TransDigm Group INC

Previous wording

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q, 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,” 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 those described under “Risk Factors” in this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q to reflect new information, future events or otherwise, except as may be required under federal securities laws.

Current wording

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q. 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. 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 described in Item 1A, “Risk Factors,” of the 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 Quarterly Report on Form 10-Q to reflect new information, future events or otherwise, except as may be required under federal securities laws.

Previous wording

We believe we are a leading global designer, producer and supplier of 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. 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 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.

Current wording

We believe we are a leading global designer, producer and supplier of 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 believe that our products have strong brand names within the industry and that we have a reputation for high quality, reliability and strong customer support. We 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.

Previous wording

Our business is well diversified due to the broad range of products that we offer to our customers. Our major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, databus and power controls, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, advanced sensor products, switches and relay panels, thermal protection and insulation, lighting and control technology, parachutes, high performance hoists, winches and lifting devices, cargo loading, handling and delivery systems, specialized flight, wind tunnel and jet engine testing services and equipment and electronic components used in the generation, amplification, transmission and reception of microwave signals. 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.

Current wording

Our business is well diversified due to the broad range of products that we offer to our customers. Our major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, databus and power controls, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, advanced sensor products, switches and relay panels, thermal protection and insulation, lighting and control technology, parachutes, high performance hoists, winches and lifting devices, cargo loading, handling and delivery systems, specialized flight, wind tunnel and jet engine testing services and equipment, electronic components used in the generation, amplification, transmission and reception of microwave signals and equipment and complex testing and instrumentation solutions. 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.

Previous wording

For the third quarter of fiscal year 2024, we generated net sales of $2,046 million and net income attributable to TD Group of $461 million. EBITDA As Defined was $1,091 million, or 53.3% 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 first quarter of fiscal 2025, we generated net sales of $2,006 million and net income attributable to TD Group of $493 million. EBITDA As Defined was $1,061 million, or 52.9% 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 net income and net cash provided by operating activities.

Previous 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 thirty-nine week periods ended June 29, 2024 and July 1, 2023, 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 equivalents of $49 million and $101 million for the thirteen week periods December 28, 2024 and December 30, 2023, respectively.

Previous wording

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 condensed consolidated financial statements included herein for further information on the Company's recent acquisitions activity.

Current wording

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 condensed consolidated financial statements included herein for information on the Company's recent acquisitions.

Previous wording

The increase in organic sales of $254 million for the thirteen week period ended June 29, 2024 compared to the thirteen week period ended July 1, 2023 is primarily related to increases in defense sales ($91 million, an increase of 13.3%), commercial OEM sales ($88 million, an increase of 23.2%) and commercial aftermarket sales ($61 million, an increase of 11.1%). 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 third quarter of fiscal 2024 compared to fiscal 2023, particularly internationally.

Current wording

The increase in organic sales of $118 million for the thirteen week period ended December 28, 2024 compared to the thirteen week period ended December 30, 2023 is primarily related to increases in defense sales ($80 million, an increase of 11.8%) and commercial aftermarket sales ($57 million, an increase of 9.9%), partially offset by a decrease in commercial OEM sales ($16 million, a decrease of 4.2%). The increase in defense sales is primarily attributable to continued improving U.S. Government defense spend outlays. The increase in commercial aftermarket sales is primarily attributable to the strong demand for air travel resulting in higher flight hours and utilization of aircraft. The decrease in commercial OEM sales is primarily attributable to the adverse impact on aircraft production from the Boeing machinist strike.

Previous wording

The increase in acquisition sales for the thirteen week period ended June 29, 2024 is primarily attributable to the third quarter fiscal 2024 acquisition of the Electron Device Business of Communications & Power Industries (“CPI's Electron Device Business”), the second quarter fiscal 2024 acquisition of FPT Industries LLC (“FPT”) and the third quarter fiscal 2023 acquisition of Calspan Corporation ("Calspan").

Current wording

The increase in acquisition sales for the thirteen week period ended December 28, 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”).

Previous wording

•Cost of Sales and Gross Profit. Cost of sales increased by $111 million, or 15.5%, to $826 million for the thirteen week period ended June 29, 2024 compared to $715 million for the thirteen week period ended July 1, 2023. Cost of sales and the related percentage of net sales for the thirteen week periods ended June 29, 2024 and July 1, 2023 were as follows (amounts in millions):

Current wording

•Cost of Sales and Gross Profit. Cost of sales increased by $24 million, or 3.2%, to $771 million for the thirteen week period ended December 28, 2024 compared to $747 million for the thirteen week period ended December 30, 2023. Cost of sales and the related percentage of net sales for the thirteen week periods ended December 28, 2024 and December 30, 2023 were as follows (amounts in millions):

Previous wording

Cost of sales during the thirteen week period ended June 29, 2024 decreased as a percentage of net sales. 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 0.6 percentage points to 59.6% for the thirteen week period ended June 29, 2024 from 59.0% for the thirteen week period ended July 1, 2023.

