SEC Filing | TransDigm Group Inc.

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Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 30, 2006.

¨	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 001-32833

TransDigm Group Incorporated

(Exact name of registrant as specified in its charter)

Delaware

(State or other Jurisdiction of incorporation or organization)

51-0484716

(I.R.S. Employer Identification No.)


1301 East 9^th Street, Suite 3710, Cleveland, Ohio		44114
(Address of principal executive offices)		(Zip Code)

(216) 706-2939

(Registrants’ telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer or non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one).

LARGE ACCELERATED FILER ¨ ACCELERATED FILER ¨ NON-ACCELERATED FILER x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

The number of shares outstanding of TransDigm Group Incorporated’s common stock, par value $.01 per share, was 44,935,221 as of January 27, 2007.

INDEX


		Page
Part I	FINANCIAL INFORMATION

Item 1	Financial Statements

	Condensed Consolidated Balance Sheets – December 30, 2006 and September 30, 2006	1

	Condensed Consolidated Statements of Income – Thirteen Week Periods Ended December 30, 2006 and December 31, 2005	2

	Condensed Consolidated Statement of Changes in Stockholders’ Equity – Thirteen Week Periods Ended December 30, 2006	3

	Condensed Consolidated Statements of Cash Flows – Thirteen Week Periods Ended December 30, 2006 and December 31, 2005	4

	Notes to Condensed Consolidated Financial Statements	5

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3	Quantitative and Qualitative Disclosure About Market Risk	28

Item 4	Controls and Procedures	29

Part II	OTHER INFORMATION

Item 6	Exhibits	30

SIGNATURES		31

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share amounts)

(Unaudited)


	December 30, 2006			September 30, 2006
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	54,556		$	61,217
Trade accounts receivable - Net		66,818			65,568
Income taxes receivable		1,677			9,366
Inventories		94,075			89,243
Deferred income taxes		7,017			7,390
Prepaid expenses and other		3,073			1,397

Total current assets		227,216			234,181

PROPERTY, PLANT AND EQUIPMENT - Net		63,377			62,851
GOODWILL		918,636			877,829
TRADEMARKS AND TRADENAMES		125,497			125,497
OTHER INTANGIBLE ASSETS - Net		98,840			100,462
DEBT ISSUE COSTS - Net		14,644			14,872
OTHER		504			1,020

TOTAL ASSETS	$	1,448,714		$	1,416,712

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	19,329		$	18,764
Accrued liabilities		30,009			24,675

Total current liabilities		49,338			43,439

LONG-TERM DEBT - Less current portion		925,000			925,000
DEFERRED INCOME TAXES		80,492			78,109
OTHER NON-CURRENT LIABILITIES		6,543			7,123

Total liabilities		1,061,373			1,053,671

STOCKHOLDERS’ EQUITY:
Common stock—$.01 par value; authorized 224,400,000 shares; issued 44,874,217 and 44,664,020 at December 30, 2006 and September 30, 2006, respectively		449			446
Additional paid-in capital		300,195			296,757
Retained earnings		88,002			67,667
Accumulated other comprehensive loss		(1,305	)		(1,829	)

Total stockholders’ equity		387,341			363,041

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,448,714		$	1,416,712

See notes to condensed consolidated financial statements.

-1-

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share data)

(Unaudited)


	Thirteen Week Periods Ended
	December 30, 2006		December 31, 2005
NET SALES	$	122,709	$	100,140

COST OF SALES		59,075		50,897

GROSS PROFIT		63,634		49,243

OPERATING EXPENSES:
Selling and administrative		12,121		13,090
Amortization of intangibles		1,642		1,816

Total operating expenses		13,763		14,906

INCOME FROM OPERATIONS		49,871		34,337

INTEREST EXPENSE - Net		17,793		19,799

INCOME BEFORE INCOME TAXES		32,078		14,538
INCOME TAX PROVISION		11,743		5,554

NET INCOME	$	20,335	$	8,984

Net earnings per share:
Basic earnings per share	$	0.45	$	0.20
Diluted earnings per share	$	0.43	$	0.19

Weighted-Average Shares Outstanding:
Basic		44,773		44,202
Diluted		47,802		46,657

See notes to condensed consolidated financial statements.

-2-

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THIRTEEN WEEK PERIOD ENDED DECEMBER 30, 2006

(Amounts in thousands, except share data)

(Unaudited)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total
	Number of Shares	Par Value		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss			Total
BALANCE, OCTOBER 1, 2006	44,664,020	$	446	$	296,757	$	67,667	$	(1,829	)	$	363,041

Compensation expense recognized for employee stock options					801							801
Income tax benefit from exercise of stock options					1,328							1,328

Exercise of employee stock options	210,197		3		1,304							1,307
Restricted stock amortization					5							5
Comprehensive income:
Net income							20,335					20,335
Interest rate swap									514			514
Other comprehensive income									10			10

Comprehensive income												20,859

BALANCE, DECEMBER 30, 2006	44,874,217	$	449	$	300,195	$	88,002	$	(1,305	)	$	387,341

See notes to condensed consolidated financial statements.

-3-

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	Thirteen Weeks Ended
	December 30, 2006			December 31, 2005
OPERATING ACTIVITIES:
Net income	$	20,335		$	8,984
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,551			2,421
Amortization of intangibles		1,642			1,816
Amortization of debt issue costs		461			1,153
Non-cash stock option costs and restricted stock amortization		806			237
Changes in assets/liabilities, net of effects from acquisition of business:
Accounts receivable		1,025			1,797
Inventories		(2,333	)		(2,131	)
Other assets		6,610			2,273
Accounts payable		344			295
Accrued and other liabilities		6,547			5,818
Deferred compensation liability		465			(29,477	)
Interest on unsecured promissory notes		—			(59,206	)

Net cash provided by (used in) operating activities		38,453			(66,020	)

INVESTING ACTIVITIES:
Capital expenditures		(2,496	)		(1,767	)
Acquisition of business		(45,250	)		—

Net cash used in investing activities		(47,746	)		(1,767	)

FINANCING ACTIVITIES:
Repayment of amounts borrowed under the former credit facility		—			(736	)
Repayment of unsecured promissory notes		—			(199,997	)
Borrowings under TD Group loan facility, net of fees		—			193,855
Tax benefit from exercise of stock options		1,328			—
Proceeds from exercise of stock options		1,304			—

Net cash provided by (used in) financing activities		2,632			(6,878	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(6,661	)		(74,665	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		61,217			104,221

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	54,556		$	29,556

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	12,713		$	68,795

Cash (received) / paid during the period for income taxes	$	(72	)	$	2,593

See notes to condensed consolidated financial statements.

-4-

TRANSDIGM GROUP INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THIRTEEN WEEK PERIODS ENDED DECEMBER 30, 2006 AND DECEMBER 31, 2005

(UNAUDITED)

1.	DESCRIPTION OF THE BUSINESS AND MERGER

Description of the Business—TransDigm Group Incorporated (“TD Group”), through its wholly-owned subsidiary, TransDigm Inc., is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. TransDigm Inc., which includes the AeroControlex and Adel Wiggins Groups, along with its wholly-owned operating subsidiaries, MarathonNorco Aerospace, Inc., Adams Rite Aerospace, Inc., Champion Aerospace Inc., Avionic Instruments, Inc., Skurka Aerospace Inc., Sweeney Engineering Corp. and CDA InterCorp (collectively, with TD Group, the “Company” or “TransDigm”) offers a broad range of proprietary aerospace components. Major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include ignition systems and components, gear pumps, mechanical/electromechanical actuators and controls, NiCad batteries/chargers, power conditioning devices, hold open rods and locking devices, engineered connectors, engineered latches, cockpit security devices, lavatory hardware and components, specialized AC/DC electric motors and specialized valving.

TransDigm Holding Company (“TransDigm Holdings”) was a wholly-owned subsidiary of TD Group and the direct parent of TransDigm Inc. and was merged into TransDigm Inc. on June 26, 2006.

TD Group was incorporated on July 8, 2003 under the name TD Holding Corporation by outside investors to acquire control of TransDigm Holdings through the Merger described below and had no operations prior to the Merger. TD Group has no significant assets or operations other than its 100% ownership of TransDigm Inc.

Initial Public Offering—On March 20, 2006, TD Group completed an initial public offering (“IPO”) of its common stock. As a result of the IPO, TD Group’s common stock is publicly traded on the New York Stock Exchange under the ticker symbol “TDG”.

On March 14, 2006, TD Group effected a 149.60 for 1.00 stock split and, in conjunction therewith, amended and restated its certificate of incorporation to increase the number of authorized shares of common stock and preferred stock. All common shares and per common share amounts in these condensed consolidated financial statements prior to March 14, 2006 have been retroactively adjusted for all periods presented to give effect to the stock split, including reclassifying an amount equal to the increase in par value from additional paid-in capital to common stock.

