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What changed in TransDigm Group's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of TransDigm Group's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+344 added−353 removedSource: 10-K (2024-11-07) vs 10-K (2023-11-09)

Top changes in TransDigm Group's 2024 10-K

344 paragraphs added · 353 removed · 259 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

52 edited+28 added−25 removed38 unchanged
Biggest changeAcquisition and divestiture-related costs represent accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold; costs incurred to integrate acquired businesses and product lines into the Company’s operations, facility relocation costs and other acquisition-related costs; transaction-related costs for both acquisitions and divestitures comprising deal fees; legal, financial and tax diligence expenses and valuation costs that are required to be expensed as incurred and other acquisition accounting adjustments.
Biggest changeAcquisition transaction and integration-related expenses represent costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and valuation-related costs for acquisitions comprising deal fees, legal, financial and tax due diligence expenses; and amortization expense of inventory step-up recorded in connection with the purchase accounting of acquired businesses.
We compete on the basis of engineering, manufacturing and marketing high quality products, which we believe meet or exceed the performance and maintenance requirements of our customers, consistent and timely delivery, and superior customer service and support.
We compete on the basis of engineering, manufacturing and marketing high quality and reliable products, which we believe meet or exceed the performance and maintenance requirements of our customers, consistent and timely delivery, and superior customer service and support.
Each business unit manager is expected to grow the sales and profitability of the products for which he or she is responsible and to achieve the targeted annual level of bookings, net sales, new business and profitability for such products.
Each business unit manager is expected to grow the sales and profitability of the products and services for which he or she is responsible and to achieve the targeted annual level of bookings, net sales, new business and profitability for such products.
More specifically, focusing our businesses on our value-driven operating strategy of obtaining profitable new business, carefully controlling the cost structure and pricing our highly engineered value-added products to fairly reflect the value we provide and the resources required to do so has historically resulted in improvements in gross profit and income from operations over the long-term.
More specifically, focusing our businesses on our value-driven operating strategy of obtaining profitable new business, carefully controlling the cost structure via productivity and cost improvements and pricing our highly engineered value-added products to fairly reflect the value we provide and the resources required to do so has historically resulted in improvements in gross profit and income from operations over the long-term.
Major product offerings include engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation, lighting and control technology, parachutes and specialized flight, wind tunnel and jet engine testing services and equipment.
Major product offerings include engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation, lighting and control technology, parachutes, specialized flight, wind tunnel and jet engine testing services and equipment and complex testing and instrumentation solutions.
TransDigm University, MDP, various internship programs and informal mentoring demonstrates the Company’s ongoing commitment and initiatives towards accelerating the development of our future leaders.
TransDigm University, MDP, JMO, various internship programs and informal mentoring demonstrates the Company’s ongoing commitment and initiatives towards accelerating the development of our future leaders.
We also use a number of distributors to provide logistical support as well as serve as a primary customer contact with certain smaller accounts. Boeing Distribution Services, Inc. and Satair A/S (a subsidiary of Airbus S.A.S.) among others, are our major distributors. Manufacturing and Engineering We maintain approximately 100 manufacturing facilities.
We also use a number of distributors to provide logistical support as well as serve as a primary customer contact with certain smaller accounts. Boeing Distribution Services, Inc. and Satair A/S (a subsidiary of Airbus S.A.S.) among others, are our major distributors. Manufacturing and Engineering We maintain approximately 120 manufacturing facilities.
For financial information about our segments, refer to Note 17, “Segments,” in the notes to the consolidated financial statements included herein. Sales and Marketing Consistent with our overall strategy, our sales and marketing organization is structured to continually develop technical solutions that meet customer needs.
For financial information about our segments, refer to Note 15, “Segments,” in the notes to the consolidated financial statements included herein. Sales and Marketing Consistent with our overall strategy, our sales and marketing organization is structured to continually develop technical solutions that meet customer needs.
We continually strive to improve productivity and reduce costs, including rationalization of operations, developing improved control systems that allow for accurate accounting and reporting, investing in equipment, tooling, information systems (including cybersecurity) and implementing broad-based employee training programs.
We continually strive to improve productivity and reduce costs, including automation projects, rationalization of operations, developing improved control systems that allow for accurate accounting and reporting, investing in equipment, tooling, information systems (including cybersecurity) and implementing broad-based employee training programs.
Our business has been adversely affected, though not materially, and could continue to be adversely affected in fiscal 2024 by disruptions in our ability to timely obtain raw materials and components from our suppliers in the quantities we require or on favorable terms.
Our business has been adversely affected, though not materially, and could continue to be adversely affected in fiscal 2025 by disruptions in our ability to timely obtain raw materials and components from our suppliers in the quantities we require or on favorable terms.
The Company is currently involved in the investigation and remediation of a number of sites under applicable laws. For information regarding environmental accruals, refer to Note 15, “Commitments and Contingencies,” in the notes to the consolidated financial statements included herein.
The Company is currently involved in the investigation and remediation of a number of sites under applicable laws. For information regarding environmental accruals, refer to Note 13, “Commitments and Contingencies,” in the notes to the consolidated financial statements included herein.
Management believes that our manufacturing systems and equipment contribute to our ability to compete by permitting us to meet the rigorous tolerances and cost sensitive price structure of aircraft component customers. We attempt to differentiate ourselves from our competitors by producing uniquely engineered products with high quality and timely delivery.
Management believes that our manufacturing systems and equipment contribute to our ability to compete by permitting us to meet the rigorous tolerances and cost sensitive price structure of aircraft component customers. We attempt to differentiate ourselves from our competitors by producing highly engineered products with high quality, reliability and timely delivery.
In particular, we attempt to focus on products and programs that will lead to high-margin, repeatable sales in the aftermarket. We have structured our sales efforts along our major product offerings, assigning a business unit manager to certain products.
In particular, we attempt to focus on products and programs that will lead to high-margin, repeatable sales in the aftermarket. We have structured our sales efforts along our major product offerings, assigning a business unit manager that leads a business unit team.
The aggregate of engineering expense and research and development expense represents approximately 9% of our operating units’ aggregate costs, or approximately 4% of our consolidated net sales for fiscal year 2023. Our proprietary products, and particularly our new product initiatives, are designed by our engineers and are intended to serve the needs of the aircraft component industry.
The aggregate of engineering expense and research and development expense represents approximately 8% of our operating units’ aggregate costs, or approximately 4% of our consolidated net sales for fiscal year 2024. Our proprietary products, and particularly our new product initiatives, are designed by our engineers and are intended to serve the needs of the aircraft component industry.
Our top ten customers for fiscal year 2023 accounted for approximately 41% of our net sales. Products supplied to many of our customers are used on multiple platforms. None of our customers individually accounted for greater than 10% of our net sales for fiscal year 2023.
Our top ten customers for fiscal year 2024 accounted for approximately 42% of our net sales. Products supplied to many of our customers are used on multiple platforms. None of our customers individually accounted for greater than 10% of our net sales for fiscal year 2024.
We estimate that approximately 56% of our net sales in fiscal year 2023 were generated from the aftermarket, the vast majority of which come from the commercial and military aftermarkets.
We estimate that approximately 55% of our net sales in fiscal year 2024 were generated from the aftermarket, the vast majority of which come from the commercial and military aftermarkets.
The Company defines EBITDA As Defined as earnings before interest, taxes, depreciation and amortization plus certain non-operating items recorded as corporate expenses including non-cash compensation charges incurred in connection with the Company’s stock incentive or deferred compensation plans, restructuring costs related to the Company's cost reduction measures in response to the COVID-19 pandemic, foreign currency gains and losses, acquisition-integration costs, acquisition and divestiture transaction-related expenses, and refinancing costs.
The Company defines EBITDA As Defined as earnings before interest, taxes, depreciation and amortization plus certain non-operating items recorded as corporate expenses including non-cash compensation charges incurred in connection with the Company’s stock incentive or deferred compensation plans, foreign currency gains and losses, acquisition-integration costs, acquisition transaction-related expenses, and refinancing costs.
We typically choose not to compete for non-proprietary “build to print” business because it frequently offers lower margins than proprietary products. We believe that our products have strong brand names within the industry and that we have a reputation for high quality, reliability and strong customer support.
We attempt to differentiate ourselves based on engineering, service and manufacturing capabilities. We typically choose not to compete for non-proprietary “build to print” business because it frequently offers lower margins than proprietary products. We believe that our products have strong brand names within the industry and that we have a reputation for high quality, reliability and strong customer support.
“Risk Factors.” Human Capital Resources As of September 30, 2023, we had approximately 15,500 full-time, part-time and temporary employees. Approximately 18% of our full-time and part-time employees are represented by labor unions. Collective bargaining agreements between us and these labor unions expire at various dates up to September 2027. Talent Development We consider our employees to be our greatest asset.
“Risk Factors.” Human Capital Resources As of September 30, 2024, we had approximately 16,600 full-time, part-time and temporary employees. Approximately 17% of our full-time and part-time employees are represented by labor unions. Collective bargaining agreements between us and these labor unions expire at various dates up to January 2029. Talent Development We consider our employees to be our greatest asset.
Major product offerings include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, advanced sensor products, switches and relay panels, high performance hoists, winches and lifting devices, and cargo loading, handling and delivery systems.
Major product offerings include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, advanced sensor products, switches and relay panels, high performance hoists, winches and lifting devices, cargo loading, handling, delivery systems and electronic components used in the generation, amplification, transmission and reception of microwave signals.
Compliance with federal, state, local and foreign environmental laws during fiscal 2023 had no material impact on our capital expenditures, results of operations or cash flows.
Compliance with federal, state, local and foreign environmental laws during fiscal 2024 did not have a material impact on our capital expenditures, results of operations or cash flows.
Raw Materials We require the use of various raw materials in our manufacturing processes. We purchase a variety of manufactured component parts from various suppliers. We also purchase replacement parts, which are utilized in our various repair and overhaul operations. At times, we concentrate our orders among a few suppliers in order to strengthen our supplier relationships.
We also purchase replacement parts, which are utilized in our various repair and overhaul operations. At times, we concentrate our orders among a few suppliers in order to strengthen our supplier relationships. Most of our raw materials and component parts are generally available from multiple suppliers at competitive prices.
In addition, the FAA and other aviation authorities require that various maintenance routines be performed on aircraft components. We believe that we currently satisfy or exceed these maintenance standards in our repair and overhaul services. We also maintain several FAA-approved repair stations. In addition, our businesses are subject to many other laws and requirements typically applicable to manufacturers and exporters.
We believe that we currently satisfy or exceed these maintenance standards in our repair and overhaul services. We also maintain several FAA-approved repair stations. 4 Table of Contents In addition, our businesses are subject to many other laws and requirements typically applicable to manufacturers and exporters.
Benefits We are proud to offer attractive benefits packages that attract, retain, motivate and reward our talent, and we are committed to providing our employees and their families with programs that support their health and overall well-being. To assist employees with financial empowerment, we offer retirement savings plans.
Benefits We are proud to offer attractive benefits packages that attract, retain, motivate and reward our talent, and we are committed to providing our employees and their families with programs that support their health and overall well-being. To empower our employees financially, we provide retirement savings plans and opportunities for tax-free savings through flexible spending accounts and health savings accounts.
Access to programs such as these enhance our employees’ value to the Company, our customers and our communities. TransDigm’s equity compensation plans are designed to assist in attracting, retaining, motivating and rewarding key employees and directors, and promoting the creation of long-term value for our stockholders by closely aligning the interests of these individuals with those of our stockholders.
TransDigm’s equity compensation plans are designed to assist in attracting, retaining, motivating and rewarding key employees and directors, and promoting the creation of long-term value for our stockholders by closely aligning the interests of these individuals with those of our stockholders. Featuring performance-based stock options, these plans are integral to our equity-based compensation strategy.
Additionally, there are fluctuations in OEM and aftermarket product mix from quarter-to-quarter that may cause positive or negative variations in gross profit since commercial aftermarket net sales have historically produced higher gross profit margins than net sales to commercial OEMs. Again, in many instances these are timing events between quarters and must be balanced with macro aerospace industry indicators.
Additionally, there are fluctuations in OEM and aftermarket product mix from quarter-to-quarter that may cause positive or negative variations in gross profit since commercial aftermarket net sales have historically produced higher gross profit margins than net sales to commercial OEMs.
We understand the value in furthering the knowledge and education of our current employee base. In addition to formal and informal employee development programs within TransDigm and our operating units, employees can expand their careers by accessing tuition reimbursement programs. Some operating units also partner with local colleges to provide training courses to TransDigm employees.
In addition to formal and informal employee development programs within TransDigm and our operating units, employees can expand their careers by accessing tuition reimbursement programs. Some operating units also partner with local colleges to provide training courses to TransDigm employees. Access to programs such as these enhance our employees’ value to the Company, our customers and our communities.
ITEM 1. BUSINESS The Company TD Group, through its wholly-owned subsidiary, TransDigm Inc., is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Our business is well diversified due to the broad range of products we offer to our customers.
ITEM 1. BUSINESS The Company TD Group, through its wholly-owned subsidiary, TransDigm Inc., is a leading global designer, producer and supplier of highly engineered aircraft components that are critical to the safe and effective operation of nearly all commercial and military aircraft worldwide. Our products are represented in nearly every commercial and military aircraft in service today.
However, due to differences between the profitability of our products sold to OEM and aftermarket customers, variation in product mix can cause variation in gross profit. 5 Table of Contents Outside of the market disruptions caused by COVID-19, there are other factors (including customer inventory level adjustments, supply chain issues, unannounced changes in order patterns, strikes, facility shutdowns caused by fires, hurricanes, health crises or other incidents and mergers and acquisitions) that can cause short-term disruptions in our quarterly shipment patterns as compared to previous quarters and the same periods in prior years.
Factors including customer inventory level adjustments, supply chain issues, unannounced changes in order patterns, strikes, facility shutdowns caused by fires, hurricanes, health crises or other incidents and mergers and acquisitions can cause short-term disruptions in our quarterly shipment patterns as compared to previous quarters and the same periods in prior years.
We estimate that approximately 90% of our net sales for fiscal year 2023 were generated by proprietary products. Most of our products generate significant aftermarket revenue.
Our business is well diversified due to the broad range of products we offer to our customers. We estimate that approximately 90% of our net sales for fiscal year 2024 were generated by proprietary products. Most of our products generate significant aftermarket revenue.
Market Channels Commercial Aftermarket The key market factors in the commercial aftermarket include RPKs and the size and activity level of the worldwide fleet of aircraft and the percentage of the fleet that is in warranty.
Market Channels Commercial Aftermarket The key market factors in the commercial aftermarket include RPKs and the size and activity level of the worldwide fleet of aircraft and the percentage of the fleet that is in warranty. In fiscal 2024, the commercial aerospace industry continued to rebound from the adverse impacts of the COVID-19 pandemic.
Supporting our veterans as they enter the civilian workforce is incredibly important to us given their valuable wealth of knowledge and skills. Many of our U.S.-based operating units have specific programs or initiatives that provide career opportunities to veterans as they transition into the civilian workforce.
We recognize the invaluable knowledge and skills they bring to the workforce, and many of our U.S.-based operating units have specific programs or initiatives that provide career opportunities to veterans as they make the transition to civilian careers.
We are committed to high ethical standards and equal employment opportunities in all personnel actions without regard to race, color, religion, gender, national origin, citizenship status, age, marital status, gender identity or expression, sexual orientation, physical or mental disability, or veteran status. 7 Table of Contents As a company whose products and values are closely tied to supporting the U.S. military and its allies, we are dedicated to offering employment opportunities to U.S. military veterans.
We are committed to high ethical standards and equal employment opportunities in all personnel actions without regard to race, color, religion, gender, national origin, citizenship status, age, marital status, gender identity or expression, sexual orientation, physical or mental disability, or veteran status.
For a variety of reasons, the military spending outlook is very uncertain, though recent DOD budgets have trended upwards. Other Considerations Historically, our presence in both the commercial aerospace and military sectors of the aerospace industry has served to mitigate the impact on our business of any specific industry risk.
