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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended December 30, 2023
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from             to            
Commission File Number 001-32833
TransDigm Group Incorporated
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
41-2101738
(I.R.S. Employer Identification No.)
1301 East 9th Street,Suite 3000,Cleveland,Ohio 44114
(Address of principal executive offices) (Zip Code)
(216) 706-2960
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, non-accelerated filer, smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  Accelerated Filer
Non-Accelerated Filer
  Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading Symbol:Name of each exchange on which registered:
Common Stock, $0.01 par valueTDGNew York Stock Exchange
The number of shares outstanding of TransDigm Group Incorporated’s common stock, par value $.01 per share, was 55,606,261 as of January 31, 2024.


Table of Contents

TABLE OF CONTENTS
 
Page
PART IFINANCIAL INFORMATION
ITEM 1Financial Statements
Condensed Consolidated Balance Sheets – December 30, 2023 and September 30, 2023
Condensed Consolidated Statements of Income – Thirteen Week Periods Ended December 30, 2023 and December 31, 2022
Condensed Consolidated Statements of Comprehensive Income – Thirteen Week Periods Ended December 30, 2023 and December 31, 2022
Condensed Consolidated Statements of Changes in Stockholders’ Deficit – Thirteen Week Periods Ended December 30, 2023 and December 31, 2022
Condensed Consolidated Statements of Cash Flows – Thirteen Week Periods Ended December 30, 2023 and December 31, 2022
Notes to Condensed Consolidated Financial Statements
ITEM 2Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3Quantitative and Qualitative Disclosure About Market Risk
ITEM 4Controls and Procedures
PART IIOTHER INFORMATION
ITEM 1Legal Proceedings
ITEM 1ARisk Factors
ITEM 2Unregistered Sales of Equity Securities and Use of Proceeds: Purchases of Equity Securities by the Issuer
ITEM 5Other Information
ITEM 6Exhibits
SIGNATURES


Table of Contents
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share amounts)
(Unaudited)
December 30, 2023September 30, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$4,135 $3,472 
Trade accounts receivable—Net1,145 1,230 
Inventories—Net1,708 1,616 
Prepaid expenses and other408 420 
Total current assets7,396 6,738 
PROPERTY, PLANT AND EQUIPMENT—NET1,335 1,255 
GOODWILL9,036 8,988 
OTHER INTANGIBLE ASSETS—NET2,733 2,747 
OTHER NON-CURRENT ASSETS185 242 
TOTAL ASSETS$20,685 $19,970 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt$81 $71 
Short-term borrowings—trade receivable securitization facility449 349 
Accounts payable288 305 
Accrued and other current liabilities1,000 854 
Total current liabilities1,818 1,579 
LONG-TERM DEBT21,346 19,330 
DEFERRED INCOME TAXES611 627 
OTHER NON-CURRENT LIABILITIES416 412 
Total liabilities24,191 21,948 
TD GROUP STOCKHOLDERS’ DEFICIT:
Common stock - $.01 par value; authorized 224,400,000 shares; issued 61,211,663 and 60,995,513 at December 30, 2023 and September 30, 2023, respectively
1 1 
Additional paid-in capital2,518 2,440 
Accumulated deficit(4,266)(2,621)
Accumulated other comprehensive loss(60)(98)
Treasury stock, at cost; 5,688,639 shares at December 30, 2023 and September 30, 2023, respectively
(1,706)(1,706)
Total TD Group stockholders’ deficit(3,513)(1,984)
NONCONTROLLING INTERESTS7 6 
Total stockholders’ deficit(3,506)(1,978)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT$20,685 $19,970 
See notes to condensed consolidated financial statements
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TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions, except per share amounts)
(Unaudited) 
 Thirteen Week Periods Ended
 December 30, 2023December 31, 2022
NET SALES$1,789 $1,397 
COST OF SALES747 604 
GROSS PROFIT1,042 793 
SELLING AND ADMINISTRATIVE EXPENSES220 169 
AMORTIZATION OF INTANGIBLE ASSETS35 34 
INCOME FROM OPERATIONS787 590 
INTEREST EXPENSE—NET300 286 
REFINANCING COSTS 4 
OTHER INCOME(1)(1)
INCOME FROM OPERATIONS BEFORE INCOME TAXES488 301 
INCOME TAX PROVISION106 72 
NET INCOME382 229 
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (1)
NET INCOME ATTRIBUTABLE TO TD GROUP$382 $228 
NET INCOME APPLICABLE TO TD GROUP COMMON STOCKHOLDERS$281 $190 
Earnings per share attributable to TD Group common stockholders:
Basic and diluted$4.87 $3.33 
Cash dividends paid per common share$35.00 $ 
Weighted-average shares outstanding:
Basic and diluted57.7 57.1 
See notes to condensed consolidated financial statements
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TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
 Thirteen Week Periods Ended
December 30, 2023December 31, 2022
Net income$382 $229 
Less: Net income attributable to noncontrolling interests (1)
Net income attributable to TD Group$382 $228 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment91 137 
Unrealized (losses) gains on derivatives(53)22 
Pension and post-retirement benefit plans adjustment  
Other comprehensive income, net of tax, attributable to TD Group38 159 
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO TD GROUP$420 $387 
See notes to condensed consolidated financial statements
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TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Amounts in millions, except share amounts)
(Unaudited)

TD Group Stockholders
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other Comprehensive LossTreasury Stock
Number of
Shares
Par
Value
Number of
Shares
ValueNoncontrolling InterestsTotal
BALANCE—September 30, 202260,049,685 $1 $2,113 $(3,914)$(267)(5,688,639)$(1,706)$7 $(3,766)
Changes in noncontrolling interest of consolidated subsidiaries, net— — — — — — — 1 1 
Accrued unvested dividend equivalents and other— — — (1)— — — — (1)
Compensation expense recognized for employee stock options— — 24 — — — — — 24 
Exercise of employee stock options121,490 — 27 — — — — — 27 
Net income attributable to TD Group— — — 228 — — — — 228 
Foreign currency translation adjustment, net of tax— — — — 137 — — — 137 
Unrealized gain on derivatives, net of tax— — — — 22 — — — 22 
Pension and postretirement benefit plans adjustment, net of tax— — — —  — — —  
BALANCE—December 31, 202260,171,175 $1 $2,164 $(3,687)$(108)(5,688,639)$(1,706)$8 $(3,328)


TD Group Stockholders
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other Comprehensive LossTreasury Stock
Number of
Shares
Par
Value
Number of
Shares
ValueNoncontrolling InterestsTotal
BALANCE—September 30, 202360,995,513 $1 $2,440 $(2,621)$(98)(5,688,639)$(1,706)$6 $(1,978)
Changes in noncontrolling interest of consolidated subsidiaries, net— — — — — — — 1 1 
Special dividends ($35 per share) and dividend equivalents— — — (2,020)— — — — (2,020)
Accrued unvested dividend equivalents and other— — — (7)— — — — (7)
Compensation expense recognized for employee stock options— — 26 — — — — — 26 
Exercise of employee stock options216,150 — 52 — — — — — 52 
Net income attributable to TD Group— — — 382 — — — — 382 