Merger—On July 22, 2003, an entity formed by Warburg Pincus Private Equity VIII, L.P. (“Warburg Pincus”) merged with and into TransDigm Holdings, with TransDigm Holdings continuing as the surviving corporation as a wholly-owned subsidiary of a newly formed corporation controlled by Warburg Pincus, TD Group (the “Merger”).

Separate Financial Statements—Separate financial statements of TransDigm Inc. are not presented since TransDigm Inc.’s 7³/4% senior subordinated notes, or the 7³/4% Senior Subordinated Notes, are fully and unconditionally guaranteed on a senior subordinated basis by TD Group and all existing domestic subsidiaries of TransDigm Inc. and since TD Group has no significant operations or assets separate from its investment in TransDigm Inc.

2.	UNAUDITED INTERIM FINANCIAL INFORMATION

The financial information included herein is unaudited; however, the information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and results of operations and cash flows for the interim periods presented. These financial statements and notes should be read in conjunction with the financial statements and related notes for the year ended September 30, 2006 included in its Form 10-K dated November 28, 2006. The September 30, 2006 condensed consolidated balance sheet was derived from the TD Group’s audited financial statements. The results of operations for the thirteen week periods ended December 30, 2006 are not necessarily indicative of the results to be expected for the full year.

-5-

3.	NEW ACCOUNTING STANDARDS

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statements and related financial statement disclosure using both the rollover approach and the iron curtain approach. The requirements of SAB 108 are effective for annual financial statements covering the first fiscal year ending after November 15, 2006. The Company has adopted SAB 108 during its first quarter of fiscal year 2007. The adoption of SAB 108 did not have a material impact on the Company’s consolidated financial position or results of operations.

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 158, “Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of FASB Statements No. 87, 88, 106, and 132(R) (“SFAS 158”). This statement requires balance sheet recognition of the overfunded or underfunded status of pension and postretirement benefit plans. Under SFAS 158, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting standards must be recognized in Accumulated Other Comprehensive Income, net of tax effects, until they are amortized as a component of net periodic benefit cost. In addition, the measurement date, the date at which plan assets and the benefit obligation are measured, is required to be the company’s fiscal year end. Presently, the Company uses a September 30 measurement date for its defined benefit pension plans. SFAS 158 is effective for publicly-held companies for fiscal years ending after December 15, 2006, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008. The Company anticipates that the adoption of this pronouncement will not have a material impact on its consolidated financial position or results of operations.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” which is effective for fiscal years beginning after November 15, 2007 and for interim periods within those years. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. The Company has not determined the impact, if any, that this statement will have on its consolidated financial position or results of operations.

In July 2006, the FASB issued Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 prescribes the minimum accounting and disclosure requirements of uncertain tax positions. FIN 48 also provides guidance on the derecognition, measurement, classification, interest and penalties, and transition of uncertain tax positions. FIN 48 is effective for fiscal periods beginning after December 15, 2006. The Company is currently analyzing the expected impact of adoption of FIN 48 on its financial statements.

4.	ACQUISITIONS

CDA – On October 3, 2006, TransDigm Inc. acquired all of the outstanding capital stock of CDA InterCorp (“CDA”) for $45.3 million in cash, subject to adjustment based on the level of working capital as of the close of the acquisition. CDA designs and manufacturers specialized controllable drive actuators, motors, transducers, and gearing. The products fit closely with TransDigm’s existing business. The Company expects that the $40.7 million of goodwill recognized for the acquisition will not be deductible for tax purposes.

Sweeney – On June 12, 2006, TransDigm Inc. acquired all of the outstanding capital stock of Sweeney Engineering Corp. (“Sweeney”) for $25.5 million in cash. Sweeney designs and manufactures specialized aerospace valving used primarily in fuel, environmental control, and de-icing applications. The products are used on defense and commercial aircraft applications. Sweeney’s product characteristics and market position fit well with TransDigm’s overall direction. The acquired business was consolidated into AeroControlex’s existing business in Painesville, Ohio. The Company expects that the $21.1 million of goodwill recognized for the acquisition will not be deductible for tax purposes.

-6-

The Company accounted for the acquisitions of CDA and Sweeney as purchases and included the results of operations of CDA and Sweeney in its consolidated financials statements for the effective date of each acquisition. The Company is in the process of obtaining third-party valuations of certain tangible and intangible assets of CDA and Sweeney; thus, the values attributed to acquired assets in the consolidated financial statements are subject to adjustment. Pro forma net sales and results of operations for CDA and Sweeney, had they occurred at the beginning of the thirteen week periods ended December 30, 2006 and December 31, 2005, respectively, are not significant and, accordingly, are not provided.

5.	INVENTORIES

Inventories are stated at the lower of cost or market. Cost of inventories is determined by the average cost and the first-in, first-out (FIFO) methods. Inventories consist of the following (in thousands):


	December 30, 2006			September 30, 2006
Work-in-progress and finished goods	$	59,451		$	51,077
Raw materials and purchased component parts		43,542			46,060

Total		102,993			97,137
Reserve for excess and obsolete inventory		(8,918	)		(7,894	)

Inventories - net	$	94,075		$	89,243

6.	INTANGIBLE ASSETS

Intangible assets subject to amortization consist of the following (in thousands):


	December 30, 2006
	Gross Carrying Amount		Accumulated Amortization		Net
Unpatented technology	$	92,196	$	13,755	$	78,441
License agreement		9,373		1,812		7,561
Trade secrets		11,772		1,830		9,942
Patented technology		1,542		610		932
Order backlog		10,040		9,543		497
Other		1,803		336		1,467

Total	$	126,726	$	27,886	$	98,840


	September 30, 2006
	Gross Carrying Amount		Accumulated Amortization		Net
Unpatented technology	$	92,196	$	12,696	$	79,500
License agreement		9,373		1,679		7,694
Trade secrets		11,772		1,696		10,076
Patented technology		1,522		568		954
Order backlog		10,040		9,320		720
Other		1,803		285		1,518

Total	$	126,706	$	26,244	$	100,462

-7-

The total carrying amount of identifiable intangible assets not subject to amortization consists of $125.5 million of trademarks and trade names at both December 30, 2006 and September 30, 2006.

The aggregate amortization expense on identifiable intangible assets for the thirteen week periods ended December 30, 2006 and December 31, 2005 was approximately $1.6 million, and $1.8 million, respectively. The estimated amortization expense for fiscal 2007 is $7.0 million and for each of the five succeeding years 2008 through 2012 is $5.7 million, $5.6 million, $5.6 million, $5.6 million and $5.5 million, respectively.

The following is a summary of the changes in the carrying value of goodwill from September 30, 2006 through December 30, 2006 (in thousands):


Balance, September 30, 2006	$	877,829
Additional goodwill recognized in accounting for acquisition of CDA		40,676
Other		131

Balance, December 30, 2006	$	918,636

7.	PRODUCT WARRANTY

The Company provides limited warranties in connection with the sale of its products. The warranty period for products sold varies among the Company’s operations, ranging from 90 days to five years; however, the warranty period for the majority of the Company’s sales generally does not exceed one year. A provision for the estimated cost to repair or replace the products is recorded at the time of sale and periodically adjusted to reflect actual experience.

The following table presents a reconciliation of changes in the product warranty liability for the periods indicated below (in thousands):


	Thirteen Week Periods Ended
	December 30, 2006			December 31, 2005
Liability balance at beginning of period	$	2,472		$	2,789
Accruals for warranties issued		417			237
Warranty costs incurred		(343	)		(402	)

Liability balance at end of period	$	2,546		$	2,624

8.	INCOME TAXES

At the end of each reporting period, the Company makes an estimate of its annual effective income tax rate. The estimate used in the year-to-date period may change in subsequent periods. The Company recorded an income tax provision of $11.7 million in the thirteen week period ended December 30, 2006 compared to $5.6 million in the prior year period. The effective tax rate for the thirteen week period ended December 30, 2006 was 36.6% compared to 38.2% for the comparable period in the prior year. The lower effective tax rate was primarily due to the retroactive reinstatement of the research and development tax credit. The federal research and development tax credit expired on December 31, 2005. On December 20, 2006, the Tax Relief and Health Care Act of 2006 was enacted, which retroactively reinstated and extended the research and development tax credit from January 1, 2006 to December 31, 2007. The retroactive benefit for the previously expired period from January 1, 2006 to September 30, 2006 is reflected as a discrete item which lowered the Company’s effective tax rate by approximately 1.5%.