Other Considerations Historically, our presence in both the commercial aerospace and military sectors of the aerospace industry has served to mitigate the impact on our business of any specific industry risk.
We know that the tone is set from the top, and our commitment to diversity, equity and inclusion must be reflected within our leadership team as well as our Board of Directors. Beginning in fiscal 2022, TransDigm implemented unconscious bias training for our Board of Directors and management.
We strive for improvement each year. 7 Table of Contents We know that the tone is set from the top, and our commitment to diversity, equity and inclusion (“DEI”) must be reflected within our leadership team as well as our Board of Directors.
We leverage both formal and informal programs to identify, foster, and retain top talent at both the corporate and operating unit level. 6 Table of Contents We have established TransDigm University, in partnership with the University of Southern California Marshall School of Business, a formal mentoring and education program with a curated curriculum and established leadership serving as mentors.
We have established TransDigm University, in partnership with the University of Southern California Marshall School of Business, a formal mentoring and education program with a curated curriculum and established leadership serving as mentors.
Participants in the program learn and develop more advanced skills leading to higher contribution and satisfaction within their roles, while mentors enhance their leadership capabilities by helping others progress. This program helps identify top performers, improving employee performance and retention, increasing our organizational learning and supporting the promotion of our current employees.
Participants in the program learn and develop more advanced skills leading to higher contribution and satisfaction within their roles, while mentors enhance their leadership capabilities by helping others progress.
These procedures, together with other customer approved techniques for document, process and quality control, are used throughout our manufacturing facilities. 3 Table of Contents Customers We predominantly serve customers in the commercial, regional, business jet and general aviation aftermarket, which accounted for approximately 32% of our net sales for fiscal year 2023; the commercial aerospace OEM market, comprising large commercial transport manufacturers and regional and business jet manufacturers, which accounted for approximately 22% of our net sales for fiscal year 2023; and the defense market (which includes defense OEMs and aftermarket sales to the U.S. and friendly foreign governments), which accounted for approximately 39% of our net sales for fiscal year 2023.
Customers We predominantly serve customers in the commercial, regional, business jet and general aviation aftermarket, which accounted for approximately 31% of our net sales for fiscal year 2024; the commercial aerospace OEM market, comprising large commercial transport manufacturers and regional and business jet manufacturers, which accounted for approximately 27% of our net sales for fiscal year 2024; and the defense market (which includes defense OEMs and aftermarket sales to the U.S. and friendly foreign governments), which accounted for approximately 40% of our net sales for fiscal year 2024.
The disruption has resulted in delays in the availability of certain raw materials and increased raw material costs, among other costs such as labor.
Disruptions in the global supply chain has resulted in delays in the availability of certain raw materials and increased raw material costs, among other costs such as labor, though the disruptions somewhat improved in fiscal 2024, resulting in a higher stabilization of costs as fiscal 2024 progressed.
We, and the components we manufacture, are required to be certified by one or more of these entities or agencies, and, in many cases, by individual OEMs, in order to engineer and service parts and components used in specific aircraft models. 4 Table of Contents We must also satisfy the requirements of our customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations.
We, and the components we manufacture, are required to be certified by one or more of these entities or agencies, and, in many cases, by individual OEMs, in order to engineer and service parts and components used in specific aircraft models.
Our commercial transport OEM shipments and revenues generally run ahead of Boeing and Airbus aircraft delivery schedules. As a result, and consistent with prior years, our fiscal 2024 shipments will be a function of, among other things, the estimated 2024 and 2025 commercial aircraft production rates.
Consistent with prior years, our fiscal 2025 shipments will be a function of, among other things, the estimated 2025 and 2026 commercial aircraft production rates for Boeing and Airbus. In fiscal 2024, we experienced improved sales in the commercial OEM sector primarily due to increased aircraft production by Boeing and Airbus.
Products We primarily design, produce and supply highly engineered proprietary aerospace components with significant aftermarket content. We seek to develop highly customized products to solve specific needs for aircraft operators and manufacturers. We attempt to differentiate ourselves based on engineering, service and manufacturing capabilities.
Refer to Note 2, “Acquisitions,” in the notes to the consolidated financial statements included herein for information on the recent acquisitions. Products We primarily design, produce and supply highly engineered proprietary aerospace components with significant aftermarket content. We seek to develop highly customized products to solve specific needs for aircraft operators and manufacturers.
We use sophisticated equipment and procedures to comply with quality requirements, specifications and aviation authority and OEM requirements. We perform a variety of testing procedures as required by our customers, such as testing under different temperature, humidity and altitude levels, flammability testing, shock and vibration testing and X-ray fluorescent measurement.
We perform a variety of testing procedures as required by our customers, such as testing under different temperature, humidity and altitude levels, flammability testing, shock and vibration testing and X-ray fluorescent measurement. These procedures, together with other customer approved techniques for document, process and quality control, are used throughout our manufacturing facilities.
Each of our product offerings is composed of many individual products that are typically customized to meet the needs of a particular aircraft platform or customer. Segments The Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.
Our business is well diversified due to the broad range of products that we offer to our customers. Each of our product offerings is composed of many individual products that are typically customized to meet the needs of a particular aircraft platform or customer.
Department of Defense (“DOD”) procurement policy and the extent of global conflicts, such as the existing conflicts between Russia and Ukraine and Israel and Hamas. Also, delays in government spending outlays and government funding reprioritization, such as shifting funds to efforts to assist friendly countries in conflicts, provides for further unpredictability in the military spending outlook.
Also, delays in government spending outlays and government funding reprioritization, such as shifting funds to efforts to assist friendly countries in conflicts, provides for further unpredictability in the military spending outlook. For a variety of reasons, the military spending outlook is very uncertain, though recent DOD budgets have trended upwards.
We strive to create new products that ensure the safety of our customer’s endeavors on the land, sea and space. Defense Our military business fluctuates from year-to-year, and is dependent, to a degree, on government budget constraints, the timing of orders, macro and micro dynamics with respect to the U.S.
Defense Our military business fluctuates from year-to-year, and is dependent, to a degree, on government budget constraints, the timing of orders, macro and micro dynamics with respect to the U.S. Department of Defense (“DOD”) procurement policy and the extent of global conflicts, such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas.
We are committed to diversity at all levels of management and leadership, and our leadership team and Board of Directors are committed to improving diversity throughout the Company and fostering a more inclusive and open environment. Diversity, equity and inclusion make us stronger as a business so we can effectively serve all our stakeholders.
Total past and present MDP participants are approximately 34% gender and/or racially diverse and we continuously work to enhance the diversity of the program. We are committed to diversity at all levels of management and leadership, and our leadership team and Board of Directors are committed to improving diversity throughout the Company and fostering a more inclusive and open environment.
These proprietary designs must withstand the extraordinary conditions and stresses that will be endured by products during use and meet the rigorous demands of our customers’ tolerance and quality requirements. Refer to Note 3, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included herein with respect to the total costs of research and development.
Refer to Note 1, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included herein with respect to the total costs of research and development. 3 Table of Contents We use sophisticated equipment and procedures to comply with quality requirements, specifications and aviation authority and OEM requirements.
Our workforce includes talented people from many backgrounds. Discrimination is not tolerated at TransDigm.
Diversity, equity and inclusion make us stronger as a business so we can effectively serve all our stakeholders. Our workforce includes talented people from many backgrounds. Discrimination is not tolerated at TransDigm.
This informal mentorship achieves a number of goals, including accelerating the development of top performers, increasing organizational learning, and improving employee performance and retention. The executive team also commits substantial time to evaluating the bench strength of our leadership and working with our leadership to improve their performance.
This informal mentorship achieves a number of goals, including accelerating the development of top performers, fosters organizational learning, enhances employee performance and contributes to our retention efforts. The executive team dedicates substantial time to assessing our pool of future leaders, ensuring that we have the people and skills necessary to continue driving our business forward.
The program hires recent Master of Business Administration graduates who work for three eight-month periods at a selection of operating units. Program participants gain experience in developing, manufacturing, and selling aerospace components with the intent of becoming fully immersed in the operations of our business.
Program participants gain experience in developing, manufacturing, and selling aerospace components with the intent of becoming fully immersed in our business operations. Once the program is complete, MDP participants are better equipped with the knowledge and experience needed to excel as a manager at TransDigm.
The Company’s Management Development Program (“MDP”) identifies new talent and prepares them for success within our organization. The Company actively recruits for MDP candidates at colleges and universities across the U.S. to ensure we are reaching a large and diverse pool of candidates.
The Company actively recruits for MDP candidates at colleges and universities across the U.S. to help reach a large and diverse pool of candidates. The program hires recent Master of Business Administration graduates who work for three eight-month periods at selected TransDigm operating units.
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Our business is well diversified due to the broad range of products that we offer to our customers.
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We also maintain a selective acquisition strategy, concentrating on proprietary commercial aerospace component businesses with significant aftermarket content, where we see a clear path to value creation. Since the inception of our company in 1993, we have acquired 93 businesses and various product lines.
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Our major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, databus and power controls, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, advanced sensor products, switches and relay panels, thermal protection and insulation, lighting and control technology, parachutes, high performance hoists, winches and lifting devices, cargo loading, handling and delivery systems and specialized flight, wind tunnel and jet engine testing services and equipment.
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Our portfolio of products encompasses a vast array of essential components that play pivotal roles on commercial aerospace and defense platforms, as well as other products.
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COVID-19 restructuring costs represented actions primarily taken by the Company in fiscal 2021 and 2020 only, to reduce its workforce to align with customer demand, as well as incremental costs related to the pandemic that were not expected to recur once the pandemic subsided and were clearly separable from normal operations (e.g., additional cleaning and disinfecting of facilities by contractors above and beyond normal requirements, personal protective equipment).
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For example, TransDigm’s operating units make aircraft seatbelts and cockpit security systems that keep passengers and pilots safe; parachutes that protect soldiers, sailors and airmen; and space telescope equipment that helps the National Aeronautics and Space Administration (“NASA”) better understand the universe. Segments The Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.
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Non-aerospace net sales comprised approximately 7% of our net sales for fiscal year 2023. The commercial aerospace industry was significantly disrupted by the COVID-19 pandemic and its adverse impact on air travel worldwide. To a lesser extent, the defense aerospace market was adversely impacted by the COVID-19 pandemic, with this impact arising primarily from supply chain shortages.
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EBITDA As Defined is not a measurement of financial performance under U.S. GAAP.
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This led to the defense market comprising a greater percentage of our net sales in fiscal years 2023, 2022 and 2021 compared to pre-pandemic historical levels. In fiscal years 2015 through 2019, defense market net sales ranged from 29% to 37% of total net sales.
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Although the Company uses EBITDA As Defined to assess the performance of its business and for various other purposes, the use of this non-GAAP financial measure as an analytical tool has limitations, and it should not be considered in isolation or as a substitute for analysis of the Company’s results of operations as reported in accordance with U.S. GAAP.
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As the commercial aerospace industry continues to recover, defense market net sales continue to trend to account for a percentage of total net sales that is relatively in line with our historical levels prior to the COVID-19 pandemic.
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The teams are generally defined based on a grouping of related products with similar functionality, engineering designs and/or applications. The team consists of physically co-located, cross functional personnel who in turn focus their efforts entirely on the products and customers they serve.
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We began to see this expected trend in fiscal 2022 and this trend has continued in fiscal 2023, as defense sales represented 39% of net sales compared to 43% of net sales in fiscal 2022 and 50% of net sales in fiscal 2021.
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The team implements the three core value drivers of obtaining profitable new business, carefully controlling the cost structure via productivity and cost improvements and pricing our highly engineered value-added products to fairly reflect the value we provide. The business unit manager drives and directs the activities of the team based on customer needs.
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Throughout fiscal 2023, we continued to see a rebound in our commercial aerospace end markets from the COVID-19 pandemic and are encouraged by the progression of the commercial aerospace market recovery to date. Commercial air travel in domestic markets continues to lead the air traffic recovery with most domestic markets nearing, achieving or surpassing pre-pandemic air traffic levels.
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These proprietary designs must withstand the extraordinary conditions and stresses that will be endured by products during use and meet the rigorous demands of our customers’ tolerance and quality requirements. The business unit team, inclusive of operations, engineering, quality and sales, and the customer work together through the design and development of a product.
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The pace of the international recovery has been slower than the domestic recovery and remains below pre-pandemic levels. However, RPKs, which is a key metric used to measure air traffic demand, continues to make positive strides as most countries have removed international traveler restrictions and there is pent-up demand for long-haul travel.
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Non-aerospace net sales comprised approximately 2% of our net sales for fiscal year 2024.
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Current industry consensus indicates that worldwide RPKs will recover and surpass the calendar year 2019 (i.e., pre-pandemic levels) in calendar year 2024. Therefore, we expect the Company's commercial aerospace end markets to continue progressing into fiscal 2024 barring any significant disruptions or setbacks.
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We must also satisfy the requirements of our customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations. In addition, the FAA and other aviation authorities require that various maintenance routines be performed on aircraft components.
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Commercial OEM Market The commercial OEM market recovery is progressing with airlines returning to the commercial OEMs to place orders; however, the continuation of commercial OEM supply chain challenges impacting manufacturers such as Boeing and Airbus are slowing the pace of new aircraft manufacturing.
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Since February 2024, both domestic and international RPKs have surpassed 2019 (i.e., pre-pandemic) levels and have remained on a steady growth trend. The 2025 leading indicators or industry consensus suggest a continuation of current trends supported by continued RPK growth. Commercial OEM Market Our commercial transport OEM shipments and revenues generally run ahead of aircraft delivery schedules.
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In fiscal 2023, we experienced improved sales in the commercial OEM sector primarily due to increased production by Boeing and Airbus. Both Boeing and Airbus have disclosed further planned OEM production rate increases for calendar 2024. Our businesses continually seek to provide innovative solutions for our customers and others in the commercial aerospace and defense industries.
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Airline demand for new aircraft remains high, and the OEMs are working to increase aircraft production. However, aircraft production rates remain well below pre-pandemic levels as the struggles in the OEM supply chain persist. Due to these factors, it is difficult to accurately predict the OEM build rates for 2025.
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Our current initiatives include creating new products that are more environmentally friendly, creating new products that will help further improve commercial airlines’ efforts to keep passengers healthy and safe, such as touch-free aircraft lavatory suite products and air shields to better cabin air quality.
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Our businesses continually seek to provide innovative solutions for our customers and others in the commercial aerospace and defense industries. These include new touchless products and environmentally friendly products, such as the brushless starter generator and sustainable decorative laminates.
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Most of our raw materials and component parts are generally available from multiple suppliers at competitive prices. In fiscal 2023, the global supply chain continued to be disrupted by the pandemic, though the disruption has gradually improved.
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Defense sales in fiscal 2024 increased compared to fiscal 2023 at a higher rate than in recent fiscal years due to improving U.S. Government defense spend outlays. DOD budgets have trended upwards as geopolitical challenges such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas, and military modernization efforts are driving demand.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeA number of risks inherent in international operations could have a material adverse effect on our results of operations, including war, sanctions, global health crises, currency fluctuations, difficulties in staffing and managing multinational operations, general economic and political uncertainties and potential for social unrest in countries in which we operate, limitations on our ability to enforce legal rights and remedies, restrictions on the repatriation of funds, change in trade policies, tariff regulation, difficulties in obtaining export and import licenses and the risk of government financed competition. 13 Table of Contents Issues with the global supply chain can also rise due to some of the aforementioned risks, as well as the availability and cost of raw materials to suppliers, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import.
Biggest changeA number of risks inherent in international operations could have a material adverse effect on our results of operations, including war, sanctions, global health crises, currency fluctuations, difficulties in staffing and managing multinational operations, general economic and political uncertainties and potential for social unrest in countries in which we operate, limitations on our ability to enforce legal rights and remedies, restrictions on the repatriation of funds, change in trade policies, tariff regulation, difficulties in obtaining export and import licenses and the risk of government financed competition.
For example, in addition to the COVID-19 pandemic, past examples in which the airline industry has been negatively affected include downturns in the global economy, higher fuel prices, increased security concerns among airline customers following the events of September 11, 2001, the Severe Acute Respiratory Syndrome (“SARS”) epidemic, and conflicts abroad.
For example, in addition to the COVID-19 pandemic, past examples in which the airline industry has been negatively affected include downturns in the global economy, higher fuel prices, increased security concerns among airline customers following the events of September 11, 2001, the Severe Acute Respiratory Syndrome epidemic, and conflicts abroad.
Our senior secured credit facility and the indentures governing the Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on TD Group, TransDigm Inc. and its subsidiaries (in the case of the senior secured credit facility) and TransDigm Inc. and its subsidiaries (in the case of the indentures) and may limit their ability to engage in acts that may be in our long-term best interests.
Our senior secured credit facility and the indentures governing the Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on TD Group, TransDigm Inc. and its restricted subsidiaries (in the case of the senior secured credit facility) and TransDigm Inc. and its restricted subsidiaries (in the case of the indentures) and may limit their ability to engage in acts that may be in our long-term best interests.
In connection with our term loans, we entered into various interest rate swap, cap and collar agreements associated with Term SOFR. The Company's objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates.
In connection with our existing term loans, we entered into various interest rate swap, cap and collar agreements associated with Term SOFR. The Company's objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates.
In fact, we have experienced data security incidents, although these have not had a material impact on our financial results. Furthermore, the Company has access to classified, sensitive, confidential, or personal data or information that is subject to privacy and security laws, regulations, or other contractually-imposed controls.
In fact, we have experienced data security incidents, although these have not had a material impact on our financial results. Furthermore, the Company has access to classified, sensitive, confidential, proprietary, or personal data or information that is subject to privacy and security laws, regulations, or other contractually-imposed controls.
Despite our use of reasonable and appropriate technical security controls and monitoring, security breaches, theft, misplaced, lost or corrupted data, programming, or employee errors and/or malfeasance have led and could in the future lead to the compromise or improper use of such sensitive, confidential, or personal data or information.
Despite our use of reasonable and appropriate technical security controls and monitoring, security breaches, theft, misplaced, lost or corrupted data, programming, or employee errors and/or malfeasance have led and could in the future lead to the compromise or improper use of such sensitive, confidential, proprietary, or personal data or information.
If these systems, or any part of the systems, are damaged, intruded upon, attacked, shutdown or cease to function properly (whether by planned upgrades, force majeure, telecommunications failures, criminal acts, including hardware or software break-ins or extortion attempts, or viruses, or other cybersecurity incidents) and we suffer any resulting interruption in our ability to manage and operate our business or if our products are affected, our results of operations and financial condition could be materially adversely affected.
If these systems, or any part of the systems, are damaged, intruded upon, attacked, shutdown or cease to function properly (whether by planned upgrades, force majeure, telecommunications failures, criminal acts, including hardware or software break-ins, ransomware attacks or extortion attempts, or viruses, or other cybersecurity incidents) and we suffer any resulting interruption in our ability to manage and operate our business or if our products are affected, our results of operations and financial condition could be materially adversely affected.
In recent years, such as in fiscal 2021 and the second half of fiscal 2020, we experienced decreased sales across the commercial OEM sector driven primarily by the decrease in production by Boeing and Airbus related to reduced demand in the commercial aerospace industry from the COVID-19 pandemic, and airlines deferring or cancelling orders.
In certain years, such as in fiscal 2021 and the second half of fiscal 2020, we experienced decreased sales across the commercial OEM sector driven primarily by the decrease in production by Boeing and Airbus related to reduced demand in the commercial aerospace industry from the COVID-19 pandemic, and airlines deferring or cancelling orders.
The interpretation and application of data protection laws in the U.S. and globally, including but not limited to the General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act (the “CCPA”) and China’s Personal Information Protection Law (“PIPL”), are uncertain and evolving.
The interpretation and application of data protection laws in the U.S. and globally, including but not limited to the General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act (the “CCPA”), China’s Personal Information Protection Law (“PIPL”) and the EU AI Act, are uncertain and evolving.
Failure to comply with such government contracting requirements could result in civil and criminal penalties that could have a material adverse effect on the Company’s results of operations. 14 Table of Contents Our business may be adversely affected if we would lose our government or industry approvals or if more stringent government regulations are enacted or if industry oversight is increased.
Failure to comply with such government contracting requirements could result in civil and criminal penalties that could have a material adverse effect on the Company’s results of operations. Our business may be adversely affected if we would lose our government or industry approvals or if more stringent government regulations are enacted or if industry oversight is increased.
Further, although we have implemented internal controls and procedures designed to ensure compliance with the GDPR, CCPA, PIPL and other privacy-related laws, rules and regulations (collectively, the “Data Protection Laws”), there can be no assurance that our controls and procedures will enable us to be fully compliant with all Data Protection Laws.
Further, although we have implemented internal controls and procedures designed to ensure compliance with the GDPR, CCPA, PIPL, the EU AI Act and other privacy-related laws, rules and regulations (collectively, the “Data Protection Laws”), there can be no assurance that our controls and procedures will enable us to be fully compliant with all Data Protection Laws.
Because we strive to limit the volume of finished goods inventory, any work stoppage could materially and adversely affect our ability to provide products to our customers. In addition, our success depends in part on our ability to attract and motivate our senior management and key employees.
Because we strive to limit the volume of finished goods inventory, any work stoppage could materially and adversely affect our ability to provide products to our customers. 11 Table of Contents In addition, our success depends in part on our ability to attract and motivate our senior management and key employees.
The Company is currently involved in the investigation and remediation of a number of sites under applicable laws. Estimates of the Company’s environmental liabilities are based on current facts, laws, regulations and technology. These estimates take into consideration the Company’s prior experience and professional judgment of the Company’s environmental advisors.
The Company is currently involved in the investigation and remediation of a number of sites under applicable laws. 15 Table of Contents Estimates of the Company’s environmental liabilities are based on current facts, laws, regulations and technology. These estimates take into consideration the Company’s prior experience and professional judgment of the Company’s environmental advisors.
If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital. 10 Table of Contents To service our indebtedness, we will require a significant amount of cash.
If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital. To service our indebtedness, we will require a significant amount of cash.
Additional examples include future geopolitical or other worldwide events, such as war, terrorist acts, or additional worldwide infectious disease outbreaks. In addition, global market and economic conditions have been challenging due to turbulence in the U.S. and international markets and economies and have prolonged declines in business and consumer spending.
Additional examples include future geopolitical or other worldwide events, such as war, terrorist acts, or additional worldwide infectious disease outbreaks. 17 Table of Contents In addition, global market and economic conditions have been challenging due to turbulence in the U.S. and international markets and economies and have prolonged declines in business and consumer spending.
Although the conflicts have not, nor are expected to, have a direct material adverse impact on TransDigm's business, the implications of the Israel and Hamas and Russia and Ukraine conflicts in the short-term and long-term are difficult to predict at this time.
Although the conflicts have not, nor are expected to, have a direct material adverse impact on TransDigm's business, the implications of the Israel and Hamas and Russia and Ukraine conflicts in the short-term and long-term are difficult to predict.
The senior secured credit facility and indentures governing the Notes include covenants restricting, among other things, the ability of TD Group, TransDigm Inc. and its subsidiaries (in the case of the senior secured credit facility) and TransDigm Inc. and its subsidiaries (in the case of the indentures) to: • incur or guarantee additional indebtedness or issue preferred stock; • pay distributions on, redeem or repurchase our capital stock or redeem or repurchase our subordinated debt; • make investments; • sell assets; • enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us; • incur or allow to exist liens; • consolidate, merge or transfer all or substantially all of our assets; • engage in transactions with affiliates; • create unrestricted subsidiaries; and • engage in certain business activities.
The senior secured credit facility and indentures governing the Notes include covenants restricting, among other things, the ability to (subject, in each case, to certain important exceptions): • incur or guarantee additional indebtedness or issue preferred stock; • pay distributions on, redeem or repurchase our capital stock or redeem or repurchase our subordinated debt; • make investments; • sell assets; • enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us; • incur or allow to exist liens; • consolidate, merge or transfer all or substantially all of our assets; • engage in transactions with affiliates; • create unrestricted subsidiaries; and • engage in certain business activities.
In fiscal year 2023, no customer individually accounted for 10% or more of the Company’s net sales; however, our top ten customers for fiscal year 2023 accounted for approximately 41% of our net sales.
In fiscal year 2024, no customer individually accounted for 10% or more of the Company’s net sales; however, our top ten customers for fiscal year 2024 accounted for approximately 42% of our net sales.
Government may review our costs and performance, as well as our accounting and general business practices. Based on the results of such audits, the U.S. Government may adjust our contract-related costs and fees, including allocated indirect costs. In addition, under U.S.
On contracts for which the price is based on the reimbursement of costs, the U.S. Government may review our costs and performance, as well as our accounting and general business practices. Based on the results of such audits, the U.S. Government may adjust our contract-related costs and fees, including allocated indirect costs. In addition, under U.S.
As of September 30, 2023, approximately 90% of our total debt was fixed rate. For information about our interest rate swap, cap and collar agreements, refer to Note 21, “Derivatives and Hedging Instruments,” in the notes to the consolidated financial statements included herein.
As of September 30, 2024, approximately 77% of our total debt was fixed rate. For information about our interest rate swap, cap and collar agreements, refer to Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein.
Our net sales to foreign customers were approximately $2.3 billion for the fiscal year ended September 30, 2023.
Our net sales to foreign customers were approximately $2.9 billion for the fiscal year ended September 30, 2024.
We also have entered into multi-year, fixed-price contracts with some of our customers, pursuant to which we have agreed to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreases or increases in the costs of making these products. This risk is greater in a high inflationary environment, such as currently.
We also have entered into multi-year, fixed-price contracts with some of our customers, pursuant to which we have agreed to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreases or increases in the costs of making these products.
Our business is affected by the price and availability of the raw materials and component parts that we use to manufacture our components.
Our business is dependent on the availability of certain components and raw materials from suppliers. Our business is affected by the price and availability of the raw materials and component parts that we use to manufacture our components.
We believe that our ability to compete depends on high product performance, consistent high quality, short lead-time and timely delivery, competitive pricing, superior customer service and support and continued certification under customer quality requirements and assurance programs. We may have to adjust the prices of some of our products to stay competitive.
We believe that our ability to compete depends on high product performance, consistent high quality, short lead-time and timely delivery, competitive pricing, superior customer service and support and continued certification under customer quality requirements and assurance programs.
These items are, in turn, affected by general economic and geopolitical and other worldwide conditions. Our commercial business is directly affected by, among other factors, changes in RPKs, the size and age of the worldwide aircraft fleet, the percentage of the fleet that is out-of-warranty and changes in the profitability of the commercial airline industry.
Our commercial business is directly affected by, among other factors, changes in RPKs, the size and age of the worldwide aircraft fleet, the percentage of the fleet that is out-of-warranty and changes in the profitability of the commercial airline industry.
Companies engaged in supplying defense-related equipment and services to U.S. Government agencies, whether through direct contracts with the U.S. Government or as a subcontractor to customers contracting with the U.S. Government, are subject to business risks specific to the defense industry. These risks include the ability of the U.S.
We are subject to certain unique business risks as a result of supplying equipment and services to the U.S. Government. Companies engaged in supplying defense-related equipment and services to U.S. Government agencies, whether through direct contracts with the U.S. Government or as a subcontractor to customers contracting with the U.S.
There has been significant volatility in the market price and trading volume of equity securities, which is unrelated to the operating performance of the companies issuing the securities. These market fluctuations may negatively affect the market price of our common stock.
Our stock price may be volatile, and an investment in our common stock could suffer a decline in value. There has been significant volatility in the market price and trading volume of equity securities, which is unrelated to the operating performance of the companies issuing the securities. These market fluctuations may negatively affect the market price of our common stock.
Termination for convenience provisions provide only for recovery of costs incurred or committed, settlement expenses and profit on the work completed prior to termination. Most of our U.S. Government contracts are based on a firm-fixed price. On contracts for which the price is based on the reimbursement of costs, the U.S.
Most U.S. Government contracts can be terminated by the U.S. Government at its convenience without significant notice. Termination for convenience provisions provide only for recovery of costs incurred or committed, settlement expenses and profit on the work completed prior to termination. Most of our U.S. Government contracts are based on a firm-fixed price.
Such events may result in possible negative consequences, such as fines, ransom demands, penalties, failure to comply with laws governing sensitive data, negative publicity, loss of reputation, loss of intellectual property, loss of competitiveness or customers, increased security and compliance costs or other negative consequences.
Such events may result in possible negative consequences, such as disruption to our business operations, loss of proprietary information, ransom demands, loss of revenue, penalties, failure to comply with laws governing sensitive data, government enforcement, litigation or regulatory proceedings, negative publicity, loss of reputation, loss of intellectual property, loss of competitiveness or customers, increased security and compliance costs or other negative consequences.
Notwithstanding special cash dividends, of which the most recent declaration by the Company’s Board of Directors was on November 9, 2023 in the amount of $35.00 per outstanding share of common stock, which is payable on November 27, 2023 to stockholders of record as of November 20, 2023, we do not anticipate declaring regular cash dividends, whether quarterly or annual, on our common stock or any other equity security in the foreseeable future.
Notwithstanding special cash dividends, of which the most recent declarations by the Company’s Board of Directors was on September 19, 2024 in the amount of $75.00 per outstanding share of common stock, which was paid on October 18, 2024 to stockholders of record as of October 4, 2024, we do not anticipate declaring regular cash dividends, whether quarterly or annual, on our common stock or any other equity security in the foreseeable future.
We may not be able to fill new positions or vacancies created by expansion or turnover or attract and retain qualified personnel. We cannot be assured that we can continue to hire, train and retain qualified employees at current wage rates since we operate in a competitive labor market, and there are currently significant inflationary and other pressures on wages.
We cannot be assured that we can continue to hire, train and retain qualified employees at current wage rates since we operate in a competitive labor market, and there are currently significant inflationary and other pressures on wages.
Our ability to make payments on and to refinance our indebtedness, including the Notes, amounts borrowed under the senior secured credit facility, amounts due under our Securitization Facility, and to fund our operations, will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
Our ability to make payments on and to refinance our indebtedness, including the Notes, amounts borrowed under the senior secured credit facility, amounts due under our Securitization Facility, and to fund our operations, will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. 10 Table of Contents We cannot assure that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under the senior secured credit facility or otherwise in amounts sufficient to enable us to service our indebtedness, including the amounts borrowed under the senior secured credit facility, amounts borrowed under our Securitization Facility and the Notes, or to fund our other liquidity needs.
The successful integration of future acquisitions may also require substantial attention from our senior management and the management of the acquired business, which could decrease the time that they have to service, attract customers and develop new products and services or attend to other acquisition opportunities.
The successful integration of future acquisitions may also require substantial attention from our senior management and the management of the acquired business, which could decrease the time that they have to service, attract customers and develop new products and services or attend to other acquisition opportunities. 9 Table of Contents Our indebtedness could adversely affect our financial health and could harm our ability to react to changes to our business and prevent us from fulfilling our obligations under our indebtedness.
DOD budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy as a result of the presidential election or otherwise, the U.S.
DOD budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy as a result of the presidential election or otherwise, the U.S. Government’s budget deficits, spending priorities, the cost of sustaining the U.S. military presence internationally and possible political pressure to reduce U.S.
Factors such as increased energy costs, the availability of certain raw materials for aircraft manufacturers, embargoes on flights from certain airlines, sanctions on certain companies, and the stability of certain customers could impact the global economy and aviation sector. We are subject to certain unique business risks as a result of supplying equipment and services to the U.S. Government.
Factors such as increased energy costs, the availability of certain raw materials for aircraft manufacturers, embargoes on flights from certain airlines, sanctions on certain companies, and the stability of certain customers could impact the global economy and aviation sector.
We are continuing to evaluate short-, medium- and long-term risks related to climate change. We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist.
We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist.
