UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | |||||
For the fiscal year ended September 30 , 2024
| 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
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
| (Address of principal executive offices) | (Zip Code) | ||||||||||||||||
(216 ) 706-2960
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report.)
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of each class: | Trading Symbol: | Name of each exchange on which registered: | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | ||||||||||||||
| ☒ | Accelerated Filer | ☐ | ||||||||||||
| Non-Accelerated Filer | ☐ | Smaller Reporting Company | ||||||||||||
| Emerging Growth Company | ||||||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | |||||||||||||
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. | ||||||||||||||
| If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. | ||||||||||||||
| Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). | ☐ | |||||||||||||
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 aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of March 29, 2024, based upon the last sale price of such voting and non-voting common stock on that date, was $67,692,346,777 .
The number of shares outstanding of TransDigm Group Incorporated’s common stock, par value $.01 per share, was 56,230,448 as of October 31, 2024.
Documents incorporated by reference: Certain sections of the registrant’s definitive Proxy Statement to be filed in connection with its 2025 Annual Meeting of Shareholders expected to be held on March 6, 2025 are incorporated by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
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| PART I | ||||||||
| PART II | ||||||||
| PART III | ||||||||
| PART IV | ||||||||
Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 27A of the Securities Act of 1933, as amended. All statements other than statements of historical fact included that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements, including, in particular, the statements about our plans, objectives, strategies and prospects regarding, among other things, our financial condition, results of operations and business. We have identified some of these forward-looking statements with words like “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” or “continue” and other words and terms of similar meaning. These forward-looking statements may be contained throughout this Annual Report on Form 10-K. These forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to, among other things, our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Many factors mentioned in our discussion in this Annual Report on Form 10-K, including the risks outlined under “Risk Factors,” will be important in determining future results. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including the risks outlined under “Risk Factors” in this Annual Report on Form 10-K. Since our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, we cannot give any assurance that any of the events anticipated by these forward-looking statements will occur or, if any of them does occur, what impact they will have on our business, results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. We do not undertake any obligation to update these forward-looking statements or the risk factors contained in this Annual Report on Form 10-K to reflect new information, future events or otherwise, except as may be required under federal securities laws.
Important factors that could cause actual results to differ materially from the forward-looking statements made in this Annual Report on Form 10-K include but are not limited to: the sensitivity of our business to the number of flight hours that our customers’ planes spend aloft and our customers’ profitability, both of which are affected by general economic conditions; supply chain constraints; increases in raw material costs, taxes and labor costs that cannot be recovered in product pricing; failure to complete or successfully integrate acquisitions; our indebtedness; current and future geopolitical or other worldwide events, including, without limitation, wars or conflicts and public health crises; cybersecurity threats; risks related to the transition or physical impacts of climate change and other natural disasters or meeting sustainability-related voluntary goals or regulatory requirements; our reliance on certain customers; the United States (“U.S.”) defense budget and risks associated with being a government supplier including government audits and investigations; failure to maintain government or industry approvals; risks related to changes in laws and regulations, including increases in compliance costs; potential environmental liabilities; liabilities arising in connection with litigation; risks and costs associated with our international sales and operations; and other factors.
In this report, the term “TD Group” refers to TransDigm Group Incorporated, which holds all of the outstanding capital stock of TransDigm Inc. The terms “Company,” “TransDigm,” “we,” “us,” “our” and similar terms, unless the context otherwise requires, refer to TD Group, together with TransDigm Inc. and its wholly-owned and majority-owned subsidiaries for which it has a controlling interest. References to “fiscal year” mean the year ending or ended September 30. For example, “fiscal year 2024” or “fiscal 2024” means the period from October 1, 2023 to September 30, 2024.
PART I
ITEM 1. BUSINESS
The Company
TD Group, through its wholly-owned subsidiary, TransDigm Inc., is a leading global designer, producer and supplier of highly engineered aircraft components that are critical to the safe and effective operation of nearly all commercial and military aircraft worldwide. Our products are represented in nearly every commercial and military aircraft in service today. Our business is well diversified due to the broad range of products we offer to our customers. We estimate that approximately 90% of our net sales for fiscal year 2024 were generated by proprietary products.
Most of our products generate significant aftermarket revenue. Once our parts are designed into and sold on a new aircraft, we generate net sales from aftermarket consumption over the life of that aircraft, which is generally estimated to be approximately 25 to 30 years. A typical platform can be produced for 20 to 30 years, giving us an estimated product life cycle in excess of 50 years. We estimate that approximately 55% of our net sales in fiscal year 2024 were generated from the aftermarket, the vast majority of which come from the commercial and military aftermarkets. Historically, these aftermarket revenues have produced a higher gross profit and have been more stable than net sales to original equipment manufacturers (“OEMs”).
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We believe we have achieved steady, long-term growth in sales and improvements in operating performance we believe that due to our competitive strengths and through execution of our value-driven operating strategy. More specifically, focusing our businesses on our value-driven operating strategy of obtaining profitable new business, carefully controlling the cost structure via productivity and cost improvements and pricing our highly engineered value-added products to fairly reflect the value we provide and the resources required to do so has historically resulted in improvements in gross profit and income from operations over the long-term.
We also maintain a selective acquisition strategy, concentrating on proprietary commercial aerospace component businesses with significant aftermarket content, where we see a clear path to value creation. Since the inception of our company in 1993, we have acquired 93 businesses and various product lines. Refer to Note 2, “Acquisitions,” in the notes to the consolidated financial statements included herein for information on the recent acquisitions.
Products
We primarily design, produce and supply highly engineered proprietary aerospace components with significant aftermarket content. We seek to develop highly customized products to solve specific needs for aircraft operators and manufacturers. We attempt to differentiate ourselves based on engineering, service and manufacturing capabilities. We typically choose not to compete for non-proprietary “build to print” business because it frequently offers lower margins than proprietary products. We believe that our products have strong brand names within the industry and that we have a reputation for high quality, reliability and strong customer support. Our business is well diversified due to the broad range of products that we offer to our customers. Each of our product offerings is composed of many individual products that are typically customized to meet the needs of a particular aircraft platform or customer. Our portfolio of products encompasses a vast array of essential components that play pivotal roles on commercial aerospace and defense platforms, as well as other products. For example, TransDigm’s operating units make aircraft seatbelts and cockpit security systems that keep passengers and pilots safe; parachutes that protect soldiers, sailors and airmen; and space telescope equipment that helps the National Aeronautics and Space Administration (“NASA”) better understand the universe.
Segments
The Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.
The Power & Control segment includes operations that primarily develop, produce and market systems and components that predominately provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. Major product offerings include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, advanced sensor products, switches and relay panels, high performance hoists, winches and lifting devices, cargo loading, handling, delivery systems and electronic components used in the generation, amplification, transmission and reception of microwave signals. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.
The Airframe segment includes operations that primarily develop, produce and market systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies. Major product offerings include engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation, lighting and control technology, parachutes, specialized flight, wind tunnel and jet engine testing services and equipment and complex testing and instrumentation solutions. Primary customers of this segment are airframe manufacturers and cabin system suppliers and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.
The Non-aviation segment includes operations that primarily develop, produce and market products for non-aviation markets. Major product offerings include seat belts and safety restraints for ground transportation applications, mechanical/electromechanical actuators and controls for space applications, hydraulic/electromechanical actuators and fuel valves for land-based gas turbines, and refueling systems for heavy equipment used in mining, construction and other industries and turbine controls for the energy and oil and gas markets. Primary customers of this segment are off-road vehicle suppliers and subsystem suppliers, child restraint system suppliers, satellite and space system suppliers, manufacturers of heavy equipment used in mining, construction and other industries and turbine original equipment manufacturers, gas pipeline builders and electric utilities.
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The primary measurement used by management to review and assess the operating performance of each segment is EBITDA As Defined. The Company defines EBITDA As Defined as earnings before interest, taxes, depreciation and amortization plus certain non-operating items recorded as corporate expenses including non-cash compensation charges incurred in connection with the Company’s stock incentive or deferred compensation plans, foreign currency gains and losses, acquisition-integration costs, acquisition transaction-related expenses, and refinancing costs. Acquisition transaction and integration-related expenses represent costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and valuation-related costs for acquisitions comprising deal fees, legal, financial and tax due diligence expenses; and amortization expense of inventory step-up recorded in connection with the purchase accounting of acquired businesses.
EBITDA As Defined is not a measurement of financial performance under U.S. GAAP. Although the Company uses EBITDA As Defined to assess the performance of its business and for various other purposes, the use of this non-GAAP financial measure as an analytical tool has limitations, and it should not be considered in isolation or as a substitute for analysis of the Company’s results of operations as reported in accordance with U.S. GAAP.
For financial information about our segments, refer to Note 15, “Segments,” in the notes to the consolidated financial statements included herein.
Sales and Marketing
Consistent with our overall strategy, our sales and marketing organization is structured to continually develop technical solutions that meet customer needs. In particular, we attempt to focus on products and programs that will lead to high-margin, repeatable sales in the aftermarket.
We have structured our sales efforts along our major product offerings, assigning a business unit manager that leads a business unit team. The teams are generally defined based on a grouping of related products with similar functionality, engineering designs and/or applications. The team consists of physically co-located, cross functional personnel who in turn focus their efforts entirely on the products and customers they serve. The team implements the three core value drivers of obtaining profitable new business, carefully controlling the cost structure via productivity and cost improvements and pricing our highly engineered value-added products to fairly reflect the value we provide. The business unit manager drives and directs the activities of the team based on customer needs. Each business unit manager is expected to grow the sales and profitability of the products and services for which he or she is responsible and to achieve the targeted annual level of bookings, net sales, new business and profitability for such products. The business unit managers are assisted by account managers and sales engineers who are responsible for covering major OEM and aftermarket accounts. Account managers and sales engineers are expected to be familiar with the personnel, organization and needs of specific customers to achieve total bookings and new business goals for each account and, together with the business unit managers, to determine when additional resources are required at customer locations. Most of our sales personnel are evaluated, in part, on their bookings and their ability to identify and obtain new business opportunities.
Though typically performed by employees, the account manager function may be performed by independent representatives depending on the specific customer, product and geographic location. We also use a number of distributors to provide logistical support as well as serve as a primary customer contact with certain smaller accounts. Boeing Distribution Services, Inc. and Satair A/S (a subsidiary of Airbus S.A.S.) among others, are our major distributors.
Manufacturing and Engineering
We maintain approximately 120 manufacturing facilities. Most of our manufacturing facilities are comprised of manufacturing, distribution and engineering functions, and most facilities have certain administrative functions, including management, sales and finance. We continually strive to improve productivity and reduce costs, including automation projects, rationalization of operations, developing improved control systems that allow for accurate accounting and reporting, investing in equipment, tooling, information systems (including cybersecurity) and implementing broad-based employee training programs. Management believes that our manufacturing systems and equipment contribute to our ability to compete by permitting us to meet the rigorous tolerances and cost sensitive price structure of aircraft component customers.
We attempt to differentiate ourselves from our competitors by producing highly engineered products with high quality, reliability and timely delivery. Our engineering costs are recorded in cost of sales and in selling and administrative expenses within our consolidated statements of income. Research and development costs are recorded in selling and administrative expenses within our consolidated statements of income. The aggregate of engineering expense and research and development expense represents approximately 8% of our operating units’ aggregate costs, or approximately 4% of our consolidated net sales for fiscal year 2024. Our proprietary products, and particularly our new product initiatives, are designed by our engineers and are intended to serve the needs of the aircraft component industry. These proprietary designs must withstand the extraordinary conditions and stresses that will be endured by products during use and meet the rigorous demands of our customers’ tolerance and quality requirements. The business unit team, inclusive of operations, engineering, quality and sales, and the customer work together through the design and development of a product. Refer to Note 1, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included herein with respect to the total costs of research and development.
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We use sophisticated equipment and procedures to comply with quality requirements, specifications and aviation authority and OEM requirements. We perform a variety of testing procedures as required by our customers, such as testing under different temperature, humidity and altitude levels, flammability testing, shock and vibration testing and X-ray fluorescent measurement. These procedures, together with other customer approved techniques for document, process and quality control, are used throughout our manufacturing facilities.
Customers
We predominantly serve customers in the commercial, regional, business jet and general aviation aftermarket, which accounted for approximately 31% of our net sales for fiscal year 2024; the commercial aerospace OEM market, comprising large commercial transport manufacturers and regional and business jet manufacturers, which accounted for approximately 27% of our net sales for fiscal year 2024; and the defense market (which includes defense OEMs and aftermarket sales to the U.S. and friendly foreign governments), which accounted for approximately 40% of our net sales for fiscal year 2024. Non-aerospace net sales comprised approximately 2% of our net sales for fiscal year 2024.
Our customers include: (1) distributors of aerospace components; (2) worldwide commercial airlines, including national and regional airlines; (3) large commercial transport and regional and business aircraft OEMs; (4) various armed forces of the United States and friendly foreign governments; (5) defense OEMs; (6) system suppliers; and (7) various other industrial customers. Our top ten customers for fiscal year 2024 accounted for approximately 42% of our net sales. Products supplied to many of our customers are used on multiple platforms. None of our customers individually accounted for greater than 10% of our net sales for fiscal year 2024.
The markets in which we sell our products are, to varying degrees, cyclical and have experienced upswings and downturns. The demand for our commercial aftermarket parts and services depends on, among other things, the breadth of our installed OEM base, revenue passenger kilometers (“RPKs”), the size and age of the worldwide aircraft fleet, the percentage of the worldwide fleet that is in warranty, and airline profitability. The demand for defense products is specifically dependent on government budget trends, military campaigns and political pressures.
Competition
The niche markets within the aerospace industry that we serve are relatively fragmented and we face several competitors for many of the products and services we provide. Due to the global nature of the commercial aircraft industry, competition in these categories comes from both U.S. and foreign companies. Competitors in our product offerings range in size from divisions of large public corporations to small privately-held entities with only one or two components in their entire product portfolios.
We compete on the basis of engineering, manufacturing and marketing high quality and reliable products, which we believe meet or exceed the performance and maintenance requirements of our customers, consistent and timely delivery, and superior customer service and support. The industry’s stringent regulatory, certification and technical requirements and the investments necessary in the development and certification of products may create disincentives for potential new competitors for certain products. If customers receive products that meet or exceed expectations and performance standards, we believe that they will have a reduced incentive to certify another supplier because of the cost and time of the technical design and testing certification process. In addition, we believe that the availability, dependability and safety of our products are reasons for our customers to continue long-term supplier relationships.
Government Contracts
Companies engaged in supplying defense-related equipment and services to United States Government (“U.S. Government”) agencies are subject to business risks specific to the defense industry. These risks include the ability of the U.S. Government to unilaterally: (1) suspend us from receiving new contracts; (2) terminate existing contracts; (3) reduce the value of existing contracts; (4) audit our contract-related costs and fees, including allocated indirect costs; (5) control and potentially prohibit the export of our products; and (6) seek repayment of contract related payments under certain circumstances. Violations of government procurement laws could result in civil or criminal penalties.
Governmental Regulation
The commercial aircraft component industry is highly regulated by the Federal Aviation Administration (“FAA”) in the United States and by the European Union Aviation Safety Agency in Europe and other agencies throughout the world, while the military aircraft component industry is governed by military quality specifications. We, and the components we manufacture, are required to be certified by one or more of these entities or agencies, and, in many cases, by individual OEMs, in order to engineer and service parts and components used in specific aircraft models.
We must also satisfy the requirements of our customers, including OEMs and airlines that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to commercial flight operations. In addition, the FAA and other aviation authorities require that various maintenance routines be performed on aircraft components. We believe that we currently satisfy or exceed these maintenance standards in our repair and overhaul services. We also maintain several FAA-approved repair stations.
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In addition, our businesses are subject to many other laws and requirements typically applicable to manufacturers and exporters. Without limiting the foregoing, sales of many of our products that will be used on aircraft owned by foreign entities are subject to compliance with export control laws and the manufacture of our products and the operations of our businesses, including the disposal of hazardous wastes, are subject to compliance with applicable environmental laws.
Market Channels
Commercial Aftermarket
The key market factors in the commercial aftermarket include RPKs and the size and activity level of the worldwide fleet of aircraft and the percentage of the fleet that is in warranty. In fiscal 2024, the commercial aerospace industry continued to rebound from the adverse impacts of the COVID-19 pandemic. Since February 2024, both domestic and international RPKs have surpassed 2019 (i.e., pre-pandemic) levels and have remained on a steady growth trend. The 2025 leading indicators or industry consensus suggest a continuation of current trends supported by continued RPK growth.
Commercial OEM Market
Our commercial transport OEM shipments and revenues generally run ahead of aircraft delivery schedules. Consistent with prior years, our fiscal 2025 shipments will be a function of, among other things, the estimated 2025 and 2026 commercial aircraft production rates for Boeing and Airbus. In fiscal 2024, we experienced improved sales in the commercial OEM sector primarily due to increased aircraft production by Boeing and Airbus. Airline demand for new aircraft remains high, and the OEMs are working to increase aircraft production. However, aircraft production rates remain well below pre-pandemic levels as the struggles in the OEM supply chain persist. Due to these factors, it is difficult to accurately predict the OEM build rates for 2025.
Our businesses continually seek to provide innovative solutions for our customers and others in the commercial aerospace and defense industries. These include new touchless products and environmentally friendly products, such as the brushless starter generator and sustainable decorative laminates.
Defense
Our military business fluctuates from year-to-year, and is dependent, to a degree, on government budget constraints, the timing of orders, macro and micro dynamics with respect to the U.S. Department of Defense (“DOD”) procurement policy and the extent of global conflicts, such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas. Also, delays in government spending outlays and government funding reprioritization, such as shifting funds to efforts to assist friendly countries in conflicts, provides for further unpredictability in the military spending outlook. For a variety of reasons, the military spending outlook is very uncertain, though recent DOD budgets have trended upwards.
Defense sales in fiscal 2024 increased compared to fiscal 2023 at a higher rate than in recent fiscal years due to improving U.S. Government defense spend outlays. DOD budgets have trended upwards as geopolitical challenges such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas, and military modernization efforts are driving demand.
Other Considerations
Historically, our presence in both the commercial aerospace and military sectors of the aerospace industry has served to mitigate the impact on our business of any specific industry risk. We service a diversified customer base in the commercial and military aerospace industry, and we provide components to a diverse installed base of aircraft, which mitigates our exposure to any individual airframe platform. At times, declines in net sales in one channel have been offset by increased net sales in another channel. However, due to differences between the profitability of our products sold to OEM and aftermarket customers, variation in product mix can cause variation in gross profit.
Factors including customer inventory level adjustments, supply chain issues, unannounced changes in order patterns, strikes, facility shutdowns caused by fires, hurricanes, health crises or other incidents and mergers and acquisitions can cause short-term disruptions in our quarterly shipment patterns as compared to previous quarters and the same periods in prior years. As such, it can be difficult to determine longer-term trends in our business based on quarterly comparisons. To normalize for short-term fluctuations, we tend to look at our performance over several quarters or years of activity rather than discrete short-term periods. Additionally, there are fluctuations in OEM and aftermarket product mix from quarter-to-quarter that may cause positive or negative variations in gross profit since commercial aftermarket net sales have historically produced higher gross profit margins than net sales to commercial OEMs. Again, in many instances these are timing events between quarters and must be balanced with macro aerospace industry indicators.
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Raw Materials
We require the use of various raw materials in our manufacturing processes. We purchase a variety of manufactured component parts from various suppliers. We also purchase replacement parts, which are utilized in our various repair and overhaul operations. At times, we concentrate our orders among a few suppliers in order to strengthen our supplier relationships. Most of our raw materials and component parts are generally available from multiple suppliers at competitive prices.
Disruptions in the global supply chain has resulted in delays in the availability of certain raw materials and increased raw material costs, among other costs such as labor, though the disruptions somewhat improved in fiscal 2024, resulting in a higher stabilization of costs as fiscal 2024 progressed. Our business has been adversely affected, though not materially, and could continue to be adversely affected in fiscal 2025 by disruptions in our ability to timely obtain raw materials and components from our suppliers in the quantities we require or on favorable terms. Although we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive aviation authority and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part.
Intellectual Property
We have various trade secrets, proprietary information, trademarks, trade names, patents, copyrights and other intellectual property rights, which we believe, in the aggregate but not individually, are important to our business. The Company's products are manufactured, marketed and sold using a portfolio of patents, trademarks, licenses, and other forms of intellectual property, some of which expire in the future. The Company develops and acquires new intellectual property on an ongoing basis. Based on the broad scope of the Company’s product lines, management believes that the loss or expiration of any single intellectual property right would not have a material effect on our consolidated financial statements.
Environmental Matters
Our operations and facilities are subject to a number of federal, state, local and foreign environmental laws and regulations that govern, among other things, discharges of pollutants into the air and water, the generation, handling, storage and disposal of hazardous materials and wastes, the remediation of contamination and the health and safety of our employees. Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. Certain facilities and third-party sites utilized by the Company have been identified as potentially responsible parties under the federal superfund laws and comparable state laws. The Company is currently involved in the investigation and remediation of a number of sites under applicable laws.
For information regarding environmental accruals, refer to Note 13, “Commitments and Contingencies,” in the notes to the consolidated financial statements included herein. Compliance with federal, state, local and foreign environmental laws during fiscal 2024 did not have a material impact on our capital expenditures, results of operations or cash flows. Based upon consideration of currently available information, we believe liabilities for environmental matters will not have a material adverse impact on our consolidated financial statements, but we cannot assure that material environmental liabilities may not arise in the future. For further information on environmental-related risks, including climate change, refer to Item 1A. “Risk Factors.”
Human Capital Resources
As of September 30, 2024, we had approximately 16,600 full-time, part-time and temporary employees. Approximately 17% of our full-time and part-time employees are represented by labor unions. Collective bargaining agreements between us and these labor unions expire at various dates up to January 2029.
Talent Development
We consider our employees to be our greatest asset. Succession planning and the development, attraction and retention of employees is critical for TransDigm and its operating units to sustain our three core value drivers (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers). To support the advancement of our employees, we offer comprehensive training and development programs to empower internal career progression. We employ a blend of structured and informal initiatives to identify, nurture and retain exceptional individuals at both the corporate and operating unit levels.
We have established TransDigm University, in partnership with the University of Southern California Marshall School of Business, a formal mentoring and education program with a curated curriculum and established leadership serving as mentors. Participants in the program learn and develop more advanced skills leading to higher contribution and satisfaction within their roles, while mentors enhance their leadership capabilities by helping others progress. This program helps identify top performers, improving employee performance and retention, increasing our organizational learning and supporting the promotion of our current employees.
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The Company’s Management Development Program (“MDP”) identifies new talent and prepare candidates for success within our organization. The Company actively recruits for MDP candidates at colleges and universities across the U.S. to help reach a large and diverse pool of candidates. The program hires recent Master of Business Administration graduates who work for three eight-month periods at selected TransDigm operating units. Program participants gain experience in developing, manufacturing, and selling aerospace components with the intent of becoming fully immersed in our business operations. Once the program is complete, MDP participants are better equipped with the knowledge and experience needed to excel as a manager at TransDigm. Our goal is to onboard successful MDP participants as full-time employees at one of our operating units upon completion of the program.
As a company with products and values that support the U.S. military and its allies, TransDigm is dedicated to offering employment opportunities to U.S. military veterans. We recognize the invaluable knowledge and skills they bring to the workforce, and many of our U.S.-based operating units have specific programs or initiatives that provide career opportunities to veterans as they make the transition to civilian careers. The Junior Military Officer (“JMO”) Rotational Program at TransDigm is a structured one-year development initiative, consisting of two 6-month rotational assignments in specified regions, including Southern California, Greater New York City and Cleveland, Ohio. Participants rotate through key functional groups, such as operations, product development, sales and marketing, supply chain and program management. Each JMO is paired with a dedicated military veteran mentor at TransDigm, often former JMOs who have successfully made the transition to civilian careers and now hold executive roles at TransDigm. After completing the program, each participant is well-prepared to assume a leadership position at one of TransDigm’s operating units. We created this program to specifically recruit JMOs because of their leadership skills, adaptability and attention to detail, which are qualities that align with TransDigm’s commitment to excellence in the aerospace and defense industry.
TransDigm’s executive team also mentors rising talent on a more informal basis. This informal mentorship achieves a number of goals, including accelerating the development of top performers, fosters organizational learning, enhances employee performance and contributes to our retention efforts. The executive team dedicates substantial time to assessing our pool of future leaders, ensuring that we have the people and skills necessary to continue driving our business forward.
TransDigm University, MDP, JMO, various internship programs and informal mentoring demonstrates the Company’s ongoing commitment and initiatives towards accelerating the development of our future leaders.
Benefits
We are proud to offer attractive benefits packages that attract, retain, motivate and reward our talent, and we are committed to providing our employees and their families with programs that support their health and overall well-being. To empower our employees financially, we provide retirement savings plans and opportunities for tax-free savings through flexible spending accounts and health savings accounts. We believe that our compensation programs, including base pay, bonus structures and equity programs, fairly reward our employees for their hard work. Additionally, we understand the importance of maintaining a work-life balance, which is why our employees receive paid time off and enjoy designated holidays.
We understand the value in furthering the knowledge and education of our current employee base. In addition to formal and informal employee development programs within TransDigm and our operating units, employees can expand their careers by accessing tuition reimbursement programs. Some operating units also partner with local colleges to provide training courses to TransDigm employees. Access to programs such as these enhance our employees’ value to the Company, our customers and our communities.
TransDigm’s equity compensation plans are designed to assist in attracting, retaining, motivating and rewarding key employees and directors, and promoting the creation of long-term value for our stockholders by closely aligning the interests of these individuals with those of our stockholders. Featuring performance-based stock options, these plans are integral to our equity-based compensation strategy. As we cultivate a culture of growth and excellence, we firmly believe that the use of performance-based stock options will continue to be a key element in retaining our essential employees and attracting future talent.
Diversity, Equity and Inclusion
At TransDigm, we highly value the contributions of diverse perspectives, fresh ideas and varied experiences. Our commitment to diversity is more than just an organizational goal; it is a fundamental principle that drives innovation, enhances our competitive edge and ultimately leads to better outcomes for all stakeholders. To gauge our progress, we annually review and assess our diversity initiatives and metrics. We strive for improvement each year.
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We know that the tone is set from the top, and our commitment to diversity, equity and inclusion (“DEI”) must be reflected within our leadership team as well as our Board of Directors. Beginning in 2022, we worked to enhance DEI awareness among our leadership through the implementation of Unconscious Bias Training for our Board and management. Furthermore, our commitment to DEI is interwoven into our internal training programs, communications and conferences, ensuring that diversity remains at the forefront of our organizational culture. Total past and present MDP participants are approximately 34% gender and/or racially diverse and we continuously work to enhance the diversity of the program. We are committed to diversity at all levels of management and leadership, and our leadership team and Board of Directors are committed to improving diversity throughout the Company and fostering a more inclusive and open environment. Diversity, equity and inclusion make us stronger as a business so we can effectively serve all our stakeholders. Our workforce includes talented people from many backgrounds.
Discrimination is not tolerated at TransDigm. We are committed to high ethical standards and equal employment opportunities in all personnel actions without regard to race, color, religion, gender, national origin, citizenship status, age, marital status, gender identity or expression, sexual orientation, physical or mental disability, or veteran status.
Health and Safety
We are focused on establishing, maintaining and operating our facilities, with a strong emphasis on process safety and risk mitigation. Equally, we strive to empower and support our employees in preventing accidents and promoting a healthy work environment. We require our personnel to report and communicate risks, potential hazards, incidents and near misses so that we can investigate and establish appropriate measures to prevent future occurrences. To underscore our commitment to employee safety and well-being, we require each operating unit to individually report environmental, health and safety matters to our executive team monthly.
Seasonality
We do not believe our net sales are subject to significant seasonal variation; however, our net sales have generally been lower in the first quarter of our fiscal year compared to the subsequent quarters due to fewer working days resulting from the observance of various holidays.
Available Information
TD Group’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including any amendments, will be made available free of charge on the Company’s website, www.transdigm.com, as soon as reasonably practicable, following the filing of the reports with the Securities and Exchange Commission (“SEC”). In addition, the Company’s website allows investors and other interested persons to sign up to automatically receive e-mail alerts when news releases and financial information is posted on the website. The SEC also maintains a website, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The information on or obtainable through our website is not incorporated into this Annual Report on Form 10-K.
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ITEM 1A. RISK FACTORS
Set forth below are material risks and uncertainties that could negatively affect our business and financial condition and could cause our actual results to differ materially from those expressed in forward-looking statements contained in this report. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations and financial condition. You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.
Risks Related to our Strategy
Our business focuses almost exclusively on the aerospace and defense industry.
During a prolonged period of significant market disruption in the aerospace and defense industry, such as the adverse impact that the COVID-19 pandemic had on the commercial aerospace market, and other macroeconomic factors such as when recessions occur, our business may be disproportionately impacted compared to peer companies that are more diversified in the industries they serve. A more diversified company with significant sales and earnings derived from outside the aerospace and defense sector may be able to recover more quickly from significant market disruptions such as the COVID-19 pandemic.
We rely heavily on certain customers for much of our sales.
In fiscal year 2024, no customer individually accounted for 10% or more of the Company’s net sales; however, our top ten customers for fiscal year 2024 accounted for approximately 42% of our net sales. A material reduction in purchasing by one of our larger customers for any reason, including but not limited to general economic or aerospace downturns, decreased production, strike or resourcing, could have a material adverse effect on results of operations, financial position and cash flows.
We generally do not have guaranteed future sales of our products. Further, when we enter into fixed price contracts with some of our customers, we take the risk for cost overruns.
As is customary in our business, we do not generally have long-term contracts with most of our aftermarket customers and, therefore, do not have guaranteed future sales. Although we have long-term contracts with many of our OEM customers, many of those customers may terminate the contracts on short notice and, in most cases, our customers have not committed to buy any minimum quantity of our products. In addition, in certain cases, we must anticipate the future volume of orders based upon the historic purchasing patterns of customers and upon our discussions with customers as to their anticipated future requirements, and this anticipated future volume of orders may not materialize.
We also have entered into multi-year, fixed-price contracts with some of our customers, pursuant to which we have agreed to perform the work for a fixed price and, accordingly, realize all the benefit or detriment resulting from any decreases or increases in the costs of making these products. This risk is greater in a high inflationary environment, such as occurred in fiscal 2023 and fiscal 2024. Sometimes we accept a fixed-price contract for a product that we have not yet produced, and this increases the risk of cost overruns or delays in the completion of the design and manufacturing of the product. Most of our contracts do not permit us to recover increases in raw material prices, taxes or labor costs.
We intend to pursue acquisitions. Our business may be adversely affected if we cannot consummate acquisitions on satisfactory terms, or if we cannot effectively integrate acquired operations.
A significant portion of our growth has occurred through acquisitions. Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions. We intend to pursue acquisitions that we believe will present opportunities consistent with our overall business strategy. However, we may not be able to find suitable acquisition candidates to purchase or may be unable to acquire desired businesses or assets on economically acceptable terms or may be unable to receive necessary regulatory approvals or support. In addition, we may not be able to raise the capital necessary to fund future acquisitions. Because we may actively pursue a number of opportunities simultaneously, we may encounter unforeseen expenses, complications and delays, including regulatory complications or difficulties in employing sufficient staff and maintaining operational and management oversight.
We regularly engage in discussions with respect to potential acquisition and investment opportunities. If we consummate an acquisition, our capitalization and results of operations may change significantly. Future acquisitions could result in margin dilution and further likely result in the incurrence of additional debt and contingent liabilities and an increase in interest and amortization expenses or periodic impairment charges related to goodwill and other intangible assets as well as significant charges relating to integration costs.
Acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect. In addition, we may not be able to successfully integrate any business we acquire into our existing business. The successful integration of new businesses depends on our ability to manage these new businesses and cut excess costs. The successful integration of future acquisitions may also require substantial attention from our senior management and the management of the acquired business, which could decrease the time that they have to service, attract customers and develop new products and services or attend to other acquisition opportunities.
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Our indebtedness could adversely affect our financial health and could harm our ability to react to changes to our business and prevent us from fulfilling our obligations under our indebtedness.
We have a significant amount of indebtedness. As of September 30, 2024, our total indebtedness, excluding approximately $67 million in letters of credit outstanding, approximately $262 million of finance lease obligation liabilities and approximately $17 million of government refundable advances, was approximately $24 billion, which was approximately 134% of our total book capitalization.
In addition, we may be able to incur substantial additional indebtedness in the future. As of September 30, 2024, we had approximately $843 million of unused commitments under our revolving credit facility and $163 million of additional borrowing capacity under our trade receivable securitization facility (the “Securitization Facility”). The $163 million available under the Securitization Facility was subsequently drawn in October 2024. Although our senior secured credit facility and the indentures governing the various series of senior secured and senior subordinated notes outstanding (the “Notes”) contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and the indebtedness incurred in compliance with these qualifications and exceptions could be substantial. A breach of any of the covenants or an inability to comply with the required leverage ratio could result in a default under the senior secured credit facility or the indentures.
An increase in our indebtedness could also have other important consequences to investors. For example, it could:
•increase our vulnerability to general economic downturns and adverse competitive and industry conditions;
•increase the risk we are subjected to downgrade or put on a negative watch by the ratings agencies;
•require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital requirements, capital expenditures, acquisitions, research and development efforts and other general corporate requirements;
•limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•place us at a competitive disadvantage compared to competitors that have less debt; and
•limit, along with the financial and other restrictive covenants contained in the documents governing our indebtedness, among other things, our ability to borrow additional funds, make investments and incur liens.
All of the term loans under our term loan facility and the borrowings under our revolving credit facility and the Securitization Facility bear interest at variable rates primarily based on the Term Secured Overnight Financing Rate (“Term SOFR”). Accordingly, if Term SOFR or other variable interest rates increase, our debt service expense will also increase. In order to mitigate the interest rate risk of these variable rate borrowings, we have in the past entered into interest rate swap, cap, and collar agreements that cover a significant portion of the existing variable rate debt and may do so in the future, subject to market and other conditions. In connection with our existing term loans, we entered into various interest rate swap, cap and collar agreements associated with Term SOFR. The Company's objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates. As of September 30, 2024, approximately 77% of our total debt was fixed rate. For information about our interest rate swap, cap and collar agreements, refer to Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein.
Our indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness, including debt under the senior secured credit facility and the Notes. We cannot assure that our business will generate sufficient cash flow from operations or that future borrowings will be available to us under the senior secured credit facility or otherwise in amounts sufficient to enable us to service our indebtedness. If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital.
To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control and any failure to meet our debt service obligations could harm our business, financial condition and results of operations.
Our ability to make payments on and to refinance our indebtedness, including the Notes, amounts borrowed under the senior secured credit facility, amounts due under our Securitization Facility, and to fund our operations, will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
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We cannot assure that our business will generate sufficient cash flow from operations, or that future borrowings will be available to us under the senior secured credit facility or otherwise in amounts sufficient to enable us to service our indebtedness, including the amounts borrowed under the senior secured credit facility, amounts borrowed under our Securitization Facility and the Notes, or to fund our other liquidity needs. If we cannot service our debt, we will have to take actions such as reducing or delaying capital investments, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We cannot assure that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments, the Securitization Facility, the indentures governing the Notes and the senior secured credit facility may restrict us from adopting any of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness on acceptable terms and could otherwise adversely affect our business, financial condition and results of operations.
The terms of the senior secured credit facility and indentures governing the Notes may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
Our senior secured credit facility and the indentures governing the Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on TD Group, TransDigm Inc. and its restricted subsidiaries (in the case of the senior secured credit facility) and TransDigm Inc. and its restricted subsidiaries (in the case of the indentures) and may limit their ability to engage in acts that may be in our long-term best interests. The senior secured credit facility and indentures governing the Notes include covenants restricting, among other things, the ability to (subject, in each case, to certain important exceptions):
•incur or guarantee additional indebtedness or issue preferred stock;
•pay distributions on, redeem or repurchase our capital stock or redeem or repurchase our subordinated debt;
•make investments;
•sell assets;
•enter into agreements that restrict distributions or other payments from our restricted subsidiaries to us;
•incur or allow to exist liens;
•consolidate, merge or transfer all or substantially all of our assets;
•engage in transactions with affiliates;
•create unrestricted subsidiaries; and
•engage in certain business activities.
A breach of any of these covenants could result in a default under the senior secured credit facility or the indentures governing the Notes. If any such default occurs, the lenders under the senior secured credit facility and the holders of the Notes may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. The lenders under the senior secured credit facility also have the right in these circumstances to terminate any commitments they have to provide further borrowings. In addition, subject to the terms of an intercreditor agreement, following an event of default under the senior secured credit facility or the indentures governing our various series of outstanding senior secured notes, the lenders thereunder or the holders thereof, as applicable, will have the right to proceed against the collateral granted to them to secure the debt, which includes our available cash, and they will also have the right to prevent us from making debt service payments on the senior subordinated notes. If the debt under the senior secured credit facility or the Notes were to be accelerated, we cannot assure that our assets would be sufficient to repay in full the Notes and other debt.
We are dependent on our executive officers, senior management team and highly trained employees and any work stoppage, difficulty hiring similar employees, or ineffective succession planning could adversely affect our business.
Because our products are complicated and highly engineered, we depend on an educated and trained workforce. Historically, there has been substantial competition for skilled personnel in the aerospace and defense industry, and we could be adversely affected by a shortage of skilled employees. We may not be able to fill new positions or vacancies created by expansion or turnover or attract and retain qualified personnel. We cannot be assured that we can continue to hire, train and retain qualified employees at current wage rates since we operate in a competitive labor market, and there are currently significant inflationary and other pressures on wages.
Although we believe that our relations with our employees are satisfactory, we cannot assure that we will be able to negotiate a satisfactory renewal of collective bargaining agreements or that our employee relations will remain stable. Because we strive to limit the volume of finished goods inventory, any work stoppage could materially and adversely affect our ability to provide products to our customers.
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In addition, our success depends in part on our ability to attract and motivate our senior management and key employees. Achieving this objective may be difficult due to a variety of factors, including fluctuations in economic and industry conditions, competitors’ hiring practices, and the effectiveness of our compensation programs. Competition for qualified personnel can be intense. If we are unable to effectively provide for the succession of key personnel, senior management and our executive officers, including our President, Chief Executive Officer and Director, our business, results of operations, cash flows and financial condition may be adversely affected. The Company’s Board of Directors continually monitors this risk and we believe that the Company’s succession plan, together with our straightforward strategy, clear value drivers, decentralized nature and the quality of managers running our operating units helps to mitigate this risk.
Public health crises, such as the COVID-19 pandemic, and other health pandemics, epidemics and outbreaks could adversely affect our business.
A significant public health crisis, such as the COVID-19 pandemic, could cause disruption to our operations. The COVID-19 pandemic had a negative effect on our business, results of operations, cash flows and financial condition. It affected our business due to the impact on the global economy, including its effects on the commercial aerospace industry, the supply chain and raw material availability, production efforts and customer demand for our products and services. Our ability to predict and respond to future changes resulting from potential health crises is uncertain. Even after a public health crises subsides, there may be long-term effects on our business practices and customers in economies in which we operate that could severely disrupt our operations and could have a material adverse effect on our business, results of operations, cash flows and financial condition. As we cannot predict the duration, scope or severity of future public health crises, the negative financial impact to our results cannot be reasonably estimated and could be material.
Risks Related to our Operations
Our sales to manufacturers of aircraft are cyclical, and a downturn in sales to these manufacturers may adversely affect us.
Our sales to manufacturers of large commercial aircraft, such as Boeing, Airbus, and related OEM suppliers, as well as manufacturers of business jets have historically experienced periodic downturns. In the past, these sales have been affected by airline profitability, which is impacted by, among other things, fuel and labor costs, price competition, interest rates, downturns in the global economy and national and international events. In addition, sales of our products to manufacturers of business jets are impacted by, among other things, downturns in the global economy. In certain years, such as in fiscal 2021 and the second half of fiscal 2020, we experienced decreased sales across the commercial OEM sector driven primarily by the decrease in production by Boeing and Airbus related to reduced demand in the commercial aerospace industry from the COVID-19 pandemic, and airlines deferring or cancelling orders. Regulatory and quality challenges, such as with Boeing’s 737 MAX aircraft and 787 aircraft, also has had an adverse impact. Significant labor disagreements and supply chain issues may also negatively impact the production of aircraft. Downturns adversely affect our results of operations, financial position and cash flows.
Our business is dependent on the availability of certain components and raw materials from suppliers.
Our business is affected by the price and availability of the raw materials and component parts that we use to manufacture our components. Our business, therefore, could be adversely impacted by factors affecting our suppliers (such as the destruction of our suppliers’ facilities or their distribution infrastructure, a work stoppage or strike by our suppliers’ employees or the failure of our suppliers to provide materials of the requisite quality), or by increased costs of such raw materials or components if we were unable to pass along such price increases to our customers. Changes to tariff and import and export regulations in the United States and abroad may also negatively impact the availability and pricing of raw materials.
Because we strive to limit the volume of raw materials and component parts on hand, our business could be adversely affected if we were unable to obtain these raw materials and components from our suppliers in the quantities we require or on favorable terms. Although we believe in most cases that we could identify alternative suppliers, or alternative raw materials or component parts, the lengthy and expensive aviation authority and OEM certification processes associated with aerospace products could prevent efficient replacement of a supplier, raw material or component part.
We face significant competition.
We operate in a highly competitive global industry and compete against a number of companies. Competitors in our product lines are both U.S. and foreign companies and range in size from divisions of large public corporations to small privately-held entities. We believe that our ability to compete depends on high product performance, consistent high quality, short lead-time and timely delivery, competitive pricing, superior customer service and support and continued certification under customer quality requirements and assurance programs. We may have to adjust the prices of some of our products to stay competitive.
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Climate-related regulations designed to address climate change may result in additional compliance costs.
Our operations and the products we sell are currently subject to rules limiting emissions and to other climate-related regulations in certain jurisdictions where we operate. The increased prevalence of global climate change concerns may result in new regulations that may negatively impact us, our suppliers and customers. We are continuing to evaluate short-, medium- and long-term risks related to climate change. We cannot predict what environmental legislation or regulations will be enacted in the future, how existing or future laws or regulations will be administered or interpreted, or what environmental conditions may be found to exist. Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require additional expenditures by us or our suppliers, in which case, the costs of raw materials and component parts could increase.
As a whole, because our manufacturing facilities primarily engage in assembly and light manufacturing and because we do not maintain any transportation infrastructure, we have relatively low Scope 1 and Scope 2 emissions. Accordingly, we do not anticipate any material adverse impact from increased carbon regulation directly on our manufacturing operations. Further, because of our wide portfolio of hundreds of thousands of products, we do not anticipate any material adverse impact from the reliance on a supplier or group of suppliers that may be subject to climate risks. However, regulation that would have a material adverse impact on air travel could have a material adverse impact on our business. Given the political significance and uncertainty around these issues, we cannot predict how legislation, regulation, and increased awareness of these issues will affect our operations and financial condition. We have established a science-aligned greenhouse gas emissions reduction target of at least a 50% reduction in our Scope 1 and Scope 2 emissions on an absolute basis by the year 2031. Fiscal 2019 is the selected baseline year for TransDigm that we will compare against as we make progress towards our emissions reduction goal. We continue to evaluate ways to reduce our energy and water consumption and lower our greenhouse gas emissions through energy efficiency measures, the purchase of green power and other actions.
Our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production.
Our operations and those of our customers and suppliers have been and may again be subject to natural disasters, climate change-related events, pandemics or other business disruptions, which could seriously harm our results of operation and increase our costs and expenses. Some of our manufacturing facilities are located in regions that may be impacted by severe weather events, such as increased storm frequency or severity in the Atlantic and fires in hotter and drier climates. These could result in potential damage to our physical assets as well as disruptions in manufacturing activities. Some of our manufacturing facilities are located in areas that may be at risk due to rising sea levels. Moreover, some of our manufacturing facilities are located in areas that could experience decreased access to water due to climate issues.
We are also vulnerable to damage from other types of disasters, including power loss, fire, explosions, floods, communications failures, terrorist attacks and similar events. Disruptions could also occur due to health-related outbreaks and crises, cyber-attacks, computer or equipment malfunction (accidental or intentional), operator error or process failures. Should insurance or other risk transfer mechanisms, such as our existing disaster recovery and business continuity plans, be insufficient to recover all costs, we could experience a material adverse effect on our business, results of operations, financial position and cash flows.
Operations and sales outside of the United States may be subject to additional risks.
Our net sales to foreign customers were approximately $2.9 billion for the fiscal year ended September 30, 2024. A number of risks inherent in international operations could have a material adverse effect on our results of operations, including war, sanctions, global health crises, currency fluctuations, difficulties in staffing and managing multinational operations, general economic and political uncertainties and potential for social unrest in countries in which we operate, limitations on our ability to enforce legal rights and remedies, restrictions on the repatriation of funds, change in trade policies, tariff regulation, difficulties in obtaining export and import licenses and the risk of government financed competition.
Issues with the global supply chain can also rise due to some of the aforementioned risks, as well as the availability and cost of raw materials to suppliers, merchandise quality or safety issues, shipping and transport availability and cost, increases in wage rates and taxes, transport security, inflation and other factors relating to the suppliers and the countries in which they are located or from which they import. Such issues are often beyond our control and could adversely affect our operations and profitability. Furthermore, the Company is subject to laws and regulations, such as the Foreign Corrupt Practices Act, U.K. Bribery Act and similar local anti-bribery laws, which generally prohibit companies and their employees, agents and contractors from making improper payments for the purpose of obtaining or retaining business. Failure to comply with these laws could subject the Company to civil and criminal penalties that could materially adversely affect the Company’s results of operations, financial position and cash flows.