-8-

9.	EARNINGS PER SHARE CALCULATION

The following table sets forth the computation of basic and diluted earnings per share:


(in thousands, except per share data)	Thirteen Week Periods Ended
	December 30, 2006		December 31, 2005
Basic Earnings Per Share Computation:

Net income	$	20,335	$	8,984

Weighted-average shares outstanding		44,773		44,202

Basic earnings per share	$	0.45	$	0.20

Diluted Earnings Per Share Computation:

Net income	$	20,335	$	8,984

Weighted-average shares outstanding		44,773		44,202
Effect of dilutive options outstanding ⁽¹⁾		3,029		2,455

Total weighted-average shares outstanding		47,802		46,657

Diluted earnings per share	$	0.43	$	0.19

⁽¹⁾	Stock options totaling 0.1 million outstanding at December 30, 2006 were excluded from the diluted earnings per share computation for the thirteen weeks ended December 30, 2006, due to the anti-dilutive effect of such options.

10.

STOCK COMPENSATION PLANS

The Company’s stock compensation plans are designed to assist us 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 stock compensation plans provide the granting of stock options, restricted stock and other stock-based incentives.

Prior to December 20, 2006 the Company used the minimum value method of accounting for stock based compensation as provided for in Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). Concurrent with the initial filing of the Company’s Registration Statement on Form S-1 on December 20, 2006, on a prospective basis, the Company converted to the fair value method also provided for in SFAS 123. The minimal value method does not require the use of a volatility factor in measuring the value of a stock based compensation grant.

Effective October 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, “Share-Based Payment,” (“SFAS 123R”), which replaces SFAS 123 utilizing the modified prospective method. SFAS 123R requires stock based compensation to be measured using the fair value method of accounting. The Company records compensation expense for service based awards under the straight line method. Expense related to performance based awards is recorded in the service period corresponding to the performance target. SFAS 123R also requires the tax benefits associated with these share-based payments to be classified as financing activities in statements of cash flows, rather than as operating activities as required under SFAS 123. The adoption of SFAS 123R did not have a significant impact on the Company’s financial condition or results of operations. The Company estimates that forfeitures of unvested awards will be insignificant and accordingly does not adjust stock based compensation expense for projected forfeitures.

-9-

The following table shows the expense recognized by the Company for stock-based compensation (in thousands):


	Thirteen Week Periods Ended
	December 30, 2006		December 31, 2005
Stock option compensation expense:
Time vested stock options	$	111	$	47
Performance vested stock options		690		190
Restricted stock award amortization		5		—

	$	806	$	237

As of December 30, 2006, there was $3.9 million of total unrecognized compensation cost related to nonvested awards expected to vest, which is expected to be recognized over a weighted-average period of 1.7 years.

2006 Stock Incentive Plan

In conjunction with the consummation of the IPO, a 2006 stock incentive plan was adopted by TD Group. TD Group has reserved 2,619,668 shares of its common stock for issuance to key employees, directors or consultants under the plan. On April 21, 2006, 2,370 restricted shares were issued with a weighted-average grant date fair value of $25.34 and which vest over three years. The compensation committee established vesting and performance requirements that must be met prior to the vesting of an award, as well as other terms and conditions relating to such awards. Options granted under the plan will expire no later than the tenth anniversary of the applicable date of grant of the options, and will have an exercise price of not less than the fair market value of our common stock on the date of grant.

At December 30, 2006, 2,617,298 remaining shares were available for award under TD Group’s 2006 stock incentive plan.

2003 Stock Option Plan

Certain executives and key employees of the Company were granted stock options under TD Group’s 2003 stock option plan. Upon the closing of the Merger, certain employees rolled over certain then-existing options to purchase shares of common stock of TransDigm Holdings. These employees were granted rollover options to purchase an aggregate of 3,870,152 shares of common stock of TD Group (after giving effect to the 149.60 for 1.00 stock split effected on March 14, 2006). All rollover options granted were fully vested on the date of grant. In addition to shares of common stock reserved for issuance upon the exercise of rollover options, an aggregate of 5,469,301 shares of TD Group’s common stock are reserved for issuance upon the exercise of new management options. In general, approximately 20% of all new management options vest based on employment service or a change in control. These time vested options have a graded vesting schedule of up to four years. Approximately 80% of all new management options vest (i) based upon the satisfaction of specified performance criteria, which is annual EBITDA As Defined targets through 2008, or (ii) upon the occurrence of a change in control if the Investor Group (defined as Warburg Pincus and the other investors who invested in TD Group in connection with the Merger) receives a minimum specified rate of return. Unless terminated earlier, the options expire ten years from the date of grant. In addition to the stock options issued under the plan covering the Company’s employees, members of the Company’s board of directors have also been granted stock options of TD Group. TD Group has reserved a total of 9,339,453 shares of its common stock for issuance to the Company’s employees under the plan, 9,055,698 of which had been issued as of December 30, 2006.

The fair value of the Company’s employee stock options was estimated at the date of grant using a Black-Sholes-Merton option-pricing model with the following weighted average assumptions for all options granted during the first quarter:

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	2007	2006
Risk-free interest rate	4.41%	4.21%-4.33%
Expected life of options	4 years	4 years
Expected dividend yield of stock	—	—
Expected volatility of stock	30%	0%-30%

The risk-free interest rate is based upon the three and five-year Treasury Bond rates as of the grant date. The average expected life of stock-based awards is based on vesting schedules and contractual terms. Expected volatility of stock was calculated using historical and implied volatilities. The Company does not pay dividends, thus, no dividend rate assumption is used.

The total fair value of shares vested during the first quarter of fiscal 2007 and fiscal 2006 was $102,000 and $117,000, respectively.

Time Vested Stock Options - The following table summarizes activity, pricing and other information for the Company’s time vested stock-based award activity during the first quarter of fiscal 2007 (options in thousands):


	Number of Options		Weighted-Average Exercise Price Per Option		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at September 30, 2006	1,063		$	9.10
Granted	14			25.60
Exercised	(24	)		7.34
Forfeited	(12	)		12.57

Outstanding at December 30, 2006	1,041		$	9.32	7.3 years	$	17.19

Expected to Vest	1,041		$	9.32	7.3 years	$	17.19

Exercisable at December 30, 2006	829		$	8.31	7.1 years	$	18.20

Performance Vested Stock Options -The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the first quarter of fiscal 2007 (options in thousands):


	Number of Options		Weighted-Average Exercise Price Per Option		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at September 30, 2006	4,250		$	9.09
Granted	56			25.60
Exercised	(137	)		7.16
Forfeited	(52	)		11.53

Outstanding at December 30, 2006	4,117		$	9.35	7.3 years	$	17.16

Expected to Vest	4,117		$	9.35	7.3 years	$	17.16

Exercisable at December 30, 2006	1,924		$	8.46	7.1 years	$	18.05

Rollover Option Awards -The following table summarizes the activity, pricing and other information for the Company’s rollover option award activity during the first quarter of fiscal 2007 (options in thousands):

-11-


	Number of Options		Weighted-Average Exercise Price Per Option		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at September 30, 2006	2,788		$	2.45
Granted	—			—
Exercised	(49	)		3.38
Forfeited	—			—

Outstanding at December 30, 2006	2,739		$	2.43	3.6 years	$	24.08

Expected to Vest	2,739		$	2.43	3.6 years	$	24.08

Exercisable at December 30, 2006	2,739		$	2.43	3.6 years	$	24.08

The weighted-average grant date fair value of time, performance and rollover options granted during the first quarter of fiscal 2007 and fiscal 2006 were $7.85 and $2.58, respectively. The total intrinsic value of time, performance and rollover options exercised during the first quarter of fiscal 2007 and fiscal 2006 were $3.9 million and $0, respectively.

11.

SUBSEQUENT EVENT

On February 7, 2007, the Company completed the acquisition of Aviation Technologies, Inc. (“ATI”) for an enterprise value of $430 million in cash. The transaction was funded through an additional term loan under the Senior Secured Credit Facility of $130.0 million, together with the net proceeds from the issuance of an additional $300.0 million of 7³/4% Senior Subordinated Notes and a portion of our cash balances. ATI, which is based in Seattle, WA, consists of two primary operating units that service the commercial and military aerospace markets – Avtech and ADS/Transicoil. Avtech is a leading supplier of flight deck and passenger audio systems, cabin lighting, and power control products and related components. ADS/Transicoil is a leading supplier of displays, clocks, brushless motors and related components and instruments. ATI manufactures proprietary products for the aerospace industry that have broad platform positions with high aftermarket content, all of which fit well with TransDigm’s overall direction.

Mr. W. Nicholas Howley, Chairman and Chief Executive Officer of TransDigm, and Mr. Douglas Peacock, a director of TransDigm, each indirectly owned less than one-half of 1% of ATI’s outstanding equity on a fully diluted basis. In addition, prior to the acquisition, Mr. Howley and Mr. Peacock were directors of ATI commencing in 2003, and Mr. Peacock served as ATI’s Chairman during that time.