Current wording

Cost of sales during the thirteen week period ended December 28, 2024 decreased as a percentage of net sales. 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. Foreign exchange rates, particularly the U.S. dollar compared to the British pound and the euro, strengthened in the first quarter of fiscal 2025 compared to fiscal 2024, resulting in foreign currency gains recognized in the first quarter of fiscal 2025.

Previous wording

•Selling and Administrative Expenses. Selling and administrative expenses increased by $39 million to $248 million, or 12.1% of net sales, for the thirteen week period ended June 29, 2024 from $209 million, or 12.0% of net sales, for the thirteen week period ended July 1, 2023. Selling and administrative expenses and the related percentage of net sales for the thirteen week periods ended June 29, 2024 and July 1, 2023 were as follows (amounts in millions):

Current wording

•Selling and Administrative Expenses. Selling and administrative expenses decreased by $9 million, or 4%, to $211 million for the thirteen week period ended December 28, 2024, compared to $220 million, or 12.3% of net sales, for the thirteen week period ended December 30, 2023. Selling and administrative expenses and the related percentage of net sales for the thirteen week periods ended December 28, 2024 and December 30, 2023 were as follows (amounts in millions):

Previous wording

Excluding certain costs specified above, selling and administrative expenses as a percentage of net sales, selling and administrative expenses as a percentage of net sales for the thirteen week period ended June 29, 2024 were in line as a percentage of net sales (slight increase of 0.1%) compared to the thirteen week period ended July 1, 2023. The decrease in non-cash stock and deferred compensation expense was due to a reduction in the stock compensation expense attributable to stock option liability awards. Acquisition-related expenses are higher due to the increase in acquisition activity compared to prior year.

Current wording

Selling and administrative expenses as a percentage of net sales for the thirteen week period ended December 28, 2024 decreased as a percentage of net sales compared to the thirteen week period ended December 30, 2023 primarily driven by the decrease in non-cash stock and deferred compensation expense. The decrease is due to the reduction in the stock price as of December 28, 2024 compared to September 30, 2024, as the stock price is a key input used to determine the Black-Scholes fair value for the non-cash stock compensation expense.

Previous wording

•Amortization of Intangible Assets. Amortization of intangible assets was $38 million for the thirteen week period ended June 29, 2024 compared to $37 million for the thirteen week period ended July 1, 2023. The increase in amortization expense of $1 million was primarily due to the amortization expense recognized on intangible assets from the fiscal 2024 acquisitions. The intangible assets recognized in connection with the fiscal 2024 acquisitions are summarized in Note 6, “Intangible Assets,” to the condensed consolidated financial statements included herein.

Current wording

•Amortization of Intangible Assets. Amortization of intangible assets was $50 million for the thirteen week period ended December 28, 2024 compared to $35 million for the thirteen week period ended December 30, 2023. The increase in amortization expense of $15 million was primarily due to the amortization expense recognized on intangible assets from the fiscal 2024 acquisitions.

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 $25 million, or 8.6%, to $316 million for the thirteen week period ended June 29, 2024 from $291 million for the comparable thirteen week period in the prior fiscal year. The increase in interest expense-net was primarily due to an increase in outstanding borrowings (refer to Note 7, “Debt”in the notes to the condensed consolidated financial statements included herein for additional details). 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 was 6.2% for the thirteen week period ended June 29, 2024 compared to 6.1% for the thirteen week period ended July 1, 2023.

Current wording

•Interest Expense-net. Interest expense-net includes interest on borrowings outstanding, amortization of debt issuance costs and original issue discount, 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 $78 million, or 26.0%, to $378 million for the thirteen week period ended December 28, 2024 from $300 million for the comparable thirteen week period in the prior fiscal year. The increase in interest expense-net was primarily due to an increase in outstanding borrowings (refer to Note 8, “Debt”in the notes to the condensed consolidated financial statements included herein for additional details) and a $10 million decrease in interest income. The weighted average interest rate for cash interest payments on total borrowings outstanding was 6.2% for the thirteen week period ended December 28, 2024 compared to 6.3% for the thirteen week period ended December 30, 2023.

Previous wording

•Other Income. Other income was $14 million for the thirteen week period ended June 29, 2024 compared to $9 million for the thirteen week period ended July 1, 2023. Other income for the thirteen week period ended June 29, 2024 primarily related to a gain on sale of business. Other income for the thirteen week period ended July 1, 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.

