TransDigm Group INC
For the period ended Mar 30, 2024. Filed May 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 30, 2024 · Filed May 7, 2024
TDG$1,197.01+0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-30; filed 2024-02-08.
0001260221-24-000021
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-03-30; filed 2024-05-07.
0001260221-24-000046
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 122 previous paragraphs and 161 current paragraphs.
74 unchanged; 45 reworded; 23 added; 3 removed; 0 previous and 19 current paragraphs rearranged.
Tables are not compared: 17 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
Net sales for the Power & Control segment increased $98 million, an increase of 12.0%, for the thirteen week period ended March 30, 2024 compared to the thirteen week period ended April 1, 2023. The sales increase resulted primarily from increases in organic sales in defense ($48 million, an increase of 12.7%), commercial OEM ($36 million, an increase of 24.4%) and commercial aftermarket ($14 million, an increase of 5.4%). 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 the second quarter of fiscal 2024 compared to fiscal 2023.
Current report
Twenty-six week period ended March 30, 2024 compared with the twenty-six week period ended April 1, 2023
Current report
Total Company
Current report
The increase in organic sales of $586 million for the twenty-six week period ended March 30, 2024 compared to the twenty-six week period ended April 1, 2023 is primarily related to increases in defense sales ($276 million, an increase of 24.1%), commercial OEM sales ($156 million, an increase of 23.3%) and commercial aftermarket sales ($142 million, an increase of 14.2%). 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 the first half of fiscal 2024 compared to fiscal 2023, particularly internationally.
Current report
•Cost of Sales and Gross Profit. Cost of sales increased by $247 million, or 19.5%, to $1,515 million for the twenty-six week period ended March 30, 2024 compared to $1,268 million for the twenty-six week period ended April 1, 2023. Cost of sales and the related percentage of net sales for the twenty-six week periods ended March 30, 2024 and April 1, 2023 were as follows (amounts in millions):
Current report
Foreign exchange rates, particularly the U.S. dollar compared to the British pound and the euro, weakened at a more significant rate in the first half of fiscal 2023 compared to fiscal 2024, resulting in a decrease in foreign currency losses in fiscal 2024.
Current report
•Selling and Administrative Expenses. Selling and administrative expenses increased by $98 million to $467 million, or 12.6% of net sales, for the twenty-six week period ended March 30, 2024 from $369 million, or 12.3% of net sales, for the twenty-six week period ended April 1, 2023. Selling and administrative expenses and the related percentage of net sales for the twenty-six week periods ended March 30, 2024 and April 1, 2023 were as follows (amounts in millions):
Current report
•Refinancing Costs. Refinancing costs of $28 million incurred for the twenty-six week period ended March 30, 2024 were primarily related to the write-off of unamortized debt issuance costs recorded in conjunction with the redemption of the 2026 Secured Notes, which was completed during the twenty-six week period ended March 30, 2024 (refer to Note 7, “Debt,” in the notes to the condensed consolidated financial statements included herein for additional details). Refinancing costs of $9 million incurred for the twenty-six week period ended April 1, 2023 were primarily related to third party fees incurred for the refinancing activity under Amendment No. 10, Loan Modification Agreement and Refinancing Facility Agreement (herein, “Amendment No. 10”) and Amendment No. 11 to the Credit Agreement, which were completed during the first half of fiscal 2023.
Current report
•Other Income. Other income was $8 million for the twenty-six week period ended March 30, 2024 compared to $3 million recorded for the twenty-six week period ended April 1, 2023. Other income for the twenty-six week period ended March 30, 2024 primarily related to proceeds received from a patent infringement settlement and the non-service related components of benefit costs on the Company's benefit plans. Other income for the twenty-six week period ended April 1, 2023 primarily related to the non-service related components of benefit costs on the Company's benefit plans.
Current report
•Net Income Attributable to TD Group. Net income attributable to TD Group increased $253 million, or 47.6%, to $785 million for the twenty-six week period ended March 30, 2024 compared to net income attributable to TD Group of $532 million for the twenty-six week period ended April 1, 2023, primarily as a result of the factors referenced above.
Current report
Business Segments
Current report
Net sales for the Power & Control segment increased $257 million, an increase of 16.7%, for the twenty-six week period ended March 30, 2024 compared to the twenty-six week period ended April 1, 2023. The sales increase resulted primarily from increases in organic sales in defense ($129 million, an increase of 18.3%), commercial aftermarket ($65 million, an increase of 13.0%) and commercial OEM ($60 million, an increase of 21.0%). The increase in defense sales is primarily attributable to improving U.S. government defense spend outlays. 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 the first half of fiscal 2024 compared to fiscal 2023, particularly internationally. The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow-body and wide-body aircraft production and deliveries.
Current report
Net sales for the Airframe segment increased $452 million, an increase of 33.0%, for the twenty-six week period ended March 30, 2024 compared to the twenty-six week period ended April 1, 2023. The sales increase resulted primarily from increases in organic sales in defense ($147 million, an increase of 33.8%), commercial OEM ($95 million, an increase of 25.0%) and commercial aftermarket ($77 million, an increase of 15.4%). 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 were approximately $133 million for the twenty-six week period ended March 30, 2024 primarily due to the impact of the Calspan acquisition. Acquisition sales represent net sales from acquired businesses for the period up to one year subsequent to their respective acquisition date.
Current report
The change in Non-aviation net sales compared to the twenty-six week period in the prior fiscal year was not material.
Current report
(1)Total assets include the proceeds from the $550 million in 6.375% senior secured notes due 2029 (the “$550 million 2029 Secured Notes”) classified as restricted cash as they were used to redeem the 7.50% senior subordinated notes due 2027 (the “7.50% 2027 Notes”) on April 22, 2024 (redemption notification was issued in March 2024). Total debt includes the 7.50% 2027 Notes and also $200 million in debt issuance costs and original issue discount. Reference Note 7, “Debt,” in the notes to the condensed consolidated financial statements included herein for additional information.
