FinanceLooker

Excrept from filing document 2024-09-30

The aggregate market value of the voting and non voting common stock held by non affiliates of the registrant as of March 29 2024 based upon the last sale price of such voting and non voting common stock on that date was 67 692 346 777
Documents incorporated by reference Certain sections of the registrant s definitive Proxy Statement to be filed in connection with its 2025 Annual Meeting of Shareholders expected to be held on March 6 2025 are incorporated by reference into Part III of this Annual Report on Form 10 K
This Annual Report on Form 10 K contains both historical and forward looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended the Exchange Act and 27A of the Securities Act of 1933 as amended All statements other than statements of historical fact included that address activities events or developments that we expect believe or anticipate will or may occur in the future are forward looking statements including in particular the statements about our plans objectives strategies and prospects regarding among other things our financial condition results of operations and business We have identified some of these forward looking statements with words like believe may will should expect intend plan predict anticipate estimate or continue and other words and terms of similar meaning These forward looking statements may be contained throughout this Annual Report on Form 10 K These forward looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to among other things our operations and business environment all of which are difficult to predict and many of which are beyond our control Many factors mentioned in our discussion in this Annual Report on Form 10 K including the risks outlined under Risk Factors will be important in determining future results Although we believe that the expectations reflected in these forward looking statements are reasonable we do not know whether our expectations will prove correct They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties including the risks outlined under Risk Factors in this Annual Report on Form 10 K Since our actual results performance or achievements could differ materially from those expressed in or implied by these forward looking statements we cannot give any assurance that any of the events anticipated by these forward looking statements will occur or if any of them does occur what impact they will have on our business results of operations and financial condition You are cautioned not to place undue reliance on these forward looking statements which speak only as of the date they are made We do not undertake any obligation to update these forward looking statements or the risk factors contained in this Annual Report on Form 10 K to reflect new information future events or otherwise except as may be required under federal securities laws
Important factors that could cause actual results to differ materially from the forward looking statements made in this Annual Report on Form 10 K include but are not limited to the sensitivity of our business to the number of flight hours that our customers planes spend aloft and our customers profitability both of which are affected by general economic conditions supply chain constraints increases in raw material costs taxes and labor costs that cannot be recovered in product pricing failure to complete or successfully integrate acquisitions our indebtedness current and future geopolitical or other worldwide events including without limitation wars or conflicts and public health crises cybersecurity threats risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability related voluntary goals or regulatory requirements our reliance on certain customers the United States U S defense budget and risks associated with being a government supplier including government audits and investigations failure to maintain government or industry approvals risks related to changes in laws and regulations including increases in compliance costs potential environmental liabilities liabilities arising in connection with litigation risks and costs associated with our international sales and operations and other factors
In this report the term TD Group refers to TransDigm Group Incorporated which holds all of the outstanding capital stock of TransDigm Inc The terms Company TransDigm we us our and similar terms unless the context otherwise requires refer to TD Group together with TransDigm Inc and its wholly owned and majority owned subsidiaries for which it has a controlling interest References to fiscal year mean the year ending or ended September 30 For example fiscal year 2024 or fiscal 2024 means the period from October 1 2023 to September 30 2024
TD Group through its wholly owned subsidiary TransDigm Inc is a leading global designer producer and supplier of highly engineered aircraft components that are critical to the safe and effective operation of nearly all commercial and military aircraft worldwide Our products are represented in nearly every commercial and military aircraft in service today Our business is well diversified due to the broad range of products we offer to our customers We estimate that approximately 90 of our net sales for fiscal year 2024 were generated by proprietary products
Most of our products generate significant aftermarket revenue Once our parts are designed into and sold on a new aircraft we generate net sales from aftermarket consumption over the life of that aircraft which is generally estimated to be approximately 25 to 30 years A typical platform can be produced for 20 to 30 years giving us an estimated product life cycle in excess of 50 years We estimate that approximately 55 of our net sales in fiscal year 2024 were generated from the aftermarket the vast majority of which come from the commercial and military aftermarkets Historically these aftermarket revenues have produced a higher gross profit and have been more stable than net sales to original equipment manufacturers OEMs
We believe we have achieved steady long term growth in sales and improvements in operating performance we believe that due to our competitive strengths and through execution of our value driven operating strategy More specifically focusing our businesses on our value driven operating strategy of obtaining profitable new business carefully controlling the cost structure via productivity and cost improvements and pricing our highly engineered value added products to fairly reflect the value we provide and the resources required to do so has historically resulted in improvements in gross profit and income from operations over the long term
We also maintain a selective acquisition strategy concentrating on proprietary commercial aerospace component businesses with significant aftermarket content where we see a clear path to value creation Since the inception of our company in 1993 we have acquired 93 businesses and various product lines Refer to Note 2 Acquisitions in the notes to the consolidated financial statements included herein for information on the recent acquisitions
We primarily design produce and supply highly engineered proprietary aerospace components with significant aftermarket content We seek to develop highly customized products to solve specific needs for aircraft operators and manufacturers We attempt to differentiate ourselves based on engineering service and manufacturing capabilities We typically choose not to compete for non proprietary build to print business because it frequently offers lower margins than proprietary products We believe that our products have strong brand names within the industry and that we have a reputation for high quality reliability and strong customer support Our business is well diversified due to the broad range of products that we offer to our customers Each of our product offerings is composed of many individual products that are typically customized to meet the needs of a particular aircraft platform or customer Our portfolio of products encompasses a vast array of essential components that play pivotal roles on commercial aerospace and defense platforms as well as other products For example TransDigm s operating units make aircraft seatbelts and cockpit security systems that keep passengers and pilots safe parachutes that protect soldiers sailors and airmen and space telescope equipment that helps the National Aeronautics and Space Administration NASA better understand the universe
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 cargo loading handling delivery systems and electronic components used in the generation amplification transmission and reception of microwave signals 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 specialized flight wind tunnel and jet engine testing services and equipment and complex testing and instrumentation solutions 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 transaction related expenses and refinancing costs Acquisition transaction and integration related expenses represent costs incurred to integrate acquired businesses into TD Group s operations facility relocation costs and other acquisition related costs transaction and valuation related costs for acquisitions comprising deal fees legal financial and tax due diligence expenses and amortization expense of inventory step up recorded in connection with the purchase accounting of acquired businesses
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
Consistent with our overall strategy our sales and marketing organization is structured to continually develop technical solutions that meet customer needs In particular we attempt to focus on products and programs that will lead to high margin repeatable sales in the aftermarket
We have structured our sales efforts along our major product offerings assigning a business unit manager that leads a business unit team The teams are generally defined based on a grouping of related products with similar functionality engineering designs and or applications The team consists of physically co located cross functional personnel who in turn focus their efforts entirely on the products and customers they serve The team implements the three core value drivers of obtaining profitable new business carefully controlling the cost structure via productivity and cost improvements and pricing our highly engineered value added products to fairly reflect the value we provide The business unit manager drives and directs the activities of the team based on customer needs Each business unit manager is expected to grow the sales and profitability of the products and services for which he or she is responsible and to achieve the targeted annual level of bookings net sales new business and profitability for such products The business unit managers are assisted by account managers and sales engineers who are responsible for covering major OEM and aftermarket accounts Account managers and sales engineers are expected to be familiar with the personnel organization and needs of specific customers to achieve total bookings and new business goals for each account and together with the business unit managers to determine when additional resources are required at customer locations Most of our sales personnel are evaluated in part on their bookings and their ability to identify and obtain new business opportunities
Though typically performed by employees the account manager function may be performed by independent representatives depending on the specific customer product and geographic location We also use a number of distributors to provide logistical support as well as serve as a primary customer contact with certain smaller accounts Boeing Distribution Services Inc and Satair A S a subsidiary of Airbus S A S among others are our major distributors
We maintain approximately 120 manufacturing facilities Most of our manufacturing facilities are comprised of manufacturing distribution and engineering functions and most facilities have certain administrative functions including management sales and finance We continually strive to improve productivity and reduce costs including automation projects rationalization of operations developing improved control systems that allow for accurate accounting and reporting investing in equipment tooling information systems including cybersecurity and implementing broad based employee training programs Management believes that our manufacturing systems and equipment contribute to our ability to compete by permitting us to meet the rigorous tolerances and cost sensitive price structure of aircraft component customers
We attempt to differentiate ourselves from our competitors by producing highly engineered products with high quality reliability and timely delivery Our engineering costs are recorded in cost of sales and in selling and administrative expenses within our consolidated statements of income Research and development costs are recorded in selling and administrative expenses within our consolidated statements of income The aggregate of engineering expense and research and development expense represents approximately 8 of our operating units aggregate costs or approximately 4 of our consolidated net sales for fiscal year 2024 Our proprietary products and particularly our new product initiatives are designed by our engineers and are intended to serve the needs of the aircraft component industry These proprietary designs must withstand the extraordinary conditions and stresses that will be endured by products during use and meet the rigorous demands of our customers tolerance and quality requirements The business unit team inclusive of operations engineering quality and sales and the customer work together through the design and development of a product Refer to Note 1 Summary of Significant Accounting Policies in the notes to the consolidated financial statements included herein with respect to the total costs of research and development
We use sophisticated equipment and procedures to comply with quality requirements specifications and aviation authority and OEM requirements We perform a variety of testing procedures as required by our customers such as testing under different temperature humidity and altitude levels flammability testing shock and vibration testing and X ray fluorescent measurement These procedures together with other customer approved techniques for document process and quality control are used throughout our manufacturing facilities
We predominantly serve customers in the commercial regional business jet and general aviation aftermarket which accounted for approximately 31 of our net sales for fiscal year 2024 the commercial aerospace OEM market comprising large commercial transport manufacturers and regional and business jet manufacturers which accounted for approximately 27 of our net sales for fiscal year 2024 and the defense market which includes defense OEMs and aftermarket sales to the U S and friendly foreign governments which accounted for approximately 40 of our net sales for fiscal year 2024 Non aerospace net sales comprised approximately 2 of our net sales for fiscal year 2024
Our customers include 1 distributors of aerospace components 2 worldwide commercial airlines including national and regional airlines 3 large commercial transport and regional and business aircraft OEMs 4 various armed forces of the United States and friendly foreign governments 5 defense OEMs 6 system suppliers and 7 various other industrial customers Our top ten customers for fiscal year 2024 accounted for approximately 42 of our net sales Products supplied to many of our customers are used on multiple platforms None of our customers individually accounted for greater than 10 of our net sales for fiscal year 2024
The markets in which we sell our products are to varying degrees cyclical and have experienced upswings and downturns The demand for our commercial aftermarket parts and services depends on among other things the breadth of our installed OEM base revenue passenger kilometers RPKs the size and age of the worldwide aircraft fleet the percentage of the worldwide fleet that is in warranty and airline profitability The demand for defense products is specifically dependent on government budget trends military campaigns and political pressures
The niche markets within the aerospace industry that we serve are relatively fragmented and we face several competitors for many of the products and services we provide Due to the global nature of the commercial aircraft industry competition in these categories comes from both U S and foreign companies Competitors in our product offerings range in size from divisions of large public corporations to small privately held entities with only one or two components in their entire product portfolios
We compete on the basis of engineering manufacturing and marketing high quality and reliable products which we believe meet or exceed the performance and maintenance requirements of our customers consistent and timely delivery and superior customer service and support The industry s stringent regulatory certification and technical requirements and the investments necessary in the development and certification of products may create disincentives for potential new competitors for certain products If customers receive products that meet or exceed expectations and performance standards we believe that they will have a reduced incentive to certify another supplier because of the cost and time of the technical design and testing certification process In addition we believe that the availability dependability and safety of our products are reasons for our customers to continue long term supplier relationships
Companies engaged in supplying defense related equipment and services to United States Government U S Government agencies are subject to business risks specific to the defense industry These risks include the ability of the U S Government to unilaterally 1 suspend us from receiving new contracts 2 terminate existing contracts 3 reduce the value of existing contracts 4 audit our contract related costs and fees including allocated indirect costs 5 control and potentially prohibit the export of our products and 6 seek repayment of contract related payments under certain circumstances Violations of government procurement laws could result in civil or criminal penalties
The commercial aircraft component industry is highly regulated by the Federal Aviation Administration FAA in the United States and by the European Union Aviation Safety Agency in Europe and other agencies throughout the world while the military aircraft component industry is governed by military quality specifications We and the components we manufacture are required to be certified by one or more of these entities or agencies and in many cases by individual OEMs in order to engineer and service parts and components used in specific aircraft models
We must also satisfy the requirements of our customers including OEMs and airlines that are subject to FAA regulations and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations In addition the FAA and other aviation authorities require that various maintenance routines be performed on aircraft components We believe that we currently satisfy or exceed these maintenance standards in our repair and overhaul services We also maintain several FAA approved repair stations
In addition our businesses are subject to many other laws and requirements typically applicable to manufacturers and exporters Without limiting the foregoing sales of many of our products that will be used on aircraft owned by foreign entities are subject to compliance with export control laws and the manufacture of our products and the operations of our businesses including the disposal of hazardous wastes are subject to compliance with applicable environmental laws
The key market factors in the commercial aftermarket include RPKs and the size and activity level of the worldwide fleet of aircraft and the percentage of the fleet that is in warranty In fiscal 2024 the commercial aerospace industry continued to rebound from the adverse impacts of the COVID 19 pandemic Since February 2024 both domestic and international RPKs have surpassed 2019 i e pre pandemic levels and have remained on a steady growth trend The 2025 leading indicators or industry consensus suggest a continuation of current trends supported by continued RPK growth
Our commercial transport OEM shipments and revenues generally run ahead of aircraft delivery schedules Consistent with prior years our fiscal 2025 shipments will be a function of among other things the estimated 2025 and 2026 commercial aircraft production rates for Boeing and Airbus In fiscal 2024 we experienced improved sales in the commercial OEM sector primarily due to increased aircraft production by Boeing and Airbus Airline demand for new aircraft remains high and the OEMs are working to increase aircraft production However aircraft production rates remain well below pre pandemic levels as the struggles in the OEM supply chain persist Due to these factors it is difficult to accurately predict the OEM build rates for 2025
Our businesses continually seek to provide innovative solutions for our customers and others in the commercial aerospace and defense industries These include new touchless products and environmentally friendly products such as the brushless starter generator and sustainable decorative laminates
Our military business fluctuates from year to year and is dependent to a degree on government budget constraints the timing of orders macro and micro dynamics with respect to the U S Department of Defense DOD procurement policy and the extent of global conflicts such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas Also delays in government spending outlays and government funding reprioritization such as shifting funds to efforts to assist friendly countries in conflicts provides for further unpredictability in the military spending outlook For a variety of reasons the military spending outlook is very uncertain though recent DOD budgets have trended upwards
Defense sales in fiscal 2024 increased compared to fiscal 2023 at a higher rate than in recent fiscal years due to improving U S Government defense spend outlays DOD budgets have trended upwards as geopolitical challenges such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas and military modernization efforts are driving demand
Historically our presence in both the commercial aerospace and military sectors of the aerospace industry has served to mitigate the impact on our business of any specific industry risk We service a diversified customer base in the commercial and military aerospace industry and we provide components to a diverse installed base of aircraft which mitigates our exposure to any individual airframe platform At times declines in net sales in one channel have been offset by increased net sales in another channel However due to differences between the profitability of our products sold to OEM and aftermarket customers variation in product mix can cause variation in gross profit
Factors including customer inventory level adjustments supply chain issues unannounced changes in order patterns strikes facility shutdowns caused by fires hurricanes health crises or other incidents and mergers and acquisitions can cause short term disruptions in our quarterly shipment patterns as compared to previous quarters and the same periods in prior years As such it can be difficult to determine longer term trends in our business based on quarterly comparisons To normalize for short term fluctuations we tend to look at our performance over several quarters or years of activity rather than discrete short term periods Additionally there are fluctuations in OEM and aftermarket product mix from quarter to quarter that may cause positive or negative variations in gross profit since commercial aftermarket net sales have historically produced higher gross profit margins than net sales to commercial OEMs Again in many instances these are timing events between quarters and must be balanced with macro aerospace industry indicators
We require the use of various raw materials in our manufacturing processes We purchase a variety of manufactured component parts from various suppliers We also purchase replacement parts which are utilized in our various repair and overhaul operations At times we concentrate our orders among a few suppliers in order to strengthen our supplier relationships Most of our raw materials and component parts are generally available from multiple suppliers at competitive prices
Disruptions in the global supply chain has resulted in delays in the availability of certain raw materials and increased raw material costs among other costs such as labor though the disruptions somewhat improved in fiscal 2024 resulting in a higher stabilization of costs as fiscal 2024 progressed Our business has been adversely affected though not materially and could continue to be adversely affected in fiscal 2025 by disruptions in our ability to timely obtain raw materials and components from our suppliers in the quantities we require or on favorable terms Although we believe in most cases that we could identify alternative suppliers or alternative raw materials or component parts the lengthy and expensive aviation authority and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier raw material or component part
We have various trade secrets proprietary information trademarks trade names patents copyrights and other intellectual property rights which we believe in the aggregate but not individually are important to our business The Company s products are manufactured marketed and sold using a portfolio of patents trademarks licenses and other forms of intellectual property some of which expire in the future The Company develops and acquires new intellectual property on an ongoing basis Based on the broad scope of the Company s product lines management believes that the loss or expiration of any single intellectual property right would not have a material effect on our consolidated financial statements
Our operations and facilities are subject to a number of federal state local and foreign environmental laws and regulations that govern among other things discharges of pollutants into the air and water the generation handling storage and disposal of hazardous materials and wastes the remediation of contamination and the health and safety of our employees Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations Certain facilities and third party sites utilized by the Company have been identified as potentially responsible parties under the federal superfund laws and comparable state laws The Company is currently involved in the investigation and remediation of a number of sites under applicable laws
For information regarding environmental accruals refer to Note 13 Commitments and Contingencies in the notes to the consolidated financial statements included herein Compliance with federal state local and foreign environmental laws during fiscal 2024 did not have a material impact on our capital expenditures results of operations or cash flows Based upon consideration of currently available information we believe liabilities for environmental matters will not have a material adverse impact on our consolidated financial statements but we cannot assure that material environmental liabilities may not arise in the future For further information on environmental related risks including climate change refer to Item 1A Risk Factors
As of September 30 2024 we had approximately 16 600 full time part time and temporary employees Approximately 17 of our full time and part time employees are represented by labor unions Collective bargaining agreements between us and these labor unions expire at various dates up to January 2029
We consider our employees to be our greatest asset Succession planning and the development attraction and retention of employees is critical for TransDigm and its operating units to sustain our three core value drivers obtaining profitable new business continually improving our cost structure and providing highly engineered value added products to customers To support the advancement of our employees we offer comprehensive training and development programs to empower internal career progression We employ a blend of structured and informal initiatives to identify nurture and retain exceptional individuals at both the corporate and operating unit levels
We have established TransDigm University in partnership with the University of Southern California Marshall School of Business a formal mentoring and education program with a curated curriculum and established leadership serving as mentors Participants in the program learn and develop more advanced skills leading to higher contribution and satisfaction within their roles while mentors enhance their leadership capabilities by helping others progress This program helps identify top performers improving employee performance and retention increasing our organizational learning and supporting the promotion of our current employees
The Company s Management Development Program MDP identifies new talent and prepare candidates for success within our organization The Company actively recruits for MDP candidates at colleges and universities across the U S to help reach a large and diverse pool of candidates The program hires recent Master of Business Administration graduates who work for three eight month periods at selected TransDigm operating units Program participants gain experience in developing manufacturing and selling aerospace components with the intent of becoming fully immersed in our business operations Once the program is complete MDP participants are better equipped with the knowledge and experience needed to excel as a manager at TransDigm Our goal is to onboard successful MDP participants as full time employees at one of our operating units upon completion of the program
As a company with products and values that support the U S military and its allies TransDigm is dedicated to offering employment opportunities to U S military veterans We recognize the invaluable knowledge and skills they bring to the workforce and many of our U S based operating units have specific programs or initiatives that provide career opportunities to veterans as they make the transition to civilian careers The Junior Military Officer JMO Rotational Program at TransDigm is a structured one year development initiative consisting of two 6 month rotational assignments in specified regions including Southern California Greater New York City and Cleveland Ohio Participants rotate through key functional groups such as operations product development sales and marketing supply chain and program management Each JMO is paired with a dedicated military veteran mentor at TransDigm often former JMOs who have successfully made the transition to civilian careers and now hold executive roles at TransDigm After completing the program each participant is well prepared to assume a leadership position at one of TransDigm s operating units We created this program to specifically recruit JMOs because of their leadership skills adaptability and attention to detail which are qualities that align with TransDigm s commitment to excellence in the aerospace and defense industry
TransDigm s executive team also mentors rising talent on a more informal basis This informal mentorship achieves a number of goals including accelerating the development of top performers fosters organizational learning enhances employee performance and contributes to our retention efforts The executive team dedicates substantial time to assessing our pool of future leaders ensuring that we have the people and skills necessary to continue driving our business forward