Foreign currency translation adjustment, net of tax— — — — 91 — — — 91 
Unrealized loss on derivatives, net of tax— — — — (53)— — — (53)
Pension and postretirement benefit plans adjustment, net of tax— — — —  — — —  
BALANCE—December 30, 202361,211,663 $1 $2,518 $(4,266)$(60)(5,688,639)$(1,706)$7 $(3,506)
See notes to condensed consolidated financial statements
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TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
Thirteen Week Periods Ended
December 30, 2023December 31, 2022
OPERATING ACTIVITIES:
Net income$382 $229 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation36 29 
Amortization of intangible assets and product certification costs35 34 
Amortization of debt issuance costs, original issue discount and premium11 9 
Amortization of inventory step-up1 2 
Amortization of loss contract reserves(5)(12)
Refinancing costs 4 
Non-cash stock and deferred compensation expense51 35 
Foreign currency exchange losses14 18 
Changes in assets/liabilities, net of effects from acquisitions and sales of businesses:
Trade accounts receivable94 121 
Inventories(78)(89)
Income taxes payable94 77 
Other assets3 (2)
Accounts payable(21)(13)
Accrued interest82 3 
Accrued and other liabilities(63)(68)
Net cash provided by operating activities636 377 
INVESTING ACTIVITIES:
Capital expenditures(36)(31)
Acquisition of businesses, net of cash acquired(14)(10)
Net cash used in investing activities(50)(41)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options52 27 
Dividends and dividend equivalent payments(2,038)(38)
Proceeds from issuance of senior secured notes, net983  
Proceeds from term loans, net988 1,690 
Proceeds from trade receivable securitization facility, net100  
Repayment on term loans(16)(1,739)
Financing costs and other, net(2)(5)
Net cash provided by (used in) financing activities67 (65)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS10 16 
NET INCREASE IN CASH AND CASH EQUIVALENTS663 287 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD3,472 3,001 
CASH AND CASH EQUIVALENTS, END OF PERIOD$4,135 $3,288 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest, net$205 $272 
Cash paid (refunded) during the period for income taxes, net of refunds$11 $(2)
See notes to condensed consolidated financial statements
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TRANSDIGM GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEK PERIODS ENDED DECEMBER 30, 2023 AND DECEMBER 31, 2022
(UNAUDITED)
1.    BASIS OF PRESENTATION
As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “Company”, “TD Group”, “TransDigm”, “we” or “us” refer to TransDigm Group Incorporated and its subsidiaries.
Principles of Consolidation
The financial information included herein is unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s condensed consolidated financial statements for the interim periods presented. These financial statements and notes should be read in conjunction with the financial statements and related notes for the fiscal year ended September 30, 2023 included in TD Group’s Annual Report on Form 10-K filed on November 9, 2023. As disclosed therein, the Company’s annual consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). The September 30, 2023 condensed consolidated balance sheet was derived from TD Group’s audited financial statements. The results of operations for the thirteen week period ended December 30, 2023 are not necessarily indicative of the results to be expected for the full year.
Reclassifications
Certain reclassifications have been made to the prior year amounts to conform to the current year presentation, none of which are material.
New Accounting Pronouncements Issued
In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” to amend certain disclosure and presentation requirements for a variety of topics within the ASC. These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The Company does not expect that the application of this standard will have an impact on our condensed consolidated financial statements and disclosures.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 expands disclosures about a public business entity's reportable segments and provides for more detailed information about a reportable segment's expenses. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. This standard is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning one year later. Early adoption is permitted. The Company is currently evaluating this standard to determine its impact on our disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature. The ASU also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. The standard makes several other changes to income tax disclosure requirements. This standard is effective for annual periods beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. Early adoption is permitted. The Company is currently evaluating this standard to determine its impact on our disclosures.
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2.    ACQUISITIONS
CPI Electron Device Business – On November 9, 2023, the Company entered into a definitive agreement to acquire the Electron Device Business of Communications & Power Industries (“CPI”), a portfolio company of TJC, L.P., for approximately $1,385 million in cash. CPI’s Electron Device Business is a leading global manufacturer of electronic components and subsystems primarily serving the aerospace and defense market. Its products are highly engineered, proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms. The acquisition is expected to close in fiscal 2024, subject to regulatory approvals in the United States (“U.S.”) and United Kingdom and customary closing conditions. The acquisition is expected to be financed through existing cash on hand, inclusive of a portion of the cash proceeds from the new long-term debt issued in the first quarter of fiscal 2024. Refer to Note 7, “Debt,” for further disclosure of the aforementioned debt issuances.
Calspan Corporation – On March 14, 2023, the Company entered into a definitive agreement to acquire all the outstanding stock of Calspan Corporation (“Calspan”) for a total purchase price of $730 million, which includes a $1 million working capital settlement paid in the first quarter of fiscal 2024. The acquisition was completed on May 8, 2023 and financed through existing cash on hand. Calspan operates from seven primary facilities within the U.S. and is a leading independent provider of proprietary highly engineered testing and technology development services and systems primarily for the aerospace and defense industry. Calspan’s state of the art transonic wind tunnel is used across a range of important aftermarket-focused development activities for both the commercial and defense aerospace end markets. The services and systems are primarily proprietary with significant aftermarket content. Calspan's operating results are included within TransDigm's Airframe segment as of the May 8, 2023 acquisition date.
As of December 30, 2023, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the Calspan acquisition are subject to adjustment until the end of the respective measurement period.