Our business, therefore, could be adversely impacted by factors affecting our suppliers (such as the destruction of our suppliers’ facilities or their distribution infrastructure, a work stoppage or strike by our suppliers’ employees or the failure of our suppliers to provide materials of the requisite quality), or by increased costs of such raw materials or components if we were unable to pass along such price increases to our customers. 12 Table of Contents We are currently experiencing supply shortages and inflationary pressures for certain components and raw materials that are important to our manufacturing process, particularly electronic parts, due to global supply chain constraints.
Our business, therefore, could be adversely impacted by factors affecting our suppliers (such as the destruction of our suppliers’ facilities or their distribution infrastructure, a work stoppage or strike by our suppliers’ employees or the failure of our suppliers to provide materials of the requisite quality), or by increased costs of such raw materials or components if we were unable to pass along such price increases to our customers.
Future acquisitions could result in margin dilution and further likely result in the incurrence of additional debt and contingent liabilities and an increase in interest and amortization expenses or periodic impairment charges related to goodwill and other intangible assets as well as significant charges relating to integration costs. 9 Table of Contents Acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect.
Future acquisitions could result in margin dilution and further likely result in the incurrence of additional debt and contingent liabilities and an increase in interest and amortization expenses or periodic impairment charges related to goodwill and other intangible assets as well as significant charges relating to integration costs.
If new and more stringent government regulations are adopted or if industry oversight increases, we might incur significant expenses to comply with any new regulations or heightened industry oversight. In addition, if material authorizations or approvals were revoked or suspended, our business would be adversely affected.
If new and more stringent government regulations are adopted or if industry oversight increases, we might incur significant expenses to comply with any new regulations or heightened industry oversight.
Government to unilaterally: • suspend or debar from receiving new contracts based on alleged violations of procurement laws or regulations; • terminate existing contracts; • revoke required security clearances; and • audit contract-related costs and fees, including allocated indirect costs. Most U.S. Government contracts can be terminated by the U.S. Government at its convenience without significant notice.
Government, are subject to business risks specific to the defense industry. These risks include the ability of the U.S. Government to unilaterally: • suspend or debar us from receiving new contracts based on alleged violations of procurement laws or regulations; • terminate existing contracts; • revoke required security clearances; and • audit contract-related costs and fees, including allocated indirect costs.
Climate-related regulations designed to address climate change may result in additional compliance costs. Our operations and the products we sell are currently subject to rules limiting emissions and to other climate-related regulations in certain jurisdictions where we operate. The increased prevalence of global climate change concerns may result in new regulations that may negatively impact us, our suppliers and customers.
We may have to adjust the prices of some of our products to stay competitive. 12 Table of Contents Climate-related regulations designed to address climate change may result in additional compliance costs. Our operations and the products we sell are currently subject to rules limiting emissions and to other climate-related regulations in certain jurisdictions where we operate.
Any failure or perceived failure, whether or not valid, to pursue or fulfill our ESG goals, targets and objectives or to satisfy various ESG reporting standards within the timelines we announce, or at all, could increase the risk of litigation.
Any failure or perceived failure, whether or not valid, to pursue or fulfill our ESG goals, targets and objectives or to satisfy various ESG reporting standards within the timelines we announce, or at all, could increase the risk of litigation. 16 Table of Contents Risks Related to Financial Matters We have recorded a significant amount of intangible assets, which may never generate the returns we expect.
As of September 30, 2023, we had approximately $759 million of unused commitments under our revolving credit facility and $100 million of additional borrowing capacity under our trade receivable securitization facility (the “Securitization Facility”).
In addition, we may be able to incur substantial additional indebtedness in the future. As of September 30, 2024, we had approximately $843 million of unused commitments under our revolving credit facility and $163 million of additional borrowing capacity under our trade receivable securitization facility (the “Securitization Facility”).
In addition to the aviation approvals, we are at times required to obtain approval from U.S. Government agencies and similar agencies elsewhere in the world to export our products.
In addition, if material authorizations or approvals were revoked or suspended, our business would be adversely affected. 14 Table of Contents In addition to the aviation approvals, we are at times required to obtain approval from U.S. Government agencies and similar agencies elsewhere in the world to export our products.
Regulatory and quality challenges, such as with Boeing’s 737 MAX aircraft and 787 aircraft, also has had an adverse impact. Downturns adversely affect our results of operations, financial position and cash flows. Our business is dependent on the availability of certain components and raw materials from suppliers.
Regulatory and quality challenges, such as with Boeing’s 737 MAX aircraft and 787 aircraft, also has had an adverse impact. Significant labor disagreements and supply chain issues may also negatively impact the production of aircraft. Downturns adversely affect our results of operations, financial position and cash flows.
If a crash were to be caused by one of our products, or if we were to otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers may be materially adversely affected. 16 Table of Contents Our ability to achieve our environmental, social and governance goals are subject to risks, many of which are outside of our control, and our reputation and brands could be harmed if we fail to meet such goals.
If a crash were to be caused by one of our products, or if we were to otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers may be materially adversely affected.
Identifiable intangible assets, which primarily include trademarks, trade names, customer relationships, and technology, were approximately $2.7 billion at September 30, 2023, representing approximately 14% of our total assets. Goodwill recognized in accounting for mergers and acquisitions was approximately $9.0 billion at September 30, 2023, representing approximately 45% of our total assets.
Mergers and acquisitions have resulted in significant increases in identifiable intangible assets and goodwill. Identifiable intangible assets, which primarily include trademarks, trade names, customer relationships, and technology, were approximately $3.4 billion at September 30, 2024, representing approximately 13% of our total assets.
We intend to pursue acquisitions that we believe will present opportunities consistent with our overall business strategy. However, we may not be able to find suitable acquisition candidates to purchase or may be unable to acquire desired businesses or assets on economically acceptable terms or may be unable to receive necessary regulatory approvals or support.
However, we may not be able to find suitable acquisition candidates to purchase or may be unable to acquire desired businesses or assets on economically acceptable terms or may be unable to receive necessary regulatory approvals or support. In addition, we may not be able to raise the capital necessary to fund future acquisitions.
Any failure to comply with Data Protection Laws could result in significant penalties, fines, legal challenges and reputational harm.
The rapid evolution and increased adoption of artificial intelligence (“AI”) technologies may intensify these risks. Any failure to comply with Data Protection Laws could result in significant penalties, fines, legal challenges and reputational harm.
A significant decline in U.S. military expenditures could result in a reduction in the amount of our products sold to the various agencies and buying organizations of the U.S. Government. Our stock price may be volatile, and an investment in our common stock could suffer a decline in value.
Government military spending, each of which could cause the DOD budget to remain unchanged or to decline. A significant decline in U.S. military expenditures could result in a reduction in the amount of our products sold to the various agencies and buying organizations of the U.S. Government.
Further, the amount of insurance coverage that we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity incident.
Further, the amount of insurance coverage that we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity incident. Depending on the nature and magnitude of these events, they may have an adverse impact on our results of operations or financial condition.
Bribery Act and similar local anti-bribery laws, which generally prohibit companies and their employees, agents and contractors from making improper payments for the purpose of obtaining or retaining business. Failure to comply with these laws could subject the Company to civil and criminal penalties that could materially adversely affect the Company’s results of operations, financial position and cash flows.
Bribery Act and similar local anti-bribery laws, which generally prohibit companies and their employees, agents and contractors from making improper payments for the purpose of obtaining or retaining business.
As of September 30, 2023, among the jurisdictions where the Company operates, only the U.K. has enacted legislation adopting the Pillar Two Rules, effective in fiscal 2025. In addition, the amount of income taxes paid by the Company is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities.
In addition, the amount of income taxes paid by the Company is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities.
If, as a result of their assessment of our ESG practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in us.
If, as a result of their assessment of our ESG practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in us. As the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand, we may have to undertake additional costs to control, assess and report on ESG metrics.
We are monitoring the ongoing conflicts between Israel and Hamas and between Russia and Ukraine and the related export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the U.K., the European Union and others.
Failure to comply with these laws could subject the Company to civil and criminal penalties that could materially adversely affect the Company’s results of operations, financial position and cash flows. 13 Table of Contents We continue to monitor the ongoing conflicts between Israel and Hamas and between Russia and Ukraine and the related export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the U.K., the European Union and others.
Depending on the nature and magnitude of these events, they may have an adverse impact on our results of operations or financial condition. 15 Table of Contents Risks Related to Legal and Regulatory Matters We could incur substantial costs as a result of violations of or liabilities under environmental laws and regulations.
Risks Related to Legal and Regulatory Matters We could incur substantial costs as a result of violations of or liabilities under environmental laws and regulations.
We regularly engage in discussions with respect to potential acquisition and investment opportunities. If we consummate an acquisition, our capitalization and results of operations may change significantly.
Because we may actively pursue a number of opportunities simultaneously, we may encounter unforeseen expenses, complications and delays, including regulatory complications or difficulties in employing sufficient staff and maintaining operational and management oversight. We regularly engage in discussions with respect to potential acquisition and investment opportunities. If we consummate an acquisition, our capitalization and results of operations may change significantly.
All of our debt under the senior secured credit facility, which includes $6.2 billion in term loans and a revolving credit facility of $810 million, and the Securitization Facility bears interest at variable rates primarily based on the Term Secured Overnight Financing Rate (“Term SOFR”).
All of the term loans under our term loan facility and the borrowings under our revolving credit facility and the Securitization Facility bear interest at variable rates primarily based on the Term Secured Overnight Financing Rate (“Term SOFR”). Accordingly, if Term SOFR or other variable interest rates increase, our debt service expense will also increase.
As of September 30, 2023, our total indebtedness, excluding approximately $51 million in letters of credit outstanding, approximately $193 million of finance lease obligation liabilities and approximately $21 million of government refundable advances, was approximately $20 billion, which was approximately 111% of our total book capitalization. In addition, we may be able to incur substantial additional indebtedness in the future.
We have a significant amount of indebtedness. As of September 30, 2024, our total indebtedness, excluding approximately $67 million in letters of credit outstanding, approximately $262 million of finance lease obligation liabilities and approximately $17 million of government refundable advances, was approximately $24 billion, which was approximately 134% of our total book capitalization.
Therefore, shareholders should not rely on regular quarterly or annual dividend income from shares of our common stock and should not rely on special dividends with any regularity or at all. 17 Table of Contents General Risks Our commercial business is sensitive to the number of flight hours that our customers’ planes spend aloft, the size and age of the worldwide aircraft fleet and our customers’ profitability.
Therefore, shareholders should not rely on regular quarterly or annual dividend income from shares of our common stock and should not rely on special dividends with any regularity or at all.
Sometimes we accept a fixed-price contract for a product that we have not yet produced, and this increases the risk of cost overruns or delays in the completion of the design and manufacturing of the product. Most of our contracts do not permit us to recover increases in raw material prices, taxes or labor costs. We intend to pursue acquisitions.
This risk is greater in a high inflationary environment, such as occurred in fiscal 2023 and fiscal 2024. Sometimes we accept a fixed-price contract for a product that we have not yet produced, and this increases the risk of cost overruns or delays in the completion of the design and manufacturing of the product.
Our business may be adversely affected if we cannot consummate acquisitions on satisfactory terms, or if we cannot effectively integrate acquired operations. A significant portion of our growth has occurred through acquisitions. Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions.
Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions. We intend to pursue acquisitions that we believe will present opportunities consistent with our overall business strategy.
If the debt under the senior secured credit facility or the Notes were to be accelerated, we cannot assure that our assets would be sufficient to repay in full our debt. 11 Table of Contents We are dependent on our executive officers, senior management team and highly trained employees and any work stoppage, difficulty hiring similar employees, or ineffective succession planning could adversely affect our business.
If the debt under the senior secured credit facility or the Notes were to be accelerated, we cannot assure that our assets would be sufficient to repay in full the Notes and other debt.
Because our products are complicated and highly engineered, we depend on an educated and trained workforce. Historically, there has been substantial competition for skilled personnel in the aerospace and defense industry, and we could be adversely affected by a shortage of skilled employees.
Historically, there has been substantial competition for skilled personnel in the aerospace and defense industry, and we could be adversely affected by a shortage of skilled employees. We may not be able to fill new positions or vacancies created by expansion or turnover or attract and retain qualified personnel.
In addition, we may not be able to successfully integrate any business we acquire into our existing business. The successful integration of new businesses, with the most significant recent acquisition being the Calspan Corporation (“Calspan”) acquisition in the third quarter of fiscal 2023, depends on our ability to manage these new businesses and cut excess costs.
The successful integration of new businesses depends on our ability to manage these new businesses and cut excess costs.
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In addition, we may not be able to raise the capital necessary to fund future acquisitions. Because we may actively pursue a number of opportunities simultaneously, we may encounter unforeseen expenses, complications and delays, including regulatory complications or difficulties in employing sufficient staff and maintaining operational and management oversight.
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Most of our contracts do not permit us to recover increases in raw material prices, taxes or labor costs. We intend to pursue acquisitions. Our business may be adversely affected if we cannot consummate acquisitions on satisfactory terms, or if we cannot effectively integrate acquired operations. A significant portion of our growth has occurred through acquisitions.
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Our indebtedness could adversely affect our financial health and could harm our ability to react to changes to our business and prevent us from fulfilling our obligations under our indebtedness. We have a significant amount of indebtedness.
Added
Acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect. In addition, we may not be able to successfully integrate any business we acquire into our existing business.
Removed
Accordingly, if Term SOFR or other variable interest rates increase, our debt service expense will also increase.
Added
The $163 million available under the Securitization Facility was subsequently drawn in October 2024.
Removed
We cannot assure that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under the senior secured credit facility or otherwise in amounts sufficient to enable us to service our indebtedness, including the amounts borrowed under the senior secured credit facility, amounts borrowed under our Securitization Facility and the Notes, or to fund our other liquidity needs.
Added
We are dependent on our executive officers, senior management team and highly trained employees and any work stoppage, difficulty hiring similar employees, or ineffective succession planning could adversely affect our business. Because our products are complicated and highly engineered, we depend on an educated and trained workforce.
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Expected growth in the global economy may exacerbate these pressures on us and our suppliers, and we expect these supply chain challenges and cost impacts to continue for the foreseeable future.
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Changes to tariff and import and export regulations in the United States and abroad may also negatively impact the availability and pricing of raw materials.
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As the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand, including the SEC’s recently proposed disclosure requirements regarding, among other matters, greenhouse gas emissions, we may have to undertake additional costs to control, assess and report on ESG metrics.
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The increased prevalence of global climate change concerns may result in new regulations that may negatively impact us, our suppliers and customers. We are continuing to evaluate short-, medium- and long-term risks related to climate change.
Removed
Risks Related to Financial Matters We have recorded a significant amount of intangible assets, which may never generate the returns we expect. Mergers and acquisitions have resulted in significant increases in identifiable intangible assets and goodwill.
Added
Issues with the global supply chain can also rise due to some of the aforementioned risks, as well as the availability and cost of raw materials to suppliers, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import.
Removed
Government’s budget deficits, spending priorities (e.g., shifting funds to assist Ukraine in the Russia and Ukraine conflict or to assist Israel), the cost of sustaining the U.S. military presence internationally and possible political pressure to reduce U.S. Government military spending, each of which could cause the DOD budget to remain unchanged or to decline.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES TransDigm’s principal owned properties (defined as greater than 20,000 square feet or related to a principal operation) as of September 30, 2023 are as follows: Location Reporting Segment Square Footage Cheektowaga, NY Airframe 656,200 Brea, CA (1) Airframe 315,000 Stillington, United Kingdom Airframe 274,800 Montreal, Canada Airframe 271,700 Miesbach, Germany Power & Control 242,000 Liberty, SC (1) Power & Control 219,000 Waco, TX Power & Control 218,800 Liverpool, NY Power & Control 197,100 Ingolstadt, Germany Airframe 191,900 Kent, OH (1) Airframe 185,000 Bridport, United Kingdom Airframe 174,700 Lillington, NC Power & Control 162,400 Union Gap, WA (1) Airframe 144,400 Coachella, CA (1) Power & Control 140,000 Phoenix, AZ Airframe 138,700 Paks, Hungary Airframe 137,800 Los Angeles, CA Power & Control 131,000 Bohemia NY (1) Power & Control 124,000 Buena Park, CA Power & Control 115,000 Llangeinor, United Kingdom Airframe 112,300 Bourges, France Power & Control 109,400 Westbury, NY Power & Control 106,800 Kent, WA (1) Airframe 100,000 Painesville, OH Power & Control 94,200 Newport News, VA Airframe 93,000 Valencia, CA (1) Airframe 88,400 Letchworth, United Kingdom Airframe 88,200 Placentia, CA Airframe 86,600 Addison, IL (1) Power & Control 83,300 Niagara Falls, NY Airframe 82,500 Sarralbe, France Power & Control 77,900 Niort, France Power & Control 69,000 Prescott, AZ Airframe 66,200 Clearwater, FL Power & Control 64,200 South Euclid, OH Power & Control 60,000 Wichita, KS Power & Control 57,000 Branford, CT Airframe 52,000 Ontario, Canada Airframe 50,000 Avenel, NJ Power & Control 48,500 Rancho Cucamonga, CA (1) Power & Control 47,000 Pennsauken, NJ Airframe 38,000 Ryde, United Kingdom Power & Control 33,200 Rancho Cucamonga, CA Airframe 32,700 Plymouth, MN Airframe 25,000 Melaka, Malaysia Power & Control 24,800 Cheveley, United Kingdom Airframe 24,000 Broussard, LA Airframe 22,000 Deerfield Beach, FL Non-aviation 20,000 (1) Subject to mortgage liens under our senior secured credit facility, our 6.25% secured notes due March 15, 2026 (“2026 Secured Notes”), our 6.75% secured notes due August 15, 2028 (“2028 Secured Notes”) and our 6.875% secured notes due December 15, 2030 (“2030 Secured Notes”). 19 Table of Contents TransDigm’s principal leased properties (defined as greater than 20,000 square feet or related to a principal operation) as of September 30, 2023 are as follows: Location Reporting Segment Square Footage Everett, WA Airframe 339,300 East Camden, AR Power & Control 276,000 Whippany, NJ Power & Control 230,500 Nittambuwa, Sri Lanka Airframe 168,000 Santa Ana, CA Airframe 159,200 Dayton, NV Airframe 144,000 Tijuana, Mexico Airframe 141,000 Holmestrand, Norway Airframe 139,500 Marlow, United Kingdom Airframe 116,100 Tijuana, Mexico Power & Control 112,800 Melbourne, FL Power & Control 107,000 Farnborough, United Kingdom Power & Control 103,400 Goldsboro, NC Power & Control 101,000 Fullerton, CA Airframe 100,000 Kunshan, China Airframe 99,500 Sylmar, CA Airframe 93,000 Elkhart, IN Non-aviation 91,500 Carson City, NV Airframe 90,100 Kunshan, China Non-aviation 86,100 Miesbach, Germany Power & Control 85,600 Davis Junction, IL Airframe 84,500 Camarillo, CA Power & Control 70,000 Matamoros, Mexico Power & Control 69,200 Gloucestor, United Kingdom Airframe 69,100 St.
Biggest changePROPERTIES TransDigm’s principal owned properties (defined as greater than 30,000 square feet or related to a principal operation) as of September 30, 2024 are as follows: Location Reporting Segment Square Footage Cheektowaga, NY Airframe 656,200 Brea, CA Airframe 315,000 Stillington, United Kingdom Airframe 274,800 Montreal, Quebec, Canada Airframe 271,700 Palo Alto, CA Power & Control 257,000 Miesbach, Germany Power & Control 242,000 Liberty, SC Power & Control 219,000 Waco, TX Power & Control 218,800 Ingolstadt, Germany Airframe 191,900 Kent, OH Airframe 185,000 Bridport, United Kingdom Airframe 174,700 Beverly, MA Power & Control 163,000 Lillington, NC Power & Control 162,400 Union Gap, WA Airframe 144,400 Coachella, CA Power & Control 140,000 Phoenix, AZ Airframe 138,700 Paks, Hungary Airframe 137,800 Los Angeles, CA Power & Control 131,000 Liverpool, NY Power & Control 128,900 Bohemia NY Power & Control 124,000 Buena Park, CA Power & Control 115,000 Llangeinor, United Kingdom Airframe 112,300 Bourges, France Power & Control 109,400 Westbury, NY Power & Control 106,800 Kent, WA Airframe 100,000 Painesville, OH Power & Control 94,200 Valencia, CA Airframe 88,400 Letchworth, United Kingdom Airframe 88,200 Placentia, CA Airframe 86,600 Addison, IL Power & Control 83,300 Niagara Falls, NY Airframe 82,500 Sarralbe, France Power & Control 77,900 Niort, France Power & Control 69,000 Prescott, AZ Airframe 66,200 Clearwater, FL Power & Control 64,200 South Euclid, OH Power & Control 60,000 Woodland, CA Power & Control 60,000 Wichita, KS Power & Control 57,000 Branford, CT Airframe 52,000 Hawkesbury, Ontario, Canada Airframe 50,000 Avenel, NJ Power & Control 48,500 Rancho Cucamonga, CA Power & Control 47,000 Pennsauken, NJ Airframe 38,000 Ryde, United Kingdom Power & Control 33,200 Rancho Cucamonga, CA Airframe 32,700 20 Table of Contents TransDigm’s principal leased properties (defined as greater than 30,000 square feet or related to a principal operation) as of September 30, 2024 are as follows: Location Reporting Segment Square Footage Everett, WA Airframe 339,300 East Camden, AR Power & Control 276,000 Whippany, NJ Power & Control 230,500 Portsmouth, United Kingdom Airframe 193,500 Nittambuwa, Sri Lanka Airframe 168,000 Santa Ana, CA Airframe 159,200 Tijuana, Mexico Airframe 141,000 Holmestrand, Norway Airframe 139,500 Marlow, United Kingdom Airframe 116,100 Tijuana, Mexico Power & Control 112,800 Melbourne, FL Power & Control 107,000 Farnborough, United Kingdom Power & Control 103,400 Goldsboro, NC Power & Control 101,000 Fullerton, CA Airframe 100,000 Kunshan, China Airframe 98,500 Bethpage, NY Power & Control 98,000 Sylmar, CA Airframe 93,000 Elkhart, IN Non-aviation 91,500 Carson City, NV Airframe 90,100 Kunshan, China Non-aviation 86,100 Davis Junction, IL Airframe 84,500 Middlesex, United Kingdom Power & Control 84,000 Miesbach, Germany Power & Control 83,600 Livermore, CA Airframe 73,200 Camarillo, CA Power & Control 70,000 Matamoros, Mexico Power & Control 69,200 Gloucestor, United Kingdom Airframe 69,100 Delta, British Columbia, Canada Airframe 59,300 Chihuahua, Mexico Airframe 55,000 Portland, OR Airframe 50,000 St.
TransDigm also leases certain of its other non-material facilities. Management believes that our machinery, plants and offices are in satisfactory operating condition and that it will have sufficient capacity to meet foreseeable future needs without incurring significant additional capital expenditures. 20 Table of Contents
TransDigm also leases certain of its other non-material facilities. Management believes that our machinery, plants and offices are in satisfactory operating condition and that it will have sufficient capacity to meet foreseeable future needs without incurring significant additional capital expenditures. 21 Table of Contents
Paul, MN Airframe 66,600 Chihuahua, Mexico Airframe 55,000 Portland, OR Airframe 50,000 Zunyi, China Power & Control 45,600 Sugar Grove, IL Airframe 45,000 Tempe, AZ Power & Control 40,200 Anaheim, CA Airframe 39,000 Collegeville, PA Airframe 37,000 Chongqing, China Airframe 36,300 Rancho Santa Margarita, CA Airframe 35,200 Joensuu, Finland Airframe 32,300 Eloy, AZ Airframe 28,100 Ashford, United Kingdom Power & Control 28,000 Nogales, Mexico Airframe 27,000 Niagara Falls, NY Airframe 24,200 Redhill, United Kingdom Airframe 22,700 Ravenna, OH Airframe 22,500 Pennsauken, NJ Airframe 20,500 Our Cleveland, OH and Pasadena, CA corporate facilities house our principal executive offices, and we currently lease approximately 20,100 square feet and 5,300 square feet, respectively, for those purposes.
Paul, MN Airframe 49,600 Zunyi, China Power & Control 45,600 Sugar Grove, IL Airframe 45,000 Palo Alto, CA Power & Control 44,300 Palm Bay, FL Power & Control 42,000 Tempe, AZ Power & Control 40,200 Anaheim, CA Airframe 39,000 Collegeville, PA Airframe 37,000 Chongqing, China Airframe 36,300 Rancho Santa Margarita, CA Airframe 35,200 Los Angeles, CA Airframe 33,200 Joensuu, Finland Airframe 32,300 Our Cleveland, OH and Newport Beach, CA corporate facilities house our principal executive offices, and we currently lease approximately 26,000 square feet and 5,800 square feet, respectively, for those purposes.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWhile the Company is currently involved in certain legal proceedings, it believes the results of these proceedings will not have a material adverse effect on its financial condition, results of operations, or cash flows. Information with respect to our legal proceedings is contained in Note 15, “Commitments and Contingencies,” within the notes to the consolidated financial statements included herein.
Biggest changeWhile the Company is currently involved in certain legal proceedings, it believes the results of these proceedings will not have a material adverse effect on its financial condition, results of operations, or cash flows. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe record date and payment date for the special dividend is November 20, 2023 and November 27, 2023, respectively. The total estimated cash payment, to be funded by existing cash on hand, related to the special dividend and dividend equivalent payments in the first quarter of fiscal 2024 is approximately $2,020 million.
Biggest changeDividends On November 27, 2023, the Company paid a special cash dividend of $35.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans. The total cash payment, funded by existing cash on hand, related to the special dividend and dividend equivalent payments was approximately $2,020 million.
The repurchased shares of common stock are classified as treasury stock in the statement of changes in stockholders' deficit. As of September 30, 2023, $1,288 million remains available for repurchase under the $2,200 million stock repurchase program.
The repurchased shares of common stock are classified as treasury stock in the statement of changes in stockholders' deficit. As of September 30, 2024, $1,288 million remains available for repurchase under the $2,200 million stock repurchase program.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on September 30, 2018, and its relative performance is tracked through September 30, 2023. 21 Table of Contents The following performance graph and related information shall not be deemed “soliciting material” nor to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent we specifically incorporate it by reference into such filing.
An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on September 30, 2019, and its relative performance is tracked through September 30, 2024. 22 Table of Contents The following performance graph and related information shall not be deemed “soliciting material” nor to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent we specifically incorporate it by reference into such filing.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among TransDigm Group Inc., the S&P 500 Index and S&P Aerospace & Defense Select Index *$100 invested on 9/30/2018 in stock or index, including reinvestment of dividends. Copyright 2023 Standard & Poor’s, a division of S&P Global.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among TransDigm Group Inc., the S&P 500 Index and S&P Aerospace & Defense Select Index *$100 invested on 9/30/2019 in stock or index, including reinvestment of dividends. Copyright 2024 Standard & Poor’s, a division of S&P Global.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the New York Stock Exchange, or NYSE, under the ticker symbol “TDG.” Holders As of October 12, 2023, there were 34 stockholders of record of our common stock and approximately 434,000 beneficial stockholders, which includes an estimated number of stockholders who have their shares held in their accounts by banks and brokers.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is traded on the New York Stock Exchange, or NYSE, under the ticker symbol “TDG.” Holders As of October 9, 2024, there were 30 stockholders of record of our common stock and approximately 836,000 beneficial stockholders, which includes an estimated number of stockholders who have their shares held in their accounts by banks and brokers.
There is no expiration date for this program. No repurchases were made under the program d uring fiscal 2023. During fiscal 2022, the Company repurchased 1,490,413 shares of common stock at an average price of $612.13 per share, for a total amount of $912 million.
There is no expiration date for this program. N o repurchases were made under the program in fiscal 2024 or 2023. During fiscal 2022, the Company repurchased 1,490,413 shares of common stock at an average price of $612.13 per share, for a total amount of $912 million.
All rights reserved. 9/30/2018 9/30/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 TransDigm Group Inc. 100.00 147.98 142.82 187.74 162.21 260.59 S&P 500 Index 100.00 104.25 120.05 156.07 131.92 160.44 S&P Aerospace & Defense Select Index 100.00 108.68 89.79 124.17 96.14 118.54 Purchases of Equity Securities by the Issuer or Affiliated Purchaser On January 27, 2022, the Board of Directors of the Company authorized a new stock repurchase program to permit repurchases of its outstanding common stock not to exceed $2,200 million in the aggregate (the “$2,200 million stock repurchase program”), replacing the $650 million stock repurchase program previously authorized by the Board on November 8, 2017, subject to any restrictions specified in the Second Amended and Restated Credit Agreement dated as of June 4, 2014 (the “Credit Agreement”) and indentures governing the Company's existing Notes.
All rights reserved. 9/30/2019 9/30/2020 9/30/2021 9/30/2022 9/30/2023 9/30/2024 TransDigm Group Inc. 100.00 96.51 126.87 109.61 176.10 308.97 S&P 500 Index 100.00 115.15 149.70 126.54 153.89 209.84 S&P Aerospace & Defense Select Index 100.00 82.62 114.25 88.47 109.07 154.59 Purchases of Equity Securities by the Issuer or Affiliated Purchaser On January 27, 2022, the Board of Directors of the Company authorized a new stock repurchase program to permit repurchases of its outstanding common stock not to exceed $2,200 million in the aggregate (the “$2,200 million stock repurchase program”), replacing the $650 million stock repurchase program previously authorized by the Board on November 8, 2017, subject to any restrictions specified in the Second Amended and Restated Credit Agreement dated as of June 4, 2014 (the “Credit Agreement”) and indentures governing the Company's existing Notes.
On November 9, 2023, the Company announced that TD Group's Board of Directors authorized and declared a special cash dividend of $35.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans.
On September 19, 2024, the Company's Board of Directors authorized and declared a special cash dividend of $75.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans.
Removed
Dividends During fiscal 2022, TD Group’s Board of Directors (the “Board”) declared a special cash dividend of $18.50 (in August 2022) on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options granted under its stock option plans.
Added
The total cash payment, funded by a combination of $3,000 million in new senior secured debt and existing cash on hand, related to the special dividend and dividend equivalents was approximately $4,348 million in October 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAlthough we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive aviation authority and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part. 24 Table of Contents Results of Operations The following table sets forth, for the periods indicated, certain operating data of the Company, including presentation of the amounts as a percentage of net sales (amounts in millions, except per share data): Fiscal Years Ended September 30, 2023 % of Net Sales 2022 % of Net Sales Net sales $ 6,585 100.0 % $ 5,429 100.0 % Cost of sales 2,743 41.7 % 2,330 42.9 % Selling and administrative expenses 780 11.8 % 748 13.8 % Amortization of intangible assets 139 2.1 % 136 2.5 % Income from operations 2,923 44.4 % 2,215 40.8 % Interest expense-net 1,164 17.7 % 1,076 19.8 % Refinancing costs 56 0.9 % 1 — % Other (income) expense (13) (0.2) % 18 0.3 % Gain on sale of businesses-net — — % (7) (0.1) % Income tax provision 417 6.3 % 261 4.8 % Income from continuing operations 1,299 19.7 % 866 16.0 % Less: Net income attributable to noncontrolling interests (1) — % (1) — % Income from continuing operations attributable to TD Group 1,298 19.7 % 865 15.9 % Income from discontinued operations, net of tax — — % 1 — % Net income attributable to TD Group $ 1,298 19.7 % $ 866 16.0 % Net income applicable to TD Group common stockholders $ 1,260 (1) 19.1 % $ 780 (1) 14.4 % Earnings per share attributable to TD Group common stockholders: Earnings per share from continuing operations—basic and diluted $ 22.03 (2) $ 13.38 (2) Earnings per share from discontinued operations—basic and diluted — (2) 0.02 (2) Earnings per share $ 22.03 $ 13.40 Cash dividends paid per common share $ — $ 18.50 Weighted-average shares outstanding—basic and diluted 57.2 58.2 Other Data: EBITDA $ 3,148 (3) $ 2,456 (3) EBITDA As Defined $ 3,395 (3) 51.6 % $ 2,646 (3) 48.7 % (1) Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends declared or paid on participating securities, including dividend equivalent payments of $38 million and $86 million for the fiscal years ended September 30, 2023 and 2022, respectively.