12.

SUPPLEMENTAL GUARANTOR INFORMATION

TransDigm’s 7³/4% Senior Subordinated Notes are jointly and severally guaranteed, on a senior subordinated basis, by TransDigm Inc. and TransDigm Inc.’s Domestic Restricted Subsidiaries, as defined therein. The following supplemental consolidating condensed financial information presents the balance sheets of the Company as of December 30, 2006 and September 30, 2006 and its statements of income and cash flows for the thirteen week periods ended December 30, 2006 and December 31, 2005.

-12-

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 30, 2006

(Amounts in thousands)


	TransDigm Group			TransDigm Inc.		Subsidiary Guarantors			Eliminations			Total Consolidated
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	2,561		$	52,637	$	(642	)	$	—		$	54,556
Marketable securities		—			—		—			—			—
Trade accounts receivable - Net		—			27,721		39,097			—			66,818
Inventories		—			35,719		58,356			—			94,075
Income Taxes Receivables		—			1,677		—			—			1,677
Deferred income taxes		—			7,017		—			—			7,017
Prepaid expenses and other		8			2,393		672			—			3,073

Total current assets		2,569			127,164		97,483			—			227,216

INVESTMENT IN SUBSIDIARIES AND INTERCOMPANY BALANCES		381,519			1,382,697		44,201			(1,808,417	)		—

PROPERTY, PLANT AND EQUIPMENT - Net		—			24,631		38,746			—			63,377

GOODWILL		—			446,457		472,179			—			918,636

TRADEMARKS AND TRADE NAMES		—			52,997		72,500			—			125,497

OTHER INTANGIBLE ASSETS - Net		—			36,361		62,479			—			98,840

DEBT ISSUE COSTS - Net		—			14,644		—			—			14,644

OTHER		—			327		177			—			504

TOTAL ASSETS	$	384,088		$	2,085,278	$	787,765		$	(1,808,417	)	$	1,448,714

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	—		$	10,954	$	8,375		$	—		$	19,329
Accrued liabilities		—			22,249		7,760			—			30,009

Total current liabilities		—			33,203		16,135			—			49,338

LONG-TERM DEBT - Less current portion		—			925,000		—			—			925,000

DEFERRED INCOME TAXES		(5,606	)		86,098		—			—			80,492
OTHER NON-CURRENT LIABILITIES		2,353			3,310		880			—			6,543

Total liabilities		(3,253	)		1,047,611		17,015			—			1,061,373

STOCKHOLDERS’ EQUITY		387,341			1,037,667		770,750			(1,808,417	)		387,341

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	384,088		$	2,085,278	$	787,765		$	(1,808,417	)	$	1,448,714

-13-

TRANSDIGM GROUP INCOPORATED

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2006

(Amounts in thousands)


	TransDigm Group			TransDigm Inc.		Subsidiary Guarantors			Eliminations			Total Consolidated
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	1,604		$	62,561	$	(2,948	)	$	—		$	61,217
Trade accounts receivable - Net		—			27,770		37,798			—			65,568
Income taxes receivable		—			9,366		—			—			9,366
Inventories		—			32,072		57,171			—			89,243
Deferred income taxes		—			7,390		—			—			7,390
Prepaid expenses and other		(248	)		778		867			—			1,397

Total current assets		1,356			139,937		92,888			—			234,181

INVESTMENTS IN SUBSIDIARIES AND INTERCOMPANY BALANCES		358,106			1,338,439		(10,992	)		(1,685,553	)		—

PROPERTY, PLANT AND EQUIPMENT - Net		—			24,895		37,956			—			62,851

GOODWILL		—			446,326		431,503			—			877,829

TRADEMARKS AND TRADE NAMES		—			52,997		72,500			—			125,497

OTHER INTANGIBLE ASSETS - Net		—			37,086		63,376			—			100,462

DEBT ISSUE COSTS - Net		—			14,872		—			—			14,872

OTHER		—			858		162			—			1,020


TOTAL ASSETS	$	359,462		$	2,055,410	$	687,393		$	(1,685,553	)	$	1,416,712

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	—		$	11,690	$	7,074		$	—		$	18,764
Accrued liabilities		139			16,450		8,086			—			24,675

Total current liabilities		139			28,140		15,160			—			43,439

LONG-TERM DEBT - Less current portion		—			925,000		—			—			925,000

DEFERRED INCOME TAXES		(5,606	)		83,715		—			—			78,109

OTHER NON-CURRENT LIABILITIES		1,888			4,355		880			—			7,123

Total liabilities		(3,579	)		1,041,210		16,040			—			1,053,671

STOCKHOLDERS’ EQUITY		363,041			1,014,200		671,353			(1,685,553	)		363,041

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	359,462		$	2,055,410	$	687,393		$	(1,685,553	)	$	1,416,712

-14-

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF INCOME

FOR THE THIRTEEN WEEK PERIOD ENDED DECEMBER 30, 2006

(Amounts in thousands)


	TransDigm Group		TransDigm Inc.			Subsidiary Guarantors			Eliminations			Total Consolidated
NET SALES	$	—	$	49,648		$	73,061		$	—		$	122,709
COST OF SALES		—		22,043			37,032			—			59,075

GROSS PROFIT		—		27,605			36,029			—			63,634

OPERATING EXPENSES:
Selling and administrative		—		6,990			5,131			—			12,121
Amortization of intangibles		—		747			895			—			1,642

Total operating expenses		—		7,737			6,026			—			13,763

INCOME FROM OPERATIONS		—		19,868			30,003			—			49,871

OTHER INCOME (EXPENSES):
Interest expense - Net		—		(16,212	)		(1,581	)		—			(17,793	)
Equity in income of subsidiaries		20,335		18,695			—			(39,030	)		—

INCOME BEFORE INCOME TAXES		20,335		22,351			28,422			(39,030	)		32,078

INCOME TAX PROVISION		—		2,016			9,727			—			11,743


NET INCOME	$	20,335	$	20,335		$	18,695		$	(39,030	)	$	20,335

-15-

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THIRTEEN WEEK PERIOD ENDED DECEMBER 31, 2005

(Amounts in thousands)


	TransDigm Group			TransDigm Inc.			Subsidiary Guarantors		Eliminations			Total Consolidated
NET SALES	$	—		$	42,624		$	57,516	$	—		$	100,140
COST OF SALES		—			20,070			30,827		—			50,897

GROSS PROFIT		—			22,554			26,689		—			49,243

OPERATING EXPENSES:
Selling and administrative		—			8,467			4,623		—			13,090
Amortization of intangibles		—			600			1,216		—			1,816

Total operating expenses		—			9,067			5,839		—			14,906

INCOME FROM OPERATIONS		—			13,487			20,850		—			34,337

OTHER INCOME (EXPENSES):
Interest expense - Net		(6,365	)		(14,360	)		926		—			(19,799	)
Equity in income of subsidiaries		12,918			13,523			—		(26,441	)		—

INCOME BEFORE INCOME TAXES		6,553			12,650			21,776		(26,441	)		14,538

INCOME TAX PROVISION (BENEFIT)		(2,431	)		(268	)		8,253		—			5,554

NET INCOME	$	8,984		$	12,918		$	13,523	$	(26,441	)	$	8,984

-16-

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THIRTEEN WEEK PERIOD ENDED DECEMBER 30, 2006

(Amounts in thousands)


	TransDigm Group			TransDigm Inc.			Subsidiary Guarantors			Eliminations			Total Consolidated
OPERATING ACTIVITIES:
Net income	$	20,335		$	20,335		$	18,695		$	(39,030	)	$	20,335
Adjustments to reconcile net income to net cash provided by operating activities		(21,550	)		(6,161	)		6,799			39,030			18,118

Net cash provided by (used in) operating activities		(1,215	)		14,174			25,494			—			38,453

INVESTING ACTIVITIES
Capital expenditures		—			(759	)		(1,737	)		—			(2,496	)
Acquisition of businesses		—			(45,250	)		—			—			(45,250	)

Net cash used in investing activities		—			(46,009	)		(1,737	)		—			(47,746	)

FINANCING ACTIVITIES:
Changes in intercompany activities		(460	)		21,911			(21,451	)		—			—
Tax benefit from exercise of stock options		1,328			—			—			—			1,328
Proceeds from exercise of stock options		1,304			—			—			—			1,304

Net cash provided by (used in) financing activities		2,172			21,911			(21,451	)		—			2,632

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		957			(9,924	)		2,306			—			(6,661	)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		1,604			62,561			(2,948	)		—			61,217

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,561		$	52,637		$	(642	)	$	—		$	54,556

