate contracts Interest rate contracts classified as Level 2 assets and liabilities are not actively traded and are valued using pricing models that use observable inputs Spoken acquisition Earn-outs The Spoken acquisition Earn-outs classified as Level 3 liabilities are measured using a probability-weighted discounted cash flow model. Significant unobservable inputs, which included probability of the achievement of the earn out targets and discount rate assumption, reflected the assumptions market participants would use in valuing these liabilities. Emergence Date Warrants Emergence Date Warrants classified as Level 3 liabilities are priced using the Black-Scholes option pricing model. The change in fair value of the Emergence Date Warrants is recognized in Other income (expense), net in the Consolidated Statements of Operations. During the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2017 (Predecessor), there were no transfers between Level 1 and Level 2, or into and out of Level 3. The following table summarizes the activity for the Company's Level 3 liabilities measured at fair value on a recurring basis:
(1) Changes in fair value of the Emergence Date Warrants and accretion of interest on the Spoken acquisition earn-outs are included in Other income (expense), net. Fair Value of Financial Instruments The fair values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, to the extent the underlying liability will be settled in cash, approximate carrying values because of the short-term nature of these instruments. As of September 30, 2018 (Successor), 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 estimated fair values of amounts borrowed under the Company's other financing arrangements at September 30, 2018 (Successor) and September 30, 2017 (Predecessor) were estimated based on a Level 2 input based on a market approach utilizing market-clearing data on the valuation date in addition to bid/ask prices. The estimated fair values of the amounts borrowed under the Company’s financing agreements at September 30, 2018 (Successor) and September 30, 2017 (Predecessor) are as follows:
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Under the Plan of Reorganization, a substantial amount of the Company’s debt was extinguished. Absent an exception, a debtor recognizes the 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 the 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 Company's U.S. federal net operating loss ("NOL") and tax credits not utilized during the taxable year ended September 30, 2018 have been eliminated due to the recognition of CODI as described above. Prior to December 15, 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 that as of December 15, 2017 were estimated to 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 or 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 $460 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. During the fourth quarter, the Company centralized the management and ownership of certain intellectual property in a U.S. Limited Partnership, some of which was previously managed and owned by a Bermuda tax resident corporation. This action resulted in the utilization and recognition of previously unrecognized NOLs, the reversal of deferred tax liabilities established as part of fresh start accounting and the recognition of a deferred tax asset, cumulatively in the amount of $366 million. On December 22, 2017, the Tax Cuts and Jobs Act (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 30th tax year-end and therefore the U.S. federal tax rate for the fiscal 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. The Company has recorded a provisional estimate related to the revaluation of its deferred taxes and the deemed repatriation of unremitted foreign earnings. The Company will continue to refine its 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, the Company is subject to various provisions under the Act for fiscal 2018, including the change to the U.S. federal statutory tax rate and the mandatory deemed repatriation of unremitted foreign earnings. Beginning in fiscal 2019, 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 that 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. The Company has determined that it will account for any taxes associated with GILTI as a period cost. The Company did not 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 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 in the period from December 16, 2017 through September 30, 2018 (Successor). The benefit from (provision for) income taxes is comprised of U.S. federal, state and foreign income taxes. The following table presents the U.S. and foreign components of (loss) income before income taxes and the benefit from (provision for) income taxes for the periods indicated:
Deferred income taxes are provided for the effects of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of the periods indicated were as follows:
A reconciliation of the Company’s loss before income taxes at the U.S. federal statutory rate to the benefit from (provision for) income taxes is as follows:
In fiscal 2017 and 2016, the Company recognized impairment charges of $52 million and $442 million, respectively, to Goodwill. See Note 7, "Goodwill," for further discussion. A portion of the impairment charges were allocated to tax jurisdictions where there would not be any taxable benefit and therefore non-deductible. In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company considered the scheduled reversal of deferred tax assets and liabilities, projected future taxable income, and certain tax planning strategies in assessing the realization of its deferred tax assets. Based on this assessment, the Company determined that it is more likely than not that the deferred tax assets in certain significant jurisdictions, including Ireland, Germany, Luxembourg and France, will not be realized to the extent they exceed the scheduled reversal of deferred tax liabilities. During the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2017 and 2016 (Predecessor), the Company's valuation allowance increased (decreased) by $82 million, $(1,316) million, $(104) million and $280 million, respectively, primarily due to valuation allowances established for additional NOLs and the tax effects related to other comprehensive income. At September 30, 2018 (Successor), the valuation allowance of $919 million is comprised of $1 million, $322 million, $537 million and $59 million related to the U.S., Germany, Luxembourg, and other foreign subsidiaries, respectively. The recognition of valuation allowances will continue to adversely affect the Company's effective income tax rate. As of September 30, 2018 (Successor), the Company had tax-effected NOLs and credits of $951 million, comprised of $17 million for U.S. state and local taxes and $934 million for foreign taxes, including $246 million and $645 million in Germany and Luxembourg, respectively. There are $558 million of tax-effected NOLs in Luxembourg associated with the impairment of intercompany balances in wholly owned subsidiaries. These NOLs, under the current operating structure of the Company, can only be utilized against future increases in value of the aforementioned intercompany balances. The U.S. state NOLs expire through the year 2034, with the majority expiring in excess of 10 years. The majority of foreign NOLs have no expiration. As of September 30, 2018 (Successor) there were $174 million of unrecognized tax benefits ("UTBs") associated with uncertain tax positions and an additional $19 million of accrued interest and penalties related to these amounts. The Company estimates $94 million of UTBs would affect the effective tax rate if recognized. The reduction in the balance during the Successor period is primarily related to U.S. tax positions that were effectively settled. At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments in connection with these tax liabilities. The Company’s policy is to include interest and penalties related to its uncertain tax positions within the benefit from (provision for) income taxes. Included in the benefit from (provision for) income taxes in the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor) was net interest expense of $0 million, $1 million, $2 million and $1 million, respectively. The Company files corporate income tax returns with the federal government in the U.S. and with multiple U.S. state and local jurisdictions and foreign tax jurisdictions. In the ordinary course of business these income tax returns will be examined by the tax authorities. Various foreign income tax returns, such as Brazil, Italy, Germany, India, Ireland, Israel, and Netherlands are under examination by taxing authorities for tax years ranging from 2001 through 2016. It is reasonably possible that the total amount of UTB will decrease by an estimated $2 million in the next 12 months as a result of these examinations and by an estimated $7 million as a result of the expiration of the statute of limitations.
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Benefit Obligations |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Obligations | Benefit Obligations Pension, Post-retirement and Postemployment Benefits 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. The Company froze benefit accruals and additional participation in the pension and post-retirement benefit plans for its U.S. management employees effective December 31, 2003. The Company also subsequently amended the post-retirement benefit plan for its U.S. management employees as follows: (1) effective January 1, 2013, it terminated retiree dental coverage and ceased providing medical and prescription drug coverage to a retiree, dependent, or lawful spouse who had attained age 65; (2) effective January 1, 2015, it reduced the Company’s maximum contribution toward the cost of providing benefits under the plan; and (3) effective January 1, 2016, it replaced coverage through the Company’s group plan, with subsidized coverage through the private insurance marketplace. 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. 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 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 $92 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 Consolidated Balance Sheet, a settlement loss of $516 million was recorded in Reorganization items, net in the Consolidated Statement of Operations for the period from October 1, 2017 through December 15, 2017 (Predecessor). On December 15, 2017, the unfunded ASPP, a non-qualified excess benefit 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 Consolidated Balance Sheet, a settlement gain of $53 million was recorded in Reorganization items, net in the Consolidated Statements of Operations for the period from October 1, 2017 through December 15, 2017 (Predecessor). 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. 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"). Most post-retirement medical benefits are not pre-funded. Consequently, the Company makes payments directly to the claims administrator as retiree medical benefit claims are disbursed. These payments are funded by the Company up to the maximum contribution amounts specified in the plan documents and contract with the CWA and IBEW, and contributions from the participants, if required. As a result, payments for retiree medical and dental benefits were $7 million, $2 million, $15 million and $41 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), respectively. The Company estimates it will make payments for retiree medical and dental benefits totaling $14 million during fiscal 2019. A reconciliation of the changes in the benefit obligations and fair value of assets of the defined benefit pension and post-retirement plans, the funded status of the plans, and the amounts recognized in the Consolidated Balance Sheets are provided in the tables below:
Effective September 30, 2018, to reflect its best estimate of future mortality for its U.S. pension and post-retirement benefit plans, the Company updated its mortality rate assumptions to use the projected mortality improvement scale, Mortality Projection-2018, as published by the Society of Actuaries. The change resulted in a $3 million decrease in the Company’s U.S. pension benefit obligation and $1 million decrease in the Company’s U.S. post-retirement benefit obligation as of September 30, 2018 (Successor). The following table provides the accumulated benefit obligation for all defined benefit pension plans and information for pension plans with an accumulated benefit obligation in excess of plan assets:
Estimated future benefits expected to be paid in each of the next five fiscal years, and in aggregate for the five fiscal years thereafter, are presented below:
The components of the pension and post-retirement net periodic benefit cost (credit) for the periods indicated are provided in the table below:
(1) Excludes Plan of Reorganization related settlements that were recorded in Reorganization items, net in the Consolidated Statements of Operations. The service components of net periodic benefit cost (credit) were recorded similar to compensation expense, while all other components were recorded in Other income (expense), 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 law and regulations, or to directly pay benefits where appropriate. As a result of the Bankruptcy Filing on January 19, 2017, there was an automatic stay on the Company's contributions to the U.S. pension plans during fiscal 2017 (Predecessor). Therefore, the minimum funding requirements for the U.S. pension plans were not met for fiscal 2017 (Predecessor). As part of the Plan of Reorganization, on December 15, 2017, the Company paid the aggregate unpaid required minimum funding for the APP of $49 million. Contributions to U.S. pension plans were $43 million, $49 million, $23 million, and $96 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), respectively. The contributions to the U.S. pension plans included $0 million, $0 million, $3 million, and $7 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), respectively, for certain pension benefits that were not pre-funded, and included $43 million, $49 million, $20 million, and $89 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), respectively, toward minimum funding requirements. Contributions to the non-U.S. pension plans were $22 million, $3 million, $25 million, and $24 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), respectively. In fiscal 2019, the Company estimates that it will make contributions totaling $26 million to satisfy the minimum statutory funding requirements in the U.S. and contributions totaling $25 million for non-U.S. plans. In fiscal 2017 (Predecessor), the Company terminated its contract with Nationale Nederlanden, which insured pension benefits for the Company's defined benefit pension plan in the Netherlands. In compliance with the termination clause in the contract, Nationale Nederlanden assumed responsibility for the pension benefit obligation accrued under the plan and the assets set aside for the plan. As a result of the settlement, the Company recognized a $4 million gain. As a result of restructuring initiatives during fiscal 2016 (Predecessor), the U.S. pension and post-retirement plans for salaried employees experienced a curtailment. The curtailment of the pension plan resulted in a $3 million loss, which was recognized in fiscal 2016 (Predecessor). The curtailment of the post-retirement plan resulted in a $6 million gain, of which $2 million was recognized in fiscal 2016 (Predecessor) associated with terminations that occurred as of September 30, 2016 (Predecessor). The remaining $4 million curtailment gain was recognized in fiscal 2017 (Predecessor) when the remaining terminations occurred. Effective for fiscal 2016 (Predecessor), the Company changed its estimate of the service and interest cost components of net periodic benefit cost for its U.S. pension and other post-retirement benefit plans. Previously, the Company estimated the service and interest cost components utilizing a single weighted average discount rate derived from the yield curve used to measure the benefit obligation. The new estimate utilizes a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to their underlying projected cash flows. The new estimate provides a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows and their corresponding spot rates. The change did not affect the measurement of the Company’s U.S. pension and post-retirement benefit obligations, and it was accounted for as a change in accounting estimate, which is applied prospectively. For fiscal 2016 (Predecessor), the change in estimate reduced the U.S. pension and post-retirement benefit plan cost by $30 million to $35 million when compared to the prior estimate. Other changes in plan assets and benefit obligations recognized in other comprehensive loss are provided in the tables below:
(1) For the period from October 1, 2017 through December 15, 2017, the U.S., non-U.S. and other Post-retirement benefits include Plan of Reorganization settlements that were recorded in Reorganization items, net in the Consolidated Statements of Operations of $(440) million, $0 million, and $(43) million, respectively. The estimated amount to be amortized from Accumulated other comprehensive loss as a net periodic benefit during fiscal 2019 is $1 million and mainly represents the recognition of a net actuarial gain for U.S. post-retirement benefits. The discount rate is subject to change each year, consistent with changes in rates of return on high-quality fixed-income investments currently available and expected to be available during the expected benefit payment period. The Company selects the assumed discount rate for its U.S. pension and post-retirement benefit plans by applying the rates from the Aon AA Only and Aon AA Only Above Median yield curves to the expected benefit payment streams and develops a rate at which it is believed the benefit obligations could be effectively settled. The Company follows a similar process for its non-U.S. pension plans by applying the Aon Euro AA corporate bond yield curve. Based on the published rates as of September 30, 2018, the Company used a weighted average discount rate of 4.22% for the U.S. pension plans, 1.92% for the non-U.S. pension plans, and 4.26% for the post-retirement plans, an increase of 49 basis points and 43 basis points from the prior year for the U.S. pension plans and post-retirement benefit plans, respectively, and a 0 basis point change from the prior year for the non-U.S. pension plans. As of September 30, 2018 (Successor), this had the effect of reducing the projected U.S. pension benefit obligation $59 million, reducing the post-retirement obligation $22 million and increasing the non-U.S. pension benefit obligation by $0 million. For fiscal 2019, this will have a minimal effect on the U.S. pension and post-retirement service cost. The expected long-term rate of return on U.S. pension and post-retirement benefit plan assets is selected by applying forward-looking capital market assumptions to the strategic asset allocation approved by the governing body for each plan. The forward-looking capital market assumptions are developed by an investment adviser and reviewed by the Company for reasonableness. The return and risk assumptions consider such factors as anticipated long-term performance of individual asset classes, risk premium for active management based on qualitative and quantitative analysis, and correlations of the asset classes that comprise the asset portfolio. The Company’s cost for post-retirement healthcare claims is capped and the projected post-retirement healthcare claims exceed the cap. Therefore, a one-percentage-point increase or decrease in the Company’s healthcare cost trend rates will not impact the post-retirement benefit obligation and the service and interest cost components of net periodic benefit cost. The weighted average asset allocation of the pension and post-retirement plans by asset category and target allocation is as follows:
The Company’s asset management strategy focuses on the dual objectives of improving the funded status of the pension plans and reducing the impact of changes in interest rates on the funded status. To improve the funded status of the pension plans, assets are invested in a diversified mix of asset classes designed to generate higher returns over time, than the pension benefit obligation discount rate assumption. To reduce the impact of interest rate changes on the funded status of the pension plans, assets are invested in a mix of fixed income investments (including long-term debt) that are selected based on the characteristics of the benefit obligation of the pension plans. Strategic asset allocation is the principal method for achieving the Company’s investment objectives, which are determined in the course of periodic asset-liability studies. The most recent asset-liability study was completed in 2018 for the pension plans. As part of the Company’s asset management strategy, investments are professionally-managed and diversified across multiple asset classes and investment styles to minimize exposure to any one specific investment. Derivative instruments (such as forwards, futures, swaptions and swaps) may be held as part of the Company’s asset management strategy. However, the use of derivative financial instruments for speculative purposes is prohibited by the Company’s investment policy. Also, as part of the Company’s investment strategy, the U.S. pension plans invest in hedge funds, real estate funds, private equity and commodities to provide additional uncorrelated returns. The fair value of plan assets is determined by the trustee and reviewed by the Company, in accordance with the accounting guidance for fair value measurements and the fair value hierarchy discussed in Note 13, “Fair Value Measurements.” Because of the inherent uncertainty of valuation, estimated fair values may differ significantly from the fair values that would have been used had quoted prices in an active market existed. The following table summarizes the fair value measurements of the U.S. pension plan assets by asset class:
The following table summarizes the fair value of the non-U.S. pension plan assets by asset class:
The following table summarizes the fair value of the post-retirement plan assets by asset class:
Savings Plans Substantially all of the Company’s U.S. employees are eligible to participate in savings plans sponsored by the Company. The plans allow employees to contribute a portion of their compensation on a pre-tax and after-tax basis in accordance with specified guidelines. Avaya matches a percentage of employee contributions up to certain limits. The Company’s expense related to these savings plans was $7 million, $0 million, $6 million and $4 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), respectively. |
Share-based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation | Share-based Compensation The Predecessor Company's common and preferred stock were canceled and new common stock was issued on the Emergence Date. Accordingly, the Predecessor Company's then existing share-based compensation awards were also canceled, which resulted in the recognition of any previously unamortized expense on the date of cancellation. As a result, share-based compensation for the Successor and Predecessor periods are not comparable. Successor Pursuant to terms of the Plan of Reorganization, the Avaya Holdings Corp. 2017 Equity Incentive Plan ("2017 Equity Incentive Plan") became effective on 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 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 awards. 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 the Successor Company common stock, as well as certain cash-based awards. The maximum number of shares of common stock that may be issued or granted under the 2017 Equity Incentive Plan is 7,381,609 shares. As of September 30, 2018 (Successor) there were 2,639,418 shares available to be granted under the 2017 Equity Incentive Plan. If any option or other stock-based award granted under the 2017 Equity Incentive Plan expires, terminates or is canceled for any reason without having been exercised in full, the number of shares of common stock underlying any unexercised award 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 Plan. Share-based compensation awards granted to employees vest ratably over three years and awards granted to non-employee directors vest ratably over one year. The aggregate 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 of all or a portion of cash retainers and any dividends payable in respect of outstanding awards) may not exceed $750,000. Share-based compensation expense recorded for the period from December 16, 2017 through September 30, 2018 (Successor) was $19 million and total income tax benefit recognized in the income statement for share-based compensation arrangements was $1 million. As of the Emergence Date, forfeitures are accounted for as incurred. Stock Options On the Emergence Date, the Company granted 1,146,835 non-qualified stock options to executives and other employees. The fair value of the stock options granted on the Emergence Date was determined using a lattice option pricing model as they were premium priced options. The Black-Scholes option pricing model is used to value all options granted after the Emergence Date. The valuation assumptions include the following: (1) expected term based on the vesting terms of the option and a contractual life of ten years; (2) volatility based on a blend of peer group companies (adjusted for the Company's leverage) and the Company's historical volatility since the Emergence Date; (3) risk-free interest rate based on U.S. Treasury yields with a term equal to the expected option term; and (4) dividend yield assumed to be zero as the Company does not anticipate paying dividends. The weighted average grant date assumptions used in calculating the fair value of Successor options granted on the Emergence Date and thereafter were as follows:
(1) Expected volatility based on peer group companies adjusted for the Company's leverage. (2) Expected life based on the vesting terms of the option and a contractual life of ten years. (3) Risk-free interest rate based on U.S. Treasury yields with a term equal to the expected option term. (4) Dividend yield was assumed to be zero as the Company does not anticipate paying dividends. A summary of option activity under the 2017 Equity Incentive Plan for the period from the Emergence Date through September 30, 2018 (Successor) is presented below:
The weighted average grant date fair value of options granted for the period from the Emergence Date through September 30, 2018 (Successor) was $8.18. The intrinsic value is the difference between the Company's common stock price and the option exercise price. The total intrinsic value of options exercised during the period from the Emergence Date through September 30, 2018 (Successor) was not material. As of September 30, 2018 (Successor), there was $7 million of unrecognized share-based compensation expense related to stock options, which is expected to be recognized over a period up to 2.9 years, or 2.3 years on a weighted average basis. Restricted Stock Units ("RSUs") On the Emergence Date, the Company granted 3,440,528 RSUs to executives and other employees. Compensation cost for restricted stock units granted to employees and non-employee directors is generally measured by using closing market price of the Company's common stock at the date of grant. The Emergence Date awards were measured using the fair value of the common stock upon emergence from bankruptcy and application of fresh start accounting. A summary of RSU activity under the 2017 Equity Incentive Plan from the Emergence Date through September 30, 2018 (Successor) is presented below:
As of September 30, 2018 (Successor), there was $42 million of unrecognized share-based compensation expense related to RSUs, which is expected to be recognized over a period up to 2.9 years, or 2.3 years on a weighted average basis. The weighted average grant date fair value for RSUs granted during the period from the Emergence Date through September 30, 2018 (Successor) was $16.11. The total grant date fair value of shares vested for the period from December 16, 2017 through September 30, 2018 (Successor) was $6 million. Predecessor Prior to the Emergence Date, the Predecessor Company had granted share-based awards that were canceled upon emergence from bankruptcy. In conjunction with the cancellation, the Predecessor Company accelerated the unrecognized share-based compensation expense and recorded $3 million of compensation expense in the period from October 1, 2017 through December 15, 2017 (Predecessor), principally reflected in Reorganization costs, net. Share-based compensation expense for fiscal 2017 and 2016 (Predecessor) was $11 million and $16 million, respectively. No income tax benefit was recognized in the income statement for share-based compensation arrangements for the period from October 1, 2017 through December 15, 2017 (Predecessor) and for fiscal 2017 and 2016 (Predecessor). The Avaya Holdings Corp.’s Second Amended and Restated 2007 Equity Incentive Plan (the “2007 Plan”) governed the issuance of equity awards, including RSUs and stock options, to eligible plan participants. Key employees, directors, and consultants of the Company were eligible to receive awards under the 2007 Plan. Each stock option, when vested and exercised, and each RSU, when vested, entitled the holder to receive one share of Predecessor common stock, subject to certain restrictions on their transfer and sale as defined in the 2007 Plan and related award agreements. Option Awards Under the 2007 Plan, stock options could not be granted with an exercise price of less than the fair market value of the underlying stock on the date of grant. Share-based compensation expense recognized in the Consolidated Statements of Operations was based on awards ultimately expected to vest. Forfeitures were estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differed from those estimates in accordance with the authoritative guidance. All options awarded under the 2007 Plan expired the earlier of ten years from the date of grant or upon cessation of employment, in which event there were limited exercise provisions allowed for vested options. Subsequent to October 1, 2012, the Company granted time-based options to purchase Predecessor common stock. Time-based options vested over their performance periods and were payable in shares of common stock upon vesting and exercise. The performance period for time-based options was generally three to four years. Compensation expense equal to the fair value of the option measured on the grant date was recognized utilizing graded attribution over the requisite service period. As of September 30, 2017 (Predecessor), the Company had 19,842,268 options outstanding with a weighted average exercise price of $2.76. During the period from October 1, 2017 through December 15, 2017 (Predecessor) and fiscal 2017 (Predecessor), there were no options granted or exercised and the 19,842,268 options outstanding were canceled upon the Company’s emergence from bankruptcy. For fiscal 2016 (Predecessor), the weighted average grant date fair value of options granted during the year was $1.20 and no options were exercised. The fair value of option awards was determined at the date of grant utilizing the Cox-Ross-Rubinstein (“CRR”) binomial option pricing model, which was affected by the fair value of Avaya Holdings’ common stock as well as a number of complex and subjective assumptions. The weighted average grant date assumptions used in calculating the fair value of Predecessor options granted in fiscal 2016 (Predecessor) were as follows:
(1) Expected volatility based on a combination of the Company's historical volatility and peer group companies' implied volatility. (2) Expected life based on the vesting terms of the option and a contractual life of ten years. (3) Risk-free interest rate based on U.S. Treasury spot rate for the expected term of the option. (4) Dividend yield was assumed to be zero as the Company did not pay dividends. Restricted Stock Units Avaya Holdings had issued RSUs, each of which represented the right to receive one share of its Predecessor common stock when fully vested. The fair value of the common stock underlying the RSUs was estimated by the Compensation Committee of Avaya Holdings’ Board of Directors at the date of grant. As of September 30, 2017 (Predecessor), the Company had 369,584 unvested RSUs with a weighted average grant date fair value of $1.83. During the period from October 1, 2017 through December 15, 2017 (Predecessor), there were no RSUs granted or vested and the 369,584 unvested RSUs were canceled upon the Company’s emergence from bankruptcy. The weighted average grant date fair value of RSUs granted in fiscal 2016 (Predecessor) was $1.84. The total grant date fair value of RSUs vested in fiscal 2017 and 2016 (Predecessor) was $1 million and $8 million, respectively. Fiscal 2016 Executive KEIP Award Exchange On May 13, 2016, the Compensation Committee of the Board of Directors of Avaya Holdings Corp. approved changes to the Company’s executive compensation program, which included revisions to the long-term incentive awards (the “LTIAs”) granted to Company executives on November 17, 2015. The LTIAs consisted of RSUs and stock options granted under the 2007 Plan and cash awards (collectively, the “November 2015 Awards”) that vested over a multi-year period. The November 2015 Awards were replaced by the Avaya Inc. 2016 Key Employee Incentive Plan (the “KEIP”), which was a single market-based performance cash incentive program tied to the Company’s key operating metric. Executives’ participation in the KEIP was conditioned upon the cancellation of their November 2015 Awards. In aggregate, November 2015 Awards consisting of 3,807,500 RSUs and 3,546,154 stock options were canceled as a condition of each executive's participation in the KEIP. Although canceled, the Company accelerated share-based compensation for the estimated fair value at the date of grant of these RSUs and stock options over a one-year vesting period. The effect of accelerating share-based compensation related to the exchange did not have a material impact on the Company’s financial statements. Fiscal 2016 Employee Replacement Cash Award Exchange Program On May 19, 2016, the Compensation Committee of the Board of Directors of Avaya Holdings Corp. approved an exchange program through which individuals holding unvested RSUs, outstanding vested and unvested deferred RSUs and outstanding unvested multiple-of-money options could exchange such awards for time-based long-term incentive cash awards (“Replacement Cash Awards”). This exchange program closed on July 26, 2016. Although the stock awards were canceled, the Company continued to recognize share-based compensation for the estimated fair value at the date of grant for unvested RSUs and unvested deferred RSUs over the original vesting period. The cash payments were recorded as share-based compensation expense. The effect of accelerating share-based compensation related to the exchange did not have a material impact on the Company’s financial statements. |
Capital Stock |
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Equity [Abstract] | |
Capital Stock | Capital Stock Successor Preferred Stock The Successor Company's certificate of incorporation authorizes it to issue up to 55,000,000 shares of preferred stock with a par value of $0.01 per share. As of September 30, 2018 (Successor), there were no preferred shares issued or outstanding. Common Stock The Successor Company's certificate of incorporation authorizes it to issue up to 550,000,000 shares of common stock with a par value of $0.01 per share. As of September 30, 2018 (Successor), there were 110,218,653 shares issued and 110,012,790 shares outstanding with the remaining 205,863 shares distributable in accordance with the Plan of Reorganization. On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company to repurchase the Company’s outstanding warrants to purchase shares of the Company’s common stock. See Note 25, "Subsequent Event," for additional information. Predecessor In connection with the Company's Plan of Reorganization and emergence from bankruptcy, all equity interests in the Predecessor Company were canceled, including preferred and common stock, warrants and equity-based awards. Capital Stock The certificate of incorporation, as amended and restated, authorized Avaya Holdings to issue up to 750,000,000 shares of common stock with a par value of $0.001 per share and 250,000 shares of preferred stock with a par value of $0.001 per share. Preferred Series A Stock On December 19, 2009, Avaya Holdings issued 125,000 shares of Series A preferred stock (“preferred series A”) with detachable warrants to purchase up to 38,500,000 common shares at a price of $3.25 per share, which would have expired December 18, 2019. The preferred series A shares were non-voting, redeemable at the Company’s election and had a liquidation preference of $1,000 per share plus cumulative, compounded quarterly, accrued unpaid dividends at a rate of 5% per annum in cash. Funds affiliated with Silver Lake and TPG provided an aggregate of $78 million of the cash proceeds from the issuance of the preferred series A shares and the warrants, with each sponsor-affiliated group providing $39 million of the cash proceeds. Based on their contributed cash, the Silver Lake and TPG funds each received 38,865 preferred series A shares and warrants to purchase up to 11,958,192 common shares. Under the terms of the preferred stock agreement, the preferred series A shares were redeemable at the Company’s election only; however, because affiliates of Silver Lake and TPG controlled the board of directors and held a substantial portion of the preferred series A shares, they could have triggered a demand for redemption at their discretion and therefore, the preferred series A shares were classified in the mezzanine section between Total liabilities and Stockholders’ equity (deficit) in the Consolidated Balance Sheets. As of September 30, 2017 (Predecessor), the carrying value of the preferred series A was $184 million, which included $59 million of accumulated and unpaid dividends as well as $57 million of discount accretion. During fiscal 2017 and 2016, the carrying value of the preferred series A shares increased $9 million and $8 million, respectively, due to an increase in accumulated unpaid dividends in each period. The carrying value was adjusted to $0 during the period from October 1, 2017 and December 15, 2017 in connection with the Company’s emergence from bankruptcy. Preferred Series B Stock On May 29, 2012, Avaya Holdings issued 48,922 shares of Series B preferred stock ("preferred series B") with detachable warrants to purchase up to 24,500,000 common shares at a price of $4.00 per share, which would have expired May 29, 2022. The preferred series B shares were non-voting and earned cumulative dividends at a rate of 8% per annum, compounded annually, whether or not declared, and were payable in cash or additional shares of preferred series B at the Company’s option. Preferred series B dividends had to be paid prior to dividends on any other series or classes of Avaya Holdings’ stock. Additionally, holders of preferred series B participated in any dividends payable on shares of Avaya Holdings’ common stock on an as converted basis. The preferred series B were issued to funds affiliated with Silver Lake and TPG. Because the preferred series B shares were redeemable at the Company’s election at any time and affiliates of Silver Lake and TPG controlled the board of directors, the holders of the preferred series B could have triggered a demand for redemption. In addition, the preferred series B was redeemable at the option of the holders in certain cases. As a result, the preferred series B shares were classified in the mezzanine section between Total liabilities and stockholders’ equity (deficit) in the Consolidated Balance Sheets. As of September 30, 2017 (Predecessor), the carrying value of the preferred series B was $393 million, which included $99 million of accumulated and unpaid dividends, $98 million of accretion to the Redemption Price, as well as $33 million of discount accretion at the date of issuance. During fiscal year 2017 and 2016, the carrying value of the preferred series B shares increased $22 million and $33 million, respectively. Fiscal 2017 reflected an increase in accumulated unpaid dividends, while fiscal 2016 reflected an increase in accumulated unpaid dividends and accretion of $20 million and $13 million, respectively. Warrants The Company had outstanding warrants to purchase 124,500,000 shares of its Predecessor common stock, of which 100,000,000 had an exercise price of $3.25 per share and would have expired on December 18, 2019. The remaining 24,500,000 warrants had an exercise price of $4.00 per share and would have expired on May 29, 2022. All of the warrants had a cashless exercise feature, contained customary adjustment provisions for stock splits, capital reorganizations and certain other distributions and were outstanding as of September 30, 2017 (Predecessor). |
Net Income (Loss) Per Common Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Per Common Share | (Loss) Per Common Share Basic earnings per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings per share 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 Convertible Notes or 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. The following table sets forth the calculation of net income (loss) attributable to common shareholders and the computation of basic and diluted earnings (loss) per share for the periods indicated:
The Predecessor Company’s preferred stock and unvested restricted stock units were participating securities, which required the application of the two-class method to calculate basic and diluted earnings per share. Under the two-class method, undistributed earnings are allocated to common stock and the participating securities according to their respective participating rights in undistributed earnings, as if all the earnings for the period had been distributed. Basic net income (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 increased for preferred stock dividends earned 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. During the period from December 16, 2017 through September 30, 2018 (Successor), the Company excluded 1.1 million stock options, 0.2 million restricted stock units and 5.6 million Emergence Date Warrants to purchase common shares from the diluted earnings per share calculation as their effect would have been anti-dilutive. The Company’s Convertible Notes and Call Spread Warrants were also excluded for the period from December 16, 2017 through September 30, 2018 (Successor) as discussed in more detail below. For purposes of considering the Convertible Notes in determining diluted earnings per share, the Company has the ability and current intent to settle conversions of the Convertible Notes through combination settlement by repaying the principal portion in cash and any excess of the conversion value over the principal amount (the “Conversion Premium”) in shares of the Company's common stock. Therefore, only the impact of the Conversion Premium will be included in diluted weighted average shares outstanding using the treasury stock method. Since the Convertible Notes were out of the money and anti-dilutive as of September 30, 2018 (Successor), they were excluded from the diluted earnings per share calculation for the period from December 16, 2017 through September 30, 2018 (Successor). The Call Spread Warrants sold in connection with the issuance of the Convertible Notes will not be considered in calculating diluted weighted average shares outstanding until the price per share of the Company’s common stock exceeds the strike price of $37.3625 per share. When the price per share of the Company’s common stock exceeds the strike price per share of the Call Spread Warrants, the effect of the additional shares that may be issued upon exercise of the Call Spread Warrants will be included in diluted weighted average shares outstanding using the treasury stock method. The Bond Hedge purchased in connection with the issuance of the Convertible Notes is considered to be anti-dilutive and therefore does not impact the Company’s calculation of diluted earnings per share. Refer to Note 11, "Financing Arrangements,” for further discussion regarding the Convertible Notes. |
