TransDigm Group TDG · USD

SEGMENTSThe Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation. The Power & Control segment includes operations that primarily develop, produce and market systems and components that predominately provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. Major product offerings include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, advanced sensor products, switches and relay panels, high performance hoists, winches and lifting devices, cargo loading, handling and delivery systems, electronic components used in the generation, amplification, transmission and reception of microwave signals, and single and two-stage servo values. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.The Airframe segment includes operations that primarily develop, produce and market systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies. Major product offerings include engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation, lighting and control technology, parachutes, specialized flight, wind tunnel and jet engine testing services and equipment and complex testing and instrumentation solutions. Primary customers of this segment are airframe manufacturers and cabin system suppliers and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.The Non-aviation segment includes operations that primarily develop, produce and market products for non-aviation markets.

REVENUE RECOGNITIONTransDigm's sales are concentrated in the aerospace and defense industry. The Company’s customers include: distributors of aerospace components, commercial airlines, large commercial transport and regional and business aircraft original equipment manufacturers (“OEMs”), various armed forces of the U.S. and friendly foreign governments, defense OEMs, system suppliers, and various other industrial customers.The Company recognizes revenue from contracts with customers using the five step model prescribed in ASC 606. A substantial portion of the Company's revenue is recorded at a point in time basis. Revenue is recognized from the sale of products or services when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to the customer. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Revenue is measured at the amount of consideration the Company expects to be paid in exchange for goods or services.In a limited number of contracts, control transfers to the customer over time, primarily in contracts where the customer is required to pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit relative to the work performed for products that were customized for the customer. Therefore, we recognize revenue over time for those agreements that have a right to margin and where the products being produced have no alternative use. Based on our production cycle, it is generally expected that goods related to the revenue will be shipped and billed within twelve months. For revenue recognized over time, we estimate the amount of revenue attributable to a contract earned at a given point during the production cycle based on certain costs, such as materials and labor incurred to date, plus the expected profit, which is a cost-to-cost input method.We consider the contractual consideration payable by the customer and assess variable consideration that may affect the total transaction price. Variable consideration is included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the estimate should be constrained in order to avoid a significant reversal of revenue in a future period.

COMMITMENTS AND CONTINGENCIESDuring the ordinary course of business, the Company is from time to time threatened with, or may become a party to, legal actions and other proceedings such as product liability claims, employee claims, workers’ compensation claims and class action lawsuits. Insurance may cover some of the costs associated with these claims and proceedings. While the Company is currently involved in certain legal proceedings, it believes the results of these proceedings will not have a material adverse effect on its financial condition, results of operations, or cash flows.Environmental Liabilities – Our operations and facilities are subject to a number of federal, state, local and foreign environmental laws and regulations that govern, among other things, discharges of pollutants into the air and water, the generation, handling, storage and disposal of hazardous materials and wastes, the remediation of contamination and the health and safety of our employees. Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. Certain facilities and third-party sites utilized by the Company have been identified as potentially responsible parties under the federal superfund laws and comparable state laws. The Company is currently involved in the investigation and remediation of a number of sites under applicable laws.Estimates of the Company’s environmental liabilities are based on current facts, laws, regulations and technology. These estimates take into consideration the Company’s prior experience and professional judgment of the Company’s environmental advisors. Estimates of the Company’s environmental liabilities are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluations and cost estimates, the extent of corrective actions that may be required and the number and financial condition of other potentially responsible parties, as well as the extent of their responsibility for the remediation.Accordingly, as investigation and remediation proceed, it is likely that adjustments in the Company’s accruals will be necessary to reflect new information.