Biggest changeDOD budgets have trended upwards as geopolitical challenges such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas, and military modernization efforts are driving demand. 25 Table of Contents Results of Operations The following table sets forth, for the periods indicated, certain operating data of the Company, including presentation of the amounts as a percentage of net sales (amounts in millions, except per share data): Fiscal Years Ended September 30, 2024 % of Net Sales 2023 % of Net Sales Net sales $ 7,940 100.0 % $ 6,585 100.0 % Cost of sales 3,268 41.2 % 2,743 41.7 % Selling and administrative expenses 980 12.3 % 780 11.8 % Amortization of intangible assets 161 2.0 % 139 2.1 % Income from operations 3,531 44.5 % 2,923 44.4 % Interest expense-net 1,286 16.2 % 1,164 17.7 % Refinancing costs 58 0.7 % 56 0.9 % Other income (28) (0.4) % (13) (0.2) % Income tax provision 500 6.3 % 417 6.3 % Income from continuing operations 1,715 21.6 % 1,299 19.7 % Less: Net income attributable to noncontrolling interests (1) — % (1) — % Net income attributable to TD Group $ 1,714 21.6 % $ 1,298 19.7 % Net income applicable to TD Group common stockholders $ 1,481 (1) 18.7 % $ 1,260 (1) 19.1 % Earnings per share attributable to TD Group common stockholders: Basic and diluted $ 25.62 (2) $ 22.03 (2) Cash dividends declared per common share $ 110.00 $ — Weighted-average shares outstanding—basic and diluted 57.8 57.2 Other Data: EBITDA $ 3,813 (3) $ 3,148 (3) EBITDA As Defined $ 4,173 (3) 52.6 % $ 3,395 (3) 51.6 % (1) Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends declared or paid on participating securities, including dividend equivalents of $233 million and $38 million for the fiscal years ended September 30, 2024 and 2023, respectively.
EBITDA As Defined from acquisitions represents EBITDA As Defined from acquired businesses for the period up to one year subsequent to the respective acquisition date. The change in Non-aviation EBITDA as Defined compared to the prior fiscal year was not material. Corporate expenses consist primarily of compensation, benefits, professional services and other administrative costs incurred by the corporate offices.
EBITDA As Defined from acquisitions represents EBITDA As Defined from acquired businesses for the period up to one year from the respective acquisition date. The change in Non-aviation EBITDA as Defined compared to the prior fiscal year was not material. Corporate expenses consist primarily of compensation, benefits, professional services and other administrative costs incurred by the corporate offices.
Pursuant to the Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan, the Amended and Restated 2014 Stock Option Plan Dividend Equivalent Plan and the 2019 Stock Option Plan Dividend Equivalent Plan, all of the vested options granted under the existing stock option plans, except for grants to the members of the Board of Directors, are entitled to certain dividend equivalent payments in the event of the declaration of a dividend by the Company.
Pursuant to the Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan, the Amended and Restated 2014 Stock Option Plan Dividend Equivalent Plan and the 2019 Stock Option Plan Dividend Equivalent Plan, all of the vested options granted under the existing stock option plans, except for grants to the members of the Board of Directors, are entitled to certain cash dividend equivalent payments in the event of the declaration of a dividend by the Company.
The initial $1,000 million offering and the subsequent $1,100 million offering of the 6.75% senior secured notes due 2028 (collectively, the “2028 Secured Notes”) in the second quarter of fiscal 2023 were issued at a price of 100% and 99%, respectively, of their principal amount, resulting in gross proceeds of $2,089 million.
The initial $1,000 million offering and the subsequent $1,100 million offering of the 6.75% senior secured notes due 2028 (collectively, the “2028 Secured Notes”) in the second quarter of fiscal 2023 were issued at a price of 100.00% and 99.00%, respectively, of their principal amount, resulting in gross proceeds of $2,089 million.
For the quantitative test, management determines the estimated fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit. If the calculated estimated fair value is less than the current carrying value, impairment of goodwill of the reporting unit may exist.
For the quantitative test, management determines the estimated fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit. If the estimated fair value is less than the current carrying value, impairment of goodwill of the reporting unit may exist.
We believe our cash provided by operating activities and available borrowing capacity will enable us to make strategic business acquisitions, pay dividends to our shareholders and make opportunistic investments in our own stock, subject to any restrictions in our existing credit agreement and market conditions.
We believe our cash provided by operating activities and available borrowing capacity will enable us to make strategic business acquisitions, pay special dividends to our shareholders and make opportunistic investments in our own stock, subject to any restrictions in our existing credit agreement and market conditions.
If any such default occurs, the lenders under the Credit Agreement and the holders of the Subordinated Notes and Secured Notes may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.
If any such default occurs, the lenders under the Credit Agreement and the holders of the Notes and Secured Notes may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.
The 2026 Secured Notes and the 2028 Secured Notes are guaranteed on a senior secured basis by TD Group, TransDigm UK and TransDigm Inc.’s Domestic Restricted Subsidiaries (as defined in the applicable indentures).
The 2028 Secured Notes are guaranteed on a senior secured basis by TD Group, TransDigm UK and TransDigm Inc.’s Domestic Restricted Subsidiaries (as defined in the applicable indentures).
In connection with the continued application of our three core value-driven operating strategies (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers), we expect our efforts will continue to generate strong margins and provide sufficient cash provided by operating activities to meet our interest obligations and liquidity needs.
In connection with the continued application of our three core value-driven operating strategy (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers), we expect our efforts will continue to generate strong margins and provide sufficient cash provided by operating activities to meet our interest obligations and liquidity needs.
This has generally enabled us to price our products to fairly reflect the value we provide and the resources required to do so. 23 Table of Contents Selective Acquisition Strategy. We selectively pursue the acquisition of proprietary aerospace component businesses when we see an opportunity to create value through the application of our three core value-driven operating strategies.
This has generally enabled us to price our products to fairly reflect the value we provide and the resources required to do so. 24 Table of Contents Selective Acquisition Strategy. We selectively pursue the acquisition of proprietary aerospace component businesses when we see an opportunity to create value through the application of our three core value-driven operating strategies.
In addition, interest payments include the impact of the existing interest rate swap, cap and collar agreements described in Note 21, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. (4) Represents future benefit payments expected to be paid from the pension and post-retirement benefit plans or from the Company’s assets.
In addition, interest payments include the impact of the existing interest rate swap, cap and collar agreements described in Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. (4) Represents future benefit payments expected to be paid from the pension and post-retirement benefit plans or from the Company’s assets.
Acquisition sales represent net sales from acquired businesses for the period up to one year subsequent to their respective acquisition date. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis.
Acquisition sales represent net sales from acquired businesses for the period up to one year from the respective acquisition date. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis.
Interest rate swaps, caps and collars used to hedge and offset, respectively, the variable interest rates on our term loans are further described in Note 21, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein.
Interest rate swaps, caps and collars used to hedge and offset, respectively, the variable interest rates on our term loans are further described in Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein.
As of September 30, 2023, the Company was in compliance with all of its debt covenants and expects to remain in compliance with its debt covenants in subsequent periods. Trade Receivable Securitization Facility During fiscal 2014, the Company established a trade receivable securitization facility (the “Securitization Facility”).
As of September 30, 2024, the Company was in compliance with all of its debt covenants and expects to remain in compliance with its debt covenants in subsequent periods. Trade Receivable Securitization Facility During fiscal 2014, the Company established a trade receivable securitization facility (the “Securitization Facility”).
Acquisition sales represent net sales from acquired businesses for the period up to one year subsequent to their respective acquisition date. The change in Non-aviation net sales compared to the prior fiscal year was not material. • EBITDA As Defined .
Acquisition sales represent net sales from acquired businesses for the period up to one year from the respective acquisition date. The change in Non-aviation net sales compared to the prior fiscal year was not material. • EBITDA As Defined .
The Subordinated Notes represent our unsecured obligations ranking subordinate to our senior debt, as defined in the applicable indentures. The Secured Notes represent our secured obligations ranking equally to all existing and future senior debt, as defined in the applicable indentures. The Subordinated Notes and Secured Notes contain many of the restrictive covenants included in the Credit Agreement.
The Secured Notes represent our secured obligations ranking equally to all existing and future senior debt, as defined in the applicable indentures. The Subordinated Notes and Secured Notes contain many of the restrictive covenants included in the Credit Agreement.
The Company’s capital expenditures incurred from year-to-year are funded using existing cash on hand and are primarily for projects that are consistent with our three core value-driven operating strategies (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers).
The Company’s capital expenditures incurred from year-to-year are funded using existing cash on hand and are primarily for projects that are consistent with our three core value-driven operating strategies (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers) such as automation projects.
The Company may issue additional debt or refinance existing debt if prevailing market conditions are favorable to doing so. In addition, the Company may increase its borrowings in connection with acquisitions, if cash flow from operating activities becomes insufficient to fund current operations or for other short-term cash needs or for common stock repurchases or dividends.
The Company may issue additional debt if prevailing market conditions are favorable to doing so. In addition, the Company may increase its borrowings in connection with acquisitions, if cash flow from operating activities becomes insufficient to fund current operations or for other short-term cash needs or for common stock repurchases or special dividends.
Terminal value rate determination follows a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates. The impairment test for indefinite-lived intangible assets consists of a comparison between the estimated fair values and carrying values.
Terminal value rate determination follows a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates. 38 Table of Contents The impairment test for indefinite-lived intangible assets consists of a comparison between the estimated fair values and carrying values.
The 2030 Secured Notes are guaranteed on a senior secured basis by TD Group and each of TransDigm Inc.’s direct and indirect Restricted Subsidiaries (as defined in the applicable indenture) that is a borrower or guarantor under TransDigm’s senior secured credit facilities or that issues or guarantees any capital markets indebtedness of TransDigm Inc. or any of the guarantors in an aggregate principal amount of at least $200 million.
The 2029 Secured Notes, 2030 Secured Notes, 2031 Secured Notes, 2032 Secured Notes and 2033 Secured Notes are guaranteed on a senior secured basis by TD Group and each of TransDigm Inc.’s direct and indirect Restricted Subsidiaries (as defined in the applicable indenture) that is a borrower or guarantor under TransDigm’s senior secured credit facilities or that issues or guarantees any capital markets indebtedness of TransDigm Inc. or any of the guarantors in an aggregate principal amount of at least $200 million.
References to “EBITDA” mean earnings before interest, taxes, depreciation and amortization, and references to “EBITDA As Defined” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of income from continuing operations to EBITDA and EBITDA As Defined and the reconciliations of net cash provided by operating activities to EBITDA and EBITDA As Defined presented below.
References to “EBITDA” mean earnings before interest, taxes, depreciation and amortization, and references to “EBITDA As Defined” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of net income to EBITDA and EBITDA As Defined and the reconciliations of net cash provided by operating activities to EBITDA and EBITDA As Defined presented below.
With respect to acquisitions integrated into an existing reporting unit, any acquired goodwill is combined with the goodwill of the reporting unit. 37 Table of Contents Companies may perform a qualitative assessment as the initial step in the annual goodwill impairment testing process for all or selected reporting units.
With respect to acquisitions integrated into an existing reporting unit, any acquired goodwill is combined with the goodwill of the reporting unit. Companies may perform a qualitative assessment as the initial step in the annual goodwill impairment testing process for all or selected reporting units.
The increase in commercial aftermarket sales is primarily attributable to the continued recovery in commercial air travel demand and the resulting higher flight hours and utilization of aircraft in fiscal 2023 compared to fiscal 2022. The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow-body and wide-body aircraft production and deliveries.
The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow-body and wide-body aircraft production and deliveries. The increase in commercial aftermarket sales is primarily attributable to the continued recovery in commercial air travel demand and the resulting higher flight hours and utilization of aircraft in fiscal 2024 compared to fiscal 2023, particularly internationally.
Reference Note 12, “Debt,” in the notes to the consolidated financial statements included herein for additional information.
Reference Note 10, “Debt,” in the notes to the consolidated financial statements included herein for additional information.
The interest rates per annum applicable to the Tranche H and Tranche I term loans under the Credit Agreement are, at TransDigm’s option, equal to either an alternate base rate or an adjusted Term SOFR for one, three or six-month interest periods chosen by TransDigm, in each case plus an applicable margin percentage.
The interest rates per annum applicable to the Term Loans Facility under the Credit Agreement are, at TransDigm’s option, equal to either an alternate base rate or an adjusted Term SOFR for one, three or six-month interest periods chosen by TransDigm, in each case plus an applicable margin percentage.
Historically, such adjustments have not been significant. New Accounting Standards For information about new accounting standards, see Note 4, “Recent Accounting Pronouncements,” in the notes to the consolidated financial statements included herein. 39 Table of Contents Non-GAAP Financial Measures We present below certain financial information based on our EBITDA and EBITDA As Defined.
Historically, such adjustments have not been significant. New Accounting Standards For information about new accounting standards, see Note 1, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included herein. 39 Table of Contents Non-GAAP Financial Measures We present below certain financial information based on our EBITDA and EBITDA As Defined.
“Management’s Discussion and Analysis of Financial Conditions and Results of Operations” of Form 10-K for the fiscal year ended September 30, 2022, as filed with the Securities and Exchange Commission on November 10, 2022. 29 Table of Contents Liquidity and Capital Resources We have historically maintained a capital structure comprising a mix of equity and debt financing.
“Management’s Discussion and Analysis of Financial Conditions and Results of Operations” of Form 10-K for the fiscal year ended September 30, 2023, as filed with the Securities and Exchange Commission on November 9, 2023. Liquidity and Capital Resources We have historically maintained a capital structure comprising a mix of equity and debt financing.
The increase in commercial aftermarket sales is primarily attributable to the continued recovery in commercial air travel demand and the resulting higher flight hours and utilization of aircraft in fiscal 2023 compared to fiscal 2022.
The increase in commercial aftermarket sales is primarily attributable to the continued recovery in commercial air travel demand and the resulting higher flight hours and utilization of aircraft in fiscal 2024 compared to fiscal 2023, particularly internationally.
Our future leverage will also be impacted by the then current conditions of the credit markets. Operating Activities . The Company generated $1,375 million of net cash from operating activities during fiscal 2023 compared to $948 million during fiscal 2022.
Our future leverage will also be impacted by the then current conditions of the credit markets. Operating Activities . The Company generated $2,045 million of net cash from operating activities during fiscal 2024 compared to $1,375 million during fiscal 2023.
In addition, following an event of default under the Credit Agreement or the indentures governing the Secured Notes, the lenders thereunder or the holders thereof, as applicable, will have the right to proceed against the collateral granted to them to secure the debt, which includes our available cash, and they will also have the right to prevent us from making debt service payments on the Subordinated Notes.
In addition, following an event of default under the Credit Agreement, the lenders thereunder and the holders of the Secured Notes will have the right to proceed against the collateral granted to them to secure the debt, which includes our available cash, and they will also have the right to prevent us from making debt service payments on the Notes.
Also contributing to the increase in EBITDA As Defined was the application of our three core value-driven operating strategies and positive leverage on our fixed overhead costs spread over a higher production volume despite the ongoing inflationary environment for freight, labor and certain raw materials. EBITDA As Defined for the Airframe segment increased approximately $426 million, an increase of 38.0%.
Also contributing to the increase in EBITDA As Defined was the application of our three core value-driven operating strategy and positive leverage on our fixed overhead costs spread over a higher production volume despite the ongoing inflationary environment for freight, labor and certain raw materials. EBITDA As Defined for the Airframe segment increased approximately $415 million, an increase of 26.8%.
As of the date of this Form 10-K, the guarantors of the 2030 Secured Notes are the same as the guarantors of the 2026 Secured Notes and the 2028 Secured Notes. The table set forth in Exhibit 22.1 filed with this Form 10-K details the primary obligors and guarantors.
As of the date of this Form 10-K, the guarantors of the 2029 Secured Notes, 2030 Secured Notes, 2031 Secured Notes, 2032 Secured Notes and 2033 Secured Notes are the same as the guarantors of the 2028 Secured Notes. The table set forth in Exhibit 22.1 filed with this Form 10-K details the primary obligors and guarantors.
As of September 30, 2023, the Company had $51 million in letters of credit outstanding. 36 Table of Contents Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in conformity with U.S. GAAP, which often requires the judgment of management in the selection and application of certain accounting principles and methods.
As of September 30, 2024, the Company had $67 million in letters of credit outstanding. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in conformity with U.S. GAAP, which often requires the judgment of management in the selection and application of certain accounting principles and methods.
Net cash used in investing activities was $900 million during fiscal 2023, consisting primarily of the acquisition of Calspan for approximately $729 million, certain product line acquisitions aggregating to approximately $33 million and capital expenditures of $139 million.
Net cash used in investing activities was $900 million during fiscal 2023, consisting primarily of the acquisition of Calspan for approximately $729 million, certain product line acquisitions aggregating to approximately $33 million and capital expenditures of $139 million. Financing Activities . Net cash provided by financing activities was $3,171 million during fiscal 2024.
(3) Assumes that the variable interest rate on our Tranche H and Tranche I term loans under our Term Loans Facility range from approximately 5.8% to 6.8% based on anticipated movements in Term SOFR, which given the ongoing volatility in rates, are highly uncertain.
(3) Assumes that the variable interest rate on our existing term loans under our Term Loans Facility range from approximately 5.6% to 6.5% based on anticipated movements in Term SOFR, which given the ongoing volatility in rates, are highly uncertain.
Refer to Note 2, “Acquisitions and Divestitures,” in the notes to the consolidated financial statements included herein for further information on the Company's recent acquisitions activity.
Refer to Note 2, “Acquisitions,” in the notes to the consolidated financial statements included herein for information on the Company's recent acquisitions.
Net income attributable to TD Group for the fiscal year ended September 30, 2023 of $1,298 million was decreased by dividend equivalent payments of $38 million, or $0.67 per share, resulting in net income applicable to TD Group common stockholders of $1,260 million.
Net income attributable to TD Group for the fiscal year ended September 30, 2023 of $1,298 million was decreased by dividend equivalents of $38 million, or $0.67 per share, resulting in net income applicable to TD Group common stockholders of $1,260 million. Business Segments • Segment Net Sales .
The change in accounts payable during fiscal 2023 was a source of cash of $12 million compared to a source of cash of $58 million in fiscal 2022. The change is due to the timing of payments to suppliers. Investing Activities.
The change in accounts payable during fiscal 2024 was a use of cash of $11 million compared to a source of cash of $12 million in fiscal 2023. The change is due to the timing of payments to suppliers. Investing Activities.
As of the date of this report, we have successfully acquired approximately 88 businesses and product lines since our formation in 1993.
As of the date of this report, we have successfully acquired 93 businesses and various product lines since our formation in 1993.
(2) Represents the compensation expense recognized by TD Group under our stock incentive plans and deferred compensation plans. (3) Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. (4) Represents the net gain on sale of businesses.
(2) Represents the compensation expense recognized by TD Group under our stock incentive plans and deferred compensation plans. (3) Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements.
(2) Represents the compensation expense recognized by TD Group under our stock incentive plans and deferred compensation plans. (3) Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. (4) Represents the net gain on sale of businesses.
(2) Represents the compensation expense recognized by TD Group under our stock incentive plans and deferred compensation plans. (3) Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements.
GAAP financial measure. 25 Table of Contents Fiscal year ended September 30, 2023 compared with fiscal year ended September 30, 2022 Total Company • Net Sales .
GAAP financial measure. 26 Table of Contents Fiscal year ended September 30, 2024 compared with fiscal year ended September 30, 2023 Total Company • Net Sales .
Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Revenue is measured at the amount of consideration the Company expects to be paid in exchange for goods or services. A substantial portion of the Company's revenue is recorded at a point in time.
Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Revenue is measured at the amount of consideration the Company expects to be paid in exchange for goods or services.
EBITDA As Defined for the Power & Control segment increased approximately $335 million, an increase of 21.9%, resulting from higher organic sales in the commercial aftermarket, commercial OEM and defense channels.
EBITDA As Defined for the Power & Control segment increased approximately $370 million, an increase of 19.8%, resulting from higher organic sales in the defense, commercial OEM and commercial aftermarket channels.
Earnings per share from discontinued operations is calculated by dividing income from discontinued operations, net of tax, by the basic and diluted weighted average common shares outstanding. (3) Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information and limitations regarding these non-GAAP financial measures, including a reconciliation to the comparable U.S.
(2) Earnings per share is calculated by dividing net income applicable to TD Group common stockholders by the basic and diluted weighted average common shares outstanding. (3) Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information and limitations regarding these non-GAAP financial measures, including a reconciliation to the comparable U.S.
Indentures The following table represents the senior subordinated and secured notes outstanding as of September 30, 2023: Description Aggregate Principal Maturity Date Interest Rate 2026 Secured Notes $4,400 million March 15, 2026 6.25% 7.50% 2027 Notes $550 million March 15, 2027 7.50% 5.50% 2027 Notes $2,650 million November 15, 2027 5.50% 2028 Secured Notes $2,100 million August 15, 2028 6.75% 4.625% 2029 Notes $1,200 million January 15, 2029 4.625% 4.875% 2029 Notes $750 million May 1, 2029 4.875% 2030 Secured Notes $1,450 million December 15, 2030 6.875% The 7.50% 2027 Notes, the 5.50% 2027 Notes, the 4.625% 2029 Notes and the 4.875% 2029 Notes (collectively, the “Subordinated Notes”) were issued at a price of 100% of the principal amount.
Indentures The following table represents the senior subordinated and secured notes outstanding as of September 30, 2024: Description Aggregate Principal Maturity Date Interest Rate 5.50% 2027 Notes $2,650 million November 15, 2027 5.50% 2028 Secured Notes $2,100 million August 15, 2028 6.75% 4.625% 2029 Notes $1,200 million January 15, 2029 4.625% 2029 Secured Notes $2,750 million March 1, 2029 6.375% 4.875% 2029 Notes $750 million May 1, 2029 4.875% 2030 Secured Notes $1,450 million December 15, 2030 6.875% 2031 Secured Notes $1,000 million December 1, 2031 7.125% 2032 Secured Notes $2,200 million March 1, 2032 6.625% 2033 Secured Notes $1,500 million January 15, 2033 6.00% The 5.50% 2027 Notes, the 4.625% 2029 Notes and the 4.875% 2029 Notes (collectively, the “Subordinated Notes”) were issued at a price of 100.00% of the principal amount.
The Company continues to actively manage its accounts receivable, the related agings and collection efforts. 31 Table of Contents The change in inventories during fiscal 2023 was a use of cash of $261 million compared to a use of cash of $134 million in fiscal 2022.
The Company continues to actively manage its accounts receivable, the related agings and collection efforts. The change in inventories during fiscal 2024 was a use of cash of $104 million compared to a use of cash of $261 million in fiscal 2023.
Fiscal Years Ended September 30, 2023 2022 Selected Cash Flow and Other Financial Data: Cash flows provided by (used in): Operating activities $ 1,375 $ 948 Investing activities (900) (553) Financing activities (16) (2,148) Capital expenditures 139 119 Ratio of earnings to fixed charges (1) 2.5x 2.0x (1) For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings from continuing operations before income taxes plus fixed charges.
Fiscal Years Ended September 30, 2024 2023 Selected Cash Flow and Other Financial Data: Cash flows provided by (used in): Operating activities $ 2,045 $ 1,375 Investing activities (2,441) (900) Financing activities 3,171 (16) Capital expenditures 165 139 Ratio of earnings to fixed charges (1) 2.7x 2.5x (1) For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings from continuing operations before income taxes plus fixed charges.
An immaterial amount of corporate expenses is allocated to the operating segments. The increase compared to the prior fiscal year is primarily attributable to the deferred compensation plan adopted in the fourth quarter of fiscal 2022 for certain members of non-executive management.
An immaterial amount of corporate expenses is allocated to the operating segments. The increase compared to fiscal 2023 is primarily attributable to the current fiscal year portion of the deferred compensation plan adopted in the fourth quarter of 2022 for certain members of non-executive management and higher salaries and bonus expense.
TransDigm is in compliance with all of the covenants contained in the Subordinated Notes and Secured Notes. 33 Table of Contents Guarantor Information The Subordinated Notes are subordinated to all of our existing and future senior secured debt, including indebtedness under TransDigm’s existing senior secured credit facilities, rank equally with all of our existing and future senior subordinated debt and rank senior to all of our future debt that is expressly subordinated to the Subordinated Notes.
Guarantor Information The Subordinated Notes are subordinated to all of our existing and future senior secured debt, including indebtedness under TransDigm’s existing senior secured credit facilities, rank equally with all of our existing and future senior subordinated debt and rank senior to all of our future debt that is expressly subordinated to the Subordinated Notes.
The restrictive covenants included in the Credit Agreement are subject to amendments executed periodically. The most recent amendment that impacted the restrictive covenants contained in the Credit Agreement is Amendment No. 11.
The restrictive covenants included in the Credit Agreement are subject to amendments executed periodically. The most recent amendment that impacted the restrictive covenants contained in the Credit Agreement is Amendment No. 15, executed on March 22, 2024.
The following tables present selected balance sheet, cash flow and other financial data relevant to the liquidity or capital resources of the Company for the periods specified below (amounts in millions): September 30, 2023 September 30, 2022 Selected Balance Sheet Data: Cash and cash equivalents $ 3,472 $ 3,001 Working capital (Total current assets less total current liabilities) 5,159 4,223 Total assets 19,970 18,107 Total debt (1) 19,750 19,795 TD Group stockholders’ deficit (1,984) (3,773) (1) Includes debt issuance costs and original issue discount and premiums.
The following tables present selected balance sheet, cash flow and other financial data relevant to the liquidity or capital resources of the Company for the periods specified below (amounts in millions): September 30, 2024 September 30, 2023 Selected Balance Sheet Data: Cash and cash equivalents $ 6,261 $ 3,472 Working capital (Total current assets less total current liabilities) 3,690 5,159 Total assets 25,586 19,970 Total debt (1) 24,880 19,750 TD Group stockholders’ deficit (6,290) (1,984) (1) Includes debt issuance costs and original issue discount and premiums.
Overview For fiscal year 2023, we generated net sales of $6,585 million, gross profit of $3,842 million or 58.3% of net sales, and net income attributable to TD Group of $1,298 million. We believe we have achieved steady, long-term growth in sales and improvements in operating performance due to our competitive strengths and through execution of our value-driven operating strategy.
Overview For fiscal year 2024, we generated net sales of $7,940 million, gross profit of $4,672 million or 58.8% of net sales, and net income attributable to TD Group of $1,714 million. We believe we have achieved steady, long-term growth in sales and improvements in operating performance due to our competitive strengths and through execution of our value-driven operating strategy.
Net income attributable to TD Group increased $432 million, or 49.9%, to $1,298 million for the fiscal year ended September 30, 2023 compared to net income attributable to TD Group of $866 million for the fiscal year ended September 30, 2022, primarily as a result of the factors referenced above. • Earnings per Share .
Net income attributable to TD Group increased $416 million, or 32.0%, to $1,714 million for the fiscal year ended September 30, 2024 compared to net income attributable to TD Group of $1,298 million for the fiscal year ended September 30, 2023, primarily as a result of the factors referenced above. • Earnings per Share .
On July 25, 2023, the Company amended the Securitization Facility to, among other things, increase the borrowing capacity from $350 million to $450 million and extend the maturity date to July 25, 2024 at an interest rate of three-month Term SOFR plus 1.60%, compared to an interest rate of three-month Term SOFR plus 1.30% that applied prior to the amendment.
On July 12, 2024, the Company amended the Securitization Facility to, among other things, (i) increase the borrowing capacity from $450 million to $650 million; and (ii) extend the maturity date to July 11, 2025 at an interest rate of Term SOFR plus 1.45% compared to an interest rate of Term SOFR plus 1.60% that applied prior to the amendment.
Off-Balance Sheet Arrangements The Company utilizes letters of credit to back certain payment and performance obligations. Letters of credit are subject to limits based on amounts outstanding under the Company’s revolving credit facility.
(5) An incremental draw on the Securitization Facility of $162.5 million occurred in October 2024. Off-Balance Sheet Arrangements The Company utilizes letters of credit to back certain payment and performance obligations. Letters of credit are subject to limits based on amounts outstanding under the Company’s revolving credit facility.
These estimates are based on historical experience, anticipated performance under the terms of the contract and our best judgment at the time. Inventories – Inventories are stated at the lower of cost or net realizable value.
These estimates are based on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.
The adjusted Term SOFR related to the Tranche H and Tranche I term loans are not subject to a floor.
The adjusted Term SOFR related to the Term Loans Facility are not subject to a floor.
The basis swaps and cap offset the LIBOR exposure of the existing swaps and cap and effectively fix the Term SOFR rate for the notional amount. The Company's objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates.
The Company's objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates.
The revolving commitments consist of two tranches which include up to $152 million of multicurrency revolving commitments. At September 30, 2023, the Company had $51 million in letters of credit outstanding and $759 million in borrowings available under the revolving commitments. Draws on the revolving commitments are subject to an interest rate of 2.50% per annum.
The revolving commitments consist of two tranches which include up to $139 million of multicurrency revolving commitments. At September 30, 2024, the Company had $67 million in letters of credit outstanding and $843 million in borrowings available under the revolving commitments. Draws on the revolving commitments are subject to an interest rate of Term SOFR plus 2.25%.
Basic and diluted earnings per share from continuing operations was $22.03 for the fiscal year ended September 30, 2023 and $13.38 for the fiscal year ended September 30, 2022. Basic and diluted earnings per share from discontinued operations was $0.02 for the fiscal year ended September 30, 2022.
Basic and diluted earnings per share from continuing operations was $25.62 for the fiscal year ended September 30, 2024 and $22.03 for the fiscal year ended September 30, 2023.
The increase in EBITDA as Defined for the Airframe segment is attributable to the same factors described in the paragraph above for the Power & Control segment. EBITDA As Defined for the Airframe segment from acquisitions was approximately $48 million due to the impact of the Calspan and DART acquisitions.
The increase in EBITDA As Defined for the Airframe segment is attributable to the same factors described in the paragraph above for the Power & Control segment. EBITDA As Defined from acquisitions for the Power & Control and Airframe segments contributed approximately $97 million in aggregate to the increase in EBITDA As Defined.
The unused portion of the revolving commitments is subject to a fee of 0.5% per annum.
The unused portion of the revolving commitments is subject to a fee of 0.5% per annum. The maturity date of the revolving credit facility is February 27, 2029.
The weighted average interest rate for cash interest payments on total borrowings outstanding for the fiscal year ended September 30, 2023 was 6.2% compared to 5.3% for the fiscal year ended September 30, 2022. • Refinancing Costs.
This was partially offset by a $52 million increase in interest income. The weighted average interest rate for cash interest payments on total borrowings outstanding for the fiscal year ended September 30, 2024 was 6.3% compared to 6.2% for the fiscal year ended September 30, 2023. • Refinancing Costs.
We believe we incorporate conservative sensitivity ranges on certain company-specific projected data, including earnings before taxes and net sales, which are significant assumptions in the discounted cash flow valuation model to determine estimated fair value, such that actual results would need to be materially out of the range of the expected assumptions in order for an impairment to occur. 38 Table of Contents Stock-Based Compensation – The cost of the Company’s stock-based compensation is recorded in accordance with ASC 718, “Stock Compensation.” The Company uses a Black-Scholes pricing model to estimate the grant-date fair value of the stock options awarded.
We believe we incorporate conservative sensitivity ranges on certain company-specific projected data, including earnings before taxes and net sales, which are significant assumptions in the discounted cash flow valuation model to determine estimated fair value, such that actual results would need to be materially out of the range of the expected assumptions in order for an impairment to occur.
Our calculation of EBITDA and EBITDA As Defined may not be comparable to the calculation of similarly titled measures reported by other companies. 40 Table of Contents The following table sets forth a reconciliation of income from continuing operations to EBITDA and EBITDA As Defined (in millions): Fiscal Years Ended September 30, 2023 2022 Income from continuing operations $ 1,299 $ 866 Adjustments: Depreciation and amortization expense 268 253 Interest expense-net 1,164 1,076 Income tax provision 417 261 EBITDA 3,148 2,456 Adjustments: Acquisition and divestiture transaction-related expenses and adjustments (1) 18 18 Non-cash stock and deferred compensation expense (2) 157 184 Refinancing costs (3) 56 1 Gain on sale of businesses-net (4) — (7) Other, net (5) 16 (6) EBITDA As Defined $ 3,395 $ 2,646 (1) Represents accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when inventory was sold; costs incurred to integrate acquired businesses and product lines into TD Group’s operations, facility relocation costs and other acquisition-related costs; transaction-related costs for both acquisitions and divestitures comprising deal fees, legal, financial and tax due diligence expenses, and valuation costs that are required to be expensed as incurred.
Our calculation of EBITDA and EBITDA As Defined may not be comparable to the calculation of similarly titled measures reported by other companies. 40 Table of Contents The following table sets forth a reconciliation of net income to EBITDA and EBITDA As Defined (in millions): Fiscal Years Ended September 30, 2024 2023 Net Income $ 1,715 $ 1,299 Adjustments: Depreciation and amortization expense 312 268 Interest expense-net 1,286 1,164 Income tax provision 500 417 EBITDA 3,813 3,148 Adjustments: Acquisition transaction and integration-related expenses (1) 70 18 Non-cash stock and deferred compensation expense (2) 217 157 Refinancing costs (3) 58 56 Other, net (4) 15 16 EBITDA As Defined $ 4,173 $ 3,395 (1) Represents costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and valuation-related costs for acquisitions comprising deal fees, legal, financial and tax due diligence expenses; and amortization expense of inventory step-up recorded in connection with the purchase accounting of acquired businesses.
On November 9, 2023, the Company announced that TD Group's Board of Directors authorized and declared a special cash dividend of $35.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans.
Dividend and Dividend Equivalent Payments During the first and fourth quarters of fiscal 2024, TD Group's Board of Directors authorized and declared special cash dividends of $35.00 and $75.00, respectively, on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans.
(5) Primarily represents foreign currency transaction (gains) or losses, payroll withholding taxes related to dividend equivalent payments and stock option exercises, deferred compensation payments, non-service related pension costs including the pension settlement (gain) loss for the ERP (further disclosed in Note 13, “Retirement Plans,” in the notes to the consolidated financial statements included herein ), and for fiscal 2022, proceeds received from a final working capital settlement for the ScioTeq and TREALITY divestiture. 41 Table of Contents The following table sets forth a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined (in millions): Fiscal Years Ended September 30, 2023 2022 Net cash provided by operating activities $ 1,375 $ 948 Adjustments: Changes in assets and liabilities, net of effects from acquisitions of businesses 415 288 Interest expense-net (1) 1,123 1,076 Income tax provision - current 414 283 Loss contract amortization 34 39 Non-cash stock and deferred compensation expense (2) (157) (184) Refinancing costs (3) (56) (1) Gain on sale of businesses-net (4) — 7 EBITDA 3,148 2,456 Adjustments: Acquisition and divestiture transaction-related expenses and adjustments (5) 18 18 Non-cash stock and deferred compensation expense (2) 157 184 Refinancing costs (3) 56 1 Gain on sale of businesses-net (4) — (7) Other, net (6) 16 (6) EBITDA As Defined $ 3,395 $ 2,646 (1) Represents interest expense excluding the amortization of debt issuance costs and premium and discount on debt.
(4) Primarily represents foreign currency transaction (gains) or losses, payroll withholding taxes related to dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation payments and other miscellaneous (income) expense. 41 Table of Contents The following table sets forth a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined (in millions): Fiscal Years Ended September 30, 2024 2023 Net cash provided by operating activities $ 2,045 $ 1,375 Adjustments: Changes in assets and liabilities, net of effects from acquisitions and sales of businesses 272 415 Interest expense-net (1) 1,246 1,123 Income tax provision-current 490 414 Loss contract amortization 35 34 Non-cash stock and deferred compensation expense (2) (217) (157) Refinancing costs (3) (58) (56) EBITDA 3,813 3,148 Adjustments: Acquisition transaction and integration-related expenses (4) 70 18 Non-cash stock and deferred compensation expense (2) 217 157 Refinancing costs (3) 58 56 Other, net (5) 15 16 EBITDA As Defined $ 4,173 $ 3,395 (1) Represents interest expense, net of interest income, excluding the amortization of debt issuance costs and premium and discount on debt.
Interest expense-net increased $88 million, or 8.2%, to $1,164 million for the fiscal year ended September 30, 2023 from $1,076 million for the fiscal year ended September 30, 2022.
Interest expense-net increased $122 million, or 10.5%, to $1,286 million for the fiscal year ended September 30, 2024 from $1,164 million for the fiscal year ended September 30, 2023.
Under the Credit Agreement, if the usage of the revolving credit facility exceeds 35%, or $284 million, of the total revolving commitments, the Company is required to maintain a maximum consolidated net leverage ratio of net debt to trailing four-quarter EBITDA As Defined of 7.25x as of the last day of the fiscal quarter.
Under the Credit Agreement, if the usage of the revolving credit facility exceeds 40% (or, currently, $364 million) of the total revolving commitments, the Company is required to maintain a maximum consolidated net leverage ratio of net debt to trailing four-quarter EBITDA As Defined of 7.50x (or, solely with respect to the first four fiscal quarters ending after the consummation of any material acquisition, 8.00x) as of the last day of the fiscal quarter.
We estimate that our products are installed on over 100,000 commercial transport, regional transport, military and general aviation fixed wing turbine aircraft and rotary wing aircraft. Diversified Revenue Base. We believe that our diversified revenue base reduces our dependence on any particular product, platform or market channel and has been a significant factor in maintaining our financial performance.
We believe that our diversified revenue base reduces our dependence on any particular product, platform or market channel and has been a significant factor in maintaining our financial performance. Our products are represented in nearly every commercial and military aircraft in service today.
Other (income) for the fiscal year ended September 30, 2023 primarily related to a $9 million cash refund received for the Esterline Retirement Plan (the “ERP”) upon the finalizing of the group annuity purchase funding. Refer to Note 13, “Retirement Plans,” in the notes to the consolidated financial statements included herein for further information.
Other income for the fiscal year ended September 30, 2023 primarily related to a $9 million cash refund received for the Esterline Retirement Plan (the “ERP”) upon the finalizing of the group annuity purchase funding. • Income Tax Provision.
Cost of sales increased by $413 million or 17.7%, to $2,743 million for the fiscal year ended September 30, 2023 compared to $2,330 million for the fiscal year ended September 30, 2022.
Cost of sales increased by $525 million or 19.1%, to $3,268 million for the fiscal year ended September 30, 2024 compared to $2,743 million for the fiscal year ended September 30, 2023.
The Company uses the proceeds from the Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs. The Securitization Facility is collateralized by substantially all of the Company’s domestic operations’ trade accounts receivable.
The Company uses the proceeds from the Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs.
The change in bad debt expense in fiscal 2023 relates to the improving market conditions within commercial aerospace and the resulting reduction in assessed risk associated with the collectability of certain trade accounts receivable. • Amortization of Intangible Assets.
Bad debt expense for the fiscal year ended September 30, 2023 was favorably impacted by a reduction in the allowance for uncollectible accounts due to improving market conditions within commercial aerospace and the resulting reduction in assessed risk associated with the collectibility of certain trade accounts receivable. • Amortization of Intangible Assets.
Cost of sales and the related percentage of net sales for the fiscal years ended September 30, 2023 and 2022 were as follows (amounts in millions): Fiscal Years Ended September 30, 2023 September 30, 2022 Change % Change Cost of sales - excluding costs below $ 2,746 $ 2,390 $ 356 14.9 % % of net sales 41.7 % 44.0 % Non-cash stock and deferred compensation expense 17 19 (2) (10.5) % % of net sales 0.3 % 0.3 % Foreign currency losses (gains) 14 (40) 54 135.0 % % of net sales 0.2 % (0.7) % Loss contract amortization (34) (39) 5 12.8 % % of net sales (0.5) % (0.7) % Total cost of sales $ 2,743 $ 2,330 $ 413 17.7 % % of net sales 41.7 % 42.9 % Gross profit (Net sales less Total cost of sales) $ 3,842 $ 3,099 $ 743 24.0 % Gross profit percentage (Gross profit / Net sales) 58.3 % 57.1 % The change in cost of sales during the fiscal year ended September 30, 2023 decreased as a percentage of net sales despite increased inflationary pressures.
Cost of sales and the related percentage of net sales for the fiscal years ended September 30, 2024 and 2023 were as follows (amounts in millions): Fiscal Years Ended September 30, 2024 September 30, 2023 Change % Change Cost of sales - excluding costs below $ 3,241 $ 2,744 $ 497 18.1 % % of net sales 40.8 % 41.7 % Non-cash stock and deferred compensation expense 21 17 4 23.5 % % of net sales 0.3 % 0.3 % Inventory step-up amortization 21 2 19 950.0 % % of net sales 0.3 % — % Foreign currency losses 20 14 6 42.9 % % of net sales 0.3 % 0.2 % Loss contract amortization (35) (34) (1) (2.9) % % of net sales (0.4) % (0.5) % Total cost of sales $ 3,268 $ 2,743 $ 525 19.1 % % of net sales 41.2 % 41.7 % Gross profit (Net sales less Total cost of sales) $ 4,672 $ 3,842 $ 830 21.6 % Gross profit percentage (Gross profit / Net sales) 58.8 % 58.3 % 27 Table of Contents Cost of sales during the fiscal year ended September 30, 2024 decreased as a percentage of net sales despite increased inflationary pressures through most of fiscal 2024.
The increase in amortization expense of $3 million was primarily due to the amortization expense recognized on intangible assets from the third quarter of fiscal 2023 acquisition of Calspan and the third quarter of fiscal 2022 acquisition of DART.
Amortization of intangible assets was $161 million for the fiscal year ended September 30, 2024 compared to $139 million for the fiscal year ended September 30, 2023. The increase in amortization expense of $22 million was primarily due to the amortization expense recognized on intangible assets from the third quarter fiscal 2023 acquisition of Calspan and the fiscal 2024 acquisitions.
The Company had 49 reporting units with goodwill and 46 reporting units with indefinite-lived intangible assets as of the first day of the fourth quarter of fiscal 2023, the date of the annual impairment test.
The Company had 50 reporting units with goodwill and 47 reporting units with indefinite-lived intangible assets as of the first day of the fourth quarter of fiscal 2024, the date of the annual impairment test. The Company identified 14 reporting units to test for impairment using a quantitative test for both goodwill and indefinite-lived intangible assets.
Net sales by segment for the fiscal years ended September 30, 2023 and 2022 were as follows (amounts in millions): Fiscal Years Ended September 30, 2023 % of Net Sales 2022 % of Net Sales Change % Change Power & Control $ 3,316 50.3 % $ 2,873 52.9 % $ 443 15.4 % Airframe 3,094 47.0 % 2,391 44.1 % 703 29.4 % Non-aviation 175 2.7 % 165 3.0 % 10 6.1 % Net sales $ 6,585 100.0 % $ 5,429 100.0 % $ 1,156 21.3 % Net sales for the Power & Control segment increased $443 million, an increase of 15.4%, for the fiscal year ended September 30, 2023 compared to the fiscal year ended September 30, 2022.
Net sales by segment for the fiscal years ended September 30, 2024 and 2023 were as follows (amounts in millions): Fiscal Years Ended September 30, 2024 % of Net Sales 2023 % of Net Sales Change % Change Power & Control $ 3,941 49.6 % $ 3,316 50.3 % $ 625 18.8 % Airframe 3,809 48.0 % 3,094 47.0 % 715 23.1 % Non-aviation 190 2.4 % 175 2.7 % 15 8.6 % Net sales $ 7,940 100.0 % $ 6,585 100.0 % $ 1,355 20.6 % 29 Table of Contents Net sales for the Power & Control segment increased $625 million, an increase of 18.8%, for the fiscal year ended September 30, 2024 compared to the fiscal year ended September 30, 2023.
This was primarily driven by the application of our three core value-driven operating strategies (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers) coupled with fixed overhead costs incurred being spread over a higher production volume.
This was primarily driven by the application of our three core value-driven operating strategy (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers) coupled with fixed overhead costs incurred being spread over a higher production volume, which contributed to the gross profit as a percentage of net sales increasing by 0.5 percentage points to 58.8% for the fiscal year ended September 30, 2024 from 58.3% for the fiscal year ended September 30, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of September 30, 2023, approximately 90% of our gross debt was fixed rate. The effect of a hypothetical one percentage point increase in interest rates would increase the annual interest costs under our Term Loans Facility and Securitization Facility by approximately $44 million based on the amount of outstanding borrowings at September 30, 2023.
Biggest changeAs of September 30, 2024, approximately 77% of our gross debt was fixed rate. The effect of a hypothetical one percentage point increase in interest rates would increase the annual interest costs under our Term Loans Facility and Securitization Facility by approximately $30 million based on the amount of outstanding borrowings at September 30, 2024.
Interest rate swaps, caps and collars used to hedge and offset, respectively, the variable interest rates on the credit facility are described in Note 21, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. We do not hold or issue derivative instruments for speculative purposes.
Interest rate swaps, caps and collars used to hedge and offset, respectively, the variable interest rates on the credit facility are described in Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. We do not hold or issue derivative instruments for speculative purposes.
Our Securitization Facility bears interest at a rate of three-month Term SOFR plus 1.60%. Accordingly, the Company’s cash flows and earnings will be exposed to the market risk of interest rate changes resulting from variable rate borrowings under our term loans.
Our Securitization Facility bears interest at a rate of three-month Term SOFR plus 1.45%. Accordingly, the Company’s cash flows and earnings will be exposed to the market risk of interest rate changes resulting from variable rate borrowings under our term loans.
For information about the fair value of the aggregate principal amount of borrowings under our term loans and the fair value of the senior secured and subordinated notes, refer to Note 20, “Fair Value Measurements,” in the notes to the consolidated financial statements included herein.
For information about the fair value of the aggregate principal amount of borrowings under our term loans and the fair value of the senior secured and subordinated notes, refer to Note 18, “Fair Value Measurements,” in the notes to the consolidated financial statements included herein.
The foreign currency forward exchange contracts entered into by the Company are described in Note 21, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. A 10% change in foreign currency exchange rates would not have resulted in a material impact to net income for the fiscal year ended September 30, 2023.
The foreign currency forward exchange contracts entered into by the Company are described in Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. A 10% change in foreign currency exchange rates would not have resulted in a material impact to net income for the fiscal year ended September 30, 2024.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk At September 30, 2023, we had borrowings under our Term Loans Facility, which consists of two tranches of term loans of approximately $6,249 million, as well as $350 million from the Securitization Facility, that are subject to interest rate risk, particularly movements in Term SOFR.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk At September 30, 2024, we had borrowings under our Term Loans Facility, which consists of four tranches of term loans of approximately $8,702 million, as well as $487 million from the Securitization Facility, that are subject to interest rate risk, particularly movements in Term SOFR.
The weighted average interest rate on the $6,249 million of term loans and the $350 million drawn on the Securitization Facility at September 30, 2023 was 6.3%.
The weighted average interest rate on the $8,702 million of term loans and the $487 million drawn on the Securitization Facility at September 30, 2024 was 6.5%.

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