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We continue to monitor the ongoing conflicts between Israel and Hamas and between Russia and Ukraine and the related export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the U.K., the European Union and others. Although the conflicts have not, nor are expected to, have a direct material adverse impact on TransDigm's business, the implications of the Israel and Hamas and Russia and Ukraine conflicts in the short-term and long-term are difficult to predict. Factors such as increased energy costs, the availability of certain raw materials for aircraft manufacturers, embargoes on flights from certain airlines, sanctions on certain companies, and the stability of certain customers could impact the global economy and aviation sector. In addition, there continues to be uncertainty about the future relationship between the U.S. and China, including with respect to trade policies, treaties, government regulations and tariffs. Any increased trade barriers or restrictions on global trade, including trade with China, could adversely affect the Company’s results of operations, financial position and cash flows.
We are subject to certain unique business risks as a result of supplying equipment and services to the U.S. Government.
Companies engaged in supplying defense-related equipment and services to U.S. Government agencies, whether through direct contracts with the U.S. Government or as a subcontractor to customers contracting with the U.S. Government, are subject to business risks specific to the defense industry. These risks include the ability of the U.S. Government to unilaterally:
•suspend or debar us from receiving new contracts based on alleged violations of procurement laws or regulations;
•terminate existing contracts;
•revoke required security clearances; and
•audit contract-related costs and fees, including allocated indirect costs.
Most U.S. Government contracts can be terminated by the U.S. Government at its convenience without significant notice. Termination for convenience provisions provide only for recovery of costs incurred or committed, settlement expenses and profit on the work completed prior to termination.
Most of our U.S. Government contracts are based on a firm-fixed price. On contracts for which the price is based on the reimbursement of costs, the U.S. Government may review our costs and performance, as well as our accounting and general business practices. Based on the results of such audits, the U.S. Government may adjust our contract-related costs and fees, including allocated indirect costs. In addition, under U.S. Government purchasing regulations, some of our costs, including most financing costs, amortization of intangible assets, portions of research and development costs, and certain marketing expenses may not be subject to reimbursement under cost-reimbursement contracts.
Furthermore, even where the price is not based on cost, the U.S. Government may seek to review our costs to determine whether our pricing is “fair and reasonable.” Our subsidiaries are periodically subject to pricing reviews and government buying agencies that purchase some of our subsidiaries’ products are periodically subject to audits by the DOD with respect to prices paid for such products. As a result of these audits, we could be asked to enter into an arrangement whereby our prices would be based on cost, plus a nominal fee, the DOD could seek to pursue alternative sources of supply for our parts, or the U.S. Government could take other adverse actions with respect to our contracts. Any of those occurrences could lead to a reduction in our revenue from, or the profitability of certain of our supply arrangements with, certain agencies and buying organizations of the U.S. Government. Further, negative publicity relating to the results of any audit, inquiry or subsequent hearing or the like could negatively impact our stock price.
If a government inquiry or investigation uncovers improper or illegal activities, we could be subject to civil or criminal penalties or administrative sanctions, including contract termination, fines, forfeiture of fees, suspension of payment and suspension or debarment from doing business with U.S. Government agencies, any of which could materially adversely affect our reputation, business, financial condition, results of operations and cash flows.
Moreover, U.S. Government purchasing regulations contain a number of additional operational requirements, which do not apply to entities not engaged in government contracting. Failure to comply with such government contracting requirements could result in civil and criminal penalties that could have a material adverse effect on the Company’s results of operations.
Our business may be adversely affected if we would lose our government or industry approvals or if more stringent government regulations are enacted or if industry oversight is increased.
The aerospace industry is highly regulated in the U.S. and in other countries. In order to sell our products, we and the products we manufacture must be certified by the FAA, the DOD and similar agencies in foreign countries and by individual manufacturers. If new and more stringent government regulations are adopted or if industry oversight increases, we might incur significant expenses to comply with any new regulations or heightened industry oversight. In addition, if material authorizations or approvals were revoked or suspended, our business would be adversely affected.
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In addition to the aviation approvals, we are at times required to obtain approval from U.S. Government agencies and similar agencies elsewhere in the world to export our products. U.S. laws and regulations applicable to us include the Arms Export Control Act, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and the trade sanctions laws and regulations administered by the United States Department of the Treasury's Office of Foreign Assets Control (“OFAC”). EAR restricts the export of commercial and dual-use products and technical data to certain countries, while ITAR restricts the export of defense products, technical data and defense services.
Failure to obtain approval to export or determination by the U.S. Government or similar agencies elsewhere in the world that we failed to receive required approvals or licenses could eliminate or restrict our ability to sell our products outside the United States or other country of origin, and the penalties that could be imposed by the U.S. Government or other applicable government for failure to comply with these laws could be significant.
We could incur substantial costs as a result of data protection concerns.
The interpretation and application of data protection laws in the U.S. and globally, including but not limited to the General Data Protection Regulation (the “GDPR”), the California Consumer Privacy Act (the “CCPA”), China’s Personal Information Protection Law (“PIPL”) and the EU AI Act, are uncertain and evolving. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. Complying with these various laws is difficult and could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. Further, although we have implemented internal controls and procedures designed to ensure compliance with the GDPR, CCPA, PIPL, the EU AI Act and other privacy-related laws, rules and regulations (collectively, the “Data Protection Laws”), there can be no assurance that our controls and procedures will enable us to be fully compliant with all Data Protection Laws. The rapid evolution and increased adoption of artificial intelligence (“AI”) technologies may intensify these risks. Any failure to comply with Data Protection Laws could result in significant penalties, fines, legal challenges and reputational harm.
Increased cybersecurity threats and more sophisticated and targeted computer crime have posed and could continue to pose a risk to our information technology systems and a disruption to or breach in the security of such systems, if material, could have adverse effects on our result of operations and financial condition.
We rely extensively on information technology systems to manage and operate our business, some of which are managed by third parties. The security and functionality of these information technology systems, and the processing of data by these systems, are critical to our business operations. If these systems, or any part of the systems, are damaged, intruded upon, attacked, shutdown or cease to function properly (whether by planned upgrades, force majeure, telecommunications failures, criminal acts, including hardware or software break-ins, ransomware attacks or extortion attempts, or viruses, or other cybersecurity incidents) and we suffer any resulting interruption in our ability to manage and operate our business or if our products are affected, our results of operations and financial condition could be materially adversely affected. In fact, we have experienced data security incidents, although these have not had a material impact on our financial results. Furthermore, the Company has access to classified, sensitive, confidential, proprietary, or personal data or information that is subject to privacy and security laws, regulations, or other contractually-imposed controls. The rapid evolution and increased adoption of AI technologies may intensify our cybersecurity risks.
Despite our use of reasonable and appropriate technical security controls and monitoring, security breaches, theft, misplaced, lost or corrupted data, programming, or employee errors and/or malfeasance have led and could in the future lead to the compromise or improper use of such sensitive, confidential, proprietary, or personal data or information. Such events may result in possible negative consequences, such as disruption to our business operations, loss of proprietary information, ransom demands, loss of revenue, penalties, failure to comply with laws governing sensitive data, government enforcement, litigation or regulatory proceedings, negative publicity, loss of reputation, loss of intellectual property, loss of competitiveness or customers, increased security and compliance costs or other negative consequences. Further, the amount of insurance coverage that we maintain may be inadequate to cover claims or liabilities relating to a cybersecurity incident. Depending on the nature and magnitude of these events, they may have an adverse impact on our results of operations or financial condition.
Risks Related to Legal and Regulatory Matters
We could incur substantial costs as a result of violations of or liabilities under environmental laws and regulations.
Our operations and facilities are subject to a number of federal, state, local and foreign environmental laws and regulations that govern, among other things, discharges of pollutants into the air and water, the generation, handling, storage and disposal of hazardous materials and wastes, the remediation of contamination and the health and safety of our employees. Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. Certain facilities and third-party sites utilized by subsidiaries of the Company have been identified as potentially responsible parties under the federal superfund laws and comparable state laws. The Company is currently involved in the investigation and remediation of a number of sites under applicable laws.
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Estimates of the Company’s environmental liabilities are based on current facts, laws, regulations and technology. These estimates take into consideration the Company’s prior experience and professional judgment of the Company’s environmental advisors. Estimates of the Company’s environmental liabilities are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluations and cost estimates, the extent of corrective actions that may be required and the number and financial condition of other potentially responsible parties, as well as the extent of their responsibility for the remediation.
Accordingly, as investigations and remediations proceed, it is likely that adjustments in the Company’s accruals will be necessary to reflect new information. The amounts of any such adjustments could have a material adverse effect on the Company’s results of operations or cash flows in a given period. Based on currently available information, however, the Company does not believe that future environmental costs in excess of those accrued with respect to sites for which the Company has been identified as a potentially responsible party are likely to have a material adverse effect on the Company’s financial condition.
We may be subject to periodic litigation and regulatory proceedings, which may adversely affect our business and financial performance.
From time to time, we are involved in lawsuits and regulatory actions brought or threatened against us in the ordinary course of business. These actions and proceedings may involve claims for, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, or breach of contract. In addition, we may be subject to class action lawsuits, including those involving allegations of violations of consumer product statutes or the Fair Labor Standards Act and state wage and hour laws. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of any such actions or proceedings. The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify, as plaintiffs may seek recovery of very large or indeterminate amounts in these types of lawsuits, and the magnitude of the potential loss may remain unknown for substantial periods of time. In addition, plaintiffs in many types of actions may seek punitive damages, civil penalties, consequential damages or other losses, or injunctive or declaratory relief. These proceedings could result in substantial cost and may require us to devote substantial resources to defend ourselves. The ultimate resolution of these matters through settlement, mediation, or court judgment could have a material impact on our financial condition, results of operations, and cash flows.
We could be adversely affected if one of our products causes an aircraft to crash.
Our operations expose us to potential liabilities for personal injury or death as a result of the failure of an aircraft product that we have designed, manufactured or serviced. While we maintain liability insurance to protect us from future product liability claims, in the event of product liability claims our insurers may attempt to deny coverage or any coverage we have may not be adequate. We also may not be able to maintain insurance coverage in the future at an acceptable cost. Any liability not covered by insurance or for which third-party indemnification is not available could result in significant liability to us.
In addition, a crash caused by one of our products could damage our reputation for quality products. We believe our customers consider safety and reliability as key criteria in selecting a provider of aircraft products. If a crash were to be caused by one of our products, or if we were to otherwise fail to maintain a satisfactory record of safety and reliability, our ability to retain and attract customers may be materially adversely affected.
Our ability to achieve our environmental, social and governance goals are subject to risks, many of which are outside of our control, and our reputation and brands could be harmed if we fail to meet such goals.
Companies across all industries are facing increasing scrutiny from stakeholders related to environmental, social and governance (“ESG”) matters, including practices and disclosures related to environmental stewardship; social responsibility; diversity, equity and inclusion; and workplace rights. Our ability to achieve our ESG goals, including our goal to achieve our Scope 1 and Scope 2 emissions by the year 2031, and to accurately and transparently report our progress presents numerous operational, financial, legal and other risks, and may be dependent on the actions of suppliers and other third parties and significant technological advancements with respect to the development and availability of reliable, affordable and sustainable alternative solutions, all of which are outside of our control. If we are unable to meet our ESG goals or evolving stakeholder expectations and industry standards, or if we are perceived to have not responded appropriately to the growing concern for ESG issues, our reputation could be negatively impacted. In addition, in recent years, investor advocacy groups and certain institutional investors have placed increasing importance on ESG matters. If, as a result of their assessment of our ESG practices, certain investors are unsatisfied with our actions or progress, they may reconsider their investment in us.
As the nature, scope and complexity of ESG reporting, diligence and disclosure requirements expand, we may have to undertake additional costs to control, assess and report on ESG metrics. Any failure or perceived failure, whether or not valid, to pursue or fulfill our ESG goals, targets and objectives or to satisfy various ESG reporting standards within the timelines we announce, or at all, could increase the risk of litigation.
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Risks Related to Financial Matters
We have recorded a significant amount of intangible assets, which may never generate the returns we expect.
Mergers and acquisitions have resulted in significant increases in identifiable intangible assets and goodwill. Identifiable intangible assets, which primarily include trademarks, trade names, customer relationships, and technology, were approximately $3.4 billion at September 30, 2024, representing approximately 13% of our total assets. Goodwill recognized in accounting for mergers and acquisitions was approximately $10.4 billion at September 30, 2024, representing approximately 41% of our total assets. We may never realize the full value of our identifiable intangible assets and goodwill, and to the extent we were to determine that our identifiable intangible assets or our goodwill were impaired within the meaning of applicable accounting standards, we would be required to write-off the amount of any impairment.
We may be subject to risks relating to changes in our tax rates or exposure to additional income tax liabilities.
We are subject to income taxes in the U.S. and various non-U.S. jurisdictions. The Company’s domestic and international tax liabilities are dependent upon the location of earnings among these different jurisdictions. The Company’s future results of operations could be adversely affected by changes in the Company’s effective tax rate as a result of changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets, challenges by tax authorities or changes in tax laws or regulations. From time to time, changes in tax laws or regulations may be proposed or enacted that could adversely affect our overall tax liability. There can be no assurance that changes in tax laws or regulations, both within the U.S. and the other jurisdictions in which we operate, such as the proposed 15% global minimum tax under the Organisation for Economic Co-operation and Development (the “OECD”) Pillar Two, Global Anti-Base Erosion Rules (the “Pillar Two Rules”), will not materially and adversely affect our effective tax rate, tax payments, financial condition and results of operations. As of September 30, 2024, a handful of jurisdictions where the Company operates, including Canada, U.K. and Germany, have adopted the Pillar Two Rules. The effective dates vary between fiscal 2025 and fiscal 2026.
In addition, the amount of income taxes paid by the Company is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. tax authorities. If these audits result in assessments different from amounts reserved, future financial results may include unfavorable adjustments to the Company’s tax liabilities, which could have a material adverse effect on the Company’s results of operations.
We do not regularly declare and pay quarterly or annual cash dividends on our stock.
Notwithstanding special cash dividends, of which the most recent declarations by the Company’s Board of Directors was on September 19, 2024 in the amount of $75.00 per outstanding share of common stock, which was paid on October 18, 2024 to stockholders of record as of October 4, 2024, we do not anticipate declaring regular cash dividends, whether quarterly or annual, on our common stock or any other equity security in the foreseeable future.
The amounts that may be available to us to pay future special cash dividends are restricted under our debt and other agreements. Any payment of special cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend on our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions and other factors deemed relevant by our Board of Directors. Therefore, shareholders should not rely on regular quarterly or annual dividend income from shares of our common stock and should not rely on special dividends with any regularity or at all.
General Risks
Our commercial business is sensitive to the number of flight hours that our customers’ planes spend aloft, the size and age of the worldwide aircraft fleet and our customers’ profitability. These items are, in turn, affected by general economic and geopolitical and other worldwide conditions.
Our commercial business is directly affected by, among other factors, changes in RPKs, the size and age of the worldwide aircraft fleet, the percentage of the fleet that is out-of-warranty and changes in the profitability of the commercial airline industry. RPKs and airline profitability have historically been correlated with the general economic environment, although national and international events also play a key role. For example, in addition to the COVID-19 pandemic, past examples in which the airline industry has been negatively affected include downturns in the global economy, higher fuel prices, increased security concerns among airline customers following the events of September 11, 2001, the Severe Acute Respiratory Syndrome epidemic, and conflicts abroad. Additional examples include future geopolitical or other worldwide events, such as war, terrorist acts, or additional worldwide infectious disease outbreaks.
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In addition, global market and economic conditions have been challenging due to turbulence in the U.S. and international markets and economies and have prolonged declines in business and consumer spending. As a result of the substantial reduction in airline traffic resulting from the aforementioned events, the airline industry incurred large losses and financial difficulties. Some carriers parked or retired a portion of their fleets and reduced workforces and flights. During periods of reduced airline profitability, some airlines may delay purchases of spare parts, preferring instead to deplete existing inventories, and delay refurbishments and discretionary spending. If demand for spare parts decreases, there would be a decrease in demand for certain products. An adverse change in demand could impact our results of operations, collection of accounts receivable and our expected cash flow generation from current and acquired businesses which may adversely impact our financial condition and access to capital markets.
U.S. military spending is dependent upon the U.S. defense budget.
The military and defense market is significantly dependent upon government budget trends, particularly the DOD budget. In addition to normal business risks, our supply of products to the U.S. Government is subject to unique risks largely beyond our control. DOD budgets could be negatively impacted by several factors, including, but not limited to, a change in defense spending policy as a result of the presidential election or otherwise, the U.S. Government’s budget deficits, spending priorities, the cost of sustaining the U.S. military presence internationally and possible political pressure to reduce U.S. Government military spending, each of which could cause the DOD budget to remain unchanged or to decline. A significant decline in U.S. military expenditures could result in a reduction in the amount of our products sold to the various agencies and buying organizations of the U.S. Government.
Our stock price may be volatile, and an investment in our common stock could suffer a decline in value.
There has been significant volatility in the market price and trading volume of equity securities, which is unrelated to the operating performance of the companies issuing the securities. These market fluctuations may negatively affect the market price of our common stock. Shareholders may not be able to sell their shares at or above the purchase price due to fluctuations in the market price of our common stock. Such changes could be caused by changes in our operating performance or prospects, including possible changes due to the cyclical nature of the aerospace industry and other factors such as fluctuations in OEM and aftermarket ordering, which could cause short-term swings in profit margins. Or such changes could be unrelated to our operating performance, such as changes in market conditions affecting the stock market generally or the stocks of aerospace companies or changes in the outlook for our common stock, such as changes to or the confidence in our business strategy, changes to or confidence in our management, or expectations for future growth of the Company.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
We have established a risk-based cybersecurity and information security program (“program”) designed to assess, identify, and manage material risks from cybersecurity threats. Our cybersecurity risk management process includes policies that specify the requirements for technical security controls, monitoring systems, tools and services from third-party providers, and employee training and awareness. Our cybersecurity risk management process also includes regular independent audits across our operating units. Management oversees our cybersecurity risk management process in order to assess and manage material risks from cybersecurity threats identified by both internal and external threat intelligence. Our program monitors and evaluates risks from cybersecurity threats, and we aim to adapt our program and related processes accordingly. As adopted by our businesses, which has been overseen by our corporate executive team, we have a cybersecurity incident response plan that outlines our policies and procedures for managing a cybersecurity incident. Our businesses are required to conduct regular exercises of their incident response plan as part of our program.
The multi-layered framework on which our cybersecurity and information security program is built incorporates cybersecurity standards and certain requirements of the National Institute of Standards and Technology (“NIST”) Special Publication 800-171—Protecting Controlled Unclassified Information in Non-Federal Systems and Organizations—along with other legal and regulatory requirements. However, this does not mean that we meet any particular technical standards, specifications, or requirements, but rather that we use NIST and other cybersecurity standards as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business.
Our cybersecurity and information security program is led by the Company’s Vice President of Cybersecurity (“VPoC”) who reports to our Chief Financial Officer. Our VPoC has served as a technology leader of cybersecurity, information security, infrastructure, and operational functions for over 35 years. The VPoC is supported by the Incident Response Team (“IRT”), a management committee made up of the Co-Chief Operating Officers, Chief Financial Officer, and executives in legal, finance, IT, and audit. The IRT supports the VPoC in assessing and managing risks from cybersecurity threats and in the event of a cybersecurity incident, provides oversight and leadership with respect to incident response.
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We have in place an incident response plan to identify, respond to, and recover from cybersecurity threats and cybersecurity incidents. In the event of a potentially material cybersecurity incident, as determined by the VPoC with support from legal, as needed, the IRT is notified through an established escalation protocol. The Chair of the Audit Committee is also notified and briefed, and meetings of the Audit Committee and/or full Board of Directors would be held as appropriate. We maintain a relationship with a third-party forensic vendor available for incident response and investigation. Additionally, we maintain cybersecurity insurance.
The Company’s Board of Directors oversees our enterprise risk management (“ERM”) program and has delegated the primary responsibility for its oversight, which includes oversight of cybersecurity risk, to the Audit Committee. The Audit Committee is informed of about material risks from cybersecurity threats through regular discussion with management regarding cybersecurity risk mitigation and cybersecurity incident management. Executive management, including our VPoC, regularly presents to the Audit Committee regarding cybersecurity matters, including program updates, key metrics, and developments.
The ERM program inventories and classifies key risk areas. We employ a methodology for scoring the risks based on the probability and impact of individual risks and discuss and implement countermeasures to address the risks.
Based on the information we have as of the date of this Annual Report on Form 10-K, we do not believe any risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition. For further information about risks related to cybersecurity threats, refer to Item 1A. “Risk Factors.”
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ITEM 2. PROPERTIES
TransDigm’s principal owned properties (defined as greater than 30,000 square feet or related to a principal operation) as of September 30, 2024 are as follows:
| Location | Reporting Segment | Square Footage | ||||||||||||
| Cheektowaga, NY | Airframe | 656,200 | ||||||||||||
| Brea, CA | Airframe | 315,000 | ||||||||||||
| Stillington, United Kingdom | Airframe | 274,800 | ||||||||||||
| Montreal, Quebec, Canada | Airframe | 271,700 | ||||||||||||
| Palo Alto, CA | Power & Control | 257,000 | ||||||||||||
| Miesbach, Germany | Power & Control | 242,000 | ||||||||||||
| Liberty, SC | Power & Control | 219,000 | ||||||||||||
| Waco, TX | Power & Control | 218,800 | ||||||||||||
| Ingolstadt, Germany | Airframe | 191,900 | ||||||||||||
| Kent, OH | Airframe | 185,000 | ||||||||||||
| Bridport, United Kingdom | Airframe | 174,700 | ||||||||||||
| Beverly, MA | Power & Control | 163,000 | ||||||||||||
| Lillington, NC | Power & Control | 162,400 | ||||||||||||
| Union Gap, WA | Airframe | 144,400 | ||||||||||||
| Coachella, CA | Power & Control | 140,000 | ||||||||||||
| Phoenix, AZ | Airframe | 138,700 | ||||||||||||
| Paks, Hungary | Airframe | 137,800 | ||||||||||||
| Los Angeles, CA | Power & Control | 131,000 | ||||||||||||
| Liverpool, NY | Power & Control | 128,900 | ||||||||||||
| Bohemia NY | Power & Control | 124,000 | ||||||||||||
| Buena Park, CA | Power & Control | 115,000 | ||||||||||||
| Llangeinor, United Kingdom | Airframe | 112,300 | ||||||||||||
| Bourges, France | Power & Control | 109,400 | ||||||||||||
| Westbury, NY | Power & Control | 106,800 | ||||||||||||
| Kent, WA | Airframe | 100,000 | ||||||||||||
| Painesville, OH | Power & Control | 94,200 | ||||||||||||
| Valencia, CA | Airframe | 88,400 | ||||||||||||
| Letchworth, United Kingdom | Airframe | 88,200 | ||||||||||||
| Placentia, CA | Airframe | 86,600 | ||||||||||||
| Addison, IL | Power & Control | 83,300 | ||||||||||||
| Niagara Falls, NY | Airframe | 82,500 | ||||||||||||
| Sarralbe, France | Power & Control | 77,900 | ||||||||||||
| Niort, France | Power & Control | 69,000 | ||||||||||||
| Prescott, AZ | Airframe | 66,200 | ||||||||||||
| Clearwater, FL | Power & Control | 64,200 | ||||||||||||
| South Euclid, OH | Power & Control | 60,000 | ||||||||||||
| Woodland, CA | Power & Control | 60,000 | ||||||||||||
| Wichita, KS | Power & Control | 57,000 | ||||||||||||
| Branford, CT | Airframe | 52,000 | ||||||||||||
| Hawkesbury, Ontario, Canada | Airframe | 50,000 | ||||||||||||
| Avenel, NJ | Power & Control | 48,500 | ||||||||||||
| Rancho Cucamonga, CA | Power & Control | 47,000 | ||||||||||||
| Pennsauken, NJ | Airframe | 38,000 | ||||||||||||
| Ryde, United Kingdom | Power & Control | 33,200 | ||||||||||||
| Rancho Cucamonga, CA | Airframe | 32,700 | ||||||||||||
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TransDigm’s principal leased properties (defined as greater than 30,000 square feet or related to a principal operation) as of September 30, 2024 are as follows:
| Location | Reporting Segment | Square Footage | ||||||||||||
| Everett, WA | Airframe | 339,300 | ||||||||||||
| East Camden, AR | Power & Control | 276,000 | ||||||||||||
| Whippany, NJ | Power & Control | 230,500 | ||||||||||||
| Portsmouth, United Kingdom | Airframe | 193,500 | ||||||||||||
| Nittambuwa, Sri Lanka | Airframe | 168,000 | ||||||||||||
| Santa Ana, CA | Airframe | 159,200 | ||||||||||||
| Tijuana, Mexico | Airframe | 141,000 | ||||||||||||
| Holmestrand, Norway | Airframe | 139,500 | ||||||||||||
| Marlow, United Kingdom | Airframe | 116,100 | ||||||||||||
| Tijuana, Mexico | Power & Control | 112,800 | ||||||||||||
| Melbourne, FL | Power & Control | 107,000 | ||||||||||||
| Farnborough, United Kingdom | Power & Control | 103,400 | ||||||||||||
| Goldsboro, NC | Power & Control | 101,000 | ||||||||||||
| Fullerton, CA | Airframe | 100,000 | ||||||||||||
| Kunshan, China | Airframe | 98,500 | ||||||||||||
| Bethpage, NY | Power & Control | 98,000 | ||||||||||||
| Sylmar, CA | Airframe | 93,000 | ||||||||||||
| Elkhart, IN | Non-aviation | 91,500 | ||||||||||||
| Carson City, NV | Airframe | 90,100 | ||||||||||||
| Kunshan, China | Non-aviation | 86,100 | ||||||||||||
| Davis Junction, IL | Airframe | 84,500 | ||||||||||||
| Middlesex, United Kingdom | Power & Control | 84,000 | ||||||||||||
| Miesbach, Germany | Power & Control | 83,600 | ||||||||||||
| Livermore, CA | Airframe | 73,200 | ||||||||||||
| Camarillo, CA | Power & Control | 70,000 | ||||||||||||
| Matamoros, Mexico | Power & Control | 69,200 | ||||||||||||
| Gloucestor, United Kingdom | Airframe | 69,100 | ||||||||||||
| Delta, British Columbia, Canada | Airframe | 59,300 | ||||||||||||
| Chihuahua, Mexico | Airframe | 55,000 | ||||||||||||
| Portland, OR | Airframe | 50,000 | ||||||||||||
| St. Paul, MN | Airframe | 49,600 | ||||||||||||
| Zunyi, China | Power & Control | 45,600 | ||||||||||||
| Sugar Grove, IL | Airframe | 45,000 | ||||||||||||
| Palo Alto, CA | Power & Control | 44,300 | ||||||||||||
| Palm Bay, FL | Power & Control | 42,000 | ||||||||||||
| Tempe, AZ | Power & Control | 40,200 | ||||||||||||
| Anaheim, CA | Airframe | 39,000 | ||||||||||||
| Collegeville, PA | Airframe | 37,000 | ||||||||||||
| Chongqing, China | Airframe | 36,300 | ||||||||||||
| Rancho Santa Margarita, CA | Airframe | 35,200 | ||||||||||||
| Los Angeles, CA | Airframe | 33,200 | ||||||||||||
| Joensuu, Finland | Airframe | 32,300 | ||||||||||||
Our Cleveland, OH and Newport Beach, CA corporate facilities house our principal executive offices, and we currently lease approximately 26,000 square feet and 5,800 square feet, respectively, for those purposes. TransDigm also leases certain of its other non-material facilities. Management believes that our machinery, plants and offices are in satisfactory operating condition and that it will have sufficient capacity to meet foreseeable future needs without incurring significant additional capital expenditures.
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in the ordinary course of business. The Securities and Exchange Commission (“SEC”) regulations require us to disclose certain information about environmental proceedings when a governmental authority is a party to the proceedings if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to such regulations, the Company uses a threshold of $1 million or more for purposes of determining whether disclosure of any such proceedings is required as we believe matters under this threshold are not material to the Company. While the Company is currently involved in certain legal proceedings, it believes the results of these proceedings will not have a material adverse effect on its financial condition, results of operations, or cash flows.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on the New York Stock Exchange, or NYSE, under the ticker symbol “TDG.”
Holders
As of October 9, 2024, there were 30 stockholders of record of our common stock and approximately 836,000 beneficial stockholders, which includes an estimated number of stockholders who have their shares held in their accounts by banks and brokers.
Dividends
On November 27, 2023, the Company paid a special cash dividend of $35.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans. The total cash payment, funded by existing cash on hand, related to the special dividend and dividend equivalent payments was approximately $2,020 million.
On September 19, 2024, the Company's Board of Directors authorized and declared a special cash dividend of $75.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans. The total cash payment, funded by a combination of $3,000 million in new senior secured debt and existing cash on hand, related to the special dividend and dividend equivalents was approximately $4,348 million in October 2024.
Performance Graph
Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in the shares of common stock of TD Group with the cumulative total return of a hypothetical investment in each of the S&P 500 Index and the S&P Aerospace & Defense Select Index. An investment of $100 (with reinvestment of all dividends) is assumed to have been made in our common stock and in each of the indexes on September 30, 2019, and its relative performance is tracked through September 30, 2024.
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The following performance graph and related information shall not be deemed “soliciting material” nor to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of 1934, each as amended, except to the extent we specifically incorporate it by reference into such filing.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among TransDigm Group Inc., the S&P 500 Index and S&P Aerospace & Defense Select Index
*$100 invested on 9/30/2019 in stock or index, including reinvestment of dividends.
Copyright 2024 Standard & Poor’s, a division of S&P Global. All rights reserved.
| 9/30/2019 | 9/30/2020 | 9/30/2021 | 9/30/2022 | 9/30/2023 | 9/30/2024 | ||||||||||||||||||||||||||||||
| TransDigm Group Inc. | 100.00 | 96.51 | 126.87 | 109.61 | 176.10 | 308.97 | |||||||||||||||||||||||||||||
| S&P 500 Index | 100.00 | 115.15 | 149.70 | 126.54 | 153.89 | 209.84 | |||||||||||||||||||||||||||||
| S&P Aerospace & Defense Select Index | 100.00 | 82.62 | 114.25 | 88.47 | 109.07 | 154.59 | |||||||||||||||||||||||||||||
Purchases of Equity Securities by the Issuer or Affiliated Purchaser
On January 27, 2022, the Board of Directors of the Company authorized a new stock repurchase program to permit repurchases of its outstanding common stock not to exceed $2,200 million in the aggregate (the “$2,200 million stock repurchase program”), replacing the $650 million stock repurchase program previously authorized by the Board on November 8, 2017, subject to any restrictions specified in the Second Amended and Restated Credit Agreement dated as of June 4, 2014 (the “Credit Agreement”) and indentures governing the Company's existing Notes. There is no expiration date for this program.
No repurchases were made under the program in fiscal 2024 or 2023. During fiscal 2022, the Company repurchased 1,490,413 shares of common stock at an average price of $612.13 per share, for a total amount of $912 million. The repurchased shares of common stock are classified as treasury stock in the statement of changes in stockholders' deficit. As of September 30, 2024, $1,288 million remains available for repurchase under the $2,200 million stock repurchase program.
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read together with TD Group’s consolidated financial statements and the related notes included elsewhere in this report. The following discussion may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under the heading entitled “Risk Factors” included elsewhere in this report. These risks could cause our actual results to differ materially from any future performance suggested below.
Overview
For fiscal year 2024, we generated net sales of $7,940 million, gross profit of $4,672 million or 58.8% of net sales, and net income attributable to TD Group of $1,714 million. We believe we have achieved steady, long-term growth in sales and improvements in operating performance due to our competitive strengths and through execution of our value-driven operating strategy. More specifically, we believe that focusing our businesses on our value-driven operating strategy of obtaining profitable new business, carefully controlling the cost structure and pricing our highly engineered value-added products to fairly reflect the value we provide and the resources required to do so has historically resulted in improvements in gross profit and income from operations over the long-term.
Our selective acquisition strategy has also been an important contribution to the growth of our business. We maintain a selective acquisition strategy, concentrating on proprietary commercial aerospace component businesses with significant aftermarket content. The integration of acquisitions into our existing businesses combined with implementing our proven operating strategy has historically resulted in improvements in the financial performance of the acquired businesses.
We believe our key competitive strengths include:
Large and Growing Installed Product Base with Aftermarket Revenue Stream. We provide components to a large and growing installed base of aircraft to which we supply aftermarket products. We estimate that our products are installed on over 100,000 commercial transport, regional transport, military and general aviation fixed wing turbine aircraft and rotary wing aircraft.
Diversified Revenue Base. We believe that our diversified revenue base reduces our dependence on any particular product, platform or market channel and has been a significant factor in maintaining our financial performance. Our products are represented in nearly every commercial and military aircraft in service today. Our portfolio of products encompasses a vast array of essential components that play pivotal roles on commercial aerospace and defense platforms, as well as other products. For example, TransDigm’s operating units make aircraft seatbelts and cockpit security systems that keep passengers and pilots safe; parachutes that protect soldiers, sailors and airmen; and space telescope equipment that helps NASA better understand the universe. We expect to continue to develop new products for military and commercial applications. Our businesses continually seek to provide innovative solutions for our customers and others in the commercial aerospace and defense industries. These include new touchless products and environmentally friendly products, such as the brushless starter generator and sustainable decorative laminates.
Our business strategy is made up of two key elements: (1) a value-driven operating strategy focused around our three core value drivers and (2) a selective acquisition strategy.
Value-Driven Operating Strategy. Our three core value drivers are:
•Obtaining Profitable New Business. We attempt to obtain profitable new business by using our technical expertise and application skill and our detailed knowledge of our customer base and the individual niche markets in which we operate. We have regularly been successful in identifying and developing both aftermarket and OEM products to drive our growth.
•Improving Our Cost Structure. We are committed to maintaining and continuously improving our lean cost structure through detailed attention to the cost of each of the products that we offer and our organizational structure, with a focus on reducing the cost of each.
•Providing Highly Engineered Value-Added Products to Customers. We focus on the engineering, manufacturing and marketing of a broad range of highly engineered niche products that we believe provide value to our customers. We believe we have been consistently successful in communicating to our customers the value of our products. This has generally enabled us to price our products to fairly reflect the value we provide and the resources required to do so.
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Selective Acquisition Strategy. We selectively pursue the acquisition of proprietary aerospace component businesses when we see an opportunity to create value through the application of our three core value-driven operating strategies. The aerospace industry, in particular, remains highly fragmented, with many of the companies in the industry being small private businesses or small non-core operations of larger businesses. We have significant experience among our management team in executing acquisitions and integrating acquired businesses into our company and culture. As of the date of this report, we have successfully acquired 93 businesses and various product lines since our formation in 1993. Many of these acquisitions have been integrated into an existing TransDigm production facility, which enables a higher production capacity utilization, which in turn improves gross profit levels due to the ability to spread the fixed manufacturing overhead costs over higher production volume. In the case of larger acquisitions that consist of multiple product lines, we may pursue opportunities to divest certain acquired operating units that are not in line with our acquisition strategy.
Acquisitions during the most recent three fiscal years is described in Note 2, “Acquisitions” in the notes to the consolidated financial statements included herein.
In fiscal 2024, the commercial aerospace industry continued to rebound from the adverse impacts of the COVID-19 pandemic. Commercial air travel in domestic markets continues to lead the air traffic recovery with most domestic markets nearing, achieving or surpassing pre-pandemic air traffic levels. The pace of the international recovery has been slower than the domestic recovery; however, it has continued to make steady improvement. Since February 2024, both domestic and international RPKs have surpassed 2019 (i.e., pre-pandemic) levels and have remained on a steady growth trend. The 2025 leading indicators or industry consensus suggest a continuation of current trends supported by continued RPK growth.
Our commercial transport OEM shipments and revenues generally run ahead of aircraft delivery schedules. Consistent with prior years, our fiscal 2025 shipments will be a function of, among other things, the estimated 2025 and 2026 commercial aircraft production rates for Boeing and Airbus. In fiscal 2024, we experienced improved sales in the commercial OEM sector primarily due to increased aircraft production by Boeing and Airbus. Airline demand for new aircraft remains high, and the OEMs are working to increase aircraft production. However, aircraft production rates remain well below pre-pandemic levels as the struggles in the OEM supply chain persist. Due to these factors, it is difficult to accurately predict the OEM build rates for 2025.
Our military business fluctuates from year-to-year, and is dependent, to a degree, on government budget constraints, the timing of orders, macro and micro dynamics with respect to the U.S. Department of Defense (“DOD”) procurement policy and the extent of global conflicts, such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas. Also, delays in government spending outlays and government funding reprioritization, such as shifting funds to efforts to assist friendly countries in conflicts, provides for further unpredictability in the military spending outlook. For a variety of reasons, the military spending outlook is very uncertain, though recent DOD budgets have trended upwards.
Defense sales in fiscal 2024 increased compared to fiscal 2023 at a higher rate than in recent fiscal years due to improving U.S. Government defense spend outlays. DOD budgets have trended upwards as geopolitical challenges such as the ongoing conflicts between Russia and Ukraine and Israel and Hamas, and military modernization efforts are driving demand.
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Results of Operations
The following table sets forth, for the periods indicated, certain operating data of the Company, including presentation of the amounts as a percentage of net sales (amounts in millions, except per share data):
| Fiscal Years Ended September 30, | |||||||||||||||||||||||
| 2024 | % of Net Sales | 2023 | % of Net Sales | ||||||||||||||||||||
| Net sales | $ | 7,940 | 100.0 | % | $ | 6,585 | 100.0 | % | |||||||||||||||
| Cost of sales | 3,268 | 41.2 | % | 2,743 | 41.7 | % | |||||||||||||||||
| Selling and administrative expenses | 980 | 12.3 | % | 780 | 11.8 | % | |||||||||||||||||
| Amortization of intangible assets | 161 | 2.0 | % | 139 | 2.1 | % | |||||||||||||||||
| Income from operations | 3,531 | 44.5 | % | 2,923 | 44.4 | % | |||||||||||||||||
| Interest expense-net | 1,286 | 16.2 | % | 1,164 | 17.7 | % | |||||||||||||||||
| Refinancing costs | 58 | 0.7 | % | 56 | 0.9 | % | |||||||||||||||||
| Other income | (28) | (0.4) | % | (13) | (0.2) | % | |||||||||||||||||
| Income tax provision | 500 | 6.3 | % | 417 | 6.3 | % | |||||||||||||||||
| Income from continuing operations | 1,715 | 21.6 | % | 1,299 | 19.7 | % | |||||||||||||||||
| Less: Net income attributable to noncontrolling interests | (1) | — | % | (1) | — | % | |||||||||||||||||
| Net income attributable to TD Group | $ | 1,714 | 21.6 | % | $ | 1,298 | 19.7 | % | |||||||||||||||
| Net income applicable to TD Group common stockholders | $ | 1,481 | (1) | 18.7 | % | $ | 1,260 | (1) | 19.1 | % | |||||||||||||
| Earnings per share attributable to TD Group common stockholders: | |||||||||||||||||||||||
| Basic and diluted | $ | 25.62 | (2) | $ | 22.03 | (2) | |||||||||||||||||
| Cash dividends declared per common share | $ | 110.00 | $ | — | |||||||||||||||||||
| Weighted-average shares outstanding—basic and diluted | 57.8 | 57.2 | |||||||||||||||||||||
| Other Data: | |||||||||||||||||||||||
| EBITDA | $ | 3,813 | (3) | $ | 3,148 | (3) | |||||||||||||||||
| EBITDA As Defined | $ | 4,173 | (3) | 52.6 | % | $ | 3,395 | (3) | 51.6 | % | |||||||||||||
(1)Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends declared or paid on participating securities, including dividend equivalents of $233 million and $38 million for the fiscal years ended September 30, 2024 and 2023, respectively.
(2)Earnings per share is calculated by dividing net income applicable to TD Group common stockholders by the basic and diluted weighted average common shares outstanding.
(3)Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information and limitations regarding these non-GAAP financial measures, including a reconciliation to the comparable U.S. GAAP financial measure.
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Fiscal year ended September 30, 2024 compared with fiscal year ended September 30, 2023
Total Company
•Net Sales. Net organic sales and acquisition sales and the related dollar and percentage changes for the fiscal years ended September 30, 2024 and 2023 were as follows (amounts in millions):
| Fiscal Years Ended | % Change Net Sales | ||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | Change | |||||||||||||||||||||
| Organic sales | $ | 7,629 | $ | 6,562 | $ | 1,067 | 16.2 | % | |||||||||||||||
| Acquisition sales | 311 | 23 | 288 | 4.4 | % | ||||||||||||||||||
| Net sales | $ | 7,940 | $ | 6,585 | $ | 1,355 | 20.6 | % | |||||||||||||||
Organic sales represent net sales from existing businesses owned by the Company, excluding sales from acquisitions. Acquisition sales represent net sales from acquired businesses for the period up to one year from the respective acquisition date. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. Refer to Note 2, “Acquisitions,” in the notes to the consolidated financial statements included herein for information on the Company's recent acquisitions.
The increase in organic sales of $1,067 million for the fiscal year ended September 30, 2024 compared to the fiscal year ended September 30, 2023 is primarily related to increases in defense sales ($486 million, an increase of 18.9%), commercial OEM sales ($294 million, an increase of 20.4%) and commercial aftermarket sales ($253 million, an increase of 12.0%).
The increase in defense sales is primarily attributable to improving U.S. Government defense spend outlays. The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow-body and wide-body aircraft production and deliveries. The increase in commercial aftermarket sales is primarily attributable to the continued recovery in commercial air travel demand and the resulting higher flight hours and utilization of aircraft in fiscal 2024 compared to fiscal 2023, particularly internationally.
The increase in acquisition sales for the fiscal year ended September 30, 2024 is primarily attributable to the fiscal 2024 acquisitions of Raptor Scientific, the Electron Device Business of Communications & Power Industries (“CPI's Electron Device Business”), SEI Industries LTD (“SEI”) and FPT Industries LLC (“FPT”) and the third quarter fiscal 2023 acquisition of Calspan Corporation (“Calspan”).
•Cost of Sales and Gross Profit. Cost of sales increased by $525 million or 19.1%, to $3,268 million for the fiscal year ended September 30, 2024 compared to $2,743 million for the fiscal year ended September 30, 2023. Cost of sales and the related percentage of net sales for the fiscal years ended September 30, 2024 and 2023 were as follows (amounts in millions):
| Fiscal Years Ended | |||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | Change | % Change | ||||||||||||||||||||
| Cost of sales - excluding costs below | $ | 3,241 | $ | 2,744 | $ | 497 | 18.1 | % | |||||||||||||||
| % of net sales | 40.8 | % | 41.7 | % | |||||||||||||||||||
| Non-cash stock and deferred compensation expense | 21 | 17 | 4 | 23.5 | % | ||||||||||||||||||
| % of net sales | 0.3 | % | 0.3 | % | |||||||||||||||||||
| Inventory step-up amortization | 21 | 2 | 19 | 950.0 | % | ||||||||||||||||||
| % of net sales | 0.3 | % | — | % | |||||||||||||||||||
| Foreign currency losses | 20 | 14 | 6 | 42.9 | % | ||||||||||||||||||
| % of net sales | 0.3 | % | 0.2 | % | |||||||||||||||||||
| Loss contract amortization | (35) | (34) | (1) | (2.9) | % | ||||||||||||||||||
| % of net sales | (0.4) | % | (0.5) | % | |||||||||||||||||||
| Total cost of sales | $ | 3,268 | $ | 2,743 | $ | 525 | 19.1 | % | |||||||||||||||
| % of net sales | 41.2 | % | 41.7 | % | |||||||||||||||||||
| Gross profit (Net sales less Total cost of sales) | $ | 4,672 | $ | 3,842 | $ | 830 | 21.6 | % | |||||||||||||||
| Gross profit percentage (Gross profit / Net sales) | 58.8 | % | 58.3 | % | |||||||||||||||||||
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Cost of sales during the fiscal year ended September 30, 2024 decreased as a percentage of net sales despite increased inflationary pressures through most of fiscal 2024. This was primarily driven by the application of our three core value-driven operating strategy (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers) coupled with fixed overhead costs incurred being spread over a higher production volume, which contributed to the gross profit as a percentage of net sales increasing by 0.5 percentage points to 58.8% for the fiscal year ended September 30, 2024 from 58.3% for the fiscal year ended September 30, 2023.
Foreign exchange rates, particularly the U.S. dollar compared to the British pound and the euro, weakened at a more significant rate in the fourth quarter of fiscal 2024 compared to fiscal 2023, resulting in an increase in foreign currency losses in fiscal 2024. No other material movement in the components to cost of sales were identified.
•Selling and Administrative Expenses. Selling and administrative expenses increased by $200 million to $980 million, or 12.3% of net sales, for the fiscal year ended September 30, 2024 from $780 million, or 11.8% of net sales, for the fiscal year ended September 30, 2023. Selling and administrative expenses and the related percentage of net sales for the fiscal years ended September 30, 2024 and 2023 were as follows (amounts in millions):
| Fiscal Years Ended | |||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | Change | % Change | ||||||||||||||||||||
| Selling and administrative expenses - excluding costs below | $ | 735 | $ | 629 | $ | 106 | 16.9 | % | |||||||||||||||
| % of net sales | 9.3 | % | 9.6 | % | |||||||||||||||||||
| Non-cash stock and deferred compensation expense | 196 | 141 | 55 | 39.0 | % | ||||||||||||||||||
| % of net sales | 2.5 | % | 2.1 | % | |||||||||||||||||||
| Acquisition transaction-related expenses | 33 | 6 | 27 | 450.0 | % | ||||||||||||||||||
| % of net sales | 0.4 | % | 0.1 | % | |||||||||||||||||||
| Acquisition integration costs | 13 | 8 | 5 | 62.5 | % | ||||||||||||||||||
| % of net sales | 0.2 | % | 0.1 | % | |||||||||||||||||||
| Bad debt expense | 3 | (4) | 7 | 175.0 | % | ||||||||||||||||||
| % of net sales | — | % | (0.1) | % | |||||||||||||||||||
| Total selling and administrative expenses | $ | 980 | $ | 780 | $ | 200 | 25.6 | % | |||||||||||||||
| % of net sales | 12.3 | % | 11.8 | % | |||||||||||||||||||
Excluding the specific costs in the table above, selling and administrative expenses as a percentage of net sales for the fiscal year ended September 30, 2024 decreased compared to the fiscal year ended September 30, 2023 despite the higher inflationary environment through most of fiscal 2024 due to continued focus on productivity and cost improvements (one of our three core value drivers). The increase in non-cash stock and deferred compensation expense is primarily attributable to the increase in the Black-Scholes fair value of the stock option grants impacting non-cash stock compensation expense. The increase in the Black-Scholes fair value is due to the appreciation of the stock price, which is a key input used to determine the Black-Scholes fair value. Acquisition-related expenses increased due to an increase in acquisition activity and related transaction costs compared to prior year. Bad debt expense for the fiscal year ended September 30, 2023 was favorably impacted by a reduction in the allowance for uncollectible accounts due to improving market conditions within commercial aerospace and the resulting reduction in assessed risk associated with the collectibility of certain trade accounts receivable.