-17-

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THIRTEEN WEEK PERIOD ENDED DECEMBER 31, 2005

(Amounts in thousands)


	TransDigm Group			TransDigm Inc.			Subsidiary Guarantors			Eliminations			Total Consolidated
OPERATING ACTIVITIES:
Net income	$	8,984		$	12,918		$	13,523		$	(26,441	)	$	8,984
Adjustments to reconcile net income to net cash provided by operating activities		(8,984	)		(93,918	)		1,457			26,441			(75,004	)

Net cash provided by (used in) operating activities		—			(81,000	)		14,980			—			(66,020	)

INVESTING ACTIVITIES
Capital expenditures		—			(569	)		(1,198	)		—			(1,767	)
Acquisition of businesses		—			—			—			—			—

Net cash used in investing activities		—			(569	)		(1,198	)		—			(1,767	)

FINANCING ACTIVITIES:
Changes in intercompany activities		—			10,153			(10,153	)		—			—
Payment of amounts borrowed under credit facility		—			(736	)		—			—			(736	)
Payoff of unsecured promissory notes		—			(199,997	)		—			—			(199,997	)
New loan facility, net of fees		—			193,855			—			—			193,855

Net cash provided by (used in) financing activities		—			3,275			(10,153	)		—			(6,878	)

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		—			(78,294	)		3,629			—			(74,665	)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		—			106,082			(1,861	)		—			104,221

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	—		$	27,788		$	1,768		$	—		$	29,556

* * * * *

-18-

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the Company’s financial condition and results of operations should be read together with TD Group’s consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. References in this section to the “TransDigm”, “the Company”, “we”, “us”, “our”, and similar references refer to TD Group, TransDigm Inc. and TransDigm Inc.’s subsidiaries, unless the context otherwise indicates. The following discussion may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed in this report. There risks could cause our actual results to differ materially from any future performance suggested below.

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, the statements about the Company’s plans, strategies and prospects under this section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Although the Company believes that its plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, the Company can give no assurance that such plans, intentions or expectations will be achieved. Many of the factors affecting these forward-looking statements are outside the control of the Company. Consequently, such forward-looking statements should be regarded solely as the Company’s current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by applicable law. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements.

Important factors that could cause actual results to differ materially from the forward-looking statements made in this Quarterly Report on Form 10-Q include but are not limited to:

•

Future terrorist attacks may have a material adverse impact on our business.

•

Our business is sensitive to the number of flight hours that our customers’ planes spend aloft, the size and age of the worldwide aircraft fleet, and our customers’ profitability. These items are, in turn, affected by general economic conditions.

•

Our sales to manufacturers of large aircraft are cyclical, and a downturn in sales to these manufacturers may adversely affect us.

•

We rely heavily on certain customers for much of our sales.

•

We generally do not have guaranteed future sales of our products. Further, we enter into fixed price contracts with some of our customers. We take the risk for cost overruns.

•

U.S military spending is dependent upon the U.S. defense budget.

•

We are subject to certain unique business risks as a result of supplying equipment and services to the U.S. Government. In addition, government contracts contain unfavorable termination provisions and are subject to modification and audit.

•

Certain of our divisions and subsidiaries have been subject to a pricing review by the DOD Office of Inspector General.

•

Our business may be adversely affected if we would lose our government or industry approvals or if more stringent government regulations were enacted, or if industry oversight is increased.

•

Our substantial indebtedness could adversely affect our financial health, harm our ability to react to changes to our business and could prevent us from fulfilling our obligations under our indebtedness, including the notes.

•

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control and any failure to meet our debt service obligations could harm our business, financial condition and results of operations.

-19-

•

The terms of the Senior Secured Credit Agreement and the Indenture may restrict our current and future operations, particularly our ability to respond to changes or take certain actions.

•

We are dependent on our highly trained employees and any work stoppage or difficulty hiring similar employees would adversely affect our business.

•

Our business is dependent on the availability of certain components and raw materials that we buy from suppliers.

•

We are subject to a number of environmental laws and regulations, and we could incur substantial costs as a result of violations under such environmental laws and regulations.

•

We intend to pursue future acquisitions. Our business may be adversely affected if we cannot consummate acquisitions on satisfactory terms, or if we cannot effectively integrate acquired operations.

•

We have recorded a significant amount of intangible assets, which may never generate the returns we expect.

•

We face significant competition.

•

We could be adversely affected if one of our components causes an aircraft to crash.

•

Our stock prices may be volatile, and your investment in our common stock could suffer a decline in value.

•

Future sales of our common stock in the public market could lower our share price.

•

Our principal stockholder and its affiliates will be able to influence matters requiring stockholder approval and could discourage the purchase of our outstanding shares at a premium.

•

We are exempt from certain corporate governance requirements since we are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, you will not have the protections afforded by these corporate governance requirements.

•

Our corporate documents and Delaware law contain certain provisions that could discourage, delay or prevent a change in control of our company.

•

We do not intend to pay regular dividends on our stock.

Please refer to the other information included in this Quarterly Report on Form 10-Q and to the Annual Report on Form 10-K for additional information regarding the foregoing factors that may affect our business.

Overview

We believe we are a leading global designer, producer, and supplier of highly engineered aircraft components for use on nearly all commercial and military aircraft in service today. Our business is well diversified due to the broad range of products we offer to our customers. Some of our more significant product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include ignition systems and components, gear pumps, mechanical/electromechanical actuators and controls, NiCad batteries/chargers, power conditioning devices, hold-open rods and locking devices, engineered connectors, engineered latches and cockpit security devices, lavatory hardware and components, specialized AC/DC electric motors and specialized valving. Each of these product offerings consists of many individual products that are typically customized to meet the needs of a particular aircraft platform or customer.

For the first quarter of fiscal 2007, we generated net sales of $122.7 million and net income of $20.3 million. EBITDA As Defined was $56.3 million, or 45.9% of net sales. Please see below for certain information regarding EBITDA and EBITDA As Defined, including a reconciliation of EBITDA and EBITDA As Defined to net income.

Recent Developments

On February 7, 2007, pursuant to a definitive agreement and plan of merger (the “Agreement”) among TransDigm Inc., Project Coffee Acquisition Co., a wholly owned subsidiary of TransDigm Inc. (“Merger Sub”), and Aviation Technologies, Inc. (“ATI”), Merger Sub was merged into ATI with the result that ATI became a wholly-owned subsidiary of TransDigm Inc., for consideration of approximately $430 million.

-20-

ATI, which is based in Seattle, WA, consists of two primary operating units that service the commercial and military aerospace markets – Avtech and ADS/Transicoil. Avtech is a leading supplier of flight deck and passenger audio systems, cabin lighting, and power control products and related components. ADS/Transicoil is a leading supplier of displays, clocks, brushless motors and related components and instruments. ATI manufactures proprietary products for the aerospace industry that have broad platform positions with high aftermarket content, all of which fit well with TransDigm’s acquisition strategy and business model.

On October 3, 2006, TransDigm Inc. acquired all of the outstanding capital stock of CDA InterCorp (“CDA”) for an aggregate purchase price of approximately $45.3 million. CDA designs and manufactures specialized controllable drive actuators, motors, transducers, and gearing. CDA’s products are used on a range of defense, space and commercial aircraft applications. The proprietary nature, established positions and aftermarket content of CDA’s products fit well with our overall business direction.

Government Pricing Review

Certain parts sold by five of our divisions and subsidiaries to the Department of Defense through various buying agencies of the Defense Logistics Agency have been the subject of a pricing review by the Department of Defense Office of Inspector General. The pricing review examined whether the various buying offices within the Defense Logistics Agency had negotiated “fair and reasonable” prices for certain sole source spare parts purchased from those divisions and subsidiaries during fiscal years 2002 through 2004. On February 28, 2006, the Company received a copy of the Inspector General’s final report dated February 23, 2006, and on April 19, 2006, a redacted version of such report was made publicly available. The report recommends, among other things, that Defense Logistics Agency contracting officers reevaluate their procedures for determining the reasonableness of pricing for sole source spare parts purchased from those divisions and subsidiaries and seek to develop Strategic Supplier Alliances with those divisions and subsidiaries.

We believe that the pricing review is part of a continuing effort by the Inspector General to monitor and evaluate prices paid to defense contractors for sole source spare parts. The report is consistent with reports issued with respect to sole source spare parts supplied by other companies, and, like those other reports, it advocates the negotiation of Strategic Supplier Alliances incorporating prices for parts based on cost, rather than based on prices of comparable commercial parts or other methods. We believe that our pricing of spare parts comports with the regulations applicable to contracts with agencies of the Federal government. Nonetheless, the report recommends that the Defense Logistics Agency request that the applicable divisions and subsidiaries of TransDigm Inc. voluntarily refund, in the aggregate, approximately $2.6 million for allegedly overpriced parts and negotiate Strategic Supplier Alliances incorporating cost-based prices for future Defense Logistics Agency purchases of sole source spare parts.