The Company is in the process of finalizing a third-party valuation of property, plant and equipment and certain intangible assets of Calspan. The allocation of the purchase price is preliminary and will likely change in future periods, perhaps materially, as fair value estimates of the assets acquired and liabilities assumed are finalized, including those related to deferred taxes and income taxes. We utilized both the cost and market approaches to value property, plant and equipment, which consider external transactions and other comparable transactions, estimated replacement and reproduction costs, and estimated useful lives and consideration for physical, functional and economic obsolescence. The fair values of acquired intangibles are determined based on an income approach, using estimates and assumptions that are deemed reasonable by the Company. Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted results of the acquired business including revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”), growth rates, royalty rates and technology obsolescence rates. These assumptions are forward looking and could differ from future economic and market conditions.
Pro forma net sales and results of operations for the Calspan acquisition had it occurred at the beginning of the thirteen week period ended December 31, 2022 are not material and, accordingly, are not provided.
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The allocation of the estimated fair value of assets acquired and liabilities assumed in the Calspan acquisition as of the May 8, 2023 acquisition date, as well as measurement period adjustments recorded within the permissible one year measurement period, are summarized in the table below (in millions):
PreliminaryMeasurement PeriodAdjusted Preliminary
Allocation
Adjustments (2)
Allocation
Assets acquired (excluding cash):
Trade accounts receivable$39 $ $39 
Inventories2  2 
Prepaid expenses and other40  40 
Property, plant and equipment105 278 383 
Goodwill367 (122)245 
(1)
Other intangible assets243 (151)92 
(1)
Other non-current assets7  7 
Total assets acquired (excluding cash)803 5 808 
Liabilities assumed:
Accounts payable10 (1)9 
Accrued and other current liabilities50  50 
Deferred income taxes8 5 13 
Other non-current liabilities6  6 
Total liabilities assumed74 4 78 
Net assets acquired$729 $1 $730 
(1)Of the approximately $245 million of goodwill recognized for the acquisition, the Company expects that approximately $218 million will be deductible for tax purposes. Of the approximately $92 million of other intangible assets recognized for the acquisition, the Company expects that approximately $86 million will be deductible for tax purposes. The goodwill and intangible assets are expected to be deductible over 15 years.
(2)Measurement period adjustments primarily related to the adjustments in the fair values of the acquired property, plant and equipment and other intangible assets from the third-party valuation. A substantial portion of the measurement period adjustments to property, plant and equipment relates to the fair value of the transonic wind tunnel. The offset to the measurement period adjustments was to goodwill.
Extant Aerospace Acquisitions – For the thirteen week period ended December 30, 2023, the Company's Extant Aerospace subsidiary, which is included within TransDigm’s Power & Control segment, completed an acquisition of substantially all of the assets and technical data rights of a certain product line, which met the definition of a business, for a total purchase price of $13 million. The allocation of the purchase price remains preliminary and will likely change, though not materially, in future periods up to the expiration of the respective one year measurement period as fair value estimates of the assets acquired and liabilities assumed are finalized. The Company expects that all of the approximately $6 million of goodwill and $3 million of other intangible assets recognized for the acquisition will be deductible for tax purposes over 15 years.
For the fiscal year ended September 30, 2023, the Company's Extant Aerospace subsidiary, completed a series of acquisitions of substantially all of the assets and technical data rights of certain product lines, each meeting the definition of a business, for a total purchase price of $24 million. The allocation of the purchase price remains preliminary and will likely change, though not materially, in future periods up to the expiration of the respective one year measurement period as fair value estimates of the assets acquired and liabilities assumed are finalized. The Company expects that all of the approximately $12 million of goodwill and $6 million of other intangible assets recognized for the acquisitions will be deductible for tax purposes over 15 years.
Pro forma net sales and results of operations for the Extant Aerospace product line acquisitions, had they occurred at the beginning of the thirteen week periods ended December 30, 2023 or December 31, 2022 are not material and, accordingly, are not provided.
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The acquisitions completed by the Company strengthen and expand the Company’s position to design, produce and supply highly engineered proprietary aerospace components in niche markets with significant aftermarket content and provide opportunities to create value through 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). The purchase prices paid reflect the current EBITDA and cash flows, as well as the future EBITDA and cash flows expected to be generated by the businesses, which are driven in most cases by the recurring aftermarket consumption over the life of a particular aircraft, estimated to be approximately 25 to 30 years.
3.    REVENUE RECOGNITION
TransDigm's sales are concentrated in the aerospace and defense industry. The Company’s customers include: distributors of aerospace components, commercial airlines, large commercial transport and regional and business aircraft original equipment manufacturers (“OEMs”), various armed forces of the U.S. and friendly foreign governments, defense OEMs, system suppliers, and various other industrial customers.
The Company recognizes revenue from contracts with customers using the five step model prescribed in ASC 606. A substantial portion of the Company's revenue is recorded at a point in time basis. Revenue is recognized from the sale of products or services when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to the customer. 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.
In certain contracts, control transfers to the customer over time, primarily in contracts where the customer is required to pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit relative to the work performed for products that were customized for the customer. Therefore, we recognize revenue over time for those agreements that have a right to margin and where the products being produced have no alternative use. 
Based on our production cycle, it is generally expected that goods related to the revenue will be shipped and billed within twelve months. For revenue recognized over time, we estimate the amount of revenue attributable to a contract earned at a given point during the production cycle based on certain costs, such as materials and labor incurred to date, plus the expected profit, which is a cost-to-cost input method.
We consider the contractual consideration payable by the customer and assess variable consideration that may affect the total transaction price. Variable consideration is included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the estimate should be constrained in order to avoid a significant reversal of revenue in a future period. These estimates are based on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.
When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification to an existing contract on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
The Company’s payment terms vary by the type and location of the customer and the products or services offered. The Company does not offer any payment terms that would meet the requirements for consideration as a significant financing component.
Shipping and handling fees and costs incurred in connection with products sold are recorded in cost of sales in the consolidated statements of income, and are not considered a performance obligation to our customers.
The Company pays sales commissions that relate to contracts for products or services that are satisfied at a point in time or over a period of one year or less and are expensed as incurred. These costs are reported as a component of selling and administrative expenses in the condensed consolidated statements of income.
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Contract Assets and Liabilities – Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing or reimbursable costs related to a specific contract. Contract liabilities (Deferred revenue) relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. The following table summarizes our contract assets and liabilities balances (in millions):
December 30, 2023September 30, 2023
Contract assets, current (1)
$196 $191 
Contract assets, non-current (2)
 1 
Total contract assets196 192 
Contract liabilities, current (3)
92 79 
Contract liabilities, non-current (4)
7 8 
Total contract liabilities99 87 
Net contract assets$97 $105 
(1)Included in prepaid expenses and other on the condensed consolidated balance sheets.