•Amortization of Intangible Assets. Amortization of intangible assets was $161 million for the fiscal year ended September 30, 2024 compared to $139 million for the fiscal year ended September 30, 2023. The increase in amortization expense of $22 million was primarily due to the amortization expense recognized on intangible assets from the third quarter fiscal 2023 acquisition of Calspan and the fiscal 2024 acquisitions. The intangible assets recognized in connection with the fiscal 2024 acquisitions are summarized in Note 8, “Intangible Assets,” of the notes to the consolidated financial statements included herein.
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•Interest Expense-net. Interest expense-net includes interest on borrowings outstanding, amortization of debt issuance costs, original issue discount and premium, revolving credit facility fees, finance leases, interest income and the impact of interest rate swaps and caps designated and qualifying as cash flow hedges. Interest expense-net increased $122 million, or 10.5%, to $1,286 million for the fiscal year ended September 30, 2024 from $1,164 million for the fiscal year ended September 30, 2023. The increase in interest expense-net was primarily due to an increase in the base rate, Term Secured Overnight Financing Rate (“Term SOFR”), to the portion of our variable rate debt that is not hedged (refer to Note 19, “Derivatives and Hedging Activities” in the notes to the consolidated financial statements for information on our hedges), as well as an increase in outstanding borrowings (refer to Note 10, “Debt” in the notes to the consolidated financial statements for information on our debt). This was partially offset by a $52 million increase in interest income. The weighted average interest rate for cash interest payments on total borrowings outstanding for the fiscal year ended September 30, 2024 was 6.3% compared to 6.2% for the fiscal year ended September 30, 2023.
•Refinancing Costs. Refinancing costs of $58 million incurred for the fiscal year ended September 30, 2024 were primarily related to the third party fees and write-off of unamortized debt issuance costs and original issue discount recorded in conjunction with the amendments to the Credit Agreement and the third party fees and write-off of unamortized debt issuance costs recorded in conjunction with the notes redemptions completed during fiscal 2024. Refer to Note 10, “Debt,” in the notes to the consolidated financial statements included herein for additional details. Refinancing costs of $56 million incurred for the fiscal year ended September 30, 2023 were primarily related to the redemption of the 8.00% secured notes due 2025 (the “2025 Secured Notes”) and 6.875% senior subordinated notes due 2026 (the “6.875% 2026 Notes”) and third party fees incurred for the refinancing activity under the amendments to the Credit Agreement completed during fiscal 2023.
•Other Income. Other income was $28 million for the fiscal year ended September 30, 2024 compared to $13 million for the fiscal year ended September 30, 2023. Other income for the fiscal year ended September 30, 2024 primarily related to a gain on sale of business, royalty and other income and the non-service related components of benefit costs on the Company's benefit plans. Other income for the fiscal year ended September 30, 2023 primarily related to a $9 million cash refund received for the Esterline Retirement Plan (the “ERP”) upon the finalizing of the group annuity purchase funding.
•Income Tax Provision. Income tax expense as a percentage of income before income taxes was approximately 22.6% for the fiscal year ended September 30, 2024 compared to 24.3% for the fiscal year ended September 30, 2023. The Company’s lower effective tax rate for the fiscal year ended September 30, 2024 was primarily due to a less significant impact on the rate from the valuation allowance applicable to the Company's net interest deduction limitation carryforward.
•Net Income Attributable to TD Group. Net income attributable to TD Group increased $416 million, or 32.0%, to $1,714 million for the fiscal year ended September 30, 2024 compared to net income attributable to TD Group of $1,298 million for the fiscal year ended September 30, 2023, primarily as a result of the factors referenced above.
•Earnings per Share. Basic and diluted earnings per share from continuing operations was $25.62 for the fiscal year ended September 30, 2024 and $22.03 for the fiscal year ended September 30, 2023. Net income attributable to TD Group for the fiscal year ended September 30, 2024 of $1,714 million was decreased by dividend equivalents of $233 million, or $4.02 per share, resulting in net income applicable to TD Group common stockholders of $1,481 million. Net income attributable to TD Group for the fiscal year ended September 30, 2023 of $1,298 million was decreased by dividend equivalents of $38 million, or $0.67 per share, resulting in net income applicable to TD Group common stockholders of $1,260 million.
Business Segments
•Segment Net Sales. Net sales by segment for the fiscal years ended September 30, 2024 and 2023 were as follows (amounts in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2024 | % of Net Sales | 2023 | % of Net Sales | Change | % Change | ||||||||||||||||||||||||||||||
| Power & Control | $ | 3,941 | 49.6 | % | $ | 3,316 | 50.3 | % | $ | 625 | 18.8 | % | |||||||||||||||||||||||
| Airframe | 3,809 | 48.0 | % | 3,094 | 47.0 | % | 715 | 23.1 | % | ||||||||||||||||||||||||||
| Non-aviation | 190 | 2.4 | % | 175 | 2.7 | % | 15 | 8.6 | % | ||||||||||||||||||||||||||
| Net sales | $ | 7,940 | 100.0 | % | $ | 6,585 | 100.0 | % | $ | 1,355 | 20.6 | % | |||||||||||||||||||||||
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Net sales for the Power & Control segment increased $625 million, an increase of 18.8%, for the fiscal year ended September 30, 2024 compared to the fiscal year ended September 30, 2023. The sales increase resulted primarily from increases in organic sales in defense ($262 million, an increase of 16.7%), commercial OEM ($127 million, an increase of 20.7%) and the commercial aftermarket ($123 million, an increase of 11.9%). The increase in defense sales is primarily attributable to improving U.S. Government defense spend outlays. The increase in commercial OEM sales is primarily attributable to the continued recovery in both narrow-body and wide-body aircraft production and deliveries. The increase in commercial aftermarket sales is primarily attributable to the continued recovery in commercial air travel demand and the resulting higher flight hours and utilization of aircraft in fiscal 2024 compared to fiscal 2023, particularly internationally.
Net sales for the Airframe segment increased $715 million, an increase of 23.1%, for the fiscal year ended September 30, 2024 compared to the fiscal year ended September 30, 2023. The sales increase resulted primarily from increases in organic sales in defense ($225 million, an increase of 22.7%), commercial OEM ($160 million, an increase of 19.7%) and the commercial aftermarket ($131 million, an increase of 12.0%). The increase in defense sales, commercial OEM sales and commercial aftermarket sales for the Airframe segment is attributable to the same factors described in the paragraph above for the Power & Control segment.
Acquisition sales for the Power & Control and Airframe segments contributed approximately $288 million in aggregate to the increase in net sales. Acquisition sales represent net sales from acquired businesses for the period up to one year from the respective acquisition date.
The change in Non-aviation net sales compared to the prior fiscal year was not material.
•EBITDA As Defined. Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information and limitations regarding these non-GAAP financial measures, including a reconciliation to the comparable U.S. GAAP financial measure. EBITDA As Defined by segment for the fiscal years ended September 30, 2024 and 2023 were as follows (amounts in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2024 | % of Segment Net Sales | 2023 | % of Segment Net Sales | Change | % Change | ||||||||||||||||||||||||||||||
| Power & Control | $ | 2,236 | 56.7 | % | $ | 1,866 | 56.3 | % | $ | 370 | 19.8 | % | |||||||||||||||||||||||
| Airframe | 1,962 | 51.5 | % | 1,547 | 50.0 | % | 415 | 26.8 | % | ||||||||||||||||||||||||||
| Non-aviation | 81 | 42.6 | % | 71 | 40.6 | % | 10 | 14.1 | % | ||||||||||||||||||||||||||
| Total segment EBITDA As Defined | 4,279 | 53.9 | % | 3,484 | 52.9 | % | 795 | 22.8 | % | ||||||||||||||||||||||||||
| Less: Unallocated corporate EBITDA As Defined | 106 | 1.3 | % | (1) | 89 | 1.3 | % | (1) | 17 | 19.1 | % | ||||||||||||||||||||||||
| Total Company EBITDA As Defined | $ | 4,173 | 52.6 | % | (1) | $ | 3,395 | 51.6 | % | (1) | $ | 778 | 22.9 | % | |||||||||||||||||||||
(1)Calculated as a percentage of consolidated net sales.
EBITDA As Defined for the Power & Control segment increased approximately $370 million, an increase of 19.8%, resulting from higher organic sales in the defense, commercial OEM and commercial aftermarket channels. Also contributing to the increase in EBITDA As Defined was the application of our three core value-driven operating strategy and positive leverage on our fixed overhead costs spread over a higher production volume despite the ongoing inflationary environment for freight, labor and certain raw materials.
EBITDA As Defined for the Airframe segment increased approximately $415 million, an increase of 26.8%. The increase in EBITDA As Defined for the Airframe segment is attributable to the same factors described in the paragraph above for the Power & Control segment.
EBITDA As Defined from acquisitions for the Power & Control and Airframe segments contributed approximately $97 million in aggregate to the increase in EBITDA As Defined. EBITDA As Defined from acquisitions represents EBITDA As Defined from acquired businesses for the period up to one year from the respective acquisition date.
The change in Non-aviation EBITDA as Defined compared to the prior fiscal year was not material.
Corporate expenses consist primarily of compensation, benefits, professional services and other administrative costs incurred by the corporate offices. An immaterial amount of corporate expenses is allocated to the operating segments. The increase compared to fiscal 2023 is primarily attributable to the current fiscal year portion of the deferred compensation plan adopted in the fourth quarter of 2022 for certain members of non-executive management and higher salaries and bonus expense. Corporate EBITDA as Defined is consistent as a percentage of net sales in fiscal 2024 compared to fiscal 2023.
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Fiscal year ended September 30, 2023 compared with fiscal year ended September 30, 2022
For our results of operations for fiscal 2023 compared with fiscal 2022, refer to the discussion in Item 7. “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” of Form 10-K for the fiscal year ended September 30, 2023, as filed with the Securities and Exchange Commission on November 9, 2023.
Liquidity and Capital Resources
We have historically maintained a capital structure comprising a mix of equity and debt financing. We vary our leverage both to optimize our equity return and to pursue acquisitions. We expect to meet our current debt obligations as they come due through internally generated funds from current levels of operations and/or through refinancing in the debt markets prior to the maturity dates of our debt.
The following tables present selected balance sheet, cash flow and other financial data relevant to the liquidity or capital resources of the Company for the periods specified below (amounts in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
| Selected Balance Sheet Data: | |||||||||||
| Cash and cash equivalents | $ | 6,261 | $ | 3,472 | |||||||
| Working capital (Total current assets less total current liabilities) | 3,690 | 5,159 | |||||||||
| Total assets | 25,586 | 19,970 | |||||||||
Total debt (1) | 24,880 | 19,750 | |||||||||
| TD Group stockholders’ deficit | (6,290) | (1,984) | |||||||||
(1)Includes debt issuance costs and original issue discount and premiums. Reference Note 10, “Debt,” in the notes to the consolidated financial statements included herein for additional information.
| Fiscal Years Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Selected Cash Flow and Other Financial Data: | |||||||||||
| Cash flows provided by (used in): | |||||||||||
| Operating activities | $ | 2,045 | $ | 1,375 | |||||||
| Investing activities | (2,441) | (900) | |||||||||
| Financing activities | 3,171 | (16) | |||||||||
| Capital expenditures | 165 | 139 | |||||||||
Ratio of earnings to fixed charges (1) | 2.7x | 2.5x | |||||||||
(1)For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings from continuing operations before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of debt issuance costs, original issue discount and premium and the “interest component” of rental expense.
Significant Transactions of Fiscal 2024
During fiscal 2024, the Company completed approximately $21,000 million in debt financing transactions, inclusive of new issuances and refinancing of existing debt. Below is further information on the significant debt financing transactions occurring in fiscal 2024:
•On November 28, 2023, the Company completed the issuance of $2,000 million in new senior debt ($1,000 million in 7.125% senior secured notes due 2031 and $1,000 million in Tranche J term loans), which was used to fund the acquisition of CPI's Electron Device Business (completed in the third quarter of fiscal 2024) and for general corporate purposes.
•On February 27, 2024, the Company amended the terms under its revolving credit facility to, among other things, extend the maturity date from May 2026 to February 2029 and increase the total commitments capacity from $810 million to $910 million. Concurrently, the Company completed the issuance of $4,400 million in new secured debt ($2,200 million in 6.375% senior secured notes due 2029 and $2,200 million in 6.625% senior secured notes due 2032), which was used to redeem all of its outstanding $4,400 million in 6.25% senior secured notes due 2026.
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•On March 22, 2024, the Company repriced all of its $4,525 million in existing Tranche I term loans maturing August 2028 to bear interest at Term SOFR plus 2.75% (a decrease from Term SOFR plus 3.25% previously applicable) and replaced all of its $1,708 million in existing Tranche H term loans due February 2027 with new Tranche K term loans maturing March 2030 and bear interest at the same rate applied to the existing Tranche I term loans. Concurrently, the Company issued an additional $550 million in 6.375% senior secured notes due 2029 (tack-on to the $2,200 million issued during February 2024), which was used to redeem all of its outstanding $550 million in 7.50% senior subordinated notes due 2027 on April 22, 2024.
•On June 4, 2024, the Company repriced all of its $997 million in existing Tranche J term loans to bear interest at Term SOFR plus 2.50% compared to Term SOFR plus 3.25% applicable prior to the transaction; and (ii) amended and extended $2,644 million in existing Tranche I term loans maturing August 24, 2028 and converting such loans into Tranche J term loans maturing February 28, 2031.
•On July 12, 2024, the Company amended the Securitization Facility to, among other things, (i) increase the borrowing capacity from $450 million to $650 million; and (ii) extend the maturity date to July 11, 2025 at an interest rate of Term SOFR plus 1.45% compared to an interest rate of Term SOFR plus 1.60% that applied prior to the amendment. In fiscal 2024, the Company drew $137.5 million available on Securitization Facility. The Company subsequently drew the remaining $162.5 million available under the trade receivable securitization facility in October 2024.
•On September 19, 2024, the Company completed the issuance of $3,000 million in new senior secured debt ($1,500 million in 6.00% senior secured notes due January 15, 2033 and $1,500 million in Tranche L term loans that bear interest at Term SOFR plus 2.50% and mature on January 19, 2032).
During fiscal 2024, the Company completed approximately $2,347 million in acquisitions of businesses, net of cash acquired. Below is further information on the significant acquisitions occurring in fiscal 2024:
•On May 21, 2024, the Company completed an acquisition of all the outstanding stock of SEI for approximately $171 million in cash.
•On June 6, 2024, the Company completed the acquisition of all the outstanding stock of CPI's Electron Device Business for approximately $1,385 million in cash. The acquisition was financed through existing cash on hand, inclusive of a portion of the cash proceeds from the $2,000 million in new senior debt issued in the first quarter of fiscal 2024.
•On July 31, 2024, the Company completed the acquisition of all the outstanding stock of Raptor Scientific for approximately $647 million in cash. The acquisition was financed through existing cash on hand.
During fiscal 2024, the Company’s Board of Directors authorized and declared $110.00 in special dividends. Below is further information on these special dividends:
•On November 27, 2023, the Company paid a special cash dividend of $35.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans. Total cash payments, funded by existing cash on hand, of special dividend and dividend equivalents from this declaration were approximately $2,020 million.
•On September 19, 2024, concurrently with the $3,000 million issuance of new senior secured debt described above, the Company’s Board of Directors authorized and declared a special cash dividend of $75.00 on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans. Total cash payments, funded by a combination of $3,000 million in new senior secured debt (as previously noted) and existing cash on hand, related to the special dividend and dividend equivalents were approximately $4,348 million. These payments were made in October 2024.
If the Company has excess cash, it generally prioritizes allocating the excess cash in the following manner: (1) capital spending at existing businesses, (2) acquisitions of businesses, (3) payment of a special dividend and/or repurchases of our common stock and (4) prepayment of indebtedness or repurchase of debt.
The Company’s ability to make scheduled interest payments on, or to refinance, the Company’s indebtedness, or to fund non-acquisition related capital expenditures and research and development efforts, will depend on the Company’s ability to generate cash in the future. This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control.
The Company's objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates. Interest rate swaps, caps and collars used to hedge and offset, respectively, the variable interest rates on our term loans are further described in Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. As of September 30, 2024, approximately 77% of our gross debt was fixed rate.
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As of September 30, 2024, the Company has significant cash liquidity as illustrated in the table presented below (in millions):
| As of September 30, 2024 | |||||
| Cash and cash equivalents | $ | 6,261 | |||
| Availability on revolving credit facility | 843 | ||||
| Availability on Securitization Facility | 163 | ||||
Cash liquidity (1) | $ | 7,267 | |||
(1)When considering the impact of the $4,348 million payment in special dividends and dividend equivalents in October 2024, the pro forma cash liquidity as of September 30, 2024 is $2,919 million.
We believe our significant cash liquidity will allow us to meet our anticipated funding requirements. We expect to meet our short-term cash liquidity requirements (including interest obligations and capital expenditures) through net cash from operating activities, cash on hand and, if needed, draws on the revolving credit facility. Long-term cash liquidity requirements consist primarily of obligations under our long-term debt agreements. There is no maturity on any tranche of term loans or notes until November 2027 (fiscal 2028).
The Company estimates its capital expenditures in fiscal year 2025 to be approximately 2.5% to 3.5% of net sales. The Company’s capital expenditures incurred from year-to-year are funded using existing cash on hand and are primarily for projects that are consistent with our three core value-driven operating strategies (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers) such as automation projects.
In connection with the continued application of our three core value-driven operating strategy (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers), we expect our efforts will continue to generate strong margins and provide sufficient cash provided by operating activities to meet our interest obligations and liquidity needs. We believe our cash provided by operating activities and available borrowing capacity will enable us to make strategic business acquisitions, pay special dividends to our shareholders and make opportunistic investments in our own stock, subject to any restrictions in our existing credit agreement and market conditions.
The Company may issue additional debt if prevailing market conditions are favorable to doing so. In addition, the Company may increase its borrowings in connection with acquisitions, if cash flow from operating activities becomes insufficient to fund current operations or for other short-term cash needs or for common stock repurchases or special dividends. Our future leverage will also be impacted by the then current conditions of the credit markets.
Operating Activities. The Company generated $2,045 million of net cash from operating activities during fiscal 2024 compared to $1,375 million during fiscal 2023.
The change in trade accounts receivable during fiscal 2024 was a use of cash of $84 million compared to a use of cash of $212 million in fiscal 2023. The decrease in the use of cash of $128 million is primarily attributable to the lower sequential increase in sales between fiscal 2024 and fiscal 2023 compared to fiscal 2023 and fiscal 2022 and related timing of cash receipts as we move further from the impact of the pandemic on net sales. The Company continues to actively manage its accounts receivable, the related agings and collection efforts.
The change in inventories during fiscal 2024 was a use of cash of $104 million compared to a use of cash of $261 million in fiscal 2023. The decrease in the use of cash of $157 million is primarily driven by an easing of the supply chain challenges that were more prevalent in the prior fiscal year resulting in a higher rate of inventory purchased in fiscal 2023 compared to fiscal 2024. The Company continues to actively and strategically manage inventory levels.
The change in accounts payable during fiscal 2024 was a use of cash of $11 million compared to a source of cash of $12 million in fiscal 2023. The change is due to the timing of payments to suppliers.
Investing Activities. Net cash used in investing activities was $2,441 million during fiscal 2024, consisting of $2,347 million from the acquisitions of Raptor Scientific, CPI's Electron Device Business, SEI, FPT and certain product lines completed during fiscal 2024, capital expenditures of $165 million; partially offset by other investing transactions of $71 million.
Net cash used in investing activities was $900 million during fiscal 2023, consisting primarily of the acquisition of Calspan for approximately $729 million, certain product line acquisitions aggregating to approximately $33 million and capital expenditures of $139 million.
Financing Activities. Net cash provided by financing activities was $3,171 million during fiscal 2024. The source of cash was primarily attributable to the net proceeds of short-term and long-term debt, including fees, of $4,965 million, plus proceeds from stock option exercises of $245 million; partially offset by special dividend and dividend equivalent payments of $2,038 million.
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Net cash used in financing activities was $16 million during fiscal 2023. The use of cash was primarily attributable to the net redemptions of short-term and long-term debt, including fees, of $193 million, dividend equivalent payments of $38 million; partially offset by proceeds from stock option exercises of $215 million.
Guarantor Information
The Subordinated Notes are subordinated to all of our existing and future senior secured debt, including indebtedness under TransDigm’s existing senior secured credit facilities, rank equally with all of our existing and future senior subordinated debt and rank senior to all of our future debt that is expressly subordinated to the Subordinated Notes. The Subordinated Notes are fully and unconditionally guaranteed on a senior subordinated unsecured basis by TD Group, TransDigm UK and TransDigm Inc.’s Domestic Restricted Subsidiaries (as defined in the applicable indentures). The table set forth in Exhibit 22.1 filed with this Form 10-K details the primary obligors and guarantors. The guarantees of the Subordinated Notes are subordinated to all of the guarantors’ existing and future senior debt, rank equally with all of their existing and future senior subordinated debt and rank senior to all of their future debt that is expressly subordinated to the guarantees of the Subordinated Notes. The Subordinated Notes are structurally subordinated to all of the liabilities of TD Group’s non-guarantor subsidiaries.
The Secured Notes are senior secured debt of TransDigm and rank equally in right of payment with all of TransDigm’s existing and future senior secured debt, including indebtedness under TransDigm’s existing senior secured credit facilities, and are senior in right of payment to all of TransDigm’s existing and future senior subordinated debt, including the Subordinated Notes. The 2028 Secured Notes are guaranteed on a senior secured basis by TD Group, TransDigm UK and TransDigm Inc.’s Domestic Restricted Subsidiaries (as defined in the applicable indentures). The 2029 Secured Notes, 2030 Secured Notes, 2031 Secured Notes, 2032 Secured Notes and 2033 Secured Notes are guaranteed on a senior secured basis by TD Group and each of TransDigm Inc.’s direct and indirect Restricted Subsidiaries (as defined in the applicable indenture) that is a borrower or guarantor under TransDigm’s senior secured credit facilities or that issues or guarantees any capital markets indebtedness of TransDigm Inc. or any of the guarantors in an aggregate principal amount of at least $200 million. As of the date of this Form 10-K, the guarantors of the 2029 Secured Notes, 2030 Secured Notes, 2031 Secured Notes, 2032 Secured Notes and 2033 Secured Notes are the same as the guarantors of the 2028 Secured Notes. The table set forth in Exhibit 22.1 filed with this Form 10-K details the primary obligors and guarantors. The guarantees of the Secured Notes rank equally in right of payment with all of the guarantors’ existing and future senior secured debt and are senior in right of payment to all of their existing and future senior subordinated debt. The Secured Notes are structurally subordinated to all of the liabilities of TransDigm’s non-guarantor subsidiaries.
Separate financial statements of TransDigm Inc. are not presented because the Subordinated Notes and Secured Notes are fully and unconditionally guaranteed on a senior subordinated unsecured basis (if Subordinated Notes) and senior secured basis (if Secured Notes) by TD Group, TransDigm UK and all of TransDigm Inc.'s Domestic Restricted Subsidiaries. TD Group has no significant operations or assets separate from its investment in TransDigm Inc.
The financial information presented is that of TD Group, TransDigm Inc. and the other Guarantors, which includes TransDigm UK, on a combined basis and the financial information of non-issuer and non-guarantor subsidiaries has been excluded. Intercompany balances and transactions between TD Group, TransDigm Inc. and the other Guarantors have been eliminated, and amounts due from, amounts due to, and transactions with non-issuer and non-guarantor subsidiaries have been presented separately.
| (in millions) | September 30, 2024 | ||||
| Current assets | $ | 7,813 | |||
| Goodwill | 8,186 | ||||
| Other non-current assets | 3,889 | ||||
| Current liabilities | 5,420 | ||||
| Non-current liabilities | 25,155 | ||||
| Amounts due (from) to subsidiaries that are non-issuers and non-guarantors-net | (1,881) | ||||
| Fiscal Year Ended | |||||
| (in millions) | September 30, 2024 | ||||
| Net sales | $ | 6,294 | |||
| Sales to subsidiaries that are non-issuers and non-guarantors | 28 | ||||
| Cost of sales | 2,458 | ||||
| Expense from subsidiaries that are non-issuers and non-guarantors-net | 64 | ||||
| Income from operations | 1,221 | ||||
| Net income attributable to TD Group | 1,221 | ||||
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Description of Senior Secured Term Loans and Indentures
Senior Secured Term Loans Facility
TransDigm has $8,702 million in fully drawn term loans (the “Term Loans Facility”) and an $910 million revolving credit facility. The Term Loans Facility consists of four tranches of term loans as follows (aggregate principal amount disclosed is as of September 30, 2024):
| Term Loans Facility | Aggregate Principal | Maturity Date | Interest Rate | |||||||||||||||||
| Tranche I | $1,871 million | August 24, 2028 | Term SOFR plus 2.75% | |||||||||||||||||
| Tranche J | $3,632 million | February 28, 2031 | Term SOFR plus 2.50% | |||||||||||||||||
| Tranche K | $1,699 million | March 22, 2030 | Term SOFR plus 2.75% | |||||||||||||||||
| Tranche L | $1,500 million | January 19, 2032 | Term SOFR plus 2.50% | |||||||||||||||||
The Term Loans Facility requires quarterly aggregate principal payments of $22 million. The revolving commitments consist of two tranches which include up to $139 million of multicurrency revolving commitments. At September 30, 2024, the Company had $67 million in letters of credit outstanding and $843 million in borrowings available under the revolving commitments. Draws on the revolving commitments are subject to an interest rate of Term SOFR plus 2.25%. The unused portion of the revolving commitments is subject to a fee of 0.5% per annum. The maturity date of the revolving credit facility is February 27, 2029.
The interest rates per annum applicable to the Term Loans Facility under the Credit Agreement are, at TransDigm’s option, equal to either an alternate base rate or an adjusted Term SOFR for one, three or six-month interest periods chosen by TransDigm, in each case plus an applicable margin percentage. The adjusted Term SOFR related to the Term Loans Facility are not subject to a floor. Refer to Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein for information about how our interest rate swaps, cap and collar agreements are used to hedge and offset, respectively, the variable interest rate portion of our debt.
Indentures
The following table represents the senior subordinated and secured notes outstanding as of September 30, 2024:
| Description | Aggregate Principal | Maturity Date | Interest Rate | |||||||||||||||||
| 5.50% 2027 Notes | $2,650 million | November 15, 2027 | 5.50% | |||||||||||||||||
| 2028 Secured Notes | $2,100 million | August 15, 2028 | 6.75% | |||||||||||||||||
| 4.625% 2029 Notes | $1,200 million | January 15, 2029 | 4.625% | |||||||||||||||||
| 2029 Secured Notes | $2,750 million | March 1, 2029 | 6.375% | |||||||||||||||||
| 4.875% 2029 Notes | $750 million | May 1, 2029 | 4.875% | |||||||||||||||||
| 2030 Secured Notes | $1,450 million | December 15, 2030 | 6.875% | |||||||||||||||||
| 2031 Secured Notes | $1,000 million | December 1, 2031 | 7.125% | |||||||||||||||||
| 2032 Secured Notes | $2,200 million | March 1, 2032 | 6.625% | |||||||||||||||||
| 2033 Secured Notes | $1,500 million | January 15, 2033 | 6.00% | |||||||||||||||||
The 5.50% 2027 Notes, the 4.625% 2029 Notes and the 4.875% 2029 Notes (collectively, the “Subordinated Notes”) were issued at a price of 100.00% of the principal amount. The 2030 Secured Notes, 2032 Secured Notes and 2033 Secured Notes (which, along with the 2028 Secured Notes, 2029 Secured Notes and 2031 Secured Notes, are collectively referred to as the “Secured Notes”) were issued at a price of 100.00% of its principal amount. The initial $1,000 million offering and the subsequent $1,100 million offering of the 6.75% senior secured notes due 2028 (collectively, the “2028 Secured Notes”) in the second quarter of fiscal 2023 were issued at a price of 100.00% and 99.00%, respectively, of their principal amount, resulting in gross proceeds of $2,089 million. The 2031 Secured Notes was issued in the first quarter of fiscal 2024 at a price of 99.25% of its principal amount, resulting in gross proceeds of $993 million. The initial $2,200 million offering and subsequent $550 million offering of the 6.375% senior secured notes due 2029 (collectively, the “2029 Secured Notes”) in the second quarter of fiscal 2024 were issued at a price of 100.00% and 99.75%, respectively, of their principal amount, resulting in gross proceeds of $2,749 million.
The Subordinated Notes and Secured Notes do not require principal payments prior to their maturity. Interest under the Subordinated Notes and Secured Notes are payable semi-annually. The Subordinated Notes represent our unsecured obligations ranking subordinate to our senior debt, as defined in the applicable indentures. The Secured Notes represent our secured obligations ranking equally to all existing and future senior debt, as defined in the applicable indentures. The Subordinated Notes and Secured Notes contain many of the restrictive covenants included in the Credit Agreement. TransDigm is in compliance with all of the covenants contained in the Subordinated Notes and Secured Notes.
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Certain Restrictive Covenants in Our Debt Documents
The Credit Agreement and the Indentures governing the Notes and Secured Notes contain restrictive covenants that, among other things, limit the incurrence of additional indebtedness, the payment of special dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances, and prepayments of certain other indebtedness.
The restrictive covenants included in the Credit Agreement are subject to amendments executed periodically. The most recent amendment that impacted the restrictive covenants contained in the Credit Agreement is Amendment No. 15, executed on March 22, 2024.
Under the terms of the Credit Agreement, TransDigm is entitled, on one or more occasions, to request additional term loans or additional revolving commitments to the extent that the existing or new lenders agree to provide such incremental term loans or additional revolving commitments provided that, among other conditions, our consolidated net leverage ratio would be no greater than 7.25x and the consolidated secured net debt ratio would be no greater than 5.00x, in each case, after giving effect to such incremental term loans or additional revolving commitments.
If any such default occurs, the lenders under the Credit Agreement and the holders of the Notes and Secured Notes may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. The lenders under the Credit Agreement also have the right in these circumstances to terminate any commitments they have to provide further borrowings. In addition, following an event of default under the Credit Agreement, the lenders thereunder and the holders of the Secured Notes will have the right to proceed against the collateral granted to them to secure the debt, which includes our available cash, and they will also have the right to prevent us from making debt service payments on the Notes.
With the exception of the revolving credit facility, the Company has no maintenance covenants in its existing term loan and indenture agreements. Under the Credit Agreement, if the usage of the revolving credit facility exceeds 40% (or, currently, $364 million) of the total revolving commitments, the Company is required to maintain a maximum consolidated net leverage ratio of net debt to trailing four-quarter EBITDA As Defined of 7.50x (or, solely with respect to the first four fiscal quarters ending after the consummation of any material acquisition, 8.00x) as of the last day of the fiscal quarter.
As of September 30, 2024, the Company was in compliance with all of its debt covenants and expects to remain in compliance with its debt covenants in subsequent periods.
Trade Receivable Securitization Facility
During fiscal 2014, the Company established a trade receivable securitization facility (the “Securitization Facility”). The Securitization Facility effectively increases the Company’s borrowing capacity depending on the amount of the domestic operations’ trade accounts receivable. The Securitization Facility includes the right for the Company to exercise annual one year extensions as long as there have been no termination events as defined by the agreement. The Company uses the proceeds from the Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs.
On July 12, 2024, the Company amended the Securitization Facility to, among other things, (i) increase the borrowing capacity from $450 million to $650 million; and (ii) extend the maturity date to July 11, 2025 at an interest rate of Term SOFR plus 1.45% compared to an interest rate of Term SOFR plus 1.60% that applied prior to the amendment.
As of September 30, 2024, the total drawn on the Securitization Facility is $487.5 million, resulting in $162.5 million available to be drawn. For the fiscal years ended September 30, 2024 and 2023, the applicable interest rate was 6.73% and 6.95%, respectively. The Securitization Facility is collateralized by substantially all of the Company’s domestic operations’ trade accounts receivable.
On October 16, 2024, the Company drew the remaining $162.5 million available under the Securitization Facility.
Dividend and Dividend Equivalent Payments
During the first and fourth quarters of fiscal 2024, TD Group's Board of Directors authorized and declared special cash dividends of $35.00 and $75.00, respectively, on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans. Pursuant to the Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan, the Amended and Restated 2014 Stock Option Plan Dividend Equivalent Plan and the 2019 Stock Option Plan Dividend Equivalent Plan, all of the vested options granted under the existing stock option plans, except for grants to the members of the Board of Directors, are entitled to certain cash dividend equivalent payments in the event of the declaration of a dividend by the Company. In fiscal 2022, all members of the Board of Directors executed amendments to their option agreements in which future dividend declarations result in a reduction of the strike price of their existing options instead of receiving cash dividend equivalent payments.
On November 27, 2023, the Company paid the special cash dividend of $35.00 on each outstanding share of common stock, totaling $1,937 million. Dividend equivalent payments are made during the Company's first fiscal quarter each year and also upon payment of any dividends declared within the fiscal year. Total dividend equivalent payments in the first quarter of fiscal 2024 and 2023 were approximately $101 million, of which $18 million was accrued as of September 30, 2023 and the remaining $83 million was associated with the November 2023 $35.00 special dividend declaration, and $38 million, respectively.
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On October 18, 2024, the Company paid the special cash dividend of $75.00 on each outstanding share of common stock, totaling $4,216 million, and dividend equivalent payments of $132 million, associated with the September 2024 $75.00 special dividend declaration, both of which are accrued as of September 30, 2024.
Any future declaration of special cash dividends on our common stock will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions under the Credit Agreement and indentures governing the Notes, the availability of surplus under Delaware law and other factors deemed relevant by our Board of Directors. TD Group is a holding company and conducts all of its operations through direct and indirect subsidiaries. Unless TD Group receives dividends, distributions, advances, transfers of funds or other payments from our subsidiaries, TD Group will be unable to pay any dividends on our common stock in the future. The ability of any subsidiaries to take any of the foregoing actions is limited by the terms of our Term Loans Facility and indentures and may be limited by future debt or other agreements that we may enter into.
Contractual Obligations and Commitments
The following table summarizes the Company’s cash requirements from all significant contractual obligations as of September 30, 2024 (in millions):
| Total | Payment Due by Period | |||||||||||||||||||||||||||||||
| Contractual | Less than | Between | Between | Over | ||||||||||||||||||||||||||||
| Obligations | 1 Year | 1-3 Years | 3-5 Years | 5 Years | ||||||||||||||||||||||||||||
Senior Subordinated and Secured Notes (1) | $ | 15,600 | $ | — | $ | — | $ | 9,450 | $ | 6,150 | ||||||||||||||||||||||
Term Loans Facility (2) | 8,702 | 88 | 176 | 1,951 | 6,487 | |||||||||||||||||||||||||||
Scheduled interest payments (3) | 8,071 | 1,524 | 2,916 | 2,194 | 1,437 | |||||||||||||||||||||||||||
Pension funding minimums (4) | 128 | 12 | 24 | 26 | 66 | |||||||||||||||||||||||||||
Securitization Facility (5) | 487 | 487 | — | — | — | |||||||||||||||||||||||||||
| Finance leases | 541 | 20 | 43 | 46 | 432 | |||||||||||||||||||||||||||
| Operating leases | 75 | 22 | 28 | 12 | 13 | |||||||||||||||||||||||||||
| Total contractual cash obligations | $ | 33,604 | $ | 2,153 | $ | 3,187 | $ | 13,679 | $ | 14,585 | ||||||||||||||||||||||
(1)Represents principal maturities which excludes interest, debt issuance costs and original issue discount.
(2)Refer to the “Description of Senior Secured Term Loans and Indentures” section for information on the maturity date of each tranche of term loans. The Term Loans Facility requires quarterly aggregate principal payments of $22 million.
(3)Assumes that the variable interest rate on our existing term loans under our Term Loans Facility range from approximately 5.6% to 6.5% based on anticipated movements in Term SOFR, which given the ongoing volatility in rates, are highly uncertain. In addition, interest payments include the impact of the existing interest rate swap, cap and collar agreements described in Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein.
(4)Represents future benefit payments expected to be paid from the pension and post-retirement benefit plans or from the Company’s assets.
(5)An incremental draw on the Securitization Facility of $162.5 million occurred in October 2024.
Off-Balance Sheet Arrangements
The Company utilizes letters of credit to back certain payment and performance obligations. Letters of credit are subject to limits based on amounts outstanding under the Company’s revolving credit facility. As of September 30, 2024, the Company had $67 million in letters of credit outstanding.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in conformity with U.S. GAAP, which often requires the judgment of management in the selection and application of certain accounting principles and methods. Management believes that the quality and reasonableness of our most critical policies enable the fair presentation of our financial position and results of operations. However, investors are cautioned that the sensitivity of financial statements to these methods, assumptions and estimates could create materially different results under different conditions or using different assumptions.
Below are those policies applied in preparing our financial statements that management believes are the most dependent on the application of estimates and assumptions. For additional significant accounting policies, see Note 1, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included herein.
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Revenue Recognition – The Company recognizes revenue from contracts with customers using the five step model prescribed in ASC 606. A substantial portion of the Company's revenue is recorded at a point in time. Revenue is recognized from the sale of products or services when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to the customer. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Revenue is measured at the amount of consideration the Company expects to be paid in exchange for goods or services. In a limited number of contracts, control transfers to the customer over time, primarily in contracts where the customer is required to pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit relative to the work performed for products that were customized for the customer. Therefore, we recognize revenue over time for those agreements that have a right to margin and where the products being produced have no alternative use. For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes based on the standalone selling price of each performance obligation. The primary method used to estimate a standalone selling price is the price observed in standalone sales to customers for the same product or service. We consider the contractual consideration payable by the customer and assesses variable consideration that may affect the total transaction price. Variable consideration is included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the estimate should be constrained in order to avoid a significant reversal of revenue in a future period. These estimates are based on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.
Goodwill and Other Intangible Assets – In accordance with ASC 805, “Business Combinations,” the Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed are recognized as goodwill. The valuations of the acquired assets and liabilities will impact the determination of future operating results. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, revenue growth rates and EBITDA margins, discount rates, customer attrition rates, royalty rates, asset lives and market multiples, among other items. We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors. Fair value adjustments to the Company’s assets and liabilities are recognized and the results of operations of the acquired business are included in our consolidated financial statements from the effective date of the merger or acquisition.
Intangible assets other than goodwill are recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed or exchanged, regardless of the Company’s intent to do so. Goodwill and identifiable intangible assets are recorded at their estimated fair value on the date of acquisition and are reviewed at least annually for impairment based on cash flow projections and fair value estimates.
U.S. GAAP requires that the annual, and any interim, goodwill impairment assessment be performed at the reporting unit level. Our reporting units have been identified at the operating unit level, which is one level below our operating segments. Substantially all goodwill was determined and recognized for each reporting unit pursuant to the accounting for the merger or acquisition as of the date of each transaction. With respect to acquisitions integrated into an existing reporting unit, any acquired goodwill is combined with the goodwill of the reporting unit.
Companies may perform a qualitative assessment as the initial step in the annual goodwill impairment testing process for all or selected reporting units. Companies are also allowed to bypass the qualitative analysis and perform a quantitative analysis if desired. Economic uncertainties and the length of time from the calculation of a baseline fair value are factors that we consider in determining whether to perform a quantitative test.
When we evaluate the potential for goodwill impairment using a qualitative assessment, we consider factors including, but not limited to, macroeconomic conditions, industry conditions, the competitive environment, changes in the market for our products and services, regulatory and political developments, entity specific factors such as strategy and changes in key personnel and overall financial performance. If, after completing this assessment, it is determined that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, we proceed to a quantitative impairment test. For the quantitative test, management determines the estimated fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit. If the estimated fair value is less than the current carrying value, impairment of goodwill of the reporting unit may exist. The key assumptions used in the discounted cash flow valuation model for impairment testing includes discount rates, revenue growth rates and EBITDA margins, cash flow projections and terminal value rates. Discount rates are set by using the weighted average cost of capital (“WACC”) methodology. The WACC methodology considers market and industry data in determining the appropriate discount rates to be used, inclusive of company-specific risk factors. The Company utilizes a third party valuation firm to assist in the determination of the WACC. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business.
Management, considering industry and company-specific historical and projected data, develops growth rates, sales projections and cash flow projections for each reporting unit. Terminal value rate determination follows a common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.
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The impairment test for indefinite-lived intangible assets consists of a comparison between the estimated fair values and carrying values. If the carrying amounts of intangible assets that have indefinite useful lives exceed their estimated fair values, an impairment loss will be recognized in an amount equal to the difference. Management utilizes the royalty savings valuation method to determine the estimated fair value for each indefinite-lived intangible asset. In this method, management estimates the royalty savings arising from the ownership of the intangible asset. The key assumptions used in estimating the royalty savings for impairment testing include discount rates, royalty rates, growth rates, sales projections and terminal value rates. Discount rates used are similar to the rates developed by the WACC methodology, inclusive of considering any differences in company-specific risk factors between reporting units and the indefinite-lived intangible assets. Royalty rates are established by management with the advice of valuation experts. Management, considering industry and company-specific historical and projected data, develops growth rates and sales projections for each significant intangible asset. Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.
The discounted cash flow and royalty savings valuation methodologies require management to make certain assumptions based upon information available at the time the valuations are performed. Actual results could differ from these assumptions. Management believes the assumptions used are reflective of what a market participant would have used in calculating fair value considering the current economic conditions.
The Company had 50 reporting units with goodwill and 47 reporting units with indefinite-lived intangible assets as of the first day of the fourth quarter of fiscal 2024, the date of the annual impairment test. The Company identified 14 reporting units to test for impairment using a quantitative test for both goodwill and indefinite-lived intangible assets. Of the 14 reporting units selected for quantitative testing, six reporting units primarily were either a recent acquisition or met certain criteria determined by management. For the remaining eight reporting units, the Company elected to bypass the qualitative analysis and perform a quantitative test considering the length of time since the last determination of baseline fair values. The estimated fair values of each of these reporting units and other indefinite-lived intangible assets were in excess of their respective carrying values. We believe we incorporate conservative sensitivity ranges on certain company-specific projected data, including earnings before taxes and net sales, which are significant assumptions in the discounted cash flow valuation model to determine estimated fair value, such that actual results would need to be materially out of the range of the expected assumptions in order for an impairment to occur.
Stock-Based Compensation – The cost of the Company’s stock-based compensation is recorded in accordance with ASC 718, “Stock Compensation.” The Company uses a Black-Scholes pricing model to estimate the grant-date fair value of the stock options awarded. The Black-Scholes pricing model requires assumptions regarding the expected volatility of the Company’s common shares, the risk-free interest rate, the expected life of the stock options award and the Company’s dividend yield. The Company primarily utilizes historical data in determining the assumptions. An increase or decrease in the assumptions or economic events outside of management’s control could, and do, have an impact on the Black-Scholes pricing model. The Company estimates stock option forfeitures based on historical data. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative adjustment in the period of change. The Company also evaluates any subsequent changes to the respective option holders terms under the modification rules of ASC 718. If determined to be a modification, the Black-Scholes pricing model is updated as of the date of the modification resulting in a cumulative catch-up to expense.
Income Taxes – The Company estimates income taxes in each jurisdiction in which it operates. This involves estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient future taxable income to utilize deferred tax assets and possible exposures related to future tax audits. To the extent these estimates change, adjustments to deferred and accrued income taxes are made in the period in which the changes occur. Historically, such adjustments have not been significant.
New Accounting Standards
For information about new accounting standards, see Note 1, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included herein.
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Non-GAAP Financial Measures
We present below certain financial information based on our EBITDA and EBITDA As Defined. References to “EBITDA” mean earnings before interest, taxes, depreciation and amortization, and references to “EBITDA As Defined” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of net income to EBITDA and EBITDA As Defined and the reconciliations of net cash provided by operating activities to EBITDA and EBITDA As Defined presented below.
Neither EBITDA nor EBITDA As Defined is a measurement of financial performance under U.S. GAAP. We present EBITDA and EBITDA As Defined because we believe they are useful indicators for evaluating operating performance and liquidity.
Our management believes that EBITDA and EBITDA As Defined are useful as indicators of liquidity because securities analysts, investors, rating agencies and others use EBITDA to evaluate a company’s ability to incur and service debt. In addition, EBITDA As Defined is useful to investors because the revolving credit facility under our senior secured credit facility requires compliance under certain circumstances, on a pro forma basis, with a financial covenant that measures the ratio of the amount of our secured indebtedness to the amount of our Consolidated EBITDA defined in the same manner as we define EBITDA As Defined herein.
In addition to the above, our management uses EBITDA As Defined to review and assess the performance of the management team in connection with employee incentive programs and to prepare its annual budget and financial projections. Moreover, our management uses EBITDA As Defined to evaluate acquisitions.
Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above, the use of these non-GAAP financial measures as analytical tools has limitations, and you should not consider any of them in isolation, or as a substitute for analysis of our results of operations as reported in accordance with U.S. GAAP. Some of these limitations are:
•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 U.S. GAAP measures, such as net income, net sales and operating profit, to measure our operating performance. Neither EBITDA nor EBITDA As Defined is a measurement of financial performance under U.S. GAAP, and neither should be considered as an alternative to net income or cash flow from operations determined in accordance with U.S. GAAP. Our calculation of EBITDA and EBITDA As Defined may not be comparable to the calculation of similarly titled measures reported by other companies.
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The following table sets forth a reconciliation of net income to EBITDA and EBITDA As Defined (in millions):
| Fiscal Years Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net Income | $ | 1,715 | $ | 1,299 | |||||||
| Adjustments: | |||||||||||
| Depreciation and amortization expense | 312 | 268 | |||||||||
| Interest expense-net | 1,286 | 1,164 | |||||||||
| Income tax provision | 500 | 417 | |||||||||
| EBITDA | 3,813 | 3,148 | |||||||||
| Adjustments: | |||||||||||
Acquisition transaction and integration-related expenses (1) | 70 | 18 | |||||||||
Non-cash stock and deferred compensation expense (2) | 217 | 157 | |||||||||
Refinancing costs (3) | 58 | 56 | |||||||||
Other, net (4) | 15 | 16 | |||||||||
| EBITDA As Defined | $ | 4,173 | $ | 3,395 | |||||||
(1) | Represents costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and valuation-related costs for acquisitions comprising deal fees, legal, financial and tax due diligence expenses; and amortization expense of inventory step-up recorded in connection with the purchase accounting of acquired businesses. | |||||||
(2) | Represents the compensation expense recognized by TD Group under our stock incentive plans and deferred compensation plans. | |||||||
(3) | Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. | |||||||
(4) | Primarily represents foreign currency transaction (gains) or losses, payroll withholding taxes related to dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation payments and other miscellaneous (income) expense. | |||||||
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The following table sets forth a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined (in millions):
| Fiscal Years Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net cash provided by operating activities | $ | 2,045 | $ | 1,375 | |||||||
| Adjustments: | |||||||||||
| Changes in assets and liabilities, net of effects from acquisitions and sales of businesses | 272 | 415 | |||||||||
Interest expense-net (1) | 1,246 | 1,123 | |||||||||
| Income tax provision-current | 490 | 414 | |||||||||
| Loss contract amortization | 35 | 34 | |||||||||
Non-cash stock and deferred compensation expense (2) | (217) | (157) | |||||||||
Refinancing costs (3) | (58) | (56) | |||||||||
| EBITDA | 3,813 | 3,148 | |||||||||
| Adjustments: | |||||||||||
Acquisition transaction and integration-related expenses (4) | 70 | 18 | |||||||||
Non-cash stock and deferred compensation expense (2) | 217 | 157 | |||||||||
Refinancing costs (3) | 58 | 56 | |||||||||
Other, net (5) | 15 | 16 | |||||||||
| EBITDA As Defined | $ | 4,173 | $ | 3,395 | |||||||
(1) | Represents interest expense, net of interest income, excluding the amortization of debt issuance costs and premium and discount on debt. | |||||||
(2) | Represents the compensation expense recognized by TD Group under our stock incentive plans and deferred compensation plans. | |||||||
(3) | Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements. | |||||||
(4) | Represents costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and valuation-related costs for acquisitions comprising deal fees, legal, financial and tax due diligence expenses; and amortization expense of inventory step-up recorded in connection with the purchase accounting of acquired businesses. | |||||||
(5) | Primarily represents foreign currency transaction (gains) or losses, payroll withholding taxes related to dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation payments and other miscellaneous (income) expense. | |||||||
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
At September 30, 2024, we had borrowings under our Term Loans Facility, which consists of four tranches of term loans of approximately $8,702 million, as well as $487 million from the Securitization Facility, that are subject to interest rate risk, particularly movements in Term SOFR. Borrowings under our term loans bear interest, at our option, at a rate equal to either an alternate base rate or an adjusted Term SOFR for a one-, three- or six-month thereafter (in each case, subject to the availability thereof), interest period chosen by us, in each case, plus an applicable margin percentage. Our Securitization Facility bears interest at a rate of three-month Term SOFR plus 1.45%. Accordingly, the Company’s cash flows and earnings will be exposed to the market risk of interest rate changes resulting from variable rate borrowings under our term loans. The Company's objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates. Interest rate swaps, caps and collars used to hedge and offset, respectively, the variable interest rates on the credit facility are described in Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. We do not hold or issue derivative instruments for speculative purposes. As of September 30, 2024, approximately 77% of our gross debt was fixed rate. The effect of a hypothetical one percentage point increase in interest rates would increase the annual interest costs under our Term Loans Facility and Securitization Facility by approximately $30 million based on the amount of outstanding borrowings at September 30, 2024. The weighted average interest rate on the $8,702 million of term loans and the $487 million drawn on the Securitization Facility at September 30, 2024 was 6.5%.
For information about the fair value of the aggregate principal amount of borrowings under our term loans and the fair value of the senior secured and subordinated notes, refer to Note 18, “Fair Value Measurements,” in the notes to the consolidated financial statements included herein.
Foreign Currency Risk
Certain of our foreign subsidiaries’ sales and results of operations are subject to the impact of foreign currency fluctuations, primarily the British pound and the euro. Because our consolidated financial statements are presented in U.S. dollars, increases or decreases in the value of the U.S. dollar relative to other currencies in which we transact business could materially adversely affect our net sales, net income and the carrying values of our assets located outside the U.S. Global economic uncertainty continues to exist. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates, and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. The foreign currency forward exchange contracts entered into by the Company are described in Note 19, “Derivatives and Hedging Activities,” in the notes to the consolidated financial statements included herein. A 10% change in foreign currency exchange rates would not have resulted in a material impact to net income for the fiscal year ended September 30, 2024.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of September 30, 2024, TD Group carried out an evaluation, under the supervision and with the participation of TD Group’s management, including its President, Chief Executive Officer and Director (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), of the effectiveness of the design and operation of TD Group’s disclosure controls and procedures. Based upon that evaluation, the President, Chief Executive Officer and Director and Chief Financial Officer concluded that TD Group’s disclosure controls and procedures are effective to ensure that information required to be disclosed by TD Group in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to TD Group’s management, including its President, Chief Executive Officer and Director and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, TD Group’s management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in designing and evaluating the controls and procedures.
Management’s Report on Internal Control Over Financial Reporting
The management of TD Group is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Using criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO”) in Internal Control-Integrated Framework, TransDigm’s management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2024. Based on our assessment, management concluded that the Company’s internal control over financial reporting was effective as of September 30, 2024.
During fiscal 2024, the Company completed the acquisitions of Raptor Scientific, CPI’s Electron Device Business, SEI and FPT. The Company is currently integrating the acquisitions into its operations, compliance programs and internal control processes. As permitted by SEC rules and regulations, the Company has excluded these acquisitions from management's evaluation of internal controls over financial reporting as of September 30, 2024. These acquisitions constituted approximately 9.8% of the Company's total assets (inclusive of acquired intangible assets and goodwill) as of September 30, 2024, and approximately 2.0% and 0.0% of the Company's net sales and income from continuing operations before income taxes, respectively, for the fiscal year ended September 30, 2024.
The effectiveness of the Company’s internal control over financial reporting as of September 30, 2024 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report, which is included elsewhere in this Annual Report on Form 10-K and is incorporated herein by reference.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of fiscal 2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
TransDigm Group Incorporated
Opinion on Internal Control over Financial Reporting
We have audited TransDigm Group Incorporated’s internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). In our opinion, TransDigm Group Incorporated (the “Company”) maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Raptor Scientific, the Electron Device Business of Communications & Power Industries (“CPI's Electron Device Business”), SEI Industries LTD (“SEI”) or FPT Industries LLC (“FPT”), which are included in the 2024 consolidated financial statements of the Company and constituted 9.8% of total assets as of September 30, 2024 and 2.0% and 0.0% of net sales and income from continuing operations before income taxes, respectively, for the fiscal year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Raptor Scientific, CPI's Electron Device Business, SEI or FPT.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of September 30, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ deficit and cash flows for each of the three fiscal years in the period ended September 30, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated November 7, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Cleveland, Ohio
November 7, 2024
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ITEM 9B. OTHER INFORMATION
On August 29, 2024 , Kevin Stein , the Company’s President, Chief Executive Officer and Director , entered into a new “Rule 10b5-1 trading arrangement ” (as defined in Item 408 of Regulation S-K) for the sale of 100,000 shares of common stock issuable upon the exercise of vested options intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act, which Rule 10b5-1 trading arrangement is scheduled to begin on December 12, 2024 and terminate no later than December 31, 2025 .
On August 21, 2024 , Joel Reiss , the Company’s Co-Chief Operating Officer , entered into a new “Rule 10b5-1 trading arrangement ” (as defined in Item 408 of Regulation S-K) for the sale of 36,300 shares of common stock issuable upon the exercise of vested options intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act, which Rule 10b5-1 trading arrangement is scheduled to begin on November 20, 2024 and terminate no later than October 31, 2025 .
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Information regarding TD Group’s directors will be set forth under the caption “Proposal No. 1 - Election of Directors” in our Proxy Statement, which is incorporated herein by reference. The following table sets forth certain information concerning TD Group’s executive officers:
| Name | Age | Position | ||||||||||||
| Kevin Stein | 58 | President, Chief Executive Officer and Director | ||||||||||||
| Michael Lisman | 42 | Co-Chief Operating Officer | ||||||||||||
| Joel Reiss | 54 | Co-Chief Operating Officer | ||||||||||||
| Sarah Wynne | 50 | Chief Financial Officer | ||||||||||||
| Jessica L. Warren | 42 | General Counsel, Chief Compliance Officer and Secretary | ||||||||||||
Mr. Stein was appointed Chief Executive Officer and Director in April 2018 and President in January 2017. Prior to that, Mr. Stein served as Chief Operating Officer from January 2017 to March 2018 and Chief Operating Officer of the Power and Control segment from October 2014 to December 2016. Prior to joining TransDigm, Mr. Stein served as President of the Structurals division and Executive Vice President of Precision Castparts Corp. from 2009 to 2014.
Mr. Lisman was appointed Co-Chief Operating Officer in May 2023. Prior to that, Mr. Lisman served as Chief Financial Officer from July 2018 to May 2023 and Executive Vice President from January 2022 to May 2023. Mr. Lisman also served as Vice President—Mergers and Acquisitions from January 2018 to June 2018, Business Unit Manager for the Air & Fuel Valves business unit at Aero Fluid Products, a wholly-owned subsidiary of TransDigm Inc., from January 2017 to January 2018 and Director of Mergers and Acquisitions of TransDigm from November 2015 to January 2017. Mr. Lisman was Vice President at Warburg Pincus from 2011 to 2015 and has previous experience in both private equity and investment banking roles at The Carlyle Group and Morgan Stanley.
Mr. Reiss was appointed Co-Chief Operating Officer in May 2023. Prior to that, Mr. Reiss served as Executive Vice President from October 2015 to May 2023. Mr. Reiss also served as President of Hartwell Corporation, a wholly-owned subsidiary of TransDigm Inc., from July 2012 to October 2015; President of Skurka Aerospace, a wholly-owned subsidiary of TransDigm Inc., from July 2010 to July 2012; and Director of Operations of Adams Rite Aerospace, a wholly-owned subsidiary of TransDigm Inc., from July 2000 to July 2010.
Ms. Wynne was appointed Chief Financial Officer in May 2023. Prior to that, Ms. Wynne served as Chief Accounting Officer from November 2018 to May 2023. Ms. Wynne also served as Group Controller from April 2015 to October 2018, as Controller of the Aero Fluid Products division of AeroControlex Group, Inc., a wholly-owned subsidiary of TransDigm Inc., from October 2009 to March 2015, and previously in other accounting roles within the Company.
Ms. Warren was appointed General Counsel, Chief Compliance Officer and Secretary in February 2023. Prior to that, Ms. Warren served as Associate General Counsel of the Company from December 2018 to February 2023. Prior to joining TransDigm as Associate General Counsel, Ms. Warren maintained a private legal practice focusing on providing services to technology-driven businesses, including providing counsel to TransDigm on disputes, environmental matters, intellectual property and a variety of other matters. Ms. Warren also served as General Counsel of Thogus Products Company from October 2014 to July 2016.
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Code of Ethics
We have adopted a Code of Business Conduct and Ethics, which applies to all of our directors, officers, and employees and a Code of Ethics for Senior Financial Officers which includes additional ethical obligations for our senior financial management (which includes our president, chief executive officer and director, co-chief operating officers, chief financial officer, corporate controller, treasurer, vice president of finance, director of audit, group controllers, general counsel, operating unit presidents and operating unit vice presidents of finance). Please refer to the information set forth in our Proxy Statement, which is incorporated herein by reference. Our Code of Business Conduct and Ethics and our Code of Ethics for Senior Financial Officers is available on our website at www.transdigm.com. Any person may receive a copy without charge by writing to us at TransDigm Group Incorporated, 1350 Euclid Avenue, Suite 1600, Cleveland, Ohio 44115. We intend to disclose on our website any amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics that applies to directors and executive officers and that is required to be disclosed pursuant to the rules of the Securities and Exchange Commission.
Nominations of Directors
The procedure by which stockholders may recommend nominees to our Board of Directors will be set forth under the caption “Shareholder Proposals for the 2025 Annual Meeting” in our Proxy Statement, which is incorporated herein by reference.
Audit Committee
The information regarding the audit committee of our Board of Directors and audit committee financial experts will be set forth under the caption “Corporate Governance” in our Proxy Statement, which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be set forth under the captions “Executive Compensation” and “Director Compensation” in our Proxy Statement, which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information regarding security ownership of certain beneficial owners and management will be set forth under the captions “Beneficial Ownership of Equity Securities of TransDigm” and “Security Ownership of Certain Beneficial Owners” in our Proxy Statement, which is incorporated herein by reference.
Equity Compensation Plan Information
| Plan category | Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c) | ||||||||||||||||||||
Equity compensation plans approved by security holders (1) | 4,414,827 | (2) | $ | 489.70 | 3,435,370 | (3) | |||||||||||||||||
(1)Includes information related to the 2006 stock incentive plan, the 2014 stock option plan and the 2019 stock option plan.
(2)This amount represents 74,215, 3,779,503 and 561,109 shares subject to outstanding stock options under our 2006 stock incentive plan, 2014 stock option plan and 2019 stock option plan, respectively. No further grants may be made under our 2006 stock incentive plan and 2014 stock option plan, although outstanding stock options continue in force in accordance with their terms.
(3)This amount represents remaining shares available for award under our 2019 stock option plan. In August 2019, the 2019 stock option plan was adopted by the Board of Directors of TD Group and was subsequently approved by stockholders on October 3, 2019. The 2019 stock option plan permits TD Group to award stock options to our key employees, directors or consultants. The total number shares of TD Group common stock reserved for issuance or delivery under the 2019 stock option plan is 4,000,000, subject to adjustment in the event of any stock dividend or split, reorganization, recapitalization, merger, share exchange or any other similar corporate transaction or event.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be set forth under the captions entitled “Corporate Governance” and “Director Compensation” in our Proxy Statement, which is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item will be set forth under the caption “Proposal No. 2 - Ratification of Appointment of Independent Registered Public Accounting Firm,” in our Proxy Statement, which is incorporated herein by reference.
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PART IV
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents Filed with Report
(a) (1) Financial Statements
| Page | |||||
Report of Independent Registered Public Accounting Firm (Ernst & Young LLP, PCAOB ID: 42) | F-1 | ||||
| Consolidated Balance Sheets as of September 30, 2024 and 2023 | F-3 | ||||
| Consolidated Statements of Income for Fiscal Years Ended September 30, 2024, 2023 and 2022 | F-4 | ||||
| Consolidated Statements of Comprehensive Income for Fiscal Years Ended September 30, 2024, 2023 and 2022 | F-5 | ||||
| Consolidated Statements of Changes in Stockholders’ Deficit for Fiscal Years Ended September 30, 2024, 2023 and 2022 | F-6 | ||||
| Consolidated Statements of Cash Flows for Fiscal Years Ended September 30, 2024, 2023 and 2022 | F-7 | ||||
| Notes to Consolidated Financial Statements for Fiscal Years Ended September 30, 2024, 2023 and 2022 | |||||
| (a) (2) Financial Statement Schedules | |||||
| Valuation and Qualifying Accounts for the Fiscal Years Ended September 30, 2024, 2023 and 2022 | |||||
48
(a) (3) Exhibits
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Second Amended and Restated Certificate of Incorporation, filed April 28, 2014, of TransDigm Group Incorporated | ||||||||||||||
| Third Amended and Restated Bylaws of TransDigm Group Incorporated | ||||||||||||||
| Certificate of Incorporation, filed July 2, 1993, of NovaDigm Acquisition, Inc. (now known as TransDigm Inc.) | ||||||||||||||
| Certificate of Amendment, filed July 22, 1993, of the Certificate of Incorporation of NovaDigm Acquisition, Inc. (now known as TransDigm Inc.) | ||||||||||||||
| Bylaws of NovaDigm Acquisition, Inc. (now known as TransDigm Inc.) | ||||||||||||||
| Certificate of Formation, filed September 10, 2019, of 4455 Genesee Properties, LLC | ||||||||||||||
| First Amended and Restated Limited Liability Company Agreement of 4455 Genesee Properties, LLC | ||||||||||||||
| Certificate of Formation, filed October 27, 2004, of 4455 Genesee Street, LLC | ||||||||||||||
| First Amended and Restated Operating Agreement of 4455 Genesee Street, LLC | ||||||||||||||
| Certificate of Formation of 17111 Waterview Pkwy LLC | ||||||||||||||
| Limited Liability Company Agreement of 17111 Waterview Pkwy LLC | ||||||||||||||
| Certificate of Incorporation, filed July 10, 2009, of Acme Aerospace, Inc. | ||||||||||||||
| By-laws of Acme Aerospace, Inc. | ||||||||||||||
| Articles of Incorporation, filed July 30, 1986, of ARP Acquisition Corporation (now known as Adams Rite Aerospace, Inc.) | ||||||||||||||
49
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Certificate of Amendment, filed September 12, 1986, of the Articles of Incorporation of ARP Acquisition Corporation (now known as Adams Rite Aerospace, Inc.) | ||||||||||||||
| Certificate of Amendment, filed January 27, 1992, of the Articles of Incorporation of Adams Rite Products, Inc. (now known as Adams Rite Aerospace, Inc.) | ||||||||||||||
| Certificate of Amendment, filed December 31, 1992, of the Articles of Incorporation of Adams Rite Products, Inc. (now known as Adams Rite Aerospace, Inc.) | ||||||||||||||
| Certificate of Amendment, filed August 11, 1997, of the Articles of Incorporation of Adams Rite Sabre International, Inc. (now known as Adams Rite Aerospace, Inc.) | ||||||||||||||
| Amended and Restated Bylaws of Adams Rite Aerospace, Inc. | ||||||||||||||
| Certificate of Incorporation, filed June 18, 2007, of AeroControlex Group, Inc. | ||||||||||||||
| By-laws of AeroControlex Group, Inc. | ||||||||||||||
| Certificate of Formation, filed September 25, 2013, of Aerosonic LLC | ||||||||||||||
| Limited Liability Company Agreement of Aerosonic LLC | ||||||||||||||
| Certificate of Incorporation, filed November 13, 2009, of Airborne Acquisition, Inc. | ||||||||||||||
| Bylaws of Airborne Acquisition, Inc. | ||||||||||||||
| Amended and Restated Certificate of Incorporation, filed January 25, 2010, of HDT International Holdings, Inc. (now known as Airborne Global, Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed February 24, 2010, of HDT International Holdings, Inc. (now known as Airborne Global, Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed December 10, 2013, of HDT Global, Inc. (now known as Airborne Global, Inc.) | ||||||||||||||
50
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Bylaws of HDT International Holdings, Inc. (now known as Airborne Global, Inc.) | ||||||||||||||
| Certificate of Incorporation, filed November 13, 2009, of Airborne Holdings, Inc. | ||||||||||||||
| Bylaws of Airborne Holdings, Inc. | ||||||||||||||
| Certificate of Incorporation, filed September 1, 1995, of Wardle Storeys Inc. (now known as Airborne Systems NA Inc.) | ||||||||||||||
| Certificate of Amendment to Certificate of Incorporation, filed May 28, 2002, of Wardle Storeys Inc. (now known as Airborne Systems NA Inc.) | ||||||||||||||
| Bylaws of Airborne Systems NA Inc., as amended | ||||||||||||||
| Certificate of Incorporation, filed April 23, 2007, of Airborne Systems North America Inc. | ||||||||||||||
| Bylaws of Airborne Systems North America Inc. | ||||||||||||||
| Certificate of Incorporation, filed April 25, 1989, of Irvin Industries (Del), Inc. (now known as Airborne Systems North America of CA Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed June 2, 1989, of Irvin Industries (Del), Inc. (now known as Airborne Systems North America of CA Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed April 30, 1996, of Irvin Industries, Inc. (now known as Airborne Systems North America of CA Inc.) | ||||||||||||||
| Certificate of Amendment to Certificate of Incorporation, filed April 23, 2007, of Irvin Aerospace Inc. (now known as Airborne Systems North America of CA Inc.) | ||||||||||||||
| Bylaws of Airborne Systems North America of CA Inc. | ||||||||||||||
| Certificate of Incorporation, Profit, filed October 28, 1994, of Wardle Storeys (Parachutes) Inc. (now known as Airborne Systems North America of NJ Inc.) | ||||||||||||||
| Certificate of Merger, filed February 9, 1995, of Para-Flite Inc. with and into Wardle Storeys (Parachutes) Inc. (now known as Airborne Systems North America of NJ Inc.) | ||||||||||||||
51
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Certificate of Amendment to Certificate of Incorporation, filed April 23, 2007, of Para-Flite Inc. (now known as Airborne Systems North America of NJ Inc.) | ||||||||||||||
| Certificate of Correction to Certificate of Incorporation, filed June 27, 2007, of Airborne Systems North America of NJ Inc. | ||||||||||||||
| Bylaws, as amended, of Airborne Systems North America of NJ Inc. | ||||||||||||||
| Certificate of Incorporation, filed October 16, 2007, of AmSafe Global Holdings, Inc. | ||||||||||||||
| Second Amended and Restated By-Laws of AmSafe Global Holdings, Inc. | ||||||||||||||
| Certificate of Incorporation, filed May 8, 1985, of Am-Safe, Inc. (now known as AmSafe, Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed May 19, 2005, of Am-Safe, Inc. (now known as AmSafe, Inc.) | ||||||||||||||
| By-Laws of Am-Safe, Inc. (now known as AmSafe, Inc.) | ||||||||||||||
| Certificate of Incorporation, as amended, of Angus Electronics Co. | ||||||||||||||
| Amended and Restated Bylaws of Angus Electronics Co. | ||||||||||||||
| Articles of Incorporation, filed November 13, 1995, of Apical Industries, Inc. | ||||||||||||||
| Bylaws of Apical Industries, Inc. | ||||||||||||||
| Restated Certificate of Incorporation, filed July 10, 1967, of Arkwin Industries, Inc. | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed November 4, 1981, of Arkwin Industries, Inc. | ||||||||||||||
52
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed June 11, 1999, of Arkwin Industries, Inc. | ||||||||||||||
| By-laws of Arkwin Industries, Inc. | ||||||||||||||
| Certificate of Incorporation of Armtec Countermeasures Co. | ||||||||||||||
| Amended and Restated Bylaws of Armtec Countermeasures Co. | ||||||||||||||
| Certificate of Incorporation, as amended, of Armtec Countermeasures TNO Co. | ||||||||||||||
| Amended and Restated Bylaws of Armtec Countermeasures TNO Co. | ||||||||||||||
| Certificate of Incorporation of Armtec Defense Products Co. | ||||||||||||||
| Amended and Restated Bylaws of Armtec Defense Products Co. | ||||||||||||||
| Certificate of Formation, filed October 27, 2004, of Ashford Properties, LLC | ||||||||||||||
| First Amended and Restated Operating Agreement of Ashford Properties, LLC | ||||||||||||||
| Certificate of Incorporation, as amended, of Esterline Sensors Services Americas, Inc. (now known as Auxitrol Weston USA, Inc.) | ||||||||||||||
| Amended and Restated Bylaws of Esterline Sensors Services Americas, Inc. (now known as Auxitrol Weston USA, Inc.) | ||||||||||||||
53
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amended and Restated Certificate of Incorporation, filed February 7, 2007, of Aviation Technologies, Inc. | ||||||||||||||
| By-laws of Wings Holdings, Inc. (now known as Aviation Technologies, Inc.) | ||||||||||||||
| Certificate of Formation, effective June 28, 2007, of Avionic Instruments LLC | ||||||||||||||
| Limited Liability Company Agreement of Avionic Instruments LLC | ||||||||||||||
| Articles of Incorporation, filed December 29, 1992, of Avionics Specialties, Inc. | ||||||||||||||
| Bylaws of Avionics Specialties, Inc. | ||||||||||||||
| Articles of Incorporation, filed October 3, 1963, of Avtech Corporation (now known as AvtechTyee, Inc.) | ||||||||||||||
| Amendment to Articles of Incorporation, filed March 30, 1984, of Avtech Corporation (now known as AvtechTyee, Inc.) | ||||||||||||||
| Amendment to Articles of Incorporation, filed April 17, 1989, of Avtech Corporation (now known as AvtechTyee, Inc.) | ||||||||||||||
| Articles of Amendment of Articles of Incorporation, filed July 17, 1998, of Avtech Corporation (now known as AvtechTyee, Inc.) | ||||||||||||||
| Articles of Amendment to Articles of Incorporation, filed May 20, 2003, of Avtech Corporation (now known as AvtechTyee, Inc.) | ||||||||||||||
| Articles of Amendment to Articles of Incorporation, filed May 2, 2012, of AvtechTyee, Inc. | ||||||||||||||
| By-laws of Avtech Corporation (now known as AvtechTyee, Inc.) | ||||||||||||||
| Certificate of Formation, filed May 30, 2013, of Beta Transformer Technology LLC | ||||||||||||||
54
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amended and Restated Limited Liability Company Agreement, filed July 7, 2016, of Beta Transformer Technology LLC | ||||||||||||||
| Limited Liability Company Certificate of Formation of Breeze-Eastern LLC | ||||||||||||||
| Limited Liability Company Agreement of Breeze-Eastern LLC | ||||||||||||||
| Certificate of Incorporation, filed May 9, 2000, of Erie Acquisition Corp. (now known as Bridport Erie Aviation, Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed May 30, 2000, of Erie Acquisition Corp. (now known as Bridport Erie Aviation, Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed June 19, 2000, of Bridport Erie Aviation, Inc. | ||||||||||||||
| Amended and Restated By-Laws of Erie Acquisition Corp. (now known as Bridport Erie Aviation, Inc.) | ||||||||||||||
| Certificate of Incorporation, filed July 2, 2004, of Bridport Holdings, Inc. | ||||||||||||||
| Amended and Restated By-Laws of Bridport Holdings, Inc. | ||||||||||||||
| Articles of Incorporation, filed February 6, 1998, of Air Carrier Acquisition Corp. (now known as Bridport-Air Carrier, Inc.) | ||||||||||||||
| Articles of Amendment, filed February 23, 1998, of Air Carrier Acquisition Corp. (now known as Bridport-Air Carrier, Inc.) | ||||||||||||||
| Articles of Amendment, filed December 14, 1999, of Bridport-Air Carrier, Inc. | ||||||||||||||
| Amended and Restated By-Laws of Bridport-Air Carrier, Inc. | ||||||||||||||
| Certificate of Incorporation, filed August 6, 2007, of Bruce Aerospace Inc. | ||||||||||||||
| By-laws of Bruce Aerospace Inc. | ||||||||||||||
55
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Restated Articles of Organization, filed June 5, 2023, of Calspan Air Facilities, LLC | ||||||||||||||
| Second Amended and Restated Operating Agreement of Calspan Air Facilities, LLC | ||||||||||||||
| Articles of Organization, filed October 15, 2013, of Calspan Air Services, LLC | ||||||||||||||
| First Amended and Restated Operating Agreement of Calspan Air Services, LLC | ||||||||||||||
| Certificate of Incorporation, filed April 16, 2021, of Calspan ASE Portugal, Inc. | ||||||||||||||
| First Amended and Restated Bylaws of Calspan ASE Portugal, Inc. | ||||||||||||||
| Restated Articles of Organization, filed June 5, 2023, of Calspan Holdings, LLC | ||||||||||||||
| Eighth Amended and Restated Operating Agreement of Calspan Holdings, LLC | ||||||||||||||
| Certificate of Formation of CALSPAN JETS LLC | ||||||||||||||
| Limited Liability Company Agreement of CALSPAN JETS LLC | ||||||||||||||
| Certificate of Formation of Calspan Technology Acquisition LLC | ||||||||||||||
| Limited Liability Company Agreement of Calspan Technology Acquisition LLC | ||||||||||||||
| Operating Agreement of Calspan Genesee, LLC (now known as Calspan, LLC) | ||||||||||||||
| Articles of Organization, filed April 25, 2023, of Calspan Genesee, LLC (now known as Calspan, LLC) | ||||||||||||||
| Certificate of Amendment of Articles of Organization, filed May 2, 2023, of Calspan, LLC (fka Calspan Genesee, LLC) | ||||||||||||||
56
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Articles of Organization, filed June 29, 2007, of CDA InterCorp LLC | ||||||||||||||
| Operating Agreement of CDA InterCorp LLC | ||||||||||||||
| Certificate of Formation, filed September 30, 2009, of CEF Industries, LLC | ||||||||||||||
| Limited Liability Company Agreement of CEF Industries, LLC | ||||||||||||||
| Certificate of Formation, effective June 30, 2007, of Champion Aerospace LLC | ||||||||||||||
| Limited Liability Company Agreement of Champion Aerospace LLC | ||||||||||||||
| Certificate of Incorporation, filed October 16, 2020, of Chelton Avionics Holdings, Inc. | ||||||||||||||
| Bylaws of Chelton Avionics Holdings, Inc. | ||||||||||||||
| Certificate of Incorporation, filed March 4, 1997, of Chelton Avionics, Inc. | ||||||||||||||
| Amended and Restated By-laws of Chelton Avionics, Inc. | ||||||||||||||
| Certificate of Incorporation, filed August 28, 2007, of Cobham Defense Products, Inc. (now known as Chelton Defense Products, Inc.) | ||||||||||||||
| Amendment to Certificate of Incorporation, filed December 20, 2021, of Cobham Defense Products, Inc. (now known as Chelton Defense Products, Inc.) | ||||||||||||||
| Amended and Restated By-laws of Cobham Defense Products, Inc. (now known as Chelton Defense Products, Inc.) | ||||||||||||||
| Certificate of Formation of CMC Electronics Aurora LLC | ||||||||||||||
57
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amended and Restated Limited Liability Company Agreement of CMC Electronics Aurora LLC | ||||||||||||||
| Amended and Restated Certificate of Incorporation of CPI Intermediate Holdings, Inc. | ||||||||||||||
| First Amended and Restated Bylaws of CPI Intermediate Holdings, Inc. | ||||||||||||||
| Certificate of Incorporation of Catalyst Holdings, Inc. (now known as CPI International, Inc.) | ||||||||||||||
| Certificate of Amendment to the Certificate of Incorporation of Catalyst Holdings, Inc. (now known as CPI International, Inc.) | ||||||||||||||
| Certificate of Amendment to the Certificate of Incorporate of CPI International Acquisition, Inc. (now known as CPI International, Inc.) | ||||||||||||||
| Third Amended and Restated Bylaws of CPI International, Inc. | ||||||||||||||
| Articles of Organization, filed April 24, 2023, of CTHC LLC | ||||||||||||||
| First Amended and Restated Operating Agreement of CTHC LLC | ||||||||||||||
| Articles of Incorporation, filed April 11, 1997, of Dart Aerospace USA, Inc. | ||||||||||||||
| Bylaws of Dart Buyer, Inc. | ||||||||||||||
| Certificate of Incorporation, filed July 29, 2011, of Dart Helicopter Services, Inc. | ||||||||||||||
| Bylaws of Dart Helicopter Services, Inc. | ||||||||||||||
| Certificate of Incorporation, filed February 28, 2019, of Dart Intermediate, Inc. | ||||||||||||||
| Bylaws of Dart Intermediate, Inc. | ||||||||||||||
58
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Second Amended and Restated Certificate of Incorporation, filed May 25, 2022, of Dart TopCo, Inc. | ||||||||||||||
| Bylaws of Dart TopCo, Inc. | ||||||||||||||
| Certificate of Incorporation, filed October 23, 1970, of ILC Data Devices Corporation (now known as Data Device Corporation) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed April 23, 1999, of ILC Data Device Corporation (now known as Data Device Corporation) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed July 14, 2014, of Data Device Corporation | ||||||||||||||
| By-laws of ILC Data Devices Corporation (now known as Data Device Corporation) | ||||||||||||||
| Certificate of Incorporation, filed November 20, 2009, of Dukes Aerospace, Inc. | ||||||||||||||
| By-laws of Dukes Aerospace, Inc. | ||||||||||||||
| Certificate of Formation, filed February 29, 2000, of Western Sky Industries, LLC (now known as Electromech Technologies LLC) | ||||||||||||||
| Certificate of Amendment, filed December 18, 2013, of Western Sky Industries, LLC (now known as Electromech Technologies LLC) | ||||||||||||||
| Fourth Amended and Restated Limited Liability Company Agreement of Electromech Technologies LLC | ||||||||||||||
| Certificate of Formation of Esterline Europe Company LLC | ||||||||||||||
| Amended and Restated Limited Liability Company Agreement of Esterline Europe Company LLC | ||||||||||||||
| Certificate of Incorporation, filed November 13, 2007, of Esterline International Company | ||||||||||||||
59
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amended and Restated Bylaws of Esterline International Company | ||||||||||||||
| Fifth Amended and Restated Certificate of Incorporation of Esterline Technologies Corporation | ||||||||||||||
| Second Amended and Restated By-laws of Esterline Technologies Corporation | ||||||||||||||
| Certificate of Formation of Esterline Technologies SGIP LLC | ||||||||||||||
| Limited Liability Company Agreement of Esterline Technologies SGIP LLC | ||||||||||||||
| Certificate of Formation of FPT Industries LLC | ||||||||||||||
| Certificate of Amendment to Certificate of Formation of FPT Industries LLC | ||||||||||||||
| Amended and Restated Limited Liability Company Agreement of FPT Industries LLC | ||||||||||||||
| Restated Articles of Organization, filed June 5, 2023, of Genesee Holdings II, LLC | ||||||||||||||
| Second Amended and Restated Operating Agreement of Genesee Holdings II, LLC | ||||||||||||||
| Articles of Organization, filed October 8, 2020, of Genesee Holdings III, LLC | ||||||||||||||
| First Amended and Restated Operating Agreement of Genesee Holdings III, LLC | ||||||||||||||
| Restated Articles of Organization, filed June 5, 2023, of Genesee Holdings, LLC | ||||||||||||||
| Second Amended and Restated Operating Agreement of Genesee Holdings, LLC | ||||||||||||||
| Articles of Organization, as amended, of HarcoSemco LLC | ||||||||||||||
60
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| First Amended and Restated Limited Liability Company Agreement of HarcoSemco LLC | ||||||||||||||
| Articles of Incorporation, filed May 10, 1957, of Hartwell Aviation Supply Company (now known as Hartwell Corporation) | ||||||||||||||
| Certificate of Amendment, filed June 9, 1960, of Articles of Incorporation of Hartwell Aviation Supply Company (now known as Hartwell Corporation) | ||||||||||||||
| Certification of Amendment, filed October 23, 1987, of Articles of Incorporation of Hartwell Corporation | ||||||||||||||
| Certificate of Amendment, filed April 9, 1997, of Articles of Incorporation of Hartwell Corporation | ||||||||||||||
| By-laws of Hartwell Corporation | ||||||||||||||
| Amended and Restated Articles of Incorporation, filed February 8, 2010, of Heli Tech, Inc. | ||||||||||||||
| Amendment No. 1, filed July 12, 2010, to the Amended and Restated Articles of Incorporation of Heli Tech, Inc. | ||||||||||||||
| Amendment No. 2, filed January 25, 2013, to the Amended and Restated Articles of Incorporation of Heli Tech, Inc. | ||||||||||||||
| Amended and Restated By-laws of Heli Tech, Inc. | ||||||||||||||
| Certificate of Incorporation of Hytek Finishes Co. | ||||||||||||||
| Amended and Restated Bylaws of Hytek Finishes Co. | ||||||||||||||
| Amended and Restated Certificate of Incorporation of Iceman Holdco, Inc. | ||||||||||||||
61
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| First Amended and Restated Bylaws of Iceman Holdco, Inc. | ||||||||||||||
| Amended and Restated Certificate of Incorporation of ILC Holdings, Inc. | ||||||||||||||
| By-laws, as amended, of ILC Holdings, Inc. | ||||||||||||||
| Restated Articles of Incorporation of Janco Corporation | ||||||||||||||
| Amended and Restated Bylaws of Janco Corporation | ||||||||||||||
| Certificate of Formation, filed January 26, 2007, of Johnson Liverpool LLC | ||||||||||||||
| Amended and Restated Limited Liability Company Agreement of Johnson Liverpool LLC | ||||||||||||||
| Second Amended and Restated Limited Liability Company Agreement of King Nutronics, LLC | ||||||||||||||
| Certificate of Incorporation, as amended, of KH Acquisition I Co. (now known as Kirkhill Inc.) | ||||||||||||||
| Amended and Restated By-laws of Kirkhill Inc. | ||||||||||||||
| Certificate of Incorporation of Korry Electronics Co. | ||||||||||||||
| Amended and Restated Bylaws of Korry Electronics Co. | ||||||||||||||
| Certificate of Incorporation, as amended, of Leach Holding Corporation | ||||||||||||||
62
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amended and Restated Bylaws of Leach Holding Corporation | ||||||||||||||
| Certificate of Incorporation, as amended, of Leach International Corporation | ||||||||||||||
| Amended and Restated Bylaws of Leach International Corporation | ||||||||||||||
| Certificate of Formation, filed February 22, 2021, of Leach Mexico Holding LLC | ||||||||||||||
| Limited Liability Company Agreement of Leach Mexico Holding LLC | ||||||||||||||
| Certificate of Incorporation of Leach Technology Group, Inc. | ||||||||||||||
| Amended and Restated Bylaws of Leach Technology Group, Inc. | ||||||||||||||
| Certificate of Incorporation, filed March 28, 1994, of MPT Acquisition Corp. (now known as MarathonNorco Aerospace, Inc.) | ||||||||||||||
| Certificate of Amendment, filed May 18, 1994, of the Certificate of Incorporation of MPT Acquisition Corp. (now known as MarathonNorco Aerospace, Inc.) | ||||||||||||||
| Certificate of Amendment, filed May 24, 1994, of the Certificate of Incorporation of MPT Acquisition Corp. (now known as MarathonNorco Aerospace, Inc.) | ||||||||||||||
| Certificate of Amendment, filed August 28, 2003, of the Certificate of Incorporation of Marathon Power Technologies Company (now known as MarathonNorco Aerospace, Inc.) | ||||||||||||||
| Bylaws of MPT Acquisition Corp. (now known as MarathonNorco Aerospace, Inc.) | ||||||||||||||
| Certificate of Incorporation, as amended, of Mason Electric Co. | ||||||||||||||
63
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amended and Restated Bylaws of Mason Electric Co. | ||||||||||||||
| Certificate of Incorporation, filed April 13, 2007, of McKechnie Aerospace DE, Inc. | ||||||||||||||
| By-laws of McKechnie Aerospace DE, Inc. | ||||||||||||||
| Certificate of Incorporation, filed April 25, 2007, of McKechnie Aerospace Holdings, Inc. | ||||||||||||||
| By-laws of McKechnie Aerospace Holdings, Inc. | ||||||||||||||
| Certificate of Formation, filed May 11, 2005, of Melrose US 3 LLC (now known as McKechnie Aerospace US LLC) | ||||||||||||||
| Certificate of Amendment, filed May 11, 2007, to Certificate of Formation of Melrose US 3 LLC (now known as McKechnie Aerospace US LLC) | ||||||||||||||
| Limited Liability Company Agreement of McKechnie Aerospace US LLC | ||||||||||||||
| Amended and Restated Certificate of Microwave Power Products, Inc. | ||||||||||||||
| Restated Bylaws of Microwave Power Products, Inc. | ||||||||||||||
| First Amended and Restated Limited Liability Company Agreement of Medtherm Labs, LLC | ||||||||||||||
| Certificate of Incorporation, as amended, of NAT Seattle Inc. | ||||||||||||||
| Amended and Restated By-laws of NAT Seattle Inc. | ||||||||||||||
| Amended and Restated Articles of Incorporation, as amended, of NMC Group, Inc. | ||||||||||||||
64
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amended and Restated Bylaws of NMC Group, Inc. | ||||||||||||||
| Certificate of Formation, filed March 27, 2015, of Telair International LLC (now known as Nordisk Aviation Products LLC) | ||||||||||||||
| Amendment to Certificate of Formation, filed February 4, 2021, of Telair International LLC (now known as Nordisk Aviation Products LLC) | ||||||||||||||
| Limited Liability Company Agreement of Telair International LLC (now known as Nordisk Aviation Products LLC) | ||||||||||||||
| Restated Certificate of Incorporation, filed June 27, 2014, of North Hills Signal Processing Corp. | ||||||||||||||
| By-laws of Porta Systems Corp. (now known as North Hills Signal Processing Corp.) | ||||||||||||||
| Certificate of Formation, filed September 30, 2021, of North Hills Signal Processing Overseas LLC | ||||||||||||||
| Limited Liability Company Agreement of North Hills Signal Processing Overseas LLC | ||||||||||||||
| Certificate of Incorporation, as amended, of Norwich Aero Products Inc. | ||||||||||||||
| Amended and Restated By-laws of Norwich Aero Products Inc. | ||||||||||||||
| Amended and Restated Articles of Incorporation, filed June 28, 2022, of Offshore Helicopter Support Services, Inc. | ||||||||||||||
| Bylaws of Offshore Helicopter Support Services, Inc. | ||||||||||||||
| Certificate of Incorporation, as amended, of Palomar Products, Inc. | ||||||||||||||
65
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amended and Restated Bylaws of Palomar Products, Inc. | ||||||||||||||
| Articles of Incorporation of Paravion Technology, Inc. | ||||||||||||||
| By-laws of Paravion Technology, Inc. | ||||||||||||||
| Certificate of Incorporation, filed April 28, 2015, of PX Acquisition Co. (now known as Pexco Aerospace, Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed May 14, 2015, of PX Acquisition Co. (now known as Pexco Aerospace, Inc.) | ||||||||||||||
| By-laws of PX Acquisition Co. (now known as Pexco Aerospace, Inc.) | ||||||||||||||
| Articles of Incorporation, filed October 3, 1956, of PneuDraulics, Inc. | ||||||||||||||
| Certificate of Amendment of Articles of Incorporation, filed December 9, 1970, of Articles of Incorporation of PneuDraulics, Inc. | ||||||||||||||
| Restated By-laws of PneuDraulics, Inc. | ||||||||||||||
| Certificate of Incorporation, filed October 24, 1977, of Transformer Technology Corporation (now known as Power Device Corporation) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed December 1, 1977, of Transformer Technology Corporation (now known as Power Device Corporation) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed June 20, 2022, of Beta Transformer Technology Corporation (now known as Power Device Corporation) | ||||||||||||||
| By-laws of Transformer Technology Corporation (now known as Power Device Corporation) | ||||||||||||||
| Second Amended and Restated Limited Liability Company Agreement of Raptor Labs HoldCo, LLC | ||||||||||||||
| First Amended and Restated Limited Liability Company Agreement of Raptor Labs Intermediate, LLC | ||||||||||||||
66
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Limited Liability Company Certificate of Formation, filed May 30, 2007, of Schneller LLC | ||||||||||||||
| Amended and Restated Limited Liability Company Agreement, dated August 31, 2011, of Schneller LLC | ||||||||||||||
| Certificate of Incorporation, as amended, of Semco Instruments, Inc. | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed October 17, 2012, of Semco Instruments, Inc. | ||||||||||||||
| Amended and Restated By-laws of Semco Instruments, Inc. | ||||||||||||||
| Second Amended and Restated Limited Liability Company Agreement of Sensor Concepts, LLC | ||||||||||||||
| Certificate of Incorporation, filed September 16, 1994, of Am-Safe Commercial Products, Inc. (now known as Shield Restraint Systems, Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed May 19, 2005, of AmSafe Commercial Products, Inc. (now known as Shield Restraint Systems, Inc.) | ||||||||||||||
| Certificate of Amendment of Certificate of Incorporation, filed August 27, 2014, of AmSafe Commercial Products, Inc. (now known as Shield Restraint Systems, Inc.) | ||||||||||||||
| By-laws of Am-Safe Commercial Products, Inc. (now known as Shield Restraint Systems, Inc.) | ||||||||||||||
| Articles of Incorporation, filed July 28, 1965, of Simplex Manufacturing Co. | ||||||||||||||
| Articles of Amendment, filed November 9, 1973, of Simplex Manufacturing Co. | ||||||||||||||
| Articles of Amendment, filed December 2, 1988, of Simplex Manufacturing Co. | ||||||||||||||
| Articles of Amendment, filed August 21, 2000, of Simplex Manufacturing Co. | ||||||||||||||
| Articles of Amendment, filed March 12, 2001, of Simplex Manufacturing Co. | ||||||||||||||
67
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Articles of Amendment, filed October 29, 2007, of Simplex Manufacturing Co. | ||||||||||||||
| Amended and Restated By-laws of Simplex Manufacturing Co., as amended | ||||||||||||||
| Articles of Incorporation, filed January 2, 1992, of Skandia, Inc. | ||||||||||||||
| Amended and Restated By-laws of Skandia, Inc. | ||||||||||||||
| Certificate of Incorporation, filed December 22, 2004, of Skurka Aerospace Inc. | ||||||||||||||
| By-laws, as amended, of Skurka Aerospace Inc. | ||||||||||||||
| Fourth Amended and Restated Limited Liability Company Agreement of Space Electronics LLC | ||||||||||||||
| Articles of Organization, as amended, of Symetrics Industries, LLC | ||||||||||||||
| Amended and Restated Limited Liability Company Agreement of Symetrics Industries, LLC | ||||||||||||||
| Restated Articles of Incorporation of TA Aerospace Co. | ||||||||||||||
| Amended and Restated Bylaws of TA Aerospace Co. | ||||||||||||||
| Certificate of Incorporation, filed August 22, 1986, of Tactair Fluid Controls, Inc. | ||||||||||||||
| Certificate of Amendment, filed June 8, 1998, of Certificate of Incorporation of Tactair Fluid Controls, Inc. | ||||||||||||||
| By-Laws, as amended, of Tactair Fluid Controls, Inc. | ||||||||||||||
| Certificate of Incorporation, filed August 26, 2019, of TDG ESL Holdings Inc. | ||||||||||||||
68
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| By-laws of TDG ESL Holdings Inc. | ||||||||||||||
| Certificate of Incorporation, filed January 15, 2004, of TEAC Aerospace Technologies, Inc. | ||||||||||||||
| Bylaws of TEAC Aerospace Technologies, Inc. | ||||||||||||||
| Certificate of Formation, filed February 23, 2015, of Telair US LLC | ||||||||||||||
| Limited Liability Company Agreement of Telair US LLC | ||||||||||||||
| Certificate of Articles of Incorporation of TestVonics, Inc. | ||||||||||||||
| Second Amended and Restated Bylaws of TestVonics, Inc. | ||||||||||||||
| Articles of Incorporation, filed August 6, 1999, of Texas Rotronics, Inc. | ||||||||||||||
| By-laws, as amended, of Texas Rotronics, Inc. | ||||||||||||||
| Certificate of Incorporation of TransDigm UK Holdings Limited | ||||||||||||||
| Articles of Association of TransDigm UK Holdings Limited | ||||||||||||||
| Certificate of Formation, effective June 30, 2007, of Transicoil LLC | ||||||||||||||
| Limited Liability Company Agreement of Transicoil LLC | ||||||||||||||
| Certificate of Formation, filed June 13, 2013, of Whippany Actuation Systems, LLC | ||||||||||||||
| Limited Liability Company Agreement of Whippany Actuation Systems, LLC | ||||||||||||||
69
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Restated Certificate of Incorporation of Young & Franklin Inc. | ||||||||||||||
| By-laws, as amended, of Young & Franklin Inc. | ||||||||||||||
| Form of Stock Certificate | ||||||||||||||
| Indenture, dated as of November 13, 2019, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to TransDigm Inc.’s 5.50% Senior Subordinated Notes due 2027 | ||||||||||||||
| Indenture, dated as of January 20, 2021, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to TransDigm Inc.’s 4.625% Senior Subordinated Notes due 2029 | ||||||||||||||
| Indenture, dated as of April 21, 2021, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to TransDigm Inc.’s 4.875% Senior Subordinated Notes due 2029 | ||||||||||||||
| Indenture, dated as of February 24, 2023, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, relating to TransDigm Inc.’s 6.75% Senior Secured Notes due 2028 | ||||||||||||||