The Company’s position has been, and continues to be, that our pricing has been fair and reasonable and that there is no legal basis for the amount suggested as a refund by the Inspector General in its report. In response to the report, we offered reasons why we disagree with the Inspector General’s overall analysis. The Defense Logistics Agency has requested additional information from the Company and the Company’s position on the voluntary refund. The Company has responded to such request.

In February 2006, the Defense Logistics Agency made a request to initiate discussions regarding future pricing and developing an acquisition strategy that will mutually strengthen TransDigm’s business relationship with the Defense Logistics Agency. The parties have discussed and are considering future purchasing approaches but negotiations regarding Strategic Supplier Alliances or any specific approach have not yet commenced, but will likely occur at a later date. As a result of those negotiations, it is possible that the divisions and subsidiaries subject to the pricing review will enter into Strategic Supplier Alliances with the Defense Logistics Agency. It is likely that in connection with any Strategic Supplier Alliance, the Defense Logistics Agency will seek prices for parts based on cost or may seek volume discounts or other favorable pricing and/or the applicable division or subsidiary may agree to cost or pricing justification or appropriate discounts. It is also possible that the Department of Defense may seek alternative sources of supply for such parts.

-21-

The entry into Strategic Supplier Alliances or a decision by the Department of Defense to pursue alternative sources of supply for our sole source parts could reduce the amount of revenue we derive from, and the profitability of certain of our supply arrangements with, certain agencies and buying organizations of the U.S. Government. However, we believe not all of the sales to the government would be affected by pricing associated with potential Strategic Supplier Alliance. While management believes that the entry into Strategic Supplier Alliances with the Defense Logistics Agency will not have a material adverse effect on our financial condition, liquidity or capital resources, there is no means to determine the outcome of any future negotiations or discussions at this time.

EBITDA and EBITDA As Defined

The following table sets forth a reconciliation of net income to EBITDA and EBITDA As Defined (in millions).


	Thirteen Week Periods Ended December 30, 2006		Thirteen Week Periods Ended December 31, 2005
Net income	$	20.3	$	9.0
Adjustments:
Depreciation and amortization expense		4.2		4.2
Interest expense, net		17.8		19.8
Income tax provision		11.8		5.6

EBITDA ⁽¹⁾		54.1		38.6
Adjustments:
Acquisition integration costs ⁽²⁾		0.7		0.3
Non-cash compensation and deferred compensation costs ⁽³⁾		1.3		(2.8	)
Acquisition earnout costs ⁽⁴⁾		0.2		0.1
Non-recurring IPO costs ⁽⁵⁾		—		0.7
One-Time Special Bonus ⁽⁶⁾		—		6.2

EBITDA, As Defined ⁽¹⁾	$	56.3	$	43.1

(1)

EBITDA represents earnings before interest, taxes, depreciation and amortization. EBITDA As Defined, represents EBITDA, plus inventory purchase accounting charges, acquisition integration costs, non-cash compensation and deferred compensation charges, refinancing costs, IPO related option vesting, acquisition earnout costs, non-recurring IPO costs and one-time special bonus payments made to certain members of our management, as applicable for the relevant period.

We present EBITDA because we believe that it is a useful indicator of our operating performance. Our management believes that EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to measure a company’s operating performance without regard to items such as interest and debt expense, income tax expense and depreciation and amortization, which may vary substantially from company to company depending upon, among other things, accounting methods, book value of assets, capital structure and the method by which assets are acquired. We also believe EBITDA is useful to our management and investors as a measure of comparative operating performance between time periods and among companies as it is reflective of changes in pricing decisions, cost controls and other factors that affect operating performance.

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Our management uses EBITDA As Defined to review and assess our operating performance and management team in connection with our employee incentive programs, the preparation of our annual budget and financial projections. In addition, the revolving credit facility under the Senior Secured Credit Agreement requires compliance, on a pro forma basis, with a first lien leverage ratio, which is measured based on our Consolidated EBITDA (as defined in therein). The Senior Secured Credit Agreement defines Consolidated EBITDA in a manner equal to how we define EBITDA As Defined. This financial covenant is a material term of the Senior Secured Credit Agreement as the failure to comply with such financial covenant could result in an event of default in respect of the revolving credit facility under the Senior Secured Credit Facility (and, in turn, an event of default under the Senior Secured Credit Agreement could result in an event of default under the Indenture governing the 7³/4% Senior Subordinated Notes). In addition, our former senior secured credit facility required compliance, on a pro forma basis, with a leverage ratio, a fixed charge coverage ratio and an interest coverage ratio, all of which were measured based on our Consolidated EBITDA (as defined therein). The former senior secured credit facility defined Consolidated EBITDA in a manner equal to how we defined EBITDA As Defined for the periods presented prior to fiscal 2007, and such historical definition was substantially similar to the definition of Consolidated EBITDA under the Senior Secured Credit Facility, except that for purposes of computing Consolidated EBITDA under the Senior Secured Credit Facility, we are permitted to add back to net income any and all expenses or charges incurred by us in connection with equity offerings, permitted investments, acquisitions, dispositions, recapitalizations or permitted debt transactions, including all of the expenses or charges related to the refinancing which occurred in June 2006.

Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above, the use of EBITDA and EBITDA As Defined as an analytical tool has limitations and you should not consider either of them in isolation, or as a substitute for analysis of our results of operations as reported in accordance with accounting principles generally accepted in the United States of America, or GAAP. Some of these limitations are:

•

neither EBITDA nor EBITDA As Defined reflects the significant interest expense, or the cash requirements necessary to service interest payments, on our indebtedness;

•

although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor EBITDA As Defined reflects any cash requirements for such replacements;

•

the omission of the substantial amortization expense associated with our intangible assets further limits the usefulness of EBITDA and EBITDA As Defined;

•

neither EBITDA nor EBITDA As Defined includes the payment of taxes, which is a necessary element of our operations; and

•

EBITDA As Defined excludes the cash expense we have incurred to integrate acquired businesses into our operations, which is a necessary element of certain of our acquisitions.

Because of these limitations, EBITDA and EBITDA As Defined should not be considered as measures of discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by not viewing EBITDA or EBITDA As Defined in isolation, and specifically by using other GAAP measures, such as net income, net sales and operating profit, to measure our operating performance. Neither EBITDA nor EBITDA As Defined is a measurement of financial performance under GAAP and neither should be considered as an alternative to net income or cash flow from operations determined in accordance with GAAP, and our calculation of EBITDA and EBITDA As Defined may not be comparable to the calculation of similarly titled measures reported by other companies.

(2)	Represents costs incurred to integrate Sweeney Engineering Corp. (“Sweeney”) and CDA into the Company’s operations.

(3)	Represents the expenses (income) recognized by the Company under a stock option plan and deferred compensation plans of TD Group. The amount reflected above for the thirteen week period ended December 31,

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2005 includes a reversal of previously recorded amounts charged to expense of $3.8 million resulting from the termination of two deferred compensation plans of TD Group. In addition, the amount reflected above for the thirteen week periods ended December 30, 2006 and December 31, 2005 includes expenses recognized by the Company under a new deferred compensation plan of TD Group adopted December 2005.

(4)

Represents the amount recognized for the potential earnout payment to Howard Skurka pursuant to the terms of the retention agreement entered into with him in connection with our acquisition of substantially all of the assets of Skurka Engineering Company in December 2004. Pursuant to the Senior Secured Credit Agreement entered into on June 23, 2006, our senior lenders agreed to exclude earnout payments and deferred purchase price payments made in connection with certain permitted acquisitions from the calculation of EBITDA As Defined.

(5)	Represents non-recurring costs and expenses incurred by TD Group related to the IPO.

(6)

Represents the one-time special bonus paid to certain members of management based on their respective holding of rollover options and new management options in November 2005. In the Senior Secured Credit Agreement entered into on June 23, 2006, our senior lenders agreed to exclude these one-time special bonus payments from the calculation of EBITDA As Defined.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with GAAP, which often requires the judgment of management in the selection and application of certain accounting principles and methods. Management believes that the quality and reasonableness of our most critical policies enable the fair

presentation of our financial position and results of operations. However, investors are cautioned that the sensitivity of financial statements to these methods, assumptions and estimates could create materially different results under different conditions or using different assumptions.

A summary of our significant accounting policies and estimates is included in the Annual Report on Form 10-K for the year ended September 30, 2006. There has been no significant change to our critical accounting policies during the thirteen week period ended December 30, 2006.