Current report
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.
Current report
On March 1, 2024, the Company's DART Aerospace subsidiary (“DART”), which is included within TransDigm’s Airframe segment, completed an acquisition of all the outstanding stock of FPT Industries (“FPT”) for approximately $57 million in cash.
Current report
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.
Current report
(1)Excludes the proceeds from the $550 million 2029 Secured Notes used to redeem the 7.50% 2027 Notes on April 22, 2024 (redemption notification was issued in March 2024). Refer to Note 7, “Debt,” in the notes to the condensed consolidated financial statements included herein for further information.
Current report
Financing Activities. Net cash provided by financing activities was $668 million during the twenty-six week period ended March 30, 2024. The source of cash was primarily attributable to the net proceeds of $5,887 million from the offering of new secured debt completed during the first half of fiscal 2024, consisting of the issuance of the 2029 Secured Notes ($2,724 million), the 2032 Secured Notes ($2,180 million) and the 2031 Secured Notes ($983 million), along with net proceeds of $2,689 million from the issuance of the Tranche K term loans ($1,701 million) and the Tranche J term loans ($988 million), proceeds of $165 million in proceeds from stock option exercises and $99 million, net, drawn on the trade receivable securitization facility. This was primarily offset by the redemption of the 2026 Secured Notes for $4,400 million, dividend and dividend equivalent payments of $2,038 million, the full repayment of existing Tranche H term loans and fees of $1,712 million plus normal course principal payments on the Tranche H, Tranche I and Tranche J term loans of $18 million and other financing fees of $4 million.
Current report
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 margin for revolving credit loans to Term SOFR plus 2.25% compared to Term SOFR plus 2.50% applicable prior to Amendment No. 14. As of February 27, 2024, the borrowings available under the revolving commitments were $847 million.
Current report
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 $4.3 million, and bear interest at Term SOFR plus 2.75%. The Tranche K term loans were fully drawn on March 22, 2024 and the other terms and conditions that apply to the Tranche K term loans are substantially the same as the terms and conditions that apply to the term loans immediately prior to Amendment No. 15.
Current report
(1)In the second quarter of fiscal 2024, the Company entered into a purchase agreement in connection with the private offerings of $2,200 million and $550 million in aggregate principal of 2029 Secured Notes. The 7.50% 2027 Notes were redeemed on April 22, 2024 using proceeds from the 2029 Secured Notes. As the notification of redemption was made in March 2024, the 7.50% 2027 Notes obligation is classified as current portion of long-term debt on the condensed consolidated balance sheet as of March 30, 2024. Refer to Note 7, “Debt,” in the notes to the condensed consolidated financial statements included herein for additional details.
Removed paragraphs (3)
Previous report
Net sales for the Power & Control segment increased $160 million, an increase of 22.1%, for the thirteen week period ended December 30, 2023 compared to the thirteen week period ended December 31, 2022. The sales increase resulted primarily from increases in organic sales in defense ($81 million, an increase of 24.5%), commercial aftermarket ($51 million, an increase of 21.7%) and commercial OEM ($24 million, an increase of 17.4%). The increase in defense sales is primarily attributable to slowly improving U.S. government defense spend outlays. 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 the first quarter of fiscal 2024 compared to fiscal 2023. The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow-body and wide-body aircraft production and deliveries.
Previous report
(1)Includes debt issuance costs, original issue discount and premiums. Reference Note 7, “Debt,” in the notes to the condensed consolidated financial statements included herein for additional information.
Previous report
Net cash used in financing activities was $65 million during the thirteen week period ended December 31, 2022. The use of cash was primarily attributable to repayments on term loans of $1,739 million, which consists of the full repayment of existing Tranche G term loans and fees ($1,725 million) plus principal payments on Tranche E and Tranche F term loans ($14 million), and dividend equivalent payments of $38 million. This was partially offset by $1,690 million in proceeds of Tranche H term loans (replacing the Tranche G term loans) and $27 million in proceeds from stock option exercises.
Reworded paragraphs (45)
Previous wording
For the first quarter of fiscal year 2024, we generated net sales of $1,789 million and net income attributable to TD Group of $382 million. EBITDA As Defined was $912 million, or 51.0% of net sales. Refer to the “Non-GAAP Financial Measures” section for certain information regarding EBITDA and EBITDA As Defined, including reconciliations of EBITDA and EBITDA As Defined to income from operations and net cash provided by operating activities.
Current wording
For the second quarter of fiscal year 2024, we generated net sales of $1,919 million and net income attributable to TD Group of $403 million. EBITDA As Defined was $1,021 million, or 53.2% of net sales. Refer to the “Non-GAAP Financial Measures” section for certain information regarding EBITDA and EBITDA As Defined, including reconciliations of EBITDA and EBITDA As Defined to income from operations and net cash provided by operating activities.
Previous wording
In the first quarter of fiscal 2024, we continued to see a rebound in our commercial aerospace end markets from the COVID-19 pandemic and despite economic headwinds and are encouraged by the progression of the commercial aerospace market recovery to date, building off of the progress from fiscal 2023. 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 and remains below pre-pandemic levels. However, international revenue passenger kilometers (“RPKs”), a metric used to measure air traffic demand, continues to make positive strides as countries, particularly those in Asia, have removed international traveler restrictions and there is pent-up demand for long-haul travel. Current industry consensus indicates that worldwide RPKs will recover or surpass calendar year 2019 (i.e., pre-pandemic levels) in calendar year 2024. Therefore, we expect the Company's commercial aerospace end markets to continue progressing the remainder of fiscal 2024 barring any significant disruptions or setbacks. In the first quarter of fiscal 2024, we experienced improved sales in the commercial original equipment manufacturer (“OEM”) sector primarily due to increased aircraft production by Boeing and Airbus. Aircraft production rates continue to lag pre-pandemic levels, mainly due to continued commercial OEM supply chain and production issues that are slowing the pace of new aircraft manufacturing. Airline demand for new aircraft is strong and both Boeing and Airbus have disclosed further planned OEM production rate increases for calendar 2024; however, we are monitoring the Federal Aviation Administration's recent halting of Boeing's planned MAX production increase due to Boeing's ongoing quality control issues.