Operating Segments |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Operating Segments | Segments The Products & Solutions segment primarily develops, markets, and sells unified communications and contact center solutions, offered on premises, in the cloud, or as a hybrid solution. These integrate multiple forms of communications, including telephony, email, instant messaging and video. The 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 complex enterprise communications networks. The Networking segment portfolio of software and hardware products offered integrated networking products. On July 14, 2017, the Company sold its Networking business to Extreme. Prior to the sale, the Company had three separate operating segments. After the sale, the Company has two operating segments, Products & Solutions and Services. Effective September 30, 2018, the Company changed the name of its Global Communications Solutions (“GCS”) and Avaya Global Services (“AGS”) segments to "Products & Solutions" and "Services," respectively. These were name changes only and did not have an impact on the operating results of each segment. The Company’s chief operating decision maker makes financial decisions and allocates resources based on segment profit information obtained from the 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, 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 operating segments is shown in the following table for the periods indicated:
Geographic Information Financial information relating to the Company’s revenue and long-lived assets by geographic area is as follows:
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Accumulated Other Comprehensive (Loss) Income | Accumulated Other Comprehensive (Loss) Income The components of accumulated other comprehensive (loss) income for the periods indicated were as follows:
Reclassifications from accumulated other comprehensive (loss) income related to changes in unamortized pension, post-retirement and postemployment benefit-related items were $0 million, $16 million, $90 million and $60 million during the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor), and fiscal 2017 and 2016 (Predecessor), respectively, and were recorded in other income (expense), net. |
Related Party Transactions |
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Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Successor Pursuant to the Plan of Reorganization confirmed by the Bankruptcy Court, the Successor Company's Board of Directors is comprised of seven directors, including the Successor Company's Chief Executive Officer, James M. Chirico, Jr., and six non-employee directors, William D. Watkins, Ronald A. Rittenmeyer, Stephan Scholl, Susan L. Spradley, Stanley J. Sutula, III and Scott D. Vogel. With the resignation of Mr. Rittenmeyer effective April 30, 2018, the Company's Board of Directors currently has one vacancy. Specific Arrangements Involving the Successor Company’s Current Directors and Executive Officers William D. Watkins is a Director and Chair of the Board of Directors of Avaya Holdings and serves on the board of directors of Flex Ltd., an electronics design manufacturer. For the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and for fiscal 2017 and 2016 (Predecessor), the Company purchased goods and services from subsidiaries of Flex Ltd. of $19 million, $6 million, $38 million and $113 million, respectively. As of September 30, 2018 (Successor) and September 30, 2017 (Predecessor), the Company had outstanding accounts payable due to Flex Ltd. of $4 million and $7 million, respectively. Specific Arrangements Involving the Successor Company’s Former Directors and Executive Officers Laurent Philonenko is a Senior Vice President of Avaya Holdings and he serves as an Advisor to Koopid, Inc., a software development company specializing in mobile communications, a position he has held since February 2017. For the period from December 16, 2017 through September 30, 2018 (Successor), the Company purchased goods and services from Koopid, Inc. of $1 million. For the period from October 1, 2017 through December 15, 2017 (Predecessor) and for fiscal 2017 and 2016 (Predecessor), purchased goods and services from Koopid were not material. Ronald A. Rittenmeyer was a Director of Avaya Holdings through April 29, 2018. While he was a Director of Avaya Holdings, Mr. Rittenmeyer served on the board of directors of Tenet Healthcare Corporation ("Tenet Healthcare"), a healthcare services company, and also served on the board of directors of American International Group, Inc. (“AIG”), a global insurance organization. For the period from December 16, 2017 through September 30, 2018 (Successor) and fiscal 2017 and 2016 (Predecessor), sales of the Company’s products and services to Tenet Healthcare were $1 million, $1 million and $2 million, respectively. For the period from October 1, 2017 through December 15, 2017 (Predecessor), sales of the Company's products and services to Tenet Healthcare were not material. For the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and for fiscal 2017 and 2016 (Predecessor), sales of the Company’s products and services to AIG were $5 million, $2 million, $10 million and $14 million, respectively. Predecessor In connection with the acquisition of Avaya Inc., through Avaya Holdings by Silver Lake Partners ("Silver Lake"), TPG Capital ("TPG") and their respective affiliates (collectively, the "Predecessor Sponsors"), in a transaction that was completed on October 26, 2007 (the “Merger”), Avaya Holdings entered into certain stockholder agreements and registration rights agreements with the Predecessor Sponsors and various co-investors. In addition, Avaya Holdings entered into a management services agreement with affiliates of the Predecessor Sponsors and, from time to time, Avaya Holdings entered into various other contracts with companies affiliated with the Predecessor Sponsors. These arrangements terminated upon emergence from bankruptcy. In addition, all Predecessor Company equity held by the Predecessor Sponsors was canceled. No fees were paid to the Predecessor Sponsors in the period from October 1, 2017 through December 15, 2017 (Predecessor). Stockholders’ Agreement In connection with the Merger, Avaya Holdings entered into a stockholders’ agreement with the Predecessor Sponsors and certain of their affiliates. The stockholders’ agreement was amended and restated in connection with the financing of certain acquisitions. The stockholders’ agreement contained certain restrictions on the Predecessor Sponsors’ and their affiliates’ transfer of Avaya Holdings’ equity securities, contained provisions regarding participation rights, contained standard tag-along and drag-along provisions, provided for the election of Avaya Holdings’ directors, mandated board of directors approval of certain matters to include the consent of each Predecessor Sponsor and generally set forth the respective rights and obligations of the stockholders who were parties to that agreement. None of Avaya Holdings’ officers or directors were parties to the agreement, although certain of Avaya Holdings' non-employee directors may have had an indirect interest in the agreement to the extent of their affiliations with the Predecessor Sponsors. This agreement was terminated upon emergence from bankruptcy. Registration Rights Agreement In addition, in connection with the Merger, Avaya Holdings entered into a registration rights agreement with the Predecessor Sponsors and certain of their affiliates, which was amended and restated in connection with the financing of certain acquisitions. Pursuant to the registration rights agreement, as amended, Avaya Holdings would provide the Predecessor Sponsors and certain of their affiliates party thereto with certain demand registration rights. In addition, in the event that Avaya Holdings registered shares of common stock for sale to the public, Avaya Holdings would be required to give notice of such registration to the Predecessor Sponsors and their affiliates party to the agreement of its intention to effect such a registration, and, subject to certain limitations, the Predecessor Sponsors and such holders would have piggyback registration rights providing them with the right to require Avaya Holdings to include shares of common stock held by them in such registration. Avaya Holdings would have been required to bear the registration expenses, other than underwriting discounts and commissions and transfer taxes, if any, associated with any registration of shares by the Predecessor Sponsors or other holders described above. Avaya Holdings had agreed to indemnify each holder of its common stock covered by the registration rights agreement for violations of federal or state securities laws by it in connection with any registration statement, prospectus or any preliminary prospectus. Each holder of such securities had in turn agreed to indemnify Avaya Holdings for federal or state securities law violations that occur in reliance upon written information the holder provided to Avaya Holdings in connection with any registration statement in which a holder of such securities was participating. None of Avaya Holdings’ officers or directors were a party to this agreement, although certain of Avaya Holdings’ non-employee directors may have had an indirect interest in the agreement to the extent of their affiliations with the Predecessor Sponsors. This agreement was terminated upon emergence from bankruptcy. Management Services Agreement and Consulting Services Both Avaya Holdings and Avaya Inc. were party to a Management Services Agreement with Silver Lake Management Company, L.L.C., an affiliate of Silver Lake, and TPG Capital Management, L.P., an affiliate of TPG, collectively “the Managers,” pursuant to which the Managers provided management and financial advisory services to the Company. Pursuant to the Management Services Agreement, the Managers received a monitoring fee of $7 million per annum and reimbursement on demand for out-of-pocket expenses incurred in connection with the provision of such services. In the event of a financing, acquisition, disposition or change of control transaction involving the Company during the term of the Management Services Agreement, the Managers had the right to require the Company to pay a fee equal to customary fees charged by internationally-recognized investment banks for serving as a financial advisor in similar transactions. The Management Services Agreement could have been terminated at any time by the Managers, but otherwise had an initial term ending on December 31, 2017 that automatically extended each December 31st for an additional year unless terminated earlier by the Company or the Managers. The term had been automatically extended nine times since the execution of the agreement such that the term was through December 31, 2026. In the event that the Management Services Agreement was terminated, the Company was required to pay a termination fee equal to the net present value of the monitoring fees that would have been payable during the remaining term of the Management Services Agreement. Therefore, if the Management Services Agreement was terminated at September 30, 2017, the termination fee would have been calculated using the term ending December 31, 2026. In accordance with the Management Services Agreement, the Company recorded $0 million, $2 million and $7 million of monitoring fees per year for the period from October 1, 2017 through December 15, 2017 and fiscal 2017 and 2016, respectively. In December 2013, the Company and TPG Capital Management, L.P. executed a letter agreement reducing the portion of the monitoring fees owed to TPG Capital Management, L.P. by $1,325,000 for fiscal 2014 and thereafter on an annual basis by $800,000. The Company agreed to pay Messrs. Mohebbi and Rittenmeyer in aggregate $800,000 annually. In fiscal 2016, the Company agreed to terms with Silver Lake and TPG to suspend payments under the Management Services Agreement. Although the management services fees continued to accrue, payments to Messrs. Mohebbi and Rittenmeyer were made in fiscal 2017 and 2016. This Management Services Agreement and consulting services were terminated upon emergence from bankruptcy. Transactions with Other Predecessor Sponsor Portfolio Companies The Predecessor Sponsors were private equity firms that had investments in companies that did business with the Company. For the period from October 1, 2017 through December 15, 2017 and fiscal 2017 and 2016, the Company recorded $10 million, $29 million and $33 million, respectively, associated with sales of the Company’s products and services to companies in which one or both of the Predecessor Sponsors had investments. For the period from October 1, 2017 through December 15, 2017 and fiscal 2017 and 2016, the Company purchased goods and services of $15 million, $10 million and $13 million, respectively, from companies in which one or both of the Predecessor Sponsors had investments. In September 2015, a company in which a Predecessor Sponsor had an investment merged with a commercial real estate services firm that began providing management services associated with the Company’s leased properties. Included in the above purchased goods and services amounts was $5 million, $5 million and $8 million incurred by the Company for management services provided by the commercial real estate services firm for the period from October 1, 2017 through December 15, 2017 and fiscal 2017 and 2016, respectively. Preferred Stock Ownership by Sponsors As of September 30, 2017, affiliates of TPG owned 38,865 shares of Avaya Holdings’ Series A Preferred Stock and affiliates of Silver Lake owned 38,865 shares of Avaya Holdings’ Series A Preferred Stock. As of September 30, 2017, affiliates of TPG owned 16,273 shares of Avaya Holdings’ Series B Preferred Stock and affiliates of Silver Lake owned 16,273 shares of Avaya Holdings’ Series B Preferred Stock. All Predecessor Company Series A and Series B Preferred Stock were canceled upon emergence from bankruptcy. Arrangements Involving the Predecessor Company’s Directors and Executive Officers In connection with the Merger, Avaya Holdings entered into a senior manager registration and preemptive rights agreement with certain members of its senior management who owned shares of Avaya Holdings’ common stock and options and RSUs convertible into shares of Avaya Holdings’ common stock. Pursuant to the senior manager registration and preemptive rights agreement, the senior managers party thereto that held registrable securities thereunder were provided with certain registration rights upon either (a) the exercise of the Predecessor Sponsors or their affiliates of demand registration rights under the Predecessor Sponsors’ registration rights agreement discussed above or (b) any request by the Predecessor Sponsors to file a shelf registration statement for the resale of such shares, as well as certain notification and piggyback registration rights. Avaya Holdings was required to bear the registration expenses, other than underwriting discounts and commissions and transfer taxes, if any, associated with any registration of stock by the senior managers as described above. Avaya Holdings had agreed to indemnify each holder of registrable securities covered by the agreement for violations of federal or state securities laws by Avaya Holdings in connection with any registration statement, prospectus or any preliminary prospectus. Each holder of such registrable securities had in turn agreed to indemnify Avaya Holdings for federal or state securities law violations that occurred in reliance upon written information the holder provided to Avaya Holdings in connection with any registration statement in which a holder of such registrable securities was participating. In addition, pursuant to the senior manager registration and preemptive rights agreement, the Company agreed to provide each senior manager party thereto with certain preemptive rights to participate in any future issuance of shares of Avaya Holdings’ common stock to the Predecessor Sponsors or their affiliates. In connection with the Merger, Avaya Holdings also entered into a management stockholders’ agreement with certain management stockholders. The stockholders’ agreement contained certain restrictions on such stockholders’ transfer of Avaya Holdings equity securities, contained rights of first refusal upon disposition of shares, contained standard tag-along and drag-along provisions, and generally set forth the respective rights and obligations of the stockholders who were parties to the agreement. The senior manager registration and preemptive rights agreement and the management stockholders’ agreement terminated upon emergence from bankruptcy. Specific Arrangements Involving Certain Former Directors and Executive Officers Charles Giancarlo was a Director of Avaya Holdings and Avaya Inc. and served in these capacities as a director designated by Silver Lake. Mr. Giancarlo served as a Director of Accenture, Plc (“Accenture”), a management consulting business. In both fiscal 2017 and 2016, sales of the Company’s products and services to Accenture were $1 million. Sales of the Company's products and services to Accenture for the period from October 1, 2017 through December 15, 2017 were not material. John W. Marren was a Director of Avaya Holdings and Avaya Inc. and served in these capacities as a director designated by TPG. He held the position of Partner of TPG until January 2016 and served on the board of directors of Sungard Data Systems, Inc. (“Sungard”), a software and technology services company until December 2015. In both fiscal 2017 and 2016, sales of the Company’s products and services to Sungard were $1 million. Sales of the Company's products and services to Sungard for the period from October 1, 2017 through December 15, 2017 were not material. Afshin Mohebbi was a Director of Avaya Holdings and Avaya Inc. and held the position of Senior Advisor of TPG. Greg Mondre was a Director of Avaya Holdings and Avaya Inc. and served in these capacities as a director designated by Silver Lake. He held the positions of Managing Partner and Managing Director of Silver Lake. Mr. Mondre was related to the former Vice Chairman and Co-Chief Executive Officer of C3/Customer Contact Channels Holdings L.P. (“C3 Holdings”), a provider of outsourced customer management solutions. In both fiscal 2017 and 2016, sales of the Company’s products and services to C3 Holdings were $1 million. Sales of the Company's products and services to C3 Holdings for the period from October 1, 2017 through December 15, 2017 were not material. Marc Randall was the Senior Vice President and General Manager of Avaya Holdings and Avaya Inc. and until January 2016 served on the board of directors of Xirrus, Inc. (“Xirrus”), a provider of wireless access network solutions. In March 2014, the Company entered a strategic partnership with Xirrus whereby the Company owned less than 6% of the outstanding voting securities of Xirrus on a fully diluted basis. During fiscal 2016, the Company made equity investments in Xirrus of $1 million. During fiscal 2016, the Company recognized an $11 million loss included in Other income (expense), net associated with this investment. During fiscal 2017 and 2016, the Company purchased goods and services from Xirrus of $12 million and $14 million, respectively. Purchased goods and services from Xirrus for the period from October 1, 2017 through December 15, 2017 were not material. Gary B. Smith was a Director of Avaya Holdings and Avaya Inc. and also served as President, Chief Executive Officer and director of Ciena Corporation ("Ciena"), a network infrastructure company. For both fiscal 2017 and 2016, sales of the Company's products and services to Ciena were $1 million. Sales of the Company's products and services to Ciena for the period from October 1, 2017 through December 15, 2017 were not material. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Legal Proceedings General The Company records accruals for legal contingencies to the extent that it has concluded that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. No estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made at this time regarding the matters specifically described below because the inherently unpredictable nature of legal proceedings may be exacerbated by various factors, including: (i) the damages sought in the proceedings are unsubstantiated or indeterminate; (ii) discovery is not complete; (iii) the proceeding is in its early stages; (iv) the matters present legal uncertainties; (v) there are significant facts in dispute; (vi) there are a large number of parties (including where it is uncertain how liability, if any, will be shared among multiple defendants); or (vii) there is a wide range of potential outcomes. In the ordinary course of business, the Company is involved in litigation, claims, government inquiries, investigations and proceedings, including, but not limited to, those identified below, relating to intellectual property, commercial, employment, environmental and regulatory matters. The Company believes that it has meritorious defenses in connection with its current lawsuits and material claims and disputes, and intends to vigorously contest each of them. Based on the Company's experience, management believes that the damages amounts claimed in a case are not a meaningful indicator of the potential liability. Claims, suits, investigations and proceedings are inherently uncertain and it is not possible to predict the ultimate outcome of cases. Other than as described below, in the opinion of the Company's management based upon information currently available to the Company, while the outcome of these lawsuits, claims and disputes is uncertain, the likely results of these lawsuits, claims and disputes are not expected, either individually or in the aggregate, to have a material adverse effect on the Company's financial position, results of operations or cash flows, although the effect could be material to the Company's consolidated results of operations or consolidated cash flows for any interim reporting period. During the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and the fiscal years ended September 30, 2017 and 2016 (Predecessor), costs incurred in connection with certain legal matters were $0 million, $37 million, $64 million, and $106 million, respectively. Antitrust Litigation In 2006, the Company instituted an action in the U.S. District Court, District of New Jersey, against defendants Telecom Labs, Inc., TeamTLI.com Corp. and Continuant Technologies, Inc. (“TLI/Continuant”) and subsequently amended its complaint to include certain individual officers of these companies as defendants. Defendants purportedly provide maintenance services to customers who have purchased or leased the Company's communications equipment. The Company asserted in its amended complaint that, among other things, defendants, or each of them, engaged in tortious conduct by improperly accessing and utilizing the Company's proprietary software, including passwords, logins and maintenance service permissions, to perform certain maintenance services on the Company's customers' equipment. TLI/Continuant filed counterclaims against the Company alleging that the Company has violated the Sherman Act's prohibitions against anticompetitive conduct through the manner in which the Company sells its products and services. TLI/Continuant sought to recover the profits they claim they would have earned from maintaining Avaya's products, and asked for injunctive relief prohibiting the conduct they claim is anticompetitive. The trial commenced on September 9, 2013. On January 7, 2014, the Court issued an order dismissing the Company's affirmative claims. With respect to TLI/Continuant’s counterclaims, on March 27, 2014, a jury found against the Company on two of eight claims and awarded damages of $20 million. Under the federal antitrust laws, the jury’s award is subject to automatic trebling, or $60 million. Following the jury verdict, TLI/Continuant sought an injunction regarding the Company’s ongoing business operations. On June 30, 2014, a federal judge rejected the demands of TLI/Continuant’s proposed injunction and stated that “only a narrow injunction is appropriate.” Instead, the judge issued an order relating to customers who purchased an Avaya PBX system between January 1, 1990 and April 30, 2008 only. Those customers and their agents will have free access to the on demand maintenance commands that were installed on their systems at the time of the purchase transaction. The court specified that this right “does not extend to access on a system purchased after April 30, 2008.” Consequently, the injunction affected only systems sold prior to April 30, 2008. The judge denied all other requests TLI/Continuant made in its injunction filing. The Company complied with the injunction although it has now been vacated by the September 30, 2016 decision discussed below. The Company and TLI/Continuant filed post-trial motions seeking to overturn the jury’s verdict, which motions were denied. In September 2014, the Court entered judgment in the amount of $63 million, which included the jury's award of $20 million, subject to automatic trebling, or $60 million, plus prejudgment interest in the amount of $3 million. On October 10, 2014, the Company filed a Notice of Appeal, and on October 23, 2014, TLI/Continuant filed a Notice of Conditional Cross-Appeal. On October 23, 2014, the Company filed its supersedeas bond with the Court in the amount of $63 million. The Company secured posting of the bond through the issuance of a letter of credit under its then existing credit facilities. On November 10, 2014, TLI/Continuant made an application for attorney's fees, expenses and costs, which the Company contested. TLI/Continuant’s application for attorneys’ fees, expenses and costs was approximately $71 million and represented activity through February 28, 2015. On February 22, 2016, the Company posted a bond in the amount of $8 million in connection with TLC/Continuant's attorneys' fees application. In September 2016, a Special Master appointed by the trial court to assist in evaluating TLI/Continuant's application rendered a Recommendation, finding that TLI/Continuant should receive approximately $61 million in attorneys' fees, expenses and costs. Subsequently, the parties submitted letters to the Special Master seeking an Amended Recommendation. However, in light of the Third Circuit's favorable opinion, outlined below, the trial court proceedings relating to TLI/Continuant's application have not proceeded. TLI/Continuant is no longer entitled to attorneys' fees, expenses and costs, because it no longer is a prevailing party, subject to further proceedings on appeal or retrial. On September 30, 2016, the Third Circuit issued a favorable ruling for the Company, which included: (1) reversing the mid-trial decision to dismiss four of the Company’s affirmative claims and reinstated them; (2) vacating the jury verdict on the two claims decided in TLI/Continuant’s favor; (3) entering judgment in the Company’s favor on a portion of TLI/Continuant’s claim relating to attempted monopolization; (4) dismissing TLI/Continuant’s PDS patches claim as a matter of law; (5) vacating the damages award to TLI/Continuant; (6) vacating the award of prejudgment interest to TLI/Continuant; and (7) vacating the injunction. On October 28, 2016, TLI/Continuant sought panel rehearing or rehearing en banc review of the opinion, which was denied on November 16, 2016. On November 22, 2016, TLI/Continuant filed a Motion for Stay of Mandate, which was denied. On December 5, 2016, the Third Circuit issued a certified judgment in lieu of a formal mandate, returning jurisdiction to the trial court. As a result of the Third Circuit’s opinion, on November 23, 2016, the Company filed a Notice of Motion to Release the Supersedeas Bonds, which the court granted on December 23, 2016. On December 12, 2016, the Court issued an Order Upon Mandate and For Status Conference, which i) vacated the Court’s January 7, 2014 order dismissing Avaya’s claims against TLI/Continuant and the order of judgment entered on September 17, 2014 and ii) scheduled a status conference for January 6, 2017 to discuss the Joint Plan for Retrial. On January 13, 2017, the Court entered an Order staying the matter pending mediation. On January 20, 2017, the Company filed a Notice of Suggestion on Pendency of Bankruptcy For Avaya Inc., et. al. and Automatic Stay of Proceedings. TLI/Continuant filed a proof of claim in the Bankruptcy Court. On November 30, 2017, the Company filed a motion in the Bankruptcy Court seeking to estimate TLI/Continuant’s claim. On June 21, 2018, the Company entered into a settlement resolving this litigation, and on June 28, 2018, the parties filed a Stipulation of Dismissal in the U.S. District Court, District of New Jersey. The Company considers this matter closed, except for distribution of the pre-petition allowed claim in accordance with the general unsecured claims procedure in the Company's Plan of Reorganization. Patent Infringement In July 2016, BlackBerry Limited (“BlackBerry”) filed a complaint for patent infringement against the Company in the Northern District of Texas, alleging infringement of multiple patents with respect to a variety of technologies including user interface design, encoding/decoding and call routing. In September 2016, the Company filed a motion to dismiss these claims and in October 2016, the Company also filed a motion to transfer this matter to the Northern District of California. In January 2017, the Company filed a notice of Suggestion of Pendency of Bankruptcy, which initially stayed the proceedings. The stay was partially lifted to allow the court in Texas to rule on the two pending motions. The Company’s motion to transfer the case from Texas to California has been denied. The Company’s motion to dismiss BlackBerry’s indirect infringement and willfulness claims was granted, although BlackBerry was provided an opportunity to file an Amended Complaint to cure the deficiencies, which it did on October 19, 2017. BlackBerry filed a proof of claim in the Bankruptcy Court. On February 20, 2018, the Company and BlackBerry entered into a settlement agreement resolving this dispute, and on February 23, 2018, the parties jointly filed a Stipulation of Dismissal with Prejudice with the Court in the Northern District of Texas. The Company considers this matter closed, except for distribution of the pre-petition allowed claim in accordance with the general unsecured claims procedure pursuant to the Company's Plan of Reorganization. In September 2011, Network-1 Security Solutions, Inc. (“Network-1”) filed a complaint for patent infringement against the Company and other corporations in the Eastern District of Texas (Tyler Division), alleging infringement of its patent with respect to power over Ethernet technology. Network-1 seeks to recover for alleged reasonable royalties, enhanced damages and attorneys’ fees. In January 2017, the Company filed a Notice of Suggestion of Pendency of Bankruptcy, which informed the Court of the Company’s voluntary bankruptcy petition filing and stay of proceedings. On October 16, 2017, the Bankruptcy Court entered an order approving a settlement agreement with Network-1 and on November 7, 2017 the Tyler Division district court entered an order dismissing the lawsuit, with prejudice. The Company considers this matter closed, except for distribution of the pre-petition allowed claim in accordance with the general unsecured claims procedure in the Company's Plan of Reorganization. Intellectual Property and Commercial Disputes In January 2010, SAE Power Incorporated and SAE Power Company (“SAE”) filed a complaint in the New Jersey Superior Court asserting various claims including breach of contract, unjust enrichment, promissory estoppel, and breach of the covenant of good faith and fair dealing arising out of Avaya’s relationship with SAE as a supplier of various power supply products. SAE has since asserted additional claims against Avaya for fraud, negligent misrepresentation, misappropriation of trade secrets, and civil conspiracy. SAE seeks to recover for alleged losses stemming from Avaya’s termination of its power supply purchases from SAE, including for Avaya’s alleged disclosure of SAE’s alleged trade secret and/or confidential information to another power supply vendor. On July 19, 2016, the Court entered an order granting Avaya’s motion for partial summary judgment, dismissing certain of SAE’s claims regarding the alleged disclosure of trade secrets. In January 2017, the Company filed a Notice of Suggestion of Pendency of Bankruptcy, which informed the Court of the Company’s voluntary bankruptcy petition filing and stay of proceedings. SAE filed a proof of claim in the Bankruptcy Court. On September 28, 2017, the Company filed a motion in the Bankruptcy Court seeking to estimate SAE’s claim, and the estimation hearing took place on February 15, 2018. On June 12, 2018, the Bankruptcy Court entered an Order estimating SAE’s pre-petition misappropriation claim in the amount of $1.21 million plus interest, its fraud claim at $0 million and declined to estimate SAE’s breach of contract claim, leaving it to be resolved through the bankruptcy claims allowance process. Once the stay of proceedings is lifted, SAE may pursue its liability claims against Avaya in the New Jersey state court action, subject to the estimation Order of the Bankruptcy Court. On June 22, 2018, SAE filed a Notice of Appeal, which is still pending, and a Motion for Stay of Estimation Order Pending Appeal, which was denied by the Bankruptcy Court on August 14, 2018 and by the District Court on September 12, 2018. This matter, although not yet closed, will receive distribution in accordance with the general unsecured claims procedure in the Company's Plan of Reorganization. In the ordinary course of business, the Company is involved in litigation alleging it has infringed upon third parties’ intellectual property rights, including patents and copyrights; some litigation may involve claims for infringement against customers, distributors and resellers by third parties relating to the use of Avaya’s products, as to which the Company may provide indemnifications of varying scope to certain parties. The Company is also involved in litigation pertaining to general commercial disputes with customers, suppliers, vendors and other third parties including royalty disputes. Much of the litigation against the Debtors was stayed as result of the Chapter 11 filing and was subject to resolution in accordance with the Bankruptcy Code and the orders of the Bankruptcy Court. Based on discussions with parties that have filed claims against the Debtors, the Company provided loss provisions for certain matters. However, these matters are ongoing and the outcomes are subject to inherent uncertainties. As a result, the Company cannot be assured that any such matter will not have a material adverse effect on its financial position, results of operations or cash flows. Product Warranties The Company recognizes a liability for the estimated costs that may be incurred to remedy certain deficiencies of quality or performance of the Company’s products. These product warranties extend over a specified period of time generally ranging up to two years from the date of sale depending upon the product subject to the warranty. The Company accrues a provision for estimated future warranty costs based upon the historical relationship of warranty claims to sales. The Company periodically reviews the adequacy of its product warranties and adjusts, if necessary, the warranty percentage and accrued warranty reserve, which is included in other current and non-current liabilities in the Consolidated Balance Sheets, for actual experience. As of September 30, 2018 (Successor) and September 30, 2017 (Predecessor), the amount reserved was $2 million and $2 million, respectively. For the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and for fiscal 2017 and 2016 (Predecessor), product warranty expense recorded in the Consolidated Statements of Operations was $2 million, $1 million, $5 million and $8 million, respectively. Guarantees of Indebtedness and Other Off-Balance Sheet Arrangements Letters of Credit and Guarantees The Company provides guarantees, letters of credit and surety bonds to various parties as required for certain transactions initiated during the ordinary course of business to guarantee the Company's performance in accordance with contractual or legal obligations. As of September 30, 2018 (Successor), the maximum potential payment obligation with regards to letters of credit, guarantees and surety bonds was $75 million. The outstanding letters of credit are collateralized by restricted cash of $4 million included in Other assets on the Consolidated Balance Sheets as of September 30, 2018 (Successor). Purchase Commitments and Termination Fees The Company purchases components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for its products. During the normal course of business, in order to manage manufacturing lead times and to help assure adequate component supply, the Company enters into agreements with contract manufacturers and suppliers that allow them to produce and procure inventory based upon forecasted requirements provided by the Company. If the Company does not meet these specified purchase commitments, it could be required to purchase the inventory, or in the case of certain agreements, pay an early termination fee. Historically, the Company has not been required to pay a charge for not meeting its designated purchase commitments with these suppliers, but has been obligated to purchase certain excess inventory levels from its outsourced manufacturers due to actual sales of product varying from forecast and due to transition of manufacturing from one vendor to another. The Company’s outsourcing agreements with its most significant contract manufacturers automatically renew in July and September for successive periods of twelve months each, subject to specific termination rights for the Company and the contract manufacturers. All manufacturing of the Company’s products is performed in accordance with either detailed requirements or specifications and product designs furnished by the Company, and is subject to rigorous quality control standards. Transactions with Nokia Pursuant to the Contribution and Distribution Agreement effective October 1, 2000, Lucent Technologies, Inc. (now Nokia) contributed to the Company substantially all of the assets, liabilities and operations associated with its enterprise networking businesses (the “Company’s Businesses”) and distributed the Company’s stock pro-rata to the shareholders of Lucent (“distribution”). The Contribution and Distribution Agreement, among other things, provides that, in general, the Company will indemnify Nokia for all liabilities including certain pre-distribution tax obligations of Nokia relating to the Company’s Businesses and all contingent liabilities primarily relating to the Company’s Businesses or otherwise assigned to the Company. In addition, the Contribution and Distribution Agreement provides that certain contingent liabilities not allocated to one of the parties will be shared by Nokia and the Company in prescribed percentages. The Contribution and Distribution Agreement also provides that each party will share specified portions of contingent liabilities based upon agreed percentages related to the business of the other party that exceed $50 million. The Company is unable to determine the maximum potential amount of other future payments, if any, that it could be required to make under this agreement. In addition, in connection with the distribution, the Company and Lucent entered into a Tax Sharing Agreement that governs Nokia’s and the Company’s respective rights, responsibilities and obligations after the distribution with respect to taxes for the periods ending on or before the distribution. Generally, pre-distribution taxes or benefits that are clearly attributable to the business of one party will be borne solely by that party and other pre-distribution taxes or benefits will be shared by the parties based on a formula set forth in the Tax Sharing Agreement. The Company may be subject to additional taxes or benefits pursuant to the Tax Sharing Agreement related to future settlements of audits by state and local and foreign taxing authorities for the periods prior to the Company’s separation from Nokia. Leases The Company leases land, buildings and equipment under agreements that expire in various years through 2029. Rental expense under operating leases, excluding any lease termination costs incurred related to the Company’s restructuring programs, was $55 million, $16 million, $84 million and $95 million for the period from December 16, 2017 through September 30, 2018 (Successor), the period from October 1, 2017 through December 15, 2017 (Predecessor) and the fiscal years ended September 30, 2017 and 2016 (Predecessor), respectively, net of sublease income of $4 million, $1 million, $11 million and $10 million. The table below sets forth future minimum lease payments, net of sublease income of $10 million, due under non-cancelable operating leases, of which $5 million of such payments relate to restructuring and exit activities accrued for as of September 30, 2018 (Successor):
The table below sets forth future minimum lease payments, due under non-cancelable capitalized leases as of September 30, 2018 (Successor):
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Quarterly Financial Data (Unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Data (Unaudited) | Quarterly Financial Data (Unaudited) The following tables present unaudited quarterly financial data. This information has been derived from the Company’s unaudited financial statements and has been prepared on the same basis as the audited Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
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Condensed Financial Information of Parent Company |
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Condensed Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information of Parent Company | Condensed Financial Information of Parent Company Avaya Holdings has no material assets or stand-alone operations other than its ownership in Avaya Inc. and its subsidiaries. These condensed financial statements have been presented on a "Parent Company only" basis. Under a Parent Company only presentation, the Company's investments in its consolidated subsidiaries are presented using the equity method of accounting. These Parent Company only condensed financial statements should be read in conjunction with the Company's Consolidated Financial Statements. The following present:
Avaya Holdings Corp. Parent Company Only Condensed Balance Sheets (In millions)
Avaya Holdings Corp. Parent Company Only Condensed Statements of Operations (In millions, except per share amounts)
Avaya Holdings Corp. Parent Company Only Condensed Statements of Comprehensive Income (Loss) (In millions)
Avaya Holdings Corp. Parent Company Only Condensed Statements of Cash Flows
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Subsequent Events |
12 Months Ended |
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Sep. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Event On November 14, 2018, the Company's Board of Directors approved a warrant repurchase program, authorizing the Company 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. The Company may adopt one or more purchase plans pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, in order to implement the warrant repurchase program. The warrant repurchase program does not obligate the Company to purchase any warrants and may be terminated, increased or decreased by the Board of Directors in its discretion at any time. |
Summary of Significant Accounting Policies (Policies) |
12 Months Ended |
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Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates 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 estimates include assessing the collectability of accounts receivable, 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 acquired in business combinations, the recoverability of long-lived assets, useful lives and impairment of tangible and intangible assets including goodwill, the amount of exposure from potential loss contingencies, fair value measurements, the application of fresh start accounting, 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 in the period they are determined to be necessary. Actual results could differ from these estimates. |
Principles of Consolidation | Principles of Consolidation The Consolidated Financial Statements include the accounts of Avaya Holdings Corp. and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation. |
Acquisition Accounting | Acquisition Accounting The Company accounts for business combinations using the acquisition method, which requires an allocation of the purchase price of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired. |
Revenue Recognition | Revenue Recognition The Company derives revenue primarily from the sale of products and services for communications systems and applications. The Company’s products are sold directly through its worldwide sales force and indirectly through its global network of channel partners, including distributors, service providers, dealers, value-added resellers, systems integrators and business partners that provide sales and services support. Services include (i) supplemental maintenance services, including services provided under contracts to monitor and optimize customers’ communications network performance; (ii) professional services for implementation and integration of converged voice and data networks, network security and unified communications; and (iii) private cloud and managed services. Maintenance contracts have terms that range from one to five years. Contracts for professional services typically have terms that range from four to six weeks for simple engagements and from six months to one year for strategic engagements. Contracts for private cloud and managed services generally have terms that range from one to five years. In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605, "Revenue Recognition" ("ASC 605"), revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. For arrangements that require acceptance of the product, system, or solution as specified by the customer, revenue is deferred until the acceptance criteria have been met. The Company’s indirect sales to channel partners are generally recognized at the time of shipment if all contractual obligations have been satisfied. The Company accrues a provision for estimated sales returns and other allowances, including promotional marketing programs and other incentives as a reduction of revenue at the time of sale. When estimating returns, the Company considers customary inventory levels held by third-party distributors. The Company enters into multiple deliverable arrangements, which may include various combinations of products, software and services. Most product and service deliverables qualify as separate units of accounting and can be sold on a standalone basis. A deliverable constitutes a separate unit of accounting when it has standalone value and, where return rights exist, delivery or performance of the undelivered items is considered probable and substantially within the Company’s control. When the Company sells products with implementation services, they are generally combined as one or more units of accounting, depending on the nature of the services and the customer's acceptance requirements. The Company’s products may have both software and non-software components that function together to deliver the products’ essential functionality. For these multiple deliverable arrangements, the Company allocates revenue to the deliverables based on their relative selling prices. To the extent that a deliverable is subject to specific guidance on whether and/or how to allocate the consideration in a multiple element arrangement, that deliverable is accounted for in accordance with such specific guidance. The Company limits the amount of revenue recognition for delivered items to the amount that is not contingent on the future delivery of products or services or meeting other future performance obligations. The Company allocates revenue based on a selling price hierarchy of vendor-specific objective evidence, third-party evidence, and then estimated selling price. Vendor-specific objective evidence is based on the price charged when the deliverable is sold separately. Third-party evidence is based on largely interchangeable competitor products or services in standalone sales to similarly situated customers. As the Company is unable to reliably determine what competitor products’ selling prices are on a standalone basis, the Company is not typically able to determine third-party evidence. Estimated selling price is based on the Company’s best estimates of what the selling prices of deliverables would be if they were sold regularly on a standalone basis. Estimated selling price is established considering multiple factors including, but not limited to, pricing practices in different geographies and through different sales channels, major product and services groups, and customer classifications. Once the Company allocates revenue to each deliverable, the Company recognizes revenue in accordance with its policies when all revenue recognition criteria are met. Product revenue is generally recognized upon delivery and maintenance services revenue is generally recognized ratably over the period during which the services are performed, whereas revenue from private cloud and managed services is generally recognized based on usage, subject to contractual minimums. Revenue for professional services arrangements is generally recognized upon completion of performance and revenue for arrangements that require acceptance of the product, system or solution, is recognized when the acceptance criteria have been met. Standalone or subsequent sales of software or software-related items are recognized in accordance with the software revenue recognition guidance. For multiple deliverable arrangements that only include software items, the Company generally uses the residual method to allocate the arrangement consideration. Under the residual method, the amount of consideration allocated to the delivered items equals the total arrangement consideration, less the fair value of the undelivered items. Where vendor-specific objective evidence of fair value for the undelivered items cannot be determined, the Company generally defers revenue until all items are delivered and services have been performed, or until such evidence of fair value can be determined for the undelivered items. Amounts billed to customers related to shipping and handling are recorded as revenue, and the Company's shipping and handling costs are classified as cost of sales. Upon emergence from bankruptcy, the Company changed its accounting policy related to uncollected deferred revenue. Prior to the Emergence Date, the Predecessor Company recorded deferred revenue and related collectible accounts receivable in its Consolidated Balance Sheets. Subsequent to the Emergence Date, the Successor Company does not recognize deferred revenue relating to any sales transactions that have been billed, but for which the related account receivable has not yet been collected. The aggregate amount of unrecognized accounts receivable and deferred revenue was $113 million as of September 30, 2018 (Successor). The Company will adopt FASB Accounting Standards Update ("ASU") No. 2014-09, “Revenue from Contracts with Customers (Topic 606,)” effective October 1, 2018. The standard supersedes most existing revenue recognition guidance and will have an impact on the Company’s revenue recognition accounting policies. Refer to Note 3, “Recent Accounting Pronouncements,” for additional information |
Cash and Cash Equivalents | Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less at the date of purchase are classified as cash equivalents. |
Concentrations of Risk | Concentrations of Risk The Company’s cash and cash equivalents are maintained with several financial institutions. Deposits held at banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate such risks by spreading its risk across multiple counterparties and monitoring the risk profiles of these counterparties. The Company, from time to time, may enter into derivative financial instruments with high credit quality financial institutions to manage foreign exchange rate and interest rate risk and is exposed to losses in the event of non-performance by the counterparties to these contracts. To date, no counterparty has failed to meet its obligations to the Company. The Company relies on a limited number of contract manufacturers and suppliers to provide manufacturing services for its products. The inability of a contract manufacturer or supplier to fulfill supply requirements of the Company could materially impact future operating results. The Company's largest distributor is also its largest customer and represented 12% of the Company's total annual consolidated revenue for the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor). |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded net of reserves for sales returns and allowances and provisions for doubtful accounts. The Company performs ongoing credit evaluations of its customers and generally does not require collateral from its customers. The allowances are based on analyses of historical trends, aging of accounts receivable balances and the creditworthiness of customers as determined by credit checks, analyses, and payment history. |
Inventory | Inventory Inventory includes goods awaiting sale (finished goods), equipment that is being installed at customer locations for various installations that are not yet complete and goods to be used in connection with providing maintenance services. Inventory is stated at net realizable value, determined on a first-in, first-out method. Reserves to reduce the inventory cost to net realizable value are based on current inventory levels, assumptions about future demand and product life cycles for the various inventory types. The Company has outsourced the manufacturing of substantially all of its products and may be obligated to purchase certain excess inventory levels from its outsourced manufacturers if actual sales of product are lower than forecast, in which case additional inventory provisions may need to be recorded in the future. |
Research and Development Costs | Research and Development Costs Research and development costs are charged to expense as incurred. The costs incurred for the development of communications software that will be sold, leased or otherwise marketed, however, are capitalized when technological feasibility has been established in accordance with FASB ASC Topic 985, “Software” (“ASC 985”). These capitalized costs are subject to an ongoing assessment of recoverability based on anticipated future revenues and costs and changes in hardware and software technologies. Costs that are capitalized include direct labor and related overhead. Capitalized costs were not material during the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor) as the software development process was essentially completed concurrently with the establishment of technological feasibility. Capitalized costs during fiscal 2017 and 2016 (Predecessor) were $2 million for both periods. Amortization of capitalized software development costs begins when the product is available for general release to customers. Amortization is recognized on a product-by-product basis generally on the straight-line method over a period of up to two years. Unamortized software development costs determined to be in excess of net realizable value of the product are expensed immediately. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is determined using a straight-line method over the estimated useful lives of the assets. Estimated lives range from two to ten years for machinery and equipment, up to five years for rental equipment, and the remaining lease term for equipment acquired under a capital lease. Improvements that extend the useful life of assets are capitalized and maintenance and repairs are charged to expense as incurred. Capitalized improvements to facilities subject to operating leases are depreciated over the lesser of the estimated useful life of the asset or the duration of the lease. Upon retirement or disposal of assets, the cost and related accumulated depreciation are removed from the Consolidated Balance Sheets and any gain or loss is reflected in the Consolidated Statements of Operations. |
Internal Use Software | The Company capitalizes costs associated with software developed or obtained for internal use when the preliminary project stage is completed and it is determined that the software will provide enhanced capabilities. Internal use software is amortized on a straight-line basis generally over five to seven years. Costs capitalized include payroll and related benefits, third party development fees and acquired software and licenses. General and administrative costs, overhead, maintenance and training, and the cost of the software that does not add functionality to existing systems, are expensed as incurred. |
Goodwill | Goodwill Goodwill is not amortized but is subject to periodic testing for impairment in accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Other” (“ASC 350”) at the reporting unit level, which is one level below the Company’s operating segments. The assessment of goodwill impairment is conducted by estimating and comparing the fair value of the Company’s reporting units, as defined in ASC 350, to their carrying amounts as of that date. The test for impairment is conducted annually and 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. |
Intangible and Long-lived Assets | Intangible and Long-lived Assets Intangible assets include technology and patents, customer relationships and trademarks and trade names. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from one to twenty years. Long-lived assets, including 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 in accordance with FASB ASC Topic 360, “Property, Plant, and Equipment.” Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the estimated fair value of the asset. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired. |
Financial Instruments | Derivative Financial Instruments All derivatives are recognized as assets or liabilities and measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. For derivative instruments designated as cash flow hedges under FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"), the change in fair value of the derivative is initially recorded in Accumulated other comprehensive (loss) income in the Consolidated Balance Sheets and is subsequently recognized in earnings when the hedged exposure impacts earnings. For derivative instruments that are not designated as hedges, gains (losses) from changes in fair values are recognized in earnings. The Company does not use financial instruments for trading or speculative purposes. |
Restructuring Programs | Restructuring Programs The Company accounts for exit or disposal activities in accordance with FASB ASC Topic 420, “Exit or Disposal Cost Obligations” (“ASC 420”). A business restructuring is defined as an exit or disposal activity that includes, but is not limited to, a program that is planned and controlled by management and materially changes either the scope of a business or the manner in which that business is conducted. Business restructuring charges include (i) one-time termination benefits related to employee separations, (ii) contract termination costs and (iii) other related costs associated with exit or disposal activities including, but not limited to, costs for consolidating or closing facilities and relocating employees. A liability is recognized and measured at its fair value for one-time termination benefits once the plan of termination meets all of the following criteria: (i) management commits to a plan of termination, (ii) the plan identifies the number of employees to be terminated and their job classifications or functions, locations and the expected completion date, (iii) the plan establishes the terms of the benefit arrangement and (iv) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. Contract termination costs include costs to terminate a contract or costs that will continue to be incurred under the contract without benefit to the Company. A liability is recognized and measured at its fair value when the Company either terminates the contract or ceases using the rights conveyed by the contract. A liability is recognized and measured at its fair value for other related costs in the period in which the liability is incurred. |
Pension and Postretirement Benefit Obligations | Pension and Post-retirement 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. These pension and other post-retirement benefits are accounted for in accordance with FASB ASC Topic 715, “Compensation—Retirement Benefits” (“ASC 715”). ASC 715 requires that plan assets and obligations be measured as of the reporting date and the over-funded, under-funded or unfunded status of plans be recognized as of the reporting date as an asset or liability in the Consolidated Balance Sheets. In addition, ASC 715 requires costs and related obligations and assets arising from pensions and other post-retirement benefit plans to be accounted for based on actuarially-determined estimates. The Company’s pension and post-retirement benefit costs are developed from actuarial valuations. Inherent in these valuations are key assumptions, including the discount rate and expected long-term rate of return on plan assets. Material changes in pension and post-retirement benefit costs may occur in the future due to changes in these assumptions, in the number of plan participants, in the level of benefits provided, in asset levels and in legislation. The market-related value of the Company’s plan assets as of the measurement date is developed using a five-year smoothing technique. First, a preliminary market-related value is calculated by adjusting the market-related value at the beginning of the year for payments to and from plan assets and the expected return on assets during the year. The expected return on assets represents the expected long-term rate of return on plan assets adjusted up to plus or minus 2% based on the actual ten-year average rate of return on plan assets. A final market-related value is determined as the preliminary market-related value, plus 20% of the difference between the actual return and expected return for each of the past five years. The plans use different factors based on plan provisions and participant census data, including years of service, eligible compensation and age, to determine the benefit amount for eligible participants. The Company funds its U.S. pension plans in compliance with applicable laws. |
Advertising Costs | Advertising Costs The Company expenses advertising costs as incurred. |
Share-based Compensation | Share-based Compensation The Company accounts for share-based compensation in accordance with FASB Topic ASC 718, “Compensation—Stock Compensation,” which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and non-employee directors including stock options, restricted stock units and stock purchases based on estimated fair values. Upon emergence from bankruptcy, the Company changed its accounting policy related to determining the fair value of equity awards. Prior to the Emergence Date, the Predecessor Company used the Cox-Ross-Rubenstein (“CRR”) binomial option pricing model to determine the grant date fair values of equity awards, including the fair value of its Preferred Series A and B Stock warrants. Forfeitures were an input assumption in the valuation model. Subsequent to the Emergence Date, the Successor Company uses the Black-Scholes-Merton option pricing model (“Black-Scholes”) to calculate the fair value of equity awards, including the fair value of warrants to purchase common stock. In addition to the change in option pricing models, the Successor Company accounts for forfeitures as incurred. Predecessor Equity Awards on Redeemable Shares The Predecessor Company issued equity awards, including restricted stock units and stock options, to employees of the Company that had a provision allowing, upon the employees' death or disability during employment, their estates to sell any shares obtained as a result of the equity award to the Company at an amount equal to the then current fair value per share as long as the sale was done pursuant to the terms and conditions of the Management Stockholders' Agreement. As a result of this provision, the Company classified the vested portion of the intrinsic value of these stock options and restricted stock units in the mezzanine section between debt and stockholders' deficit in the Consolidated Balance Sheets. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Consolidated Statements of Operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized. Additionally, the accounting for income taxes requires the Company to evaluate and make an assertion as to whether undistributed foreign earnings will be indefinitely reinvested or repatriated. FASB ASC Subtopic 740-10, “Income Taxes—Overall” (“ASC 740-10”) prescribes a comprehensive model for the financial statement recognition, measurement, classification, and disclosure of uncertain tax positions. ASC 740-10 contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, based on the technical merits of the position. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. Significant judgment is required in evaluating uncertain tax positions and determining the provision for income taxes. Although the Company believes its reserves are reasonable, no assurance can be given that the final tax outcome of these matters will not be different from that which is reflected in the historical income tax provision and accruals. The Company adjusts its estimated liability for uncertain tax positions periodically due to new information discovered from ongoing examinations by, and settlements with various taxing authorities, as well as changes in tax laws, regulations and interpretations. The Company's policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense. As part of the Company's accounting for business combinations, some of the purchase price is allocated to goodwill and intangible assets. Impairment expenses associated with goodwill are generally not tax deductible and will result in an increased effective income tax rate in the fiscal period any impairment is recorded. The income tax benefit from future releases of the acquisition date valuation allowances or income tax contingencies, if any, are reflected in the income tax provision in the Consolidated Statements of Operations, rather than as an adjustment to the purchase price allocation. |
Net Income (Loss) Per Share | Net Income (Loss) Per Share Basic net income (loss) per 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) for the Predecessor Company attributable to common stockholders was adjusted (increased) for preferred stock dividends earned during the period. Diluted income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding plus potentially dilutive common shares. |
Deferred Financing Costs | Deferred Financing Costs Deferred financing costs are amortized using the effective interest method as interest expense over the contractual lives of the related credit facilities. Deferred financing costs related to a debt liability are presented on the Consolidated Balance Sheets as a reduction of the carrying amount of that debt liability and deferred financing costs related to revolving credit facilities are included within other assets. |
Foreign Currency Translation | Foreign Currency Translation Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where the local currency is the functional currency, are translated from foreign currencies into U.S. dollars at period-end exchange rates. Upon emergence from bankruptcy, the Company changed its accounting policy related to translating the income and expense of non-U.S. dollar functional currency subsidiaries into U.S. dollars. Prior to the Emergence Date, the Predecessor Company translated the income and expense of non-U.S. dollar functional currency subsidiaries into U.S. dollars at the spot rate for the transaction. Subsequent to the Emergence Date, the Successor Company translates the income and expense of non-U.S. dollar functional currency subsidiaries into U.S. dollars using an average rate for the period. Translation gains or losses related to net assets located outside the U.S. are shown as a component of Accumulated other comprehensive income (loss) in the Consolidated Statements of Changes in Stockholders' Equity (Deficit). Gains and losses resulting from foreign currency transactions, which are denominated in currencies other than the functional currency, are included in other income (expense), net in the Consolidated Statements of Operations. |
Other Comprehensive Income (Loss) | Other Comprehensive Income (Loss) Other comprehensive income (loss) is recorded in Accumulated other comprehensive loss within stockholders' equity (deficit) on the Consolidated Balance Sheets and primarily includes unrealized gains and losses excluded from the Consolidated Statements of Operations. These unrealized gains and losses consist of changes in foreign currency translation, and changes in unamortized pension, post-retirement and postemployment actuarial gains and losses. |
Background and Basis of Presentation (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Error Corrections and Prior Period Adjustments | The Consolidated Balance Sheet as of December 16, 2017, the Consolidated Statement of Cash Flows for the Predecessor period from October 1, 2017 through December 15, 2017, and the notes thereto have been revised to include the effects of these errors and the cash flow reclassification as follows:
For additional information refer to Notes: 5. “Fresh Start Accounting”; 7. “Goodwill”; 9. “Supplementary Financial Information”; and 12. “Derivative Instruments and Hedging Activities”. |
Fresh Start Accounting (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fresh-Start Adjustments |
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:
10.Other Current Liabilities.
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.
16.Liabilities Subject to Compromise. Liabilities subject to compromise were reinstated or settled as follows in accordance with the Plan of Reorganization:
(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:
Fresh Start Adjustments At the Emergence Date, the Company met the requirements under ASC 852 for the adoption of fresh start accounting. These adjustments reflect actual amounts recorded as of the Emergence Date.
The following table reflects the components of property, plant and equipment, net as of December 15, 2017:
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 was 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 Company goodwill of $3,541 million was eliminated and Successor Company goodwill of $2,658 million was established based on the calculated reorganization value.
The following table reconciles the enterprise value to the estimated fair value of the Successor stockholders' equity as of the Emergence Date:
The following table reconciles the enterprise value to the estimated reorganization value as of the Emergence Date:
The following table reflects the components of property, plant and equipment, net as of December 15, 2017:
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:
Liabilities Subject to Compromise. Liabilities subject to compromise were reinstated or settled as follows in accordance with the Plan of Reorganization:
(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:
Other Current Liabilities.
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:
The Company recorded an adjustment to intangible assets for $3,137 million as follows:
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Goodwill (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The changes in the carrying amount of goodwill by segment for the periods indicated were as follows:
The Company adjusted the carrying value of goodwill upon application of fresh start accounting. As discussed in Note 1, "Background and Basis of Presentation - Revision of Prior Period Amounts," prior period amounts have been revised, where applicable. |
Intangible Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived and Indefinite-Lived Intangible Assets by Major Class | The Company's intangible assets consist of the following for the periods indicated:
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Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Future amortization expense of intangible assets as of September 30, 2018 for the fiscal years ending September 30, is as follows:
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Supplementary Financial Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplementary Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidated Statements of Operations Information | The following table presents a summary of depreciation and amortization and Other income (expense), net for the periods indicated:
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Summary of Reorganization Items | A summary of Reorganization items, net for the periods indicated is presented in the following table:
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Consolidated Balance Sheet Information | Consolidated Balance Sheet Information
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Property, Plant and Equipment |
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Schedule of Liabilities Subject to Compromise |
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Supplemental Cash Flow Information | Supplemental Cash Flow Information
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Business Restructuring Reserves and Programs (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Reserve [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Restructuring and Related Costs | The following table summarizes the components of the fiscal 2016 restructuring program:
The following table summarizes the components of the fiscal 2018 restructuring program for the period from December 16, 2017 through September 30, 2018 (Successor) and the period from October 1, 2017 through December 15, 2017 (Predecessor):
The following table aggregates the remaining components of the fiscal 2008 through 2015 restructuring programs:
The following table summarizes the components of the fiscal 2017 restructuring program:
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Financing Arrangements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The following table reflects principal amounts of debt and debt net of discounts and issuance costs as of September 30, 2018 (Successor) and September 30, 2017 (Predecessor), which includes the impact of adequate protection payments and accrued interest as of January 19, 2017, the date the Company filed for bankruptcy:
(1) Pre-petition long-term debt as of September 30, 2017 (Predecessor) was included in Liabilities subject to compromise. |
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Convertible Debt | The net carrying amount of the Convertible Notes for the period indicated was as follows:
The net carrying amount of the equity component of the Convertible Notes for the period indicated was as follows:
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Schedule of Maturities of Long-term Debt | The stated annual maturity of total debt for the fiscal years ended September 30, consist of:
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Derivative Instruments and Hedging Activities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assumptions Used | The fair value of the Emergence Date Warrants upon emergence and as of September 30, 2018 (Successor) was recorded in Non-current liabilities - Other liabilities in the Consolidated Balance Sheets, and was determined by using the Black-Scholes option pricing model with the input assumptions summarized below:
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Schedule of Derivative Instruments in Balance Sheet | The following table summarizes the fair value of the Company's derivatives on a gross basis segregated between those that are designated as hedging instruments and those that are not designated as hedging instruments:
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Derivatives Designated as Cash Flow Hedges | The following table provides information regarding the location and amount of pre-tax (losses) gains for derivatives designated as cash flow hedges:
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Derivatives Not Designated As Hedging Instruments | The following table provides information regarding the pre-tax (losses) gains for derivatives not designated as hedging instruments on the Consolidated Statements of Operations:
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Schedule of Outstanding Derivative Positions Presented on a Net Basis | 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:
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Fair Value Measurements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements, Recurring and Nonrecurring | Assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 (Successor) and September 30, 2017 (Predecessor) were as follows:
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Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The following table summarizes the activity for the Company's Level 3 liabilities measured at fair value on a recurring basis:
(1) Changes in fair value of the Emergence Date Warrants and accretion of interest on the Spoken acquisition earn-outs are included in Other income (expense), net. |
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Fair Value, by Balance Sheet Grouping | The estimated fair values of the amounts borrowed under the Company’s financing agreements at September 30, 2018 (Successor) and September 30, 2017 (Predecessor) are as follows:
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Income Taxes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Income before Income Tax, Domestic and Foreign | The following table presents the U.S. and foreign components of (loss) income before income taxes and the benefit from (provision for) income taxes for the periods indicated:
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Schedule of Components of Income Tax Expense (Benefit) | The following table presents the U.S. and foreign components of (loss) income before income taxes and the benefit from (provision for) income taxes for the periods indicated:
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Schedule of Deferred Tax Assets and Liabilities | Significant components of the Company's deferred tax assets and liabilities as of the periods indicated were as follows:
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Schedule of Effective Income Tax Rate Reconciliation | A reconciliation of the Company’s loss before income taxes at the U.S. federal statutory rate to the benefit from (provision for) income taxes is as follows:
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Schedule of Unrecognized Tax Benefits Roll Forward |
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Benefit Obligations (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Defined Benefit Plans Disclosures | A reconciliation of the changes in the benefit obligations and fair value of assets of the defined benefit pension and post-retirement plans, the funded status of the plans, and the amounts recognized in the Consolidated Balance Sheets are provided in the tables below:
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Schedule of Accumulated Benefit Obligations in Excess of Fair Value of Plan Assets | The following table provides the accumulated benefit obligation for all defined benefit pension plans and information for pension plans with an accumulated benefit obligation in excess of plan assets:
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Schedule of Expected Benefit Payments | Estimated future benefits expected to be paid in each of the next five fiscal years, and in aggregate for the five fiscal years thereafter, are presented below:
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Schedule of Net Benefit Costs | The components of the pension and post-retirement net periodic benefit cost (credit) for the periods indicated are provided in the table below:
(1) Excludes Plan of Reorganization related settlements that were recorded in Reorganization items, net in the Consolidated Statements of Operations. |
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Schedule of Defined Benefit Plan Amounts Recognized in Other Comprehensive Income (Loss) | Other changes in plan assets and benefit obligations recognized in other comprehensive loss are provided in the tables below:
(1) For the period from October 1, 2017 through December 15, 2017, the U.S., non-U.S. and other Post-retirement benefits include Plan of Reorganization settlements that were recorded in Reorganization items, net in the Consolidated Statements of Operations of $(440) million, $0 million, and $(43) million, respectively. |
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Schedule of Allocation of Plan Assets | The following table summarizes the fair value of the post-retirement plan assets by asset class:
The weighted average asset allocation of the pension and post-retirement plans by asset category and target allocation is as follows:
The following table summarizes the fair value of the non-U.S. pension plan assets by asset class:
The following table summarizes the fair value measurements of the U.S. pension plan assets by asset class:
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Share-based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The weighted average grant date assumptions used in calculating the fair value of options granted | The weighted average grant date assumptions used in calculating the fair value of Predecessor options granted in fiscal 2016 (Predecessor) were as follows:
(1) Expected volatility based on a combination of the Company's historical volatility and peer group companies' implied volatility. (2) Expected life based on the vesting terms of the option and a contractual life of ten years. (3) Risk-free interest rate based on U.S. Treasury spot rate for the expected term of the option. (4) Dividend yield was assumed to be zero as the Company did not pay dividends. The weighted average grant date assumptions used in calculating the fair value of Successor options granted on the Emergence Date and thereafter were as follows:
(1) Expected volatility based on peer group companies adjusted for the Company's leverage. (2) Expected life based on the vesting terms of the option and a contractual life of ten years. (3) Risk-free interest rate based on U.S. Treasury yields with a term equal to the expected option term. (4) Dividend yield was assumed to be zero as the Company does not anticipate paying dividends. |
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A summary of option activity | A summary of option activity under the 2017 Equity Incentive Plan for the period from the Emergence Date through September 30, 2018 (Successor) is presented below:
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A summary of RSU activity | A summary of RSU activity under the 2017 Equity Incentive Plan from the Emergence Date through September 30, 2018 (Successor) is presented below:
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Net Income (Loss) Per Common Share (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings (Loss) Per Share | The following table sets forth the calculation of net income (loss) attributable to common shareholders and the computation of basic and diluted earnings (loss) per share for the periods indicated:
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Operating Segments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarized Financial Information of Operating Segments | Summarized financial information relating to the Company's operating segments is shown in the following table for the periods indicated:
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Revenue and Long-Lived Assets by Geographic Area | Financial information relating to the Company’s revenue and long-lived assets by geographic area is as follows:
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Accumulated Other Comprehensive (Loss) Income (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The components of accumulated other comprehensive (loss) income for the periods indicated were as follows:
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Commitments and Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | The table below sets forth future minimum lease payments, net of sublease income of $10 million, due under non-cancelable operating leases, of which $5 million of such payments relate to restructuring and exit activities accrued for as of September 30, 2018 (Successor):
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Schedule of Future Minimum Lease Payments for Capital Leases | The table below sets forth future minimum lease payments, due under non-cancelable capitalized leases as of September 30, 2018 (Successor):
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Quarterly Financial Data (Unaudited) (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information | The following tables present unaudited quarterly financial data. This information has been derived from the Company’s unaudited financial statements and has been prepared on the same basis as the audited Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K.
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Condensed Financial Information of Parent Company (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Balance Sheets | Avaya Holdings Corp. Parent Company Only Condensed Balance Sheets (In millions)
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Condensed Statements of Operations | Avaya Holdings Corp. Parent Company Only Condensed Statements of Operations (In millions, except per share amounts)
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Condensed Statements of Comprehensive Income (Loss) | Avaya Holdings Corp. Parent Company Only Condensed Statements of Comprehensive Income (Loss) (In millions)
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Condensed Statements of Cash Flows | Avaya Holdings Corp. Parent Company Only Condensed Statements of Cash Flows
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Background and Basis of Presentation - Narrative (Details) $ in Millions |
12 Months Ended | ||||
---|---|---|---|---|---|
Jul. 14, 2017
segment
|
Jul. 13, 2017
segment
|
Sep. 30, 2018
USD ($)
segment
|
Dec. 16, 2017
USD ($)
|
Dec. 15, 2017
USD ($)
|
|
General Disclosures [Line Items] | |||||
Number of segments | segment | 2 | 3 | 2 | ||
Cash and cash equivalents | $ 700 | $ 366 | $ 366 | ||
Adjustments | |||||
General Disclosures [Line Items] | |||||
Cash and cash equivalents | $ 26 |
Recent Accounting Pronouncements - Narrative (Details) - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Other pension and post-retirement benefit credits (costs), net | $ 13 | |||
Restricted cash | 4 | |||
Accounting Standards Update 2016-18 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Restricted cash | $ 4 | |||
Predecessor | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Other pension and post-retirement benefit credits (costs), net | $ (8) | $ (34) | $ (27) | |
Predecessor | Accounting Standards Update 2016-18 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Restricted cash | $ 91 |
Fresh Start Accounting - Other Current Assets (Details) - Discharge of Debt $ in Millions |
Dec. 15, 2017
USD ($)
|
---|---|
Fresh-Start Adjustment [Line Items] | |
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) |
Fresh Start Accounting - Other Current Liabilities (Details) - Discharge of Debt $ in Millions |
Dec. 15, 2017
USD ($)
|
---|---|
Fresh-Start Adjustment [Line Items] | |
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 |
Fresh Start Accounting - Exit Financing (Details) - USD ($) |
Sep. 30, 2018 |
Dec. 15, 2017 |
---|---|---|
Fresh-Start Adjustment [Line Items] | ||
Term Loan Credit Agreement | $ 3,253,000,000 | |
Less: | ||
Current portion of Long-term debt | (29,000,000) | |
Discharge of Debt | ||
Less: | ||
Discount | $ (29,000,000) | |
Upfront and underwriting fees | (54,000,000) | |
Cash received upon emergence from bankruptcy | 2,842,000,000 | |
Reclassification of debt issuance costs incurred prior to emergence from bankruptcy | (42,000,000) | |
Current portion of Long-term debt | (29,000,000) | |
Long-term debt, net of current portion | 2,771,000,000 | |
Term Loan | ||
Fresh-Start Adjustment [Line Items] | ||
Term Loan Credit Agreement | $ 2,903,000,000 | |
Term Loan | Term Loan Credit Agreement due December 15, 2024 | ||
Fresh-Start Adjustment [Line Items] | ||
Term Loan Credit Agreement | 2,925,000,000 | |
Term Loan | Term Loan Credit Agreement due December 15, 2024 | Discharge of Debt | ||
Fresh-Start Adjustment [Line Items] | ||
Term Loan Credit Agreement | $ 2,925,000,000 |
Fresh Start Accounting - Property, Plant and Equipment (Details) - USD ($) $ in Millions |
Dec. 16, 2017 |
Dec. 15, 2017 |
---|---|---|
Fresh-Start Adjustment [Line Items] | ||
Total property, plant and equipment | $ 310 | |
Less: accumulated depreciation and amortization | 0 | |
Property, plant and equipment, net | $ 310 | 310 |
Buildings and improvements | ||
Fresh-Start Adjustment [Line Items] | ||
Total property, plant and equipment | 82 | |
Machinery and equipment | ||
Fresh-Start Adjustment [Line Items] | ||
Total property, plant and equipment | 38 | |
Rental equipment | ||
Fresh-Start Adjustment [Line Items] | ||
Total property, plant and equipment | 85 | |
Assets under construction | ||
Fresh-Start Adjustment [Line Items] | ||
Total property, plant and equipment | 13 | |
Internal use software | ||
Fresh-Start Adjustment [Line Items] | ||
Total property, plant and equipment | $ 92 |
Fresh Start Accounting - Goodwill (Details) - USD ($) $ in Millions |
Dec. 16, 2017 |
Dec. 15, 2017 |
---|---|---|
Reorganization value of Successor Company | $ 7,609 | |
Less: Fair value of Successor Company assets | (4,951) | |
Reorganization value of Successor Company assets in excess of fair value - Goodwill | 2,658 | $ 2,658 |
As Previously Reported | ||
Reorganization value of Successor Company | 7,583 | 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 | 2,632 |
Adjustments | ||
Reorganization value of Successor Company | 26 | 26 |
Less: Fair value of Successor Company assets | 0 | |
Reorganization value of Successor Company assets in excess of fair value - Goodwill | $ 26 | $ 26 |
Goodwill - Narrative (Details) $ in Millions |
2 Months Ended | 3 Months Ended | 10 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2016
USD ($)
|
Dec. 15, 2017
USD ($)
|
Jun. 30, 2017
USD ($)
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2018
USD ($)
reporting_unit
|
Sep. 30, 2017
USD ($)
|
Sep. 30, 2016
USD ($)
|
Jul. 31, 2018 |
Jul. 01, 2018
USD ($)
|
Dec. 16, 2017
USD ($)
|
|
Goodwill [Line Items] | |||||||||||
Goodwill | $ 2,658 | $ 2,764 | $ 2,764 | $ 2,764 | $ 3,542 | $ 2,658 | |||||
Number of reporting units | 5 | 5 | |||||||||
Impairment loss | $ 0 | 52 | $ 442 | ||||||||
Unified Communications Solutions Provider | |||||||||||
Goodwill [Line Items] | |||||||||||
Goodwill | $ 946 | ||||||||||
Impairment loss | 442 | ||||||||||
Goodwill, fair value | $ 504 | ||||||||||
Predecessor | |||||||||||
Goodwill [Line Items] | |||||||||||
Goodwill | 2,658 | 3,542 | 3,629 | ||||||||
Impairment loss | $ 0 | $ 52 | $ 52 | $ 442 | |||||||
Professional Services | |||||||||||
Goodwill [Line Items] | |||||||||||
Goodwill | $ 22 | ||||||||||
Global Support Services | |||||||||||
Goodwill [Line Items] | |||||||||||
Goodwill | $ 1,448 | ||||||||||
Goodwill, measurement input | 1.10% | ||||||||||
Fair value in excess of carrying amount, percent | 7.00% |
Intangible Assets - Amortization Expense Maturity (Details) $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Intangible Assets, Net (Excluding Goodwill) [Abstract] | |
2019 | $ 333 |
2020 | 333 |
2021 | 332 |
2022 | 305 |
2023 and thereafter | 1,594 |
Finite-lived intangible assets, net | $ 2,897 |
Supplementary Financial Information - Liabilities Subject to Compromise (Details) - USD ($) $ in Millions |
Sep. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
Liabilities Subject To Compromise [Line Items] | ||
Accounts payable | $ 0 | |
Debt subject to compromise including accrued interest | 0 | |
Pension obligations | 0 | |
Payroll and benefit obligations | 0 | |
Other post-retirement obligations | 0 | |
Deferred revenue | 0 | |
Deferred income taxes | 0 | |
Other liabilities | 0 | |
Consolidated Liabilities subject to compromise | 0 | |
Payables to non-debtor subsidiaries | 0 | |
Debtors’ Liabilities subject to compromise | $ 0 | |
Predecessor | ||
Liabilities Subject To Compromise [Line Items] | ||
Accounts payable | $ 40 | |
Debt subject to compromise including accrued interest | 5,832 | |
Pension obligations | 1,012 | |
Payroll and benefit obligations | 45 | |
Other post-retirement obligations | 211 | |
Deferred revenue | 95 | |
Deferred income taxes | 113 | |
Other liabilities | 357 | |
Consolidated Liabilities subject to compromise | 7,705 | |
Payables to non-debtor subsidiaries | 100 | |
Debtors’ Liabilities subject to compromise | $ 7,805 |
Supplementary Financial Information - Supplementary Cash Flow Information (Details) - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
OTHER PAYMENTS | ||||
Interest payments | $ 149 | |||
Income tax payments | 22 | |||
NON-CASH INVESTING ACTIVITIES | ||||
Acquisition of equipment under capital lease | 2 | |||
Increase (decrease) in Accounts payable for Capital expenditures | $ 1 | |||
Predecessor | ||||
OTHER PAYMENTS | ||||
Interest payments | $ 15 | $ 138 | $ 425 | |
Income tax payments | 7 | 33 | 51 | |
NON-CASH INVESTING ACTIVITIES | ||||
Acquisition of equipment under capital lease | 0 | 0 | 4 | |
Increase (decrease) in Accounts payable for Capital expenditures | $ 0 | $ (1) | $ (4) |
Financing Arrangements - Carrying Amount of Convertible Debt (Details) - USD ($) |
Sep. 30, 2018 |
Jun. 11, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Principal | $ 3,253,000,000 | |
Convertible Notes | ||
Debt Instrument [Line Items] | ||
Principal | 350,000,000 | $ 350,000,000 |
Less: | ||
Unamortized debt discount | (87,000,000) | |
Unamortized issuance costs | (7,000,000) | $ (10,000,000) |
Net carrying amount | $ 256,000,000 |
Financing Arrangements - Equity Component of Convertible Debt (Details) - Convertible Notes - USD ($) $ in Millions |
Sep. 30, 2018 |
Jun. 11, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Debt discount for conversion option | $ 92 | |
Less: | ||
Issuance costs | $ (7) | $ (10) |
Net carrying amount | 256 | |
Convertible Debt, Equity Component | ||
Debt Instrument [Line Items] | ||
Debt discount for conversion option | 92 | |
Less: | ||
Issuance costs | (3) | |
Net carrying amount | $ 89 |
Financing Arrangements - Maturity profile (Details) $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2019 | $ 29 |
2020 | 29 |
2021 | 29 |
2022 | 29 |
2023 and thereafter | 3,137 |
Total | $ 3,253 |
Derivative Instruments and Hedging Activities - Assumptions Used (Details) |
Sep. 30, 2018
year
$ / shares
|
Dec. 15, 2017
year
$ / shares
|
---|---|---|
Expected volatility | ||
Derivative [Line Items] | ||
Warrants, measurement input | 0.5014 | 0.5438 |
Expected volatility | As Previously Reported | ||
Derivative [Line Items] | ||
Warrants, measurement input | 0.5457 | |
Risk-free interest rates | ||
Derivative [Line Items] | ||
Warrants, measurement input | 0.0290 | 0.0220 |
Risk-free interest rates | As Previously Reported | ||
Derivative [Line Items] | ||
Warrants, measurement input | 0.0220 | |
Expected remaining life (in years) | ||
Derivative [Line Items] | ||
Warrants, measurement input | year | 4.21 | 5.00 |
Expected remaining life (in years) | As Previously Reported | ||
Derivative [Line Items] | ||
Warrants, measurement input | year | 5.00 | |
Warrants | ||
Derivative [Line Items] | ||
Price per share of common stock (in usd per share) | $ / shares | $ 22.14 | $ 15.16 |
Warrants | As Previously Reported | ||
Derivative [Line Items] | ||
Price per share of common stock (in usd per share) | $ / shares | $ 14.93 |
Derivative Instruments and Hedging Activities - Derivatives Designated as Cash Flow Hedges (Details) - Derivatives Designated as Hedging Instruments: - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended |
---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
|
Interest Expense | ||
Derivative [Line Items] | ||
Derivative, gain (loss) | $ (169) | |
Loss recognized in AOCI - on interest rate swaps | 0 | |
Interest expense reclassified from AOCI | (6) | |
Other Comprehensive Income (Loss) | ||
Derivative [Line Items] | ||
Derivative, gain (loss) | 0 | |
Loss recognized in AOCI - on interest rate swaps | (9) | |
Interest expense reclassified from AOCI | $ 6 | |
Predecessor | Interest Expense | ||
Derivative [Line Items] | ||
Derivative, gain (loss) | $ (14) | |
Loss recognized in AOCI - on interest rate swaps | 0 | |
Interest expense reclassified from AOCI | 0 | |
Predecessor | Other Comprehensive Income (Loss) | ||
Derivative [Line Items] | ||
Derivative, gain (loss) | 658 | |
Loss recognized in AOCI - on interest rate swaps | 0 | |
Interest expense reclassified from AOCI | $ 0 |
Derivative Instruments and Hedging Activities - Derivatives Not Designated as Hedging Instruments (Details) - Other income (expense), net - Derivatives Not Designated as Hedging Instruments: - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Emergence Date Warrants | ||||
Derivative [Line Items] | ||||
Derivative, gain (loss) | $ (17) | |||
Preferred Series B embedded derivative | ||||
Derivative [Line Items] | ||||
Derivative, gain (loss) | 0 | |||
Foreign currency forward contracts | ||||
Derivative [Line Items] | ||||
Derivative, gain (loss) | $ 0 | |||
Predecessor | Emergence Date Warrants | ||||
Derivative [Line Items] | ||||
Derivative, gain (loss) | $ 0 | $ 0 | $ 0 | |
Predecessor | Preferred Series B embedded derivative | ||||
Derivative [Line Items] | ||||
Derivative, gain (loss) | 0 | 0 | 73 | |
Predecessor | Foreign currency forward contracts | ||||
Derivative [Line Items] | ||||
Derivative, gain (loss) | $ 0 | $ 0 | $ 1 |
Income Taxes - Income Taxes by Location (Details) - USD ($) $ in Millions |
1 Months Ended | 2 Months Ended | 3 Months Ended | 10 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Dec. 15, 2017 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
LOSS BEFORE INCOME TAXES: | ||||||||||||
U.S. | $ (165) | |||||||||||
Foreign | (94) | |||||||||||
(LOSS) INCOME BEFORE INCOME TAXES | (259) | |||||||||||
CURRENT | ||||||||||||
Federal | 0 | |||||||||||
State and local | 4 | |||||||||||
Foreign | (40) | |||||||||||
Current income tax provision (benefit) | (36) | |||||||||||
DEFERRED | ||||||||||||
Federal | 530 | |||||||||||
State and local | 34 | |||||||||||
Foreign | 18 | |||||||||||
Deferred income tax provision (benefit) | 582 | |||||||||||
Benefit from (provision for) income taxes | $ 246 | $ 311 | $ (20) | $ 9 | $ 546 | |||||||
Predecessor | ||||||||||||
LOSS BEFORE INCOME TAXES: | ||||||||||||
U.S. | $ 3,353 | $ (275) | $ (769) | |||||||||
Foreign | 83 | 77 | 50 | |||||||||
(LOSS) INCOME BEFORE INCOME TAXES | 3,436 | (198) | (719) | |||||||||
CURRENT | ||||||||||||
Federal | 0 | 2 | 3 | |||||||||
State and local | 0 | 1 | (1) | |||||||||
Foreign | (4) | (27) | (65) | |||||||||
Current income tax provision (benefit) | (4) | (24) | (63) | |||||||||
DEFERRED | ||||||||||||
Federal | (453) | 34 | 72 | |||||||||
State and local | (19) | 5 | 7 | |||||||||
Foreign | 17 | 1 | (27) | |||||||||
Deferred income tax provision (benefit) | (455) | 40 | 52 | |||||||||
Benefit from (provision for) income taxes | $ (459) | $ (6) | $ 6 | $ 19 | $ (3) | $ 16 | $ (11) |
Income Taxes - Schedule of Deferred Taxes (Details) - USD ($) $ in Millions |
Sep. 30, 2018 |
Sep. 30, 2017 |
---|---|---|
DEFERRED INCOME TAX ASSETS: | ||
Benefit obligations | $ 205 | |
Net operating losses / credit carryforwards | 951 | |
Property, plant and equipment | 21 | |
Other | 0 | |
Valuation allowance | (919) | |
Deferred income tax assets | 258 | |
DEFERRED INCOME TAX LIABILITIES: | ||
Goodwill and intangible assets | (290) | |
Other/accrued liabilities | (79) | |
Deferred income tax liabilities | (369) | |
Net deferred income tax liabilities | $ (111) | |
Predecessor | ||
DEFERRED INCOME TAX ASSETS: | ||
Benefit obligations | $ 624 | |
Net operating losses / credit carryforwards | 1,452 | |
Property, plant and equipment | 43 | |
Other | 35 | |
Valuation allowance | (2,152) | |
Deferred income tax assets | 2 | |
DEFERRED INCOME TAX LIABILITIES: | ||
Goodwill and intangible assets | (29) | |
Other/accrued liabilities | (118) | |
Deferred income tax liabilities | (147) | |
Net deferred income tax liabilities | $ (145) |
Income Taxes - Unrecognized Tax Benefits (Details) - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Reconciliation of Gross Unrecognized Tax Benefits [Roll Forward] | ||||
Gross UTB balance beginning | $ 272 | |||
Additions based on tax positions relating to the period | 57 | |||
Change to tax positions relating to prior periods | (143) | |||
Statute of limitations expirations | (12) | |||
Gross UTB balance ending | $ 272 | 174 | ||
Predecessor | ||||
Reconciliation of Gross Unrecognized Tax Benefits [Roll Forward] | ||||
Gross UTB balance beginning | 268 | $ 272 | $ 263 | $ 252 |
Additions based on tax positions relating to the period | 4 | 23 | 24 | |
Change to tax positions relating to prior periods | (10) | (3) | ||
Statute of limitations expirations | (8) | (10) | ||
Gross UTB balance ending | $ 272 | $ 268 | $ 263 |
Benefit Obligations - Future Payments (Details) $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Post-retirement Benefits | |
Defined Benefit Plan Disclosure [Line Items] | |
2019 | $ 20 |
2020 | 21 |
2021 | 21 |
2022 | 21 |
2023 | 21 |
2024-2028 | 109 |
Total | 213 |
U.S. | Pension Plan | |
Defined Benefit Plan Disclosure [Line Items] | |
2019 | 74 |
2020 | 73 |
2021 | 73 |
2022 | 73 |
2023 | 72 |
2024-2028 | 351 |
Total | 716 |
Non-US | Pension Plan | |
Defined Benefit Plan Disclosure [Line Items] | |
2019 | 24 |
2020 | 23 |
2021 | 24 |
2022 | 26 |
2023 | 25 |
2024-2028 | 139 |
Total | $ 261 |
Share-based Compensation - Valuations Assumptions (Details) - $ / shares |
10 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2016 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Dividend yield (percent) | 0.00% | |||
Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Exercise price (in dollars per share) | $ 19.46 | $ 21.6595 | $ 21.6595 | |
Volatility (percent) | 56.59% | 49.67% | ||
Term (years) | 6 years 7 months 24 days | 5 years 10 months 10 days | ||
Risk-free rate (percent) | 2.35% | 2.72% | ||
Dividend yield (percent) | 0.00% | 0.00% | ||
Predecessor | Stock options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Exercise price (in dollars per share) | $ 1.83 | |||
Volatility (percent) | 83.09% | |||
Term (years) | 5 years | |||
Risk-free rate (percent) | 1.53% | |||
Dividend yield (percent) | 0.00% | 0.00% | ||
Expiration period | 10 years |
Share-based Compensation - Nonvested Restricted Stock Units (Details) - Restricted stock units |
10 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2018
shares
|
Sep. 30, 2018
shares
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | 3,440,528 | 4,048,000 |
Vested (in shares) | (379,000) | |
Forfeited (in shares) | (427,000) | |
Non-vested shares, ending balance (in shares) | 3,243,000 | 3,243,000 |
Operating Segments - Narrative (Details) - segment |
12 Months Ended | ||
---|---|---|---|
Jul. 14, 2017 |
Jul. 13, 2017 |
Sep. 30, 2018 |
|
Segment Reporting [Abstract] | |||
Number of operating segments | 2 | 3 | 2 |
Accumulated Other Comprehensive (Loss) Income - Narrative (Details) - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Amounts reclassified to earnings | $ 0 | |||
Predecessor | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Amounts reclassified to earnings | $ 16 | $ 90 | $ 60 |
Commitments and Contingencies - General (Details) - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Loss Contingencies [Line Items] | ||||
Legal costs | $ 0 | |||
Predecessor | ||||
Loss Contingencies [Line Items] | ||||
Legal costs | $ 37 | $ 64 | $ 106 |
Commitments and Contingencies - Antitrust Litigation (Details) $ in Millions |
1 Months Ended | |||||
---|---|---|---|---|---|---|
Sep. 30, 2016
claim
|
Nov. 10, 2014
USD ($)
|
Mar. 27, 2014
USD ($)
claim
|
Sep. 30, 2016
USD ($)
|
Sep. 30, 2014
USD ($)
|
Feb. 22, 2016
USD ($)
|
|
Loss Contingencies [Line Items] | ||||||
Number of claims settled | claim | 2 | |||||
Antitrust Litigation | ||||||
Loss Contingencies [Line Items] | ||||||
Number of pending claims | claim | 8 | |||||
Amount of damages awarded | $ 20 | $ 20 | ||||
Amount of damages subject to automatic trebling | $ 60 | 60 | ||||
Amount of bond | 63 | $ 8 | ||||
Prejudgment interest | $ 3 | |||||
Attorneys' fees, expenses and costs | $ 71 | |||||
Loss contingency, damages sought | $ 61 | |||||
Number of claims reinstated | claim | 4 | |||||
Number of claims vacated | claim | 2 |
Commitments and Contingencies - Patent Infringement (Details) |
Jan. 31, 2017
claim
|
---|---|
Patent Infringement Case Filed by BlackBerry Limited | |
Loss Contingencies [Line Items] | |
Number of pending claims | 2 |
Commitments and Contingencies - Intellectual Property and Commercial Disputes (Details) $ in Thousands |
Jun. 12, 2018
USD ($)
|
---|---|
Misappropriations Claim | |
Loss Contingencies [Line Items] | |
Estimated litigation liability | $ 1,210 |
Fraud Claim | |
Loss Contingencies [Line Items] | |
Estimated litigation liability | $ 0 |
Commitments and Contingencies - Product Warranties (Details) - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Product Warranty Liability [Line Items] | |||||
Product warranties, maximum term | 2 years | ||||
Amount reserved for product warranties | $ 2 | $ 2 | |||
Product warranty expense | $ 2 | ||||
Predecessor | |||||
Product Warranty Liability [Line Items] | |||||
Amount reserved for product warranties | $ 2 | ||||
Product warranty expense | $ 1 | $ 5 | $ 8 |
Commitments and Contingencies - Letters of Credit and Guarantees (Details) $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Line of Credit Facility [Line Items] | |
Restricted cash | $ 4 |
Standby Letters of Credit | |
Line of Credit Facility [Line Items] | |
Letters of credit, maximum amount | $ 75 |
Commitments and Contingencies - Transactions with Nokia (Details) $ in Millions |
12 Months Ended |
---|---|
Sep. 30, 2018
USD ($)
| |
Indemnification Agreement | |
Loss Contingencies [Line Items] | |
Threshold amount of contribution and distribution agreement | $ 50 |
Commitments and Contingencies - Leases, Narrative (Details) - USD ($) $ in Millions |
2 Months Ended | 10 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Dec. 15, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Operating Leased Assets [Line Items] | ||||
Rental expense | $ 55 | |||
Sublease income | 4 | |||
Sublease receivable | 10 | |||
Accrued rent | $ 5 | |||
Predecessor | ||||
Operating Leased Assets [Line Items] | ||||
Rental expense | $ 16 | $ 84 | $ 95 | |
Sublease income | $ 1 | $ 11 | $ 10 |
Commitments and Contingencies - Future Minimum Lease Payments, Operating Leases (Details) $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 48 |
2020 | 40 |
2021 | 28 |
2022 | 24 |
2023 | 15 |
2024 and thereafter | 39 |
Future minimum lease payments | $ 194 |
Commitments and Contingencies - Future Minimum Lease Payments, Capital Leases (Details) (Details) $ in Millions |
Sep. 30, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 15 |
2020 | 10 |
2021 | 5 |
2022 | 1 |
Future minimum lease payments | 31 |
Less: Imputed interest | (2) |
Present value of net minimum lease payments | $ 29 |
Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 2 Months Ended | 3 Months Ended | 10 Months Ended | 12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Dec. 15, 2017 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Effect of Fourth Quarter Events [Line Items] | ||||||||||||
Revenue | $ 148 | $ 735 | $ 692 | $ 672 | $ 2,247 | |||||||
Gross profit | 78 | 390 | 352 | 323 | 1,143 | |||||||
Operating income (loss) | 2 | 11 | (49) | (89) | (125) | |||||||
Benefit from (provision for) income taxes | 246 | 311 | (20) | 9 | 546 | |||||||
Net income (loss) | 237 | 268 | (88) | (130) | $ 287 | |||||||
Net income (loss) attributable to common stockholders | $ 237 | $ 268 | $ (88) | $ (130) | ||||||||
Net income (loss) per common share - basic (in usd per share) | $ 2.16 | $ 2.44 | $ (0.80) | $ (1.18) | $ 2.61 | |||||||
Net income (loss) per common share - diluted (in usd per share) | $ 2.15 | $ 2.41 | $ (0.80) | $ (1.18) | $ 2.58 | |||||||
Predecessor | ||||||||||||
Effect of Fourth Quarter Events [Line Items] | ||||||||||||
Revenue | $ 604 | $ 790 | $ 803 | $ 804 | $ 875 | $ 3,272 | $ 3,702 | |||||
Gross profit | 362 | 496 | 493 | 484 | 535 | 2,008 | 2,258 | |||||
Operating income (loss) | 36 | 69 | (43) | 75 | 70 | 171 | (289) | |||||
Benefit from (provision for) income taxes | (459) | (6) | 6 | 19 | (3) | 16 | (11) | |||||
Net income (loss) | 2,977 | 27 | (98) | (8) | (103) | $ (182) | $ (730) | |||||
Net income (loss) attributable to common stockholders | $ 2,582 | $ 19 | $ (106) | $ (15) | $ (111) | |||||||
Net income (loss) per common share - basic (in usd per share) | $ 5.19 | $ 0.04 | $ (0.22) | $ (0.03) | $ (0.22) | $ (0.43) | $ (1.54) | |||||
Net income (loss) per common share - diluted (in usd per share) | $ 5.19 | $ 0.04 | $ (0.22) | $ (0.03) | $ (0.22) | $ (0.43) | $ (1.54) |
Subsequent Events (Details) |
Nov. 14, 2018
USD ($)
|
---|---|
Subsequent Event | |
Subsequent Event [Line Items] | |
Warrant repurchase program, authorized amount | $ 15,000,000 |
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