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 June 29, 2024

☐ 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.)

1350 Euclid Avenue,	Suite 1600,	Cleveland,	Ohio	44115
(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 value	TDG	New York Stock Exchange

The number of shares outstanding of TransDigm Group Incorporated’s common stock, par value $.01 per share, was 56,111,393 as of July 31, 2024.

TABLE OF CONTENTS

			Page
PART I	FINANCIAL INFORMATION		1
ITEM 1		Financial Statements	1
		Condensed Consolidated Balance Sheets – June 29, 2024 and September 30, 2023	1
		Condensed Consolidated Statements of Income – Thirteen and Thirty-Nine Week Periods Ended June 29, 2024 and July 1, 2023	2
		Condensed Consolidated Statements of Comprehensive Income – Thirteen and Thirty-Nine Week Periods Ended June 29, 2024 and July 1, 2023	3
		Condensed Consolidated Statements of Changes in Stockholders’ Deficit – Thirteen and Thirty-Nine Week Periods Ended June 29, 2024 and July 1, 2023	4
		Condensed Consolidated Statements of Cash Flows – Thirty-Nine Week Periods Ended June 29, 2024 and July 1, 2023	6
		Notes to Condensed Consolidated Financial Statements	7
ITEM 2		Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
ITEM 3		Quantitative and Qualitative Disclosure About Market Risk	53
ITEM 4		Controls and Procedures	53
PART II	OTHER INFORMATION		54
ITEM 1		Legal Proceedings	54
ITEM 1A		Risk Factors	54
ITEM 2		Unregistered Sales of Equity Securities and Use of Proceeds: Purchases of Equity Securities by the Issuer	54
ITEM 6		Exhibits	55
SIGNATURES			56

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in millions, except share amounts)

(Unaudited)

	June 29, 2024		September 30, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,360	$	3,472
Trade accounts receivable—Net	1,300		1,230
Inventories—Net	1,878		1,616
Prepaid expenses and other	523		420
Total current assets	7,061		6,738
PROPERTY, PLANT AND EQUIPMENT—NET	1,431		1,255
GOODWILL	10,018		8,988
OTHER INTANGIBLE ASSETS—NET	3,116		2,747
OTHER NON-CURRENT ASSETS	202		242
TOTAL ASSETS	$	21,828	$	19,970
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt	$	78	$	71
Short-term borrowings—trade receivable securitization facility	450		349
Accounts payable	320		305
Accrued and other current liabilities	1,003		854
Total current liabilities	1,851		1,579
LONG-TERM DEBT	21,364		19,330
DEFERRED INCOME TAXES	708		627
OTHER NON-CURRENT LIABILITIES	415		412
Total liabilities	24,338		21,948
TD GROUP STOCKHOLDERS’ DEFICIT:
Common stock - $.01 par value; authorized 224,400,000 shares; issued 61,774,108 and 60,995,513 at June 29, 2024 and September 30, 2023, respectively	1		1
Additional paid-in capital	2,749		2,440
Accumulated deficit	(3,416)		(2,621)
Accumulated other comprehensive loss	(146)		(98)
Treasury stock, at cost; 5,688,639 shares at June 29, 2024 and September 30, 2023, respectively	(1,706)		(1,706)
Total TD Group stockholders’ deficit	(2,518)		(1,984)
NONCONTROLLING INTERESTS	8		6
Total stockholders’ deficit	(2,510)		(1,978)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	21,828	$	19,970

See notes to condensed consolidated financial statements

1

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in millions, except per share amounts)

(Unaudited) 