Current wording
In the first half of fiscal 2024, the rebound in our commercial aerospace end markets from the COVID-19 pandemic continued, and we remain encouraged by the progression of the commercial aerospace market recovery to date, building off of the progress from fiscal 2023. 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, international revenue passenger kilometers (“RPKs”), a metric used to measure air traffic demand, continue to make positive strides. According to the International Air Transport Association (“IATA”), February 2024 marked the first occurrence in which both domestic and international RPKs surpassed 2019 (i.e., pre-pandemic) levels. We expect the Company's commercial aerospace end markets to continue progressing the remainder of fiscal 2024 barring any significant disruptions or setbacks. In the first half of fiscal 2024, we experienced improved sales in the commercial original equipment manufacturer (“OEM”) sector primarily due to increased aircraft production by Boeing and Airbus. Aircraft production rates still remain below pre-pandemic levels, mainly due to continued commercial OEM supply chain and production issues that are slowing the pace of new aircraft manufacturing. Airline demand for new aircraft is strong and both Boeing and Airbus have disclosed further planned OEM production rate increases for calendar 2024; however, we are continuing to monitor the Federal Aviation Administration's recent halting of Boeing's planned MAX production increase due to Boeing's ongoing quality control issues.
Previous wording
The pace of U.S. government defense spending outlays and government funding reprioritization provides for uncertainty in the defense aerospace market. Beginning in the second half of fiscal 2023 and continuing into the first quarter of fiscal 2024, defense sales have increased compared to the comparable prior year period due to improving U.S. government defense spend outlays, which we are hopeful will continue in subsequent quarters. Department of Defense (“DOD”) budgets have also trended upwards; however, the ongoing conflicts between Russia and Ukraine and Israel and Hamas and potential impact on reprioritization of U.S. government defense spending and other ancillary impacts of these conflicts causes uncertainty.
Current wording
The pace of U.S. government defense spending outlays and government funding reprioritization provides for uncertainty in the defense aerospace market. Beginning in the second half of fiscal 2023 and continuing into the first half of fiscal 2024, defense sales have increased compared to the comparable prior year period due to improving U.S. government defense spend outlays. Department of Defense (“DOD”) budgets have also trended upwards; however, the ongoing conflicts between Russia and Ukraine and Israel and Hamas and potential impact on reprioritization of U.S. government defense spending and other ancillary impacts of these conflicts causes uncertainty.
Previous wording
(1)Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends paid on participating securities, including dividend equivalent payments of $101 million and $38 million for the thirteen week periods ended December 30, 2023 and December 31, 2022, respectively.
Current wording
(1)Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends declared or paid on participating securities, including dividend equivalent payments of $101 million and $38 million for the twenty-six week periods ended March 30, 2024 and April 1, 2023, respectively.
Previous wording
The increase in organic sales of $328 million for the thirteen week period ended December 30, 2023 compared to the thirteen week period ended December 31, 2022 is primarily related to increases in defense sales ($149 million, an increase of 28.0%), commercial aftermarket sales ($101 million, an increase of 21.3%) and commercial OEM sales ($77 million, an increase of 24.9%). The increase in defense sales is primarily attributable to improving U.S. government defense spend outlays. 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 the first quarter of fiscal 2024 compared to fiscal 2023, particularly internationally. The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow-body and wide-body aircraft production and deliveries.
Current wording
The increase in organic sales of $257 million for the thirteen week period ended March 30, 2024 compared to the thirteen week period ended April 1, 2023 is primarily related to increases in defense sales ($127 million, an increase of 20.8%), commercial OEM sales ($79 million, an increase of 22.0%) and commercial aftermarket sales ($41 million, an increase of 7.9%). 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 the second quarter of fiscal 2024 compared to fiscal 2023, particularly internationally.
Previous wording
The acquisition sales for the thirteen week period ended December 30, 2023 are attributable to Calspan Corporation (“Calspan”), which was acquired in the third quarter of fiscal 2023.
Current wording
The acquisition sales for the thirteen week period ended March 30, 2024 are primarily attributable to Calspan Corporation (“Calspan”), which was acquired in the third quarter of fiscal 2023.
Previous wording
•Cost of Sales and Gross Profit. Cost of sales increased by $143 million, or 23.7%, to $747 million for the thirteen week period ended December 30, 2023 compared to $604 million for the thirteen week period ended December 31, 2022. Cost of sales and the related percentage of net sales for the thirteen week periods ended December 30, 2023 and December 31, 2022 were as follows (amounts in millions):
Current wording
•Cost of Sales and Gross Profit. Cost of sales increased by $104 million, or 15.7%, to $767 million for the thirteen week period ended March 30, 2024 compared to $663 million for the thirteen week period ended April 1, 2023. Cost of sales and the related percentage of net sales for the thirteen week periods ended March 30, 2024 and April 1, 2023 were as follows (amounts in millions):
Previous wording
Cost of sales during the thirteen week period ended December 30, 2023 decreased as a percentage of net sales despite increased inflationary pressures. 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. A favorable sales mix, specifically, higher commercial aftermarket sales as a percentage of net sales compared to commercial OEM net sales, also contributed to the gross profit as a percentage of net sales increasing by 1.4 percentage points to 58.2% for the thirteen week period ended December 30, 2023 from 56.8% for the thirteen week period ended December 31, 2022.