Current wording

•Other Income. Other income was $23 million for the thirteen week period ended December 28, 2024 compared to $1 million for the thirteen week period ended December 30, 2023. Other income for the thirteen week period ended December 28, 2024 primarily related to a gain on sale of business. Other income for the thirteen week period ended December 30, 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 23.4% for the thirteen week period ended June 29, 2024 compared to 24.9% for the thirteen week period ended July 1, 2023. The Company’s lower effective tax rate for the thirteen week period ended June 29, 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 wording

•Income Tax Provision. Income tax expense as a percentage of income before income taxes was approximately 20.4% for the thirteen week period ended December 28, 2024 compared to 21.7% for the thirteen week period ended December 30, 2023. The Company’s lower effective tax rate for the thirteen week period ended December 28, 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 $110 million, or 31.3%, to $461 million for the thirteen week period ended June 29, 2024 compared to net income attributable to TD Group of $351 million for the thirteen week period ended July 1, 2023, primarily as a result of the factors referenced above.

Current wording

•Net Income Attributable to TD Group. Net income attributable to TD Group increased $111 million, or 29.1%, to $493 million for the thirteen week period ended December 28, 2024 compared to net income attributable to TD Group of $382 million for the thirteen week period ended December 30, 2023, primarily as a result of the factors referenced above.

Previous wording

•Earnings per Share. Basic and diluted earnings per share from continuing operations was $19.81 for the thirty-nine week period ended June 29, 2024 and $14.80 for the thirty-nine week period ended July 1, 2023. Net income attributable to TD Group for the thirty-nine week period ended June 29, 2024 of $1,246 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 $1,145 million. Net income attributable to TD Group for the thirty-nine week period ended July 1, 2023 of $883 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 $845 million.

Current wording

•Earnings per Share. Basic and diluted earnings per share was $7.62 for the thirteen week period ended December 28, 2024 and $4.87 for the thirteen week period ended December 30, 2023. Net income attributable to TD Group for the thirteen week period ended December 28, 2024 of $493 million was decreased by dividend equivalent payments of $49 million, or $0.83 per share, resulting in net income applicable to TD Group common stockholders of $444 million. 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.

Previous wording

EBITDA As Defined for the Power & Control segment increased approximately $100 million, an increase of 20.5%, 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 $73 million, an increase of 14.3%, resulting primarily from the higher organic sales in commercial aftermarket and defense. 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.

Previous wording

EBITDA As Defined from acquisitions for the Power & Control and Airframe segments contributed approximately $17 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.

Current wording

EBITDA As Defined from acquisitions for the Power & Control and Airframe segments increased approximately $36 million in the aggregate. EBITDA As Defined from acquisitions represents EBITDA As Defined from acquired businesses for the period up to one year from the respective acquisition date.

Previous wording

(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.

Current wording

(1)Includes debt issuance costs and original issue discount. Reference Note 8, “Debt,” in the notes to the condensed consolidated financial statements included herein for additional information.

Previous wording

(1)For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings from 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.

Current wording

(1)For purposes of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of debt issuance costs and original issue discount and the “interest component” of rental expense.

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 from this declaration were approximately $2,020 million.

Current wording

On October 18, 2024, the Company paid the special cash dividend of $75.00 per outstanding share of common stock declared in September 2024, totaling $4,216 million, and $131 million in cash dividend equivalent payments on vested options outstanding under its stock option plans associated with the September 2024 dividend declaration.

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 June 29, 2024, approximately 80% 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 11, “Derivatives and Hedging Activities,” in the notes to the condensed consolidated financial statements included herein. As of December 28, 2024, approximately 75% of our gross debt was fixed rate.

Previous wording

Operating Activities. The Company generated $1,473 million of net cash from operating activities during the thirty-nine week period ended June 29, 2024 compared to $913 million during the thirty-nine week period ended July 1, 2023.

Current wording

Operating Activities. The Company generated $752 million of net cash from operating activities during the thirteen week period ended December 28, 2024 compared to $636 million during the thirteen week period ended December 30, 2023.

Previous wording

The change in accounts receivable during the thirty-nine week period ended June 29, 2024 was a use of cash of $22 million compared to a use of cash of $134 million during the thirty-nine week period ended July 1, 2023. The decrease in the use of cash of $112 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 thirteen week period ended December 28, 2024 was a source of cash of $80 million compared to a source of cash of $94 million during the thirteen week period ended December 30, 2023. The decrease in the source of cash of $14 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 thirty-nine week period ended June 29, 2024 was a use of cash of $140 million compared to a use of cash of $244 million during the thirty-nine week period ended July 1, 2023. The decrease in the use of cash of $104 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 thirteen week period ended December 28, 2024 was a use of cash of $79 million compared to a use of cash of $78 million during the thirteen week period ended December 30, 2023. The slight increase in the use of cash is due to an increase in inventory purchases to support the increase in bookings partially offset by higher sales activity. 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 thirty-nine week period ended June 29, 2024 was a use of cash of $9 million compared to a use of cash of $4 million during the thirty-nine week period ended July 1, 2023. The change is due to the timing of payments to suppliers.

Current wording

The change in accounts payable during the thirteen week period ended December 28, 2024 was a use of cash of $3 million compared to a use of cash of $21 million during the thirteen week period ended December 30, 2023. The change is due to the timing of payments to suppliers.

Previous wording

Investing Activities. Net cash used in investing activities was $1,739 million during the thirty-nine week period ended June 29, 2024, consisting of $1,686 million from the acquisitions of CPI's Electron Device Business, SEI, FPT and certain product lines completed during the first nine months of fiscal 2024, capital expenditures of $124 million; partially offset by other investing transactions of $71 million.

Current wording

Investing Activities. Net cash used in investing activities was $24 million during the thirteen week period ended December 28, 2024, consisting primarily of capital expenditures of $42 million and acquisitions of certain product lines completed during the first quarter of 2025 for $29 million; partially offset by other investing transactions inflows of $47 million.

Previous wording

Net cash used in investing activities was $852 million during the thirty-nine week period ended July 1, 2023, consisting of the acquisition of Calspan for $729 million, certain product line acquisitions aggregating to $21 million and capital expenditures of $102 million.

Current wording

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 $13 million.

Previous wording

Net cash used in financing activities was $11 million during the thirty-nine week period ended July 1, 2023. The use of cash was primarily attributable to the net repayment of short-term and long-term debt, including fees, of $152 million, plus dividend and dividend equivalent payments of $38 million, primarily offset by proceeds from stock option exercises of $179 million.

Current wording

Financing Activities. Net cash used in financing activities was $4,516 million during the thirteen week period ended December 28, 2024. The use of cash was primarily attributable to dividend and dividend equivalent payments of $4,396 million and repurchases of common stock of $316 million; partially offset by an additional draw from the trade receivable securitization facility, including fees, of $163 million and proceeds from stock option exercises of $35 million.

Previous wording

Financing Activities. Net cash provided by financing activities was $152 million during the thirty-nine week period ended June 29, 2024. The source of cash was primarily attributable to the net proceeds of short-term and long-term debt, including fees, of $1,977 million, plus proceeds from stock option exercises of $213 million, primarily offset by dividend and dividend equivalent payments of $2,038 million.

Current wording

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 of short-term and long-term debt, including fees, of $2,071 million and proceeds from stock option exercises of $52 million; partially offset by dividend and dividend equivalent payments of $2,038 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 thirty-nine week period ended June 29, 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.

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 thirteen week period ended December 28, 2024, 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, 2024.

Previous wording

As of June 29, 2024, TransDigm has $7,220 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 June 29, 2024):

Current wording

As of December 28, 2024, 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 December 28, 2024):

Previous 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 June 29, 2024, the Company had $71 million in letters of credit outstanding and $839 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.

Current wording

The Term Loans Facility requires quarterly aggregate principal payments of $22 million. Due to the timing of our quarter-end, no payments were made in the first quarter of fiscal 2025. The revolving commitments consist of two tranches which include up to $139 million of multicurrency revolving commitments. At December 28, 2024, the Company had $61 million in letters of credit outstanding and $849 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 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 10, “Derivatives and Hedging Activities,” in the notes to the condensed 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.

Current wording

The interest rates per annum applicable to the Term Loans Facility under the Second Amended and Restated Credit Agreement dated as of June 4, 2014 (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 11, “Derivatives and Hedging Activities,” in the notes to the condensed 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.

Previous wording

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.

Current wording

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.

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 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.

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, 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-Q, 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-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

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 subsequently drew an additional $38 million available under the Securitization Facility in July 2024.

Current wording

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.

Previous wording

On July 25, 2023, the Company amended the Securitization Facility to, among other things, increase the borrowing capacity from $350 million to $450 million and extend the maturity date to July 25, 2024. During the first quarter of fiscal 2024, the Company drew the remaining $100 million available under the Securitization Facility. As of June 29, 2024, the Company has borrowed $450 million under the Securitization Facility, which is fully drawn and bears interest at a rate of Term SOFR plus 1.60%. At June 29, 2024, the applicable interest rate was 6.91%. The Securitization Facility is collateralized by substantially all of the Company’s domestic operations’ trade accounts receivable.

Current wording

During the first quarter of fiscal 2025, the Company drew the remaining $163 million available under the Securitization Facility. As of December 28, 2024, the Company has borrowed $650 million under the Securitization Facility, which is fully drawn. At December 28, 2024, the applicable interest rate was 6.08%. The Securitization Facility is collateralized by substantially all of the Company’s domestic operations’ trade accounts receivable.