	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
NET SALES	$	2,046	$	1,744	$	5,754	$	4,733
COST OF SALES	826		715		2,341		1,983
GROSS PROFIT	1,220		1,029		3,413		2,750
SELLING AND ADMINISTRATIVE EXPENSES	248		209		715		578
AMORTIZATION OF INTANGIBLE ASSETS	38		37		110		105
INCOME FROM OPERATIONS	934		783		2,588		2,067
INTEREST EXPENSE—NET	316		291		943		872
REFINANCING COSTS	30		32		59		41
OTHER INCOME	(14)		(9)		(24)		(12)
INCOME FROM OPERATIONS BEFORE INCOME TAXES	602		469		1,610		1,166
INCOME TAX PROVISION	141		117		362		281
NET INCOME	461		352		1,248		885
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—		(1)		(2)		(2)
NET INCOME ATTRIBUTABLE TO TD GROUP	$	461	$	351	$	1,246	$	883
NET INCOME APPLICABLE TO TD GROUP COMMON STOCKHOLDERS	$	461	$	351	$	1,145	$	845
Earnings per share attributable to TD Group common stockholders:
Basic and diluted	$	7.96	$	6.14	$	19.81	$	14.80
Cash dividends paid per common share	$	—	$	—	$	35.00	$	—
Weighted-average shares outstanding:
Basic and diluted	57.9		57.2		57.8		57.1

See notes to condensed consolidated financial statements

2

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in millions)

(Unaudited)

	Thirteen Week Periods Ended				Thirty-Nine Week Periods Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Net income	$	461	$	352	$	1,248	$	885
Less: Net income attributable to noncontrolling interests	—		(1)		(2)		(2)
Net income attributable to TD Group	$	461	$	351	$	1,246	$	883
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment	(7)		31		24		211
Unrealized (losses) gains on derivatives	(21)		35		(72)		26
Pension and post-retirement benefit plans adjustment	—		—		—		—
Other comprehensive (loss) income, net of tax, attributable to TD Group	(28)		66		(48)		237
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO TD GROUP	$	433	$	417	$	1,198	$	1,120

See notes to condensed consolidated financial statements

3

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Amounts in millions, except share amounts)

(Unaudited)

	TD Group Stockholders
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock
	Number of Shares	Par Value								Number of Shares	Value		Noncontrolling Interests		Total
BALANCE—September 30, 2022	60,049,685	$	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 options	121,490	—		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, 2022	60,171,175	$	1	$	2,164	$	(3,687)	$	(108)	(5,688,639)	$	(1,706)	$	8	$	(3,328)
Accrued unvested dividend equivalents and other	—	—		—		(1)		—		—	—		—		(1)
Compensation expense recognized for employee stock options	—	—		28		—		—		—	—		—		28
Exercise of employee stock options	400,474	—		92		—		—		—	—		—		92
Net income attributable to TD Group	—	—		—		304		—		—	—		—		304
Foreign currency translation adjustment, net of tax	—	—		—		—		43		—	—		—		43
Unrealized loss on derivatives, net of tax	—	—		—		—		(31)		—	—		—		(31)
Pension and postretirement benefit plans adjustment, net of tax	—	—		—		—		—		—	—		—		—
BALANCE—April 1, 2023	60,571,649	$	1	$	2,284	$	(3,384)	$	(96)	(5,688,639)	$	(1,706)	$	8	$	(2,893)
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	—	—		31		—		—		—	—		—		31
Exercise of employee stock options	261,167	—		60		—		—		—	—		—		60
Net income attributable to TD Group	—	—		—		351		—		—	—		—		351
Foreign currency translation adjustment, net of tax	—	—		—		—		31		—	—		—		31
Unrealized gain on derivatives, net of tax	—	—		—		—		35		—	—		—		35
Pension and post-retirement benefit plans adjustment, net of tax	—	—		—		—		—		—	—		—		—
BALANCE—July 1, 2023	60,832,816	$	1	$	2,375	$	(3,034)	$	(30)	(5,688,639)	$	(1,706)	$	7	$	(2,387)

See notes to condensed consolidated financial statements

4

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Amounts in millions, except share amounts)

(Unaudited)

	TD Group Stockholders
	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock
	Number of Shares	Par Value								Number of Shares	Value		Noncontrolling Interests		Total
BALANCE—September 30, 2023	60,995,513	$	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 options	216,150	—		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, 2023	61,211,663	$	1	$	2,518	$	(4,266)	$	(60)	(5,688,639)	$	(1,706)	$	7	$	(3,506)
Accrued unvested dividend equivalents and other	—	—		—		(7)		—		—	—		—		(7)
Compensation expense recognized for employee stock options	—	—		33		—		—		—	—		—		33
Exercise of employee stock options	410,748	—		113		—		—		—	—		—		113
Net income attributable to TD Group	—	—		—		403		—		—	—		—		403
Foreign currency translation adjustment, net of tax	—	—		—		—		(60)		—	—		—		(60)
Unrealized gain on derivatives, net of tax	—	—		—		—		2		—	—		—		2
Pension and postretirement benefit plans adjustment, net of tax	—	—		—		—		—		—	—		—		—
BALANCE—March 30, 2024	61,622,411	$	1	$	2,664	$	(3,870)	$	(118)	(5,688,639)	$	(1,706)	$	7	$	(3,022)
Changes in noncontrolling interest of consolidated subsidiaries, net	—	—		—		—		—		—	—		1		1
Accrued unvested dividend equivalents and other	—	—		—		(7)		—		—	—		—		(7)
Compensation expense recognized for employee stock options	—	—		37		—		—		—	—		—		37
Exercise of employee stock options	151,697	—		48		—		—		—	—		—		48
Net income attributable to TD Group	—	—		—		461		—		—	—		—		461
Foreign currency translation adjustment, net of tax	—	—		—		—		(7)		—	—		—		(7)
Unrealized loss on derivatives, net of tax	—	—		—		—		(21)		—	—		—		(21)
Pension and post-retirement benefit plans adjustment, net of tax	—	—		—		—		—		—	—		—		—
BALANCE—June 29, 2024	61,774,108	$	1	$	2,749	$	(3,416)	$	(146)	(5,688,639)	$	(1,706)	$	8	$	(2,510)

See notes to condensed consolidated financial statements

5

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in millions)

(Unaudited)

	Thirty-Nine Week Periods Ended
	June 29, 2024		July 1, 2023
OPERATING ACTIVITIES:
Net income	$	1,248	$	885
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	108		93
Amortization of intangible assets and product certification costs	111		106
Amortization of debt issuance costs, original issue discount and premium	31		30
Amortization of inventory step-up	8		2
Amortization of loss contract reserves	(24)		(27)
Refinancing costs	59		41
Gain on sale of businesses, net	(11)		—
Non-cash stock and deferred compensation expense	158		131
Deferred income taxes	—		(1)
Foreign currency exchange losses	3		21
Gain on settlement of the Esterline Retirement Plan (the “ERP”)	—		(8)
Cash refund for the ERP settlement, net	—		8
Changes in assets/liabilities, net of effects from acquisitions and sales of businesses:
Trade accounts receivable	(22)		(134)
Inventories	(140)		(244)
Income taxes (receivable) payable	(120)		70
Other assets	(27)		(16)
Accounts payable	(9)		(4)
Accrued interest	118		29
Accrued and other liabilities	(18)		(69)
Net cash provided by operating activities	1,473		913
INVESTING ACTIVITIES:
Capital expenditures	(124)		(102)
Acquisition of businesses, net of cash acquired	(1,686)		(750)
Other investing transactions	71		—
Net cash used in investing activities	(1,739)		(852)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options	213		179
Dividends and dividend equivalent payments	(2,038)		(38)
Repayments of senior subordinated notes, net	(550)		—
Proceeds from issuance of senior secured notes, net	5,887		2,068
Repayments of senior secured notes	(4,400)		(1,122)
Proceeds from term loans, net	5,332		6,238
Proceeds from trade receivable securitization facility, net	100		—
Repayment on term loans	(4,385)		(7,318)
Financing costs and other, net	(7)		(18)
Net cash provided by (used in) financing activities	152		(11)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	2		20
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(112)		70
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	3,472		3,001
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3,360	$	3,071
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest, net	$	777	$	808
Cash paid during the period for income taxes, net of refunds	$	472	$	231

See notes to condensed consolidated financial statements

6

TRANSDIGM GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THIRTY-NINE WEEK PERIODS ENDED JUNE 29, 2024 AND JULY 1, 2023

(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 thirty-nine week period ended June 29, 2024 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.