DEBTThe Company’s debt consists of the following (in millions):September 30, 2025Gross AmountDebt Issuance CostsOriginal Issue DiscountNet AmountShort-term borrowings—trade receivable securitization facility$725 $(1)$— $724 Term loans$11,124 $(43)$(33)$11,048 6.750% secured notes due 2028 (“2028 Secured Notes”)2,100 (11)(6)2,083 4.625% senior subordinated notes due 2029 (“4.625% 2029 Notes”)1,200 (5)— 1,195 6.375% secured notes due 2029 (“2029 Secured Notes”)2,750 (17)(1)2,732 4.875% senior subordinated notes due 2029 (“4.875% 2029 Notes”)750 (3)— 747 6.875% secured notes due 2030 (“2030 Secured Notes”)1,450 (10)— 1,440 7.125% secured notes due 2031 (“2031 Secured Notes”)1,000 (8)(6)986 6.625% secured notes due 2032 (“2032 Secured Notes”)2,200 (17)— 2,183 6.000% secured notes due 2033 (“2033 Secured Notes”)1,500 (12)— 1,488 6.375% senior subordinated notes due 2033 (“6.375% 2033 Notes”)2,650 (14)(20)2,616 6.250% secured notes due 2034 (“2034 Secured Notes”)500 (5)— 495 6.750% senior subordinated notes due 2034 (“6.750% 2034 Notes”)2,000 (18)— 1,982 Government refundable advances12 — — 12 Finance lease obligations284 — — 284 29,520 (163)(66)29,291 Less: current portion125 (1)— 124 Long-term debt$29,395 $(162)$(66)$29,167 September 30, 2024Gross AmountDebt Issuance CostsOriginal Issue DiscountNet AmountShort-term borrowings—trade receivable securitization facility$487 $(1)$— $486 Term loans$8,702 $(25)$(35)$8,642 5.500% senior subordinated notes due 2027 (“5.500% 2027 Notes”)2,650 (9)— 2,641 2028 Secured Notes2,100 (15)(8)2,077 4.625% 2029 Notes1,200 (6)— 1,194 2029 Secured Notes2,750 (22)(1)2,727 4.875% 2029 Notes750 (4)— 746 2030 Secured Notes1,450 (12)— 1,438 2031 Secured Notes1,000 (9)(7)984 2032 Secured Notes2,200 (20)— 2,180 2033 Secured Notes1,500 (14)— 1,486 Government refundable advances17 — — 17 Finance lease obligations262 — — 262 24,581 (136)(51)24,394 Less: current portion99 (1)— 98 Long-term debt$24,482 $(135)$(51)$24,296 Issuance of $2,650 million of Senior Subordinated Notes due 2033 – On May 20, 2025, the Company entered into a purchase agreement in connection with a private offering of $2,650 million in aggregate principal amount consisting of the 6.375% 2033 Notes at an issue price of 99.225% of the principal amount, which represents an approximately $20.5 million discount. The 6.375% 2033 Notes were issued pursuant to an indenture, dated as of May 20, 2025, amongst TransDigm Inc.

INCOME TAXESThe Company’s income from continuing operations before income taxes includes the following components for the periods shown below (in millions):Fiscal Years Ended September 30,202520242023United States$2,119 $1,800 $1,413 Foreign510 415 303 $2,629 $2,215 $1,716 The Company’s income tax provision (benefit) on income from continuing operations consists of the following for the periods shown below (in millions): Fiscal Years Ended September 30, 202520242023CurrentFederal$420 $354 $276 State45 38 41 Foreign100 98 97 565 490 414 DeferredFederal(32)(6)28 State1 7 11 Foreign21 9 (36)(10)10 3 $555 $500 $417 A reconciliation of the federal statutory income tax rate to the effective income tax rate for the periods shown below is as follows: Fiscal Years Ended September 30, 202520242023Federal statutory income tax rate 21.0 %21.0 %21.0 %Changes in valuation allowances impacting results3.7 %4.0 %5.3 %State and local income taxes, net of federal benefit0.9 %1.3 %1.7 %Foreign-derived intangible income(1.6)%(1.2)%(1.2)%Stock-based compensation(2.9)%(3.6)%(2.3)%Other—net— %1.1 %(0.2)%Effective income tax rate21.1 %22.6 %24.3 %The components of the deferred taxes consist of the following (in millions):September 30, 2025September 30, 2024Deferred tax assets (liabilities):Intangible assets$(1,012)$(1,008)Property, plant and equipment(99)(101)Interest expense limitation419 279 Employee benefits131 115 Inventories99 90 Capitalized research and development costs86 73 Net operating losses59 52 Other14 52 Total(303)(448)Add: Valuation allowance(456)(318)Total net deferred tax assets (liabilities)$(759)$(766)At September 30, 2025, the Company has state net operating loss carryforwards of approximately $780 million, German net operating loss carryforwards of $66 million and United Kingdom net operating loss carryforwards of approximately $93 million that expire in various fiscal years from 2026 to 2045. The Company has U.S. and non-U.S. tax credit carryforwards of $9 million that expire beginning in fiscal year 2026. The deferred tax assets for the interest expense limitation, net operating losses, and tax credit carryforwards are reduced by a valuation allowance for the amount of such assets that the Company believes will not be realized.