Results of Operations

The following table sets forth, for the periods indicated, certain operating data of the Company as a percentage of net sales.


	Thirteen Week Periods Ended
	December 30, 2006		December 31, 2005
	December 30, 2006		December 31, 2005
Net sales	100	%	100	%

Cost of Sales	48		51
Selling and administrative expenses	10		13
Amortization of intangibles	1		2

Income from operations	41		34
Interest expense - net	14		20
Income tax provision	10		5

Net income	17	%	9	%

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Changes in Results of Operations

Thirteen-week period ended December 30, 2006 compared with the thirteen-week period ended December 31, 2005.

•

Net Sales. Net sales increased by $22.6 million, or 22.5%, to $122.7 million for the quarter ended December 30, 2006, from $100.1 million for the comparable quarter last year. Sales growth excluding acquisitions was $16.3 million and represented a 16.2% increase over the prior year. The organic sales growth was primarily due to (i) an increase of $10.5 million of commercial aftermarket sales primarily resulting from the continuing recovery in the commercial aftermarket and the strength of our proprietary products and market position, (ii) an increase of $3.5 million of commercial OEM sales primarily resulting from an increase in business jet sales, and (iii) a modest increase in defense sales. The remaining $6.3 million of the increase resulted from the acquisitions of CDA, Sweeney and Electra-Motion, Inc. (“Electra-Motion”), which were not owned in the comparable quarter last year.

•

Cost of Sales. Cost of sales increased by $8.2 million, or 16.1%, to $59.1 million for the quarter ended December 30, 2006 from $50.9 million for the comparable quarter last year. Cost of sales as a percentage of sales decreased almost three percentage points to 48.1% for the thirteen week period ended December 30, 2006 from 50.8% for the thirteen week period ended December 31, 2005. The absolute dollar increase in cost of sales was primarily due to increased volume associated with the higher net sales of $22.6 million discussed above. The decrease in cost of sales as a percentage of sales was primarily due to a very favorable product mix on the increase in commercial aftermarket sales, and to a lesser extent, favorable fixed cost leverage on greater volume and continued productivity improvements.

•

Selling and Administrative Expenses. Selling and administrative expenses decreased by $1.0 million, or 7.4%, to $12.1 million, or 9.9% of sales, for the quarter ended December 30, 2006 from $13.1 million, or 13.1% of sales, for the comparable quarter last year. The prior year quarter included many unusual non operating activities which resulted in a net decrease of year over year expenses. The net decrease is primarily due to non-recurring costs recorded in the prior year of $6.2 million for a one-time special bonus and $0.7 million for professional fees associated with the IPO. These prior year increased costs were partially offset by a $3.8 million reversal of charges resulting from the termination of deferred compensation plans. The net reduction of prior year non operating activity was partially offset by a current year increase in selling and administrative costs associated with higher sales volume discussed above and a $0.6 million increase in stock option expense.

Selling and administrative expenses as a percentage of net sales decreased to 9.9% for the quarter ended December 30, 2006 compared to 13.1% for the prior year quarter. The decrease is primarily due to the non-recurring charges recorded in the prior year quarter discussed above and favorable leverage of increased volume on period costs.

•

Amortization of Intangibles. Amortization of intangibles decreased slightly to $1.6 million for the quarter ended December 30, 2006 from $1.8 million for the comparable quarter last year.

•

Interest Expense. Interest expense decreased $2.0 million, or 10.1%, to $17.8 million for the quarter ended December 30, 2006 from $19.8 million for the comparable quarter last year. The net decrease was primarily the result of the refinancing of our debt structure during fiscal 2006. As a result of the refinancing, despite an increase in our average level of outstanding borrowings to $925.0 million during the quarter ended December 30, 2006 from approximately $889.5 million during the comparable quarter last year, interest expense decreased due to a decline in the average interest rate to 7.54% during the quarter ended December 30, 2006 from 8.55% for the comparable quarter last year.

•

Income Taxes. Income tax expense as a percentage of income before income taxes was approximately 36.6% for the quarter ended December 30, 2006 compared to 38.2% for the quarter ended December 31, 2005. The lower effective tax rate was primarily due to the retroactive reinstatement of the research and development tax credit. The federal research and development tax credit expired on December 31, 2005. On December 20, 2006, the Tax Relief and Health Care Act of 2006 was enacted, which retroactively reinstated and extended the research and development tax credit from January 1, 2006 to December 31, 2007. The retroactive benefit for the previously expired period from

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January 1, 2006 to September 30, 2006 is reflected as a discrete item which lowered the Company’s effective tax rate by approximately 1.5%.

•

Net Income. Net income increased $11.3 million, or 126.3%, to $20.3 million for the first quarter of fiscal 2007 compared to net income of $9.0 million for the first quarter of fiscal 2006, primarily as a result of the factors referred to above.

Backlog

As of December 30, 2006, the Company estimated its sales order backlog at $261.6 million compared to an estimated $225.0 million as of December 31, 2005. This increase in backlog is due to the acquisitions of CDA, Electra-Motion and Sweeney discussed above totaling approximately $20.0 million and an increase in orders across existing product lines in both the OEM and aftermarket segments. The majority of the purchase orders outstanding as of December 30, 2006 are scheduled for delivery within the next twelve months. Purchase orders may be subject to cancellation by the customer prior to shipment. The level of unfilled purchase orders at any given date during the year will be materially affected by the timing of the Company’s receipt of purchase orders and the speed with which those orders are filled. Accordingly, the Company’s backlog as of December 30, 2006 may not necessarily represent the actual amount of shipments or sales for any future period.

Foreign Currency Exchange Rate Risk

We manufacture all of our products in the United States and sell our products in the United States, as well as in foreign countries. Substantially all of our foreign sales are transacted in U.S. dollars and, therefore, we have no material exposure to fluctuations in the rate of exchange between foreign currencies and the U.S. dollar. In addition the amount of components or other raw materials or supplies that we purchase from foreign suppliers are not material, with substantially all such transactions being made in U.S. dollars. Accordingly, we have no material exposure to currency fluctuations in the rate of exchange between foreign currencies and the U.S. dollar arising from these transactions.

Inflation

Many of the Company’s raw materials and operating expenses are sensitive to the effects of inflation, which could result in changing operating costs. The effects of inflation on the Company’s businesses during the thirteen week periods ended December 30, 2006 and December 31, 2005 were not significant.

Liquidity and Capital Resources

Operating Activities. The Company generated $38.5 million of cash from operating activities during the quarter ended December 30, 2006 compared to a use of $66.0 million during the comparable quarter ended December 31, 2005. The increase of $104.5 million is primarily due to (i) the absence in 2007 of the payment of accrued interest of $62.7 million relating to 12% senior unsecured promissory notes in November 2005, (ii) the absence in 2007 of the distributions to participants in our deferred compensation plans totaling approximately $26.0 million in November 2005 (in connection with the distributions under the deferred compensation plans, our Board of Directors approved the termination of the plans during the first quarter of fiscal 2006), (iii) the absence in 2007 of the payment in November 2005 of a one-time special bonus to certain members of management of $6.2 million, and (iv) higher net income in the current quarter ended December 30, 2006.

Investing Activities. Cash used in investing activities was $47.8 million during the quarter ended December 30, 2006 primarily a result of the acquisition of CDA for $45.3 million discussed above and $2.5 million for capital expenditures. Cash used in investing activities was $1.8 million during the quarter ended December 31, 2005 consisting of capital expenditures.

Financing Activities. Cash provided by financing activities during the quarter ended December 30, 2006 was $2.6 million compared to cash used in financing activities of $6.9 million during the quarter ended December 31, 2005. The cash provided by financing activities during fiscal 2007 consisted of $1.3 million from the exercise of stock options and $1.3 million from the excess tax benefit from the exercise of stock options. The cash used in financing activities during the quarter ended December 31, 2005 of $6.9 million was primarily due to the payment of $200.0 million to prepay the entire

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outstanding principal balance of senior unsecured promissory notes, partially offset by the proceeds from the TD Group loan facility, net of fees, of $193.8 million.

June 2006 Refinancing

In June 2006 TransDigm refinanced its entire debt structure. In connection with the refinancing, TransDigm Inc. obtained a new senior secured credit facility (the “Senior Secured Credit Facility”). The Senior Secured Credit Facility consists of a $650 million term loan facility, which was fully drawn at closing, and a $150 million revolving loan facility, of which $148.8 million was available as of December 30, 2006.

The term loan facility will mature in July 2013 and will not be subject to interim scheduled amortization, but will be subject to certain prepayments requirements. Subject to exceptions, commencing 90 days after the end of fiscal year 2007, TransDigm Inc. will be obligated to make mandatory prepayments of the term loans based on certain percentages of excess cash flows. In addition, subject to exceptions (including in respect of reinvestment in productive assets), TransDigm Inc. will be required to offer to prepay the term loans with the net proceeds of certain asset sales. The revolving loan facility will mature and the commitments thereunder will terminate in July 2012.