7

2.    ACQUISITIONS

Raptor Scientific – On May 24, 2024, the Company entered into a definitive agreement to acquire all the outstanding stock of Raptor Scientific for a total purchase price of approximately $655 million in cash, including certain tax benefits. The acquisition was completed on July 31, 2024 and financed through existing cash on hand. Raptor Scientific is a leading global manufacturer of complex test and measurement solutions primarily serving the aerospace and defense end markets. Its products are highly engineered, proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms.

CPI's Electron Device Business – On June 6, 2024, the Company completed the acquisition of all the outstanding stock of the Electron Device Business of Communications & Power Industries (“CPI's Electron Device Business”) for approximately $1,385 million in cash. The acquisition was financed through existing cash on hand, inclusive of a portion of the cash proceeds from the new long-term debt issued during the first quarter of fiscal 2024 (refer to Note 7, “Debt,” for further disclosure of the aforementioned debt issuances). 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 operating results of CPI’s Electron Device Business are included within TransDigm's Power & Control segment as of the June 6, 2024 acquisition date.

As of June 29, 2024, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the acquisition of CPI's Electron Device Business are subject to adjustment until the end of the respective measurement period.

The Company accounted for the acquisition of CPI's Electron Device Business using the acquisition method of accounting and included the results of operations of the acquisition in its condensed consolidated financial statements from the effective date of the acquisition. The purchase price was allocated to identifiable assets and liabilities based on information available at the date of acquisition. 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, particularly intangible assets and property, plant and equipment, and liabilities assumed are finalized. The Company is in the process of obtaining a third-party valuation of certain intangible assets and property, plant and equipment of CPI's Electron Device Business. Pro forma net sales and results of operations for the acquisition, had it occurred at the beginning of the thirty-nine week periods ended June 29, 2024 or July 1, 2023 are not material and, accordingly, are not provided.

The allocation of the estimated fair value of assets acquired and liabilities assumed in the acquisition of CPI's Electron Device Business as of the June 6, 2024 acquisition date is summarized in the table below (in millions):

Assets acquired (excluding cash):
Trade accounts receivable	$	40
Inventories	81
Prepaid expenses and other	64
Property, plant and equipment	137
Goodwill	844		(1)
Other intangible assets	368		(1)
Other non-current assets	15
Total assets acquired (excluding cash)	1,549
Liabilities assumed:
Accounts payable	18
Accrued and other current liabilities	45
Deferred income taxes	89
Other non-current liabilities	12
Total liabilities assumed	164
Net assets acquired	$	1,385

(1)Based on the preliminary allocation of the net assets acquired, the Company expects that the $844 million of goodwill and $368 million of other intangible assets recognized for the acquisition will not be deductible for tax purposes.

8

SEI Industries LTD – On May 21, 2024, the Company acquired all the outstanding stock of SEI Industries LTD (“SEI”) for approximately $170 million in cash, including certain tax benefits. The acquisition was financed through existing cash on hand. SEI, located in Delta, British Columbia, Canada, is a leading provider of highly engineered products for aerial firefighting and other liquid transportation solutions, such as remote refueling, for both the commercial and defense aerospace end markets. The products are primarily proprietary with significant aftermarket content. SEI's operating results are presented within TransDigm's Airframe segment as of the May 21, 2024 acquisition date.

The Company accounted for the SEI acquisition using the acquisition method of accounting and included the results of operations of the acquisition in its condensed consolidated financial statements from the effective date of the acquisition. The purchase price was allocated to identifiable assets and liabilities based on information available at the date of acquisition. 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, particularly intangible assets, and liabilities assumed are finalized. The Company is in the process of obtaining a third-party valuation of certain intangible assets of SEI. Pro forma net sales and results of operations for the acquisition, had it occurred at the beginning of the thirty-nine week periods ended June 29, 2024 or July 1, 2023 are not material and, accordingly, are not provided.