STOCK-BASED COMPENSATIONThe Company’s equity compensation plans are designed to assist the Company in attracting, retaining, motivating and rewarding key employees, directors or consultants, and promoting the creation of long-term value for stockholders by closely aligning the interests of these individuals with those of the Company’s stockholders. The Company’s equity compensation plans provide for the granting of stock options.Non-cash stock compensation expense recognized by the Company during the fiscal years ended September 30, 2025, 2024 and 2023 was $152 million, $188 million and $135 million, respectively. The related tax benefit for the fiscal years ended September 30, 2025, 2024 and 2023 was $24 million, $24 million and $15 million, respectively. Of the non-cash stock compensation expense recorded in fiscal 2025, 2024 and 2023, $150 million, $134 million and $112 million was recorded as a component of additional paid in capital and less than $2 million, $54 million and $23 million was recorded as a component of other non-current liabilities. The liability awards relate to stock options granted between fiscal 2017 to fiscal 2020 from the 2014 stock option plan to certain employees in lieu of these individuals receiving salary and bonus compensation paid in cash. The vesting of the stock options are subject to the achievement of the same operating performance goals as other grants. The liability is remeasured each reporting period based on the market value of our common shares on the last day of the reported period. The other non-current liabilities related to stock-based compensation was $102 million as of September 30, 2025 and 2024.The weighted-average grant date fair value of options granted during the fiscal years ended September 30, 2025, 2024 and 2023 was $549.03, $397.31 and $251.73, respectively. The total fair value of options vested during fiscal years ended September 30, 2025, 2024 and 2023 was $107 million, $97 million and $80 million, respectively. Compensation expense is recognized based upon probability assessments of awards that are expected to vest in future periods, adjusted for expected forfeitures. Such probability assessments are subject to revision and, therefore, unrecognized compensation expense is subject to future changes in estimate.

LEASESThe Company leases certain manufacturing facilities, offices, land, equipment and vehicles. Such leases, some of which are noncancellable and, in many cases, include renewals, expire at various dates. Such options to renew are included in the lease term when it is reasonably certain that the option will be exercised. The Company’s lease agreements typically do not contain any significant residual value guarantees or restrictive covenants, and payments within certain lease agreements are adjusted periodically for changes in an index or rate.The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The discount rate implicit within our leases is generally not determinable and therefore we determine the discount rate based on our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on the lease term and the currency in which lease payments are made. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of twelve months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease.

ACQUISITIONSSimmonds Precision Products, Inc. – On June 30, 2025, the Company entered into a definitive agreement to acquire all the outstanding stock of the Simmonds Precision Products, Inc. Business (“Simmonds”) of Goodrich Corporation from RTX Corporation for approximately $757 million in cash. On October 6, 2025, the acquisition was completed. The acquisition was financed through existing cash on hand. Simmonds, headquartered in Vergennes, Vermont, is a leading global designer and manufacturer of fuel & proximity sensing and structural health monitoring solutions for the aerospace and defense end markets. The Company’s products are highly engineered, proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms. The operating results of Simmonds will be included within TransDigm's Power & Control segment.Servotronics, Inc. – On June 2, 2025, the Company launched a tender offer to acquire all the issued and outstanding stock of Servotronics, Inc. (“Servotronics”), at a price of $47.00 per share in cash. On July 1, 2025, the tender offer expired, resulting in all issued and outstanding stock of Servotronics being canceled and Servotronics becoming a wholly owned subsidiary of the Company. The total purchase price was approximately $133 million in cash, which was financed through existing cash on hand. Servotronics, headquartered in Elma, New York, is a leading global designer and manufacturer of servo controls and other advanced technology components for aerospace and defense applications. Its products are highly engineered, proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms. The operating results of Servotronics are included within TransDigm's Power & Control segment.Based on the fair value of the assets acquired and liabilities assumed, $75 million of goodwill and $46 million of other intangible assets was recognized for the acquisition as of September 30, 2025, none of which is expected to be deductible for tax purposes. As of September 30, 2025, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed are subject to adjustment until the end of the measurement period.Raptor Scientific – On July 31, 2024, the Company acquired all the outstanding stock of Raptor Scientific for approximately $646 million in cash.