| First Supplemental Indenture, dated as of March 9, 2023, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, relating to TransDigm Inc.’s 6.75% Senior Secured Notes due 2028 | ||||||||||||||
| Indenture, dated as of August 18, 2023, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, relating to TransDigm Inc.’s 6.875% Senior Secured Notes due 2030 | ||||||||||||||
| Indenture, dated as of November 28, 2023, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, relating to TransDigm Inc.’s 7.125% Senior Secured Notes due 2031 | ||||||||||||||
70
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Indenture, dated as of February 27, 2024, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, relating to TransDigm Inc.’s 6.375% Senior Secured Notes due 2029 | ||||||||||||||
| Indenture, dated as of February 27, 2024, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, relating to TransDigm Inc.’s 6.625% Senior Secured Notes due 2032 | ||||||||||||||
| First Supplemental Indenture, dated as of March 22, 2024, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, to the Indenture, dated as of February 27, 2024, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, relating to TransDigm Inc.’s additional 6.375% Senior Secured Notes due 2029 | ||||||||||||||
| Indenture, dated as of September 19, 2024, among TransDigm Inc., as issuer, TransDigm Group Incorporated, as a guarantor, the subsidiary guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and US collateral agent, and The Bank of New York Mellon, as UK collateral agent, relating to TransDigm Inc.’s 6.000% Senior Secured Notes due 2033 | ||||||||||||||
| Form of Supplemental Indenture to Add New Guarantors | ||||||||||||||
| Form of TransDigm Inc.’s 5.50% Senior Subordinated Notes due 2027 | ||||||||||||||
| Form of TransDigm Inc.’s 4.625% Senior Subordinated Notes due 2029 | ||||||||||||||
| Form of TransDigm Inc.’s 4.875% Senior Subordinated Notes due 2029 | ||||||||||||||
| Form of TransDigm Inc.’s 6.75% Senior Secured Notes due 2028 | ||||||||||||||
| Form of TransDigm Inc.’s 6.875% Senior Secured Notes due 2030 | ||||||||||||||
| Form of TransDigm Inc.’s 7.125% Senior Secured Notes due 2031 | ||||||||||||||
71
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Form of TransDigm Inc.’s 6.375% Senior Secured Notes due 2029 | ||||||||||||||
| Form of TransDigm Inc.’s 6.625% Senior Secured Notes due 2032 | ||||||||||||||
| Form of TransDigm Inc.’s additional 6.375% Senior Secured Notes due 2029 | ||||||||||||||
| Form of TransDigm Inc.’s 6.00% Senior Secured Notes due 2033 | ||||||||||||||
| Description of Securities | ||||||||||||||
| Option Agreement dated August 6, 2021 between the Company and W. Nicholas Howley* | ||||||||||||||
| Second Amended and Restated Employment Agreement, dated April 26, 2018, between TransDigm Group Incorporated and Kevin Stein* | ||||||||||||||
| Amendment to Second Amended and Restated Employment Agreement, dated February 6, 2024, between TransDigm Group Incorporated and Kevin Stein* | ||||||||||||||
| Amended and Restated Employment Agreement, dated July 26, 2023, between TransDigm Group Incorporated and Michael Lisman* | ||||||||||||||
| Employment Agreement, dated October 28, 2013, between TransDigm Group Incorporated and Jorge Valladares* | ||||||||||||||
| Form of Amendment to Employment Agreement, dated October 2015, between TransDigm Group Incorporated and Jorge Valladares* | ||||||||||||||
| Second Amendment to Employment Agreement, dated July 30, 2018, between TransDigm Group Incorporated and Jorge Valladares* | ||||||||||||||
| Amendment to Employment Agreement, dated November 16, 2021, between TransDigm Group Incorporated and Jorge Valladares* | ||||||||||||||
| Amended and Restated Employment Agreement, dated July 26, 2023, between TransDigm Group Incorporated and Joel Reiss* | ||||||||||||||
| Amended and Restated Employment Agreement, dated July 26, 2023, between TransDigm Group Incorporated and Sarah Wynne* | ||||||||||||||
| Employment Agreement, dated February 6, 2023, between TransDigm Group Incorporated and Jessica Warren* | ||||||||||||||
72
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| TransDigm Group Incorporated 2006 Stock Incentive Plan* | ||||||||||||||
| Amendment No. 1, dated October 20, 2006, to the TransDigm Group Incorporated 2006 Stock Incentive Plan* | ||||||||||||||
| Second Amendment to TransDigm Group Incorporated 2006 Stock Incentive Plan, dated April 25, 2008* | ||||||||||||||
| Amended and Restated TransDigm Group Incorporated 2014 Stock Option Plan* | ||||||||||||||
| TransDigm Group Incorporated 2019 Stock Option Plan* | ||||||||||||||
| TransDigm Group Incorporated 2019 Stock Option Plan Dividend Equivalent Plan* | ||||||||||||||
| TransDigm Group Incorporated 2016 Director Share Plan* | ||||||||||||||
| Form of Stock Option Agreement for options awarded in fiscal 2020* | ||||||||||||||
| Form of Stock Option Agreement for options awarded in fiscal 2021* | ||||||||||||||
| Form of Stock Option Agreement for options awarded in fiscal 2022* | ||||||||||||||
| Form of Stock Option Agreement for options awarded in fiscal 2023* | ||||||||||||||
| Form of Stock Option Grant Notice and Agreement for executive officers under the TransDigm Group Incorporated 2019 Stock Option Plan (or TransDigm Group Incorporated 2014 Stock Option Plan) for options awarded in fiscal 2024* | ||||||||||||||
| Form of Stock Option Grant Notice and Agreement for directors under the TransDigm Group Incorporated 2019 Stock Option Plan for options awarded in fiscal 2024* | ||||||||||||||
| Form of Stock Option Grant Notice and Agreement for executive officers under the TransDigm Group Incorporated 2019 Stock Option Plan for options awarded in fiscal 2025* | ||||||||||||||
| Form of Stock Option Grant Notice and Agreement for directors under the TransDigm Group Incorporated 2019 Stock Option Plan for options awarded in fiscal 2025* | ||||||||||||||
73
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan* | ||||||||||||||
| Amendment to Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan* | ||||||||||||||
| Amended and Restated TransDigm Group Incorporated 2014 Stock Option Plan Dividend Equivalent Plan* | ||||||||||||||
| Amendment to Amended and Restated TransDigm Group Incorporated 2014 Stock Option Plan Dividend Equivalent Plan* | ||||||||||||||
| Form of Amendment to Director Options to Effect Changes in Dividend Equivalent Payment Method* | ||||||||||||||
| Amendment and Restatement Agreement, and Second Amendment and Restated Credit Agreement, dated as of June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, the subsidiaries of TransDigm Inc. from time to time party thereto, the lenders party thereto, as lenders, and Credit Suisse AG, as administrative agent | ||||||||||||||
| Incremental Assumption and Refinancing Facility Agreement, dated as of May 14, 2015, among TransDigm Inc., TransDigm Group Incorporated, the subsidiary guarantors party thereto, Credit Suisse AG, as administrative agent and collateral agent, and the other agents and lenders named therein | ||||||||||||||
| Loan Modification Agreement, dated as of May 20, 2015, among TransDigm Inc., TransDigm Group Incorporated, the subsidiary guarantors party thereto, Credit Suisse AG, as administrative agent and collateral agent, and the other agents and lenders party thereto | ||||||||||||||
| Incremental Revolving Credit Assumption and Refinancing Facility Agreement, dated as of May 20, 2015, among TransDigm Inc., TransDigm Group Incorporated, the subsidiary guarantors party thereto, Credit Suisse AG, as administrative agent and collateral agent and the other agents and lenders party thereto | ||||||||||||||
| Incremental Term Loan Assumption Agreement dated October 14, 2016 among TransDigm Inc., TransDigm Group Incorporated, the subsidiaries of TransDigm Inc. party thereto, the lenders party thereto and Credit Suisse AG, as administrative and collateral agent | ||||||||||||||
| Amendment No. 2 to the Second Amended and Restated Credit Agreement, dated as of March 6, 2017, among TransDigm Inc., as borrower, TransDigm Group Incorporated, as guarantor, the subsidiary guarantors party thereto, Credit Suisse AG, as administrative agent and collateral agent, and the other agents and lenders named therein | ||||||||||||||
74
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amendment No. 3 to the Second Amended and Restated Credit Agreement, dated as of August 22, 2017, among TransDigm Inc., as borrower, TransDigm Group Incorporated, as guarantor, the subsidiary guarantors party thereto, Credit Suisse AG, as administrative agent and collateral agent, and the other agents and lenders named therein | ||||||||||||||
| Amendment No. 4 to the Second Amended and Restated Credit Agreement, dated as of November 30, 2017, among TransDigm Inc., as borrower, TransDigm Group Incorporated, as guarantor, the subsidiary guarantors party thereto, Credit Suisse AG, as administrative agent and collateral agent, and the other agents and lenders named therein | ||||||||||||||
| Refinancing Facility Agreement to the Second Amended and Restated Credit Agreement, dated as of February 22, 2018, among TransDigm Inc., as borrower, TransDigm Group Incorporated, as guarantor, the subsidiary guarantors party thereto, Credit Suisse AG, as administrative agent and collateral agent, and the other agents and lenders named therein | ||||||||||||||
| Amendment No. 5, Incremental Assumption Agreement and Refinancing Facility Agreement, dated as of May 30, 2018, relating to the Second Amended and Restated Credit Agreement, dated as of June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Credit Suisse AG, as administrative agent and collateral agent for the lenders | ||||||||||||||
| Amendment No. 6 and Incremental Revolving Credit Assumption Agreement, dated as of March 14, 2019, to the Second Amended and Restated Credit Agreement, dated as of June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Credit Suisse AG, as administrative agent and collateral agent for the lenders | ||||||||||||||
| Amendment No. 7 and Refinancing Facility Agreement, dated as of February 6, 2020, to the Second Amended and Restated Credit Agreement, dated as of June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Credit Suisse AG, as administrative agent and collateral agent for the lenders | ||||||||||||||
| Amendment No. 8 and Loan Modification Agreement, dated as of May 24, 2021, to the Second Amended and Restated Credit Agreement, dated as of June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Credit Suisse AG, as administrative agent and collateral agent for the lenders | ||||||||||||||
| Amendment No. 9 and Incremental Revolving Credit Assumption Agreement, dated as of December 29, 2021, to the Second Amended and Restated Credit Agreement, dated as of June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Credit Suisse AG, as administrative agent and collateral agent for the lenders | ||||||||||||||
75
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amendment No. 10, Loan Modification Agreement and Refinancing Facility Agreement, dated December 14, 2022, to the Second Amended and Restated Credit Agreement, dated June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent (as successor to Credit Suisse AG) for the lenders | ||||||||||||||
| Amendment No. 11, Loan Modification Agreement and Refinancing Facility Agreement, dated February 24, 2023, to the Second Amended and Restated Credit Agreement, dated June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent for the lenders** | ||||||||||||||
| Amendment No. 12 to the Second Amended and Restated Credit Agreement, dated June 16, 2023, to the Second Amended and Restated Credit Agreement, dated June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent for the lenders** | ||||||||||||||
| Amendment No. 13 and Incremental Term Loan Assumption Agreement, dated November 28, 2023, to the Second Amended and Restated Credit Agreement, dated June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent for the lenders** | ||||||||||||||
| Amendment No. 14 and Incremental Revolving Credit Assumption Agreement, dated February 27, 2024, to the Second Amended and Restated Credit Agreement, dated June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent for the lenders** | ||||||||||||||
| Amendment No. 15, Loan Modification Agreement and Refinancing Facility Agreement, dated March 22, 2024, relating to the Second Amended and Restated Credit Agreement, dated June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent for the lenders and Amendment, dated March 22, 2024, relating to the Guarantee and Collateral Agreement, dated June 23, 2006, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent for the lenders** | ||||||||||||||
| Amendment No. 16, Loan Modification Agreement and Refinancing Facility Agreement, dated June 4, 2024, to the Second Amended and Restated Credit Agreement, dated June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent for the lenders** | ||||||||||||||
76
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Amendment No. 17 and Incremental Revolving Credit Assumption Agreement, dated September 19, 2024, to the Second Amended and Restated Credit Agreement, dated June 4, 2014, among TransDigm Inc., TransDigm Group Incorporated, each subsidiary of TransDigm Inc. party thereto, the lenders party thereto, and Goldman Sachs Bank USA, as administrative agent and collateral agent for the lenders** | ||||||||||||||
| Guarantee and Collateral Agreement, dated as of June 23, 2006, as amended and restated as of December 6, 2010, as further amended and restated as of February 14, 2011 and February 28, 2013, among TransDigm Inc., TransDigm Group Incorporated, the subsidiaries of TransDigm Inc. named therein and Credit Suisse AG as administrative agent and collateral agent | ||||||||||||||
| Receivables Purchase Agreement, dated October 21, 2013, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association as a Purchaser and a Purchaser Agent, the various other Purchasers and Purchaser Agents from time to time party thereto, and PNC National Association as Administrator** | ||||||||||||||
| First Amendment to the Receivables Purchase Agreement, dated March 25, 2014, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association as a Purchaser, Purchaser Agent for its Purchaser Group and as Administrator | ||||||||||||||
| Second Amendment to the Receivables Purchase Agreement, dated August 8, 2014, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as a Purchaser Agent for its Purchaser Group and Administrator, and Credit Agricole Corporate and Investment Bank, as a Committed Purchaser and as a Purchase Agent for its Purchaser Group | ||||||||||||||
| Third Amendment to the Receivables Purchase Agreement, dated March 20, 2015, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as a Purchaser Agent for its Purchaser Group and Administrator, Atlantic Asset Securitization LLC, as a Conduit Purchaser, and Credit Agricole Corporate and Investment Bank, as a Committed Purchaser and as a Purchase Agent for its and Atlantic’s Purchaser Group | ||||||||||||||
| Fourth Amendment to the Receivables Purchase Agreement dated as of August 4, 2015, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as a Purchaser Agent for its Purchaser Group and Administrator, Atlantic Asset Securitization LLC, as a Conduit Purchaser, and Credit Agricole Corporate and Investment Bank, as a Committed Purchaser and as a Purchaser Agent for its and Atlantic’s Purchaser Group** | ||||||||||||||
| Ninth Amendment to the Receivables Purchase Agreement dated as of August 1, 2017, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, Atlantic Asset Securitization LLC, as a Conduit Purchaser, Credit Agricole Corporate and Investment Bank, as a Committed Purchaser and as a Purchaser Agent for its and Atlantic’s Purchaser Group, and Fifth Third Bank, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
77
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Tenth Amendment to the Receivables Purchase Agreement dated as of July 31, 2018, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, Atlantic Asset Securitization LLC, as a Conduit Purchaser, Credit Agricole Corporate and Investment Bank, as a Committed Purchaser and as a Purchaser Agent for its and Atlantic’s Purchaser Group, and Fifth Third Bank, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
| Eleventh Amendment to the Receivables Purchase Agreement dated as of July 30, 2019, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, Atlantic Asset Securitization LLC, as a Conduit Purchaser, Credit Agricole Corporate and Investment Bank, as a Committed Purchaser and as a Purchaser Agent for its and Atlantic’s Purchaser Group, and Fifth Third Bank, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
| Twelfth Amendment to the Receivables Purchase Agreement dated as of July 22, 2020, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, Atlantic Asset Securitization LLC, as a Conduit Purchaser, Credit Agricole Corporate and Investment Bank, as a Committed Purchaser and as a Purchaser Agent for its and Atlantic’s Purchaser Group, and Fifth Third Bank, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
| Thirteenth Amendment to the Receivables Purchase Agreement dated as of July 26, 2021, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, and Fifth Third Bank, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
| Fourteenth Amendment to the Receivables Purchase Agreement dated as of July 25, 2022, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, and Fifth Third Bank, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
| Fifteenth Amendment to the Receivables Purchase Agreement dated as of July 25, 2023, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, and Wells Fargo Bank, National Association, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
| Sixteenth Amendment to the Receivables Purchase Agreement dated as of May 28, 2024, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, and Wells Fargo Bank, National Association, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
78
| Exhibit No. | Description | Filed Herewith or Incorporated by Reference From | ||||||||||||
| Seventeenth Amendment to the Receivables Purchase Agreement dated as of July 12, 2024, among TransDigm Receivables LLC, TransDigm Inc., PNC Bank, National Association, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator, and Wells Fargo Bank, National Association, as a Committed Purchaser and as Purchaser Agent for its Purchaser Group** | ||||||||||||||
| TransDigm Group Incorporated Amended and Restated Insider Trading and Confidentiality Policy Statement* | ||||||||||||||
| Subsidiaries of TransDigm Group Incorporated | ||||||||||||||
| Listing of Subsidiary Guarantors | ||||||||||||||
| Consent of Independent Registered Public Accounting Firm | ||||||||||||||
| Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||||||||
| Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||||||||||||||
| 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 | ||||||||||||||
| 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 | ||||||||||||||
| TransDigm Group Incorporated Compensation Clawback Policy, dated October 2, 2023* | ||||||||||||||
| 101.INS | Inline XBRL Instance Document: The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | Filed Herewith | ||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | Filed Herewith | ||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | Filed Herewith | ||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | Filed Herewith | ||||||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | Filed Herewith | ||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | Filed Herewith | ||||||||||||
| 104 | Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101 | Filed Herewith | ||||||||||||
| * | Indicates management contract or compensatory plan contract or arrangement. | |||||||
| ** | Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish on a supplemental basis a copy of any omitted schedule or exhibit upon request by the Securities and Exchange Commission. | |||||||
79
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on November 7, 2024.
| TRANSDIGM GROUP INCORPORATED | |||||
| By: | /s/ Sarah Wynne | ||||
| Name: | Sarah Wynne | ||||
| Title: | Chief Financial Officer | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and as of the dates indicated.
| Signature | Title | Date | ||||||||||||
| /s/ Kevin Stein | President, Chief Executive Officer and Director (Principal Executive Officer) | November 7, 2024 | ||||||||||||
| Kevin Stein | ||||||||||||||
| /s/ Sarah Wynne | Chief Financial Officer (Principal Financial Officer) | November 7, 2024 | ||||||||||||
| Sarah Wynne | ||||||||||||||
| /s/ W. Nicholas Howley | Chairman | November 7, 2024 | ||||||||||||
| W. Nicholas Howley | ||||||||||||||
| /s/ David A. Barr | Director | November 7, 2024 | ||||||||||||
| David A. Barr | ||||||||||||||
| /s/ Jane M. Cronin | Director | November 7, 2024 | ||||||||||||
| Jane M. Cronin | ||||||||||||||
| /s/ Michael Graff | Director | November 7, 2024 | ||||||||||||
| Michael Graff | ||||||||||||||
| /s/ Sean P. Hennessy | Director | November 7, 2024 | ||||||||||||
| Sean P. Hennessy | ||||||||||||||
| /s/ Gary E. McCullough | Director | November 7, 2024 | ||||||||||||
| Gary E. McCullough | ||||||||||||||
| /s/ Michele L. Santana | Director | November 7, 2024 | ||||||||||||
| Michele L. Santana | ||||||||||||||
| /s/ Robert J. Small | Lead Independent Director | November 7, 2024 | ||||||||||||
| Robert J. Small | ||||||||||||||
| /s/ Jorge L. Valladares III | Director | November 7, 2024 | ||||||||||||
| Jorge L. Valladares III | ||||||||||||||
80
TRANSDIGM GROUP INCORPORATED AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K:
FISCAL YEAR ENDED SEPTEMBER 30, 2024
ITEM 8 AND ITEM 15(a) (1)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
| Page | |||||
| Financial Statements: | |||||
Report of Independent Registered Public Accounting Firm (Ernst & Young LLP, PCAOB ID: | F-1 | ||||
| Consolidated Balance Sheets as of September 30, 2024 and 2023 | F-3 | ||||
| Consolidated Statements of Income for Fiscal Years Ended September 30, 2024, 2023 and 2022 | F-4 | ||||
| Consolidated Statements of Comprehensive Income for Fiscal Years Ended September 30, 2024, 2023 and 2022 | F-5 | ||||
| Consolidated Statements of Changes in Stockholders’ Deficit for Fiscal Years Ended September 30, 2024, 2023 and 2022 | F-6 | ||||
| Consolidated Statements of Cash Flows for Fiscal Years Ended September 30, 2024, 2023 and 2022 | F-7 | ||||
| Notes to Consolidated Financial Statements for Fiscal Years Ended September 30, 2024, 2023 and 2022 | |||||
| Supplementary Data: | |||||
| Valuation and Qualifying Accounts for the Fiscal Years Ended September 30, 2024, 2023 and 2022 | |||||
81
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
TransDigm Group Incorporated
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of TransDigm Group Incorporated (the “Company”) as of September 30, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders’ deficit and cash flows for each of the three fiscal years in the period ended September 30, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three fiscal years in the period ended September 30, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 7, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-1
Valuation of goodwill | ||||||||
Description of the Matter | As disclosed in Note 8, the Company had goodwill of $10.4 billion at September 30, 2024. As discussed in Note 1 to the consolidated financial statements, goodwill is tested for impairment annually as of the first day of the fourth fiscal quarter, or more frequently, if an event occurs or circumstances change that would more likely than not reduce fair value below carrying value. The Company’s goodwill is initially assigned to its reporting units as of the acquisition date. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the Company determines the qualitative assessment is not sufficient to conclude on whether it is more likely than not that the fair value is less than the carrying value, a quantitative impairment test is performed. The company may also elect to bypass the qualitative assessment and perform a quantitative test for any or all reporting units. The Company performed a quantitative assessment on the goodwill at 14 of its reporting units. As part of the quantitative assessment, the Company determines the fair value of the reporting units using a discounted cash flow valuation model. Auditing management’s quantitative impairment assessment was complex and judgmental for certain of the 14 reporting units due to the significant estimation required to determine fair value. In particular, the fair value estimates were sensitive to significant assumptions, such as changes in the discount rate, revenue growth rates and EBITDA margins, which are affected by expectations about future market or economic conditions. | |||||||
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s impairment process, including controls over management’s review of the valuation model and the significant assumptions underlying the fair value determination, as described above. To test the fair values of the Company’s reporting units, our audit procedures included, among others, assessing the use of the discounted cash flow valuation model and testing the significant assumptions discussed above and underlying data used by the Company in its analyses for certain of the 14 reporting units evaluated using the quantitative assessment. We utilized internal valuation specialists in assessing the fair value methodologies applied and evaluating the reasonableness of certain assumptions selected by management in the determination of the fair values of certain of the 14 reporting units. We compared the significant assumptions used by management to current industry and economic trends, recent historical performance, and other relevant factors. We performed sensitivity analyses of significant assumptions to evaluate the changes in fair values that would result from changes in the assumptions. | |||||||
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2004.
November 7, 2024
F-2
TRANSDIGM GROUP INCORPORATED
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2024 AND 2023
(Amounts in millions, except share amounts)
| 2024 | 2023 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Trade accounts receivable—Net | |||||||||||
| Inventories—Net | |||||||||||
| Prepaid expenses and other | |||||||||||
| Total current assets | |||||||||||
| PROPERTY, PLANT AND EQUIPMENT—NET | |||||||||||
| GOODWILL | |||||||||||
| OTHER INTANGIBLE ASSETS—NET | |||||||||||
| OTHER NON-CURRENT ASSETS | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Short-term borrowings—trade receivable securitization facility | |||||||||||
| Accounts payable | |||||||||||
| Dividends payable | |||||||||||
| Accrued and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| LONG-TERM DEBT | |||||||||||
| DEFERRED INCOME TAXES | |||||||||||
| OTHER NON-CURRENT LIABILITIES | |||||||||||
| Total liabilities | |||||||||||
| TD GROUP STOCKHOLDERS’ DEFICIT: | |||||||||||
Common stock - $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock, at cost; | ( | ( | |||||||||
| Total TD Group stockholders’ deficit | ( | ( | |||||||||
| NONCONTROLLING INTERESTS | |||||||||||
| Total stockholders’ deficit | ( | ( | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | |||||||||
See notes to consolidated financial statements
F-3
TRANSDIGM GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions, except per share amounts)
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| NET SALES | $ | $ | $ | ||||||||||||||
| COST OF SALES | |||||||||||||||||
| GROSS PROFIT | |||||||||||||||||
| SELLING AND ADMINISTRATIVE EXPENSES | |||||||||||||||||
| AMORTIZATION OF INTANGIBLE ASSETS | |||||||||||||||||
| INCOME FROM OPERATIONS | |||||||||||||||||
| INTEREST EXPENSE—NET | |||||||||||||||||
| REFINANCING COSTS | |||||||||||||||||
| OTHER (INCOME) EXPENSE | ( | ( | |||||||||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | |||||||||||||||||
| INCOME TAX PROVISION | |||||||||||||||||
| INCOME FROM CONTINUING OPERATIONS | |||||||||||||||||
| INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX | |||||||||||||||||
| NET INCOME | |||||||||||||||||
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | ( | ( | ( | ||||||||||||||
| NET INCOME ATTRIBUTABLE TO TD GROUP | $ | $ | $ | ||||||||||||||
| NET INCOME APPLICABLE TO TD GROUP COMMON STOCKHOLDERS | $ | $ | $ | ||||||||||||||
| Earnings per share attributable to TD Group common stockholders: | |||||||||||||||||
| Earnings per share from continuing operations—basic and diluted | $ | $ | $ | ||||||||||||||
| Earnings per share from discontinued operations—basic and diluted | |||||||||||||||||
| Earnings per share | $ | $ | $ | ||||||||||||||
| Cash dividends declared per common share | $ | $ | $ | ||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||
| Basic and diluted | |||||||||||||||||
See notes to consolidated financial statements
F-4
TRANSDIGM GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Less: Net income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||
| Net income attributable to TD Group | $ | $ | $ | ||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||
| Foreign currency translation adjustment | ( | ||||||||||||||||
| Unrealized (losses) gains on derivatives | ( | ||||||||||||||||
| Pension and post-retirement benefit plans adjustment | ( | ||||||||||||||||
| Other comprehensive income (loss), net of tax, attributable to TD Group | ( | ||||||||||||||||
| TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO TD GROUP | $ | $ | $ | ||||||||||||||
See notes to consolidated financial statements
F-5
TRANSDIGM GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Amounts in millions, except share amounts)
| TD Group Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Par Value | Number of Shares | Value | Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—September 30, 2021 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||
| Changes in noncontrolling interest of consolidated subsidiaries, net | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Special dividends ($ | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Accrued unvested dividend equivalents and other | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense recognized for employee stock options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases under repurchase program | — | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to TD Group | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Pension and post-retirement benefit plans adjustment, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—September 30, 2022 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||
| Changes in noncontrolling interest of consolidated subsidiaries, net | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Accrued unvested dividend equivalents and other | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense recognized for employee stock options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to TD Group | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Pension and post-retirement benefit plans adjustment, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—September 30, 2023 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||
| Changes in noncontrolling interest of consolidated subsidiaries, net | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Special dividends ($ | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Accrued unvested dividend equivalents and other | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense recognized for employee stock options | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to TD Group | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Unrealized loss on derivatives, net of tax | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Pension and post-retirement benefit plans adjustment, net of tax | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—September 30, 2024 | $ | $ | $ | ( | $ | ( | ( | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||
See notes to consolidated financial statements
F-6
TRANSDIGM GROUP INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| OPERATING ACTIVITIES: | |||||||||||||||||
| Net income | $ | $ | $ | ||||||||||||||
| Income from discontinued operations, net of tax | ( | ||||||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation | |||||||||||||||||
| Amortization of intangible assets and product certification costs | |||||||||||||||||
| Amortization of debt issuance costs, original issue discount and premium | |||||||||||||||||
| Amortization of inventory step-up | |||||||||||||||||
| Amortization of loss contract reserves | ( | ( | ( | ||||||||||||||
| Refinancing costs | |||||||||||||||||
| Gain on sale of businesses, net | ( | ( | |||||||||||||||
| Non-cash stock and deferred compensation expense | |||||||||||||||||
| Deferred income taxes | ( | ||||||||||||||||
| Foreign currency exchange losses (gains) | ( | ||||||||||||||||
| (Gain) loss on settlement of the Esterline Retirement Plan (the “ERP”) | ( | ||||||||||||||||
| Cash refund (contribution) for the ERP settlement, net | ( | ||||||||||||||||
| Changes in assets/liabilities, net of effects from acquisitions and sales of businesses: | |||||||||||||||||
| Trade accounts receivable | ( | ( | ( | ||||||||||||||
| Inventories | ( | ( | ( | ||||||||||||||
| Income taxes (receivable) payable | ( | ||||||||||||||||
| Other assets | ( | ( | ( | ||||||||||||||
| Accounts payable | ( | ||||||||||||||||
| Accrued interest | ( | ( | |||||||||||||||
| Accrued and other liabilities | ( | ( | ( | ||||||||||||||
| Net cash provided by operating activities | |||||||||||||||||
| INVESTING ACTIVITIES: | |||||||||||||||||
| Capital expenditures | ( | ( | ( | ||||||||||||||
| Acquisition of businesses, net of cash acquired | ( | ( | ( | ||||||||||||||
| Other investing transactions | |||||||||||||||||
| Net cash used in investing activities | ( | ( | ( | ||||||||||||||
| FINANCING ACTIVITIES: | |||||||||||||||||
| Proceeds from exercise of stock options | |||||||||||||||||
| Dividends and dividend equivalent payments | ( | ( | ( | ||||||||||||||
| Repurchases of common stock | ( | ||||||||||||||||
| Proceeds from issuance of senior secured notes, net | |||||||||||||||||
| Repayments of senior secured notes | ( | ( | |||||||||||||||
| Repayments of senior subordinated notes, net | ( | ( | |||||||||||||||
| Repayment on revolving credit facility | ( | ||||||||||||||||
| Proceeds from trade receivable securitization facility, net | |||||||||||||||||
| Proceeds from term loans, net | |||||||||||||||||
| Repayment on term loans | ( | ( | ( | ||||||||||||||
| Financing costs and other, net | ( | ( | ( | ||||||||||||||
| Net cash provided by (used in) financing activities | ( | ( | |||||||||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | ( | ||||||||||||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | ||||||||||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |||||||||||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | $ | $ | ||||||||||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||||||||||
| Cash paid during the period for interest, net | $ | $ | $ | ||||||||||||||
| Cash paid during the period for income taxes, net of refunds | $ | $ | $ | ||||||||||||||
See notes to consolidated financial statements
F-7
TRANSDIGM GROUP INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED SEPTEMBER 30, 2024, 2023 AND 2022
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General Information
TransDigm Group Incorporated (“TD Group”), through its wholly-owned subsidiary, TransDigm Inc., is a leading global designer, producer and supplier of highly engineered aircraft components that are critical to the safe and effective operation of nearly all commercial and military aircraft worldwide. Our products are represented in nearly every commercial and military aircraft in service today. TransDigm Inc., along with TransDigm Inc.’s direct and indirect wholly-owned operating subsidiaries (collectively, with TD Group, the “Company” or “TransDigm”), offers a broad range of proprietary aerospace products. TD Group has no significant assets or operations other than its 100% ownership of TransDigm Inc. TD Group’s common stock is listed on the New York Stock Exchange, or the NYSE, under the trading symbol “TDG.”
As used in this Annual Report on Form 10-K, unless the context otherwise requires, the terms “Company”, “TD Group”, “TransDigm”, “we,” “our” or “us” refer to TransDigm Group Incorporated and its subsidiaries.
Basis of Presentation and Principles of Consolidation
Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Shipping and Handling Costs – Shipping and handling costs are included in cost of sales in the consolidated statements of income.
Research and Development Costs – The Company expenses research and development costs as incurred and classifies such amounts in selling and administrative expenses. The expense recognized for research and development costs for the fiscal years ended September 30, 2024, 2023 and 2022 was approximately $107 million, $105 million, and $95 million, respectively.
Cash Equivalents – The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are recorded at cost, which approximates fair value.
Allowance for Credit Losses – The Company's allowance for credit losses is the allowance for uncollectible accounts. The allowance for uncollectible accounts reduces the trade accounts receivable balance to the estimated net realizable value equal to the amount that is expected to be collected. The Company’s method for developing its allowance for credit losses is based on historical write-off experience, the aging of receivables, an assessment of the creditworthiness of customers, economic conditions and other external market information. The allowance also incorporates a provision for the estimated impact of disputes with customers. All provisions for allowances for uncollectible accounts are included in selling and administrative expenses. The determination of the amount of the allowance for uncollectible accounts is subject to judgment and estimation by management and is also assessed individually at each operating unit by the operating unit’s management team. If circumstances change or economic conditions deteriorate or improve, the allowance for uncollectible accounts could increase or decrease. Refer to Note 5, “Trade Accounts Receivable,” for further information.
Inventories – Inventories are stated at the lower of cost or net realizable value. Cost of inventories is generally determined by the average actual cost and the first-in, first-out (“FIFO”) methods and includes material, labor and overhead related to the manufacturing process. Provision for potentially obsolete or slow-moving inventory is made based on management’s analysis of inventory levels, historical usage and future sales forecasts. Refer to Note 6, “Inventories,” for further information.
F-8
Property, Plant and Equipment – Property, plant and equipment are stated at cost and include improvements which significantly increase capacities or extend the useful lives of existing plant and equipment. Depreciation is computed using the straight-line method over the following general estimated useful lives: land improvements from 10 to 20 years, buildings and improvements from 5 to 30 years, machinery and equipment from 2 to 10 years and furniture and fixtures from 3 to 10 years. Certain exceptions do apply in which an asset will have an estimated useful life outside of the range listed above dependent on, among other things, the nature and condition of the asset. Net gains or losses related to asset dispositions are recognized in earnings in the period in which dispositions occur. Routine maintenance, repairs and replacements are expensed as incurred. Amortization expense of assets accounted for as finance leases is included within depreciation expense.
Property, plant and equipment is assessed for potential impairment whenever indicators of impairment are present by determining whether the carrying value of the property can be recovered through projected, undiscounted cash flows from future operations over the property’s remaining estimated useful life. Any impairment recognized is the amount by which the carrying amount exceeds the fair value of the asset. Fair value is measured based on quoted market prices in active markets, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. No material impairments of long-lived assets were recorded in fiscal 2024, 2023 or 2022. Refer to Note 7, “Property, Plant and Equipment,” for further information.
Financial Instruments – Interest rate swap, cap and collar agreements are used to manage interest rate risk associated with floating rate borrowings under our Credit Agreement. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the term of the agreements without an exchange of the underlying principal amount. The agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating rate debt to a fixed rate basis from the effective date through the maturity date of the respective interest rate swap, cap and collar agreements, thereby reducing the impact of interest rate movements on future interest expense. These derivative instruments qualify as effective cash flow hedges under U.S. GAAP.
The Company transacts business in various foreign currencies, which subjects the Company’s cash flows and results of operations to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates, and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies.
For the interest rate swap, cap and collar agreements and the foreign currency forward contracts designated as cash flow hedges, the effective portion of the gain or loss from the financial instruments is reported as a component of accumulated other comprehensive loss in stockholders’ deficit and subsequently reclassified into earnings in the same line as the hedged item in the same period or periods during which the hedged item affected earnings. As the interest rate swap, cap and collar agreements are used to manage interest rate risk, any gains or losses from the derivative instruments that are reclassified into earnings are recognized in interest expense-net in the consolidated statements of income. As the foreign currency forward exchange contracts are used to manage foreign currency exposure primarily arising from sales to third parties, any gains or losses from the derivative instruments that are reclassified into earnings are recognized in net sales in the consolidated statements of income. The cash flows from settled contracts are recognized in net cash provided by operating activities in the consolidated statements of cash flows. Refer to Note 19, “Derivatives and Hedging Activities,” for further information.
Business Combinations – In accordance with ASC 805, “Business Combinations,” the Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed were recognized as goodwill. The valuations of the acquired assets and liabilities assumed will impact the determination of future operating results. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of estimates and assumptions which may be significant, including assumptions with respect to future cash inflows and outflows, revenue growth rates and EBITDA margins, discount rates, customer attrition rates, royalty rates, asset lives and market multiples, among other items. These assumptions are forward looking and could be affected by future economic and market conditions. We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors. Fair value adjustments to the Company’s assets and liabilities are recognized and the results of operations of the acquired business are included in our consolidated financial statements from the effective date of the merger or acquisition. Intangible assets other than goodwill are recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed or exchanged, regardless of the Company’s intent to do so.
F-9
Goodwill and Other Intangible Assets – The Company performs an annual impairment test for goodwill and other intangible assets as of the first day of the fourth fiscal quarter of each year, or more frequently, if an event occurs or circumstances change that would more likely than not reduce fair value below carrying value.
We may elect to perform a qualitative assessment that considers economic, industry and company-specific factors for all or selected reporting units. If, after completing this assessment, it is determined that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value, we proceed to a quantitative test. We may also elect to perform a quantitative test instead of a qualitative assessment for any or all of our reporting units. In this application, the definition of “more-likely-than-not” is interpreted as a likelihood of more than 50%. For the quantitative test, management determines the estimated fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit. If the estimated fair value is less than the current carrying value, impairment of goodwill of the reporting unit may exist. The assumptions used in the discounted cash flow valuation model for impairment testing includes discount rates, revenue growth rates and EBITDA margins, cash flow projections and terminal value rates. Discount rates are set by using the weighted average cost of capital (“WACC”) methodology.
U.S. GAAP requires that the annual, and any interim, impairment assessment be performed at the reporting unit level. Our reporting units have been identified at the operating unit level, which is one level below our operating segments. Substantially all goodwill was determined and recognized for each reporting unit pursuant to the accounting for the merger or acquisition as of the date of each transaction. With respect to acquisitions integrated into an existing reporting unit, any acquired goodwill is combined with the goodwill of the reporting unit.
The impairment test for indefinite lived intangible assets consists of a comparison between their fair values and carrying values. If the carrying amounts of intangible assets that have indefinite useful lives exceed their fair values, an impairment loss will be recognized in an amount equal to the sum of any such excesses.
The Company had 50 reporting units with goodwill and 47 reporting units with indefinite-lived intangible assets as of the first day of the fourth quarter of fiscal 2024, the date of the annual impairment test. The Company identified 14 reporting units to test for impairment using a quantitative test for both goodwill and indefinite-lived intangible assets. Of the 14 reporting units selected for quantitative testing, six reporting units primarily were either a recent acquisition or met certain criteria determined by management. For the remaining eight reporting units, the Company elected to bypass the qualitative analysis and perform a quantitative test considering the length of time since the last determination of baseline fair values. The estimated fair values of each of these reporting units and other indefinite-lived intangible assets were in excess of their respective carrying values. Sensitivity analyses were performed around certain of these assumptions in order to assess the reasonableness of the assumptions and the resulting estimated fair values. As a result of the impairment testing performed as of the first day of the fourth quarter, no indefinite-lived intangible assets or goodwill was determined to be impaired. As economic and market conditions have not changed significantly since the first day of the fourth quarter, this conclusion remains appropriate as of September 30, 2024.
The Company assesses the recoverability of its amortizable intangible assets only when indicators of impairment are present by determining whether the carrying value can be recovered through projected, undiscounted cash flows from future operations over their remaining lives. Amortization of amortizable intangible assets is computed using the straight-line method over the following general estimated useful lives: technology from 20 to 22 years, order backlog from 1 to 3 years, customer relationships over 20 years and other intangible assets over 20 years. No indicators of impairment on the amortizable intangible assets were identified in fiscal 2024, 2023 or 2022.
Stock-Based Compensation – The Company records stock-based compensation expense using the Black-Scholes pricing model based on certain valuation assumptions. Compensation expense is recorded over the vesting periods of the stock options, adjusted for expected forfeitures. The Company has classified stock-based compensation primarily within selling and administrative expenses to correspond with the classification of employees that receive stock option grants. The Company also evaluates any subsequent changes to the respective option holders terms under the modification rules of ASC 718. If determined to be a modification, the Black-Scholes pricing model is updated as of the date of the modification resulting in a cumulative catch up to expense, if necessary. Refer to Note 16, “Stock-Based Compensation,” for further information.
F-10
Income Taxes – The provision for income taxes is calculated using the asset and liability method. Under the asset and liability method, deferred income taxes are recognized for the tax effect of temporary differences between the financial statement carrying amount of assets and liabilities and the amounts used for income tax purposes and for certain changes in valuation allowances. Valuation allowances are recorded to reduce certain deferred tax assets when, in our estimation, it is more likely than not that a tax benefit will not be realized. We recognize uncertain tax positions when we have determined it is more likely than not that a tax position will be sustained upon examination. However, new information may become available, or applicable laws or regulations may change, thereby resulting in a favorable or unfavorable adjustment to amounts recorded. Taxes related to Global Intangible Low-Taxed Income (“GILTI”) are treated as a current period expense when incurred. Refer to Note 12, “Income Taxes,” for further information.
Comprehensive Income (Loss) – The term “comprehensive income (loss)” represents the change in stockholders’ equity (deficit) from transactions and other events and circumstances resulting from non-stockholder sources. The Company’s accumulated other comprehensive income or loss, consisting principally of fair value adjustments to its interest rate swap, cap and collar agreements (net of tax), cumulative foreign currency translation adjustments and pension liability adjustments (net of tax), is reported separately in the accompanying consolidated statements of comprehensive income.
Foreign Currency Translation and Transactions – The assets and liabilities of subsidiaries located outside the United States are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Revenue and expense items are translated at the average monthly exchange rates prevailing during the period. Gains and losses resulting from foreign currency transactions are recognized currently in income and those resulting from translation of financial statements, including gains and losses from certain intercompany transactions, are accumulated as a separate component of other comprehensive income (loss) for the period. Foreign currency losses or (gains) recognized in cost of sales on the consolidated statements of income from changes in exchange rates were $20 million, $14 million and $(40 ) million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.
Earnings per Share – Earnings per share information is determined using the two-class method, which includes the weighted-average number of common shares outstanding during the period and other securities that participate in cash dividends (“participating securities”). Our vested stock options are considered “participating securities” because they include non-forfeitable rights to cash dividends. In applying the two-class method, earnings are allocated to both common shares and participating securities based on their respective weighted-average shares outstanding for the period. Diluted earnings per share information may include the additional effect of other securities, if dilutive, in which case the dilutive effect of such securities is calculated using the treasury stock method. Contingently issuable shares are not included in earnings per share until the period in which the contingency is satisfied. Refer to Note 4, “Earnings Per Share,” for further information.
New Accounting Pronouncements Issued
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 expands disclosures about a public business entity's reportable segments and provides for more detailed information about a reportable segment's expenses. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. This standard is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning one year later. Early adoption is permitted. The Company is currently evaluating this standard to determine its impact on our disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature. The ASU also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. The standard makes several other changes to income tax disclosure requirements. This standard is effective for annual periods beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. Early adoption is permitted. The Company is currently evaluating this standard to determine its impact on our disclosures.
F-11
2. ACQUISITIONS
Raptor Scientific – On July 31, 2024, the Company acquired all the outstanding stock of Raptor Scientific for approximately $647 million in cash. The acquisition was financed through existing cash on hand. Raptor Scientific is a leading global manufacturer of complex test and measurement solutions primarily serving the aerospace and defense end markets. Its products are highly engineered, proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms. The operating results of Raptor Scientific are included within TransDigm's Airframe segment.
As of September 30, 2024, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the acquisition of Raptor Scientific are subject to adjustment until the end of the respective measurement period.
The Company accounted for the acquisition of Raptor Scientific using the acquisition method of accounting and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition. The purchase price was allocated to identifiable assets and liabilities based on information available at the date of acquisition. The allocation of the purchase price is preliminary and will likely change in future periods, perhaps materially, as fair value estimates of the assets acquired, particularly intangible assets and liabilities assumed are finalized. Pro forma net sales and results of operations for the acquisition, had it occurred at the beginning of the fiscal years ended September 30, 2024 or September 30, 2023 are not material and, accordingly, are not provided.
The allocation of the estimated fair value of assets acquired and liabilities assumed in the acquisition of Raptor Scientific as of the July 31, 2024 acquisition date is summarized in the table below (in millions):
| Assets acquired (excluding cash): | |||||||||||
| Trade accounts receivable | $ | ||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other | |||||||||||
| Property, plant and equipment | |||||||||||
| Goodwill | (1) | ||||||||||
| Other intangible assets | (1) | ||||||||||
| Other non-current assets | |||||||||||
| Total assets acquired (excluding cash) | |||||||||||
| Liabilities assumed: | |||||||||||
| Accounts payable | |||||||||||
| Accrued and other current liabilities | |||||||||||
| Other non-current liabilities | |||||||||||
| Total liabilities assumed | |||||||||||
| Net assets acquired | $ | ||||||||||
(1)Based on the preliminary allocation of the net assets acquired, all of the approximately $426 million of goodwill and $197 million of other intangible assets recognized for the acquisition is expected to be deductible for tax purposes.
CPI's Electron Device Business – On June 6, 2024, the Company acquired all the outstanding stock of the Electron Device Business of Communications & Power Industries (“CPI's Electron Device Business”) for approximately $1,385 million in cash. The acquisition was financed through existing cash on hand, inclusive of a portion of the cash proceeds from the new long-term debt issued during the first quarter of fiscal 2024 (refer to Note 10, “Debt,” for further disclosure of the aforementioned debt issuances). CPI’s Electron Device Business is a leading global manufacturer of electronic components and subsystems primarily serving the aerospace and defense market. Its products are highly engineered, proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms. The operating results of CPI’s Electron Device Business are included within TransDigm's Power & Control segment.
As of September 30, 2024, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the acquisition of CPI's Electron Device Business are subject to adjustment until the end of the respective measurement period, including those related to deferred taxes and income taxes.
F-12
The Company accounted for the acquisition of CPI's Electron Device Business using the acquisition method of accounting and a third-party valuation appraisal and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition. The total purchase price was allocated to identifiable assets and liabilities based upon the respective fair value at the date of acquisition. The Company utilized both the cost and market approaches to value property, plant and equipment, which consider external transactions and other comparable transactions, estimated replacement and reproduction costs, and estimated useful lives and consideration for physical, functional and economic obsolescence. The fair values of acquired intangibles are determined based on an income approach, using estimates and assumptions that are deemed reasonable by the Company. Certain assumptions include the discount rates and other assumptions that form the basis of the forecasted results of the acquired business including revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”), growth rates, royalty rates and technology obsolescence rates. These assumptions are forward looking and could be affected by future economic and market conditions.
Pro forma net sales and results of operations for the acquisition, had it occurred at the beginning of the fiscal years ended September 30, 2024 or September 30, 2023 are not material and, accordingly, are not provided.
The allocation of the estimated fair value of assets acquired and liabilities assumed in the acquisition of CPI's Electron Device Business as of the June 6, 2024 acquisition date is summarized in the table below (in millions):
| Preliminary | Measurement Period | Adjusted Preliminary | |||||||||||||||||||||
| Allocation | Adjustments (2) | Allocation | |||||||||||||||||||||
| Assets acquired (excluding cash): | |||||||||||||||||||||||
| Trade accounts receivable | $ | $ | $ | ||||||||||||||||||||
| Inventories | ( | ||||||||||||||||||||||
| Prepaid expenses and other | |||||||||||||||||||||||
| Property, plant and equipment | |||||||||||||||||||||||
| Goodwill | ( | (1) | |||||||||||||||||||||
| Other intangible assets | (1) | ||||||||||||||||||||||
| Other non-current assets | ( | ||||||||||||||||||||||
| Total assets acquired (excluding cash) | |||||||||||||||||||||||
| Liabilities assumed: | |||||||||||||||||||||||
| Accounts payable | ( | ||||||||||||||||||||||
| Accrued and other current liabilities | |||||||||||||||||||||||
| Deferred income taxes | |||||||||||||||||||||||
| Other non-current liabilities | ( | ||||||||||||||||||||||
| Total liabilities assumed | |||||||||||||||||||||||
| Net assets acquired | $ | $ | $ | ||||||||||||||||||||
(1)None 747 million of goodwill and $509 million of other intangible assets recognized for the acquisition is expected to be deductible for tax purposes.
(2)Measurement period adjustments primarily related to the adjustments in the fair values of the acquired property, plant and equipment and other intangible assets from the third-party valuation and related impact on deferred income taxes. The offset to the measurement period adjustments was to goodwill.
SEI Industries LTD – On May 21, 2024, the Company acquired all the outstanding stock of SEI Industries LTD (“SEI”) for approximately $171 million in cash, which included a working capital settlement of $1 million. The acquisition was financed through existing cash on hand. SEI, located in Delta, British Columbia, Canada, is a leading provider of highly engineered products for aerial firefighting and other liquid transportation solutions, such as remote refueling, for both the commercial and defense aerospace end markets. The products are primarily proprietary with significant aftermarket content. SEI's operating results are presented within TransDigm's Airframe segment.
As of September 30, 2024, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the acquisition of SEI are subject to adjustment until the end of the respective measurement period.
F-13
The Company accounted for the SEI acquisition using the acquisition method of accounting and a third-party valuation appraisal and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition. The total purchase price was allocated to identifiable assets and liabilities based upon the respective fair value at the date of acquisition. The fair values of acquired intangibles are determined based on an income approach, using estimates and assumptions that are deemed reasonable by the Company. Certain assumptions include the discount rates and other assumptions that form the basis of the forecasted results of the acquired business including revenue, EBITDA, growth rates, royalty rates and technology obsolescence rates. These assumptions are forward looking and could be affected by future economic and market conditions.
Pro forma net sales and results of operations for the acquisition, had it occurred at the beginning of the fiscal years ended September 30, 2024 or September 30, 2023 are not material and, accordingly, are not provided.
The allocation of the estimated fair value of assets acquired and liabilities assumed in the SEI acquisition as of the May 21, 2024 acquisition date is summarized in the table below (in millions):
| Preliminary | Measurement Period | Adjusted Preliminary | |||||||||||||||||||||
| Allocation | Adjustments (2) | Allocation | |||||||||||||||||||||
| Assets acquired (excluding cash): | |||||||||||||||||||||||
| Trade accounts receivable | $ | $ | $ | ||||||||||||||||||||
| Inventories | |||||||||||||||||||||||
| Prepaid expenses and other | |||||||||||||||||||||||
| Property, plant and equipment | |||||||||||||||||||||||
| Goodwill | ( | (1) | |||||||||||||||||||||
| Other intangible assets | (1) | ||||||||||||||||||||||
| Total assets acquired (excluding cash) | |||||||||||||||||||||||
| Liabilities assumed: | |||||||||||||||||||||||
| Accounts payable | |||||||||||||||||||||||
| Accrued and other current liabilities | |||||||||||||||||||||||
| Deferred income taxes | |||||||||||||||||||||||
| Total liabilities assumed | |||||||||||||||||||||||
| Net assets acquired | $ | $ | $ | ||||||||||||||||||||
(1)None 103 million of goodwill and $75 million of other intangible assets recognized for the acquisition is expected to be deductible for tax purposes.
(2)Measurement period adjustments primarily related to the adjustments in the fair values of the other intangible assets from the third-party valuation. The offset to the measurement period adjustments was to goodwill.
FPT Industries LLC – On March 1, 2024, the Company acquired all the outstanding stock of FPT Industries LLC (“FPT”) for approximately $57 million in cash. The acquisition was financed through existing cash on hand. FPT, which has facilities in the United Kingdom and Alabama, designs and manufactures an extensive range of specialist fuel tanks and flotation systems for both the commercial and defense aerospace end markets. The products are primarily proprietary with significant aftermarket content. FPT's operating results are presented within TransDigm's Airframe segment.
The Company accounted for the FPT acquisition using the acquisition method of accounting and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition. As of September 30, 2024, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed related to the acquisition of FPT are subject to adjustment until the end of the respective measurement period. The Company expects that $9 million of the approximately $34 million of goodwill recognized for the acquisition will be deductible for tax purposes over 15 years. The Company expects that none of the approximately $19 million of other intangible assets recognized for the acquisition will be deductible for tax purposes.
Pro forma net sales and results of operations for the acquisition, had it occurred at the beginning of the fiscal years ended September 30, 2024 or September 30, 2023 are not material and, accordingly, are not provided.
F-14
Calspan Corporation – On May 8, 2023, the Company acquired all the outstanding stock of Calspan Corporation (“Calspan”) for approximately $730 million in cash, which includes a $1 million working capital settlement paid in the first quarter of fiscal 2024. The acquisition was financed through existing cash on hand. Calspan is a leading independent provider of proprietary highly engineered testing and technology development services and systems primarily for the aerospace and defense industry. Calspan’s state of the art transonic wind tunnel is used across a range of important aftermarket-focused development activities for both the commercial and defense aerospace end markets. The services and systems are primarily proprietary with significant aftermarket content. Calspan's operating results are included within TransDigm's Airframe segment.
The Company accounted for the Calspan acquisition using the acquisition method of accounting and third-party valuation appraisals and included the results of operations of the acquisition in its consolidated financial statements from the effective date of the acquisition. The total purchase price of Calspan was allocated to the underlying assets acquired and liabilities assumed based upon the respective fair value at the date of acquisition. To the extent the purchase price exceeded the fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill.
The Company utilized both the cost and market approaches to value property, plant and equipment, which consider external transactions and other comparable transactions, estimated replacement and reproduction costs, and estimated useful lives and consideration for physical, functional and economic obsolescence. The fair values of acquired intangibles are determined based on an income approach, using estimates and assumptions that are deemed reasonable by the Company. Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted results of the acquired business including revenue, EBITDA, growth rates, royalty rates and technology obsolescence rates. These assumptions are forward looking and could be affected by future economic and market conditions.
Pro forma net sales and results of operations for the Calspan acquisition had it occurred at the beginning of the fiscal year ended September 30, 2023 are not material and, accordingly, are not provided.
The final allocation of the fair value of assets acquired and liabilities assumed in the Calspan acquisition as of the May 8, 2023 acquisition date, as well as measurement period adjustments recorded within the permissible one year measurement period, are summarized in the table below (in millions):
| Preliminary | Measurement Period | Final | |||||||||||||||||||||
| Allocation | Adjustments (2) | Allocation | |||||||||||||||||||||
| Assets acquired (excluding cash): | |||||||||||||||||||||||
| Trade accounts receivable | $ | $ | $ | ||||||||||||||||||||
| Inventories | |||||||||||||||||||||||
| Prepaid expenses and other | ( | ||||||||||||||||||||||
| Property, plant and equipment | |||||||||||||||||||||||
| Goodwill | ( | (1) | |||||||||||||||||||||
| Other intangible assets | ( | (1) | |||||||||||||||||||||
| Other non-current assets | |||||||||||||||||||||||
| Total assets acquired (excluding cash) | |||||||||||||||||||||||
| Liabilities assumed: | |||||||||||||||||||||||
| Accounts payable | ( | ||||||||||||||||||||||
| Accrued and other current liabilities | |||||||||||||||||||||||
| Deferred income taxes | ( | ||||||||||||||||||||||
| Other non-current liabilities | |||||||||||||||||||||||
| Total liabilities assumed | |||||||||||||||||||||||
| Net assets acquired | $ | $ | $ | ||||||||||||||||||||
(1)Of the approximately $280 million of goodwill recognized for the acquisition, the Company expects that approximately $222 million will be deductible for tax purposes. Of the approximately $101 million of other intangible assets recognized for the acquisition, the Company expects that approximately $86 million will be deductible for tax purposes. The goodwill and intangible assets are expected to be deductible over 15 years.
(2)Measurement period adjustments primarily related to the adjustments in the fair values of the acquired property, plant and equipment and other intangible assets from the third-party valuation. A substantial portion of the measurement period adjustments to property, plant and equipment relates to the fair value of the transonic wind tunnel. The offset to the measurement period adjustments was to goodwill.
F-15
The fiscal 2024 acquisitions of Raptor Scientific, CPI's Electron Device Business, SEI and FPT and fiscal 2023 acquisition of Calspan completed by the Company strengthen and expand the Company’s position to design, produce and supply highly engineered proprietary aerospace components in niche markets with significant aftermarket content and provide opportunities to create value through the application of our three core value-driven operating strategy (obtaining profitable new business, continually improving our cost structure, and providing highly engineered value-added products to customers). The purchase prices paid reflect the current EBITDA As Defined and cash flows, as well as the future EBITDA As Defined and cash flows expected to be generated by the businesses, which are driven in most cases by the recurring aftermarket consumption over the life of a particular aircraft, estimated to be approximately 25 to 30 years. Acquisition transaction-related expenses in fiscal 2024, 2023 and 2022 totaled approximately $33 million, $6 million and $4 million, respectively. These costs are included in selling and administrative expenses in the consolidated statements of income.
Extant Aerospace Acquisitions – For the fiscal year ended September 30, 2024, the Company's Extant Aerospace subsidiary, which is included within TransDigm’s Power & Control segment, completed a series of acquisitions of substantially all of the assets and technical data rights of certain product lines (collectively, referred to herein as the “Extant Aerospace product line acquisitions”), each meeting the definition of a business, for a total purchase price of $86 million. The Company accounted for the acquisitions using the acquisition method of accounting and included the results of operations of the acquisitions in its consolidated financial statements from the effective date of each acquisition. The allocation of the purchase price remains preliminary and will likely change, though not materially, in future periods up to the expiration of the respective one year measurement period as fair value estimates of the assets acquired and liabilities assumed are finalized. The Company expects that all of the approximately $39 million of goodwill and $22 million of other intangible assets recognized for the acquisitions will be deductible for tax purposes over 15 years.
For the fiscal year ended September 30, 2023, the Company's Extant Aerospace subsidiary, completed a series of acquisitions of substantially all of the assets and technical data rights of certain product lines, each meeting the definition of a business, for a total purchase price of $24 million. The Company accounted for the acquisitions using the acquisition method of accounting and included the results of operations of the acquisitions in its consolidated financial statements from the effective date of each acquisition. All of the approximately $12 million of goodwill and $6 million of other intangible assets recognized for the acquisitions is deductible for tax purposes over 15 years.
3. REVENUE RECOGNITION
TransDigm's sales are concentrated in the aerospace and defense industry. The Company’s customers include: distributors of aerospace components, commercial airlines, large commercial transport and regional and business aircraft original equipment manufacturers (“OEMs”), various armed forces of the U.S. and friendly foreign governments, defense OEMs, system suppliers, and various other industrial customers.
The Company recognizes revenue from contracts with customers using the five step model prescribed in ASC 606. A substantial portion of the Company's revenue is recorded at a point in time basis. Revenue is recognized from the sale of products or services when obligations under the terms of the contract are satisfied and control of promised goods or services have transferred to the customer. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Revenue is measured at the amount of consideration the Company expects to be paid in exchange for goods or services.
In a limited number of contracts, control transfers to the customer over time, primarily in contracts where the customer is required to pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit relative to the work performed for products that were customized for the customer. Therefore, we recognize revenue over time for those agreements that have a right to margin and where the products being produced have no alternative use.
Based on our production cycle, it is generally expected that goods related to the revenue will be shipped and billed within twelve months. For revenue recognized over time, we estimate the amount of revenue attributable to a contract earned at a given point during the production cycle based on certain costs, such as materials and labor incurred to date, plus the expected profit, which is a cost-to-cost input method.
We consider the contractual consideration payable by the customer and assess variable consideration that may affect the total transaction price. Variable consideration is included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the estimate should be constrained in order to avoid a significant reversal of revenue in a future period. These estimates are based on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.
F-16
When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification to an existing contract on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
The Company’s payment terms vary by the type and location of the customer and the products or services offered. The Company does not offer any payment terms that would meet the requirements for consideration as a significant financing component.
Shipping and handling fees and costs incurred in connection with products sold are recorded in cost of sales in the consolidated statements of income, and are not considered a performance obligation to our customers.
The Company pays sales commissions that relate to contracts for products or services that are satisfied at a point in time or over a period of one year or less and are expensed as incurred. These costs are reported as a component of selling and administrative expenses in the consolidated statements of income.
In fiscal 2024, 2023 and 2022, no customer individually accounted for 10
Net sales to foreign customers, primarily in Western Europe, Canada and Asia, were $2.9 billion, $2.3 billion and $1.9 billion during the fiscal years ended September 30, 2024, 2023 and 2022, respectively.
We have elected to adopt the practical expedient to not disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied as of the end of the reporting period for performance obligations that are part of a contract with an original expected duration of one year or less.
Contract Assets and Liabilities – Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing or reimbursable costs related to a specific contract. Contract liabilities (Deferred revenue) relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. The following table summarizes our contract assets and liabilities balances (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
Contract assets, current (1) | $ | $ | |||||||||
Contract assets, non-current (2) | |||||||||||
| Total contract assets | |||||||||||
Contract liabilities, current (3) | |||||||||||
Contract liabilities, non-current (4) | |||||||||||
| Total contract liabilities | |||||||||||
| Net contract assets | $ | $ | |||||||||
(1)Included in prepaid expenses and other on the consolidated balance sheets.
(2)Included in other non-current assets on the consolidated balance sheets.
(3)Included in accrued and other current liabilities on the consolidated balance sheets.
(4)Included in other non-current liabilities on the consolidated balance sheets.
The increase in the Company's current contract assets at September 30, 2024 compared to September 30, 2023 is primarily due to the acquisitions of CPI's Electron Device Business and Raptor Scientific and also the timing and status of work in process and/or milestones of certain contracts. The increase in non-current contract assets is attributable to expected customer billing of certain contracts exceeding one year from September 30, 2024. The increase in the Company's current contract liabilities at September 30, 2024 compared to September 30, 2023 is primarily due to the acquisitions of CPI's Electron Device Business and Raptor Scientific and also receipt of advance payments. For the fiscal year ended September 30, 2024, the revenue recognized that was included in the contract liability balance at the beginning of the fiscal year was approximately $58 million.
Refer to Note 15, “Segments,” for disclosures related to the disaggregation of revenue.
F-17
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data) using the two-class method:
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Numerator for earnings per share: | |||||||||||||||||
| Income from continuing operations | $ | $ | $ | ||||||||||||||
| Less: Net income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||
| Net income from continuing operations attributable to TD Group | |||||||||||||||||
| Less: Dividends declared or paid on participating securities | ( | ( | ( | ||||||||||||||
| Income from discontinued operations, net of tax | |||||||||||||||||
| Net income applicable to TD Group common stockholders—basic and diluted | $ | $ | $ | ||||||||||||||
| Denominator for basic and diluted earnings per share under the two-class method: | |||||||||||||||||
| Weighted-average common shares outstanding | |||||||||||||||||
| Vested options deemed participating securities | |||||||||||||||||
| Total shares for basic and diluted earnings per share | |||||||||||||||||
| Earnings per share from continuing operations—basic and diluted | $ | $ | $ | ||||||||||||||
| Earnings per share from discontinued operations—basic and diluted | |||||||||||||||||
| Earnings per share | $ | $ | $ | ||||||||||||||
5. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consist of the following (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
| Trade accounts receivable—gross | $ | $ | |||||||||
| Allowance for uncollectible accounts | ( | ( | |||||||||
| Trade accounts receivable—Net | $ | $ | |||||||||
At September 30, 2024, none of our customers individually accounted for greater than 10 % of the Company’s trade accounts receivable-gross. In addition, approximately 39 % of the Company’s trade accounts receivable-gross was due from entities that operate principally outside of the United States – primarily in Western Europe, Canada and Asia. Credit is extended based on an evaluation of each customer’s financial condition and collateral is generally not required.
6. INVENTORIES
Inventories consist of the following (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
| Raw materials and purchased component parts | $ | $ | |||||||||
| Work-in-progress | |||||||||||
| Finished goods | |||||||||||
| Total | |||||||||||
| Reserves for excess and obsolete inventory | ( | ( | |||||||||
| Inventories—Net | $ | $ | |||||||||
F-18
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
| Land and improvements | $ | $ | |||||||||
| Buildings and improvements | |||||||||||
| Machinery, equipment and other | |||||||||||
| Construction-in-progress | |||||||||||
| Total | |||||||||||
| Accumulated depreciation | ( | ( | |||||||||
| Property, plant and equipment—Net | $ | $ | |||||||||
8. INTANGIBLE ASSETS
Other intangible assets–net in the consolidated balance sheets consist of the following at September 30 (in millions):
| 2024 | 2023 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||
| Trademarks and trade names | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Technology | |||||||||||||||||||||||||||||||||||
| Order backlog | |||||||||||||||||||||||||||||||||||
| Customer relationships | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
As disclosed in Note 2, “Acquisitions,” the estimated fair value of the net identifiable tangible and intangible assets acquired is based on the acquisition method of accounting and is subject to adjustment upon completion of the third-party valuation for certain acquisitions. Material adjustments may occur. The fair value of the net identifiable tangible and intangible assets acquired will be finalized within the measurement period (not to exceed one year). Intangible assets acquired during the fiscal year ended September 30, 2024 are summarized in the table below (in millions):
| Gross Amount | Amortization Period | ||||||||||
| Intangible assets not subject to amortization: | |||||||||||
| Goodwill | $ | ||||||||||
| Trademarks and trade names | |||||||||||
| Intangible assets subject to amortization: | |||||||||||
| Technology | |||||||||||
| Order backlog | |||||||||||
| Customer relationships | |||||||||||
| Total | $ | ||||||||||
Information regarding the amortization expense of amortizable intangible assets is detailed below (in millions):
Annual Amortization Expense:
| Fiscal Years Ended September 30, | |||||
| 2024 | $ | ||||
| 2023 | |||||
| 2022 | |||||
F-19
Estimated Amortization Expense:
| Fiscal Years Ended September 30, | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
The following is a summary of changes in the carrying value of goodwill by segment for the fiscal years ended September 30, 2023 and 2024 (in millions):
| Power & Control | Airframe | Non-aviation | Total | ||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | $ | $ | |||||||||||||||||||
| Goodwill acquired during the period (Note 2) | |||||||||||||||||||||||
| Purchase price allocation adjustments | |||||||||||||||||||||||
| Currency translation adjustments and other | |||||||||||||||||||||||
| Balance at September 30, 2023 | |||||||||||||||||||||||
| Goodwill acquired during the period (Note 2) | |||||||||||||||||||||||
Purchase price allocation adjustments (1) | |||||||||||||||||||||||
| Currency translation adjustments and other | |||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | $ | |||||||||||||||||||
(1)Primarily related to opening balance sheet adjustments recorded from the fiscal 2023 acquisition of Calspan. Refer to Note 2, “Acquisitions,” for further information.
9. ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consist of the following (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
| Compensation and related benefits | $ | $ | |||||||||
| Interest | |||||||||||
| Dividend equivalent payments, current (Note 16) | |||||||||||
| Contract liabilities, current (Note 3) | |||||||||||
| Income taxes payable, current | |||||||||||
| Loss contract reserves | |||||||||||
| Product warranties | |||||||||||
| Environmental and other litigation reserves | |||||||||||
| Current operating lease liabilities (Note 17) | |||||||||||
| Foreign currency forward exchange contracts (Note 19) | |||||||||||
| Other | |||||||||||
| Accrued and other current liabilities | $ | $ | |||||||||
F-20
10. DEBT
The Company’s debt consists of the following (in millions):
| September 30, 2024 | |||||||||||||||||||||||
| Gross Amount | Debt Issuance Costs | Original Issue (Discount) Premium | Net Amount | ||||||||||||||||||||
Short-term borrowings—trade receivable securitization facility | $ | $ | ( | $ | $ | ||||||||||||||||||
| Term loans | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| ( | |||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| Government refundable advances | |||||||||||||||||||||||
| Finance lease obligations | |||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| Less: current portion | ( | ||||||||||||||||||||||
| Long-term debt | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| September 30, 2023 | |||||||||||||||||||||||
| Gross Amount | Debt Issuance Costs | Original Issue (Discount) Premium | Net Amount | ||||||||||||||||||||
Short-term borrowings—trade receivable securitization facility | $ | $ | ( | $ | $ | ||||||||||||||||||
| Term loans | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| ( | |||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| 2028 Secured Notes | ( | ( | |||||||||||||||||||||
| ( | |||||||||||||||||||||||
| ( | |||||||||||||||||||||||
| 2030 Secured Notes | ( | ||||||||||||||||||||||
| Government refundable advances | |||||||||||||||||||||||
| Finance lease obligations | |||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| Less: current portion | |||||||||||||||||||||||
| Long-term debt | $ | $ | ( | $ | ( | $ | |||||||||||||||||
F-21
First Quarter of Fiscal 2024 Activity
Amendment No. 13 and Incremental Term Loan Assumption Agreement – On November 28, 2023, the Company entered into Amendment No. 13 and Incremental Term Loan Assumption Agreement (herein, “Amendment No. 13”) to the Second Amended and Restated Credit Agreement dated as of June 4, 2014 (the “Credit Agreement”). Under the terms of Amendment No. 13, the Company, among other things, issued $1,000 million in Tranche J term loans maturing February 28, 2031. The Tranche J term loans bore interest at a rate of adjusted Term Secured Overnight Financing Rate (“Term SOFR”) plus 3.25 %. The Tranche J term loans were issued at a discount of 0.25 %, or approximately $3 million. The Tranche J term loans were fully drawn on November 28, 2023 and the other terms and conditions that apply to the Tranche J term loans were substantially the same as the terms and conditions that apply to the term loans immediately prior to Amendment No. 13. Principal payments commenced on March 31, 2024, in which $3 million was to be paid on a quarterly basis up to the maturity date.
The Company capitalized $10 million in debt issuance costs associated with the Tranche J term loans during the fiscal year ended September 30, 2024.
In the third quarter of fiscal 2024, the remaining $997 million of existing Tranche J term loans were refinanced. Refer to the section below, “Amendment No. 16 Loan Modification Agreement and Refinancing Facility Agreement” for further information.
Issuance of $1,000 million of Senior Secured Notes due 2031 – On November 28, 2023, the Company entered into a purchase agreement in connection with a private offering of $1,000 million in aggregate principal amount of 7.125 % senior secured notes due 2031 at an issue price of 99.25 % of the principal amount, which represents an approximately $8 million discount. The 2031 Secured Notes were issued pursuant to an indenture, dated as of November 28, 2023, amongst TransDigm Inc., as issuer, TransDigm Group and the other subsidiaries of TransDigm Inc. named therein, as guarantors. The 2031 Secured Notes are guaranteed, on a senior secured basis, by TransDigm Group and each of TransDigm Inc.’s direct and indirect restricted subsidiaries that is a borrower or guarantor under TransDigm’s senior secured credit facilities or that issues or guarantees any capital markets indebtedness of TransDigm or any of the guarantors in an aggregate principal amount of at least $200 million. The 2031 Secured Notes and guarantees rank equally in right of payment with all of TransDigm’s and the guarantors’ existing and future senior indebtedness, senior in right of payment to any of TransDigm’s and the guarantors’ existing and future indebtedness that is, by its terms, expressly subordinated in right of payment to the 2031 Secured Notes and guarantees, and structurally subordinated to all of the liabilities of TransDigm’s non-guarantor subsidiaries. The Company used the proceeds of the offering of the 2031 Secured Notes, along with the proceeds from the Tranche J term loans further described above, together with cash on hand, primarily to fund the acquisition of CPI's Electron Device Business completed during the third quarter of fiscal 2024 (see Note 2, “Acquisitions,” for further information).
The 2031 Secured Notes bear interest at a rate of 7.125 % per annum, which accrues from November 28, 2023 and is payable in arrears on June 1st and December 1st of each year, commencing on June 1, 2024. The 2031 Secured Notes mature on December 1, 2031, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the indenture.
The Company capitalized $10 million in debt issuance costs associated with the 2031 Secured Notes during the fiscal year ended September 30, 2024.
Second Quarter of Fiscal 2024 Activity
Amendment No. 14 and Incremental Revolving Credit Assumption Agreement – On February 27, 2024, the Company entered into Amendment No. 14 and Incremental Revolving Credit Assumption Agreement (herein, “Amendment No. 14”) to the Credit Agreement. Under the terms of Amendment No. 14, the Company, among other things, refinanced its revolving credit facility to (i) extend the maturity date from May 2026 to February 2029; (ii) increased the total commitments capacity thereunder from $810 million to $910 million; and (iii) decreased the applicable interest rate to Term SOFR plus 2.25 % compared to Term SOFR plus 2.50 % applicable prior to Amendment No. 14. As of September 30, 2024, the borrowings available under the revolving commitments were $843 million.
The Company capitalized $1 million in debt issuance costs and wrote-off $3 million in unamortized debt issuance costs associated with Amendment No. 14 during the fiscal year ended September 30, 2024.
Issuance of $4,400 million of Senior Secured Notes due 2029 and 2032 – On February 27, 2024, the Company entered into two separate purchase agreements in connection with private offerings of $2,200 million in aggregate principal amount of 6.375 % senior secured notes due 2029 (the “$2,200 million 2029 Secured Notes”) at an issue price of 100 % of the principal amount and $2,200 million in aggregate principal amount of 6.625 % senior secured notes due 2032 (the “2032 Secured Notes”) at an issue price of 100 % of the principal amount. The proceeds were used to repurchase all outstanding 6.25 % secured notes due 2026 (the “2026 Secured Notes”) further described below.
F-22
The $2,200 6.375 % per annum and 6.625 % per annum, respectively, which accrues from February 27, 2024 and is payable in arrears on March 1st and September 1st of each year, commencing on September 1, 2024. The $2,200
The $2,200 200 million. The secured notes and the related guarantees rank equally in right of payment with all of TransDigm’s and the guarantors’ existing and future senior indebtedness, senior in right of payment to any of TransDigm’s and the guarantors’ existing and future indebtedness that is, by its terms, expressly subordinated in right of payment to the $2,200
The Company capitalized approximately $20 million and $21 million in debt issuance costs associated with the $2,200
Amendment No. 15 Loan Modification Agreement and Refinancing Facility Agreement – On March 22, 2024, the Company entered into Amendment No. 15 Loan Modification Agreement and Incremental Term Loan Assumption Agreement (herein, “Amendment No. 15”) to the Credit Agreement. Under the terms of Amendment No. 15, the Company, among other things, (i) repriced all of its $4,525 million in existing Tranche I term loans maturing August 24, 2028 to bear interest at Term SOFR plus 2.75 % compared to Term SOFR plus 3.25 % applicable prior to Amendment No. 15; and (ii) repaid in full its existing approximately $1,708 million in Tranche H term loans maturing February 22, 2027 and replaced such loans with approximately $1,708 million in new Tranche K term loans maturing March 22, 2030. The Tranche K term loans were issued at a discount of 0.25 %, or approximately $4 million, and bear interest at Term SOFR plus 2.75 %. The Tranche K term loans were fully drawn on March 22, 2024.
The other terms and conditions that apply to the Tranche I and Tranche K term loans are substantially the same as the terms and conditions that applied to the term loans immediately prior to Amendment No. 15. Principal payments for the Tranche I term loans and Tranche K term loans commenced on June 30, 2024, in which $11 million (subsequently revised in Amendment No. 16 detailed below) and $4 million will be paid on a quarterly basis up to the maturity date of each respective tranche of term loans.
The Company expensed approximately $5 million in refinancing costs associated with the refinancing during the fiscal year ended September 30, 2024. Additionally, the Company wrote-off $2 million of original issue discount associated with Amendment No. 15 during the fiscal year ended September 30, 2024.
In the third quarter of fiscal 2024, $2,644 million of existing Tranche I term loans were refinanced. Refer to the section below, “Amendment No. 16 Loan Modification Agreement and Refinancing Facility Agreement” for further information.
Redemption of $4,400 million of Senior Secured Notes due 2026 – On March 28, 2024, the Company redeemed all $4,400 million aggregate principal amount of its outstanding 2026 Secured Notes at a redemption price of 100 % of the principal amount thereof, plus accrued and unpaid interest thereon to, but not including, the redemption date, using the net proceeds of the offering of the $2,200
The Company recorded refinancing costs of $19 million, consisting primarily of the write-off of $21 million in unamortized debt issuance costs, slightly offset by the write-off of unamortized premium of $2 million during the fiscal year ended September 30, 2024 in conjunction with the redemption of the 2026 Secured Notes.
Issuance of $550 million of Senior Secured Notes due 2029 – On March 22, 2024, the Company entered into a purchase agreement in connection with a private offering of $550 million in aggregate principal amount consisting of 6.375 % senior secured notes due 2029 (the “$550 million 2029 Secured Notes”) at an issue price of 99.75 % of the principal amount, which represents an approximately $1 million discount. The $550 million 2029 Secured Notes are an additional issuance of the Company's existing $2,200 million 2029 Secured Notes (as further described above) and were issued under a supplemental indenture dated as of March 22, 2024, pursuant to which the Company previously issued the $2,200 million 2029 Secured Notes. The $550 million 2029 Secured Notes are the same class and series as, and otherwise identical to, the $2,200 million 2029 Secured Notes other than with respect to the date of issuance and issue price (collectively, the $550 million 2029 Secured Notes and the $2,200 million 2029 Secured Notes are referred to herein as the “2029 Secured Notes”).
F-23
The Company capitalized $5 million in debt issuance costs associated with the $550 million 2029 Secured Notes during the fiscal year ended September 30, 2024.
Third Quarter of Fiscal 2024 Activity
Redemption of $550 million of Senior Subordinated Notes due 2027 – On April 22, 2024, the Company redeemed all $550 million aggregate principal of its outstanding 7.50 % senior subordinated notes due 2027 (the “7.50 % 2027 Notes”) at a redemption price of 100 % of the principal amount thereof, plus accrued and unpaid interest thereon to, but not including, the redemption date, using the net proceeds of the offering of the $550 million 2029 Secured Notes, together with cash on hand.
The Company wrote off $2 million in unamortized debt issuance costs during the fiscal year ended September 30, 2024 in conjunction with the redemption of the 7.50 % 2027 Notes.
Amendment No. 16 Loan Modification Agreement and Refinancing Facility Agreement – On June 4, 2024, the Company entered into Amendment No. 16 Loan Modification Agreement and Refinancing Facility Agreement (herein, “Amendment No. 16”) to the Credit Agreement. Under the terms of Amendment No. 16, the Company, among other things, (i) repriced all of its $997 million in existing Tranche J term loans to bear interest at Term SOFR plus 2.50 % compared to Term SOFR plus 3.25 % applicable prior to Amendment No. 16; and (ii) amended and extended $2,644 million of existing Tranche I term loans maturing August 24, 2028 and converting such loans into Tranche J term loans maturing February 28, 2031.
The other terms and conditions that apply to the Tranche I and Tranche J term loans are substantially the same as the terms and conditions that applied to the term loans immediately prior to Amendment No. 16. Principal payments for Tranche I and Tranche J term loans commence on June 30, 2024 and September 30, 2024 respectively, in which $5 million and $9 million will be paid on a quarterly basis up to the maturity date of each respective tranche of term loans.
The Company capitalized $3 million in debt issuance costs associated with the refinancing during the fiscal year ended September 30, 2024. Additionally, the Company wrote-off $14 million in unamortized debt issuance costs and $12 million of original issue discount associated with Amendment No. 16 during the fiscal year ended September 30, 2024.
Trade Receivable Securitization Facility – The Company’s trade receivable securitization facility (the “Securitization Facility”) effectively increases the Company’s borrowing capacity depending on the amount of the domestic operations’ trade accounts receivable. The Securitization Facility includes the right for the Company to exercise annual one year extensions as long as there have been no termination events as defined by the agreement. The Company uses the proceeds from the Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs.
On July 12, 2024, the Company amended the Securitization Facility to, among other things, (i) increase the borrowing capacity from $450 million to $650 million; and (ii) extend the maturity date to July 11, 2025 at an interest rate of Term SOFR plus 1.45 % compared to an interest rate of Term SOFR plus 1.60 % that applied prior to the amendment.
The Company drew $100 million and $37 million available under the Securitization Facility in December 2023 and July 2024, respectively. As of September 30, 2024, the total drawn on the Securitization Facility is $487 million. For the fiscal years ended September 30, 2024 and 2023, the applicable interest rate was 6.73 % and 6.95 %, respectively. The Securitization Facility is collateralized by substantially all of the Company’s domestic operations’ trade accounts receivable.
Fourth Quarter of Fiscal 2024 Activity
Issuance of $1,500 million of Senior Secured Notes due 2033 – On September 19, 2024, the Company entered into a purchase agreement in connection with a private offering of $1,500 million in aggregate principal amount of 6.00 % senior secured notes due 2033 (the “2033 Secured Notes”) at an issue price of 100 % of the principal amount. The 2033 Secured Notes were issued pursuant to an indenture, dated as of September 19, 2024, amongst TransDigm Inc., as issuer, TransDigm Group and the other subsidiaries of TransDigm Inc. named therein, as guarantors. The 2033 Secured Notes are guaranteed, on a senior secured basis, by TransDigm Group and each of TransDigm Inc.’s direct and indirect restricted subsidiaries that is a borrower or guarantor under TransDigm’s senior secured credit facilities or that issues or guarantees any capital markets indebtedness of TransDigm or any of the guarantors in an aggregate principal amount of at least $200 million. The 2033 Secured Notes and guarantees rank equally in right of payment with all of TransDigm’s and the guarantors’ existing and future senior indebtedness, senior in right of payment to any of TransDigm’s and the guarantors’ existing and future indebtedness that is, by its terms, expressly subordinated in right of payment to the 2033 Secured Notes and related guarantees, and structurally subordinated to all of the liabilities of TransDigm’s non-guarantor subsidiaries.
The Company capitalized approximately $14 million in debt issuance costs associated with the 2033 Secured Notes during the fiscal year ended September 30, 2024.
F-24
Amendment No. 17 and Incremental Term Loan Assumption Agreement – On September 19, 2024, the the Company entered into Amendment No. 17 and Incremental Term Loan Assumption Agreement (herein, “Amendment No. 17”) to the Credit Agreement. Under the terms of Amendment No. 17, the Company, among other things, issued $1,500 million in Tranche L term loans maturing January 19, 2032. The Tranche L term loans bore interest at a rate of Term SOFR plus 2.50 %. The Tranche L term loans were issued at a discount of 0.25 %, or approximately $4 million. The Tranche L term loans were fully drawn on September 19, 2024 and the other terms and conditions that apply to the Tranche L term loans are substantially the same as the terms and conditions that apply to the term loans immediately prior to Amendment No. 17.
The Company capitalized approximately $12 million in debt issuance costs associated with Amendment No. 17 during the fiscal year ended September 30, 2024.
The proceeds from both fourth quarter of fiscal 2024 issuances were used, along with existing cash on hand, to fund a $75.00 special dividend declaration on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans.
Subsequent Event – Trade Receivable Securitization Facility – The Company drew the remaining $162.5 million available under the Securitization Facility in October 2024.
Government Refundable Advances
Government refundable advances consist of payments received from the Canadian government to assist in research and development related to commercial aviation. The requirement to repay this advance is based on year-over-year commercial aviation revenue growth for certain product lines at CMC Electronics, which is a wholly-owned subsidiary of TransDigm. As of September 30, 2024 and 2023, the outstanding balance of these advances were $17 million and $21 million, respectively.
Obligations under Finance Leases
The Company leases certain buildings and equipment under finance leases. The present value of the minimum finance lease payments, net of the current portion, represents a balance of $262 million and $193 million at September 30, 2024 and 2023, respectively. The increase in fiscal 2024 is primarily attributable to the leases assumed from the acquisition of CPI’s Electron Device Business in the third quarter of fiscal 2024 and certain new leases of facilities and amendments to previous agreements qualifying as lease modifications resulting in a change in classification from an operating lease to a finance lease. Refer to Note 17, “Leases,” for further disclosure of the Company’s lease obligations.
Senior Secured Term Loans Facility
As of September 30, 2024, TransDigm had $8,702 million in fully drawn term loans (the “Term Loans Facility”), $910 million in revolving commitments, of which $843 million was available to the Company, subject to an interest rate of 2.25 % per annum. As of September 30, 2023, TransDigm had $6,249 million in fully drawn term loans, $810 million in revolving commitments, of which $755 million was available to the Company, subject to an interest rate of 2.50 % per annum. The unused portion of the revolving commitments is subject to a fee of 0.5 % per annum for both fiscal 2024 and 2023. The total fees incurred on the unused portion of the revolving commitments were not material in fiscal 2024 or fiscal 2023.
| Term Loans Facility | Maturity Date | Interest Rate under Term Loans Facility | Aggregate Principal as of September 30, | |||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
Tranche H (1) | February 22, 2027 | Term SOFR plus 3.25% | $ | $ | ||||||||||||||||||||||
| Tranche I | August 24, 2028 | Term SOFR plus 2.75% | $ | $ | ||||||||||||||||||||||
| Tranche J | February 28, 2031 | Term SOFR plus 2.50% | $ | $ | ||||||||||||||||||||||
| Tranche K | March 22, 2030 | Term SOFR plus 2.75% | $ | $ | ||||||||||||||||||||||
| Tranche L | January 19, 2032 | Term SOFR plus 2.50% | $ | $ | ||||||||||||||||||||||
The interest rates per annum applicable to the loans under the Term Loans Facility are, at TransDigm’s option, equal to either an alternate base rate or an adjusted Term SOFR for one, three or six-months thereafter (in each case, subject to the availability thereof), interest periods chosen by TransDigm, in each case, plus an applicable margin percentage. The adjusted Term SOFR related to the existing term loans are not subject to a floor. Refer to Note 19, “Derivatives and Hedging Activities,” for information about how our interest rate swaps, cap and collar agreements are used to hedge and offset, respectively, the variable interest rates on the Term Loans Facility.
F-25
Secured Notes
TransDigm Inc.’s 2028 Secured Notes are jointly and severally guaranteed, on a senior basis, by TD Group, TransDigm UK and all of TransDigm Inc.'s Domestic Restricted Subsidiaries, as defined in the applicable indentures. The 2029 Secured Notes, 2030 Secured Notes, 2031 Secured Notes, 2032 Secured Notes and 2033 Secured Notes (collectively with the 2028 Secured Notes, the “Secured Notes”) are guaranteed on a senior secured basis by TD Group and each of TransDigm Inc.’s direct and indirect Restricted Subsidiaries (as defined in the applicable indenture) that is a borrower or guarantor under TransDigm’s senior secured credit facilities or that issues or guarantees any capital market indebtedness of TransDigm Inc. or any of the guarantors in an aggregate principal amount of at least $200 million. As of the date of this Form 10-K, the guarantors of the 2029 Secured Notes, 2030 Secured Notes, 2031 Secured Notes, 2032 Secured Notes and 2033 Secured Notes are the same as the guarantors of the 2028 Secured Notes. The Secured Notes contain restrictive covenants that are substantially similar to many of the restrictive covenants included in the Credit Agreement. TransDigm is in compliance with all the covenants contained in the Secured Notes.
Subordinated Notes
TransDigm Inc.'s 5.50 % 2027 Notes, 4.625 % 2029 Notes, and 4.875 % 2029 Notes (collectively, the “Subordinated Notes”) are jointly and severally guaranteed, on a senior subordinated basis, by TD Group, TransDigm UK and all of TransDigm Inc.'s Domestic Restricted Subsidiaries, as defined in the applicable indentures. The Subordinated Notes contain restrictive covenants that are substantially similar to many of the restrictive covenants included in the Credit Agreement. TransDigm is in compliance with all the covenants contained in the Subordinated Notes.
Debt Repayment Schedule
At September 30, 2024, future maturities of long-term debt (excluding finance leases) are as follows (in millions), refer to Note 17, “Leases,” for future maturities of finance leases:
| Fiscal Years Ended September 30, | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total | $ | ||||
F-26
11. RETIREMENT PLANS
The Company maintains certain non-contributory defined benefit pension plans (collectively, referred to as the “pension plans”) covering eligible employees in the U.S. and in other certain countries such as Canada, France, Germany and the United Kingdom. These pension plans generally provide benefits to employees based on formulas recognizing length of service and earnings. The Company’s funding policy is to contribute actuarial-determined amounts allowable under tax and statutory regulations for the qualified plans. The Company uses a September 30th measurement date for its defined benefit pension plans. The Company also sponsors other post-retirement pension plans for its employees in the U.S. and in Canada (collectively, referred to as the “post-retirement pension plans”). Other post-retirement pension plans are non-contributory health care and life insurance plans.
The components of net periodic pension benefit cost (income) for the pension plans at the end of each fiscal year consisted of the following (in millions):
| Defined Benefit Pension Plans | |||||||||||||||||||||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| U.S. Pension Plans | Non-U.S. Pension Plans | U.S. Pension Plans | Non-U.S. Pension Plans | U.S. Pension Plans | Non-U.S. Pension Plans | ||||||||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Interest cost | |||||||||||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
| Amortization of net loss | |||||||||||||||||||||||||||||||||||
| ( | |||||||||||||||||||||||||||||||||||
| Net periodic pension benefit cost (income) | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||
(1) Effective June 30, 2021, the Company terminated the Esterline Retirement Plan (the “ERP”) in accordance with regulatory requirements. Pension obligations were distributed through a combination of lump sum payments (using existing plan assets) to eligible plan participants and the purchase of a group annuity contract in fiscal 2022. During the third quarter of fiscal 2022, the Company transferred the remaining benefit obligations to an insurance company to purchase a group annuity contract. In connection with the transfer, a settlement loss of approximately $22 million was recorded as a component of other (income) expense in the consolidated statements of income in fiscal 2022. Upon the finalization of the group annuity purchase funding during fiscal 2023, a settlement (gain) of approximately $(9 ) million was recorded as a component of other (income) expense in the consolidated statements of income in fiscal 2023. No settlement (gain) or loss was recorded in fiscal 2024.
Net periodic pension benefit cost for the post-retirement pension plans was less than $1
F-27
The changes in benefit obligations and plan assets, funded status and amounts recognized in the consolidated balance sheets and accumulated other comprehensive loss for pension plans at September 30, 2024 and 2023, were as follows (in millions):
| Defined Benefit Pension Plans | ||||||||||||||||||||||||||
| September 30, 2024 | September 30, 2023 | |||||||||||||||||||||||||
| U.S. Pension Plans | Non-U.S. Pension Plans | U.S. Pension Plans | Non-U.S. Pension Plans | |||||||||||||||||||||||
| Benefit Obligations | ||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||||||||||||
| Currency translation adjustment | ||||||||||||||||||||||||||
| Service cost | ||||||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Actuarial loss (gain) | ( | ( | ||||||||||||||||||||||||
| Plan amendments | ||||||||||||||||||||||||||
| Benefits paid | ( | ( | ( | ( | ||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||||||||||||
| Plan Assets - Fair Value | ||||||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | ||||||||||||||||||||||
| Currency translation adjustment | ||||||||||||||||||||||||||
| Realized and unrealized gain on plan assets | ||||||||||||||||||||||||||
| Company contributions (refunds) | ( | |||||||||||||||||||||||||
| Benefits paid | ( | ( | ( | ( | ||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||||||||||||
| Funded Status | ||||||||||||||||||||||||||
| Fair value of plan assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Benefit obligations | ( | ( | ( | ( | ||||||||||||||||||||||
| Net amount recognized | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Amount Recognized on Consolidated Balance Sheets | ||||||||||||||||||||||||||
| Other non-current assets | $ | $ | $ | $ | ||||||||||||||||||||||
| Accrued and other current liabilities | ( | |||||||||||||||||||||||||
| Other non-current liabilities | ( | ( | ( | ( | ||||||||||||||||||||||
| Net amount recognized | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Amounts Recognized in Accumulated Other Comprehensive Loss (Income) | ||||||||||||||||||||||||||
| Net loss (gain) | $ | $ | ( | $ | $ | |||||||||||||||||||||
| Prior service cost | ||||||||||||||||||||||||||
| Ending balance | $ | $ | $ | $ | ||||||||||||||||||||||
The accumulated benefit obligation for all pension plans was $175 million and $152 million as of September 30, 2024 and September 30, 2023, respectively.
Estimated future benefit payments expected to be paid from the pension and post-retirement pension plans or from the Company’s assets are as follows (in millions):
| Fiscal Years Ended September 30, | ||||||||
| 2025 | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 - 2034 | ||||||||
The expected funding requirement in fiscal 2025 for the non-U.S. pension plans and the U.S. pension plans maintained by the Company is not material.
F-28
| U.S. Defined Benefit Pension Plans | Non-U.S. Defined Benefit Pension Plans | ||||||||||||||||||||||
| Principal assumptions as of year end | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Discount rate | |||||||||||||||||||||||
| Rate of increase in future compensation levels | N/A (1) | N/A (1) | |||||||||||||||||||||
| Assumed long-term rate of return on plan assets | |||||||||||||||||||||||
(1)As a result of the plan freeze to the ERP during fiscal 2021, for all future benefit accruals and participation by new or rehired employees on or after January 1, 2021, the assumed rate of increase in future compensation levels was not applicable as of September 30, 2024 and 2023, as pay increases are not valued once a defined benefit pension plan is frozen. The ERP settlement occurred in fiscal 2022.
The Company uses discount rates developed from a yield curve established from high-quality corporate bonds and matched to plan-specific projected benefit payments. Although future changes to the discount rate and expected return on assets are unknown, had the discount rate and expected return on assets increased or decreased by 25 basis points, the impact on the fiscal 2024 net periodic benefit cost is not material. Management is not aware of any legislative or other initiatives or circumstances that will significantly impact the Company’s pension obligations in fiscal 2025.
Plan assets are invested in a diversified portfolio of equity and debt securities consisting primarily of common stocks, bonds and government securities. The objective of these investments is to maintain sufficient liquidity to fund current benefit payments and achieve targeted risk-adjusted returns. Management periodically reviews allocations of plan assets by investment type and evaluates external sources of information regarding the long-term historical returns and expected future returns for each investment type.
Allocations by investment type are as follows:
| Actual | ||||||||||||||||||||
| Plan assets allocation as of fiscal year end | Target | 2024 | 2023 | |||||||||||||||||
| Return-seeking assets (e.g., equity securities and real estate) | ||||||||||||||||||||
| Fixed-income securities (e.g., debt securities) | ||||||||||||||||||||
| Cash | ||||||||||||||||||||
| Total | ||||||||||||||||||||
F-29
The following table presents the fair value of the Company’s pension plan assets as of September 30, 2024 and 2023, segregated by level within the fair value hierarchy as described in Note 18, “Fair Value Measurements” (in millions):
| Fair Value Hierarchy | ||||||||||||||
| September 30, 2024 | September 30, 2023 | |||||||||||||
Investments measured at fair value by level: (4) | ||||||||||||||
Level 1 (1) | $ | $ | ||||||||||||
Level 2 (2) | ||||||||||||||
Investments measured at net asset value (3) | ||||||||||||||
| Total | $ | $ | ||||||||||||
(1) Level 1 investments include return seeking assets, which are primarily equity securities and real estate, are actively traded on U.S. and non-U.S. exchanges and valued using the market approach at quoted market prices on the measurement date or at the net asset value of the shares held by the plan on the measurement date based on quoted market prices. Includes cash and cash equivalents which is used to pay benefits and cash invested in a short-term investment fund that holds securities with values based on quoted market prices, but for which the funds are not valued on quoted market basis.
(2) Level 2 investments include fixed-income securities, which are primarily debt securities, are primarily valued using the market approach at either quoted market prices, pricing models that use observable market data, or bids provided by independent investment brokerage firms.
(3) These investments are valued at the net asset value (“NAV”) of units held. The NAV is used to estimate fair value and is based on the fair value of the underlying investments held by the fund less its liability.
(4) No investments measured using Level 3 inputs.
Defined Contribution Plans
The Company sponsors certain defined contribution employee savings plans that cover substantially all of the Company’s U.S. employees. Under certain plans, the Company contributes a percentage of employee compensation and matches a portion of employee contributions. The cost recognized for such contributions for the fiscal years ended September 30, 2024, 2023 and 2022 was approximately $45 million, $34 million and $30 million, respectively.
12. INCOME TAXES
The Company’s income from continuing operations before income taxes includes the following components for the periods shown below (in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| Foreign | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
F-30
The Company’s income tax provision (benefit) on income from continuing operations consists of the following for the periods shown below (in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
| State | |||||||||||||||||
| Foreign | |||||||||||||||||
| Deferred | |||||||||||||||||
| Federal | ( | ( | |||||||||||||||
| State | ( | ||||||||||||||||
| Foreign | ( | ||||||||||||||||
| ( | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
A reconciliation of the federal statutory income tax rate to the effective income tax rate for the periods shown below is as follows:
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Federal statutory income tax rate | % | % | % | ||||||||||||||
| Changes in valuation allowances impacting results | % | % | % | ||||||||||||||
| State and local income taxes, net of federal benefit | % | % | % | ||||||||||||||
| Federal deemed inclusion amounts | % | % | % | ||||||||||||||
| Withholding taxes | % | % | % | ||||||||||||||
| Provision to return adjustments | % | % | ( | % | |||||||||||||
| Foreign-derived intangible income | ( | % | ( | % | ( | % | |||||||||||
| Stock-based compensation | ( | % | ( | % | ( | % | |||||||||||
| Other—net | % | ( | % | ( | % | ||||||||||||
| Effective income tax rate | % | % | % | ||||||||||||||
F-31
The components of the deferred taxes consist of the following (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
| Deferred tax assets (liabilities): | |||||||||||
| Intangible assets | $ | ( | $ | ( | |||||||
| Property, plant and equipment | ( | ( | |||||||||
| Interest rate swaps, caps and collars | ( | ( | |||||||||
| Interest expense limitation | |||||||||||
| Employee benefits | |||||||||||
| Inventories | |||||||||||
| Capitalized research and development costs | |||||||||||
| Net operating losses | |||||||||||
| Loss contract reserves | |||||||||||
| Environmental reserves | |||||||||||
| U.S. income tax credits | |||||||||||
| Product warranty reserves | |||||||||||
| Non-U.S. income tax credits | |||||||||||
| Other | ( | ||||||||||
| Total | ( | ( | |||||||||
| Add: Valuation allowance | ( | ( | |||||||||
| Total net deferred tax assets (liabilities) | $ | ( | $ | ( | |||||||
At September 30, 2024, the Company has state net operating loss carryforwards of approximately $816 million, German net operating loss carryforwards of $54 million and United Kingdom net operating loss carryforwards of approximately $65 million that expire in various fiscal years from 2025 to 2044 . The Company has U.S. and non-U.S. tax credit carryforwards of $10 million that expire beginning in fiscal year 2025 .
The deferred tax assets for the interest expense limitation, net operating losses, and tax credit carryforwards are reduced by a valuation allowance for the amount of such assets that the Company believes will not be realized.
With limited exception, no provision has been made for income taxes on undistributed earnings of foreign subsidiaries of approximately, $40 million at September 30, 2024, since it is the Company’s intention to indefinitely reinvest such undistributed earnings. The cash that is permanently reinvested is typically used to expand operations either organically or through acquisitions. It is not practicable to estimate the additional taxes that would be payable on the remittance of such earnings. We have provided for taxes in jurisdictions in which we are not considered indefinitely reinvested, however, such amounts are not significant.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations for years before fiscal 2018. The Company is currently under examination for its federal income taxes in Canada for fiscal years 2013 through 2019, in France for fiscal years 2020 through 2022, and in Germany for fiscal years 2017 through 2019. In addition, the Company is subject to state income tax examinations for fiscal years 2015 and later.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
| 2024 | 2023 | ||||||||||
| Balance at October 1 | $ | $ | |||||||||
| Additions based on tax positions related to the prior year | |||||||||||
| Additions based on tax positions related to the current year | |||||||||||
| Reductions based on tax positions related to the prior year | |||||||||||
| Settlement with tax authorities | ( | ( | |||||||||
| Lapse in statute of limitations | ( | ( | |||||||||
| Balance at September 30 | $ | $ | |||||||||
F-32
Unrecognized tax benefits at September 30, 2024 and 2023, the recognition of which would have an effect on the effective tax rate for each fiscal year, amounted to $14 million and $17 million, respectively. The Company classifies all income tax-related interest and penalties as income tax expense, which were not significant for the years ended September 30, 2024 and 2023. As of September 30, 2024 and 2023, the Company accrued $4 million and $6 million, respectively, for the potential payment of interest and penalties. Within the next twelve months, it is reasonably possible that unrecognized tax benefits could be reduced by approximately $2 million resulting from the resolution or closure of tax examinations. Any increase in the amount of unrecognized tax benefits within the next twelve months is not expected to be material.
13. COMMITMENTS AND CONTINGENCIES
During the ordinary course of business, the Company is from time to time threatened with, or may become a party to, legal actions and other proceedings such as product liability claims, employee claims, workers’ compensation claims and class action lawsuits. Insurance may cover some of the costs associated with these claims and proceedings. While the Company is currently involved in certain legal proceedings, it believes the results of these proceedings will not have a material adverse effect on its financial condition, results of operations, or cash flows.
Environmental Liabilities – Our operations and facilities are subject to a number of federal, state, local and foreign environmental laws and regulations that govern, among other things, discharges of pollutants into the air and water, the generation, handling, storage and disposal of hazardous materials and wastes, the remediation of contamination and the health and safety of our employees. Environmental laws and regulations may require that the Company investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. Certain facilities and third-party sites utilized by the Company have been identified as potentially responsible parties under the federal superfund laws and comparable state laws. The Company is currently involved in the investigation and remediation of a number of sites under applicable laws.
Estimates of the Company’s environmental liabilities are based on current facts, laws, regulations and technology. These estimates take into consideration the Company’s prior experience and professional judgment of the Company’s environmental advisors. Estimates of the Company’s environmental liabilities are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluations and cost estimates, the extent of corrective actions that may be required and the number and financial condition of other potentially responsible parties, as well as the extent of their responsibility for the remediation.
Accordingly, as investigation and remediation proceed, it is likely that adjustments in the Company’s accruals will be necessary to reflect new information. The amounts of any such adjustments could have a material adverse effect on the Company’s results of operations or cash flows in a given period. Based on currently available information, however, the Company does not believe that future environmental costs in excess of those accrued with respect to sites for which the Company has been identified as a potentially responsible party are likely to have a material adverse effect on the Company’s financial condition or results of operations.
Environmental liabilities are recorded when the liability is probable and the costs are reasonably estimable, which generally is not later than at completion of a feasibility study or when the Company has recommended a remedy or has committed to an appropriate plan of action. The Company also takes into consideration the estimated period of time in which payments will be required. The liabilities are reviewed periodically and, as investigation and remediation proceed, adjustments are made as necessary. Liabilities for losses from environmental remediation obligations do not consider the effects of inflation and anticipated expenditures are not discounted to their present value. The liabilities are not offset by possible recoveries from insurance carriers or other third parties, but do reflect anticipated allocations among potentially responsible parties at federal superfund sites or similar state-managed sites, third party indemnity obligations, and an assessment of the likelihood that such parties will fulfill their obligations at such sites.
14. STOCK REPURCHASE PROGRAM
TD Group consists of 224,400,000 shares of $.01 par value common stock and 149,600,000 shares of $.01 par value preferred stock. The total number of shares of common stock issued at September 30, 2024 and 2023 was 61,904,833 and 60,995,513 , respectively. The total number of shares held in treasury was 5,688,639 no
F-33
On January 27, 2022, the Board of Directors of the Company (the “Board”) authorized a new stock repurchase program to permit repurchases of its outstanding common stock not to exceed $2,200 million in the aggregate (the “$2,200 million stock repurchase program”), replacing the $650 million stock repurchase program previously authorized by the Board on November 8, 2017, subject to any restrictions specified in the Second Amended and Restated Credit Agreement dated as of June 4, 2014, and indentures governing the Company's existing Notes. There is no expiration date for this program.
15. SEGMENTS
The Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation.
The Power & Control segment includes operations that primarily develop, produce and market systems and components that predominately provide power to or control power of the aircraft utilizing electronic, fluid, power and mechanical motion control technologies. Major product offerings include mechanical/electromechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, batteries and chargers, databus and power controls, advanced sensor products, switches and relay panels, high performance hoists, winches and lifting devices, cargo loading, handling and delivery systems and electronic components used in the generation, amplification, transmission and reception of microwave signals. Primary customers of this segment are engine and power system and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.
The Airframe segment includes operations that primarily develop, produce and market systems and components that are used in non-power airframe applications utilizing airframe and cabin structure technologies. Major product offerings include engineered latching and locking devices, engineered rods, engineered connectors and elastomer sealing solutions, cockpit security components and systems, specialized and advanced cockpit displays, engineered audio, radio and antenna systems, specialized lavatory components, seat belts and safety restraints, engineered and customized interior surfaces and related components, thermal protection and insulation, lighting and control technology, parachutes, specialized flight, wind tunnel and jet engine testing services and equipment and complex testing and instrumentation solutions. Primary customers of this segment are airframe manufacturers and cabin system suppliers and subsystem suppliers, airlines, third party maintenance suppliers, military buying agencies and repair depots. Products are sold in the original equipment and aftermarket market channels.
The Non-aviation segment includes operations that primarily develop, produce and market products for non-aviation markets. Major product offerings include seat belts and safety restraints for ground transportation applications, mechanical/electromechanical actuators and controls for space applications, hydraulic/electromechanical actuators and fuel valves for land-based gas turbines, and refueling systems for heavy equipment used in mining, construction and other industries and turbine controls for the energy and oil and gas markets. Primary customers of this segment are off-road vehicle suppliers and subsystem suppliers, child restraint system suppliers, satellite and space system suppliers, manufacturers of heavy equipment used in mining, construction and other industries and turbine original equipment manufacturers, gas pipeline builders and electric utilities.
The primary measurement used by management to review and assess the operating performance of each segment is EBITDA As Defined. The Company defines EBITDA As Defined as earnings before interest, taxes, depreciation and amortization plus certain non-operating items recorded as corporate expenses including non-cash compensation charges incurred in connection with the Company’s stock incentive or deferred compensation plans, foreign currency gains and losses, acquisition-integration costs, acquisition transaction-related expenses, and refinancing costs. Acquisition transaction and integration-related expenses and adjustments represent costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and valuation-related costs for acquisitions comprising deal fees, legal, financial and tax due diligence expenses; amortization expense of inventory step-up recorded in connection with the purchase accounting of acquired businesses.
EBITDA As Defined is not a measurement of financial performance under U.S. GAAP. Although the Company uses EBITDA As Defined to assess the performance of its business and for various other purposes, the use of this non-GAAP financial measure as an analytical tool has limitations, and it should not be considered in isolation or as a substitute for analysis of the Company’s results of operations as reported in accordance with U.S. GAAP.
F-34
The Company’s segments are reported on the same basis used internally for evaluating performance and for allocating resources. The accounting policies for each segment are the same as those described in the summary of significant accounting policies in Note 1 to the Company’s consolidated financial statements. Intersegment sales and transfers are recorded at values based on market prices, which creates intercompany profit on intersegment sales or transfers that is eliminated in consolidation. Intersegment sales were immaterial for the periods presented below. Corporate consists of our corporate offices. Corporate expenses consist primarily of compensation, benefits, professional services and other administrative costs incurred by the corporate offices. Corporate assets consist primarily of cash and cash equivalents. Corporate expenses and assets reconcile reportable segment data to the consolidated totals. An immaterial amount of corporate expenses is allocated to the operating segments.
The following table presents net sales by reportable segment (in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Net sales to external customers | |||||||||||||||||
| Power & Control | |||||||||||||||||
| Commercial and non-aerospace OEM | $ | $ | $ | ||||||||||||||
| Commercial and non-aerospace aftermarket | |||||||||||||||||
| Defense | |||||||||||||||||
| Total Power & Control | |||||||||||||||||
| Airframe | |||||||||||||||||
| Commercial and non-aerospace OEM | |||||||||||||||||
| Commercial and non-aerospace aftermarket | |||||||||||||||||
| Defense | |||||||||||||||||
| Total Airframe | |||||||||||||||||
| Total Non-aviation | |||||||||||||||||
| Net Sales | $ | $ | $ | ||||||||||||||
F-35
The following table reconciles EBITDA As Defined by segment to consolidated income from continuing operations before income taxes (in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| EBITDA As Defined | |||||||||||||||||
| Power & Control | $ | $ | $ | ||||||||||||||
| Airframe | |||||||||||||||||
| Non-aviation | |||||||||||||||||
| Total segment EBITDA As Defined | |||||||||||||||||
| Less: Unallocated corporate EBITDA As Defined | |||||||||||||||||
| Total Company EBITDA As Defined | |||||||||||||||||
| Depreciation and amortization expense | |||||||||||||||||
| Interest expense-net | |||||||||||||||||
| Acquisition transaction and integration-related expenses | |||||||||||||||||
| Non-cash stock and deferred compensation expense | |||||||||||||||||
| Refinancing costs | |||||||||||||||||
| Other, net | ( | ||||||||||||||||
| Income from continuing operations before income taxes | $ | $ | $ | ||||||||||||||
The following table presents capital expenditures and depreciation and amortization by segment (in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Capital expenditures | |||||||||||||||||
| Power & Control | $ | $ | $ | ||||||||||||||
| Airframe | |||||||||||||||||
| Non-aviation | |||||||||||||||||
| Corporate | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Power & Control | $ | $ | $ | ||||||||||||||
| Airframe | |||||||||||||||||
| Non-aviation | |||||||||||||||||
| Corporate | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
The following table presents total assets by segment (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
| Total assets | |||||||||||
| Power & Control | $ | $ | |||||||||
| Airframe | |||||||||||
| Non-aviation | |||||||||||
| Corporate | |||||||||||
| $ | $ | ||||||||||
F-36
Geographic Area Information
Net sales are measured based on the geographic destination of sales. Long-lived assets consist of property, plant and equipment-net and operating lease right-of-use assets. Net sales and long-lived assets of individual countries outside of the United States are not material.
The following table presents net sales by geographic area (in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Net sales | |||||||||||||||||
| United States | $ | $ | $ | ||||||||||||||
| Foreign Countries | |||||||||||||||||
| $ | $ | $ | |||||||||||||||
The following table presents long-lived assets by geographic area (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||
| Long-lived assets | |||||||||||
| United States | $ | $ | |||||||||
| Foreign Countries | |||||||||||
| $ | $ | ||||||||||
16. STOCK-BASED COMPENSATION
The Company’s equity compensation plans are designed to assist the Company in attracting, retaining, motivating and rewarding key employees, directors or consultants, and promoting the creation of long-term value for stockholders by closely aligning the interests of these individuals with those of the Company’s stockholders. The Company’s equity compensation plans provide for the granting of stock options.
Non-cash stock compensation expense recognized by the Company during the fiscal years ended September 30, 2024, 2023 and 2022 was $188 million, $135 million and $153 million, respectively. The related tax benefit for the fiscal years ended September 30, 2024, 2023 and 2022 was $24 million, $15 million and $18 million, respectively. Of the non-cash stock compensation expense recorded in fiscal 2024, 2023 and 2022, $134 million, $112 million and $151 million was recorded as a component of additional paid in capital and $54 million, $23 million and $2 million was recorded as a component of other non-current liabilities. The liability awards relate to stock options granted between fiscal 2017 to fiscal 2020 from the 2014 stock option plan to certain employees in lieu of these individuals receiving salary and bonus compensation paid in cash. The vesting of the stock options are subject to the achievement of the same operating performance goals as other grants. The liability is remeasured each reporting period based on the market value of our common shares on the last day of the reported period. The other non-current liabilities related to stock-based compensation as of September 30, 2024 and 2023 was $102 million and $48 million, respectively.
The weighted-average grant date fair value of options granted during the fiscal years ended September 30, 2024, 2023 and 2022 was $397.31 , $251.73 and $254.21 , respectively. The total fair value of options vested during fiscal years ended September 30, 2024, 2023 and 2022 was $97 million, $80 million and $88 million, respectively.
Compensation expense is recognized based upon probability assessments of awards that are expected to vest in future periods, adjusted for expected forfeitures. Such probability assessments are subject to revision and, therefore, unrecognized compensation expense is subject to future changes in estimate. As of September 30, 2024, there was approximately $245 million of total unrecognized compensation expense related to non-vested awards expected to vest, which is expected to be recognized over a weighted-average period of 1.9 years.
F-37
The fair value of the Company’s employee stock options was estimated at the date of grant or modification using a Black-Scholes option-pricing model with the following weighted average assumptions for all options granted during the fiscal years ended:
| Fiscal Years Ended September 30, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Risk-free interest rate | |||||||||||||||||
| Expected life of options | |||||||||||||||||
| Expected dividend yield of stock | |||||||||||||||||
| Expected volatility of stock | |||||||||||||||||
The risk-free interest rate is based upon the U.S. Treasury bond rates with a term similar to the expected life of the award as of the grant date or modification date. The average expected life of stock-based awards is based on the Company’s actual historical exercise experience. The Company uses actual historical changes in the market value of its stock to calculate the volatility assumption as it is management’s belief that this is the best indicator of future volatility. The Company estimates stock option forfeitures based on historical data. The total number of stock options expected to vest is adjusted by actual and estimated forfeitures. Changes to the actual and estimated forfeitures will result in a cumulative adjustment in the period of change. Notwithstanding the special cash dividends declared and paid from time to time, the Company historically has not declared and paid regular cash dividends and does not anticipate declaring and paying regular cash dividends in future periods; thus, no dividend yield assumption is used.
2019 Stock Option Plan
In August 2019, the Board of Directors of TD Group adopted a new stock option plan, which was subsequently approved by stockholders on October 3, 2019. The 2019 stock option plan permits TD Group to award stock options to our key employees, directors or consultants. The total number shares of TD Group common stock reserved for issuance or delivery under the 2019 stock option plan is 4,000,000 , subject to adjustment in the event of any stock dividend or split, reorganization, recapitalization, merger, share exchange or any other similar corporate transaction or event.
Performance Vested Stock Options – Generally all of the options granted through September 30, 2024 under the 2019 stock option plan have been pursuant to an equity incentive program adopted by the Company in 2008. Under the 2008 equity incentive program, generally all of the options granted will vest based on the Company’s achievement of established operating performance goals. The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the fiscal year ended September 30, 2024:
| Number of Options | Weighted-Average Exercise Price Per Option | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding at September 30, 2023 | $ | ||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Forfeited | ( | ||||||||||||||||||||||
| Expired | |||||||||||||||||||||||
| Outstanding at September 30, 2024 | $ | $ | |||||||||||||||||||||
| Expected to vest | $ | $ | |||||||||||||||||||||
| Exercisable at September 30, 2024 | $ | $ | |||||||||||||||||||||
At September 30, 2024, there were 3,435,370 remaining shares available for award under TD Group’s 2019 stock option plan.
2014 Stock Option Plan
In July 2014, the Board of Directors of TD Group adopted the 2014 stock option plan, which was subsequently approved by stockholders on October 2, 2014. The 2014 stock option plan permits TD Group to award stock options to our key employees, directors or consultants. The total number of shares of TD Group common stock reserved for issuance or delivery under the 2014 stock option plan is 5,000,000 , subject to adjustment in the event of any stock dividend or split, reorganization, recapitalization, merger, share exchange or any other similar corporate transaction or event.
F-38
Performance Vested Stock Options – Generally all of the options granted through September 30, 2024 under the 2014 stock option plan have been pursuant to an equity incentive program adopted by the Company in 2008. Under the 2008 equity incentive program, generally all of the options granted will vest based on the Company’s achievement of established operating performance goals. The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the fiscal year ended September 30, 2024:
| Number of Options | Weighted-Average Exercise Price Per Option | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding at September 30, 2023 | $ | ||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Forfeited | ( | ||||||||||||||||||||||
| Expired | |||||||||||||||||||||||
| Outstanding at September 30, 2024 | $ | $ | |||||||||||||||||||||
| Expected to vest | $ | $ | |||||||||||||||||||||
| Exercisable at September 30, 2024 | $ | $ | |||||||||||||||||||||
The 2014 stock incentive plan expired on July 24, 2024 and no further shares will be granted under the plan thereafter.
2006 Stock Incentive Plan
In conjunction with the consummation of the Company’s initial public offering, a 2006 stock incentive plan was adopted by TD Group. In July 2008 and March 2011, the 2006 stock incentive plan was amended to increase the number of shares available for issuance thereunder. TD Group reserved 8,119,668 shares of its common stock for issuance to key employees, directors or consultants under the plan. Awards under the plan were in the form of options, restricted stock or other stock-based awards. Options granted under the plan expire no later than the tenth anniversary of the applicable date of grant of the options, and have an exercise price of not less than the fair market value of our common stock on the date of grant. Restricted stock granted under the plan vested over three years . No restricted stock units remained outstanding as of September 30, 2018.
Performance Vested Stock Options – All of the options granted under the 2006 stock incentive plan have been pursuant to an equity incentive program adopted by the Company in 2008. Under the 2008 equity incentive program, all of the options granted vest based on the Company’s achievement of established operating performance goals. The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the fiscal year ended September 30, 2024:
| Number of Options | Weighted-Average Exercise Price Per Option | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| Outstanding at September 30, 2023 | $ | ||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Forfeited | |||||||||||||||||||||||
| Expired | |||||||||||||||||||||||
| Outstanding at September 30, 2024 | $ | $ | |||||||||||||||||||||
| Exercisable at September 30, 2024 | $ | $ | |||||||||||||||||||||
The 2006 stock incentive plan expired on March 14, 2016 and no further shares were granted under the plan thereafter.
The total intrinsic value of performance options exercised during the fiscal years ended September 30, 2024, 2023 and 2022 was $794 million, $500 million and $279 million, respectively.
F-39
Dividends and Dividend Equivalent Plans
Until August 5, 2022, pursuant to the 2014 Stock Option Plan Dividend Equivalent Plan and the Third Amended and Restated 2006 Stock Incentive Plan Dividend Equivalent Plan, all of the vested options granted under the existing stock option plans were entitled to certain dividend equivalent payments in the event of the declaration of a special dividend by the Company. On August 5, 2022, the Board of Directors adopted the Fourth Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan, the Amended and Restated 2014 Stock Option Plan Dividend Equivalent Plan and the 2019 Stock Option Plan Dividend Equivalent Plan, pursuant to which, all of the vested options granted under the existing stock option plans, except for grants to the members of the Board of Directors, are entitled to certain dividend equivalent payments in the event of the declaration of a special dividend by the Company. The amendments did not represent a change in the Company’s practice. In August 2022, all members of the Board of Directors at that time executed amendments to their option agreements resulting in the directors no longer receiving dividend equivalent payments in cash, but rather for special dividends declared after June 1, 2022, special dividends result in a reduction of strike price.
In fiscal 2024, the Company’s Board of Directors authorized and declared $110.00 in special dividends on each outstanding share of common stock and cash dividend equivalent payments on eligible vested options outstanding under its stock option plans: $35.00 in November 2023 (also paid in November 2023) and $75.00 in September 2024. The special dividends totaled $6,153 million, of which $1,937 million was paid in the first quarter of fiscal 2024 and the remaining $4,216 million is accrued as of September 30, 2024.
Subsequent Event – $75.00 Special Dividend Payment – The Company paid $4,216 million and $132 million in special dividend and dividend equivalents, respectively, in October 2024.
Dividend equivalents on vested options were $233 million, $38 million and $86 million during the fiscal years ended September 30, 2024, 2023 and 2022, respectively. At September 30, 2024, there was $180 million recorded in accrued and other current liabilities and $47 million recorded in other non-current liabilities on the consolidated balance sheets related to future dividend equivalent payments.
17. LEASES
The Company leases certain manufacturing facilities, offices, land, equipment and vehicles. Such leases, some of which are noncancellable and, in many cases, include renewals, expire at various dates. Such options to renew are included in the lease term when it is reasonably certain that the option will be exercised. The Company’s lease agreements typically do not contain any significant residual value guarantees or restrictive covenants, and payments within certain lease agreements are adjusted periodically for changes in an index or rate.
The Company determines if an arrangement is a lease at inception. Operating lease assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The discount rate implicit within our leases is generally not determinable and therefore we determine the discount rate based on our incremental borrowing rate. The incremental borrowing rate for our leases is determined based on the lease term and the currency in which lease payments are made. The length of a lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company made an accounting policy election to not recognize lease assets or liabilities for leases with a term of twelve months or less. Additionally, when accounting for leases, the Company combines payments for leased assets, related services and other components of a lease.
The components of lease expense for the fiscal years ended September 30, 2024 and 2023 are as follows (in millions):
| Fiscal Years Ended September 30, | |||||||||||||||||
| Classification | 2024 | 2023 | |||||||||||||||
| Operating lease cost | Cost of sales or selling and administrative expenses | $ | $ | ||||||||||||||
| Finance lease cost: | |||||||||||||||||
| Amortization of leased assets | Cost of sales | ||||||||||||||||
| Interest on lease liabilities | Interest expense-net | ||||||||||||||||
| Total lease cost | $ | $ | |||||||||||||||
F-40
Supplemental cash flow information related to leases for the fiscal years ended September 30, 2024 and 2023 is as follows (in millions):
| Fiscal Years Ended September 30, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||
| Operating cash outflows from operating leases | $ | $ | ||||||||||||
| Operating cash outflows from finance leases | ||||||||||||||
| Financing cash outflows from finance leases | ||||||||||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||||||||
| Operating leases | $ | $ | ||||||||||||
| Financing leases | ||||||||||||||
Supplemental balance sheet information related to leases is as follows (in millions):
| Classification | September 30, 2024 | September 30, 2023 | |||||||||||||||
| Operating Leases | |||||||||||||||||
| Operating lease right-of-use assets | $ | $ | |||||||||||||||
| Current operating lease liabilities | |||||||||||||||||
| Long-term operating lease liabilities | |||||||||||||||||
| Total operating lease liabilities | $ | $ | |||||||||||||||
| Finance Leases | |||||||||||||||||
| Finance lease right-of-use assets, net | $ | $ | |||||||||||||||
| Current finance lease liabilities | |||||||||||||||||
| Long-term finance lease liabilities | |||||||||||||||||
| Total finance lease liabilities | $ | $ | |||||||||||||||
As of September 30, 2024, the Company has the following remaining lease term and weighted average discount rates:
| Weighted-average remaining lease term | |||||
| Operating leases | |||||
| Finance leases | |||||
| Weighted-average discount rate | |||||
| Operating leases | |||||
| Finance leases | |||||
| Operating Leases | Finance Leases | ||||||||||
| 2025 | $ | $ | |||||||||
| 2026 | |||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| Thereafter | |||||||||||
| Total future minimum lease payments | |||||||||||
| Less: imputed interest | |||||||||||
| Present value of lease liabilities reported | $ | $ | |||||||||
F-41
18. FAIR VALUE MEASUREMENTS
The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following summarizes the carrying amounts and fair values of financial instruments (in millions):
| September 30, 2024 | September 30, 2023 | ||||||||||||||||||||||||||||
| Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | 1 | $ | $ | $ | $ | ||||||||||||||||||||||||
Interest rate swap agreements (1) | 2 | ||||||||||||||||||||||||||||
Interest rate cap agreements (1) | 2 | ||||||||||||||||||||||||||||
Foreign currency forward exchange contracts (1) | 2 | ||||||||||||||||||||||||||||
Interest rate swap agreements (2) | 2 | ||||||||||||||||||||||||||||
Interest rate cap agreements (2) | 2 | ||||||||||||||||||||||||||||
Interest rate collar agreements (2) | 2 | ||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
Interest rate swap agreements (3) | 2 | ||||||||||||||||||||||||||||
Interest rate cap agreements (3) | 2 | ||||||||||||||||||||||||||||
Foreign currency forward exchange contracts (3) | 2 | ||||||||||||||||||||||||||||
Interest rate swap agreements (4) | 2 | ||||||||||||||||||||||||||||
Interest rate cap agreements (4) | 2 | ||||||||||||||||||||||||||||
Interest rate collar agreements (4) | 2 | ||||||||||||||||||||||||||||
Short-term borrowings - trade receivable securitization facility (5) | 2 | ||||||||||||||||||||||||||||
| Long-term debt, including current portion: | |||||||||||||||||||||||||||||
Term loans (5) | 2 | ||||||||||||||||||||||||||||
2026 Secured Notes (5) | 1 | ||||||||||||||||||||||||||||
7.50% 2027 Notes (5) | 1 | ||||||||||||||||||||||||||||
5.50% 2027 Notes (5) | 1 | ||||||||||||||||||||||||||||
2028 Secured Notes (5) | 1 | ||||||||||||||||||||||||||||
4.625% 2029 Notes (5) | 1 | ||||||||||||||||||||||||||||
2029 Secured Notes (5) | 1 | ||||||||||||||||||||||||||||
4.875% 2029 Notes (5) | 1 | ||||||||||||||||||||||||||||
2030 Secured Notes (5) | 1 | ||||||||||||||||||||||||||||
2031 Secured Notes (5) | 1 | ||||||||||||||||||||||||||||
2032 Secured Notes (5) | 1 | ||||||||||||||||||||||||||||
2033 Secured Notes (5) | 1 | ||||||||||||||||||||||||||||
| Government refundable advances | 2 | ||||||||||||||||||||||||||||
| Finance lease obligations | 2 | ||||||||||||||||||||||||||||
(1)Included in prepaid expenses and other on the consolidated balance sheets.
(2)Included in other assets on the consolidated balance sheets.
(3)Included in accrued and other current liabilities on the consolidated balance sheets.
(4)Included in other non-current liabilities on the consolidated balance sheets.
(5)The carrying amount of the debt instrument is presented net of the debt issuance costs, premium and discount. Refer to Note 10, “Debt,” for gross carrying amounts.
F-42
The Company values its financial instruments using an industry standard market approach, in which prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities. No financial instruments were recognized or disclosed using unobservable inputs (i.e., Level 3).
The Company’s derivatives consist of interest rate swap, cap and collar agreements and foreign currency exchange contracts. The fair values of the interest rate swap, cap and collar agreements were derived by taking the net present value of the expected cash flows using observable market inputs (Level 2) such as SOFR rate curves, futures, volatilities and basis spreads (when applicable). The fair values of the foreign currency exchange contracts were derived by using Level 2 inputs based on observable spot and forward exchange rates in active markets. There has not been any impact to the fair value of derivative liabilities due to the Company's own credit risk. Similarly, there has not been any material impact to the fair value of derivative assets based on the Company's evaluation of counterparties' credit risks.
The estimated fair value of the Company’s term loans was based on information provided by the agent under the Company’s Credit Agreement. The estimated fair values of the Company’s notes were based upon quoted market prices.
19. DERIVATIVES AND HEDGING ACTIVITIES
The Company is exposed to, among other things, the impact of changes in foreign currency exchange rates and interest rates in the normal course of business. The Company’s risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments to offset a portion of these risks. The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks and does not enter into such transactions for trading purposes. The Company generally does not require collateral or other security with counterparties to these financial instruments and is therefore subject to credit risk in the event of nonperformance; however, the Company monitors credit risk and currently does not anticipate nonperformance by other parties. These derivative financial instruments do not subject the Company to undue risk, as gains and losses on these instruments generally offset gains and losses on the underlying assets, liabilities, or anticipated transactions that are being hedged. The Company has agreements with each of its swap, cap and collar counterparties that contain a provision whereby if the Company defaults on the Credit Agreement, the Company could also be declared in default on its swaps, cap and collars resulting in an acceleration of settlement under the swaps, cap and collars.
All derivative financial instruments are recorded at fair value in the consolidated balance sheets. For a derivative that has not been designated as an accounting hedge, the change in the fair value is recognized immediately through earnings. For a derivative that has been designated as an accounting hedge of an existing asset or liability (a fair value hedge), the change in the fair value of both the derivative and underlying asset or liability is recognized immediately through earnings. For a derivative designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the consolidated balance sheets in accumulated other comprehensive loss to the extent the derivative is effective in mitigating the exposure related to the anticipated transaction. The change in the fair value related to the ineffective portion of the hedge, if any, is immediately recognized in earnings. The amount recorded within accumulated other comprehensive loss is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings.
Interest Rate Swap, Cap and Collar Agreements – Interest rate swap, cap and collar agreements are used to manage interest rate risk associated with floating rate borrowings under our Credit Agreement. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the term of the agreements without an exchange of the underlying principal amount. The agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating rate debt to a fixed rate basis from the effective date through the maturity date of the respective interest rate swap, cap and collar agreements, thereby reducing the impact of interest rate movements on future interest expense.
During the second quarter of fiscal 2023, we entered into LIBOR to Term SOFR basis interest rate swap and cap transactions to effectively convert our existing swaps and cap from LIBOR-based to Term SOFR-based. The basis swaps and cap offset the LIBOR exposure of the existing swaps and cap and effectively fix the Term SOFR rate for the notional amount. We also entered into forward starting interest rate collar agreements during the second quarter of fiscal 2023. The interest rate collar agreements establish a range where we will pay the counterparties if the three-month Term SOFR rate falls below the established floor rate of 2.00 %, and the counterparties will pay us if the three-month Term SOFR rate exceeds the ceiling rate of 3.50 %. The collar will settle quarterly from the effective date through the maturity date. No payments or receipts will be exchanged on the interest rate collar contracts unless interest rates rise above or fall below the contracted ceiling or floor rates.
F-43
During the third quarter of fiscal 2024, we entered into forward starting interest rate collar agreements. The interest rate collar agreements establish a range where we will pay the counterparties if the three-month Term SOFR rate falls below the established floor rate of 2.50 %, and the counterparties will pay us if the three-month Term SOFR rate exceeds the ceiling rate of 4.50 %. The collar will settle quarterly from the effective date through the maturity date. No payments or receipts will be exchanged on the interest rate collar contracts unless interest rates rise above or fall below the contracted ceiling or floor rates.
The tables below summarize the key terms of the swaps, cap and collars as of September 30, 2024 (aggregated by effective date).
Interest rate swap agreements:
| Aggregate Notional Amount (in millions) | Effective Date | Maturity Date | Conversion of Related Variable Rate Debt subject to Term SOFR to Fixed Rate of: | |||||||||||||||||
| $ | 3/31/2023 | 3/31/2025 | ||||||||||||||||||
| $ | 3/31/2023 | 3/31/2025 | ||||||||||||||||||
| $ | 3/31/2023 | 9/30/2025 | ||||||||||||||||||
Interest rate cap agreement:
| Aggregate Notional Amount (in millions) | Effective Date | Maturity Date | Offsets Variable Rate Debt Attributable to Fluctuations Above: | |||||||||||||||||
| $ | 3/31/2023 | 9/30/2025 | Three-month Term SOFR rate of | |||||||||||||||||
Interest rate collar agreements:
| Aggregate Notional Amount (in millions) | Effective Date | Maturity Date | Offsets Variable Rate Debt Attributable to Fluctuations Below and Above: | |||||||||||||||||
| $ | 3/31/2025 | 9/30/2026 | Three-month Term SOFR rate of | |||||||||||||||||
| $ | 9/30/2025 | 9/30/2026 | Three-month Term SOFR rate of | |||||||||||||||||
| $ | 9/30/2025 | 9/30/2027 | Three-month Term SOFR rate of | |||||||||||||||||
| $ | 9/30/2026 | 9/30/2027 | Three-month Term SOFR rate of | |||||||||||||||||
These derivative instruments qualify as effective cash flow hedges under U.S. GAAP. For the LIBOR to Term SOFR basis interest rate swap and cap agreements referenced above, we applied the practical expedients permissible under ASC 848 to continue hedge accounting for our existing swaps and cap as effective cash flow hedges. For our cash flow hedges, the effective portion of the gain or loss from the financial instruments is initially reported as a component of accumulated other comprehensive loss in stockholders’ deficit and subsequently reclassified into earnings in the same line as the hedged item in the same period or periods during which the hedged item affects earnings. As the interest rate swap, cap and collar agreements are used to manage interest rate risk, any gains or losses from the derivative instruments that are reclassified into earnings are recognized in interest expense-net in the consolidated statements of income. Cash flows related to the derivative contracts are included in cash flows from operating activities on the consolidated statements of cash flows.
Certain derivative asset and liability balances are offset where master netting agreements provide for the legal right of setoff. For classification purposes, we record the net fair value of each type of derivative position that is expected to settle in less than one year with each counterparty as a net current asset or liability and each type of long-term position as a net non-current asset or liability. The amounts shown in the table below represent the gross amounts of recognized assets and liabilities, the amounts offset in the consolidated balance sheets and the net amounts of assets and liabilities presented therein (in millions):
| September 30, 2024 | September 30, 2023 | |||||||||||||||||||||||||
| Asset | Liability | Asset | Liability | |||||||||||||||||||||||
| Interest rate cap agreement | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest rate collar agreements | ||||||||||||||||||||||||||
| Interest rate swap agreements | ||||||||||||||||||||||||||
Net derivatives as classified in the consolidated balance sheets (1) | $ | $ | $ | $ | ||||||||||||||||||||||
(1)Refer to Note 18, “Fair Value Measurements,” for the consolidated balance sheets classification of the Company’s interest rate swap, cap and collar agreements. The decrease in the interest rate cap, collar and swap assets is primarily attributable to a downward trend in Term SOFR during fiscal 2024.
F-44
Based on the fair value amounts determined as of September 30, 2024, the estimated net amount of existing (gains) losses and caplet amortization expected to be reclassified into interest expense-net within the next twelve months is approximately $(25 ) million.
Foreign Currency Forward Exchange Contracts – The Company transacts business in various foreign currencies, which subjects the Company’s cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates, and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. At September 30, 2024, the Company has outstanding foreign currency forward exchange contracts to sell U.S. dollars with notional amounts of $120 million. The maximum duration of the Company’s foreign currency cash flow hedge contracts at September 30, 2024 is twelve months. These notional values consist of contracts for the Canadian dollar and the euro and are stated in U.S. dollar equivalents at spot exchange rates at the respective trade dates. Amounts related to foreign currency forward exchange contracts included in accumulated other comprehensive loss in stockholders' deficit are reclassified into net sales when the hedged transaction settles.
20. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the total changes by component in accumulated other comprehensive loss (“AOCL”), net of taxes, for the fiscal years ended September 30, 2024 and 2023 (in millions):
Unrealized gains (losses) on derivatives (1) | Pension and post-retirement benefit plans adjustment (2) | Foreign currency translation adjustment (3) | Total | ||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Net current-period other comprehensive income (4) | |||||||||||||||||||||||
| Balance at September 30, 2023 | ( | ( | |||||||||||||||||||||
Net current-period other comprehensive (loss) income (4) | ( | ( | |||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | $ | ( | |||||||||||||||||
(1)Represents unrealized (losses) gains on derivatives designated and qualifying as cash flow hedges, net of taxes, of $(37 ) million, $6 million and $112 million for the fiscal years ended September 30, 2024, 2023 and 2022, respectively.