(2)Included in other non-current assets on the condensed consolidated balance sheets.
(3)Included in accrued and other current liabilities on the condensed consolidated balance sheets.
(4)Included in other non-current liabilities on the condensed consolidated balance sheets.
The increase in the Company's total contract assets at December 30, 2023 compared to September 30, 2023 is primarily due to the timing and status of work in process and/or milestones of certain contracts. The increase in the Company's total contract liabilities at December 30, 2023 compared to September 30, 2023 is primarily due to the receipt of advance payments. For the thirteen week period ended December 30, 2023, the revenue recognized that was previously included in contract liabilities was approximately $9 million.
Refer to Note 11, “Segments,” for disclosures related to the disaggregation of revenue.
Allowance for Credit Losses – The Company's allowance for credit losses is the allowance for uncollectible accounts. The allowance for uncollectible accounts reduces the trade accounts receivable balance to the estimated net realizable value equal to the amount that is expected to be collected.
The Company’s method for developing its allowance for credit losses is based on historical write-off experience, the aging of receivables, an assessment of the creditworthiness of customers, economic conditions and other external market information and supportable forward-looking information. The allowance also incorporates a provision for the estimated impact of disputes with customers. All provisions for allowances for uncollectible accounts are included in selling and administrative expenses. The determination of the amount of the allowance for uncollectible accounts is subject to judgment and estimation by management. If circumstances change or economic conditions deteriorate or improve, the allowance for uncollectible accounts could increase or decrease.
As of December 30, 2023 and September 30, 2023, the allowance for uncollectible accounts was $33 million and $31 million, respectively. The allowance for uncollectible accounts is assessed individually at each operating unit by the operating unit’s management team.
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4.    EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data) using the two-class method:
Thirteen Week Periods Ended
December 30, 2023December 31, 2022
Numerator for earnings per share:
Net income$382 $229 
Less: Net income attributable to noncontrolling interests (1)
Net income attributable to TD Group382 228 
Less: Dividends paid on participating securities (1)
(101)(38)
Net income applicable to TD Group common stockholders—basic and diluted$281 $190 
Denominator for basic and diluted earnings per share under the two-class method:
Weighted-average common shares outstanding55.4 54.4 
Vested options deemed participating securities2.3 2.7 
Total shares for basic and diluted earnings per share57.7 57.1 
Earnings per share—basic and diluted$4.87 $3.33 
(1)Represents dividend equivalent payments in the first quarter of fiscal 2024 and 2023 of approximately $101 million, of which $18 million was accrued as of September 30, 2023 and the remaining $83 million was associated with the November 2023 $35.00 dividend declaration, and $38 million, respectively.
5.    INVENTORIES
Inventories are stated at the lower of cost or net realizable value. Cost of inventories is generally determined by the average cost and the first–in, first–out (“FIFO”) methods and includes material, labor and overhead related to the manufacturing process.
Inventories consist of the following (in millions):
December 30, 2023September 30, 2023
Raw materials and purchased component parts$1,208 $1,144 
Work-in-progress480 455 
Finished goods235 226 
Total1,923 1,825 
Reserves for excess and obsolete inventory(215)(209)
Inventories—Net$1,708 $1,616 
6.    INTANGIBLE ASSETS
Other intangible assets–net in the condensed consolidated balance sheets consist of the following (in millions):
 December 30, 2023September 30, 2023
 Gross Carrying AmountAccumulated AmortizationNetGross Carrying AmountAccumulated AmortizationNet
Trademarks and trade names$1,022 $— $1,022 $1,019 $— $1,019 
Technology2,138 917 1,221 2,124 888 1,236 
Order backlog2 2  7 6 1 
Customer relationships631 146 485 623 136 487 
Other10 5 5 9 5 4 
Total$3,803 $1,070 $2,733 $3,782 $1,035 $2,747 
The aggregate amortization expense on identifiable intangible assets is approximately $35 million and $34 million for the thirteen week periods ended December 30, 2023 and December 31, 2022, respectively.
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As disclosed in Note 2, “Acquisitions,” the estimated fair value of the net identifiable tangible and intangible assets acquired is based on the acquisition method of accounting. The fair value of the net identifiable tangible and intangible assets acquired will be finalized within the measurement period (not to exceed one year). Intangible assets acquired during the thirteen week period ended December 30, 2023 are summarized in the table below (in millions):
Gross AmountAmortization Period
Intangible assets not subject to amortization:
Goodwill$6 
6 
Intangible assets subject to amortization:
Technology2 20 years
Customer relationships1 20 years
3 
Total$9 
The following is a summary of changes in the carrying value of goodwill by segment from September 30, 2023 through December 30, 2023 (in millions):
Power & ControlAirframeNon-aviationTotal
Balance at September 30, 2023$4,194 $4,701 $93 $8,988 
Goodwill acquired during the period (Note 2)6   6 
Purchase price allocation adjustments (1)
 1  1 
Currency translation adjustments and other22 19  41 
Balance at December 30, 2023$4,222 $4,721 $93 $9,036 
(1)Related to the opening balance sheet adjustments recorded from the acquisition of Calspan completed during fiscal year 2023, up to the expiration of the measurement period (not to exceed one year). Refer to Note 2, “Acquisitions,” for further information.
The Company performs its annual impairment test for goodwill and other intangible assets as of the first day of the fourth fiscal quarter of each year, or more frequently, if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We have assessed the changes in events and circumstances through the first quarter of fiscal 2024 and concluded that no triggering events occurred that required interim quantitative testing.