Current wording
Cost of sales during the thirteen week period ended March 30, 2024 decreased as a percentage of net sales despite continued inflationary pressures. 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 1.6 percentage points to 60.0% for the thirteen week period ended March 30, 2024 from 58.4% for the thirteen week period ended April 1, 2023.
Previous wording
•Selling and Administrative Expenses. Selling and administrative expenses increased by $51 million to $220 million, or 12.3% of net sales, for the thirteen week period ended December 30, 2023 from $169 million, or 12.1% of net sales, for the thirteen week period ended December 31, 2022. Selling and administrative expenses and the related percentage of net sales for the thirteen week periods ended December 30, 2023 and December 31, 2022 were as follows (amounts in millions):
Current wording
•Selling and Administrative Expenses. Selling and administrative expenses increased by $49 million to $248 million, or 12.9% of net sales, for the thirteen week period ended March 30, 2024 from $199 million, or 12.5% of net sales, for the thirteen week period ended April 1, 2023. Selling and administrative expenses and the related percentage of net sales for the thirteen week periods ended March 30, 2024 and April 1, 2023 were as follows (amounts in millions):
Previous wording
Selling and administrative expenses as a percentage of net sales for the thirteen week period ended December 30, 2023 are consistent with the thirteen week period ended December 31, 2022 despite the higher inflationary environment compared to a year ago due to continued strategic cost mitigation efforts. The increase in selling and administrative expenses is primarily a result of the Calspan acquisition in the third quarter of fiscal 2023 and higher net sales across our businesses. 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 assumption used to determine the Black-Scholes fair value.
Current wording
Excluding non-cash stock and deferred compensation expense and acquisition and divestiture transaction-related expenses, selling and administrative expenses as a percentage of net sales for the thirteen week period ended March 30, 2024 decreased as a percentage of net sales compared to the thirteen week period ended April 1, 2023 despite the higher inflationary environment compared to a year ago due to continued strategic cost mitigation efforts. 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 assumption used to determine the Black-Scholes fair value. Refer to Note 2, “Acquisitions,” in the notes to the condensed consolidated financial statements included herein for the activity impacting the increase in acquisition and divestiture transaction-related expenses.
Previous wording
•Amortization of Intangible Assets. Amortization of intangible assets was $35 million for the thirteen week period ended December 30, 2023 compared to $34 million for the thirteen week period ended December 31, 2022. The increase in amortization expense of $1 million was primarily due to the amortization expense recognized on intangible assets from the third quarter of fiscal 2023 acquisition of Calspan.
Current wording
•Amortization of Intangible Assets. Amortization of intangible assets was $37 million for the thirteen week period ended March 30, 2024 compared to $35 million for the thirteen week period ended April 1, 2023. The increase in amortization expense of $2 million was primarily due to the amortization expense recognized on intangible assets from the third quarter of fiscal 2023 acquisition of Calspan.
Previous wording
•Interest Expense-net. 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 $14 million, or 4.9%, to $300 million for the thirteen week period ended December 30, 2023 from $286 million for the comparable thirteen week period in the prior fiscal year. The increase in interest expense-net was primarily due an increase in the base rates, i.e., Term Secured Overnight Financing Rate (“Term SOFR”) and London Inter-Bank Offered Rate (“LIBOR”), to the portion of our variable rate debt that is not hedged (refer to Note 10, "“Derivatives and Hedging Activities” for information on our hedges). This was partially offset by a $15 million increase in interest income. The weighted average interest rate for cash interest payments on total borrowings outstanding for the thirteen week period ended December 30, 2023 was 6.3% compared to 5.9% for the thirteen week period ended December 31, 2022.
Current wording
•Interest Expense-net. 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 $31 million, or 10.5%, to $326 million for the thirteen week period ended March 30, 2024 from $295 million for the comparable thirteen week period in the prior fiscal year. The increase in interest expense-net was primarily due an increase in the base rates, i.e., Term Secured Overnight Financing Rate (“Term SOFR”) and London Inter-Bank Offered Rate (“LIBOR”), to the portion of our variable rate debt that is not hedged (refer to Note 10, “Derivatives and Hedging Activities” for information on our hedges). This was partially offset by a $20 million increase in interest income. The weighted average interest rate for cash interest payments on total borrowings outstanding for the thirteen week period ended March 30, 2024 was 6.3% compared to 6.2% for the thirteen week period ended April 1, 2023.
Previous wording
•Refinancing Costs. No refinancing costs were incurred for the thirteen week period ended December 30, 2023. Refinancing costs of $4 million recorded for the thirteen week period ended December 31, 2022 were primarily related to third party fees incurred for the refinancing activity under Amendment No. 10, Loan Modification Agreement and Refinancing Facility Agreement (herein, “Amendment No. 10”), to the Second Amended and Restated Credit Agreement, dated June 4, 2014 (the “Credit Agreement”) completed during the first quarter of fiscal 2023.
Current wording
•Refinancing Costs. Refinancing costs of $28 million incurred for the thirteen week period ended March 30, 2024 were primarily related to the write-off of unamortized debt issuance costs recorded in conjunction with the redemption of the 2026 Secured Notes, which was completed during the thirteen week period ended March 30, 2024 (refer to Note 7, “Debt,”in the notes to the condensed consolidated financial statements included herein for additional details). Refinancing costs of $5 million incurred for the thirteen week period ended April 1, 2023 were primarily related to third party fees incurred for the refinancing activity under Amendment No. 11, Loan Modification Agreement and Refinancing Facility Agreement (herein, “Amendment No. 11”), to the Second Amended and Restated Credit Agreement, dated June 4, 2014 (the “Credit Agreement”) completed during the second quarter of fiscal 2023.
Previous wording
•Other Income. Other income was $1 million for the thirteen week periods ended December 30, 2023 and December 31, 2022, respectively. The activity in both periods primarily relates to the non-service related components of benefit costs on the Company's benefit plans.
Current wording
•Other Income. Other income was $6 million for the thirteen week period ended March 30, 2024 compared to $2 million for the thirteen week period ended April 1, 2023. Other income for the thirteen week period ended March 30, 2024 primarily related to proceeds received from a patent infringement settlement and the non-service related components of benefit costs on the Company's benefit plans. Other income for the thirteen week period ended April 1, 2023 primarily related to the non-service related components of benefit costs on the Company's benefit plans.
Previous wording
•Income Tax Provision. Income tax expense as a percentage of income before income taxes was approximately 21.7% for the thirteen week period ended December 30, 2023 compared to 23.9% for the thirteen week period ended December 31, 2022. The Company’s lower effective tax rate for the thirteen week period ended December 30, 2023 was primarily due was to a more significant discrete impact of excess tax benefits associated with share-based payments, partially offset by an increase in the valuation allowance applicable to the Company's net interest deduction limitation carryforward.
Current wording
•Income Tax Provision. Income tax expense as a percentage of income before income taxes was approximately 22.2% for the thirteen week period ended March 30, 2024 compared to 23.4% for the thirteen week period ended April 1, 2023. The Company’s lower effective tax rate for the thirteen week period ended March 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.
Previous wording
•Net Income Attributable to TD Group. Net income attributable to TD Group increased $154 million, or 67.5%, to $382 million for the thirteen week period ended December 30, 2023 compared to net income attributable to TD Group of $228 million for the thirteen week period ended December 31, 2022, primarily as a result of the factors referenced above.
Current wording
•Net Income Attributable to TD Group. Net income attributable to TD Group increased $99 million, or 32.6%, to $403 million for the thirteen week period ended March 30, 2024 compared to net income attributable to TD Group of $304 million for the thirteen week period ended April 1, 2023, primarily as a result of the factors referenced above.
Previous wording
Net sales for the Airframe segment increased $225 million, an increase of 35.3%, for the thirteen week period ended December 30, 2023 compared to the thirteen week period ended December 31, 2022. The sales increase resulted primarily from increases in organic sales in defense ($68 million, an increase of 34.4%), commercial OEM ($52 million, an increase of 30.0%) and commercial aftermarket ($49 million, an increase of 21.0%). 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 were approximately $64 million for the thirteen week period ended December 30, 2023 due to the impact of the Calspan acquisition. Acquisition sales represent net sales from acquired businesses for the period up to one year subsequent to their respective acquisition date.
Current wording
Net sales for the Airframe segment increased $226 million, an increase of 30.8%, for the thirteen week period ended March 30, 2024 compared to the thirteen week period ended April 1, 2023. The sales increase resulted primarily from increases in organic sales in defense ($78 million, an increase of 33.3%), commercial OEM ($43 million, an increase of 20.8%) and commercial aftermarket ($27 million, an increase of 10.4%). 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 were approximately $70 million for the thirteen week period ended March 30, 2024 primarily due to the impact of the Calspan acquisition. Acquisition sales represent net sales from acquired businesses for the period up to one year subsequent to their respective acquisition date.
Previous wording
EBITDA As Defined for the Power & Control segment increased approximately $108 million, an increase of 26.9%, 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.
Current wording
EBITDA As Defined for the Power & Control segment increased approximately $67 million, an increase of 14.8%, 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.
Previous wording
EBITDA As Defined for the Airframe segment increased approximately $119 million, an increase of 38.1%. The increase in EBITDA as Defined for the Airframe segment is attributable to the same factors described in the paragraph above for the Power & Control segment. EBITDA As Defined for the Airframe segment from acquisitions was approximately $18 million due to the impact of the Calspan acquisition. EBITDA As Defined from acquisitions represents EBITDA As Defined from acquired businesses for the period up to one year subsequent to the respective acquisition date.
Current wording
EBITDA As Defined for the Airframe segment increased approximately $137 million, an increase of 36.7%. The increase in EBITDA as Defined for the Airframe segment is attributable to the same factors described in the paragraph above for the Power & Control segment. EBITDA As Defined for the Airframe segment from acquisitions was approximately $25 million primarily due to the impact of the Calspan acquisition. EBITDA As Defined from acquisitions represents EBITDA As Defined from acquired businesses for the period up to one year subsequent to the respective acquisition date.
Previous wording
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 the prior fiscal year is primarily attributable to the current fiscal year portion of the deferred compensation plan adopted in the fourth quarter of fiscal 2022 for certain members of non-executive management.
Current wording
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 the thirteen week period in the prior fiscal year is primarily attributable to the current fiscal year portion of the deferred compensation plan adopted in the fourth quarter of fiscal 2022 for certain members of non-executive management.
Previous wording
•Earnings per Share. Basic and diluted earnings per share was $4.87 for the thirteen week period ended December 30, 2023 and $3.33 for the thirteen week period ended December 31, 2022. Net income attributable to TD Group for the thirteen week period ended December 30, 2023 of $382 million was decreased by dividend equivalent payments of $101 million, or $1.75 per share, resulting in net income applicable to TD Group common stockholders of $281 million, or $4.87 per share. Net income attributable to TD Group for the thirteen week period ended December 31, 2022 of $228 million was decreased by dividend equivalent payments of $38 million, or $0.67 per share, resulting in net income applicable to TD Group common stockholders of $190 million, or $3.33 per share.
Current wording
•Earnings per Share. Basic and diluted earnings per share from continuing operations was $11.83 for the twenty-six week period ended March 30, 2024 and $8.65 for the twenty-six week period ended April 1, 2023. Net income attributable to TD Group for the twenty-six week period ended March 30, 2024 of $785 million was decreased by dividend equivalent payments of $101 million, or $1.75 per share, resulting in net income applicable to TD Group common stockholders of $684 million. Net income attributable to TD Group for the twenty-six week period ended April 1, 2023 of $532 million was decreased by dividend equivalent payments of $38 million, or $0.67 per share, resulting in net income applicable to TD Group common stockholders of $494 million.
Previous wording
Significant Transactions – First Quarter of Fiscal 2024
Current wording
Significant Transactions – First Half of Fiscal 2024
Previous wording
On November 9, 2023, TransDigm entered into a definitive agreement to acquire the Electron Device Business of CPI for approximately $1,385 million in cash. The acquisition, which is expected to close in fiscal 2024, is expected to be financed through existing cash on hand, inclusive of a portion of the cash proceeds from the new long-term debt issued in the first quarter of fiscal 2024 (further described below and in Note 7, "Debt").
Current wording
On November 9, 2023, TransDigm entered into a definitive agreement to acquire all the outstanding stock of the Electron Device Business of CPI for approximately $1,385 million in cash. The acquisition, which is expected to close in fiscal 2024, is expected to be 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.
Previous wording
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, were approximately $2,020 million.
Current wording
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.
Previous wording
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 10, “Derivatives and Hedging Activities,” in the notes to the condensed consolidated financial statements included herein. As of December 30, 2023, approximately 86% of our gross debt was fixed rate.
Current wording
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 10, “Derivatives and Hedging Activities,” in the notes to the condensed consolidated financial statements included herein. As of March 30, 2024, approximately 87% of our gross debt was fixed rate.
Previous wording
We believe our significant cash liquidity will allow us to meet our anticipated funding requirements, including the funding of $1,385 million acquisition of the Electron Device Business of CPI. 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 March 2026.
Current wording
We believe our significant cash liquidity will allow us to meet our anticipated funding requirements, including the funding of $1,385 million acquisition of the Electron Device Business of CPI. 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. Following the April 2024 redemption of the 7.50% 2027 Notes, there is no maturity on any tranche of term loans or notes until November 2027.
Previous wording
Operating Activities. The Company generated $636 million of net cash from operating activities during the thirteen week period ended December 30, 2023 compared to $377 million during the thirteen week period ended December 31, 2022.
Current wording
Operating Activities. The Company generated $865 million of net cash from operating activities during the twenty-six week period ended March 30, 2024 compared to $507 million during the twenty-six week period ended April 1, 2023.
Previous wording
The change in accounts receivable during the thirteen week period ended December 30, 2023 was a source of cash of $94 million compared to a source of cash of $121 million during the thirteen week period ended December 31, 2022. The decrease in the source of cash of $27 million is primarily attributable to the timing of cash receipts. The Company continues to actively manage its accounts receivable, the related agings and collection efforts.
Current wording
The change in accounts receivable during the twenty-six week period ended March 30, 2024 was a source of cash of $36 million compared to a use of cash of $33 million during the twenty-six week period ended April 1, 2023. The increase in the source of cash of $69 million is primarily attributable to the timing of cash receipts. The Company continues to actively manage its accounts receivable, the related agings and collection efforts.
Previous wording
The change in inventories during the thirteen week period ended December 30, 2023 was a use of cash of $78 million compared to a use of cash of $89 million during the thirteen week period ended December 31, 2022. The decrease in the use of cash of $11 million is primarily driven by higher sales activity partially offset by increased purchasing from higher demand. The Company continues to actively and strategically manage inventory levels in response to the ongoing supply chain challenges.
Current wording
The change in inventories during the twenty-six week period ended March 30, 2024 was a use of cash of $114 million compared to a use of cash of $176 million during the twenty-six week period ended April 1, 2023. The decrease in the use of cash of $62 million is primarily driven by higher sales activity partially offset by increased purchasing from higher demand. The Company continues to actively and strategically manage inventory levels in response to the ongoing supply chain challenges.
Previous wording
The change in accounts payable during the thirteen week period ended December 30, 2023 was a use of cash of $21 million compared to a use of cash of $13 million during the thirteen week period ended December 31, 2022. The change is due to the timing of payments to suppliers.
Current wording
The change in accounts payable during the twenty-six week period ended March 30, 2024 was a use of cash of $9 million compared to a source of cash of $6 million during the twenty-six week period ended April 1, 2023. The change is due to the timing of payments to suppliers.
Previous wording
Investing Activities. Net cash used in investing activities was $50 million during the thirteen week period ended December 30, 2023, consisting primarily of capital expenditures of $36 million and the acquisition of a certain product line for approximately $13 million.
Current wording
Investing Activities. Net cash used in investing activities was $171 million during the twenty-six week period ended March 30, 2024, consisting primarily of $87 million from the acquisitions of FPT and certain product lines completed during the first half of fiscal 2024 and capital expenditures of $84 million.
Previous wording
Net cash used in investing activities was $41 million during the thirteen week period ended December 31, 2022, consisting of capital expenditures of $31 million and the remaining $10 million cash payment due for a certain product line acquired at the end of fiscal 2022.
Current wording
Net cash used in investing activities was $76 million during the twenty-six week period ended April 1, 2023, consisting of capital expenditures of $66 million and the remaining $10 million cash payment due for a certain product line acquired at the end of fiscal 2022.
Previous wording
Financing Activities. Net cash provided by financing activities was $67 million during the thirteen week period ended December 30, 2023. The source of cash was primarily attributable to the net proceeds from the issuance of Tranche J term loans of $988 million, net proceeds of $983 million from the completion of the 2031 Secured Notes offering, proceeds of $100 million drawn on the revolving credit facility and $52 million in proceeds from stock option exercises. This was primarily offset by dividend and dividend equivalent payments of $2,038 million and principal payments on Tranche H and Tranche I term loans of $16 million. For the Tranche J term loans, principal payments commence on March 31, 2024, in which $3 million will be paid on a quarterly basis up to the maturity date.
Current wording
Net cash provided by financing activities was $1,068 million during the twenty-six week period ended April 1, 2023. The source of cash was primarily attributable to the total net proceeds from the issuance of Tranche H and Tranche I term loans of $6,235 million, net proceeds of $2,066 million from the completion of the 2028 Secured Notes offering and $119 million in proceeds from stock option exercises. This was primarily offset by repayments on term loans of $7,303 million, which consists of the full repayment of the existing principal for the Tranche E, Tranche F and Tranche G term loans ($7,284 million), plus normal course principal payments on the Tranche E, Tranche F and Tranche H term loans ($19 million), dividend equivalent payments of $38 million and other financing fees of $11 million.
Previous wording
We have future obligations under various contracts relating to debt and interest payments, finance and operating leases, pension and post-retirement benefit plans and purchase obligations. During the thirteen week period ended December 30, 2023, other than the financing activity further described in Note 7, “Debt,” in the notes to the condensed consolidated financial statements included herein, there were no material changes to these obligations as reported in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Current wording
We have future obligations under various contracts relating to debt and interest payments, finance and operating leases, pension and post-retirement benefit plans and purchase obligations. During the twenty-six week period ended March 30, 2024, other than the financing activity further described in Note 7, “Debt,” in the notes to the condensed consolidated financial statements included herein, there were no material changes to these obligations as reported in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.
Previous wording
On November 28, 2023, the Company entered into Amendment No. 13 and Incremental Term Loan Assumption Agreement (herein, “Amendment No. 13”) to the Credit Agreement. Under the terms of Amendment No. 13, the Company, among other things, issued $1,000 million in Tranche J term loans maturing February 28, 2031. The Tranche J term loans bear interest at a rate of adjusted Term Secured Overnight Financing Rate (“Term SOFR”) plus an applicable margin of 3.25%. The Tranche J term loans were issued at a discount of 0.25%, or approximately $3 million. The Tranche J term loans were fully drawn on November 28, 2023 and the other terms and conditions that apply to the Tranche J term loans are substantially the same as the terms and conditions that apply to the term loans immediately prior to Amendment No. 13.
Current wording
On November 28, 2023, the Company entered into Amendment No. 13 and Incremental Term Loan Assumption Agreement (herein, “Amendment No. 13”) to the Credit Agreement. Under the terms of Amendment No. 13, the Company, among other things, issued $1,000 million in Tranche J term loans maturing February 28, 2031. The Tranche J term loans bear interest at a rate of adjusted Term 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 are substantially the same as the terms and conditions that apply to the term loans immediately prior to Amendment No. 13.
Previous wording
As of December 30, 2023, TransDigm has $7,233 million in fully drawn term loans (the “Term Loans Facility”) and an $810 million revolving credit facility. The Term Loans Facility consists of three tranches of term loans as follows (aggregate principal amount disclosed is as of December 30, 2023):
Current wording
As of March 30, 2024, TransDigm has $7,230 million in fully drawn term loans (the “Term Loans Facility”) and an $910 million revolving credit facility. The Term Loans Facility consists of three tranches of term loans as follows (aggregate principal amount disclosed is as of March 30, 2024):
Previous wording
The Term Loans Facility requires quarterly aggregate principal payments of $19 million. The revolving commitments consist of two tranches which include up to $152 million of multicurrency revolving commitments. At December 30, 2023, the Company had $54 million in letters of credit outstanding and $756 million in borrowings available under the revolving commitments. Draws on the revolving commitments are subject to an interest rate of 2.50% per annum. The unused portion of the revolving commitments is subject to a fee of 0.5% per annum.
Current wording
The Term Loans Facility requires quarterly aggregate principal payments of $18 million. The revolving commitments consist of two tranches which include up to $139 million of multicurrency revolving commitments. At March 30, 2024, the Company had $63 million in letters of credit outstanding and $847 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.
Previous wording
The 7.50% 2027 Notes, the 5.50% 2027 Notes, the 4.625% 2029 Notes and the 4.875% 2029 Notes (collectively, the “Subordinated Notes”) were issued at a price of 100% of the principal amount. The 2030 Secured Notes (which, along with the 2026 Secured Notes, 2028 Secured Notes and 2031 Secured Notes, are collectively referred to as the “Secured Notes”) was issued at a price of 100% of its principal amount. The initial $3,800 million offering of the 2026 Secured Notes was issued at a price of was issued at a price of 100% of its principal amount and the subsequent $200 million and $400 million offerings of the 2026 Secured Notes in the second quarter of fiscal 2019 and the third quarter of fiscal 2020, respectively, were issued at a price of 101% of their principal amount, resulting in gross proceeds of $4,411 million. The initial $1,000 million offering and the subsequent $1,100 million offering of the 6.75% senior secured notes due 2028 (collectively, the “2028 Secured Notes”) in the second quarter of fiscal 2023 were issued at a price of 100% and 99%, respectively, of their principal amount, resulting in gross proceeds of $2,089 million. The 2031 Secured Notes were 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.
Current wording
The 7.50% 2027 Notes, the 5.50% 2027 Notes, the 4.625% 2029 Notes and the 4.875% 2029 Notes (collectively, the “Subordinated Notes”) were issued at a price of 100.00% of the principal amount. The 2030 Secured Notes and 2032 Secured Notes (which, along with the 2028 Secured Notes, 2029 Secured Notes and 2031 Secured Notes, are collectively referred to as the “Secured Notes”) was 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.
Previous wording
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 2026 Secured Notes and the 2028 Secured Notes are guaranteed on a senior secured basis by TD Group, TransDigm UK and TransDigm Inc.’s Domestic Restricted Subsidiaries (as defined in the applicable indentures). The 2030 Secured Notes and the 2031 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-Q, the guarantors of the 2030 Secured Notes and 2031 Secured Notes are the same as the guarantors of the 2026 Secured Notes and the 2028 Secured Notes. The table set forth in Exhibit 22 filed with this Form 10-Q 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.
Current wording
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 and 2032 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-Q, the guarantors of the 2029 Secured Notes, 2030 Secured Notes, 2031 Secured Notes and 2031 Secured Notes are the same as the guarantors of the 2028 Secured Notes. The table set forth in Exhibit 22 filed with this Form 10-Q 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.
Previous wording
The restrictive covenants included in the Credit Agreement are subject to amendments executed periodically. The most recent amendment that impacted the restrictive covenants contained in the Credit Agreement is Amendment No. 11, executed on February 24, 2023.
Current wording
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.
Showing the first 40 of 45 pairs. Open the source sections for the rest.
Rearranged current paragraphs (19)
Current report — wording carried from elsewhere
(1)Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends paid on participating securities, including dividend equivalent payments. No special dividends were declared or paid on participating securities, including dividend equivalent payments, for the thirteen week periods ended March 30, 2024 and April 1, 2023.
Current report — wording carried from elsewhere
(2)Earnings per share is calculated by dividing net income applicable to TD Group common stockholders by the basic and diluted weighted average common shares outstanding.
Current report — wording carried from elsewhere
(3)Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information and limitations regarding these non-GAAP financial measures, including a reconciliation to the comparable U.S. GAAP financial measure.
Current report — wording carried from elsewhere
•Earnings per Share. Basic and diluted earnings per share was $6.97 for the thirteen week period ended March 30, 2024 and $5.32 for the thirteen week period ended April 1, 2023.
Current report — wording carried from elsewhere
•Net Sales. Net organic sales and acquisition sales and the related dollar and percentage changes for the twenty-six week periods ended March 30, 2024 and April 1, 2023 were as follows (amounts in millions):
Current report — wording carried from elsewhere
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 subsequent to their respective acquisition date. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. Refer to Note 2, “Acquisitions,” in the notes to the condensed consolidated financial statements included herein for further information on the Company's recent acquisitions activity.
Current report — wording carried from elsewhere
The acquisition sales for the twenty-six week period ended March 30, 2024 are primarily attributable to Calspan, which was acquired in the third quarter of fiscal 2023.
Current report — wording carried from elsewhere
Cost of sales during the twenty-six week period ended March 30, 2024 decreased as a percentage of net sales despite increased inflationary pressures. 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 1.5 percentage points to 59.1% for the twenty-six week period ended March 30, 2024 from 57.6% for the twenty-six week period ended April 1, 2023.
Current report — wording carried from elsewhere
Excluding non-cash stock and deferred compensation expense and acquisition and divestiture transaction-related expenses, selling and administrative expenses as a percentage of net sales for the twenty-six week period ended March 30, 2024 decreased compared to the twenty-six week period ended April 1, 2023 despite the higher inflationary environment compared to a year ago due to continued strategic cost mitigation efforts. 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 assumption used to determine the Black-Scholes fair value. Refer to Note 2, “Acquisitions,” in the notes to the condensed consolidated financial statements included herein for the activity impacting the increase in acquisition and divestiture transaction-related expenses.
Current report — wording carried from elsewhere
•Amortization of Intangible Assets. Amortization of intangible assets was $72 million for the twenty-six week period ended March 30, 2024 compared to $68 million for the twenty-six week period ended April 1, 2023. The increase in amortization expense of $4 million was primarily due to the amortization expense recognized on intangible assets from the third quarter of fiscal 2023 acquisition of Calspan.
Current report — wording carried from elsewhere
•Interest Expense-net. 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 $45 million, or 7.7%, to $626 million for the twenty-six week period ended March 30, 2024 from $581 million for the comparable twenty-six week period in the prior fiscal year. The increase in interest expense-net was primarily due an increase in the base rates, i.e., Term SOFR and LIBOR, to the portion of our variable rate debt that is not hedged via an interest rate swap or cap. This was partially offset by a $35 million increase in interest income. The weighted average interest rate for cash interest payments on total borrowings outstanding for the twenty-six week period ended March 30, 2024 was 6.3% compared to 6.2% for the twenty-six week period ended April 1, 2023.
Current report — wording carried from elsewhere
•Income Tax Provision. Income tax expense as a percentage of income before income taxes was approximately 22.0% for the twenty-six week period ended March 30, 2024 compared to 23.5% for the twenty-six week period ended April 1, 2023. The Company’s lower effective tax rate for the twenty-six week period ended March 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.
Current report — wording carried from elsewhere
•Segment Net Sales. Net sales by segment for the twenty-six week periods ended March 30, 2024 and April 1, 2023 were as follows (amounts in millions):
Current report — wording carried from elsewhere
•EBITDA As Defined. 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 twenty-six week periods ended March 30, 2024 and April 1, 2023 were as follows (amounts in millions):
Current report — wording carried from elsewhere
(1)Calculated as a percentage of consolidated net sales.
Current report — wording carried from elsewhere
EBITDA As Defined for the Power & Control segment increased approximately $175 million, an increase of 20.5%, resulting from higher organic sales in the commercial aftermarket, commercial OEM and defense 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.
Current report — wording carried from elsewhere
EBITDA As Defined for the Airframe segment increased approximately $255 million, an increase of 37.2%. The increase in EBITDA As Defined for the Airframe segment is attributable to the same factors described in the paragraph above for the Power & Control segment. EBITDA As Defined for the Airframe segment from acquisitions was approximately $44 million primarily due to the impact of the Calspan acquisition. EBITDA As Defined from acquisitions represents EBITDA As Defined from acquired businesses for the period up to one year subsequent to the respective acquisition date.
Current report — wording carried from elsewhere
The change in Non-aviation EBITDA As Defined compared to the twenty-six week period in the prior fiscal year was not material.
Current report — wording carried from elsewhere
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 the twenty-six week period in the prior fiscal year is primarily attributable to the current fiscal year portion of the deferred compensation plan adopted in the fourth quarter of fiscal 2022 for certain members of non-executive management.