We are proud to offer attractive benefits packages that attract retain motivate and reward our talent and we are committed to providing our employees and their families with programs that support their health and overall well being To empower our employees financially we provide retirement savings plans and opportunities for tax free savings through flexible spending accounts and health savings accounts We believe that our compensation programs including base pay bonus structures and equity programs fairly reward our employees for their hard work Additionally we understand the importance of maintaining a work life balance which is why our employees receive paid time off and enjoy designated holidays
We understand the value in furthering the knowledge and education of our current employee base In addition to formal and informal employee development programs within TransDigm and our operating units employees can expand their careers by accessing tuition reimbursement programs Some operating units also partner with local colleges to provide training courses to TransDigm employees Access to programs such as these enhance our employees value to the Company our customers and our communities
TransDigm s equity compensation plans are designed to assist in attracting retaining motivating and rewarding key employees and directors and promoting the creation of long term value for our stockholders by closely aligning the interests of these individuals with those of our stockholders Featuring performance based stock options these plans are integral to our equity based compensation strategy As we cultivate a culture of growth and excellence we firmly believe that the use of performance based stock options will continue to be a key element in retaining our essential employees and attracting future talent
At TransDigm we highly value the contributions of diverse perspectives fresh ideas and varied experiences Our commitment to diversity is more than just an organizational goal it is a fundamental principle that drives innovation enhances our competitive edge and ultimately leads to better outcomes for all stakeholders To gauge our progress we annually review and assess our diversity initiatives and metrics We strive for improvement each year
We know that the tone is set from the top and our commitment to diversity equity and inclusion DEI must be reflected within our leadership team as well as our Board of Directors Beginning in 2022 we worked to enhance DEI awareness among our leadership through the implementation of Unconscious Bias Training for our Board and management Furthermore our commitment to DEI is interwoven into our internal training programs communications and conferences ensuring that diversity remains at the forefront of our organizational culture Total past and present MDP participants are approximately 34 gender and or racially diverse and we continuously work to enhance the diversity of the program We are committed to diversity at all levels of management and leadership and our leadership team and Board of Directors are committed to improving diversity throughout the Company and fostering a more inclusive and open environment Diversity equity and inclusion make us stronger as a business so we can effectively serve all our stakeholders Our workforce includes talented people from many backgrounds
Discrimination is not tolerated at TransDigm We are committed to high ethical standards and equal employment opportunities in all personnel actions without regard to race color religion gender national origin citizenship status age marital status gender identity or expression sexual orientation physical or mental disability or veteran status
We are focused on establishing maintaining and operating our facilities with a strong emphasis on process safety and risk mitigation Equally we strive to empower and support our employees in preventing accidents and promoting a healthy work environment We require our personnel to report and communicate risks potential hazards incidents and near misses so that we can investigate and establish appropriate measures to prevent future occurrences To underscore our commitment to employee safety and well being we require each operating unit to individually report environmental health and safety matters to our executive team monthly
We do not believe our net sales are subject to significant seasonal variation however our net sales have generally been lower in the first quarter of our fiscal year compared to the subsequent quarters due to fewer working days resulting from the observance of various holidays
as soon as reasonably practicable following the filing of the reports with the Securities and Exchange Commission SEC In addition the Company s website allows investors and other interested persons to sign up to automatically receive e mail alerts when news releases and financial information is posted on the website The SEC also maintains a website
that contains reports proxy and information statements and other information regarding issuers that file electronically with the SEC The information on or obtainable through our website is not incorporated into this Annual Report on Form 10 K
Set forth below are material risks and uncertainties that could negatively affect our business and financial condition and could cause our actual results to differ materially from those expressed in forward looking statements contained in this report Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and financial condition You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized
During a prolonged period of significant market disruption in the aerospace and defense industry such as the adverse impact that the COVID 19 pandemic had on the commercial aerospace market and other macroeconomic factors such as when recessions occur our business may be disproportionately impacted compared to peer companies that are more diversified in the industries they serve A more diversified company with significant sales and earnings derived from outside the aerospace and defense sector may be able to recover more quickly from significant market disruptions such as the COVID 19 pandemic
In fiscal year 2024 no customer individually accounted for 10 or more of the Company s net sales however our top ten customers for fiscal year 2024 accounted for approximately 42 of our net sales A material reduction in purchasing by one of our larger customers for any reason including but not limited to general economic or aerospace downturns decreased production strike or resourcing could have a material adverse effect on results of operations financial position and cash flows
As is customary in our business we do not generally have long term contracts with most of our aftermarket customers and therefore do not have guaranteed future sales Although we have long term contracts with many of our OEM customers many of those customers may terminate the contracts on short notice and in most cases our customers have not committed to buy any minimum quantity of our products In addition in certain cases we must anticipate the future volume of orders based upon the historic purchasing patterns of customers and upon our discussions with customers as to their anticipated future requirements and this anticipated future volume of orders may not materialize
We also have entered into multi year fixed price contracts with some of our customers pursuant to which we have agreed to perform the work for a fixed price and accordingly realize all the benefit or detriment resulting from any decreases or increases in the costs of making these products This risk is greater in a high inflationary environment such as occurred in fiscal 2023 and fiscal 2024 Sometimes we accept a fixed price contract for a product that we have not yet produced and this increases the risk of cost overruns or delays in the completion of the design and manufacturing of the product Most of our contracts do not permit us to recover increases in raw material prices taxes or labor costs
A significant portion of our growth has occurred through acquisitions Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions We intend to pursue acquisitions that we believe will present opportunities consistent with our overall business strategy However we may not be able to find suitable acquisition candidates to purchase or may be unable to acquire desired businesses or assets on economically acceptable terms or may be unable to receive necessary regulatory approvals or support In addition we may not be able to raise the capital necessary to fund future acquisitions Because we may actively pursue a number of opportunities simultaneously we may encounter unforeseen expenses complications and delays including regulatory complications or difficulties in employing sufficient staff and maintaining operational and management oversight
We regularly engage in discussions with respect to potential acquisition and investment opportunities If we consummate an acquisition our capitalization and results of operations may change significantly Future acquisitions could result in margin dilution and further likely result in the incurrence of additional debt and contingent liabilities and an increase in interest and amortization expenses or periodic impairment charges related to goodwill and other intangible assets as well as significant charges relating to integration costs
Acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value strengths and weaknesses of businesses acquired will prove incorrect In addition we may not be able to successfully integrate any business we acquire into our existing business The successful integration of new businesses depends on our ability to manage these new businesses and cut excess costs The successful integration of future acquisitions may also require substantial attention from our senior management and the management of the acquired business which could decrease the time that they have to service attract customers and develop new products and services or attend to other acquisition opportunities
We have a significant amount of indebtedness As of September 30 2024 our total indebtedness excluding approximately 67 million in letters of credit outstanding approximately 262 million of finance lease obligation liabilities and approximately 17 million of government refundable advances was approximately 24 billion which was approximately 134 of our total book capitalization
In addition we may be able to incur substantial additional indebtedness in the future As of September 30 2024 we had approximately 843 million of unused commitments under our revolving credit facility and 163 million of additional borrowing capacity under our trade receivable securitization facility the Securitization Facility The 163 million available under the Securitization Facility was subsequently drawn in October 2024 Although our senior secured credit facility and the indentures governing the various series of senior secured and senior subordinated notes outstanding the Notes contain restrictions on the incurrence of additional indebtedness these restrictions are subject to a number of significant qualifications and exceptions and the indebtedness incurred in compliance with these qualifications and exceptions could be substantial A breach of any of the covenants or an inability to comply with the required leverage ratio could result in a default under the senior secured credit facility or the indentures
require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness thereby reducing the availability of our cash flow to fund working capital requirements capital expenditures acquisitions research and development efforts and other general corporate requirements
limit along with the financial and other restrictive covenants contained in the documents governing our indebtedness among other things our ability to borrow additional funds make investments and incur liens
All of the term loans under our term loan facility and the borrowings under our revolving credit facility and the Securitization Facility bear interest at variable rates primarily based on the Term Secured Overnight Financing Rate Term SOFR Accordingly if Term SOFR or other variable interest rates increase our debt service expense will also increase In order to mitigate the interest rate risk of these variable rate borrowings we have in the past entered into interest rate swap cap and collar agreements that cover a significant portion of the existing variable rate debt and may do so in the future subject to market and other conditions In connection with our existing term loans we entered into various interest rate swap cap and collar agreements associated with Term SOFR The Company s objective is to maintain an allocation of at least 75 fixed rate and 25 variable rate debt thereby limiting its exposure to changes in near term interest rates As of September 30 2024 approximately 77 of our total debt was fixed rate For information about our interest rate swap cap and collar agreements refer to Note 19 Derivatives and Hedging Activities in the notes to the consolidated financial statements included herein
Our indebtedness increases the possibility that we may be unable to generate cash sufficient to pay when due the principal of interest on or other amounts due in respect of our indebtedness including debt under the senior secured credit facility and the Notes We cannot assure that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the senior secured credit facility or otherwise in amounts sufficient to enable us to service our indebtedness If we cannot service our debt we will have to take actions such as reducing or delaying capital investments selling assets restructuring or refinancing our debt or seeking additional equity capital
To service our indebtedness we will require a significant amount of cash Our ability to generate cash depends on many factors beyond our control and any failure to meet our debt service obligations could harm our business financial condition and results of operations
Our ability to make payments on and to refinance our indebtedness including the Notes amounts borrowed under the senior secured credit facility amounts due under our Securitization Facility and to fund our operations will depend on our ability to generate cash in the future which to a certain extent is subject to general economic financial competitive legislative regulatory and other factors that are beyond our control
We cannot assure that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the senior secured credit facility or otherwise in amounts sufficient to enable us to service our indebtedness including the amounts borrowed under the senior secured credit facility amounts borrowed under our Securitization Facility and the Notes or to fund our other liquidity needs If we cannot service our debt we will have to take actions such as reducing or delaying capital investments selling assets restructuring or refinancing our debt or seeking additional equity capital We cannot assure that any of these remedies could if necessary be effected on commercially reasonable terms or at all Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants which could further restrict our business operations The terms of existing or future debt instruments the Securitization Facility the indentures governing the Notes and the senior secured credit facility may restrict us from adopting any of these alternatives In addition any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating which could harm our ability to incur additional indebtedness on acceptable terms and could otherwise adversely affect our business financial condition and results of operations
The terms of the senior secured credit facility and indentures governing the Notes may restrict our current and future operations particularly our ability to respond to changes or to take certain actions
Our senior secured credit facility and the indentures governing the Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on TD Group TransDigm Inc and its restricted subsidiaries in the case of the senior secured credit facility and TransDigm Inc and its restricted subsidiaries in the case of the indentures and may limit their ability to engage in acts that may be in our long term best interests The senior secured credit facility and indentures governing the Notes include covenants restricting among other things the ability to subject in each case to certain important exceptions
A breach of any of these covenants could result in a default under the senior secured credit facility or the indentures governing the Notes If any such default occurs the lenders under the senior secured credit facility and the holders of the Notes may elect to declare all outstanding borrowings together with accrued interest and other amounts payable thereunder to be immediately due and payable The lenders under the senior secured credit facility also have the right in these circumstances to terminate any commitments they have to provide further borrowings In addition subject to the terms of an intercreditor agreement following an event of default under the senior secured credit facility or the indentures governing our various series of outstanding senior secured notes the lenders thereunder or the holders thereof as applicable will have the right to proceed against the collateral granted to them to secure the debt which includes our available cash and they will also have the right to prevent us from making debt service payments on the senior subordinated notes If the debt under the senior secured credit facility or the Notes were to be accelerated we cannot assure that our assets would be sufficient to repay in full the Notes and other debt
We are dependent on our executive officers senior management team and highly trained employees and any work stoppage difficulty hiring similar employees or ineffective succession planning could adversely affect our business
Because our products are complicated and highly engineered we depend on an educated and trained workforce Historically there has been substantial competition for skilled personnel in the aerospace and defense industry and we could be adversely affected by a shortage of skilled employees We may not be able to fill new positions or vacancies created by expansion or turnover or attract and retain qualified personnel We cannot be assured that we can continue to hire train and retain qualified employees at current wage rates since we operate in a competitive labor market and there are currently significant inflationary and other pressures on wages
Although we believe that our relations with our employees are satisfactory we cannot assure that we will be able to negotiate a satisfactory renewal of collective bargaining agreements or that our employee relations will remain stable Because we strive to limit the volume of finished goods inventory any work stoppage could materially and adversely affect our ability to provide products to our customers
In addition our success depends in part on our ability to attract and motivate our senior management and key employees Achieving this objective may be difficult due to a variety of factors including fluctuations in economic and industry conditions competitors hiring practices and the effectiveness of our compensation programs Competition for qualified personnel can be intense I
f we are unable to effectively provide for the succession of key personnel senior management and our executive officers including our President Chief Executive Officer and Director our business results of operations cash flows and financial condition may be adversely affected
The Company s Board of Directors continually monitors this risk and we believe that the Company s succession plan together with our straightforward strategy clear value drivers decentralized nature and the quality of managers running our operating units helps to mitigate this risk
A significant public health crisis such as the COVID 19 pandemic could cause disruption to our operations The COVID 19 pandemic had a negative effect on our business results of operations cash flows and financial condition It affected our business due to the impact on the global economy including its effects on the commercial aerospace industry the supply chain and raw material availability production efforts and customer demand for our products and services Our ability to predict and respond to future changes resulting from potential health crises is uncertain Even after a public health crises subsides there may be long term effects on our business practices and customers in economies in which we operate that could severely disrupt our operations and could have a material adverse effect on our business results of operations cash flows and financial condition As we cannot predict the duration scope or severity of future public health crises the negative financial impact to our results cannot be reasonably estimated and could be material
Our sales to manufacturers of large commercial aircraft such as Boeing Airbus and related OEM suppliers as well as manufacturers of business jets have historically experienced periodic downturns In the past these sales have been affected by airline profitability which is impacted by among other things fuel and labor costs price competition interest rates downturns in the global economy and national and international events In addition sales of our products to manufacturers of business jets are impacted by among other things downturns in the global economy In certain years such as in fiscal 2021 and the second half of fiscal 2020 we experienced decreased sales across the commercial OEM sector driven primarily by the decrease in production by Boeing and Airbus related to reduced demand in the commercial aerospace industry from the COVID 19 pandemic and airlines deferring or cancelling orders Regulatory and quality challenges such as with Boeing s 737 MAX aircraft and 787 aircraft also has had an adverse impact Significant labor disagreements and supply chain issues may also negatively impact the production of aircraft Downturns adversely affect our results of operations financial position and cash flows
Our business is affected by the price and availability of the raw materials and component parts that we use to manufacture our components Our business therefore could be adversely impacted by factors affecting our suppliers such as the destruction of our suppliers facilities or their distribution infrastructure a work stoppage or strike by our suppliers employees or the failure of our suppliers to provide materials of the requisite quality or by increased costs of such raw materials or components if we were unable to pass along such price increases to our customers Changes to tariff and import and export regulations in the United States and abroad may also negatively impact the availability and pricing of raw materials
Because we strive to limit the volume of raw materials and component parts on hand our business could be adversely affected if we were unable to obtain these raw materials and components from our suppliers in the quantities we require or on favorable terms Although we believe in most cases that we could identify alternative suppliers or alternative raw materials or component parts the lengthy and expensive aviation authority and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier raw material or component part
We operate in a highly competitive global industry and compete against a number of companies Competitors in our product lines are both U S and foreign companies and range in size from divisions of large public corporations to small privately held entities We believe that our ability to compete depends on high product performance consistent high quality short lead time and timely delivery competitive pricing superior customer service and support and continued certification under customer quality requirements and assurance programs We may have to adjust the prices of some of our products to stay competitive
Our operations and the products we sell are currently subject to rules limiting emissions and to other climate related regulations in certain jurisdictions where we operate The increased prevalence of global climate change concerns may result in new regulations that may negatively impact us our suppliers and customers We are continuing to evaluate short medium and long term risks related to climate change We cannot predict what environmental legislation or regulations will be enacted in the future how existing or future laws or regulations will be administered or interpreted or what environmental conditions may be found to exist Compliance with any new or more stringent laws or regulations or stricter interpretations of existing laws could require additional expenditures by us or our suppliers in which case the costs of raw materials and component parts could increase
As a whole because our manufacturing facilities primarily engage in assembly and light manufacturing and because we do not maintain any transportation infrastructure we have relatively low Scope 1 and Scope 2 emissions Accordingly we do not anticipate any material adverse impact from increased carbon regulation directly on our manufacturing operations Further because of our wide portfolio of hundreds of thousands of products we do not anticipate any material adverse impact from the reliance on a supplier or group of suppliers that may be subject to climate risks However regulation that would have a material adverse impact on air travel could have a material adverse impact on our business Given the political significance and uncertainty around these issues we cannot predict how legislation regulation and increased awareness of these issues will affect our operations and financial condition We have established a science aligned greenhouse gas emissions reduction target of at least a 50 reduction in our Scope 1 and Scope 2 emissions on an absolute basis by the year 2031 Fiscal 2019 is the selected baseline year for TransDigm that we will compare against as we make progress towards our emissions reduction goal We continue to evaluate ways to reduce our energy and water consumption and lower our greenhouse gas emissions through energy efficiency measures the purchase of green power and other actions
Our operations and those of our customers and suppliers have been and may again be subject to natural disasters climate change related events pandemics or other business disruptions which could seriously harm our results of operation and increase our costs and expenses Some of our manufacturing facilities are located in regions that may be impacted by severe weather events such as increased storm frequency or severity in the Atlantic and fires in hotter and drier climates These could result in potential damage to our physical assets as well as disruptions in manufacturing activities Some of our manufacturing facilities are located in areas that may be at risk due to rising sea levels Moreover some of our manufacturing facilities are located in areas that could experience decreased access to water due to climate issues
We are also vulnerable to damage from other types of disasters including power loss fire explosions floods communications failures terrorist attacks and similar events Disruptions could also occur due to health related outbreaks and crises cyber attacks computer or equipment malfunction accidental or intentional operator error or process failures Should insurance or other risk transfer mechanisms such as our existing disaster recovery and business continuity plans be insufficient to recover all costs we could experience a material adverse effect on our business results of operations financial position and cash flows
Our net sales to foreign customers were approximately 2 9 billion for the fiscal year ended September 30 2024 A number of risks inherent in international operations could have a material adverse effect on our results of operations including war sanctions global health crises currency fluctuations difficulties in staffing and managing multinational operations general economic and political uncertainties and potential for social unrest in countries in which we operate limitations on our ability to enforce legal rights and remedies restrictions on the repatriation of funds change in trade policies tariff regulation difficulties in obtaining export and import licenses and the risk of government financed competition
Issues with the global supply chain can also rise due to some of the aforementioned risks as well as the availability and cost of raw materials to suppliers merchandise quality or safety issues shipping and transport availability and cost increases in wage rates and taxes transport security inflation and other factors relating to the suppliers and the countries in which they are located or from which they import Such issues are often beyond our control and could adversely affect our operations and profitability Furthermore the Company is subject to laws and regulations such as the Foreign Corrupt Practices Act U K Bribery Act and similar local anti bribery laws which generally prohibit companies and their employees agents and contractors from making improper payments for the purpose of obtaining or retaining business Failure to comply with these laws could subject the Company to civil and criminal penalties that could materially adversely affect the Company s results of operations financial position and cash flows
We continue to monitor the ongoing conflicts between Israel and Hamas and between Russia and Ukraine and the related export controls and financial and economic sanctions imposed on certain industry sectors including the aviation sector and parties in Russia by the U S the U K the European Union and others Although the conflicts have not nor are expected to have a direct material adverse impact on TransDigm s business the implications of the Israel and Hamas and Russia and Ukraine conflicts in the short term and long term are difficult to predict Factors such as increased energy costs the availability of certain raw materials for aircraft manufacturers embargoes on flights from certain airlines sanctions on certain companies and the stability of certain customers could impact the global economy and aviation sector In addition there continues to be uncertainty about the future relationship between the U S and China including with respect to trade policies treaties government regulations and tariffs Any increased trade barriers or restrictions on global trade including trade with China could adversely affect the Company s results of operations financial position and cash flows
Companies engaged in supplying defense related equipment and services to U S Government agencies whether through direct contracts with the U S Government or as a subcontractor to customers contracting with the U S Government are subject to business risks specific to the defense industry These risks include the ability of the U S Government to unilaterally
Most U S Government contracts can be terminated by the U S Government at its convenience without significant notice Termination for convenience provisions provide only for recovery of costs incurred or committed settlement expenses and profit on the work completed prior to termination
Most of our U S Government contracts are based on a firm fixed price On contracts for which the price is based on the reimbursement of costs the U S Government may review our costs and performance as well as our accounting and general business practices Based on the results of such audits the U S Government may adjust our contract related costs and fees including allocated indirect costs In addition under U S Government purchasing regulations some of our costs including most financing costs amortization of intangible assets portions of research and development costs and certain marketing expenses may not be subject to reimbursement under cost reimbursement contracts
Furthermore even where the price is not based on cost the U S Government may seek to review our costs to determine whether our pricing is fair and reasonable Our subsidiaries are periodically subject to pricing reviews and government buying agencies that purchase some of our subsidiaries products are periodically subject to audits by the DOD with respect to prices paid for such products As a result of these audits we could be asked to enter into an arrangement whereby our prices would be based on cost plus a nominal fee the DOD could seek to pursue alternative sources of supply for our parts or the U S Government could take other adverse actions with respect to our contracts Any of those occurrences could lead to a reduction in our revenue from or the profitability of certain of our supply arrangements with certain agencies and buying organizations of the U S Government Further negative publicity relating to the results of any audit inquiry or subsequent hearing or the like could negatively impact our stock price
If a government inquiry or investigation uncovers improper or illegal activities we could be subject to civil or criminal penalties or administrative sanctions including contract termination fines forfeiture of fees suspension of payment and suspension or debarment from doing business with U S Government agencies any of which could materially adversely affect our reputation business financial condition results of operations and cash flows
Moreover U S Government purchasing regulations contain a number of additional operational requirements which do not apply to entities not engaged in government contracting Failure to comply with such government contracting requirements could result in civil and criminal penalties that could have a material adverse effect on the Company s results of operations
The aerospace industry is highly regulated in the U S and in other countries In order to sell our products we and the products we manufacture must be certified by the FAA the DOD and similar agencies in foreign countries and by individual manufacturers If new and more stringent government regulations are adopted or if industry oversight increases we might incur significant expenses to comply with any new regulations or heightened industry oversight In addition if material authorizations or approvals were revoked or suspended our business would be adversely affected
In addition to the aviation approvals we are at times required to obtain approval from U S Government agencies and similar agencies elsewhere in the world to export our products U S laws and regulations applicable to us include the Arms Export Control Act the International Traffic in Arms Regulations ITAR the Export Administration Regulations EAR and the trade sanctions laws and regulations administered by the United States Department of the Treasury s Office of Foreign Assets Control OFAC EAR restricts the export of commercial and dual use products and technical data to certain countries while ITAR restricts the export of defense products technical data and defense services
Failure to obtain approval to export or determination by the U S Government or similar agencies elsewhere in the world that we failed to receive required approvals or licenses could eliminate or restrict our ability to sell our products outside the United States or other country of origin and the penalties that could be imposed by the U S Government or other applicable government for failure to comply with these laws could be significant
The interpretation and application of data protection laws in the U S and globally including but not limited to the General Data Protection Regulation the GDPR the California Consumer Privacy Act the CCPA China s Personal Information Protection Law PIPL and the EU AI Act are uncertain and evolving It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices Complying with these various laws is difficult and could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business Further although we have implemented internal controls and procedures designed to ensure compliance with the GDPR CCPA PIPL the EU AI Act and other privacy related laws rules and regulations collectively the Data Protection Laws there can be no assurance that our controls and procedures will enable us to be fully compliant with all Data Protection Laws The rapid evolution and increased adoption of artificial intelligence AI technologies may intensify these risks Any failure to comply with Data Protection Laws could result in significant penalties fines legal challenges and reputational harm
Increased cybersecurity threats and more sophisticated and targeted computer crime have posed and could continue to pose a risk to our information technology systems and a disruption to or breach in the security of such systems if material could have adverse effects on our result of operations and financial condition
We rely extensively on information technology systems to manage and operate our business some of which are managed by third parties The security and functionality of these information technology systems and the processing of data by these systems are critical to our business operations If these systems or any part of the systems are damaged intruded upon attacked shutdown or cease to function properly whether by planned upgrades force majeure telecommunications failures criminal acts including hardware or software break ins ransomware attacks or extortion attempts or viruses or other cybersecurity incidents and we suffer any resulting interruption in our ability to manage and operate our business or if our products are affected our results of operations and financial condition could be materially adversely affected In fact we have experienced data security incidents although these have not had a material impact on our financial results Furthermore the Company has access to classified sensitive confidential proprietary or personal data or information that is subject to privacy and security laws regulations or other contractually imposed controls The rapid evolution and increased adoption of AI technologies may intensify our cybersecurity risks
Despite our use of reasonable and appropriate technical security controls and monitoring security breaches theft misplaced lost or corrupted data programming or employee errors and or malfeasance have led and could in the future lead to the compromise or improper use of such sensitive confidential proprietary or personal data or information Such events may result in possible negative consequences such as disruption to our business operations loss of proprietary information ransom demands loss of revenue penalties failure to comply with laws governing sensitive data government enforcement litigation or regulatory proceedings negative publicity loss of reputation loss of intellectual property loss of competitiveness or customers increased security and compliance costs or other negative consequences Further the amount of insurance coverage that we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity incident Depending on the nature and magnitude of these events they may have an adverse impact on our results of operations or financial condition
Our operations and facilities are subject to a number of federal state local and foreign environmental laws and regulations that govern among other things discharges of pollutants into the air and water the generation handling storage and disposal of hazardous materials and wastes the remediation of contamination and the health and safety of our employees Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations Certain facilities and third party sites utilized by subsidiaries of the Company have been identified as potentially responsible parties under the federal superfund laws and comparable state laws The Company is currently involved in the investigation and remediation of a number of sites under applicable laws
Estimates of the Company s environmental liabilities are based on current facts laws regulations and technology These estimates take into consideration the Company s prior experience and professional judgment of the Company s environmental advisors Estimates of the Company s environmental liabilities are further subject to uncertainties regarding the nature and extent of site contamination the range of remediation alternatives available evolving remediation standards imprecise engineering evaluations and cost estimates the extent of corrective actions that may be required and the number and financial condition of other potentially responsible parties as well as the extent of their responsibility for the remediation
Accordingly as investigations and remediations proceed it is likely that adjustments in the Company s accruals will be necessary to reflect new information The amounts of any such adjustments could have a material adverse effect on the Company s results of operations or cash flows in a given period Based on currently available information however the Company does not believe that future environmental costs in excess of those accrued with respect to sites for which the Company has been identified as a potentially responsible party are likely to have a material adverse effect on the Company s financial condition
From time to time we are involved in lawsuits and regulatory actions brought or threatened against us in the ordinary course of business These actions and proceedings may involve claims for among other things compensation for alleged personal injury workers compensation employment discrimination or breach of contract In addition we may be subject to class action lawsuits including those involving allegations of violations of consumer product statutes or the Fair Labor Standards Act and state wage and hour laws Due to the inherent uncertainties of litigation we cannot accurately predict the ultimate outcome of any such actions or proceedings The outcome of litigation particularly class action lawsuits and regulatory actions is difficult to assess or quantify as plaintiffs may seek recovery of very large or indeterminate amounts in these types of lawsuits and the magnitude of the potential loss may remain unknown for substantial periods of time In addition plaintiffs in many types of actions may seek punitive damages civil penalties consequential damages or other losses or injunctive or declaratory relief These proceedings could result in substantial cost and may require us to devote substantial resources to defend ourselves The ultimate resolution of these matters through settlement mediation or court judgment could have a material impact on our financial condition results of operations and cash flows
Our operations expose us to potential liabilities for personal injury or death as a result of the failure of an aircraft product that we have designed manufactured or serviced While we maintain liability insurance to protect us from future product liability claims in the event of product liability claims our insurers may attempt to deny coverage or any coverage we have may not be adequate We also may not be able to maintain insurance coverage in the future at an acceptable cost Any liability not covered by insurance or for which third party indemnification is not available could result in significant liability to us
In addition a crash caused by one of our products could damage our reputation for quality products We believe our customers consider safety and reliability as key criteria in selecting a provider of aircraft products If a crash were to be caused by one of our products or if we were to otherwise fail to maintain a satisfactory record of safety and reliability our ability to retain and attract customers may be materially adversely affected
Our ability to achieve our environmental social and governance goals are subject to risks many of which are outside of our control and our reputation and brands could be harmed if we fail to meet such goals
Companies across all industries are facing increasing scrutiny from stakeholders related to environmental social and governance ESG matters including practices and disclosures related to environmental stewardship social responsibility diversity equity and inclusion and workplace rights Our ability to achieve our ESG goals including our goal to achieve our Scope 1 and Scope 2 emissions by the year 2031 and to accurately and transparently report our progress presents numerous operational financial legal and other risks and may be dependent on the actions of suppliers and other third parties and significant technological advancements with respect to the development and availability of reliable affordable and sustainable alternative solutions all of which are outside of our control If we are unable to meet our ESG goals or evolving stakeholder expectations and industry standards or if we are perceived to have not responded appropriately to the growing concern for ESG issues our reputation could be negatively impacted In addition in recent years investor advocacy groups and certain institutional investors have placed increasing importance on ESG matters If as a result of their assessment of our ESG practices certain investors are unsatisfied with our actions or progress they may reconsider their investment in us
As the nature scope and complexity of ESG reporting diligence and disclosure requirements expand we may have to undertake additional costs to control assess and report on ESG metrics Any failure or perceived failure whether or not valid to pursue or fulfill our ESG goals targets and objectives or to satisfy various ESG reporting standards within the timelines we announce or at all could increase the risk of litigation
Mergers and acquisitions have resulted in significant increases in identifiable intangible assets and goodwill Identifiable intangible assets which primarily include trademarks trade names customer relationships and technology were approximately 3 4 billion at September 30 2024 representing approximately 13 of our total assets Goodwill recognized in accounting for mergers and acquisitions was approximately 10 4 billion at September 30 2024 representing approximately 41 of our total assets We may never realize the full value of our identifiable intangible assets and goodwill and to the extent we were to determine that our identifiable intangible assets or our goodwill were impaired within the meaning of applicable accounting standards we would be required to write off the amount of any impairment
We are subject to income taxes in the U S and various non U S jurisdictions The Company s domestic and international tax liabilities are dependent upon the location of earnings among these different jurisdictions The Company s future results of operations could be adversely affected by changes in the Company s effective tax rate as a result of changes in the mix of earnings in countries with differing statutory tax rates changes in the valuation of deferred tax assets challenges by tax authorities or changes in tax laws or regulations From time to time changes in tax laws or regulations may be proposed or enacted that could adversely affect our overall tax liability There can be no assurance that changes in tax laws or regulations both within the U S and the other jurisdictions in which we operate such as the proposed 15 global minimum tax under the Organisation for Economic Co operation and Development the OECD Pillar Two Global Anti Base Erosion Rules the Pillar Two Rules will not materially and adversely affect our effective tax rate tax payments financial condition and results of operations As of September 30 2024 a handful of jurisdictions where the Company operates including Canada U K and Germany have adopted the Pillar Two Rules The effective dates vary between fiscal 2025 and fiscal 2026
In addition the amount of income taxes paid by the Company is subject to ongoing audits by U S federal state and local tax authorities and by non U S tax authorities If these audits result in assessments different from amounts reserved future financial results may include unfavorable adjustments to the Company s tax liabilities which could have a material adverse effect on the Company s results of operations
Notwithstanding special cash dividends of which the most recent declarations by the Company s Board of Directors was on September 19 2024 in the amount of 75 00 per outstanding share of common stock which was paid on October 18 2024 to stockholders of record as of October 4 2024 we do not anticipate declaring regular cash dividends whether quarterly or annual on our common stock or any other equity security in the foreseeable future
The amounts that may be available to us to pay future special cash dividends are restricted under our debt and other agreements Any payment of special cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend on our results of operations earnings capital requirements financial condition future prospects contractual restrictions and other factors deemed relevant by our Board of Directors Therefore shareholders should not rely on regular quarterly or annual dividend income from shares of our common stock and should not rely on special dividends with any regularity or at all
Our commercial business is sensitive to the number of flight hours that our customers planes spend aloft the size and age of the worldwide aircraft fleet and our customers profitability These items are in turn affected by general economic and geopolitical and other worldwide conditions
Our commercial business is directly affected by among other factors changes in RPKs the size and age of the worldwide aircraft fleet the percentage of the fleet that is out of warranty and changes in the profitability of the commercial airline industry RPKs and airline profitability have historically been correlated with the general economic environment although national and international events also play a key role For example in addition to the COVID 19 pandemic past examples in which the airline industry has been negatively affected include downturns in the global economy higher fuel prices increased security concerns among airline customers following the events of September 11 2001 the Severe Acute Respiratory Syndrome epidemic and conflicts abroad Additional examples include future geopolitical or other worldwide events such as war terrorist acts or additional worldwide infectious disease outbreaks
In addition global market and economic conditions have been challenging due to turbulence in the U S and international markets and economies and have prolonged declines in business and consumer spending As a result of the substantial reduction in airline traffic resulting from the aforementioned events the airline industry incurred large losses and financial difficulties Some carriers parked or retired a portion of their fleets and reduced workforces and flights During periods of reduced airline profitability some airlines may delay purchases of spare parts preferring instead to deplete existing inventories and delay refurbishments and discretionary spending If demand for spare parts decreases there would be a decrease in demand for certain products An adverse change in demand could impact our results of operations collection of accounts receivable and our expected cash flow generation from current and acquired businesses which may adversely impact our financial condition and access to capital markets
The military and defense market is significantly dependent upon government budget trends particularly the DOD budget In addition to normal business risks our supply of products to the U S Government is subject to unique risks largely beyond our control DOD budgets could be negatively impacted by several factors including but not limited to a change in defense spending policy as a result of the presidential election or otherwise the U S Government s budget deficits spending priorities the cost of sustaining the U S military presence internationally and possible political pressure to reduce U S Government military spending each of which could cause the DOD budget to remain unchanged or to decline A significant decline in U S military expenditures could result in a reduction in the amount of our products sold to the various agencies and buying organizations of the U S Government
There has been significant volatility in the market price and trading volume of equity securities which is unrelated to the operating performance of the companies issuing the securities These market fluctuations may negatively affect the market price of our common stock Shareholders may not be able to sell their shares at or above the purchase price due to fluctuations in the market price of our common stock Such changes could be caused by changes in our operating performance or prospects including possible changes due to the cyclical nature of the aerospace industry and other factors such as fluctuations in OEM and aftermarket ordering which could cause short term swings in profit margins Or such changes could be unrelated to our operating performance such as changes in market conditions affecting the stock market generally or the stocks of aerospace companies or changes in the outlook for our common stock such as changes to or the confidence in our business strategy changes to or confidence in our management or expectations for future growth of the Company
We have established a risk based cybersecurity and information security program program designed to assess identify and manage material risks from cybersecurity threats Our cybersecurity risk management process includes policies that specify the requirements for technical security controls monitoring systems tools and services from third party providers and employee training and awareness Our cybersecurity risk management process also includes regular independent audits across our operating units Management oversees our cybersecurity risk management process in order to assess and manage material risks from cybersecurity threats identified by both internal and external threat intelligence Our program monitors and evaluates risks from cybersecurity threats and we aim to adapt our program and related processes accordingly As adopted by our businesses which has been overseen by our corporate executive team we have a cybersecurity incident response plan that outlines our policies and procedures for managing a cybersecurity incident Our businesses are required to conduct regular exercises of their incident response plan as part of our program
The multi layered framework on which our cybersecurity and information security program is built incorporates cybersecurity standards and certain requirements of the National Institute of Standards and Technology NIST Special Publication 800 171 Protecting Controlled Unclassified Information in Non Federal Systems and Organizations along with other legal and regulatory requirements However this does not mean that we meet any particular technical standards specifications or requirements but rather that we use NIST and other cybersecurity standards as a guide to help us identify assess and manage cybersecurity risks relevant to our business
Our cybersecurity and information security program is led by the Company s Vice President of Cybersecurity VPoC who reports to our Chief Financial Officer Our VPoC has served as a technology leader of cybersecurity information security infrastructure and operational functions for over 35 years The VPoC is supported by the Incident Response Team IRT a management committee made up of the Co Chief Operating Officers Chief Financial Officer and executives in legal finance IT and audit The IRT supports the VPoC in assessing and managing risks from cybersecurity threats and in the event of a cybersecurity incident provides oversight and leadership with respect to incident response
We have in place an incident response plan to identify respond to and recover from cybersecurity threats and cybersecurity incidents In the event of a potentially material cybersecurity incident as determined by the VPoC with support from legal as needed the IRT is notified through an established escalation protocol The Chair of the Audit Committee is also notified and briefed and meetings of the Audit Committee and or full Board of Directors would be held as appropriate We maintain a relationship with a third party forensic vendor available for incident response and investigation Additionally we maintain cybersecurity insurance
The Company s Board of Directors oversees our enterprise risk management ERM program and has delegated the primary responsibility for its oversight which includes oversight of cybersecurity risk to the Audit Committee The Audit Committee is informed of about material risks from cybersecurity threats through regular discussion with management regarding cybersecurity risk mitigation and cybersecurity incident management Executive management including our VPoC regularly presents to the Audit Committee regarding cybersecurity matters including program updates key metrics and developments
The ERM program inventories and classifies key risk areas We employ a methodology for scoring the risks based on the probability and impact of individual risks and discuss and implement countermeasures to address the risks
Based on the information we have as of the date of this Annual Report on Form 10 K we do not believe any risks from cybersecurity threats including as a result of any previous cybersecurity incidents have materially affected or are reasonably likely to materially affect our business strategy results of operations or financial condition For further information about risks related to cybersecurity threats refer to Item 1A Risk Factors
Our Cleveland OH and Newport Beach CA corporate facilities house our principal executive offices and we currently lease approximately 26 000 square feet and 5 800 square feet respectively for those purposes TransDigm also leases certain of its other non material facilities Management believes that our machinery plants and offices are in satisfactory operating condition and that it will have sufficient capacity to meet foreseeable future needs without incurring significant additional capital expenditures
The Company is involved in various claims and legal actions arising in the ordinary course of business The Securities and Exchange Commission SEC regulations require us to disclose certain information about environmental proceedings when a governmental authority is a party to the proceedings if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold Pursuant to such regulations the Company uses a threshold of 1 million or more for purposes of determining whether disclosure of any such proceedings is required as we believe matters under this threshold are not material to the Company While the Company is currently involved in certain legal proceedings it believes the results of these proceedings will not have a material adverse effect on its financial condition results of operations or cash flows
As of October 9 2024 there were 30 stockholders of record of our common stock and approximately 836 000 beneficial stockholders which includes an estimated number of stockholders who have their shares held in their accounts by banks and brokers
On November 27 2023 the Company paid a special cash dividend of 35 00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans The total cash payment funded by existing cash on hand related to the special dividend and dividend equivalent payments was approximately 2 020 million
the Company s Board of Directors authorized and declared a special cash dividend of 75 00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans The total cash payment funded by a combination of 3 000 million in new senior secured debt and existing cash on hand related to the special dividend and dividend equivalents was approximately 4 348 million in October 2024
Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in the shares of common stock of TD Group with the cumulative total return of a hypothetical investment in each of the S P 500 Index and the S P Aerospace Defense Select Index An investment of 100 with reinvestment of all dividends is assumed to have been made in our common stock and in each of the indexes on September 30 2019 and its relative performance is tracked through September 30 2024
The following performance graph and related information shall not be deemed soliciting material nor to be filed with the SEC nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934 each as amended except to the extent we specifically incorporate it by reference into such filing
On January 27 2022 the Board of Directors of the Company authorized a new stock repurchase program to permit repurchases of its outstanding common stock not to exceed 2 200 million in the aggregate the 2 200 million stock repurchase program replacing the 650 million stock repurchase program previously authorized by the Board on November 8 2017
2023 During fiscal 2022 the Company repurchased 1 490 413 shares of common stock at an average price of 612 13 per share for a total amount of 912 million The repurchased shares of common stock are classified as treasury stock in the statement of changes in stockholders deficit As of September 30 2024 1 288 million remains available for repurchase under the 2 200 million stock repurchase program
The following discussion of our financial condition and results of operations should be read together with TD Group s consolidated financial statements and the related notes included elsewhere in this report The following discussion may contain predictions estimates and other forward looking statements that involve a number of risks and uncertainties including those discussed under the heading entitled Risk Factors included elsewhere in this report These risks could cause our actual results to differ materially from any future performance suggested below
For fiscal year 2024 we generated net sales of 7 940 million gross profit of 4 672 million or 58 8 of net sales and net income attributable to TD Group of 1 714 million We believe we have achieved steady long term growth in sales and improvements in operating performance due to our competitive strengths and through execution of our value driven operating strategy More specifically we believe that focusing our businesses on our value driven operating strategy of obtaining profitable new business carefully controlling the cost structure and pricing our highly engineered value added products to fairly reflect the value we provide and the resources required to do so has historically resulted in improvements in gross profit and income from operations over the long term
Our selective acquisition strategy has also been an important contribution to the growth of our business We maintain a selective acquisition strategy concentrating on proprietary commercial aerospace component businesses with significant aftermarket content The integration of acquisitions into our existing businesses combined with implementing our proven operating strategy has historically resulted in improvements in the financial performance of the acquired businesses
We provide components to a large and growing installed base of aircraft to which we supply aftermarket products We estimate that our products are installed on over 100 000 commercial transport regional transport military and general aviation fixed wing turbine aircraft and rotary wing aircraft
We believe that our diversified revenue base reduces our dependence on any particular product platform or market channel and has been a significant factor in maintaining our financial performance Our products are represented in nearly every commercial and military aircraft in service today Our portfolio of products encompasses a vast array of essential components that play pivotal roles on commercial aerospace and defense platforms as well as other products For example TransDigm s operating units make aircraft seatbelts and cockpit security systems that keep passengers and pilots safe parachutes that protect soldiers sailors and airmen and space telescope equipment that helps NASA better understand the universe We expect to continue to develop new products for military and commercial applications Our businesses continually seek to provide innovative solutions for our customers and others in the commercial aerospace and defense industries These include new touchless products and environmentally friendly products such as the brushless starter generator and sustainable decorative laminates
We attempt to obtain profitable new business by using our technical expertise and application skill and our detailed knowledge of our customer base and the individual niche markets in which we operate We have regularly been successful in identifying and developing both aftermarket and OEM products to drive our growth
We are committed to maintaining and continuously improving our lean cost structure through detailed attention to the cost of each of the products that we offer and our organizational structure with a focus on reducing the cost of each
We focus on the engineering manufacturing and marketing of a broad range of highly engineered niche products that we believe provide value to our customers We believe we have been consistently successful in communicating to our customers the value of our products This has generally enabled us to price our products to fairly reflect the value we provide and the resources required to do so
We selectively pursue the acquisition of proprietary aerospace component businesses when we see an opportunity to create value through the application of our three core value driven operating strategies The aerospace industry in particular remains highly fragmented with many of the companies in the industry being small private businesses or small non core operations of larger businesses We have significant experience among our management team in executing acquisitions and integrating acquired businesses into our company and culture As of the date of this report we have successfully acquired 93 businesses and various product lines since our formation in 1993 Many of these acquisitions have been integrated into an existing TransDigm production facility which enables a higher production capacity utilization which in turn improves gross profit levels due to the ability to spread the fixed manufacturing overhead costs over higher production volume In the case of larger acquisitions that consist of multiple product lines we may pursue opportunities to divest certain acquired operating units that are not in line with our acquisition strategy
In fiscal 2024 the commercial aerospace industry continued to rebound from the adverse impacts of the COVID 19 pandemic Commercial air travel in domestic markets continues to lead the air traffic recovery with most domestic markets nearing achieving or surpassing pre pandemic air traffic levels The pace of the international recovery has been slower than the domestic recovery however it has continued to make steady improvement Since February 2024 both domestic and international RPKs have surpassed 2019 i e pre pandemic levels and have remained on a steady growth trend The 2025 leading indicators or industry consensus suggest a continuation of current trends supported by continued RPK growth
Our commercial transport OEM shipments and revenues generally run ahead of aircraft delivery schedules Consistent with prior years our fiscal 2025 shipments will be a function of among other things the estimated 2025 and 2026 commercial aircraft production rates for Boeing and Airbus In fiscal 2024 we experienced improved sales in the commercial OEM sector primarily due to increased aircraft production by Boeing and Airbus Airline demand for new aircraft remains high and the OEMs are working to increase aircraft production However aircraft production rates remain well below pre pandemic levels as the struggles in the OEM supply chain persist Due to these factors it is difficult to accurately predict the OEM build rates for 2025
Our military business fluctuates from year to year and is dependent to a degree on government budget constraints the timing of orders macro and micro dynamics with respect to the U S Department of Defense DOD procurement policy and the extent of global conflicts such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas Also delays in government spending outlays and government funding reprioritization such as shifting funds to efforts to assist friendly countries in conflicts provides for further unpredictability in the military spending outlook For a variety of reasons the military spending outlook is very uncertain though recent DOD budgets have trended upwards
Defense sales in fiscal 2024 increased compared to fiscal 2023 at a higher rate than in recent fiscal years due to improving U S Government defense spend outlays DOD budgets have trended upwards as geopolitical challenges such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas and military modernization efforts are driving demand
The following table sets forth for the periods indicated certain operating data of the Company including presentation of the amounts as a percentage of net sales amounts in millions except per share data
Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends declared or paid on participating securities including dividend equivalents of 233 million and 38 million for the fiscal years ended September 30 2024 and 2023 respectively
Refer to Non GAAP Financial Measures in this discussion and analysis for additional information and limitations regarding these non GAAP financial measures including a reconciliation to the comparable U S GAAP financial measure
Organic sales represent net sales from existing businesses owned by the Company excluding sales from acquisitions Acquisition sales represent net sales from acquired businesses for the period up to one year from the respective acquisition date We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis Refer to Note 2 Acquisitions in the notes to the consolidated financial statements included herein for information on the Company s recent acquisitions
The increase in organic sales of 1 067 million for the fiscal year ended September 30 2024 compared to the fiscal year ended September 30 2023 is primarily related to increases in defense sales 486 million an increase of 18 9 commercial OEM sales 294 million an increase of 20 4 and commercial aftermarket sales 253 million an increase of 12 0
The increase in defense sales is primarily attributable to improving U S Government defense spend outlays The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow body and wide body aircraft production and deliveries The increase in commercial aftermarket sales is primarily attributable to the continued recovery in commercial air travel demand and the resulting higher flight hours and utilization of aircraft in fiscal 2024 compared to fiscal 2023 particularly internationally
The increase in acquisition sales for the fiscal year ended September 30 2024 is primarily attributable to the fiscal 2024 acquisitions of Raptor Scientific the Electron Device Business of Communications Power Industries CPI s Electron Device Business SEI Industries LTD SEI and FPT Industries LLC FPT and the third quarter fiscal 2023 acquisition of Calspan Corporation Calspan
Cost of sales increased by 525 million or 19 1 to 3 268 million for the fiscal year ended September 30 2024 compared to 2 743 million for the fiscal year ended September 30 2023 Cost of sales and the related percentage of net sales for the fiscal years ended September 30 2024 and 2023 were as follows amounts in millions
Cost of sales during the fiscal year ended September 30 2024 decreased as a percentage of net sales despite increased inflationary pressures through most of fiscal 2024 This was primarily driven by the application of our three core value driven operating strategy obtaining profitable new business continually improving our cost structure and providing highly engineered value added products to customers coupled with fixed overhead costs incurred being spread over a higher production volume which contributed to the gross profit as a percentage of net sales increasing by 0 5 percentage points to 58 8 for the fiscal year ended September 30 2024 from 58 3 for the fiscal year ended September 30 2023
Foreign exchange rates particularly the U S dollar compared to the British pound and the euro weakened at a more significant rate in the fourth quarter of fiscal 2024 compared to fiscal 2023 resulting in an increase in foreign currency losses in fiscal 2024 No other material movement in the components to cost of sales were identified
Selling and administrative expenses increased by 200 million to 980 million or 12 3 of net sales for the fiscal year ended September 30 2024 from 780 million or 11 8 of net sales for the fiscal year ended September 30 2023 Selling and administrative expenses and the related percentage of net sales for the fiscal years ended September 30 2024 and 2023 were as follows amounts in millions
Excluding the specific costs in the table above selling and administrative expenses as a percentage of net sales for the fiscal year ended September 30 2024 decreased compared to the fiscal year ended September 30 2023 despite the higher inflationary environment through most of fiscal 2024 due to continued focus on productivity and cost improvements one of our three core value drivers The increase in non cash stock and deferred compensation expense is primarily attributable to the increase in the Black Scholes fair value of the stock option grants impacting non cash stock compensation expense The increase in the Black Scholes fair value is due to the appreciation of the stock price which is a key input used to determine the Black Scholes fair value Acquisition related expenses increased due to an increase in acquisition activity and related transaction costs compared to prior year Bad debt expense for the fiscal year ended September 30 2023 was favorably impacted by a reduction in the allowance for uncollectible accounts due to improving market conditions within commercial aerospace and the resulting reduction in assessed risk associated with the collectibility of certain trade accounts receivable
Amortization of intangible assets was 161 million for the fiscal year ended September 30 2024 compared to 139 million for the fiscal year ended September 30 2023 The increase in amortization expense of 22 million was primarily due to the amortization expense recognized on intangible assets from the third quarter fiscal 2023 acquisition of Calspan and the fiscal 2024 acquisitions The intangible assets recognized in connection with the fiscal 2024 acquisitions are summarized in Note 8 Intangible Assets of the notes to the consolidated financial statements included herein
Interest expense net includes interest on borrowings outstanding amortization of debt issuance costs original issue discount and premium revolving credit facility fees finance leases interest income and the impact of interest rate swaps and caps designated and qualifying as cash flow hedges Interest expense net increased 122 million or 10 5 to 1 286 million for the fiscal year ended September 30 2024 from 1 164 million for the fiscal year ended September 30 2023 The increase in interest expense net was primarily due to an increase in the base rate Term Secured Overnight Financing Rate Term SOFR to the portion of our variable rate debt that is not hedged refer to Note 19 Derivatives and Hedging Activities in the notes to the consolidated financial statements for information on our hedges as well as an increase in outstanding borrowings refer to Note 10 Debt in the notes to the consolidated financial statements for information on our debt This was partially offset by a 52 million increase in interest income The weighted average interest rate for cash interest payments on total borrowings outstanding for the fiscal year ended September 30 2024 was 6 3 compared to 6 2 for the fiscal year ended September 30 2023
Refinancing costs of 58 million incurred for the fiscal year ended September 30 2024 were primarily related to the third party fees and write off of unamortized debt issuance costs and original issue discount recorded in conjunction with the amendments to the Credit Agreement and the third party fees and write off of unamortized debt issuance costs recorded in conjunction with the notes redemptions completed during fiscal 2024 Refer to Note 10 Debt
Refinancing costs of 56 million incurred for the fiscal year ended September 30 2023 were primarily related to the redemption of the 8 00 secured notes due 2025 the 2025 Secured Notes and 6 875 senior subordinated notes due 2026 the 6 875 2026 Notes and third party fees incurred for the refinancing activity under the amendments to the Credit Agreement completed during fiscal 2023
Other income was 28 million for the fiscal year ended September 30 2024 compared to 13 million for the fiscal year ended September 30 2023 Other income for the fiscal year ended September 30 2024 primarily related to a gain on sale of business royalty and other income and the non service related components of benefit costs on the Company s benefit plans Other income for the fiscal year ended September 30 2023 primarily related to a 9 million cash refund received for the Esterline Retirement Plan the ERP upon the finalizing of the group annuity purchase funding
Income tax expense as a percentage of income before income taxes was approximately 22 6 for the fiscal year ended September 30 2024 compared to 24 3 for the fiscal year ended September 30 2023 The Company s lower effective tax rate for the fiscal year ended September 30 2024 was primarily due to a less significant impact on the rate from the valuation allowance applicable to the Company s net interest deduction limitation carryforward
Net income attributable to TD Group increased 416 million or 32 0 to 1 714 million for the fiscal year ended September 30 2024 compared to net income attributable to TD Group of 1 298 million for the fiscal year ended September 30 2023 primarily as a result of the factors referenced above
Basic and diluted earnings per share from continuing operations was 25 62 for the fiscal year ended September 30 2024 and 22 03 for the fiscal year ended September 30 2023 Net income attributable to TD Group for the fiscal year ended September 30 2024 of 1 714 million was decreased by dividend equivalents of 233 million or 4 02 per share resulting in net income applicable to TD Group common stockholders of 1 481 million Net income attributable to TD Group for the fiscal year ended September 30 2023 of 1 298 million was decreased by dividend equivalents of 38 million or 0 67 per share resulting in net income applicable to TD Group common stockholders of 1 260 million
Net sales for the Power Control segment increased 625 million an increase of 18 8 for the fiscal year ended September 30 2024 compared to the fiscal year ended September 30 2023 The sales increase resulted primarily from increases in organic sales in defense 262 million an increase of 16 7 commercial OEM 127 million an increase of 20 7 and the commercial aftermarket 123 million an increase of 11 9 The increase in defense sales is primarily attributable to improving U S Government defense spend outlays The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow body and wide body aircraft production and deliveries The increase in commercial aftermarket sales is primarily attributable to the continued recovery in commercial air travel demand and the resulting higher flight hours and utilization of aircraft in fiscal 2024 compared to fiscal 2023 particularly internationally
Net sales for the Airframe segment increased 715 million an increase of 23 1 for the fiscal year ended September 30 2024 compared to the fiscal year ended September 30 2023 The sales increase resulted primarily from increases in organic sales in defense 225 million an increase of 22 7 commercial OEM 160 million an increase of 19 7 and the commercial aftermarket 131 million an increase of 12 0 The increase in defense sales commercial OEM sales and commercial aftermarket sales for the Airframe segment is attributable to the same factors described in the paragraph above for the Power Control segment
Acquisition sales for the Power Control and Airframe segments contributed approximately 288 million in aggregate to the increase in net sales Acquisition sales represent net sales from acquired businesses for the period up to one year from the respective acquisition date
Refer to Non GAAP Financial Measures in this discussion and analysis for additional information and limitations regarding these non GAAP financial measures including a reconciliation to the comparable U S GAAP financial measure EBITDA As Defined by segment for the fiscal years ended September 30 2024 and 2023 were as follows amounts in millions
EBITDA As Defined for the Power Control segment increased approximately 370 million an increase of 19 8 resulting from higher organic sales in the defense commercial OEM and commercial aftermarket channels Also contributing to the increase in EBITDA As Defined was the application of our three core value driven operating strategy and positive leverage on our fixed overhead costs spread over a higher production volume despite the ongoing inflationary environment for freight labor and certain raw materials
EBITDA As Defined for the Airframe segment increased approximately 415 million an increase of 26 8 The increase in EBITDA As Defined for the Airframe segment is attributable to the same factors described in the paragraph above for the Power Control segment
EBITDA As Defined from acquisitions for the Power Control and Airframe segments contributed approximately 97 million in aggregate to the increase in EBITDA As Defined EBITDA As Defined from acquisitions represents EBITDA As Defined from acquired businesses for the period up to one year from the respective acquisition date
Corporate expenses consist primarily of compensation benefits professional services and other administrative costs incurred by the corporate offices An immaterial amount of corporate expenses is allocated to the operating segments The increase compared to fiscal 2023 is primarily attributable to the current fiscal year portion of the deferred compensation plan adopted in the fourth quarter of 2022 for certain members of non executive management and higher salaries and bonus expense Corporate EBITDA as Defined is consistent as a percentage of net sales in fiscal 2024 compared to fiscal 2023
For our results of operations for fiscal 2023 compared with fiscal 2022 refer to the discussion in Item 7 Management s Discussion and Analysis of Financial Conditions and Results of Operations of Form 10 K for the fiscal year ended September 30 2023 as filed with the Securities and Exchange Commission on November 9 2023
We have historically maintained a capital structure comprising a mix of equity and debt financing We vary our leverage both to optimize our equity return and to pursue acquisitions We expect to meet our current debt obligations as they come due through internally generated funds from current levels of operations and or through refinancing in the debt markets prior to the maturity dates of our debt
For purposes of computing the ratio of earnings to fixed charges earnings consist of earnings from continuing operations before income taxes plus fixed charges Fixed charges consist of interest expense amortization of debt issuance costs original issue discount and premium and the interest component of rental expense
During fiscal 2024 the Company completed approximately 21 000 million in debt financing transactions inclusive of new issuances and refinancing of existing debt Below is further information on the significant debt financing transactions occurring in fiscal 2024
On November 28 2023 the Company completed the issuance of 2 000 million in new senior debt 1 000 million in 7 125 senior secured notes due 2031 and 1 000 million in Tranche J term loans which was used to fund the acquisition of CPI s Electron Device Business completed in the third quarter of fiscal 2024 and for general corporate purposes
On February 27 2024 the Company amended the terms under its revolving credit facility to among other things extend the maturity date from May 2026 to February 2029 and increase the total commitments capacity from 810 million to 910 million Concurrently the Company completed the issuance of 4 400 million in new secured debt 2 200 million in 6 375 senior secured notes due 2029 and 2 200 million in 6 625 senior secured notes due 2032 which was used to redeem all of its outstanding 4 400 million in 6 25 senior secured notes due 2026
On March 22 2024 the Company repriced all of its 4 525 million in existing Tranche I term loans maturing August 2028 to bear interest at Term SOFR plus 2 75 a decrease from Term SOFR plus 3 25 previously applicable and replaced all of its 1 708 million in existing Tranche H term loans due February 2027 with new Tranche K term loans maturing March 2030 and bear interest at the same rate applied to the existing Tranche I term loans Concurrently the Company issued an additional 550 million in 6 375 senior secured notes due 2029 tack on to the 2 200 million issued during February 2024 which was used to redeem all of its outstanding 550 million in 7 50 senior subordinated notes due 2027 on April 22 2024
On June 4 2024 the Company repriced all of its 997 million in existing Tranche J term loans to bear interest at Term SOFR plus 2 50 compared to Term SOFR plus 3 25 applicable prior to the transaction and ii amended and extended 2 644 million in existing Tranche I term loans maturing August 24 2028 and converting such loans into Tranche J term loans maturing February 28 2031
On July 12 2024 the Company amended the Securitization Facility to among other things i increase the borrowing capacity from 450 million to 650 million and ii extend the maturity date to July 11 2025 at an interest rate of Term SOFR plus 1 45 compared to an interest rate of Term SOFR plus 1 60 that applied prior to the amendment In fiscal 2024 the Company drew 137 5 million available on Securitization Facility The Company subsequently drew the remaining 162 5 million available under the trade receivable securitization facility in October 2024
the Company completed the issuance of 3 000 million in new senior secured debt 1 500 million in 6 00 senior secured notes due January 15 2033 and 1 500 million in Tranche L term loans that bear interest at Term SOFR plus 2 50 and mature on January 19 2032
During fiscal 2024 the Company completed approximately 2 347 million in acquisitions of businesses net of cash acquired Below is further information on the significant acquisitions occurring in fiscal 2024
On June 6 2024 the Company completed the acquisition of all the outstanding stock of 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 2 000 million in new senior debt issued in the first quarter of fiscal 2024
On November 27 2023 the Company paid a special cash dividend of 35 00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans Total cash payments funded by existing cash on hand of special dividend and dividend equivalents from this declaration were approximately 2 020 million
oncurrently with the 3 000 million issuance of new senior secured debt described above the Company s Board of Directors authorized and declared a special cash dividend of 75 00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans Total cash payments funded by a combination of 3 000 million in new senior secured debt as previously noted and existing cash on hand related to the special dividend and dividend equivalents were approximately 4 348 million These payments were made in October 2024
If the Company has excess cash it generally prioritizes allocating the excess cash in the following manner 1 capital spending at existing businesses 2 acquisitions of businesses 3 payment of a special dividend and or repurchases of our common stock and 4 prepayment of indebtedness or repurchase of debt
The Company s ability to make scheduled interest payments on or to refinance the Company s indebtedness or to fund non acquisition related capital expenditures and research and development efforts will depend on the Company s ability to generate cash in the future This is subject to general economic financial competitive legislative regulatory and other factors that are beyond its control
The Company s objective is to maintain an allocation of at least 75 fixed rate and 25 variable rate debt thereby limiting its exposure to changes in near term interest rates Interest rate swaps caps and collars used to hedge and offset respectively the variable interest rates on our term loans are further described in Note 19 Derivatives and Hedging Activities in the notes to the consolidated financial statements included herein
We believe our significant cash liquidity will allow us to meet our anticipated funding requirements We expect to meet our short term cash liquidity requirements including interest obligations and capital expenditures through net cash from operating activities cash on hand and if needed draws on the revolving credit facility Long term cash liquidity requirements consist primarily of obligations under our long term debt agreements There is no maturity on any tranche of term loans or notes until November 2027 fiscal 2028
The Company estimates its capital expenditures in fiscal year 2025 to be approximately 2 5 to 3 5 of net sales The Company s capital expenditures incurred from year to year are funded using existing cash on hand and are primarily for projects that are consistent with our three core value driven operating strategies obtaining profitable new business continually improving our cost structure and providing highly engineered value added products to customers such as automation projects
In connection with the continued application of our three core value driven operating strategy obtaining profitable new business continually improving our cost structure and providing highly engineered value added products to customers we expect our efforts will continue to generate strong margins and provide sufficient cash provided by operating activities to meet our interest obligations and liquidity needs We believe our cash provided by operating activities and available borrowing capacity will enable us to make strategic business acquisitions pay special dividends to our shareholders and make opportunistic investments in our own stock subject to any restrictions in our existing credit agreement and market conditions
The Company may issue additional debt if prevailing market conditions are favorable to doing so In addition the Company may increase its borrowings in connection with acquisitions if cash flow from operating activities becomes insufficient to fund current operations or for other short term cash needs or for common stock repurchases or special dividends Our future leverage will also be impacted by the then current conditions of the credit markets
The change in trade accounts receivable during fiscal 2024 was a use of cash of 84 million compared to a use of cash of 212 million in fiscal 2023 The decrease in the use of cash of 128 million is primarily attributable to the lower sequential increase in sales between fiscal 2024 and fiscal 2023 compared to fiscal 2023 and fiscal 2022 and related timing of cash receipts as we move further from the impact of the pandemic on net sales The Company continues to actively manage its accounts receivable the related agings and collection efforts
The change in inventories during fiscal 2024 was a use of cash of 104 million compared to a use of cash of 261 million in fiscal 2023 The decrease in the use of cash of 157 million is primarily driven by an easing of the supply chain challenges that were more prevalent in the prior fiscal year resulting in a higher rate of inventory purchased in fiscal 2023 compared to fiscal 2024 The Company continues to actively and strategically manage inventory levels
Net cash used in investing activities was 2 441 million during fiscal 2024 consisting of 2 347 million from the acquisitions of Raptor Scientific CPI s Electron Device Business SEI FPT and certain product lines completed during fiscal 2024 capital expenditures of 165 million partially offset by other investing transactions of 71 million
Net cash used in investing activities was 900 million during fiscal 2023 consisting primarily of the acquisition of Calspan for approximately 729 million certain product line acquisitions aggregating to approximately 33 million and capital expenditures of 139 million
Net cash provided by financing activities was 3 171 million during fiscal 2024 The source of cash was primarily attributable to the net proceeds of short term and long term debt including fees of 4 965 million plus proceeds from stock option exercises of 245 million partially offset by special dividend and dividend equivalent payments of 2 038 million
Net cash used in financing activities was 16 million during fiscal 2023 The use of cash was primarily attributable to the net redemptions of short term and long term debt including fees of 193 million dividend equivalent payments of 38 million partially offset by proceeds from stock option exercises of 215 million
The Subordinated Notes are subordinated to all of our existing and future senior secured debt including indebtedness under TransDigm s existing senior secured credit facilities rank equally with all of our existing and future senior subordinated debt and rank senior to all of our future debt that is expressly subordinated to the Subordinated Notes The Subordinated Notes are fully and unconditionally guaranteed on a senior subordinated unsecured basis by TD Group TransDigm UK and TransDigm Inc s Domestic Restricted Subsidiaries as defined in the applicable indentures The table set forth in Exhibit 22 1 filed with this Form 10 K details the primary obligors and guarantors The guarantees of the Subordinated Notes are subordinated to all of the guarantors existing and future senior debt rank equally with all of their existing and future senior subordinated debt and rank senior to all of their future debt that is expressly subordinated to the guarantees of the Subordinated Notes The Subordinated Notes are structurally subordinated to all of the liabilities of TD Group s non guarantor subsidiaries
The Secured Notes are senior secured debt of TransDigm and rank equally in right of payment with all of TransDigm s existing and future senior secured debt including indebtedness under TransDigm s existing senior secured credit facilities and are senior in right of payment to all of TransDigm s existing and future senior subordinated debt including the Subordinated Notes The 2028 Secured Notes are guaranteed on a senior secured basis by TD Group TransDigm UK and TransDigm Inc s Domestic Restricted Subsidiaries as defined in the applicable indentures The 2029 Secured Notes 2030 Secured Notes 2031 Secured Notes 2032 Secured Notes and 2033 Secured Notes are guaranteed on a senior secured basis by TD Group and each of TransDigm Inc s direct and indirect Restricted Subsidiaries as defined in the applicable indenture that is a borrower or guarantor under TransDigm s senior secured credit facilities or that issues or guarantees any capital markets indebtedness of TransDigm Inc or any of the guarantors in an aggregate principal amount of at least 200 million As of the date of this Form 10 K the guarantors of the 2029 Secured Notes 2030 Secured Notes 2031 Secured Notes 2032 Secured Notes and 2033 Secured Notes are the same as the guarantors of the 2028 Secured Notes The table set forth in Exhibit 22 1 filed with this Form 10 K details the primary obligors and guarantors The guarantees of the Secured Notes rank equally in right of payment with all of the guarantors existing and future senior secured debt and are senior in right of payment to all of their existing and future senior subordinated debt The Secured Notes are structurally subordinated to all of the liabilities of TransDigm s non guarantor subsidiaries
Separate financial statements of TransDigm Inc are not presented because the Subordinated Notes and Secured Notes are fully and unconditionally guaranteed on a senior subordinated unsecured basis if Subordinated Notes and senior secured basis if Secured Notes by TD Group TransDigm UK and all of TransDigm Inc s Domestic Restricted Subsidiaries TD Group has no significant operations or assets separate from its investment in TransDigm Inc
The financial information presented is that of TD Group TransDigm Inc and the other Guarantors which includes TransDigm UK on a combined basis and the financial information of non issuer and non guarantor subsidiaries has been excluded Intercompany balances and transactions between TD Group TransDigm Inc and the other Guarantors have been eliminated and amounts due from amounts due to and transactions with non issuer and non guarantor subsidiaries have been presented separately
TransDigm has 8 702 million in fully drawn term loans the Term Loans Facility and an 910 million revolving credit facility The Term Loans Facility consists of four tranches of term loans as follows aggregate principal amount disclosed is as of September 30 2024
The Term Loans Facility requires quarterly aggregate principal payments of 22 million The revolving commitments consist of two tranches which include up to 139 million of multicurrency revolving commitments At September 30 2024 the Company had 67 million in letters of credit outstanding and 843 million in borrowings available under the revolving commitments Draws on the revolving commitments are subject to an interest rate of Term SOFR plus 2 25 The unused portion of the revolving commitments is subject to a fee of 0 5 per annum The maturity date of the revolving credit facility is February 27 2029
The interest rates per annum applicable to the Term Loans Facility under the Credit Agreement are at TransDigm s option equal to either an alternate base rate or an adjusted Term SOFR for one three or six month interest periods chosen by TransDigm in each case plus an applicable margin percentage The adjusted Term SOFR related to the Term Loans Facility are not subject to a floor Refer to Note 19 Derivatives and Hedging Activities in the notes to the consolidated financial statements included herein for information about how our interest rate swaps cap and collar agreements are used to hedge and offset respectively the variable interest rate portion of our debt
The 5 50 2027 Notes the 4 625 2029 Notes and the 4 875 2029 Notes collectively the Subordinated Notes were issued at a price of 100 00 of the principal amount The 2030 Secured Notes 2032 Secured Notes and 2033 Secured Notes which along with the 2028 Secured Notes 2029 Secured Notes and 2031 Secured Notes are collectively referred to as the Secured Notes were issued at a price of 100 00 of its principal amount The initial 1 000 million offering and the subsequent 1 100 million offering of the 6 75 senior secured notes due 2028 collectively the 2028 Secured Notes in the second quarter of fiscal 2023 were issued at a price of 100 00 and 99 00 respectively of their principal amount resulting in gross proceeds of 2 089 million The 2031 Secured Notes was issued in the first quarter of fiscal 2024 at a price of 99 25 of its principal amount resulting in gross proceeds of 993 million The initial 2 200 million offering and subsequent 550 million offering of the 6 375 senior secured notes due 2029 collectively the 2029 Secured Notes in the second quarter of fiscal 2024 were issued at a price of 100 00 and 99 75 respectively of their principal amount resulting in gross proceeds of 2 749 million
The Subordinated Notes and Secured Notes do not require principal payments prior to their maturity Interest under the Subordinated Notes and Secured Notes are payable semi annually The Subordinated Notes represent our unsecured obligations ranking subordinate to our senior debt as defined in the applicable indentures The Secured Notes represent our secured obligations ranking equally to all existing and future senior debt as defined in the applicable indentures The Subordinated Notes and Secured Notes contain many of the restrictive covenants included in the Credit Agreement TransDigm is in compliance with all of the covenants contained in the Subordinated Notes and Secured Notes
The Credit Agreement and the Indentures governing the Notes and Secured Notes contain restrictive covenants that among other things limit the incurrence of additional indebtedness the payment of special dividends transactions with affiliates asset sales acquisitions mergers and consolidations liens and encumbrances and prepayments of certain other indebtedness
The restrictive covenants included in the Credit Agreement are subject to amendments executed periodically The most recent amendment that impacted the restrictive covenants contained in the Credit Agreement is Amendment No 15 executed on March 22 2024
Under the terms of the Credit Agreement TransDigm is entitled on one or more occasions to request additional term loans or additional revolving commitments to the extent that the existing or new lenders agree to provide such incremental term loans or additional revolving commitments provided that among other conditions our consolidated net leverage ratio would be no greater than 7 25x and the consolidated secured net debt ratio would be no greater than 5 00x in each case after giving effect to such incremental term loans or additional revolving commitments
If any such default occurs the lenders under the Credit Agreement and the holders of the Notes and Secured Notes may elect to declare all outstanding borrowings together with accrued interest and other amounts payable thereunder to be immediately due and payable The lenders under the Credit Agreement also have the right in these circumstances to terminate any commitments they have to provide further borrowings In addition following an event of default under the Credit Agreement the lenders thereunder and the holders of the Secured Notes will have the right to proceed against the collateral granted to them to secure the debt which includes our available cash and they will also have the right to prevent us from making debt service payments on the Notes
With the exception of the revolving credit facility the Company has no maintenance covenants in its existing term loan and indenture agreements Under the Credit Agreement if the usage of the revolving credit facility exceeds 40 or currently 364 million of the total revolving commitments the Company is required to maintain a maximum consolidated net leverage ratio of net debt to trailing four quarter EBITDA As Defined of 7 50x or solely with respect to the first four fiscal quarters ending after the consummation of any material acquisition 8 00x as of the last day of the fiscal quarter
During fiscal 2014 the Company established a trade receivable securitization facility the 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 12 2024 the Company amended the Securitization Facility to among other things i increase the borrowing capacity from 450 million to 650 million and ii extend the maturity date to July 11 2025 at an interest rate of Term SOFR plus 1 45 compared to an interest rate of Term SOFR plus 1 60 that applied prior to the amendment
As of September 30 2024 the total drawn on the Securitization Facility is 487 5 million resulting in 162 5 million available to be drawn For the fiscal years ended September 30 2024 and 2023 the applicable interest rate was 6 73 and 6 95 respectively The Securitization Facility is collateralized by substantially all of the Company s domestic operations trade accounts receivable
During the first and fourth quarters of fiscal 2024 TD Group s Board of Directors authorized and declared special cash dividends of 35 00 and 75 00 respectively on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans Pursuant to the Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan the Amended and Restated 2014 Stock Option Plan Dividend Equivalent Plan and the 2019 Stock Option Plan Dividend Equivalent Plan all of the vested options granted under the existing stock option plans except for grants to the members of the Board of Directors are entitled to certain cash dividend equivalent payments in the event of the declaration of a dividend by the Company In fiscal 2022 all members of the Board of Directors executed amendments to their option agreements in which future dividend declarations result in a reduction of the strike price of their existing options instead of receiving cash dividend equivalent payments
On November 27 2023 the Company paid the special cash dividend of 35 00 on each outstanding share of common stock totaling 1 937 million Dividend equivalent payments are made during the Company s first fiscal quarter each year and also upon payment of any dividends declared within the fiscal year Total dividend equivalent payments in the first quarter of fiscal 2024 and 2023 were 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 special dividend declaration and 38 million respectively
On October 18 2024 the Company paid the special cash dividend of 75 00 on each outstanding share of common stock totaling 4 216 million and dividend equivalent payments of 132 million associated with the September 2024 75 00 special dividend declaration both of which are accrued as of September 30 2024
Any future declaration of special cash dividends on our common stock will be at the discretion of our Board of Directors and will depend upon our results of operations earnings capital requirements financial condition future prospects contractual restrictions under the Credit Agreement and indentures governing the Notes the availability of surplus under Delaware law and other factors deemed relevant by our Board of Directors TD Group is a holding company and conducts all of its operations through direct and indirect subsidiaries Unless TD Group receives dividends distributions advances transfers of funds or other payments from our subsidiaries TD Group will be unable to pay any dividends on our common stock in the future The ability of any subsidiaries to take any of the foregoing actions is limited by the terms of our Term Loans Facility and indentures and may be limited by future debt or other agreements that we may enter into
Assumes that the variable interest rate on our existing term loans under our Term Loans Facility range from approximately 5 6 to 6 5 based on anticipated movements in Term SOFR which given the ongoing volatility in rates are highly uncertain In addition interest payments include the impact of the existing interest rate swap cap and collar agreements described in Note 19 Derivatives and Hedging Activities in the notes to the consolidated financial statements included herein
The Company utilizes letters of credit to back certain payment and performance obligations Letters of credit are subject to limits based on amounts outstanding under the Company s revolving credit facility As of September 30 2024 the Company had 67 million in letters of credit outstanding
Our consolidated financial statements have been prepared in conformity with U S GAAP which often requires the judgment of management in the selection and application of certain accounting principles and methods Management believes that the quality and reasonableness of our most critical policies enable the fair presentation of our financial position and results of operations However investors are cautioned that the sensitivity of financial statements to these methods assumptions and estimates could create materially different results under different conditions or using different assumptions
Below are those policies applied in preparing our financial statements that management believes are the most dependent on the application of estimates and assumptions For additional significant accounting policies see Note 1 Summary of Significant Accounting Policies in the notes to the consolidated financial statements included herein
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 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 For agreements with multiple performance obligations judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes based on the standalone selling price of each performance obligation The primary method used to estimate a standalone selling price is the price observed in standalone sales to customers for the same product or service We consider the contractual consideration payable by the customer and assesses 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
In accordance with ASC 805 Business Combinations the Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed are recognized as goodwill The valuations of the acquired assets and liabilities will impact the determination of future operating results Determining the fair value of assets acquired and liabilities assumed requires management s judgment and often involves the use of significant estimates and assumptions including assumptions with respect to future cash inflows and outflows revenue growth rates and EBITDA margins discount rates customer attrition rates royalty rates asset lives and market multiples among other items We determine the fair values of intangible assets acquired generally in consultation with third party valuation advisors Fair value adjustments to the Company s assets and liabilities are recognized and the results of operations of the acquired business are included in our consolidated financial statements from the effective date of the merger or acquisition
Intangible assets other than goodwill are recognized if the benefit of the intangible asset is obtained through contractual or other legal rights or if the intangible asset can be sold transferred licensed or exchanged regardless of the Company s intent to do so Goodwill and identifiable intangible assets are recorded at their estimated fair value on the date of acquisition and are reviewed at least annually for impairment based on cash flow projections and fair value estimates
U S GAAP requires that the annual and any interim goodwill impairment assessment be performed at the reporting unit level Our reporting units have been identified at the operating unit level which is one level below our operating segments Substantially all goodwill was determined and recognized for each reporting unit pursuant to the accounting for the merger or acquisition as of the date of each transaction With respect to acquisitions integrated into an existing reporting unit any acquired goodwill is combined with the goodwill of the reporting unit
Companies may perform a qualitative assessment as the initial step in the annual goodwill impairment testing process for all or selected reporting units Companies are also allowed to bypass the qualitative analysis and perform a quantitative analysis if desired Economic uncertainties and the length of time from the calculation of a baseline fair value are factors that we consider in determining whether to perform a quantitative test
When we evaluate the potential for goodwill impairment using a qualitative assessment we consider factors including but not limited to macroeconomic conditions industry conditions the competitive environment changes in the market for our products and services regulatory and political developments entity specific factors such as strategy and changes in key personnel and overall financial performance If after completing this assessment it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value we proceed to a quantitative impairment test For the quantitative test management determines the estimated fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit If the estimated fair value is less than the current carrying value impairment of goodwill of the reporting unit may exist The key assumptions used in the discounted cash flow valuation model for impairment testing includes discount rates revenue growth rates and EBITDA margins cash flow projections and terminal value rates Discount rates are set by using the weighted average cost of capital WACC methodology The WACC methodology considers market and industry data in determining the appropriate discount rates to be used inclusive of company specific risk factors The Company utilizes a third party valuation firm to assist in the determination of the WACC The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business
Management considering industry and company specific historical and projected data develops growth rates sales projections and cash flow projections for each reporting unit Terminal value rate determination follows a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long term growth rates
The impairment test for indefinite lived intangible assets consists of a comparison between the estimated fair values and carrying values If the carrying amounts of intangible assets that have indefinite useful lives exceed their estimated fair values an impairment loss will be recognized in an amount equal to the difference Management utilizes the royalty savings valuation method to determine the estimated fair value for each indefinite lived intangible asset In this method management estimates the royalty savings arising from the ownership of the intangible asset The key assumptions used in estimating the royalty savings for impairment testing include discount rates royalty rates growth rates sales projections and terminal value rates Discount rates used are similar to the rates developed by the WACC methodology inclusive of considering any differences in company specific risk factors between reporting units and the indefinite lived intangible assets Royalty rates are established by management with the advice of valuation experts Management considering industry and company specific historical and projected data develops growth rates and sales projections for each significant intangible asset Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant WACC and low long term growth rates
The discounted cash flow and royalty savings valuation methodologies require management to make certain assumptions based upon information available at the time the valuations are performed Actual results could differ from these assumptions Management believes the assumptions used are reflective of what a market participant would have used in calculating fair value considering the current economic conditions
The Company had 50 reporting units with goodwill and 47 reporting units with indefinite lived intangible assets as of the first day of the fourth quarter of fiscal 2024 the date of the annual impairment test The Company identified 14 reporting units to test for impairment using a quantitative test for both goodwill and indefinite lived intangible assets Of the 14 reporting units selected for quantitative testing six reporting units primarily were either a recent acquisition or met certain criteria determined by management For the remaining eight reporting units the Company elected to bypass the qualitative analysis and perform a quantitative test considering the length of time since the last determination of baseline fair values The estimated fair values of each of these reporting units and other indefinite lived intangible assets were in excess of their respective carrying values We believe we incorporate conservative sensitivity ranges on certain company specific projected data including earnings before taxes and net sales which are significant assumptions in the discounted cash flow valuation model to determine estimated fair value such that actual results would need to be materially out of the range of the expected assumptions in order for an impairment to occur
The cost of the Company s stock based compensation is recorded in accordance with ASC 718 Stock Compensation The Company uses a Black Scholes pricing model to estimate the grant date fair value of the stock options awarded The Black Scholes pricing model requires assumptions regarding the expected volatility of the Company s common shares the risk free interest rate the expected life of the stock options award and the Company s dividend yield The Company primarily utilizes historical data in determining the assumptions An increase or decrease in the assumptions or economic events outside of management s control could and do have an impact on the Black Scholes pricing model The Company estimates stock option forfeitures based on historical data The total number of stock options expected to vest is adjusted by actual and estimated forfeitures Changes to the actual and estimated forfeitures will result in a cumulative adjustment in the period of change The Company also evaluates any subsequent changes to the respective option holders terms under the modification rules of ASC 718 If determined to be a modification the Black Scholes pricing model is updated as of the date of the modification resulting in a cumulative catch up to expense
The Company estimates income taxes in each jurisdiction in which it operates This involves estimating taxable earnings specific taxable and deductible items the likelihood of generating sufficient future taxable income to utilize deferred tax assets and possible exposures related to future tax audits To the extent these estimates change adjustments to deferred and accrued income taxes are made in the period in which the changes occur Historically such adjustments have not been significant
We present below certain financial information based on our EBITDA and EBITDA As Defined References to EBITDA mean earnings before interest taxes depreciation and amortization and references to EBITDA As Defined mean EBITDA plus as applicable for each relevant period certain adjustments as set forth in the reconciliations of net income to EBITDA and EBITDA As Defined and the reconciliations of net cash provided by operating activities to EBITDA and EBITDA As Defined presented below
Neither EBITDA nor EBITDA As Defined is a measurement of financial performance under U S GAAP We present EBITDA and EBITDA As Defined because we believe they are useful indicators for evaluating operating performance and liquidity
Our management believes that EBITDA and EBITDA As Defined are useful as indicators of liquidity because securities analysts investors rating agencies and others use EBITDA to evaluate a company s ability to incur and service debt In addition EBITDA As Defined is useful to investors because the revolving credit facility under our senior secured credit facility requires compliance under certain circumstances on a pro forma basis with a financial covenant that measures the ratio of the amount of our secured indebtedness to the amount of our Consolidated EBITDA defined in the same manner as we define EBITDA As Defined herein
In addition to the above our management uses EBITDA As Defined to review and assess the performance of the management team in connection with employee incentive programs and to prepare its annual budget and financial projections Moreover our management uses EBITDA As Defined to evaluate acquisitions
Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above the use of these non GAAP financial measures as analytical tools has limitations and you should not consider any of them in isolation or as a substitute for analysis of our results of operations as reported in accordance with U S GAAP Some of these limitations are
although depreciation and amortization are non cash charges the assets being depreciated and amortized will often have to be replaced in the future and neither EBITDA nor EBITDA As Defined reflects any cash requirements for such replacements
Because of these limitations EBITDA and EBITDA As Defined should not be considered as measures of discretionary cash available to us to invest in the growth of our business Management compensates for these limitations by not viewing EBITDA or EBITDA As Defined in isolation and specifically by using other U S GAAP measures such as net income net sales and operating profit to measure our operating performance Neither EBITDA nor EBITDA As Defined is a measurement of financial performance under U S GAAP and neither should be considered as an alternative to net income or cash flow from operations determined in accordance with U S GAAP Our calculation of EBITDA and EBITDA As Defined may not be comparable to the calculation of similarly titled measures reported by other companies
Represents costs incurred to integrate acquired businesses into TD Group s operations facility relocation costs and other acquisition related costs transaction and valuation related costs for acquisitions comprising deal fees legal financial and tax due diligence expenses and amortization expense of inventory step up recorded in connection with the purchase accounting of acquired businesses
Primarily represents foreign currency transaction gains or losses payroll withholding taxes related to dividend equivalent payments and stock option exercises non service related pension costs deferred compensation payments and other miscellaneous income expense
Represents costs incurred to integrate acquired businesses into TD Group s operations facility relocation costs and other acquisition related costs transaction and valuation related costs for acquisitions comprising deal fees legal financial and tax due diligence expenses and amortization expense of inventory step up recorded in connection with the purchase accounting of acquired businesses
Primarily represents foreign currency transaction gains or losses payroll withholding taxes related to dividend equivalent payments and stock option exercises non service related pension costs deferred compensation payments and other miscellaneous income expense
At September 30 2024 we had borrowings under our Term Loans Facility which consists of four tranches of term loans of approximately 8 702 million as well as 487 million from the Securitization Facility that are subject to interest rate risk particularly movements in Term SOFR Borrowings under our term loans bear interest at our option at a rate equal to either an alternate base rate or an adjusted Term SOFR for a one three or six month thereafter in each case subject to the availability thereof interest period chosen by us in each case plus an applicable margin percentage Our Securitization Facility bears interest at a rate of three month Term SOFR plus 1 45 Accordingly the Company s cash flows and earnings will be exposed to the market risk of interest rate changes resulting from variable rate borrowings under our term loans The Company s objective is to maintain an allocation of at least 75 fixed rate and 25 variable rate debt thereby limiting its exposure to changes in near term interest rates Interest rate swaps caps and collars used to hedge and offset respectively the variable interest rates on the credit facility are described in Note 19 Derivatives and Hedging Activities in the notes to the consolidated financial statements included herein We do not hold or issue derivative instruments for speculative purposes As of September 30 2024 approximately 77 of our gross debt was fixed rate The effect of a hypothetical one percentage point increase in interest rates would increase the annual interest costs under our Term Loans Facility and Securitization Facility by approximately 30 million based on the amount of outstanding borrowings at September 30 2024 The weighted average interest rate on the 8 702 million of term loans and the 487 million drawn on the Securitization Facility at September 30 2024 was 6 5
For information about the fair value of the aggregate principal amount of borrowings under our term loans and the fair value of the senior secured and subordinated notes refer to Note 18 Fair Value Measurements in the notes to the consolidated financial statements included herein
Certain of our foreign subsidiaries sales and results of operations are subject to the impact of foreign currency fluctuations primarily the British pound and the euro Because our consolidated financial statements are presented in U S dollars increases or decreases in the value of the U S dollar relative to other currencies in which we transact business could materially adversely affect our net sales net income and the carrying values of our assets located outside the U S Global economic uncertainty continues to exist 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 The foreign currency forward exchange contracts entered into by the Company are described in Note 19 Derivatives and Hedging Activities in the notes to the consolidated financial statements included herein A 10 change in foreign currency exchange rates would not have resulted in a material impact to net income for the fiscal year ended September 30 2024
As of September 30 2024 TD Group carried out an evaluation under the supervision and with the participation of TD Group s management including its President Chief Executive Officer and Director Principal Executive Officer and Chief Financial Officer Principal Financial Officer of the effectiveness of the design and operation of TD Group s disclosure controls and procedures Based upon that evaluation the President Chief Executive Officer and Director and Chief Financial Officer concluded that TD Group s disclosure controls and procedures are effective to ensure that information required to be disclosed by TD Group in the reports it files or submits under the Exchange Act is recorded processed summarized and reported within the time periods specified by the Securities and Exchange Commission s rules and forms and that such information is accumulated and communicated to TD Group s management including its President Chief Executive Officer and Director and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure In designing and evaluating the disclosure controls and procedures TD Group s management recognized that any controls and procedures no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures
The management of TD Group is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a 15 f Using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework COSO in Internal Control Integrated Framework TransDigm s management assessed the effectiveness of the Company s internal control over financial reporting as of September 30 2024 Based on our assessment management concluded that the Company s internal control over financial reporting was effective as of September 30 2024
During fiscal 2024 the Company completed the acquisitions of Raptor Scientific CPI s Electron Device Business SEI and FPT The Company is currently integrating the acquisitions into its operations compliance programs and internal control processes As permitted by SEC rules and regulations the Company has excluded these acquisitions from management s evaluation of internal controls over financial reporting as of September 30 2024 These acquisitions constituted approximately 9 8 of the Company s total assets inclusive of acquired intangible assets and goodwill as of September 30 2024 and approximately 2 0 and 0 0 of the Company s net sales and income from continuing operations before income taxes respectively for the fiscal year ended September 30 2024
The effectiveness of the Company s internal control over financial reporting as of September 30 2024 has been audited by Ernst Young LLP an independent registered public accounting firm as stated in their report which is included elsewhere in this Annual Report on Form 10 K and is incorporated herein by reference
There have been no changes in the Company s internal control over financial reporting that occurred during the fourth quarter of fiscal 2024 that materially affected or are reasonably likely to materially affect the Company s internal control over financial reporting
We have audited TransDigm Group Incorporated s internal control over financial reporting as of September 30 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework
the COSO criteria In our opinion TransDigm Group Incorporated the Company maintained in all material respects effective internal control over financial reporting as of September 30 2024 based on the COSO criteria
As indicated in the accompanying Management s Report on Internal Control Over Financial Reporting management s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Raptor Scientific the Electron Device Business of Communications Power Industries CPI s Electron Device Business SEI Industries LTD SEI or FPT Industries LLC FPT which are included in the 2024 consolidated financial statements of the Company and constituted 9 8 of total assets as of September 30 2024 and 2 0 and 0 0 of net sales and income from continuing operations before income taxes respectively for the fiscal year then ended Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Raptor Scientific CPI s Electron Device Business SEI or FPT
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the consolidated balance sheets of the Company as of September 30 2024 and 2023 the related consolidated statements of income comprehensive income changes in stockholders deficit and cash flows for each of the three fiscal years in the period ended September 30 2024 and the related notes and financial statement schedule listed in the Index at Item 15 a and our report dated November 7 2024 expressed an unqualified opinion thereon
The Company s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control Over Financial Reporting Our responsibility is to express an opinion on the Company s internal control over financial reporting based on our audit We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audit in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects
Our audit included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists testing and evaluating the design and operating effectiveness of internal control based on the assessed risk and performing such other procedures as we considered necessary in the circumstances We believe that our audit provides a reasonable basis for our opinion
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
Because of its inherent limitations internal control over financial reporting may not prevent or detect misstatements Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate
On August 29 2024 Kevin Stein the Company s President Chief Executive Officer and Director entered into a new Rule 10b5 1 trading arrangement as defined in Item 408 of Regulation S K for the sale of 100 000 shares of common stock issuable upon the exercise of vested options intended to satisfy the affirmative defense conditions of Rule 10b5 1 c under the Exchange Act which Rule 10b5 1 trading arrangement is scheduled to begin on December 12 2024 and terminate no later than December 31 2025
On August 21 2024 Joel Reiss the Company s Co Chief Operating Officer entered into a new Rule 10b5 1 trading arrangement as defined in Item 408 of Regulation S K for the sale of 36 300 shares of common stock issuable upon the exercise of vested options intended to satisfy the affirmative defense conditions of Rule 10b5 1 c under the Exchange Act which Rule 10b5 1 trading arrangement is scheduled to begin on November 20 2024 and terminate no later than October 31 2025
Information regarding TD Group s directors will be set forth under the caption Proposal No 1 Election of Directors in our Proxy Statement which is incorporated herein by reference The following table sets forth certain information concerning TD Group s executive officers
Mr Stein was appointed Chief Executive Officer and Director in April 2018 and President in January 2017 Prior to that Mr Stein served as Chief Operating Officer from January 2017 to March 2018 and Chief Operating Officer of the Power and Control segment from October 2014 to December 2016 Prior to joining TransDigm Mr Stein served as President of the Structurals division and Executive Vice President of Precision Castparts Corp from 2009 to 2014
Mr Lisman was appointed Co Chief Operating Officer in May 2023 Prior to that Mr Lisman served as Chief Financial Officer from July 2018 to May 2023 and Executive Vice President from January 2022 to May 2023 Mr Lisman also served as Vice President Mergers and Acquisitions from January 2018 to June 2018 Business Unit Manager for the Air Fuel Valves business unit at Aero Fluid Products a wholly owned subsidiary of TransDigm Inc from January 2017 to January 2018 and Director of Mergers and Acquisitions of TransDigm from November 2015 to January 2017 Mr Lisman was Vice President at Warburg Pincus from 2011 to 2015 and has previous experience in both private equity and investment banking roles at The Carlyle Group and Morgan Stanley
Mr Reiss was appointed Co Chief Operating Officer in May 2023 Prior to that Mr Reiss served as Executive Vice President from October 2015 to May 2023 Mr Reiss also served as President of Hartwell Corporation a wholly owned subsidiary of TransDigm Inc from July 2012 to October 2015 President of Skurka Aerospace a wholly owned subsidiary of TransDigm Inc from July 2010 to July 2012 and Director of Operations of Adams Rite Aerospace a wholly owned subsidiary of TransDigm Inc from July 2000 to July 2010
Ms Wynne was appointed Chief Financial Officer in May 2023 Prior to that Ms Wynne served as Chief Accounting Officer from November 2018 to May 2023 Ms Wynne also served as Group Controller from April 2015 to October 2018 as Controller of the Aero Fluid Products division of AeroControlex Group Inc a wholly owned subsidiary of TransDigm Inc from October 2009 to March 2015 and previously in other accounting roles within the Company
Ms Warren was appointed General Counsel Chief Compliance Officer and Secretary in February 2023 Prior to that Ms Warren served as Associate General Counsel of the Company from December 2018 to February 2023 Prior to joining TransDigm as Associate General Counsel Ms Warren maintained a private legal practice focusing on providing services to technology driven businesses including providing counsel to TransDigm on disputes environmental matters intellectual property and a variety of other matters Ms Warren also served as General Counsel of Thogus Products Company from October 2014 to July 2016
We have adopted a Code of Business Conduct and Ethics which applies to all of our directors officers and employees and a Code of Ethics for Senior Financial Officers which includes additional ethical obligations for our senior financial management which includes our president chief executive officer and director co chief operating officers chief financial officer corporate controller treasurer vice president of finance director of audit group controllers general counsel operating unit presidents and operating unit vice presidents of finance Please refer to the information set forth in our Proxy Statement which is incorporated herein by reference Our Code of Business Conduct and Ethics and our Code of Ethics for Senior Financial Officers is available on our website at
Any person may receive a copy without charge by writing to us at TransDigm Group Incorporated 1350 Euclid Avenue Suite 1600 Cleveland Ohio 44115 We intend to disclose on our website any amendment to or waiver from a provision of our Code of Business Conduct and Ethics that applies to directors and executive officers and that is required to be disclosed pursuant to the rules of the Securities and Exchange Commission
The procedure by which stockholders may recommend nominees to our Board of Directors will be set forth under the caption Shareholder Proposals for the 2025 Annual Meeting in our Proxy Statement which is incorporated herein by reference
The information regarding the audit committee of our Board of Directors and audit committee financial experts will be set forth under the caption Corporate Governance in our Proxy Statement which is incorporated herein by reference
The information regarding security ownership of certain beneficial owners and management will be set forth under the captions Beneficial Ownership of Equity Securities of TransDigm and Security Ownership of Certain Beneficial Owners in our Proxy Statement which is incorporated herein by reference
This amount represents 74 215 3 779 503 and 561 109 shares subject to outstanding stock options under our 2006 stock incentive plan 2014 stock option plan and 2019 stock option plan respectively No further grants may be made under our 2006 stock incentive plan and 2014 stock option plan although outstanding stock options continue in force in accordance with their terms
This amount represents remaining shares available for award under our 2019 stock option plan In August 2019 the 2019 stock option plan was adopted by the Board of Directors of TD Group and was subsequently approved by stockholders on October 3 2019 The 2019 stock option plan permits TD Group to award stock options to our key employees directors or consultants The total number shares of TD Group common stock reserved for issuance or delivery under the 2019 stock option plan is 4 000 000 subject to adjustment in the event of any stock dividend or split reorganization recapitalization merger share exchange or any other similar corporate transaction or event
The information required by this item will be set forth under the caption Proposal No 2 Ratification of Appointment of Independent Registered Public Accounting Firm in our Proxy Statement which is incorporated herein by reference
Indenture dated as of November 13 2019 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company N A as trustee relating to TransDigm Inc s 5 50 Senior Subordinated Notes due 2027
Indenture dated as of January 20 2021 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company N A as trustee relating to TransDigm Inc s 4 625 Senior Subordinated Notes due 2029
Indenture dated as of April 21 2021 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company N A as trustee relating to TransDigm Inc s 4 875 Senior Subordinated Notes due 2029
Indenture dated as of February 24 2023 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent relating to TransDigm Inc s 6 75 Senior Secured Notes due 2028
First Supplemental Indenture dated as of March 9 2023 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent relating to TransDigm Inc s 6 75 Senior Secured Notes due 2028
Indenture dated as of August 18 2023 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent relating to TransDigm Inc s 6 875 Senior Secured Notes due 2030
Indenture dated as of November 28 2023 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent relating to TransDigm Inc s 7 125 Senior Secured Notes due 2031
Indenture dated as of February 27 2024 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent relating to TransDigm Inc s 6 375 Senior Secured Notes due 2029
Indenture dated as of February 27 2024 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent relating to TransDigm Inc s 6 625 Senior Secured Notes due 2032
First Supplemental Indenture dated as of March 22 2024 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent to the Indenture dated as of February 27 2024 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent relating to TransDigm Inc s additional 6 375 Senior Secured Notes due 2029
Indenture dated as of September 19 2024 among TransDigm Inc as issuer TransDigm Group Incorporated as a guarantor the subsidiary guarantors party thereto The Bank of New York Mellon Trust Company N A as trustee and US collateral agent and The Bank of New York Mellon as UK collateral agent relating to TransDigm Inc s 6 000 Senior Secured Notes due 2033
Form of Stock Option Grant Notice and Agreement for executive officers under the TransDigm Group Incorporated 2019 Stock Option Plan or TransDigm Group Incorporated 2014 Stock Option Plan for options awarded in fiscal 2024
Amendment and Restatement Agreement and Second Amendment and Restated Credit Agreement dated as of June 4 2014 among TransDigm Inc TransDigm Group Incorporated the subsidiaries of TransDigm Inc from time to time party thereto the lenders party thereto as lenders and Credit Suisse AG as administrative agent
Incremental Assumption and Refinancing Facility Agreement dated as of May 14 2015 among TransDigm Inc TransDigm Group Incorporated the subsidiary guarantors party thereto Credit Suisse AG as administrative agent and collateral agent and the other agents and lenders named therein
Loan Modification Agreement dated as of May 20 2015 among TransDigm Inc TransDigm Group Incorporated the subsidiary guarantors party thereto Credit Suisse AG as administrative agent and collateral agent and the other agents and lenders party thereto
Incremental Revolving Credit Assumption and Refinancing Facility Agreement dated as of May 20 2015 among TransDigm Inc TransDigm Group Incorporated the subsidiary guarantors party thereto Credit Suisse AG as administrative agent and collateral agent and the other agents and lenders party thereto
Incremental Term Loan Assumption Agreement dated October 14 2016 among TransDigm Inc TransDigm Group Incorporated the subsidiaries of TransDigm Inc party thereto the lenders party thereto and Credit Suisse AG as administrative and collateral agent
Amendment No 2 to the Second Amended and Restated Credit Agreement dated as of March 6 2017 among TransDigm Inc as borrower TransDigm Group Incorporated as guarantor the subsidiary guarantors party thereto Credit Suisse AG as administrative agent and collateral agent and the other agents and lenders named therein
Amendment No 3 to the Second Amended and Restated Credit Agreement dated as of August 22 2017 among TransDigm Inc as borrower TransDigm Group Incorporated as guarantor the subsidiary guarantors party thereto Credit Suisse AG as administrative agent and collateral agent and the other agents and lenders named therein
Amendment No 4 to the Second Amended and Restated Credit Agreement dated as of November 30 2017 among TransDigm Inc as borrower TransDigm Group Incorporated as guarantor the subsidiary guarantors party thereto Credit Suisse AG as administrative agent and collateral agent and the other agents and lenders named therein
Refinancing Facility Agreement to the Second Amended and Restated Credit Agreement dated as of February 22 2018 among TransDigm Inc as borrower TransDigm Group Incorporated as guarantor the subsidiary guarantors party thereto Credit Suisse AG as administrative agent and collateral agent and the other agents and lenders named therein
Amendment No 5 Incremental Assumption Agreement and Refinancing Facility Agreement dated as of May 30 2018 relating to the Second Amended and Restated Credit Agreement dated as of June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Credit Suisse AG as administrative agent and collateral agent for the lenders
Amendment No 6 and Incremental Revolving Credit Assumption Agreement dated as of March 14 2019 to the Second Amended and Restated Credit Agreement dated as of June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Credit Suisse AG as administrative agent and collateral agent for the lenders
Amendment No 7 and Refinancing Facility Agreement dated as of February 6 2020 to the Second Amended and Restated Credit Agreement dated as of June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Credit Suisse AG as administrative agent and collateral agent for the lenders
Amendment No 8 and Loan Modification Agreement dated as of May 24 2021 to the Second Amended and Restated Credit Agreement dated as of June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Credit Suisse AG as administrative agent and collateral agent for the lenders
Amendment No 9 and Incremental Revolving Credit Assumption Agreement dated as of December 29 2021 to the Second Amended and Restated Credit Agreement dated as of June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Credit Suisse AG as administrative agent and collateral agent for the lenders
Amendment No 10 Loan Modification Agreement and Refinancing Facility Agreement dated December 14 2022 to the Second Amended and Restated Credit Agreement dated June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent as successor to Credit Suisse AG for the lenders
Amendment No 11 Loan Modification Agreement and Refinancing Facility Agreement dated February 24 2023 to the Second Amended and Restated Credit Agreement dated June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent for the lenders
Amendment No 12 to the Second Amended and Restated Credit Agreement dated June 16 2023 to the Second Amended and Restated Credit Agreement dated June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent for the lenders
Amendment No 13 and Incremental Term Loan Assumption Agreement dated November 28 2023 to the Second Amended and Restated Credit Agreement dated June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent for the lenders
Amendment No 14 and Incremental Revolving Credit Assumption Agreement dated February 27 2024 to the Second Amended and Restated Credit Agreement dated June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent for the lenders
Amendment No 15 Loan Modification Agreement and Refinancing Facility Agreement dated March 22 2024 relating to the Second Amended and Restated Credit Agreement dated June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent for the lenders and Amendment dated March 22 2024 relating to the Guarantee and Collateral Agreement dated June 23 2006 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent for the lenders
Amendment No 16 Loan Modification Agreement and Refinancing Facility Agreement dated June 4 2024 to the Second Amended and Restated Credit Agreement dated June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent for the lenders
Amendment No 17 and Incremental Revolving Credit Assumption Agreement dated September 19 2024 to the Second Amended and Restated Credit Agreement dated June 4 2014 among TransDigm Inc TransDigm Group Incorporated each subsidiary of TransDigm Inc party thereto the lenders party thereto and Goldman Sachs Bank USA as administrative agent and collateral agent for the lenders
Guarantee and Collateral Agreement dated as of June 23 2006 as amended and restated as of December 6 2010 as further amended and restated as of February 14 2011 and February 28 2013 among TransDigm Inc TransDigm Group Incorporated the subsidiaries of TransDigm Inc named therein and Credit Suisse AG as administrative agent and collateral agent
Receivables Purchase Agreement dated October 21 2013 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Purchaser and a Purchaser Agent the various other Purchasers and Purchaser Agents from time to time party thereto and PNC National Association as Administrator
First Amendment to the Receivables Purchase Agreement dated March 25 2014 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Purchaser Purchaser Agent for its Purchaser Group and as Administrator
Second Amendment to the Receivables Purchase Agreement dated August 8 2014 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as a Purchaser Agent for its Purchaser Group and Administrator and Credit Agricole Corporate and Investment Bank as a Committed Purchaser and as a Purchase Agent for its Purchaser Group
Third Amendment to the Receivables Purchase Agreement dated March 20 2015 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as a Purchaser Agent for its Purchaser Group and Administrator Atlantic Asset Securitization LLC as a Conduit Purchaser and Credit Agricole Corporate and Investment Bank as a Committed Purchaser and as a Purchase Agent for its and Atlantic s Purchaser Group
Fourth Amendment to the Receivables Purchase Agreement dated as of August 4 2015 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as a Purchaser Agent for its Purchaser Group and Administrator Atlantic Asset Securitization LLC as a Conduit Purchaser and Credit Agricole Corporate and Investment Bank as a Committed Purchaser and as a Purchaser Agent for its and Atlantic s Purchaser Group
Ninth Amendment to the Receivables Purchase Agreement dated as of August 1 2017 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator Atlantic Asset Securitization LLC as a Conduit Purchaser Credit Agricole Corporate and Investment Bank as a Committed Purchaser and as a Purchaser Agent for its and Atlantic s Purchaser Group and Fifth Third Bank as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Tenth Amendment to the Receivables Purchase Agreement dated as of July 31 2018 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator Atlantic Asset Securitization LLC as a Conduit Purchaser Credit Agricole Corporate and Investment Bank as a Committed Purchaser and as a Purchaser Agent for its and Atlantic s Purchaser Group and Fifth Third Bank as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Eleventh Amendment to the Receivables Purchase Agreement dated as of July 30 2019 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator Atlantic Asset Securitization LLC as a Conduit Purchaser Credit Agricole Corporate and Investment Bank as a Committed Purchaser and as a Purchaser Agent for its and Atlantic s Purchaser Group and Fifth Third Bank as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Twelfth Amendment to the Receivables Purchase Agreement dated as of July 22 2020 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator Atlantic Asset Securitization LLC as a Conduit Purchaser Credit Agricole Corporate and Investment Bank as a Committed Purchaser and as a Purchaser Agent for its and Atlantic s Purchaser Group and Fifth Third Bank as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Thirteenth Amendment to the Receivables Purchase Agreement dated as of July 26 2021 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator and Fifth Third Bank as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Fourteenth Amendment to the Receivables Purchase Agreement dated as of July 25 2022 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator and Fifth Third Bank as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Fifteenth Amendment to the Receivables Purchase Agreement dated as of July 25 2023 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator and Wells Fargo Bank National Association as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Sixteenth Amendment to the Receivables Purchase Agreement dated as of May 28 2024 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator and Wells Fargo Bank National Association as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Seventeenth Amendment to the Receivables Purchase Agreement dated as of July 12 2024 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator and Wells Fargo Bank National Association as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to Rule 13a 14 a or 15d 14 a of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to Rule 13a 14 a or 15d 14 a of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Schedules and exhibits have been omitted pursuant to Item 601 a 5 of Regulation S K The Company hereby undertakes to furnish on a supplemental basis a copy of any omitted schedule or exhibit upon request by the Securities and Exchange Commission
Pursuant to the requirements of Section 13 or 15 d of the Securities Exchange Act of 1934 the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized on November 7 2024
Pursuant to the requirements of the Securities Exchange Act of 1934 this Report has been signed below by the following persons on behalf of the registrant and in the capacities and as of the dates indicated
We have audited the accompanying consolidated balance sheets of TransDigm Group Incorporated the Company as of September 30 2024 and 2023 the related consolidated statements of income comprehensive income changes in stockholders deficit and cash flows for each of the three fiscal years in the period ended September 30 2024 and the related notes and financial statement schedule listed in the Index at Item 15 a collectively referred to as the consolidated financial statements In our opinion the consolidated financial statements present fairly in all material respects the financial position of the Company at September 30 2024 and 2023 and the results of its operations and its cash flows for each of the three fiscal years in the period ended September 30 2024 in conformity with U S generally accepted accounting principles
We also have audited in accordance with the standards of the Public Company Accounting Oversight Board United States PCAOB the Company s internal control over financial reporting as of September 30 2024 based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework
These financial statements are the responsibility of the Company s management Our responsibility is to express an opinion on the Company s financial statements based on our audits We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud Our audits included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures that respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements We believe that our audits provide a reasonable basis for our opinion
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
As disclosed in Note 8 the Company had goodwill of 10 4 billion at September 30 2024 As discussed in Note 1 to the consolidated financial statements goodwill is tested for impairment annually as of the first day of the fourth fiscal quarter or more frequently if an event occurs or circumstances change that would more likely than not reduce fair value below carrying value The Company s goodwill is initially assigned to its reporting units as of the acquisition date The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value If the Company determines the qualitative assessment is not sufficient to conclude on whether it is more likely than not that the fair value is less than the carrying value a quantitative impairment test is performed The company may also elect to bypass the qualitative assessment and perform a quantitative test for any or all reporting units The Company performed a quantitative assessment on the goodwill at 14 of its reporting units As part of the quantitative assessment the Company determines the fair value of the reporting units using a discounted cash flow valuation model
Auditing management s quantitative impairment assessment was complex and judgmental for certain of the 14 reporting units due to the significant estimation required to determine fair value In particular the fair value estimates were sensitive to significant assumptions such as changes in the discount rate revenue growth rates and EBITDA margins which are affected by expectations about future market or economic conditions
We obtained an understanding evaluated the design and tested the operating effectiveness of controls over the Company s impairment process including controls over management s review of the valuation model and the significant assumptions underlying the fair value determination as described above
To test the fair values of the Company s reporting units our audit procedures included among others assessing the use of the discounted cash flow valuation model and testing the significant assumptions discussed above and underlying data used by the Company in its analyses for certain of the 14 reporting units evaluated using the quantitative assessment We utilized internal valuation specialists in assessing the fair value methodologies applied and evaluating the reasonableness of certain assumptions selected by management in the determination of the fair values of certain of the 14 reporting units We compared the significant assumptions used by management to current industry and economic trends recent historical performance and other relevant factors We performed sensitivity analyses of significant assumptions to evaluate the changes in fair values that would result from changes in the assumptions
TransDigm Group Incorporated TD Group through its wholly owned subsidiary TransDigm Inc is a leading global designer producer and supplier of highly engineered aircraft components that are critical to the safe and effective operation of nearly all commercial and military aircraft worldwide Our products are represented in nearly every commercial and military aircraft in service today TransDigm Inc along with TransDigm Inc s direct and indirect wholly owned operating subsidiaries collectively with TD Group the Company or TransDigm offers a broad range of proprietary aerospace products TD Group has no significant assets or operations other than its 100 ownership of TransDigm Inc TD Group s common stock is listed on the New York Stock Exchange or the NYSE under the trading symbol TDG
The accompanying consolidated financial statements were prepared in conformity with U S GAAP and include the accounts of TD Group and subsidiaries Intercompany balances and transactions have been eliminated Certain reclassifications to the consolidated financial statements and notes have been made to the prior year amounts to conform to the current year presentation none of which are material
The preparation of financial statements in conformity with U S GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period Actual results could differ from those estimates
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 Refer to Note 3 Revenue Recognition for further information
The Company expenses research and development costs as incurred and classifies such amounts in selling and administrative expenses The expense recognized for research and development costs for the fiscal years ended September 30 2024 2023 and 2022 was approximately 107 million 105 million and 95 million respectively
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 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 and is also assessed individually at each operating unit by the operating unit s management team If circumstances change or economic conditions deteriorate or improve the allowance for uncollectible accounts could increase or decrease Refer to Note 5 Trade Accounts Receivable for further information
Inventories are stated at the lower of cost or net realizable value Cost of inventories is generally determined by the average actual cost and the first in first out FIFO methods and includes material labor and overhead related to the manufacturing process Provision for potentially obsolete or slow moving inventory is made based on management s analysis of inventory levels historical usage and future sales forecasts Refer to Note 6 Inventories for further information
Property plant and equipment are stated at cost and include improvements which significantly increase capacities or extend the useful lives of existing plant and equipment Depreciation is computed using the straight line method over the following general estimated useful lives land improvements from 10 to 20 years buildings and improvements from 5 to 30 years machinery and equipment from 2 to 10 years and furniture and fixtures from 3 to 10 years Certain exceptions do apply in which an asset will have an estimated useful life outside of the range listed above dependent on among other things the nature and condition of the asset Net gains or losses related to asset dispositions are recognized in earnings in the period in which dispositions occur Routine maintenance repairs and replacements are expensed as incurred Amortization expense of assets accounted for as finance leases is included within depreciation expense
Property plant and equipment is assessed for potential impairment whenever indicators of impairment are present by determining whether the carrying value of the property can be recovered through projected undiscounted cash flows from future operations over the property s remaining estimated useful life Any impairment recognized is the amount by which the carrying amount exceeds the fair value of the asset Fair value is measured based on quoted market prices in active markets if available If quoted market prices are not available the estimate of fair value is based on various valuation techniques including the discounted value of estimated future cash flows No material impairments of long lived assets were recorded in fiscal 2024 2023 or 2022 Refer to Note 7 Property Plant and Equipment for further information
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 These derivative instruments qualify as effective cash flow hedges under U S GAAP
The Company transacts business in various foreign currencies which subjects the Company s cash flows and results of operations 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
For the interest rate swap cap and collar agreements and the foreign currency forward contracts designated as cash flow hedges the effective portion of the gain or loss from the financial instruments is 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 affected 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 consolidated statements of income As the foreign currency forward exchange contracts are used to manage foreign currency exposure primarily arising from sales to third parties any gains or losses from the derivative instruments that are reclassified into earnings are recognized in net sales in the consolidated statements of income The cash flows from settled contracts are recognized in net cash provided by operating activities in the consolidated statements of cash flows Refer to Note 19 Derivatives and Hedging Activities for further information
In accordance with ASC 805 Business Combinations the Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed were recognized as goodwill The valuations of the acquired assets and liabilities assumed will impact the determination of future operating results Determining the fair value of assets acquired and liabilities assumed requires management s judgment and often involves the use of estimates and assumptions which may be significant including assumptions with respect to future cash inflows and outflows revenue growth rates and EBITDA margins discount rates customer attrition rates royalty rates asset lives and market multiples among other items These assumptions are forward looking and could be affected by future economic and market conditions We determine the fair values of intangible assets acquired generally in consultation with third party valuation advisors Fair value adjustments to the Company s assets and liabilities are recognized and the results of operations of the acquired business are included in our consolidated financial statements from the effective date of the merger or acquisition Intangible assets other than goodwill are recognized if the benefit of the intangible asset is obtained through contractual or other legal rights or if the intangible asset can be sold transferred licensed or exchanged regardless of the Company s intent to do so
Goodwill is the excess of the purchase price paid over the estimated fair value of the net assets of a business acquired Other intangible assets consist of identifiable intangibles acquired or recognized in accounting for the acquisitions trademarks trade names technology customer relationships order backlog and other intangible assets Goodwill and intangible assets that have indefinite useful lives i e trademarks and trade names are subject to annual impairment testing Management determines fair value using a discounted future cash flow analysis or other accepted valuation techniques
The Company performs an 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 an event occurs or circumstances change that would more likely than not reduce fair value below carrying value
We may elect to perform a qualitative assessment that considers economic industry and company specific factors for all or selected reporting units If after completing this assessment it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value we proceed to a quantitative test We may also elect to perform a quantitative test instead of a qualitative assessment for any or all of our reporting units In this application the definition of more likely than not is interpreted as a likelihood of more than 50 For the quantitative test management determines the estimated fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit If the estimated fair value is less than the current carrying value impairment of goodwill of the reporting unit may exist The assumptions used in the discounted cash flow valuation model for impairment testing includes discount rates revenue growth rates and EBITDA margins cash flow projections and terminal value rates Discount rates are set by using the weighted average cost of capital WACC methodology
U S GAAP requires that the annual and any interim impairment assessment be performed at the reporting unit level Our reporting units have been identified at the operating unit level which is one level below our operating segments Substantially all goodwill was determined and recognized for each reporting unit pursuant to the accounting for the merger or acquisition as of the date of each transaction With respect to acquisitions integrated into an existing reporting unit any acquired goodwill is combined with the goodwill of the reporting unit
The impairment test for indefinite lived intangible assets consists of a comparison between their fair values and carrying values If the carrying amounts of intangible assets that have indefinite useful lives exceed their fair values an impairment loss will be recognized in an amount equal to the sum of any such excesses
The Company had 50 reporting units with goodwill and 47 reporting units with indefinite lived intangible assets as of the first day of the fourth quarter of fiscal 2024 the date of the annual impairment test The Company identified 14 reporting units to test for impairment using a quantitative test for both goodwill and indefinite lived intangible assets Of the 14 reporting units selected for quantitative testing six reporting units primarily were either a recent acquisition or met certain criteria determined by management For the remaining eight reporting units the Company elected to bypass the qualitative analysis and perform a quantitative test considering the length of time since the last determination of baseline fair values The estimated fair values of each of these reporting units and other indefinite lived intangible assets were in excess of their respective carrying values Sensitivity analyses were performed around certain of these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values As a result of the impairment testing performed as of the first day of the fourth quarter no indefinite lived intangible assets or goodwill was determined to be impaired As economic and market conditions have not changed significantly since the first day of the fourth quarter this conclusion remains appropriate as of September 30 2024
The Company assesses the recoverability of its amortizable intangible assets only when indicators of impairment are present by determining whether the carrying value can be recovered through projected undiscounted cash flows from future operations over their remaining lives Amortization of amortizable intangible assets is computed using the straight line method over the following general estimated useful lives technology from 20 to 22 years order backlog from 1 to 3 years customer relationships over 20 years and other intangible assets over 20 years No indicators of impairment on the amortizable intangible assets were identified in fiscal 2024 2023 or 2022
The Company records stock based compensation expense using the Black Scholes pricing model based on certain valuation assumptions Compensation expense is recorded over the vesting periods of the stock options adjusted for expected forfeitures The Company has classified stock based compensation primarily within selling and administrative expenses to correspond with the classification of employees that receive stock option grants The Company also evaluates any subsequent changes to the respective option holders terms under the modification rules of ASC 718 If determined to be a modification the Black Scholes pricing model is updated as of the date of the modification resulting in a cumulative catch up to expense if necessary Refer to Note 16 Stock Based Compensation for further information
The provision for income taxes is calculated using the asset and liability method Under the asset and liability method deferred income taxes are recognized for the tax effect of temporary differences between the financial statement carrying amount of assets and liabilities and the amounts used for income tax purposes and for certain changes in valuation allowances Valuation allowances are recorded to reduce certain deferred tax assets when in our estimation it is more likely than not that a tax benefit will not be realized We recognize uncertain tax positions when we have determined it is more likely than not that a tax position will be sustained upon examination However new information may become available or applicable laws or regulations may change thereby resulting in a favorable or unfavorable adjustment to amounts recorded Taxes related to Global Intangible Low Taxed Income GILTI are treated as a current period expense when incurred Refer to Note 12 Income Taxes for further information
The term comprehensive income loss represents the change in stockholders equity deficit from transactions and other events and circumstances resulting from non stockholder sources The Company s accumulated other comprehensive income or loss consisting principally of fair value adjustments to its interest rate swap cap and collar agreements net of tax cumulative foreign currency translation adjustments and pension liability adjustments net of tax is reported separately in the accompanying consolidated statements of comprehensive income
The assets and liabilities of subsidiaries located outside the United States are translated into U S dollars at the rates of exchange in effect at the balance sheet dates Revenue and expense items are translated at the average monthly exchange rates prevailing during the period Gains and losses resulting from foreign currency transactions are recognized currently in income and those resulting from translation of financial statements including gains and losses from certain intercompany transactions are accumulated as a separate component of other comprehensive income loss for the period Foreign currency losses or gains recognized in cost of sales on the consolidated statements of income from changes in exchange rates were 20 million 14 million and 40 million for the fiscal years ended September 30 2024 2023 and 2022 respectively
Earnings per share information is determined using the two class method which includes the weighted average number of common shares outstanding during the period and other securities that participate in cash dividends participating securities Our vested stock options are considered participating securities because they include non forfeitable rights to cash dividends In applying the two class method earnings are allocated to both common shares and participating securities based on their respective weighted average shares outstanding for the period Diluted earnings per share information may include the additional effect of other securities if dilutive in which case the dilutive effect of such securities is calculated using the treasury stock method Contingently issuable shares are not included in earnings per share until the period in which the contingency is satisfied Refer to Note 4 Earnings Per Share for further information
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
On July 31 2024 the Company acquired all the outstanding stock of Raptor Scientific for approximately 647 million in cash The acquisition was 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 The operating results of Raptor Scientific are included within TransDigm s Airframe segment
As of September 30 2024 the measurement period not to exceed one year is open therefore the assets acquired and liabilities assumed related to the acquisition of Raptor Scientific are subject to adjustment until the end of the respective measurement period
The Company accounted for the acquisition of Raptor Scientific using the acquisition method of accounting and included the results of operations of the acquisition in its 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 Pro forma net sales and results of operations for the acquisition had it occurred at the beginning of the fiscal years ended September 30 2024 or September 30 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 Raptor Scientific as of the July 31 2024 acquisition date is summarized in the table below in millions
Based on the preliminary allocation of the net assets acquired all of the approximately 426 million of goodwill and 197 million of other intangible assets recognized for the acquisition is expected to be deductible for tax purposes
On June 6 2024 the Company acquired 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 10 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 September 30 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 including those related to deferred taxes and income taxes
The Company accounted for the acquisition of CPI s Electron Device Business using the acquisition method of accounting and a third party valuation appraisal and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition The total purchase price was allocated to identifiable assets and liabilities based upon the respective fair value at the date of acquisition 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 Certain assumptions include the discount rates and other 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 acquisition had it occurred at the beginning of the fiscal years ended September 30 2024 or September 30 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
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 and related impact on deferred income taxes The offset to the measurement period adjustments was to goodwill
On May 21 2024 the Company acquired all the outstanding stock of SEI Industries LTD SEI for approximately 171 million in cash which included a working capital settlement of 1 million 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 September 30 2024 the measurement period not to exceed one year is open therefore the assets acquired and liabilities assumed related to the acquisition of SEI are subject to adjustment until the end of the respective measurement period
The Company accounted for the SEI acquisition using the acquisition method of accounting and a third party valuation appraisal and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition The total purchase price was allocated to identifiable assets and liabilities based upon the respective fair value at the date of acquisition The fair values of acquired intangibles are determined based on an income approach using estimates and assumptions that are deemed reasonable by the Company Certain assumptions include the discount rates and other assumptions that form the basis of the forecasted results of the acquired business including revenue 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 acquisition had it occurred at the beginning of the fiscal years ended September 30 2024 or September 30 2023 are not material and accordingly are not provided
Measurement period adjustments primarily related to the adjustments in the fair values of the other intangible assets from the third party valuation The offset to the measurement period adjustments was to goodwill
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
The Company accounted for the FPT acquisition using the acquisition method of accounting and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition As of September 30 2024 the measurement period not to exceed one year is open therefore the assets acquired and liabilities assumed related to the acquisition of FPT are subject to adjustment until the end of the respective measurement period The Company expects that 9 million of the approximately 34 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
Pro forma net sales and results of operations for the acquisition had it occurred at the beginning of the fiscal years ended September 30 2024 or September 30 2023 are not material and accordingly are not provided
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 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 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 EBITDA growth rates royalty rates and technology obsolescence rates These assumptions are forward looking and could be affected by future economic and market conditions
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
Of the approximately 280 million of goodwill recognized for the acquisition the Company expects that approximately 222 million will be deductible for tax purposes Of the approximately 101 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
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 Raptor Scientific 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 Acquisition transaction related expenses in fiscal 2024 2023 and 2022 totaled approximately 33 million 6 million and 4 million respectively These costs are included in selling and administrative expenses in the consolidated statements of income
For the fiscal year ended September 30 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 86 million The Company accounted for the acquisitions using the acquisition method of accounting and included the results of operations of the acquisitions in its 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 39 million of goodwill and 22 million of other intangible assets recognized for the acquisitions 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 consolidated financial statements from the effective date of each acquisition 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 fiscal years ended September 30 2024 September 30 2023 or September 30 2022 are not material and accordingly are not provided
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
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 consolidated statements of income
We have elected to adopt the practical expedient to not disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied as of the end of the reporting period for performance obligations that are part of a contract with an original expected duration of one year or less
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
At September 30 2024 none of our customers individually accounted for greater than 10 of the Company s trade accounts receivable gross In addition approximately 39 of the Company s trade accounts receivable gross was due from entities that operate principally outside of the United States primarily in Western Europe Canada and Asia Credit is extended based on an evaluation of each customer s financial condition and collateral is generally not required
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 fiscal year ended September 30 2024 are summarized in the table below in millions
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 bore interest at a rate of adjusted Term Secured Overnight Financing Rate Term SOFR plus 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 were substantially the same as the terms and conditions that apply to the term loans immediately prior to Amendment No 13 Principal payments commenced on March 31 2024 in which 3 million was to be paid on a quarterly basis up to the maturity date
In the third quarter of fiscal 2024 the remaining 997 million of existing Tranche J term loans were refinanced Refer to the section below Amendment No 16 Loan Modification Agreement and Refinancing Facility Agreement for further information
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 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 Company used the proceeds of the offering of the 2031 Secured Notes along with the proceeds from the Tranche J term loans further described above together with cash on hand primarily to fund the acquisition of CPI s Electron Device Business completed during the third quarter of fiscal 2024 see Note 2 Acquisitions for further information
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 1st and December 1st 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
On February 27 2024 the Company entered into Amendment No 14 and Incremental Revolving Credit Assumption Agreement herein Amendment No 14 to the Credit Agreement Under the terms of Amendment No 14 the Company among other things refinanced its revolving credit facility to i extend the maturity date from May 2026 to February 2029 ii increased the total commitments capacity thereunder from 810 million to 910 million and iii decreased the applicable interest rate to Term SOFR plus 2 25 compared to Term SOFR plus 2 50 applicable prior to Amendment No 14 As of September 30 2024 the borrowings available under the revolving commitments were 843 million
On February 27 2024 the Company entered into two separate purchase agreements in connection with private offerings of 2 200 million in aggregate principal amount of 6 375 senior secured notes due 2029 the 2 200 million 2029 Secured Notes at an issue price of 100 of the principal amount and 2 200 million in aggregate principal amount of 6 625 senior secured notes due 2032 the 2032 Secured Notes at an issue price of 100 of the principal amount The proceeds were used to repurchase all outstanding 6 25 secured notes due 2026 the 2026 Secured Notes further described below
The 2 200 million 2029 Secured Notes and 2032 Secured Notes bear interest at the rate of 6 375 per annum and 6 625 per annum respectively which accrues from February 27 2024 and is payable in arrears on March 1st and September 1st of each year commencing on September 1 2024 The 2 200 million 2029 Secured Notes mature on March 1 2029 and the 2032 Secured Notes mature on March 1 2032 unless earlier redeemed or repurchased and are subject to the terms and conditions set forth in the applicable indenture
The 2 200 million 2029 Secured Notes and 2032 Secured Notes were issued pursuant to an indenture dated as of February 27 2024 in each case amongst TransDigm Inc as issuer TD Group and the subsidiaries of TransDigm party thereto as guarantors The secured notes are guaranteed on a senior secured basis by TD Group and each of TransDigm 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 secured notes and the related 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 2 200 million 2029 Secured Notes and 2032 Secured Notes and related guarantees and structurally subordinated to all of the liabilities of TransDigm s non guarantor subsidiaries
The Company capitalized approximately 20 million and 21 million in debt issuance costs associated with the 2 200 million 2029 Secured Notes and the 2032 Secured Notes respectively during the fiscal year ended September 30 2024
On March 22 2024 the Company entered into Amendment No 15 Loan Modification Agreement and Incremental Term Loan Assumption Agreement herein Amendment No 15 to the Credit Agreement Under the terms of Amendment No 15 the Company among other things i repriced all of its 4 525 million in existing Tranche I term loans maturing August 24 2028 to bear interest at Term SOFR plus 2 75 compared to Term SOFR plus 3 25 applicable prior to Amendment No 15 and ii repaid in full its existing approximately 1 708 million in Tranche H term loans maturing February 22 2027 and replaced such loans with approximately 1 708 million in new Tranche K term loans maturing March 22 2030 The Tranche K term loans were issued at a discount of 0 25 or approximately 4 million and bear interest at Term SOFR plus 2 75 The Tranche K term loans were fully drawn on March 22 2024
The other terms and conditions that apply to the Tranche I and Tranche K term loans are substantially the same as the terms and conditions that applied to the term loans immediately prior to Amendment No 15 Principal payments for the Tranche I term loans and Tranche K term loans commenced on June 30 2024 in which 11 million subsequently revised in Amendment No 16 detailed below and 4 million will be paid on a quarterly basis up to the maturity date of each respective tranche of term loans
The Company expensed approximately 5 million in refinancing costs associated with the refinancing during the fiscal year ended September 30 2024 Additionally the Company wrote off 2 million of original issue discount associated with Amendment No 15 during the fiscal year ended September 30 2024
In the third quarter of fiscal 2024 2 644 million of existing Tranche I term loans were refinanced Refer to the section below Amendment No 16 Loan Modification Agreement and Refinancing Facility Agreement for further information
On March 28 2024 the Company redeemed all 4 400 million aggregate principal amount of its outstanding 2026 Secured Notes at a redemption price of 100 of the principal amount thereof plus accrued and unpaid interest thereon to but not including the redemption date using the net proceeds of the offering of the 2 200 million 2029 Secured Notes and the 2032 Secured Notes together with cash on hand
The Company recorded refinancing costs of 19 million consisting primarily of the write off of 21 million in unamortized debt issuance costs slightly offset by the write off of unamortized premium of 2 million during the fiscal year ended September 30 2024 in conjunction with the redemption of the 2026 Secured Notes
On March 22 2024 the Company entered into a purchase agreement in connection with a private offering of 550 million in aggregate principal amount consisting of 6 375 senior secured notes due 2029 the 550 million 2029 Secured Notes at an issue price of 99 75 of the principal amount which represents an approximately 1 million discount The 550 million 2029 Secured Notes are an additional issuance of the Company s existing 2 200 million 2029 Secured Notes as further described above and were issued under a supplemental indenture dated as of March 22 2024 pursuant to which the Company previously issued the 2 200 million 2029 Secured Notes The 550 million 2029 Secured Notes are the same class and series as and otherwise identical to the 2 200 million 2029 Secured Notes other than with respect to the date of issuance and issue price collectively the 550 million 2029 Secured Notes and the 2 200 million 2029 Secured Notes are referred to herein as the 2029 Secured Notes
On April 22 2024 the Company redeemed all 550 million aggregate principal of its outstanding 7 50 senior subordinated notes due 2027 the 7 50 2027 Notes at a redemption price of 100 of the principal amount thereof plus accrued and unpaid interest thereon to but not including the redemption date using the net proceeds of the offering of the 550 million 2029 Secured Notes together with cash on hand
On June 4 2024 the Company entered into Amendment No 16 Loan Modification Agreement and Refinancing Facility Agreement herein Amendment No 16 to the Credit Agreement Under the terms of Amendment No 16 the Company among other things i repriced all of its 997 million in existing Tranche J term loans to bear interest at Term SOFR plus 2 50 compared to Term SOFR plus 3 25 applicable prior to Amendment No 16 and ii amended and extended 2 644 million of existing Tranche I term loans maturing August 24 2028 and converting such loans into Tranche J term loans maturing February 28 2031
The other terms and conditions that apply to the Tranche I and Tranche J term loans are substantially the same as the terms and conditions that applied to the term loans immediately prior to Amendment No 16 Principal payments for Tranche I and Tranche J term loans commence on June 30 2024 and September 30 2024 respectively in which 5 million and 9 million will be paid on a quarterly basis up to the maturity date of each respective tranche of term loans
The Company capitalized 3 million in debt issuance costs associated with the refinancing during the fiscal year ended September 30 2024 Additionally the Company wrote off 14 million in unamortized debt issuance costs and 12 million of original issue discount associated with Amendment No 16 during the fiscal year ended September 30 2024
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 12 2024 the Company amended the Securitization Facility to among other things i increase the borrowing capacity from 450 million to 650 million and ii extend the maturity date to July 11 2025 at an interest rate of Term SOFR plus 1 45 compared to an interest rate of Term SOFR plus 1 60 that applied prior to the amendment
The Company drew 100 million and 37 million available under the Securitization Facility in December 2023 and July 2024 respectively As of September 30 2024 the total drawn on the Securitization Facility is 487 million For the fiscal years ended September 30 2024 and 2023 the applicable interest rate was 6 73 and 6 95 respectively The Securitization Facility is collateralized by substantially all of the Company s domestic operations trade accounts receivable
On September 19 2024 the Company entered into a purchase agreement in connection with a private offering of 1 500 million in aggregate principal amount of 6 00 senior secured notes due 2033 the 2033 Secured Notes at an issue price of 100 of the principal amount The 2033 Secured Notes were issued pursuant to an indenture dated as of September 19 2024 amongst TransDigm Inc as issuer TransDigm Group and the other subsidiaries of TransDigm Inc named therein as guarantors The 2033 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 2033 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 2033 Secured Notes and related guarantees and structurally subordinated to all of the liabilities of TransDigm s non guarantor subsidiaries
On September 19 2024 the the Company entered into Amendment No 17 and Incremental Term Loan Assumption Agreement herein Amendment No 17 to the Credit Agreement Under the terms of Amendment No 17 the Company among other things issued 1 500 million in Tranche L term loans maturing January 19 2032 The Tranche L term loans bore interest at a rate of Term SOFR plus 2 50 The Tranche L term loans were issued at a discount of 0 25 or approximately 4 million The Tranche L term loans were fully drawn on September 19 2024 and the other terms and conditions that apply to the Tranche L term loans are substantially the same as the terms and conditions that apply to the term loans immediately prior to Amendment No 17
The proceeds from both fourth quarter of fiscal 2024 issuances were used along with existing cash on hand to fund a 75 00 special dividend declaration on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans
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 September 30 2024 and 2023 the outstanding balance of these advances were 17 million and 21 million respectively
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 262 million and 193 million at September 30 2024 and 2023 respectively The increase in fiscal 2024 is primarily attributable to the leases assumed from the acquisition of CPI s Electron Device Business in the third quarter of fiscal 2024 and 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 17 Leases for further disclosure of the Company s lease obligations
As of September 30 2024 TransDigm had 8 702 million in fully drawn term loans the Term Loans Facility 910 million in revolving commitments of which 843 million was available to the Company subject to an interest rate of 2 25 per annum As of September 30 2023 TransDigm had 6 249 million in fully drawn term loans 810 million in revolving commitments of which 755 million was available to the Company subject to an interest rate of 2 50 per annum The unused portion of the revolving commitments is subject to a fee of 0 5 per annum for both fiscal 2024 and 2023 The total fees incurred on the unused portion of the revolving commitments were not material in fiscal 2024 or fiscal 2023
The interest rates per annum applicable to the loans under the Term Loans Facility are at TransDigm s option equal to either an alternate base rate or an adjusted Term SOFR for one three or six months thereafter in each case subject to the availability thereof interest periods chosen by TransDigm in each case plus an applicable margin percentage The adjusted Term SOFR related to the existing term loans are not subject to a floor Refer to Note 19 Derivatives and Hedging Activities for information about how our interest rate swaps cap and collar agreements are used to hedge and offset respectively the variable interest rates on the Term Loans Facility
TransDigm Inc s 2028 Secured Notes are jointly and severally guaranteed on a senior basis by TD Group TransDigm UK and all of TransDigm Inc s Domestic Restricted Subsidiaries as defined in the applicable indentures The 2029 Secured Notes 2030 Secured Notes 2031 Secured Notes 2032 Secured Notes and 2033 Secured Notes collectively with the 2028 Secured Notes the Secured Notes are guaranteed on a senior secured basis by TD Group and each of TransDigm Inc s direct and indirect Restricted Subsidiaries as defined in the applicable indenture that is a borrower or guarantor under TransDigm s senior secured credit facilities or that issues or guarantees any capital market indebtedness of TransDigm Inc or any of the guarantors in an aggregate principal amount of at least 200 million As of the date of this Form 10 K the guarantors of the 2029 Secured Notes 2030 Secured Notes 2031 Secured Notes 2032 Secured Notes and 2033 Secured Notes are the same as the guarantors of the 2028 Secured Notes The Secured Notes contain restrictive covenants that are substantially similar to many of the restrictive covenants included in the Credit Agreement TransDigm is in compliance with all the covenants contained in the Secured Notes
TransDigm Inc s 5 50 2027 Notes 4 625 2029 Notes and 4 875 2029 Notes collectively the Subordinated Notes are jointly and severally guaranteed on a senior subordinated basis by TD Group TransDigm UK and all of TransDigm Inc s Domestic Restricted Subsidiaries as defined in the applicable indentures The Subordinated Notes contain restrictive covenants that are substantially similar to many of the restrictive covenants included in the Credit Agreement TransDigm is in compliance with all the covenants contained in the Subordinated Notes
The Company maintains certain non contributory defined benefit pension plans collectively referred to as the pension plans covering eligible employees in the U S and in other certain countries such as Canada France Germany and the United Kingdom These pension plans generally provide benefits to employees based on formulas recognizing length of service and earnings The Company s funding policy is to contribute actuarial determined amounts allowable under tax and statutory regulations for the qualified plans The Company uses a September 30th measurement date for its defined benefit pension plans The Company also sponsors other post retirement pension plans for its employees in the U S and in Canada collectively referred to as the post retirement pension plans Other post retirement pension plans are non contributory health care and life insurance plans
ion of lump sum payments using existing plan assets to eligible plan participants and the purchase of a group annuity contract in fiscal 2022 During the third quarter of fiscal 2022 the Company transferred the remaining benefit obligations to an insurance company to purchase a group annuity contract In connection with the transfer a settlement loss of approximately 22 million was recorded as a component of other income expense in the consolidated statements of income in fiscal 2022 Upon the finalization of the group annuity purchase funding during fiscal 2023 a settlement gain of approximately 9 million was recorded as a component of other income expense in the consolidated statements of income in fiscal 2023 No settlement gain or loss was recorded in fiscal 2024
Net periodic pension benefit cost for the post retirement pension plans was less than 1 million for each of the fiscal years ended 2024 2023 and 2022 respectively The components of net periodic pension benefit cost other than service cost are included in other income expense in the consolidated statements of income The
As a result of the plan freeze to the ERP during fiscal 2021 for all future benefit accruals and participation by new or rehired employees on or after January 1 2021 the assumed rate of increase in future compensation levels was not applicable as of September 30 2024 and 2023
pecific projected benefit payments Although future changes to the discount rate and expected return on assets are unknown had the discount rate and expected return on assets increased or decreased by 25 basis points the impact on the fiscal 2024 net periodic benefit cost is not material Management is not aware of any legislative or other initiatives or circumstances that will significantly impact the Company s pension obligations in fiscal 2025
Plan assets are invested in a diversified portfolio of equity and debt securities consisting primarily of common stocks bonds and government securities The objective of these investments is to maintain sufficient liquidity to fund current benefit payments and achieve targeted risk adjusted returns Management periodically reviews allocations of plan assets by investment type and evaluates external sources of information regarding the long term historical returns and expected future returns for each investment type
The following table presents the fair value of the Company s pension plan assets as of September 30 2024 and 2023 segregated by level within the fair value hierarchy as described in Note 18 Fair Value Measurements in millions
Level 1 investments include return seeking assets which are primarily equity securities and real estate are actively traded on U S and non U S exchanges and valued using the market approach at quoted market prices on the measurement date or at the net asset value of the shares held by the plan on the measurement date based on quoted market prices Includes cash and cash equivalents which is used to pay benefits and cash invested in a short term investment fund that holds securities with values based on quoted market prices but for which the funds are not valued on quoted market basis
Level 2 investments include fixed income securities which are primarily debt securities are primarily valued using the market approach at either quoted market prices pricing models that use observable market data or bids provided by independent investment brokerage firms
These investments are valued at the net asset value NAV of units held The NAV is used to estimate fair value and is based on the fair value of the underlying investments held by the fund less its liability
The Company sponsors certain defined contribution employee savings plans that cover substantially all of the Company s U S employees Under certain plans the Company contributes a percentage of employee compensation and matches a portion of employee contributions The cost recognized for such contributions for the fiscal years ended September 30 2024 2023 and 2022 was approximately 45 million 34 million and 30 million respectively
At September 30 2024 the Company has state net operating loss carryforwards of approximately 816 million German net operating loss carryforwards of 54 million and United Kingdom net operating loss carryforwards of approximately 65 million that expire in various fiscal years from 2025 to 2044 The Company has U S and non U S tax credit carryforwards of 10 million that expire beginning in fiscal year 2025
The deferred tax assets for the interest expense limitation net operating losses and tax credit carryforwards are reduced by a valuation allowance for the amount of such assets that the Company believes will not be realized
With limited exception no provision has been made for income taxes on undistributed earnings of foreign subsidiaries of approximately 40 million at September 30 2024 since it is the Company s intention to indefinitely reinvest such undistributed earnings The cash that is permanently reinvested is typically used to expand operations either organically or through acquisitions It is not practicable to estimate the additional taxes that would be payable on the remittance of such earnings We have provided for taxes in jurisdictions in which we are not considered indefinitely reinvested however such amounts are not significant
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 2017 through 2019 In addition the Company is subject to state income tax examinations for fiscal years 2015 and later
Unrecognized tax benefits at September 30 2024 and 2023 the recognition of which would have an effect on the effective tax rate for each fiscal year amounted to 14 million and 17 million respectively The Company classifies all income tax related interest and penalties as income tax expense which were not significant for the years ended September 30 2024 and 2023 As of September 30 2024 and 2023 the Company accrued 4 million and 6 million respectively 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 2 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
During the ordinary course of business the Company is from time to time threatened with or may become a party to legal actions and other proceedings such as product liability claims employee claims workers compensation claims and class action lawsuits Insurance may cover some of the costs associated with these claims and proceedings While the Company is currently involved in certain legal proceedings it believes the results of these proceedings will not have a material adverse effect on its financial condition results of operations or cash flows
Our operations and facilities are subject to a number of federal state local and foreign environmental laws and regulations that govern among other things discharges of pollutants into the air and water the generation handling storage and disposal of hazardous materials and wastes the remediation of contamination and the health and safety of our employees Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations Certain facilities and third party sites utilized by the Company have been identified as potentially responsible parties under the federal superfund laws and comparable state laws The Company is currently involved in the investigation and remediation of a number of sites under applicable laws
Estimates of the Company s environmental liabilities are based on current facts laws regulations and technology These estimates take into consideration the Company s prior experience and professional judgment of the Company s environmental advisors Estimates of the Company s environmental liabilities are further subject to uncertainties regarding the nature and extent of site contamination the range of remediation alternatives available evolving remediation standards imprecise engineering evaluations and cost estimates the extent of corrective actions that may be required and the number and financial condition of other potentially responsible parties as well as the extent of their responsibility for the remediation
Accordingly as investigation and remediation proceed it is likely that adjustments in the Company s accruals will be necessary to reflect new information The amounts of any such adjustments could have a material adverse effect on the Company s results of operations or cash flows in a given period Based on currently available information however the Company does not believe that future environmental costs in excess of those accrued with respect to sites for which the Company has been identified as a potentially responsible party are likely to have a material adverse effect on the Company s financial condition or results of operations
Environmental liabilities are recorded when the liability is probable and the costs are reasonably estimable which generally is not later than at completion of a feasibility study or when the Company has recommended a remedy or has committed to an appropriate plan of action The Company also takes into consideration the estimated period of time in which payments will be required The liabilities are reviewed periodically and as investigation and remediation proceed adjustments are made as necessary Liabilities for losses from environmental remediation obligations do not consider the effects of inflation and anticipated expenditures are not discounted to their present value The liabilities are not offset by possible recoveries from insurance carriers or other third parties but do reflect anticipated allocations among potentially responsible parties at federal superfund sites or similar state managed sites third party indemnity obligations and an assessment of the likelihood that such parties will fulfill their obligations at such sites
The Company s consolidated balance sheets includes current environmental remediation obligations at September 30 2024 and 2023 of 5 million and 3 million classified as a component of accrued and other current liabilities respectively and non current environmental remediation obligations at September 30 2024 and 2023 of 36 million and 41 million classified as a component of other non current liabilities respectively
TD Group consists of 224 400 000 shares of 01 par value common stock and 149 600 000 shares of 01 par value preferred stock The total number of shares of common stock issued at September 30 2024 and 2023 was 61 904 833 and 60 995 513 respectively The total number of shares held in treasury was 5 688 639 at September 30 2024 and 2023 respectively There were no shares of preferred stock outstanding at September 30 2024 and 2023 The terms of the preferred stock have not been established
On January 27 2022 the Board of Directors of the Company the Board authorized a new stock repurchase program to permit repurchases of its outstanding common stock not to exceed 2 200 million in the aggregate the 2 200 million stock repurchase program replacing the 650 million stock repurchase program previously authorized by the Board on November 8 2017
2023 During fiscal 2022 the Company repurchased 1 490 413 shares of common stock at an average price of 612 13 per share for a total amount of 912 million The repurchased shares of common stock are classified as treasury stock in the statement of changes in stockholders deficit As of September 30 2024 1 288 million remains available for repurchase under the 2 200 million stock repurchase program
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 cargo loading handling and delivery systems and electronic components used in the generation amplification transmission and reception of microwave signals 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 specialized flight wind tunnel and jet engine testing services and equipment and complex testing and instrumentation solutions 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 transaction related expenses and refinancing costs Acquisition transaction and integration related expenses and adjustments represent costs incurred to integrate acquired businesses into TD Group s operations facility relocation costs and other acquisition related costs transaction and valuation related costs for acquisitions comprising deal fees legal financial and tax due diligence expenses amortization expense of inventory step up recorded in connection with the purchase accounting of acquired businesses
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 Note 1 to 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
Net sales are measured based on the geographic destination of sales Long lived assets consist of property plant and equipment net and operating lease right of use assets Net sales and long lived assets of individual countries outside of the United States are not material
The Company s equity compensation plans are designed to assist the Company in attracting retaining motivating and rewarding key employees directors or consultants and promoting the creation of long term value for stockholders by closely aligning the interests of these individuals with those of the Company s stockholders The Company s equity compensation plans provide for the granting of stock options
Non cash stock compensation expense recognized by the Company during the fiscal years ended September 30 2024 2023 and 2022 was 188 million 135 million and 153 million respectively The related tax benefit for the fiscal years ended September 30 2024 2023 and 2022 was 24 million 15 million and 18 million respectively Of the non cash stock compensation expense recorded in fiscal 2024 2023 and 2022 134 million 112 million and 151 million was recorded as a component of additional paid in capital and 54 million 23 million and 2 million was recorded as a component of other non current liabilities The liability awards relate to stock options granted between fiscal 2017 to fiscal 2020 from the 2014 stock option plan to certain employees in lieu of these individuals receiving salary and bonus compensation paid in cash The vesting of the stock options are subject to the achievement of the same operating performance goals as other grants The liability is remeasured each reporting period based on the market value of our common shares on the last day of the reported period The other non current liabilities related to stock based compensation as of September 30 2024 and 2023 was 102 million and 48 million respectively
The weighted average grant date fair value of options granted during the fiscal years ended September 30 2024 2023 and 2022 was 397 31 251 73 and 254 21 respectively The total fair value of options vested during fiscal years ended September 30 2024 2023 and 2022 was 97 million 80 million and 88 million respectively
Compensation expense is recognized based upon probability assessments of awards that are expected to vest in future periods adjusted for expected forfeitures Such probability assessments are subject to revision and therefore unrecognized compensation expense is subject to future changes in estimate As of September 30 2024 there was approximately 245 million of total unrecognized compensation expense related to non vested awards expected to vest which is expected to be recognized over a weighted average period of 1 9 years
The fair value of the Company s employee stock options was estimated at the date of grant or modification using a Black Scholes option pricing model with the following weighted average assumptions for all options granted during the fiscal years ended
The risk free interest rate is based upon the U S Treasury bond rates with a term similar to the expected life of the award as of the grant date or modification date The average expected life of stock based awards is based on the Company s actual historical exercise experience The Company uses actual historical changes in the market value of its stock to calculate the volatility assumption as it is management s belief that this is the best indicator of future volatility The Company estimates stock option forfeitures based on historical data The total number of stock options expected to vest is adjusted by actual and estimated forfeitures Changes to the actual and estimated forfeitures will result in a cumulative adjustment in the period of change Notwithstanding the special cash dividends declared and paid from time to time the Company historically has not declared and paid regular cash dividends and does not anticipate declaring and paying regular cash dividends in future periods thus no dividend yield assumption is used
In August 2019 the Board of Directors of TD Group adopted a new stock option plan which was subsequently approved by stockholders on October 3 2019 The 2019 stock option plan permits TD Group to award stock options to our key employees directors or consultants The total number shares of TD Group common stock reserved for issuance or delivery under the 2019 stock option plan is 4 000 000 subject to adjustment in the event of any stock dividend or split reorganization recapitalization merger share exchange or any other similar corporate transaction or event
Generally all of the options granted through September 30 2024 under the 2019 stock option plan have been pursuant to an equity incentive program adopted by the Company in 2008 Under the 2008 equity incentive program generally all of the options granted will vest based on the Company s achievement of established operating performance goals The following table summarizes the activity pricing and other information for the Company s performance vested stock based award activity during the fiscal year ended September 30 2024
In July 2014 the Board of Directors of TD Group adopted the 2014 stock option plan which was subsequently approved by stockholders on October 2 2014 The 2014 stock option plan permits TD Group to award stock options to our key employees directors or consultants The total number of shares of TD Group common stock reserved for issuance or delivery under the 2014 stock option plan is 5 000 000 subject to adjustment in the event of any stock dividend or split reorganization recapitalization merger share exchange or any other similar corporate transaction or event
Generally all of the options granted through September 30 2024 under the 2014 stock option plan have been pursuant to an equity incentive program adopted by the Company in 2008 Under the 2008 equity incentive program generally all of the options granted will vest based on the Company s achievement of established operating performance goals The following table summarizes the activity pricing and other information for the Company s performance vested stock based award activity during the fiscal year ended September 30 2024
In conjunction with the consummation of the Company s initial public offering a 2006 stock incentive plan was adopted by TD Group In July 2008 and March 2011 the 2006 stock incentive plan was amended to increase the number of shares available for issuance thereunder TD Group reserved 8 119 668 shares of its common stock for issuance to key employees directors or consultants under the plan Awards under the plan were in the form of options restricted stock or other stock based awards Options granted under the plan expire no later than the tenth anniversary of the applicable date of grant of the options and have an exercise price of not less than the fair market value of our common stock on the date of grant Restricted stock granted under the plan vested over three years No restricted stock units remained outstanding as of September 30 2018
All of the options granted under the 2006 stock incentive plan have been pursuant to an equity incentive program adopted by the Company in 2008 Under the 2008 equity incentive program all of the options granted vest based on the Company s achievement of established operating performance goals The following table summarizes the activity pricing and other information for the Company s performance vested stock based award activity during the fiscal year ended September 30 2024
Until August 5 2022 pursuant to the 2014 Stock Option Plan Dividend Equivalent Plan and the Third Amended and Restated 2006 Stock Incentive Plan Dividend Equivalent Plan all of the vested options granted under the existing stock option plans were entitled to certain dividend equivalent payments in the event of the declaration of a special dividend by the Company On August 5 2022 the Board of Directors adopted the Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan the Amended and Restated 2014 Stock Option Plan Dividend Equivalent Plan and the 2019 Stock Option Plan Dividend Equivalent Plan pursuant to which all of the vested options granted under the existing stock option plans except for grants to the members of the Board of Directors are entitled to certain dividend equivalent payments in the event of the declaration of a special dividend by the Company The amendments did not represent a change in the Company s practice In August 2022 all members of the Board of Directors at that time executed amendments to their option agreements resulting in the directors no longer receiving dividend equivalent payments in cash but rather for special dividends declared after June 1 2022 special dividends result in a reduction of strike price
In fiscal 2024 the Company s Board of Directors authorized and declared 110 00 in special dividends on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans 35 00 in November 2023 also paid in November 2023 and 75 00 in September 2024 The special dividends totaled 6 153 million of which 1 937 million was paid in the first quarter of fiscal 2024 and the remaining 4 216 million is accrued as of September 30 2024
Dividend equivalents on vested options were 233 million 38 million and 86 million during the fiscal years ended September 30 2024 2023 and 2022 respectively At September 30 2024 there was 180 million recorded in accrued and other current liabilities and 47 million recorded in other non current liabilities on the consolidated balance sheets related to future dividend equivalent payments
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
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 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 September 30 2024 and 2023
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 settlement under the swaps cap and collars
All derivative financial instruments are recorded at fair value in the 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 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 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
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 00 and the counterparties will pay us if the three month Term SOFR rate exceeds the ceiling rate of 3 50 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
During the third quarter of fiscal 2024 we entered into forward starting interest rate collar agreements 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 50 and the counterparties will pay us if the three month Term SOFR rate exceeds the ceiling rate of 4 50 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
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 consolidated statements of income Cash flows related to the derivative contracts are included in cash flows from operating activities on the consolidated statements of cash flows
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 consolidated balance sheets and the net amounts of assets and liabilities presented therein in millions
Refer to Note 18 Fair Value Measurements for the consolidated balance sheets classification of the Company s interest rate swap cap and collar agreements The decrease in the interest rate cap collar and swap assets is primarily attributable to a downward trend in Term SOFR during fiscal 2024
Based on the fair value amounts determined as of September 30 2024 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 25 million
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 September 30 2024 the Company has outstanding foreign currency forward exchange contracts to sell U S dollars with notional amounts of 120 million The maximum duration of the Company s foreign currency cash flow hedge contracts at September 30 2024 is twelve 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 fiscal year ended September 30 2024 the losses reclassified on settlements of foreign currency forward exchange contracts designated as cash flow hedges into net sales was approximately 4 million The losses were previously recorded as a component of accumulated other comprehensive loss in stockholders deficit As of September 30 2024 the Company expects to record a net gain of approximately 3 million on foreign currency forward exchange contracts designated as cash flow hedges to net sales over the next twelve months
Represents unrealized losses gains on derivatives designated and qualifying as cash flow hedges net of taxes of 37 million 6 million and 112 million for the fiscal years ended September 30 2024 2023 and 2022 respectively
There were no material pension liability adjustments net of taxes related to activity for the defined pension plans and postretirement benefit plans for the fiscal years ended September 30 2024 and 2023
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 Refer to Note 1 Summary of Significant Accounting Policies for additional information
Presented net of reclassifications out of AOCL into earnings specifically net sales and interest expense net for realized losses gains on derivatives designated and qualifying as cash flow hedges of 3 million net of taxes of 1 million and 106 million net of taxes of 33 million respectively for the fiscal year ended September 30 2024 and 3 million net of taxes of 1 million and 71 million net of taxes of 22 million for the fiscal year ended September 30 2023 respectively
Sixteenth Amendment to the Receivables Purchase Agreement dated as of May 28 2024 among TransDigm Receivables LLC TransDigm Inc PNC Bank National Association as a Committed Purchaser as Purchaser Agent for its Purchaser Group and as Administrator and Wells Fargo Bank National Association as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to Rule 13a 14 a or 15d 14 a of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to Rule 13a 14 a or 15d 14 a of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002
Schedules and exhibits have been omitted pursuant to Item 601 a 5 of Regulation S K The Company hereby undertakes to furnish on a supplemental basis a copy of any omitted schedule or exhibit upon request by the Securities and Exchange Commission

Company Name	TransDigm Group INC Vist SEC web-site
Category	AIRCRAFT PART & AUXILIARY EQUIPMENT, NEC
Trading Symbol	TDG