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7.    DEBT
The Company’s debt consists of the following (in millions):
December 30, 2023
Gross AmountDebt Issuance CostsOriginal Issue (Discount) or PremiumNet Amount
Short-term borrowings—trade receivable securitization facility$450 $(1)$ $449 
Term loans$7,233 $(29)$(47)$7,157 
6.25% secured notes due 2026 (“2026 Secured Notes”)
4,400 (23)2 4,379 
7.50% senior subordinated notes due 2027 (“7.50% 2027 Notes”)
550 (2) 548 
5.50% senior subordinated notes due 2027 (“5.50% 2027 Notes”)
2,650 (12) 2,638 
6.75% secured notes due 2028 (“2028 Secured Notes”)
2,100 (18)(9)2,073 
4.625% senior subordinated notes due 2029 (“4.625% 2029 Notes”)
1,200 (7) 1,193 
4.875% senior subordinated notes due 2029 (“4.875% 2029 Notes”)
750 (5) 745 
6.875% secured notes due 2030 (“2030 Secured Notes”)
1,450 (14) 1,436 
7.125% secured notes due 2031 (“2031 Secured Notes”)
1,000 (10)(7)983 
Government refundable advances21   21 
Finance lease obligations254   254 
21,608 (120)(61)21,427 
Less: current portion81   81 
Long-term debt$21,527 $(120)$(61)$21,346 

September 30, 2023
Gross AmountDebt Issuance CostsOriginal Issue (Discount) or PremiumNet Amount
Short-term borrowings—trade receivable securitization facility$350 $(1)$ $349 
Term loans$6,249 $(22)$(48)$6,179 
2026 Secured Notes4,400 (25)2 4,377 
7.50% 2027 Notes
550 (2) 548 
5.50% 2027 Notes
2,650 (12) 2,638 
2028 Secured Notes2,100 (19)(10)2,071 
4.625% 2029 Notes
1,200 (7) 1,193 
4.875% 2029 Notes
750 (5) 745 
2030 Secured Notes1,450 (14) 1,436 
Government refundable advances21   21 
Finance lease obligations193   193 
19,563 (106)(56)19,401 
Less: current portion71   71 
Long-term debt$19,492 $(106)$(56)$19,330 
Amendment No. 13 and Incremental Term Loan Assumption Agreement – On November 28, 2023, the Company entered into Amendment No. 13 and Incremental Term Loan Assumption Agreement (herein, “Amendment No. 13”) to the Second Amended and Restated Credit Agreement dated as of June 4, 2014 (the “Credit Agreement”). Under the terms of Amendment No. 13, the Company, among other things, issued $1,000 million in Tranche J term loans maturing February 28, 2031. The Tranche J term loans bear interest at a rate of adjusted Term Secured Overnight Financing Rate (“Term SOFR”) plus an applicable margin of 3.25%. The Tranche J term loans were issued at a discount of 0.25%, or approximately $3 million. The Tranche J term loans were fully drawn on November 28, 2023 and the other terms and conditions that apply to the Tranche J term loans are substantially the same as the terms and conditions that apply to the term loans immediately prior to Amendment No. 13. Principal payments commence on March 31, 2024, in which $3 million will be paid on a quarterly basis up to the maturity date.
The Company capitalized $10 million in debt issuance costs associated with the Tranche J term loans during the thirteen week period ended December 30, 2023.
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Issuance of $1,000 million Senior Secured Notes due 2031 On November 28, 2023, the Company entered into a purchase agreement in connection with a private offering of $1,000 million in aggregate principal amount of 7.125% senior secured notes due 2031 (the “2031 Secured Notes”) at an issue price of 99.25% of the principal amount, which represents an approximately $8 million discount. The 2031 Secured Notes were issued pursuant to an indenture, dated as of November 28, 2023, amongst TransDigm Inc., as issuer, TransDigm Group and the other subsidiaries of TransDigm Inc. named therein, as guarantors. The 2031 Secured Notes are guaranteed, on a senior secured basis, by TransDigm Group and each of TransDigm Inc.’s direct and indirect restricted subsidiaries that is a borrower or guarantor under TransDigm’s senior secured credit facilities or that issues or guarantees any capital markets indebtedness of TransDigm or any of the guarantors in an aggregate principal amount of at least $200 million. The 2031 Secured Notes and guarantees rank equally in right of payment with all of TransDigm’s and the guarantors’ existing and future senior indebtedness, senior in right of payment to any of TransDigm’s and the guarantors’ existing and future indebtedness that is, by its terms, expressly subordinated in right of payment to the 2031 Secured Notes and guarantees, and structurally subordinated to all of the liabilities of TransDigm’s non-guarantor subsidiaries.
The 2031 Secured Notes bear interest at a rate of 7.125% per annum, which accrues from November 28, 2023 and is payable in arrears on June 1 and December 1 of each year, commencing on June 1, 2024. The 2031 Secured Notes mature on December 1, 2031, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the indenture.
The Company capitalized $10 million in debt issuance costs associated with the 2031 Secured Notes during the thirteen week period ended December 30, 2023.
Trade Receivable Securitization Facility – The Company’s trade receivable securitization facility (the “Securitization Facility”) effectively increases the Company’s borrowing capacity depending on the amount of the domestic operations’ trade accounts receivable. The Securitization Facility includes the right for the Company to exercise annual one year extensions as long as there have been no termination events as defined by the agreement. The Company uses the proceeds from the Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs.
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. During the first quarter of fiscal 2024, the Company drew the remaining $100 million available under the Securitization Facility. As of December 30, 2023, the Company has borrowed $450 million under the Securitization Facility, which is fully drawn, and bears interest at a rate of 1.6% plus Term SOFR. At December 30, 2023, the applicable interest rate was 6.99%. The Securitization Facility is collateralized by substantially all of the Company’s domestic operations’ trade accounts receivable.
Government Refundable Advances – Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The requirement to repay this advance is based on year-over-year commercial aviation revenue growth for certain product lines at CMC Electronics, which is a wholly-owned subsidiary of TransDigm. As of December 30, 2023 and September 30, 2023, the outstanding balance of these advances was $21 million.
Obligations under Finance Leases – The Company leases certain buildings and equipment under finance leases. The present value of the minimum finance lease payments, net of the current portion, represents a balance of $254 million and $193 million at December 30, 2023 and September 30, 2023, respectively. The increase in the current fiscal year is attributable to certain new leases of facilities and amendments to previous agreements qualifying as lease modifications resulting in a change in classification from an operating lease to a finance lease. Refer to Note 13, “Leases,” for further disclosure of the Company's lease obligations.
8.    INCOME TAXES
At the end of each reporting period, TD Group makes an estimate of its annual effective income tax rate. The estimate used in the year-to-date period may change in subsequent periods.
During the thirteen week periods ended December 30, 2023 and December 31, 2022, the effective income tax rate was 21.7% and 23.9%, respectively. The Company’s lower effective income tax rate for the thirteen week period ended December 30, 2023, was primarily due to a more significant discrete impact of excess tax benefits associated with share-based payments. The Company's effective income tax rate for the thirteen week period ended December 30, 2023 was slightly higher than the federal statutory tax rate of 21% primarily due to an increase in the valuation allowance applicable to the Company's net interest deduction limitation carryforward, offset by the discrete impact of excess tax benefits associated with share-based payments.
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The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations for years before fiscal 2018. The Company is currently under examination for its federal income taxes in Canada for fiscal years 2013 through 2019, in France for fiscal years 2020 through 2022, and in Germany for fiscal years 2014 through 2019. In addition, the Company is subject to state income tax examinations for fiscal years 2015 and later.
Unrecognized tax benefits at December 30, 2023 and September 30, 2023, the recognition of which would have an impact on the effective tax rate for each fiscal year, amounted to $17 million. The Company classifies all income tax-related interest and penalties as income tax expense, which were not significant for the thirteen week periods ended December 30, 2023 and December 31, 2022. As of December 30, 2023 and September 30, 2023, the Company accrued $6 million for the potential payment of interest and penalties. Within the next twelve months, it is reasonably possible that unrecognized tax benefits could be reduced by approximately $6 million resulting from the resolution or closure of tax examinations. Any increase in the amount of unrecognized tax benefits within the next twelve months is not expected to be material.
9.    FAIR VALUE MEASUREMENTS
The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following summarizes the carrying amounts and fair values of financial instruments (in millions):
December 30, 2023September 30, 2023
LevelCarrying
Amount
Fair ValueCarrying
Amount
Fair Value
Assets:
Cash and cash equivalents1$4,135 $4,135 $3,472 $3,472 
Interest rate swap agreements (1)
275 75 103 103 
Interest rate swap agreements (2)
220 20 41 41 
Interest rate cap agreements (2)
239 39 53 53 
Interest rate collar agreements (2)
24 4 17 17 
Liabilities:
Foreign currency forward exchange contracts (3)
2  5 5 
Interest rate swap agreements (4)
23 3 3 3 
Interest rate cap agreements (4)
21 1 1 1 
Short-term borrowings - trade receivable securitization facility (5)
2449 449 349 349 
Long-term debt, including current portion:
Term loans (5)
27,157 7,216 6,179 6,212 
2026 Secured Notes (5)
14,379 4,378 4,377 4,329 
7.50% 2027 Notes (5)
1548 552 548 549 
5.50% 2027 Notes (5)
12,638 2,607 2,638 2,484 
2028 Secured Notes (5)
12,073 2,137 2,071 2,069 
4.625% 2029 Notes (5)
11,193 1,116 1,193 1,047 
4.875% 2029 Notes (5)
1745 698 745 654 
2030 Secured Notes (5)
11,436 1,494 1,436 1,423 
2031 Secured Notes (5)
1983 1,051   
Government refundable advances221 21 21 21 
Finance lease obligations2254 254 193 193 
(1)Included in prepaid expenses and other on the condensed consolidated balance sheets.
(2)Included in other non-current assets on the condensed consolidated balance sheets.
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(3)Included in accrued and other current liabilities on the condensed consolidated balance sheets.
(4)Included in other non-current liabilities on the condensed consolidated balance sheets.
(5)The carrying amount of the debt instrument is presented net of debt issuance costs, premium and discount. Refer to Note 7, “Debt,” for gross carrying amounts.
The Company values its financial instruments using an industry standard market approach, in which prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities. No financial instruments were recognized or disclosed using unobservable inputs (i.e., Level 3).
The Company’s derivatives consist of interest rate swap, cap and collar agreements and foreign currency exchange contracts. The fair values of the interest rate swap, cap and collar agreements were derived by taking the net present value of the expected cash flows using observable market inputs (Level 2) such as SOFR rate curves, futures, volatilities and basis spreads (when applicable). The fair values of the foreign currency exchange contracts were derived by using Level 2 inputs based on observable spot and forward exchange rates in active markets. There has not been any impact to the fair value of derivative liabilities due to the Company's own credit risk. Similarly, there has not been any material impact to the fair value of derivative assets based on the Company's evaluation of counterparties' credit risks.
The estimated fair value of the Company’s term loans was based on information provided by the agent under the Company’s Credit Agreement. The estimated fair values of the Company’s notes were based upon quoted market prices.
The fair value of cash and cash equivalents, trade accounts receivable-net and accounts payable approximated carrying value due to the short-term nature of these instruments at December 30, 2023 and September 30, 2023.
10.    DERIVATIVES AND HEDGING ACTIVITIES
The Company is exposed to, among other things, the impact of changes in foreign currency exchange rates and interest rates in the normal course of business. The Company’s risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments to offset a portion of these risks. The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks and does not enter into such transactions for trading purposes. The Company generally does not require collateral or other security with counterparties to these financial instruments and is therefore subject to credit risk in the event of nonperformance; however, the Company monitors credit risk and currently does not anticipate nonperformance by other parties. These derivative financial instruments do not subject the Company to undue risk, as gains and losses on these instruments generally offset gains and losses on the underlying assets, liabilities, or anticipated transactions that are being hedged. The Company has agreements with each of its swap, cap and collar counterparties that contain a provision whereby if the Company defaults on the Credit Agreement, the Company could also be declared in default on its swaps, cap and collars resulting in an acceleration of payment under the swaps, cap and collars.
All derivative financial instruments are recorded at fair value in the condensed consolidated balance sheets. For a derivative that has not been designated as an accounting hedge, the change in the fair value is recognized immediately through earnings. For a derivative that has been designated as an accounting hedge of an existing asset or liability (a fair value hedge), the change in the fair value of both the derivative and underlying asset or liability is recognized immediately through earnings. For a derivative designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the condensed consolidated balance sheets in accumulated other comprehensive loss to the extent the derivative is effective in mitigating the exposure related to the anticipated transaction. The change in the fair value related to the ineffective portion of the hedge, if any, is immediately recognized in earnings. The amount recorded within accumulated other comprehensive loss is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings.
Interest Rate Swap, Cap and Collar Agreements – Interest rate swap, cap and collar agreements are used to manage interest rate risk associated with floating rate borrowings under our Credit Agreement. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the term of the agreements without an exchange of the underlying principal amount. The agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating rate debt to a fixed rate basis from the effective date through the maturity date of the respective interest rate swap, cap and collar agreements, thereby reducing the impact of interest rate movements on future interest expense.
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During the second quarter of fiscal 2023, we entered into LIBOR to Term SOFR basis interest rate swap and cap transactions to effectively convert our existing swaps and cap from LIBOR-based to Term SOFR-based. 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. We also entered into forward starting interest rate collar agreements during the second quarter of fiscal 2023. The interest rate collar agreements establish a range where we will pay the counterparties if the three-month Term SOFR rate falls below the established floor rate of 2.0%, and the counterparties will pay us if the three-month Term SOFR rate exceeds the ceiling rate of 3.5%. The collar will settle quarterly from the effective date through the maturity date. No payments or receipts will be exchanged on the interest rate collar contracts unless interest rates rise above or fall below the contracted ceiling or floor rates.
The tables below summarize the key terms of the swaps, cap and collars as of December 30, 2023 (aggregated by effective date).
Interest rate swap agreements:
Aggregate Notional Amount (in millions)Effective DateMaturity DateConversion of Related Variable Rate Debt subject to Term SOFR to Fixed Rate of:
$4003/31/20236/28/2024
6.25% (3.0% plus the 3.25% margin percentage)
$9003/31/20236/28/2024
6.35% (3.1% plus the 3.25% margin percentage)
$5003/31/20233/31/2025
6.25% (3.0% plus the 3.25% margin percentage)
$1,5003/31/20233/31/2025
6.35% (3.1% plus the 3.25% margin percentage)
$7003/31/20239/30/2025
4.55% (1.3% plus the 3.25% margin percentage)
Interest rate cap agreement:
Aggregate Notional Amount (in millions)Effective DateMaturity DateOffsets Variable Rate Debt Attributable to Fluctuations Above:
$7003/31/20239/30/2025
Three-month Term SOFR rate of 1.25%
Interest rate collar agreements:
Aggregate Notional Amount (in millions)Effective DateMaturity DateOffsets Variable Rate Debt Attributable to Fluctuations Below and Above:
$1,1003/31/20259/30/2026
Three-month Term SOFR rate of 2.00% (floor) and 3.50% (cap)
$5009/30/20259/30/2026
Three-month Term SOFR rate of 2.00% (floor) and 3.50% (cap)
These derivative instruments qualify as effective cash flow hedges under U.S. GAAP. For the LIBOR to Term SOFR basis interest rate swap and cap agreements referenced above, we applied the practical expedients permissible under ASC 848 to continue hedge accounting for our existing swaps and cap as effective cash flow hedges. For our cash flow hedges, the effective portion of the gain or loss from the financial instruments is initially reported as a component of accumulated other comprehensive loss in stockholders’ deficit and subsequently reclassified into earnings in the same line as the hedged item in the same period or periods during which the hedged item affects earnings. As the interest rate swap, cap and collar agreements are used to manage interest rate risk, any gains or losses from the derivative instruments that are reclassified into earnings are recognized in interest expense-net in the condensed consolidated statements of income. Cash flows related to the derivative contracts are included in cash flows from operating activities on the condensed consolidated statements of cash flows.
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Certain derivative asset and liability balances are offset where master netting agreements provide for the legal right of setoff. For classification purposes, we record the net fair value of each type of derivative position that is expected to settle in less than one year with each counterparty as a net current asset or liability and each type of long-term position as a net non-current asset or liability. The amounts shown in the table below represent the gross amounts of recognized assets and liabilities, the amounts offset in the condensed consolidated balance sheets and the net amounts of assets and liabilities presented therein (in millions):
December 30, 2023September 30, 2023
AssetLiabilityAssetLiability
Interest rate cap agreement$39 $1 $53 $1 
Interest rate collar agreements4  17  
Interest rate swap agreements95 3 144 3 
Net derivatives as classified in the condensed consolidated balance sheets (1)
$138 $4 $214 $4 
(1)Refer to Note 9, “Fair Value Measurements,” for the condensed consolidated balance sheets classification of the Company's interest rate swap, cap and collar agreements.
Based on the fair value amounts determined as of December 30, 2023, the estimated net amount of existing (gains) losses and caplet amortization expected to be reclassified into interest expense-net within the next twelve months is approximately ($71) million.
Foreign Currency Forward Exchange Contracts – The Company transacts business in various foreign currencies, which subjects the Company’s cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates, and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. At December 30, 2023, the Company has outstanding foreign currency forward exchange contracts to sell U.S. dollars with notional amounts of $124 million. The maximum duration of the Company’s foreign currency cash flow hedge contracts at December 30, 2023 is nine months. These notional values consist of contracts for the Canadian dollar and the euro and are stated in U.S. dollar equivalents at spot exchange rates at the respective trade dates. Amounts related to foreign currency forward exchange contracts included in accumulated other comprehensive loss in stockholders' deficit are reclassified into net sales when the hedged transaction settles.
During the thirteen week period ended December 30, 2023, the losses reclassified on settlements of foreign currency forward exchange contracts designated as cash flow hedges into net sales was approximately $1 million. The losses were previously recorded as a component of accumulated other comprehensive loss in stockholders' deficit. As of December 30, 2023, the Company expects to record a net loss of less than $1 million on foreign currency forward exchange contracts designated as cash flow hedges to net sales over the next twelve months.
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11.    SEGMENTS
The Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.
The Power & Control segment includes operations that primarily develop, produce and market systems and components that predominately provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. 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. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.
The Airframe segment includes operations that primarily develop, produce and market systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies. 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. Primary customers of this segment are airframe manufacturers and cabin system suppliers and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.
The Non-aviation segment includes operations that primarily develop, produce and market products for non-aviation markets. Major product offerings include seat belts and safety restraints for ground transportation applications, mechanical/electromechanical actuators and controls for space applications, hydraulic/electromechanical actuators and fuel valves for land-based gas turbines, and refueling systems for heavy equipment used in mining, construction and other industries and turbine controls for the energy and oil and gas markets. Primary customers of this segment are off-road vehicle suppliers and subsystem suppliers, child restraint system suppliers, satellite and space system suppliers, manufacturers of heavy equipment used in mining, construction and other industries and turbine original equipment manufacturers, gas pipeline builders and electric utilities.
The primary measurement used by management to review and assess the operating performance of each segment is EBITDA As Defined. 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 and divestiture transaction-related expenses, and refinancing costs. Acquisition 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.
EBITDA As Defined is not a measurement of financial performance under U.S. GAAP. 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.