The allocation of the estimated fair value of assets acquired and liabilities assumed in the SEI acquisition as of the May 21, 2024 acquisition date is summarized in the table below (in millions):

Assets acquired (excluding cash):
Trade accounts receivable	$	2
Inventories	11
Prepaid expenses and other	—
Property, plant and equipment	1
Goodwill	109		(1)
Other intangible assets	68		(1)
Other non-current assets	—
Total assets acquired (excluding cash)	191
Liabilities assumed:
Accounts payable	1
Accrued and other current liabilities	1
Deferred income taxes	19
Other non-current liabilities	—
Total liabilities assumed	21
Net assets acquired	$	170

(1)Based on the preliminary allocation of the net assets acquired, the Company expects that the $109 million of goodwill and $68 million of other intangible assets recognized for the acquisition will not be deductible for tax purposes.

FPT Industries LLC – On March 1, 2024, the Company acquired all the outstanding stock of FPT Industries LLC (“FPT”) for approximately $57 million in cash. The acquisition was financed through existing cash on hand. FPT, which has facilities in the United Kingdom and Alabama, designs and manufactures an extensive range of specialist fuel tanks and flotation systems for both the commercial and defense aerospace end markets. The products are primarily proprietary with significant aftermarket content. FPT's operating results are presented within TransDigm's Airframe segment as of the March 1, 2024 acquisition date.

The Company accounted for the FPT acquisition using the acquisition method of accounting and included the results of operations of the acquisition in its condensed consolidated financial statements from the effective date of the acquisition. 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 $9 million of the approximately $35 million of goodwill recognized for the acquisition will be deductible for tax purposes over 15 years. The Company expects that none of the approximately $19 million of other intangible assets recognized for the acquisition will be deductible for tax purposes.

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Pro forma net sales and results of operations for the acquisition, had it occurred at the beginning of the thirty-nine week periods ended June 29, 2024 or July 1, 2023 are not material and, accordingly, are not provided.

Calspan Corporation – On May 8, 2023, the Company acquired all the outstanding stock of Calspan Corporation (“Calspan”) for approximately $730 million in cash, which includes a $1 million working capital settlement paid in the first quarter of fiscal 2024 and certain tax benefits. The acquisition was financed through existing cash on hand. Calspan 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.

The Company accounted for the Calspan acquisition using the acquisition method of accounting and third-party valuation appraisals and included the results of operations of the acquisition in its condensed consolidated financial statements from the effective date of the acquisition. The total purchase price of Calspan was allocated to the underlying assets acquired and liabilities assumed based upon the respective fair value at the date of acquisition. To the extent the purchase price exceeded the fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill.

The Company 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 be affected by 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 thirty-nine week period ended July 1, 2023 are not material and, accordingly, are not provided.

The final allocation of the 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):

	Preliminary		Measurement Period		Final
	Allocation		Adjustments (2)		Allocation
Assets acquired (excluding cash):
Trade accounts receivable	$	39	$	—	$	39
Inventories	2		—		2
Prepaid expenses and other	40		(3)		37
Property, plant and equipment	105		234		339
Goodwill	367		(87)		280		(1)
Other intangible assets	243		(142)		101		(1)
Other non-current assets	7		—		7
Total assets acquired (excluding cash)	803		2		805
Liabilities assumed:
Accounts payable	10		(1)		9
Accrued and other current liabilities	50		4		54
Deferred income taxes	8		(3)		5
Other non-current liabilities	6		1		7
Total liabilities assumed	74		1		75
Net assets acquired	$	729	$	1	$	730

(1)Of the approximately $280 million of goodwill recognized for the acquisition, approximately $222 million is deductible for tax purposes. Of the approximately $101 million of other intangible assets recognized for the acquisition, approximately $86 million is deductible for tax purposes. The goodwill and intangible assets are deductible over 15 years.

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(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.

The fiscal 2024 acquisitions of CPI's Electron Device Business, SEI and FPT and fiscal 2023 acquisition of Calspan 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 As Defined and cash flows, as well as the future EBITDA As Defined 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.