Under the terms of the Senior Secured Credit Facility, TransDigm Inc., has the right to request (but no lender is committed to provide) additional term loans of up to $250 million, subject to the satisfaction of customary conditions, including pro forma compliance with the financial covenants contained in the Senior Secured Credit Facility after giving effect to any such incremental term loan borrowings.

The Senior Secured Credit Facility is guaranteed by TD Group and all of TransDigm Inc.’s current and future domestic restricted subsidiaries, and is secured by a first priority security interest in substantially all of the existing and future property and assets of TransDigm Inc. and all of TransDigm Inc.’s existing and future domestic restricted subsidiaries, and a first priority pledge of the capital stock of TransDigm Inc. and TransDigm Inc.’s domestic subsidiaries.

TransDigm Inc. entered into a three year interest rate swap with Credit Suisse for an initial notional amount of $187 million at a fixed rate of 7.63%. The notional amount will decrease to $170 million on September 23, 2007 and to $150 million on September 23, 2008. As a result of the interest rate swap, the interest rates on TransDigm’s total debt are approximately 50% variable and 50% fixed. The decrease in the notional amounts is to maintain the approximate mix between fixed and variable interest rates.

In connection with the refinancing, TransDigm Inc. also issued $275 million aggregate principal amount of 7³/4% Senior Subordinated Notes. Such notes do not require principal payments prior to their maturity in July 2014. The notes are fully and unconditionally guaranteed, jointly and severally and on an unsecured senior subordinated basis, by TransDigm Group and all of our existing domestic subsidiaries.

Upon the closing of the refinancing, the entire term loan facility, together with the net proceeds from the $275 million from the 7³/4% Senior Subordinated Notes and a portion of our existing cash balances, was drawn to fund (i) the repayment of the entire $288.4 million of principal amount outstanding under the former senior secured credit facility, (ii) the repayment of the entire $200 million of principal amount outstanding under the TD Group loan facility, (iii) the purchase of substantially all of the $400 million of aggregate principal amount of our 8³/8% senior subordinated notes that were tendered in connection with our tender offer for such notes, (iv) the payment of accrued and unpaid interest on all such indebtedness, and (v) the payment of premiums and transaction expenses associated therewith.

Impact of Acquisition of ATI

In connection with the acquisition of ATI, TransDigm Inc. entered into an amendment of our Senior Secured Credit Facility which provides for, among other things, (i) an additional term loan of $130.0 million, (ii) a $50.0 million increase in the revolving credit facility that is available under our Senior Secured Credit Facility (bringing the total available revolver to $200 million), none of which will be drawn in connection with the closing of the acquisition of ATI. In addition, the $250.0 million uncommitted incremental loan facility was increased to $300.0 million.

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Also in connection with the acquisition of ATI, TransDigm Inc. issued $300.0 million aggregate principal amount of 7³/4% Senior Subordinated Notes. The new notes are additional debt securities under the indenture dated as of June 23, 2006.

Upon the closing of ATI, the additional term loan of $130.0 million, together with the net proceeds from the $300.0 million from the additional 7³/4% Senior Subordinated Notes and a portion of our cash balances, was drawn to fund the approximately $430 million purchase price of ATI.

New Accounting Standards

ITEM 3.

Quantitative and Qualitative Disclosure About Market Risk

Our main exposure to market risk relates to interest rates. Our financial instruments that are subject to interest rate risk principally include fixed-rate and floating-rate long-term debt. At December 30, 2006, the Company had borrowings under its Senior Secured Credit Facility of $650 million that were subject to interest rate risk. Borrowings under the Company’s Senior Secured Credit Facility bear interest, at its option, at a rate equal to either an alternate base rate or an adjusted LIBO rate for a one, two, three or six-month interest period chosen by the Company, in each case, plus an applicable margin percentage that varies based on the consolidated leverage ratio of TransDigm Inc. as of the relevant date of determination. Accordingly, the Company’s cash flows and earnings will be exposed to the market risk of interest

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rate changes resulting from variable rate borrowings under its Senior Secured Credit Facility. The effect of a hypothetical one percentage point increase in interest rates would increase the annual interest costs under the senior secured credit facilities by approximately $6.5 million based on the amount of outstanding borrowings at December 30, 2006. The weighted average interest rate on the $650 million of borrowings under the Senior Secured Credit Facility on December 30, 2006 was 7.37%.

At December 30, 2006, we had an agreement in place to swap variable interest rates on our Senior Secured Credit Facility for fixed interest rates through June 23, 2009 for the notional amount of $187 million, which will decrease to $170 million on September 23, 2007 and to $150 million on September 23, 2008 through June 23, 2009. The fair value of the interest rate swap agreement is adjusted at each balance sheet date, with a corresponding adjustment to other comprehensive income. At December 30, 2006, the fair value of the interest rate swap agreement was a liability of $2.4 million.

Because the interest rates on borrowings under the Senior Secured Credit Facility vary with market conditions, the amount of outstanding borrowings under the Senior Secured Credit Facility approximates the fair value of the indebtedness. The fair value of the $275 million aggregate principal amount of the Company’s 7³/4% Senior Subordinated Notes is exposed to the market risk of interest rate changes. The estimated fair value of such notes approximated $285 million at December 30, 2006 based upon quoted market rates.

ITEM 4.

CONTROLS AND PROCEDURES

As of December 30, 2006, TD Group carried out an evaluation, under the supervision and with the participation of TD Group’s management, including its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of TD Group’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that TD Group’s disclosure controls and procedures are effective to ensure that information required to be disclosed by TD Group in the reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to TD Group’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, TD Group’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures. There have been no significant changes in TD Group’s internal controls or other factors that could significantly affect the internal controls subsequent to the date of TD Group’s evaluations.

Internal Control Over Financial Reporting

There have been no changes in TD Group’s internal control over financial reporting that occurred during the thirteen week period ending December 30, 2006 that have materially affected, or are reasonably likely to materially affect, TD Group’s internal control over financial reporting.

Sarbanes-Oxley Act – Section 404 Compliance

Section 404 of the Sarbanes-Oxley Act requires the Company’s management to report on, and its independent auditors to attest to, the Company’s internal control over financial reporting as of September 30, 2007. The Company is actively pursuing its compliance efforts and utilizing outside assistance for documenting, testing and evaluating the effectiveness of its internal control over financial reporting in order to be in full compliance with all requirements of Section 404 as of September 30, 2007.

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PART II: OTHER INFORMATI ON

ITEM 6.

Exhibits


31.1		Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

TRANSDIGM GROUP INCORPORATED

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly assigned.


SIGNATURE	TITLE	DATE

/s/ W. Nicholas Howley	Chairman of the Board of Directors and	February 13, 2007
W. Nicholas Howley	Chief Executive Officer
	(Principal Executive Officer)

/s/ Gregory Rufus	Chief Financial Officer and	February 13, 2007
Gregory Rufus	Executive Vice President
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

TO FORM 10-Q FOR THE PERIOD ENDED December 30, 2006


EXHIBIT NO.		DESCRIPTION
31.1		Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Section 302 CEO Certification

Exhibit 31.1

CERTIFICATION

I, W. Nicholas Howley, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of TransDigm Group Incorporated;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of TransDigm Group Incorporated’s board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: February 13, 2007
				/s/ W. Nicholas Howley
				Name: W. Nicholas Howley:
				Title: Chairman of the Board of Directors and Chief Executive Officer
				(Principal Executive Officer)

Section 302 CFO Certification

Exhibit 31.2

CERTIFICATION

I, Gregory Rufus, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of TransDigm Group Incorporated;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and have:

(a)

(b)

(c)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of TransDigm Group Incorporated’s board of directors:

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 13, 2007


		/s/ Gregory Rufus
		Name: Gregory Rufus
		Title: Executive Vice President andChief Financial Officer
		(Principal Financial and Accounting Officer)

Section 906 CEO Certification

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of TransDigm Group Incorporated (the “Company”) for the period ended December 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, W. Nicholas Howley, Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition of the Company.

Date: February 13, 2007


		/s/ W. Nichols Howley
		Name: W. Nicholas Howley
		Title: Chairman of the Board of Directors and Chief Executive Officer
		(Principal Executive Officer)

Section 906 CFO Certification

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of TransDigm Group Incorporated (the “Company”) for the period ended December 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory Rufus, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and

2.	The information contained in the Report fairly presents in all material respects, the financial condition of the Company.

Date: February 13, 2007


		/s/ Gregory Rufus
		Name: Gregory Rufus
		Title: Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents