Item 2.05 Costs Associated with Exit or Disposal Activities
On September 5, 2022, Avaya Holdings Corp. (“Avaya” or the “Company”) authorized a reduction in force, which together with incremental cost reduction actions unrelated to the workforce reduction, will operationalize more than $250 million of annual cost reductions, allowing the Company to realize the higher end of the Company’s plans to achieve annual cost reductions of between $225 million to $250 million, as announced on July 28, 2022. The reduction in force better aligns the size of Avaya’s workforce with its operational strategy and cost structure.
The Company estimates that it will incur approximately $23 million to $26 million in pre-tax restructuring charges, all of which are expected to be in the form of cash-based expenditures and substantially all of which are expected to be related to employee severance and other termination benefits. The Company will amend this Current Report on Form 8-K to provide its estimate of aggregate costs incurred related to these actions once available, if materially different than the range noted herein.
The charges that the Company expects to incur in connection with this workforce reduction are estimates and subject to a number of assumptions, and actual results may differ materially. The foregoing estimated amounts do not include any non-cash charges associated with stock-based compensation. The Company expects to operationalize additional cost reduction actions that will include workforce reductions as well as other incremental cost reduction actions unrelated to workforce reductions. These actions will trigger incremental restructuring charges beyond those noted above as they are finalized. The Company expects to recognize substantially all of these pre-tax restructuring charges in the fourth quarter of fiscal 2022.
Cautionary Note Regarding Forward-Looking Statements
This report contains certain “forward-looking statements.” All statements other than statements of historical fact are “forward-looking” statements for purposes of the U.S. federal and state securities laws. These statements may be identified by the use of forward-looking terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “our vision,” “plan,” “potential,” “preliminary,” “predict,” “should,” “will,” or “would” or the negative thereof or other variations thereof or comparable terminology. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. These statements, including the Company’s outlook, do not include the potential impact of any business combinations, asset acquisitions, divestitures, strategic investments or other strategic transactions completed after the date hereof. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond its control. Risks and uncertainties that may cause these forward-looking statements to be inaccurate include, among others: the impact of the reduction in force; the impact and timing of any cost-savings measures; the termination or modification of current contracts which could impair attainment of our OneCloud ARR metric; the duration, severity and impact of the coronavirus pandemic (“COVID-19”); the impact of the Russia/Ukraine conflict on the global economy and our business, including impacts from related sanctions and export controls imposed by the U.S., UK and the EU on certain industries and Russian parties as a result of the conflict, as well as responses by the governments of Russia or other jurisdictions; and other factors discussed in the Company’s Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the SEC. These risks and uncertainties may cause the Company’s actual results, performance, liquidity or achievements to differ materially from any future results, performance, liquidity or achievements expressed or implied by these forward-looking statements. For a further list and description of such risks and uncertainties, please refer to the Company’s filings with the SEC that are available at www.sec.gov. The Company cautions you that the list of important factors included in the Company’s SEC filings may not contain all of the material factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this report may not in fact occur. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.