The Company’s segments are reported on the same basis used internally for evaluating performance and for allocating resources. The accounting policies for each segment are the same as those described in the summary of significant accounting policies in the Company’s consolidated financial statements. Intersegment sales and transfers are recorded at values based on market prices, which creates intercompany profit on intersegment sales or transfers that is eliminated in consolidation. Intersegment sales were immaterial for the periods presented below. Corporate consists of our corporate offices. Corporate expenses consist primarily of compensation, benefits, professional services and other administrative costs incurred by the corporate offices. Corporate assets consist primarily of cash and cash equivalents. Corporate expenses and assets reconcile reportable segment data to the consolidated totals. An immaterial amount of corporate expenses is allocated to the operating segments.
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The following table presents net sales by reportable segment (in millions):
Thirteen Week Periods Ended
December 30, 2023December 31, 2022
Net sales to external customers
Power & Control
Commercial and non-aerospace OEM$177 $152 
Commercial and non-aerospace aftermarket296 242 
Defense412 331 
Total Power & Control885 725 
Airframe
Commercial and non-aerospace OEM272 201 
Commercial and non-aerospace aftermarket324 238 
Defense266 198 
Total Airframe862 637 
Total Non-aviation42 35 
Net Sales$1,789 $1,397 
The following table reconciles EBITDA As Defined by segment to consolidated income from operations before income taxes (in millions):
Thirteen Week Periods Ended
December 30, 2023December 31, 2022
EBITDA As Defined
Power & Control$509 $401 
Airframe431 312 
Non-aviation17 14 
Total segment EBITDA As Defined957 727 
Less: Unallocated corporate EBITDA As Defined45 28 
Total Company EBITDA As Defined912 699 
Depreciation and amortization expense71 63 
Interest expense-net300 286 
Acquisition and divestiture transaction-related expenses2 3 
Non-cash stock and deferred compensation expense51 35 
Refinancing costs 4 
Other, net 7 
Income from operations before income taxes$488 $301 
The following table presents total assets by segment (in millions):
December 30, 2023September 30, 2023
Total assets
Power & Control$7,440 $7,315 
Airframe9,083 8,972 
Non-aviation228 234 
Corporate3,934 3,449 
$20,685 $19,970 
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12.    ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the total changes by component in accumulated other comprehensive loss (“AOCI”), net of taxes, for the thirteen week periods ended December 30, 2023 and December 31, 2022 (in millions):
Unrealized (losses) gains on derivatives (1)
Pension and post-retirement benefit plans adjustment (2)
Foreign currency translation adjustment (3)
Total
Balance at September 30, 2023$143 $2 $(243)$(98)
Net current-period other comprehensive (loss) income (4)
(53) 91 38 
Balance at December 30, 2023$90 $2 $(152)$(60)
Balance at September 30, 2022$123 $(10)$(380)$(267)
Net current-period other comprehensive income (4)
22  137 159 
Balance at December 31, 2022$145 $(10)$(243)$(108)
(1)Represents unrealized (losses) gains on derivatives designated and qualifying as cash flow hedges, net of taxes, of ($18) million and $7 million for the thirteen week periods ended December 30, 2023 and December 31, 2022, respectively.
(2)There were no material pension liability adjustments, net of taxes, related to activity on the defined pension plan and postretirement benefit plan for the thirteen week periods ended December 30, 2023 and December 31, 2022.
(3)Represents gains (losses) resulting from foreign currency translation of financial statements, including gains (losses) from certain intercompany transactions, into U.S. dollars at the rates of exchange in effect at the balance sheet dates.
(4)Presented net of reclassifications out of AOCI into earnings, specifically net sales and interest expense-net, for realized (losses) gains on derivatives designated and qualifying as cash flow hedges of ($1) million (net of taxes of less than ($1) million) and $28 million (net of taxes of $9 million), respectively, for the thirteen week period ended December 30, 2023 and ($1) million (net of taxes of less than ($1) million) and $6 million (net of taxes of $2 million), respectively, for the thirteen week period ended December 31, 2022.
13.    LEASES
The Company leases certain manufacturing facilities, offices, land, equipment and vehicles. Such leases, some of which are noncancellable and, in many cases, include renewals, expire at various dates. Such options to renew are included in the lease term when it is reasonably certain that the option will be exercised. The Company’s lease agreements typically do not contain any significant residual value guarantees or restrictive covenants, and payments within certain lease agreements are adjusted periodically for changes in an index or rate.
The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The discount rate implicit within our leases is generally not determinable and therefore we determine the discount rate based on our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on the lease term and the currency in which lease payments are made. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of twelve months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease.
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The components of lease expense are as follows (in millions):
Thirteen Week Periods Ended
ClassificationDecember 30, 2023December 31, 2022
Operating lease costCost of sales or selling and administrative expenses$5 $5 
Finance lease cost:
Amortization of leased assetsCost of sales3 2 
Interest on lease liabilitiesInterest expense-net2 3 
Total lease cost$10 $10 
Supplemental cash flow information related to leases is as follows (in millions):
Thirteen Week Periods Ended
December 30, 2023December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows from operating leases$5 $5 
Operating cash outflows from finance leases3 3 
Financing cash outflows from finance leases1 1 
Lease assets obtained in exchange for new lease obligations:
Operating leases$1 $ 
Financing leases59 48 
Supplemental balance sheet information related to leases is as follows (in millions):
ClassificationDecember 30, 2023September 30, 2023
Operating Leases
Operating lease right-of-use assetsOther non-current assets$59 $64 
Current operating lease liabilitiesAccrued and other current liabilities16 16 
Long-term operating lease liabilitiesOther non-current liabilities45 51 
Total operating lease liabilities$61 $67 
Finance Leases
Finance lease right-of-use assets, netProperty, plant and equipment-net$237 $176 
Current finance lease liabilitiesCurrent portion of long-term debt5 5 
Long-term finance lease liabilitiesLong-term debt249 188 
Total finance lease liabilities$254 $193 
As of December 30, 2023, the Company has the following remaining lease term and weighted average discount rates:
Weighted-average remaining lease term
Operating leases5.5 years
Finance leases21.7 years
Weighted-average discount rate
Operating leases6.0%
Finance leases7.0%
22

Table of Contents
Maturities of lease liabilities at December 30, 2023 are as follows (in millions):
Operating LeasesFinance Leases
2024$14 $13 
202517 20 
202612 20 
202710 21 
20285 22 
Thereafter14 444 
Total future minimum lease payments72 540 
Less: imputed interest11 286 
Present value of lease liabilities reported$61 $254 
14.    COMMITMENTS AND CONTINGE