Extant Aerospace Acquisitions – For the thirty-nine week period ended June 29, 2024, the Company's Extant Aerospace subsidiary, which is included within TransDigm’s Power & Control segment, completed a series of acquisitions of substantially all of the assets and technical data rights of certain product lines (collectively, referred to herein as the “Extant Aerospace product line acquisitions”), each meeting the definition of a business, for a total purchase price of $72 million. The Company accounted for the acquisitions using the acquisition method of accounting and included the results of operations of the acquisitions in its condensed consolidated financial statements from the effective date of each acquisition. 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 $32 million of goodwill and $18 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 Company accounted for the acquisitions using the acquisition method of accounting and included the results of operations of the acquisitions in its condensed consolidated financial statements from the effective date of each acquisition. The Company expects that all of the approximately $12 million of goodwill and $6 million of other intangible assets recognized for the acquisitions is 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 thirty-nine week periods ended June 29, 2024 or July 1, 2023 are not material and, accordingly, are not provided.

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 a limited number of 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.

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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 condensed 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.

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):

	June 29, 2024		September 30, 2023
Contract assets, current (1)	$	268	$	191
Contract assets, non-current (2)	—		1
Total contract assets	268		192
Contract liabilities, current (3)	153		79
Contract liabilities, non-current (4)	7		8
Total contract liabilities	160		87
Net contract assets	$	108	$	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 June 29, 2024 compared to September 30, 2023 is primarily due to the acquisition of CPI's Electron Device Business (completed during the third quarter of fiscal 2024) and also the timing and status of work in process and/or milestones of certain contracts. The increase in the Company's total contract liabilities at June 29, 2024 compared to September 30, 2023 is primarily due to the acquisition of CPI's Electron Device Business and also receipt of advance payments. For the thirty-nine week period ended June 29, 2024, the revenue recognized that was included in the contract liability balance at the beginning of the fiscal year was not material.

Refer to Note 11, “Segments,” for disclosures related to the disaggregation of revenue.

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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 June 29, 2024 and September 30, 2023, the allowance for uncollectible accounts was $31 million. The allowance for uncollectible accounts is assessed individually at each operating unit by the operating unit’s management team.

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				Thirty-Nine Week Periods Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
Numerator for earnings per share:
Net income	$	461	$	352	$	1,248	$	885
Less: Net income attributable to noncontrolling interests	—		(1)		(2)		(2)
Net income attributable to TD Group	461		351		1,246		883
Less: Dividends paid on participating securities (1)	—		—		(101)		(38)
Net income applicable to TD Group common stockholders—basic and diluted	$	461	$	351	$	1,145	$	845
Denominator for basic and diluted earnings per share under the two-class method:
Weighted-average common shares outstanding	56.0		55.0		55.7		54.7
Vested options deemed participating securities	1.9		2.2		2.1		2.4
Total shares for basic and diluted earnings per share	57.9		57.2		57.8		57.1
Earnings per share—basic and diluted	$	7.96	$	6.14	$	19.81	$	14.80

(1)Represents dividend equivalent payments 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, for the thirty-nine week periods ended June 29, 2024 and July 1, 2023. No special dividends were declared or paid on participating securities, including dividend equivalent payments, for the thirteen week periods ended June 29, 2024 and July 1, 2023.

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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):

	June 29, 2024		September 30, 2023
Raw materials and purchased component parts	$	1,313	$	1,144
Work-in-progress	508		455
Finished goods	285		226
Total	2,106		1,825
Reserves for excess and obsolete inventory	(228)		(209)
Inventories—Net	$	1,878	$	1,616

6.    INTANGIBLE ASSETS

Other intangible assets–net in the condensed consolidated balance sheets consist of the following (in millions):

	June 29, 2024						September 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Trademarks and trade names	$	1,086	$	—	$	1,086	$	1,019	$	—	$	1,019
Technology	2,358		967		1,391		2,124		888		1,236
Order backlog	16		4		12		7		6		1
Customer relationships	784		162		622		623		136		487
Other	10		5		5		9		5		4
Total	$	4,254	$	1,138	$	3,116	$	3,782	$	1,035	$	2,747

The aggregate amortization expense on identifiable intangible assets is approximately $38 million and $37 million for the thirteen week periods ended June 29, 2024 and July 1, 2023, respectively. The aggregate amortization expense on identifiable intangible assets is approximately $110 million and $105 million for the thirty-nine week periods ended June 29, 2024 and July 1, 2023, 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 and is subject to adjustment upon completion of the third-party valuation for certain acquisitions. Material adjustments may occur. 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 thirty-nine week period ended June 29, 2024 are summarized in the table below (in millions):

	Gross Amount		Amortization Period
Intangible assets not subject to amortization:
Goodwill	$	1,020
Trademarks and trade names	70
	1,090
Intangible assets subject to amortization:
Technology	235		20 years
Order backlog	12		1 year
Customer relationships	156		20 years
	403
Total	$	1,493

The following is a summary of changes in the carrying value of goodwill by segment from September 30, 2023 through June 29, 2024 (in millions):

	Power & Control		Airframe		Non-aviation		Total
Balance at September 30, 2023	$	4,194	$	4,701	$	93	$	8,988
Goodwill acquired during the period (Note 2)	876		144		—		1,020
Purchase price allocation adjustments (1)	—		35		—		35
Currency translation adjustments and other	(2)		(23)		—		(25)
Balance at June 29, 2024	$	5,068	$	4,857	$	93	$	10,018

(1)Related to the opening balance sheet adjustments recorded from the acquisition of Calspan completed during the third quarter of fiscal 2023, within the allowable 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 third quarter of fiscal 2024 and concluded that no triggering events occurred that required an interim evaluation.

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7.    DEBT

The Company’s debt consists of the following (in millions):

	June 29, 2024
	Gross Amount		Debt Issuance Costs		Original Issue Discount		Net Amount
Short-term borrowings—trade receivable securitization facility	$	450	$	—	$	—	$	450
Term loans	$	7,220	$	(14)	$	(33)	$	7,173
5.50% senior subordinated notes due 2027 (“5.50% 2027 Notes”)	2,650		(10)		—		2,640
6.75% secured notes due 2028 (“2028 Secured Notes”)	2,100		(16)		(8)		2,076
4.625% senior subordinated notes due 2029 (“4.625% 2029 Notes”)	1,200		(6)		—		1,194
4.875% senior subordinated notes due 2029 (“4.875% 2029 Notes”)	750		(4)		—		746
6.375% secured notes due 2029 (“2029 Secured Notes”)	2,750		(24)		(1)		2,725
6.875% secured notes due 2030 (“2030 Secured Notes”)	1,450		(13)		—		1,437
7.125% secured notes due 2031 (“2031 Secured Notes”)	1,000		(9)		(7)		984
6.625% secured notes due 2032 (“2032 Secured Notes”)	2,200		(20)		—		2,180
Government refundable advances	16		—		—		16
Finance lease obligations	271		—		—		271
	21,607		(116)		(49)		21,442
Less: current portion	78		—		—		78
Long-term debt	$	21,529	$	(116)	$	(49)	$	21,364

	September 30, 2023
	Gross Amount		Debt Issuance Costs		Original Issue (Discount) Premium		Net Amount
Short-term borrowings—trade receivable securitization facility	$	350	$	(1)	$	—	$	349
Term loans	$	6,249	$	(22)	$	(48)	$	6,179
6.25% secured notes due 2026 (“2026 Secured Notes”)	4,400		(25)		2		4,377
7.50% senior subordinated notes due 2027 (“7.50% 2027 Notes”)	550		(2)		—		548
5.50% 2027 Notes	2,650		(12)		—		2,638
2028 Secured Notes	2,100		(19)		(10)		2,071
4.625% 2029 Notes	1,200		(7)		—		1,193
4.875% 2029 Notes	750		(5)		—		745
2030 Secured Notes	1,450		(14)		—		1,436
Government refundable advances	21		—		—		21
Finance lease obligations	193		—		—		193
	19,563		(106)		(56)		19,401
Less: current portion	71		—		—		71
Long-term debt	$	19,492	$	(106)	$	(56)	$	19,330

Accrued interest, which is classified as a component of accrued and other current liabilities on the condensed consolidated balance sheets, was $243 million and $125 million as of June 29, 2024 and September 30, 2023, respectively.