(2)There were no
(3)Represents gains (losses) resulting from foreign currency translation of financial statements, including gains (losses) from certain intercompany transactions, into U.S. dollars at the rates of exchange in effect at the balance sheet dates. Refer to Note 1, “Summary of Significant Accounting Policies,” for additional information.
(4)Presented net of reclassifications out of AOCL into earnings, specifically net sales and interest expense-net, for realized (losses) gains on derivatives designated and qualifying as cash flow hedges of $(3 ) million (net of taxes of $(1 ) million) and $106 million (net of taxes of $33 million), respectively, for the fiscal year ended September 30, 2024 and $(3 ) million (net of taxes of $(1 ) million) and $71 million (net of taxes of $22 million) for the fiscal year ended September 30, 2023, respectively.
F-45
TRANSDIGM GROUP INCORPORATED
VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2024, 2023, AND 2022
(Amounts in millions)
| Column A | Column B | Column C | Column D | Column E | ||||||||||||||||||||||||||||
| Balance at Beginning of Period | Additions | Divestitures & Deductions from Reserve (1) | Balance at End of Period | |||||||||||||||||||||||||||||
| Description | Charged to Costs and Expenses | Acquisitions & Purchase Price Adjustments | ||||||||||||||||||||||||||||||
| Year Ended September 30, 2024 | ||||||||||||||||||||||||||||||||
| Allowance for uncollectible accounts | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Inventory valuation reserves | ( | |||||||||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | ||||||||||||||||||||||||||||||||
| Year Ended September 30, 2023 | ||||||||||||||||||||||||||||||||
| Allowance for uncollectible accounts | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Inventory valuation reserves | ( | |||||||||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | ||||||||||||||||||||||||||||||||
| Year Ended September 30, 2022 | ||||||||||||||||||||||||||||||||
| Allowance for uncollectible accounts | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||
| Inventory valuation reserves | ( | |||||||||||||||||||||||||||||||
| Valuation allowance for deferred tax assets | ||||||||||||||||||||||||||||||||
(1)The amounts in this column represent the impact from divestitures, charge-offs net of recoveries and the impact of foreign currency translation adjustments.
F-46
EXHIBIT INDEX
TO FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 2024
| Exhibit No. | Description | |||||||
| 101.INS | Inline XBRL Instance Document: The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | |||||||
| 104 | Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101 | |||||||
| * | Indicates management contract or compensatory plan contract or arrangement. | |||||||
| ** | Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish on a supplemental basis a copy of any omitted schedule or exhibit upon request by the Securities and Exchange Commission. | |||||||
Exhibit 3.184
Iceman Holdco, Inc.
Amended and Restated Certificate of Incorporation
Amended and Restated Certificate of Incorporation
ARTICLE ONE
The name of the Corporation is “Iceman Holdco, Inc.” (hereinafter called the “Corporation”)
ARTICLE TWO
The address of the Corporation’s registered office in the state of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The registered agent at such address is The Corporation Trust Company.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful activity for which corporations may be organized under the General Corporation Law of Delaware.
ARTICLE FOUR
The total number of shares which the Corporation shall have the authority to issue is one thousand (1,000) shares, all of which shall be shares of common stock, with a par value of $0.01 per share.
1
Exhibit 3.192
Second Amended and Restated Limited Liability Company Agreement
OF
King Nutronics, LLC,
A Delaware Limited Liability Company
The undersigned, being the sole member of King Nutronics, LLC, a Delaware limited liability company (the “Company”), does hereby execute this Second Amended and Restated Limited Liability Company Agreement of the Company (this “Agreement”), effective as of this 31 day of July 2024.
RECITALS
WHEREAS, the Company was originally formed as a limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act (as amended from time to time, the “Law”);
WHEREAS, the Member desires to replace all previous operating agreements, limited liability company agreements, and other such agreements governing the conduct of the Company with the terms and conditions set forth herein and enter into this Agreement.
ARTICLE I
MEMBER
Raptor Labs Intermediate, LLC, a Delaware limited liability company, is the sole member of the Company (the “Member'').
ARTICLE II
OFFICE
The principal office of the Company shall be located at 6421 Independence Avenue, Woodland Hills, CA 91367 (the “Principal Office”). The Company may have such other offices as the Member may designate or as the business of the Company may require.
ARTICLE Ill
PURPOSE
The sole purpose for which the Company is organized is to conduct any lawful business purpose as defined in the Law. The Company shall have all of the powers granted to a limited liability company under the laws of the Delaware.
ARTICLE IV
DURATION OF THE COMPANY
The Company shall continue in perpetuity unless terminated sooner by operation of law or by decision of the Member.
ARTICLE V
CAPITAL CONTRIBUTIONS
The Member may in the future contribute any additional capital deemed necessary by the Member for the operation of the Company.
ARTICLE VI
OWNERSHIP OF MEMBERSHIP INTERESTS
The Member shall own all of the membership interests in the Company and the Member shall have a 100% distributive share of the Company's profits, losses and cash flow.
ARTICLE VII
MANAGEMENT
The Member will manage the affairs of the Company, but shall be entitled to appoint or authorize representatives, including, but not limited to, such officers as the Member may deem necessary, to Law on behalf of the Company and to delegate the authority otherwise reserved to the Member to such representatives. The signature of the Member of the Company shall be sufficient to bind the Company with respect to any matter on which the Member shall be required or entitled to act. The Member has the power, on behalf of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company. A copy of this Agreement may be shown to third parties (and all third parties may rely hereupon) in order to confirm the identity and authorization of the Member.
2
ARTICLE VIII
PLEDGE OF MEMBERSHIP INTEREST
Notwithstanding any other provision in this Agreement, the Member shall be entitled to pledge its membership interest, including all interests, economic rights, voting rights, control rights and status rights as a member, to, and otherwise grant a lien and security interest in its membership interest and all of its right, title and interest under this Agreement in favor of, any lender to the Company or an affiliate of the Company (or an agent on behalf of such lender) without any further consents, approvals or actions required by such lender (or agent), the Member, the Company or any other person under this Agreement or otherwise. So long as any such pledge of or security interest in the Member’s membership interest is in effect, no consent of the Company or the Member shall be required to permit a pledgee thereof to be substituted for the Member under this Agreement upon the exercise of such pledgee’s rights with respect to such membership interest. Notwithstanding anything contained herein to the contrary, and without complying with any other procedures set forth in this Agreement, upon the exercise of remedies in connection with a pledge or hypothecation, (a) the lender (or agent) or transferee of such lender (or agent), as the case may be, shall become a member under this Agreement and shall succeed to all of the rights and powers, including the right to participate in the management of the business and affairs of the Company, and shall be bound by all of the obligations, of a member under this Agreement without taking any further action on the part of such lender (or agent) or transferee, as the case may be, and (b) following such exercise of remedies, the pledging Member shall cease to be a member and shall have no further rights or powers under this Agreement. The execution and delivery of this Agreement by the Member shall constitute any necessary approval of such Member under the Law to the foregoing provisions of this Article 8. So long as any pledge of the Member’s membership interest is in effect, this provision shall inure to the benefit of such pledgee and its successors, assigns and designated agents, as an intended third party beneficiary, and no amendment, modification or waiver of, or consent with respect to this provision shall in any event be effective without the prior written consent of such pledgee. All of the foregoing shall be subject to the limitations and other provisions applicable to the exercise of remedies contained in each of the Collateral Agreements. For purposes of the foregoing, “Collateral Agreements” means (1) the Guarantee and Collateral Agreement, dated as of June 23, 2006, as amended and restated as of December 6, 2010, as further amended and restated as of February 14, 2011, and as further amended and restated as of February 28, 2013 (as further amended, restated, amended and restated, supplemented, or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and Goldman Sachs Bank USA, as collateral agent, (2) the Pledge and Security Agreement, dated as of February 13, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, (3) the Pledge and Security Agreement, dated as of February 24, 2023 (as amended, restated,
3
amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, and (4) other security agreements, guarantee agreements and pledge agreements that the Company may enter into from time to time.
ARTICLE IX
BOOKS AND RECORDS
The Company books shall be maintained at the Principal Office. The fiscal year of the Company shall end on such date in each year as shall be designated from time to time by the Member. The Member shall cause all known business transactions pertaining to the purpose of the Company to be entered properly and completely into said books. The Member will prepare and file on behalf of the Company all tax returns in a timely manner.
ARTICLE X
AMENDMENTS
This Agreement may be amended by a written instrument adopted by the Member and executed by the Member at any time, for any purpose, at the sole discretion of the Member.
ARTICLE XI
INDEMNIFICATION
To the fullest extent permitted by law, the Company shall defend, indemnify, and save harmless the Member and any officers of the Company (each an “Indemnified Person”) for all loss, liability, damage, cost, or expense (including reasonable attorneys’ fees) incurred by reason of any demands, claims, suits, actions, or proceedings arising out of (a) the Indemnified Person’s relationship to the Company or (b) such Indemnified Person’s capacity as an officer, except for such loss, liability, damage, cost, or expense as arises out of the theft, fraud, willful misconduct, or gross negligence by such Indemnified Person. To the fullest extent permitted by law, expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding, and not less often than monthly upon receipt of an undertaking by and on behalf of the Indemnified Person to repay such amount if it shall be ultimately determined that he or she is not entitled to be indemnified by the Company. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article XI shall continue for a person who has ceased to be an officer and inures to the benefit of the heirs, executors and administrators of such a person.
4
The Company may obtain, at the expense of the Company, directors and officers insurance coverage in an amount and on such terms as determined by the Member.
ARTICLE XII
BANKING
All funds of the Company shall be deposited in one or more Company checking accounts as shall be designated by the Member, and the Member is authorized to sign any such checks or withdrawal forms
ARTICLE XIII
APPLICABILITY OF UCC ARTICLE 8
The Company hereby irrevocably elects that all membership interests in the Company shall be securities governed by Article 8 of the Uniform Commercial Code. Each certificate evidencing membership interests in the Company shall bear the following legend:
“This certificate evidences an interest in King Nutronics, LLC and shall be a security for purposes of Article 8 of the Uniform Commercial Code.”
No change to this provision shall be effective until all outstanding certificates have been surrendered for cancellation and any new certificates thereafter issued shall not bear the foregoing legend.
ARTICLE XIV
MISCELLANEOUS
This Agreement is made by the Member for the exclusive benefit of the Company, the Member, and its successors and assignees. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other person or entity. Except and only to the extent provided by applicable statute or otherwise in this Agreement, no such creditor or third party shall have any rights under this Agreement or any agreement between the Company and the Member with respect to any capital contribution or otherwise.
5
IN WITNESS WHEREOF, the Member has hereunto set its hand effective the day and year first written above.
Raptor Labs Intermediate, LLC, its sole member
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Its: | Secretary | ||||||||||
Exhibit 3.221
First Amended and Restated Limited Liability Company Agreement
OF
Medtherm Labs, LLC,
A Delaware Limited Liability Company
The undersigned, being the sole member of Medtherm Labs, LLC, a Delaware limited liability company (the “Company”), does hereby execute this First Amended and Restated Limited Liability Company Agreement of the Company (this “Agreement”), effective as of this 31 day of July, 2024.
RECITALS
WHEREAS, the Company was originally formed as a limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act (as amended from time to time, the “Law”);
WHEREAS, the Member desires to replace all previous operating agreements, limited liability company agreements, and other such agreements governing the conduct of the Company with the terms and conditions set forth herein and enter into this Agreement.
ARTICLE I
MEMBER
Raptor Labs Intermediate, LLC, a Delaware limited liability company, is the sole member of the Company (the “Member'').
ARTICLE II
OFFICE
The principal office of the Company shall be located at 4900 Bradford Drive, Suite 101, Huntsville, AL 35893 (the “Principal Office”). The Company may have such other offices as the Member may designate or as the business of the Company may require.
ARTICLE Ill
PURPOSE
The sole purpose for which the Company is organized is to conduct any lawful business purpose as defined in the Law. The Company shall have all of the powers granted to a limited liability company under the laws of the Delaware.
ARTICLE IV
DURATION OF THE COMPANY
The Company shall continue in perpetuity unless terminated sooner by operation of law or by decision of the Member.
ARTICLE V
CAPITAL CONTRIBUTIONS
The Member may in the future contribute any additional capital deemed necessary by the Member for the operation of the Company.
ARTICLE VI
OWNERSHIP OF MEMBERSHIP INTERESTS
The Member shall own all of the membership interests in the Company and the Member shall have a 100% distributive share of the Company's profits, losses and cash flow.
ARTICLE VII
MANAGEMENT
The Member will manage the affairs of the Company, but shall be entitled to appoint or authorize representatives, including, but not limited to, such officers as the Member may deem necessary, to Law on behalf of the Company and to delegate the authority otherwise reserved to the Member to such representatives. The signature of the Member of the Company shall be sufficient to bind the Company with respect to any matter on which the Member shall be required or entitled to act. The Member has the power, on behalf of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company. A copy of this Agreement may be shown to third parties (and all third parties may rely hereupon) in order to confirm the identity and authorization of the Member.
2
ARTICLE VIII
PLEDGE OF MEMBERSHIP INTEREST
Notwithstanding any other provision in this Agreement, the Member shall be entitled to pledge its membership interest, including all interests, economic rights, voting rights, control rights and status rights as a member, to, and otherwise grant a lien and security interest in its membership interest and all of its right, title and interest under this Agreement in favor of, any lender to the Company or an affiliate of the Company (or an agent on behalf of such lender) without any further consents, approvals or actions required by such lender (or agent), the Member, the Company or any other person under this Agreement or otherwise. So long as any such pledge of or security interest in the Member’s membership interest is in effect, no consent of the Company or the Member shall be required to permit a pledgee thereof to be substituted for the Member under this Agreement upon the exercise of such pledgee’s rights with respect to such membership interest. Notwithstanding anything contained herein to the contrary, and without complying with any other procedures set forth in this Agreement, upon the exercise of remedies in connection with a pledge or hypothecation, (a) the lender (or agent) or transferee of such lender (or agent), as the case may be, shall become a member under this Agreement and shall succeed to all of the rights and powers, including the right to participate in the management of the business and affairs of the Company, and shall be bound by all of the obligations, of a member under this Agreement without taking any further action on the part of such lender (or agent) or transferee, as the case may be, and (b) following such exercise of remedies, the pledging Member shall cease to be a member and shall have no further rights or powers under this Agreement. The execution and delivery of this Agreement by the Member shall constitute any necessary approval of such Member under the Law to the foregoing provisions of this Article 8. So long as any pledge of the Member’s membership interest is in effect, this provision shall inure to the benefit of such pledgee and its successors, assigns and designated agents, as an intended third party beneficiary, and no amendment, modification or waiver of, or consent with respect to this provision shall in any event be effective without the prior written consent of such pledgee. All of the foregoing shall be subject to the limitations and other provisions applicable to the exercise of remedies contained in each of the Collateral Agreements. For purposes of the foregoing, “Collateral Agreements” means (1) the Guarantee and Collateral Agreement, dated as of June 23, 2006, as amended and restated as of December 6, 2010, as further amended and restated as of February 14, 2011, and as further amended and restated as of February 28, 2013 (as further amended, restated, amended and restated, supplemented, or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and Goldman Sachs Bank USA, as collateral agent, (2) the Pledge and Security Agreement, dated as of February 13, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, (3) the Pledge and Security Agreement, dated as of February 24, 2023 (as amended, restated,
3
amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, and (4) other security agreements, guarantee agreements and pledge agreements that the Company may enter into from time to time.
ARTICLE IX
BOOKS AND RECORDS
The Company books shall be maintained at the Principal Office. The fiscal year of the Company shall end on such date in each year as shall be designated from time to time by the Member. The Member shall cause all known business transactions pertaining to the purpose of the Company to be entered properly and completely into said books. The Member will prepare and file on behalf of the Company all tax returns in a timely manner.
ARTICLE X
AMENDMENTS
This Agreement may be amended by a written instrument adopted by the Member and executed by the Member at any time, for any purpose, at the sole discretion of the Member.
ARTICLE XI
INDEMNIFICATION
To the fullest extent permitted under the Law, the Member (irrespective of the capacity in which it acts) shall be entitled to indemnification and advancement of expenses from the Company for and against any loss, damage, claim or expense (including attorneys’ fees) whatsoever incurred by it relating to or arising out of any act or omission or alleged acts or omissions (whether or not constituting negligence or gross negligence) performed or omitted by the Member on behalf of the Company; provided, however, that any indemnity under this Article XI shall be provided out of and to the extent of Company assets only, and neither the Member nor any other person shall have any personal liability on account thereof.
4
ARTICLE XII
BANKING
All funds of the Company shall be deposited in one or more Company checking accounts as shall be designated by the Member, and the Member is authorized to sign any such checks or withdrawal forms
ARTICLE XIII
APPLICABILITY OF UCC ARTICLE 8
The Company hereby irrevocably elects that all membership interests in the Company shall be securities governed by Article 8 of the Uniform Commercial Code. Each certificate evidencing membership interests in the Company shall bear the following legend:
“This certificate evidences an interest in Medtherm Labs, LLC and shall be a security for purposes of Article 8 of the Uniform Commercial Code.”
No change to this provision shall be effective until all outstanding certificates have been surrendered for cancellation and any new certificates thereafter issued shall not bear the foregoing legend.
ARTICLE XIV
MISCELLANEOUS
This Agreement is made by the Member for the exclusive benefit of the Company, the Member, and its successors and assignees. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other person or entity. Except and only to the extent provided by applicable statute or otherwise in this Agreement, no such creditor or third party shall have any rights under this Agreement or any agreement between the Company and the Member with respect to any capital contribution or otherwise.
5
IN WITNESS WHEREOF, the Member has hereunto set its hand effective the day and year first written above.
Raptor Labs Intermediate, LLC, its sole member
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Its: | Secretary | ||||||||||
Exhibit 3.251
Second Amended and Restated Limited Liability Company Agreement
OF
Raptor Labs HoldCo, LLC,
A Delaware Limited Liability Company
The undersigned, being the sole member of Raptor Labs HoldCo, LLC, a Delaware limited liability company (the “Company”), does hereby execute this Second Amended and Restated Limited Liability Company Agreement of the Company (this “Agreement”), effective as of this 31 day of July 2024.
RECITALS
WHEREAS, the Company was originally formed as a limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act (as amended from time to time, the “Law”);
WHEREAS, the Member desires to replace all previous operating agreements, limited liability company agreements, and other such agreements governing the conduct of the Company with the terms and conditions set forth herein and enter into this Agreement.
ARTICLE I
MEMBER
TransDigm Inc., a Delaware corporation, is the sole member of the Company (the “Member'').
ARTICLE II
OFFICE
The principal office of the Company shall be located at 1350 Euclid Avenue, Suite 1600, Cleveland, Ohio 44115 (the “Principal Office”). The Company may have such other offices as the Member may designate or as the business of the Company may require.
ARTICLE Ill
PURPOSE
The sole purpose for which the Company is organized is to conduct any lawful business purpose as defined in the Law. The Company shall have all of the powers granted to a limited liability company under the laws of the Delaware.
ARTICLE IV
DURATION OF THE COMPANY
The Company shall continue in perpetuity unless terminated sooner by operation of law or by decision of the Member.
ARTICLE V
CAPITAL CONTRIBUTIONS
The Member may in the future contribute any additional capital deemed necessary by the Member for the operation of the Company.
ARTICLE VI
OWNERSHIP OF MEMBERSHIP INTERESTS
The Member shall own all of the membership interests in the Company and the Member shall have a 100% distributive share of the Company's profits, losses and cash flow.
ARTICLE VII
MANAGEMENT
The Member will manage the affairs of the Company, but shall be entitled to appoint or authorize representatives, including, but not limited to, such officers as the Member may deem necessary, to Law on behalf of the Company and to delegate the authority otherwise reserved to the Member to such representatives. The signature of the Member of the Company shall be sufficient to bind the Company with respect to any matter on which the Member shall be required or entitled to act. The Member has the power, on behalf of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company. A copy of this Agreement may be shown to third parties (and all third parties may rely hereupon) in order to confirm the identity and authorization of the Member.
2
ARTICLE VIII
PLEDGE OF MEMBERSHIP INTEREST
Notwithstanding any other provision in this Agreement, the Member shall be entitled to pledge its membership interest, including all interests, economic rights, voting rights, control rights and status rights as a member, to, and otherwise grant a lien and security interest in its membership interest and all of its right, title and interest under this Agreement in favor of, any lender to the Company or an affiliate of the Company (or an agent on behalf of such lender) without any further consents, approvals or actions required by such lender (or agent), the Member, the Company or any other person under this Agreement or otherwise. So long as any such pledge of or security interest in the Member’s membership interest is in effect, no consent of the Company or the Member shall be required to permit a pledgee thereof to be substituted for the Member under this Agreement upon the exercise of such pledgee’s rights with respect to such membership interest. Notwithstanding anything contained herein to the contrary, and without complying with any other procedures set forth in this Agreement, upon the exercise of remedies in connection with a pledge or hypothecation, (a) the lender (or agent) or transferee of such lender (or agent), as the case may be, shall become a member under this Agreement and shall succeed to all of the rights and powers, including the right to participate in the management of the business and affairs of the Company, and shall be bound by all of the obligations, of a member under this Agreement without taking any further action on the part of such lender (or agent) or transferee, as the case may be, and (b) following such exercise of remedies, the pledging Member shall cease to be a member and shall have no further rights or powers under this Agreement. The execution and delivery of this Agreement by the Member shall constitute any necessary approval of such Member under the Law to the foregoing provisions of this Article 8. So long as any pledge of the Member’s membership interest is in effect, this provision shall inure to the benefit of such pledgee and its successors, assigns and designated agents, as an intended third party beneficiary, and no amendment, modification or waiver of, or consent with respect to this provision shall in any event be effective without the prior written consent of such pledgee. All of the foregoing shall be subject to the limitations and other provisions applicable to the exercise of remedies contained in each of the Collateral Agreements. For purposes of the foregoing, “Collateral Agreements” means (1) the Guarantee and Collateral Agreement, dated as of June 23, 2006, as amended and restated as of December 6, 2010, as further amended and restated as of February 14, 2011, and as further amended and restated as of February 28, 2013 (as further amended, restated, amended and restated, supplemented, or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and Goldman Sachs Bank USA, as collateral agent, (2) the Pledge and Security Agreement, dated as of February 13, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, (3) the Pledge and Security Agreement, dated as of February 24, 2023 (as amended, restated,
3
amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, and (4) other security agreements, guarantee agreements and pledge agreements that the Company may enter into from time to time.
ARTICLE IX
BOOKS AND RECORDS
The Company books shall be maintained at the Principal Office. The fiscal year of the Company shall end on such date in each year as shall be designated from time to time by the Member. The Member shall cause all known business transactions pertaining to the purpose of the Company to be entered properly and completely into said books. The Member will prepare and file on behalf of the Company all tax returns in a timely manner.
ARTICLE X
AMENDMENTS
This Agreement may be amended by a written instrument adopted by the Member and executed by the Member at any time, for any purpose, at the sole discretion of the Member.
ARTICLE XI
INDEMNIFICATION
The Company shall at all times maintain officers’ insurance coverage, in form and substance satisfactory to the Member.
The Company shall indemnify and hold harmless the officers and the Member and their respective affiliates and such affiliates’ respective directors, officers, members, stockholders, partners, employees and agents, as the case may be (each an “Indemnified Party”), from and against any damages suffered or sustained by him or them by reason of any acts, omissions or alleged acts or omissions arising out of his, her or its or any other person’s activities on behalf of the Company or its Subsidiaries or in furtherance of the interests of the Company or its Subsidiaries; provided, that:
(a)the acts, omissions or alleged acts or omissions of an Indemnified Party upon which such actual or threatened action, proceeding or claim is based were not performed or omitted fraudulently or in bad faith or as a result of gross negligence, willful misconduct, knowing violation of law or material
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breach of this Agreement by such Indemnified Party or any other agreement between the Company and such Indemnified Party; and
(b)such Indemnified Party reasonably believed that any of his, her or its acts, omissions, or alleged acts or omissions upon which such actual or threatened action, proceeding or claim is based were in the best interests of the Company.
Such indemnification shall be made only to the extent of the assets of the Company, and no Member shall have any personal liability on account thereof.
Expenses (including, without limitation, attorneys’ fees and expenses) incurred by any Indemnified Party in defending a civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Company under this Article XI or under any other contract or agreement between such person and the Company. Such expenses incurred by such person may be so paid upon the receipt of the aforesaid undertaking.
The indemnification and advancement of expenses provided by this Article XI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement or otherwise, both as to action in such person’s capacity and as to action in another capacity, and shall continue as to a person who has ceased to be an officer or Member and shall inure to the benefit of the successors, assigns, heirs, executors and administrators of such person.
The Company hereby acknowledges that an Indemnified Party may have certain rights to indemnification, advancement of expenses and/or insurance provided by other sources. The Company hereby agrees (i) that it (or, to the extent applicable, its insurance provider) is the indemnitor of first resort (i.e., its obligations to an Indemnified Party are primary and any obligation of such other sources to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Indemnified Party are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by an Indemnified Party and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement without regard to any rights an Indemnified Party may have against such other sources, and (iii) irrevocably waives, relinquishes and releases such other sources from any and all claims against such other sources for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by such other sources on behalf of an Indemnified Party with respect to any claim for which such Indemnified Party has sought indemnification from the Company shall affect the
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foregoing, and such other sources shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Indemnified Party against the Company. Any such other sources are express third party beneficiaries of this Article XI and, at the request of any Indemnified Party, the Company shall acknowledge its obligations under this Article XI to any such other sources.
Neither the amendment nor repeal of this Article XI nor the adoption of any other provision to this Agreement, nor, to the fullest extent permitted by Delaware law, any modification of law, shall eliminate or reduce the effect of this Article XI in respect of any acts or omissions occurring prior to such amendment, repeal, adoption or modification.
ARTICLE XII
BANKING
All funds of the Company shall be deposited in one or more Company checking accounts as shall be designated by the Member, and the Member is authorized to sign any such checks or withdrawal forms
ARTICLE XIII
APPLICABILITY OF UCC ARTICLE 8
The Company hereby irrevocably elects that all membership interests in the Company shall be securities governed by Article 8 of the Uniform Commercial Code. Each certificate evidencing membership interests in the Company shall bear the following legend:
“This certificate evidences an interest in Raptor Labs HoldCo, LLC and shall be a security for purposes of Article 8 of the Uniform Commercial Code.”
No change to this provision shall be effective until all outstanding certificates have been surrendered for cancellation and any new certificates thereafter issued shall not bear the foregoing legend.
ARTICLE XIV
MISCELLANEOUS
This Agreement is made by the Member for the exclusive benefit of the Company, the Member, and its successors and assignees. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other person or entity. Except and only to the extent provided by applicable statute or otherwise in this
6
Agreement, no such creditor or third party shall have any rights under this Agreement or any agreement between the Company and the Member with respect to any capital contribution or otherwise.
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IN WITNESS WHEREOF, the Member has hereunto set its hand effective the day and year first written above.
TransDigm Inc., its sole member
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Its: | General Counsel, Chief Compliance Officer, and Secretary | ||||||||||
Exhibit 3.252
First Amended and Restated Limited Liability Company Agreement
OF
Raptor Labs Intermediate, LLC,
A Delaware Limited Liability Company
The undersigned, being the sole member of Raptor Labs Intermediate, LLC, a Delaware limited liability company (the “Company”), does hereby execute this First Amended and Restated Limited Liability Company Agreement of the Company (this “Agreement”), effective as of this 31 day of July 2024.
RECITALS
WHEREAS, the Company was originally formed as a limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act (as amended from time to time, the “Law”);
WHEREAS, the Member desires to replace all previous operating agreements, limited liability company agreements, and other such agreements governing the conduct of the Company with the terms and conditions set forth herein and enter into this Agreement.
ARTICLE I
MEMBER
Raptor Labs HoldCo, LLC, a Delaware limited liability company, is the sole member of the Company (the “Member'').
ARTICLE II
OFFICE
The principal office of the Company shall be located at 1350 Euclid Avenue, Suite 1600, Cleveland, Ohio 44115 (the “Principal Office”). The Company may have such other offices as the Member may designate or as the business of the Company may require.
ARTICLE Ill
PURPOSE
The sole purpose for which the Company is organized is to conduct any lawful business purpose as defined in the Law. The Company shall have all of the powers granted to a limited liability company under the laws of the Delaware.
ARTICLE IV
DURATION OF THE COMPANY
The Company shall continue in perpetuity unless terminated sooner by operation of law or by decision of the Member.
ARTICLE V
CAPITAL CONTRIBUTIONS
The Member may in the future contribute any additional capital deemed necessary by the Member for the operation of the Company.
ARTICLE VI
OWNERSHIP OF MEMBERSHIP INTERESTS
The Member shall own all of the membership interests in the Company and the Member shall have a 100% distributive share of the Company's profits, losses and cash flow.
ARTICLE VII
MANAGEMENT
The Member will manage the affairs of the Company, but shall be entitled to appoint or authorize representatives, including, but not limited to, such officers as the Member may deem necessary, to Law on behalf of the Company and to delegate the authority otherwise reserved to the Member to such representatives. The signature of the Member of the Company shall be sufficient to bind the Company with respect to any matter on which the Member shall be required or entitled to act. The Member has the power, on behalf of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company. A copy of this Agreement may be shown to third parties (and all third parties may rely hereupon) in order to confirm the identity and authorization of the Member.
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ARTICLE VIII
PLEDGE OF MEMBERSHIP INTEREST
Notwithstanding any other provision in this Agreement, the Member shall be entitled to pledge its membership interest, including all interests, economic rights, voting rights, control rights and status rights as a member, to, and otherwise grant a lien and security interest in its membership interest and all of its right, title and interest under this Agreement in favor of, any lender to the Company or an affiliate of the Company (or an agent on behalf of such lender) without any further consents, approvals or actions required by such lender (or agent), the Member, the Company or any other person under this Agreement or otherwise. So long as any such pledge of or security interest in the Member’s membership interest is in effect, no consent of the Company or the Member shall be required to permit a pledgee thereof to be substituted for the Member under this Agreement upon the exercise of such pledgee’s rights with respect to such membership interest. Notwithstanding anything contained herein to the contrary, and without complying with any other procedures set forth in this Agreement, upon the exercise of remedies in connection with a pledge or hypothecation, (a) the lender (or agent) or transferee of such lender (or agent), as the case may be, shall become a member under this Agreement and shall succeed to all of the rights and powers, including the right to participate in the management of the business and affairs of the Company, and shall be bound by all of the obligations, of a member under this Agreement without taking any further action on the part of such lender (or agent) or transferee, as the case may be, and (b) following such exercise of remedies, the pledging Member shall cease to be a member and shall have no further rights or powers under this Agreement. The execution and delivery of this Agreement by the Member shall constitute any necessary approval of such Member under the Law to the foregoing provisions of this Article 8. So long as any pledge of the Member’s membership interest is in effect, this provision shall inure to the benefit of such pledgee and its successors, assigns and designated agents, as an intended third party beneficiary, and no amendment, modification or waiver of, or consent with respect to this provision shall in any event be effective without the prior written consent of such pledgee. All of the foregoing shall be subject to the limitations and other provisions applicable to the exercise of remedies contained in each of the Collateral Agreements. For purposes of the foregoing, “Collateral Agreements” means (1) the Guarantee and Collateral Agreement, dated as of June 23, 2006, as amended and restated as of December 6, 2010, as further amended and restated as of February 14, 2011, and as further amended and restated as of February 28, 2013 (as further amended, restated, amended and restated, supplemented, or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and Goldman Sachs Bank USA, as collateral agent, (2) the Pledge and Security Agreement, dated as of February 13, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, (3) the Pledge and Security Agreement, dated as of February 24, 2023 (as amended, restated,
3
amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, and (4) other security agreements, guarantee agreements and pledge agreements that the Company may enter into from time to time.
ARTICLE IX
BOOKS AND RECORDS
The Company books shall be maintained at the Principal Office. The fiscal year of the Company shall end on such date in each year as shall be designated from time to time by the Member. The Member shall cause all known business transactions pertaining to the purpose of the Company to be entered properly and completely into said books. The Member will prepare and file on behalf of the Company all tax returns in a timely manner.
ARTICLE X
AMENDMENTS
This Agreement may be amended by a written instrument adopted by the Member and executed by the Member at any time, for any purpose, at the sole discretion of the Member.
ARTICLE XI
INDEMNIFICATION
To the fullest extent permitted by law, the Company shall defend, indemnify, and save harmless the Member and any officers of the Company (each an “Indemnified Person”) for all loss, liability, damage, cost, or expense (including reasonable attorneys’ fees) incurred by reason of any demands, claims, suits, actions, or proceedings arising out of (a) the Indemnified Person’s relationship to the Company or (b) such Indemnified Person’s capacity as an officer, except for such loss, liability, damage, cost, or expense as arises out of the theft, fraud, willful misconduct, or gross negligence by such Indemnified Person. To the fullest extent permitted by law, expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding, and not less often than monthly upon receipt of an undertaking by and on behalf of the Indemnified Person to repay such amount if it shall be ultimately determined that he or she is not entitled to be indemnified by the Company. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article XI shall continue for a person who has ceased to be an officer and inures to the benefit of the heirs, executors and administrators of such a person.
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The Company may obtain, at the expense of the Company, directors and officers insurance coverage in an amount and on such terms as determined by the Member.
ARTICLE XII
BANKING
All funds of the Company shall be deposited in one or more Company checking accounts as shall be designated by the Member, and the Member is authorized to sign any such checks or withdrawal forms
ARTICLE XIII
APPLICABILITY OF UCC ARTICLE 8
The Company hereby irrevocably elects that all membership interests in the Company shall be securities governed by Article 8 of the Uniform Commercial Code. Each certificate evidencing membership interests in the Company shall bear the following legend:
“This certificate evidences an interest in Raptor Labs Intermediate, LLC and shall be a security for purposes of Article 8 of the Uniform Commercial Code.”
No change to this provision shall be effective until all outstanding certificates have been surrendered for cancellation and any new certificates thereafter issued shall not bear the foregoing legend.
ARTICLE XIV
MISCELLANEOUS
This Agreement is made by the Member for the exclusive benefit of the Company, the Member, and its successors and assignees. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other person or entity. Except and only to the extent provided by applicable statute or otherwise in this Agreement, no such creditor or third party shall have any rights under this Agreement or any agreement between the Company and the Member with respect to any capital contribution or otherwise.
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IN WITNESS WHEREOF, the Member has hereunto set its hand effective the day and year first written above.
Raptor Labs HoldCo, LLC, its sole member
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Its: | Secretary | ||||||||||
Exhibit 3.258
Second Amended and Restated Limited Liability Company Agreement
OF
Sensor Concepts, LLC,
A Delaware Limited Liability Company
The undersigned, being the sole member of Sensor Concepts, LLC, a Delaware limited liability company (the “Company”), does hereby execute this Second Amended and Restated Limited Liability Company Agreement of the Company (this “Agreement”), effective as of this 31 day of July, 2024.
RECITALS
WHEREAS, the Company was originally formed as a limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act (as amended from time to time, the “Law”);
WHEREAS, the Member desires to replace all previous operating agreements, limited liability company agreements, and other such agreements governing the conduct of the Company with the terms and conditions set forth herein and enter into this Agreement.
ARTICLE I
MEMBER
Raptor Labs Intermediate, LLC, a Delaware limited liability company, is the sole member of the Company (the “Member'').
ARTICLE II
OFFICE
The principal office of the Company shall be located at 7950 National Drive, Livermore, CA 94550 (the “Principal Office”). The Company may have such other offices as the Member may designate or as the business of the Company may require.
ARTICLE Ill
PURPOSE
The sole purpose for which the Company is organized is to conduct any lawful business purpose as defined in the Law. The Company shall have all of the powers granted to a limited liability company under the laws of the Delaware.
ARTICLE IV
DURATION OF THE COMPANY
The Company shall continue in perpetuity unless terminated sooner by operation of law or by decision of the Member.
ARTICLE V
CAPITAL CONTRIBUTIONS
The Member may in the future contribute any additional capital deemed necessary by the Member for the operation of the Company.
ARTICLE VI
OWNERSHIP OF MEMBERSHIP INTERESTS
The Member shall own all of the membership interests in the Company and the Member shall have a 100% distributive share of the Company's profits, losses and cash flow.
ARTICLE VII
MANAGEMENT
The Member will manage the affairs of the Company, but shall be entitled to appoint or authorize representatives, including, but not limited to, such officers as the Member may deem necessary, to Law on behalf of the Company and to delegate the authority otherwise reserved to the Member to such representatives. The signature of the Member of the Company shall be sufficient to bind the Company with respect to any matter on which the Member shall be required or entitled to act. The Member has the power, on behalf of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company. A copy of this Agreement may be shown to third parties (and all third parties may rely hereupon) in order to confirm the identity and authorization of the Member.
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ARTICLE VIII
PLEDGE OF MEMBERSHIP INTEREST
Notwithstanding any other provision in this Agreement, the Member shall be entitled to pledge its membership interest, including all interests, economic rights, voting rights, control rights and status rights as a member, to, and otherwise grant a lien and security interest in its membership interest and all of its right, title and interest under this Agreement in favor of, any lender to the Company or an affiliate of the Company (or an agent on behalf of such lender) without any further consents, approvals or actions required by such lender (or agent), the Member, the Company or any other person under this Agreement or otherwise. So long as any such pledge of or security interest in the Member’s membership interest is in effect, no consent of the Company or the Member shall be required to permit a pledgee thereof to be substituted for the Member under this Agreement upon the exercise of such pledgee’s rights with respect to such membership interest. Notwithstanding anything contained herein to the contrary, and without complying with any other procedures set forth in this Agreement, upon the exercise of remedies in connection with a pledge or hypothecation, (a) the lender (or agent) or transferee of such lender (or agent), as the case may be, shall become a member under this Agreement and shall succeed to all of the rights and powers, including the right to participate in the management of the business and affairs of the Company, and shall be bound by all of the obligations, of a member under this Agreement without taking any further action on the part of such lender (or agent) or transferee, as the case may be, and (b) following such exercise of remedies, the pledging Member shall cease to be a member and shall have no further rights or powers under this Agreement. The execution and delivery of this Agreement by the Member shall constitute any necessary approval of such Member under the Law to the foregoing provisions of this Article 8. So long as any pledge of the Member’s membership interest is in effect, this provision shall inure to the benefit of such pledgee and its successors, assigns and designated agents, as an intended third party beneficiary, and no amendment, modification or waiver of, or consent with respect to this provision shall in any event be effective without the prior written consent of such pledgee. All of the foregoing shall be subject to the limitations and other provisions applicable to the exercise of remedies contained in each of the Collateral Agreements. For purposes of the foregoing, “Collateral Agreements” means (1) the Guarantee and Collateral Agreement, dated as of June 23, 2006, as amended and restated as of December 6, 2010, as further amended and restated as of February 14, 2011, and as further amended and restated as of February 28, 2013 (as further amended, restated, amended and restated, supplemented, or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and Goldman Sachs Bank USA, as collateral agent, (2) the Pledge and Security Agreement, dated as of February 13, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, (3) the Pledge and Security Agreement, dated as of February 24, 2023 (as amended, restated,
3
amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, and (4) other security agreements, guarantee agreements and pledge agreements that the Company may enter into from time to time.
ARTICLE IX
BOOKS AND RECORDS
The Company books shall be maintained at the Principal Office. The fiscal year of the Company shall end on such date in each year as shall be designated from time to time by the Member. The Member shall cause all known business transactions pertaining to the purpose of the Company to be entered properly and completely into said books. The Member will prepare and file on behalf of the Company all tax returns in a timely manner.
ARTICLE X
AMENDMENTS
This Agreement may be amended by a written instrument adopted by the Member and executed by the Member at any time, for any purpose, at the sole discretion of the Member.
ARTICLE XI
INDEMNIFICATION
To the fullest extent permitted by law, the Company shall defend, indemnify, and save harmless the Member and any officers of the Company (each an “Indemnified Person”) for all loss, liability, damage, cost, or expense (including reasonable attorneys’ fees) incurred by reason of any demands, claims, suits, actions, or proceedings arising out of (a) the Indemnified Person’s relationship to the Company or (b) such Indemnified Person’s capacity as an officer, except for such loss, liability, damage, cost, or expense as arises out of the theft, fraud, willful misconduct, or gross negligence by such Indemnified Person. To the fullest extent permitted by law, expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding, and not less often than monthly upon receipt of an undertaking by and on behalf of the Indemnified Person to repay such amount if it shall be ultimately determined that he or she is not entitled to be indemnified by the Company. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article XI shall continue for a person who has ceased to be an officer and inures to the benefit of the heirs, executors and administrators of such a person.
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The Company may obtain, at the expense of the Company, directors and officers insurance coverage in an amount and on such terms as determined by the Member.
ARTICLE XII
BANKING
All funds of the Company shall be deposited in one or more Company checking accounts as shall be designated by the Member, and the Member is authorized to sign any such checks or withdrawal forms
ARTICLE XIII
APPLICABILITY OF UCC ARTICLE 8
The Company hereby irrevocably elects that all membership interests in the Company shall be securities governed by Article 8 of the Uniform Commercial Code. Each certificate evidencing membership interests in the Company shall bear the following legend:
“This certificate evidences an interest in Sensor Concepts, LLC and shall be a security for purposes of Article 8 of the Uniform Commercial Code.”
No change to this provision shall be effective until all outstanding certificates have been surrendered for cancellation and any new certificates thereafter issued shall not bear the foregoing legend.
ARTICLE XIV
MISCELLANEOUS
This Agreement is made by the Member for the exclusive benefit of the Company, the Member, and its successors and assignees. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other person or entity. Except and only to the extent provided by applicable statute or otherwise in this Agreement, no such creditor or third party shall have any rights under this Agreement or any agreement between the Company and the Member with respect to any capital contribution or otherwise.
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IN WITNESS WHEREOF, the Member has hereunto set its hand effective the day and year first written above.
Raptor Labs Intermediate, LLC, its sole member
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Its: | Secretary | ||||||||||
Exhibit 3.274
Fourth Amended and Restated Limited Liability Company Agreement
OF
Space Electronics LLC,
A Delaware Limited Liability Company
The undersigned, being the sole member of Space Electronics LLC, a Delaware limited liability company (the “Company”), does hereby execute this Fourth Amended and Restated Limited Liability Company Agreement of the Company (this “Agreement”), effective as of this 31 day of July 2024.
RECITALS
WHEREAS, the Company was originally formed as a limited liability company pursuant to the provisions of the Delaware Limited Liability Company Act (as amended from time to time, the “Law”);
WHEREAS, the Member desires to replace all previous operating agreements, limited liability company agreements, and other such agreements governing the conduct of the Company with the terms and conditions set forth herein and enter into this Agreement.
ARTICLE I
MEMBER
Raptor Labs Intermediate, LLC, a Delaware limited liability company, is the sole member of the Company (the “Member'').
ARTICLE II
OFFICE
The principal office of the Company shall be located at 81 Fuller Way, Berlin, CT 06037 (the “Principal Office”). The Company may have such other offices as the Member may designate or as the business of the Company may require.
ARTICLE Ill
PURPOSE
The sole purpose for which the Company is organized is to conduct any lawful business purpose as defined in the Law. The Company shall have all of the powers granted to a limited liability company under the laws of the Delaware.
ARTICLE IV
DURATION OF THE COMPANY
The Company shall continue in perpetuity unless terminated sooner by operation of law or by decision of the Member.
ARTICLE V
CAPITAL CONTRIBUTIONS
The Member may in the future contribute any additional capital deemed necessary by the Member for the operation of the Company.
ARTICLE VI
OWNERSHIP OF MEMBERSHIP INTERESTS
The Member shall own all of the membership interests in the Company and the Member shall have a 100% distributive share of the Company's profits, losses and cash flow.
ARTICLE VII
MANAGEMENT
The Member will manage the affairs of the Company, but shall be entitled to appoint or authorize representatives, including, but not limited to, such officers as the Member may deem necessary, to Law on behalf of the Company and to delegate the authority otherwise reserved to the Member to such representatives. The signature of the Member of the Company shall be sufficient to bind the Company with respect to any matter on which the Member shall be required or entitled to act. The Member has the power, on behalf of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company. A copy of this Agreement may be shown to third parties (and all third parties may rely hereupon) in order to confirm the identity and authorization of the Member.
2
ARTICLE VIII
PLEDGE OF MEMBERSHIP INTEREST
Notwithstanding any other provision in this Agreement, the Member shall be entitled to pledge its membership interest, including all interests, economic rights, voting rights, control rights and status rights as a member, to, and otherwise grant a lien and security interest in its membership interest and all of its right, title and interest under this Agreement in favor of, any lender to the Company or an affiliate of the Company (or an agent on behalf of such lender) without any further consents, approvals or actions required by such lender (or agent), the Member, the Company or any other person under this Agreement or otherwise. So long as any such pledge of or security interest in the Member’s membership interest is in effect, no consent of the Company or the Member shall be required to permit a pledgee thereof to be substituted for the Member under this Agreement upon the exercise of such pledgee’s rights with respect to such membership interest. Notwithstanding anything contained herein to the contrary, and without complying with any other procedures set forth in this Agreement, upon the exercise of remedies in connection with a pledge or hypothecation, (a) the lender (or agent) or transferee of such lender (or agent), as the case may be, shall become a member under this Agreement and shall succeed to all of the rights and powers, including the right to participate in the management of the business and affairs of the Company, and shall be bound by all of the obligations, of a member under this Agreement without taking any further action on the part of such lender (or agent) or transferee, as the case may be, and (b) following such exercise of remedies, the pledging Member shall cease to be a member and shall have no further rights or powers under this Agreement. The execution and delivery of this Agreement by the Member shall constitute any necessary approval of such Member under the Law to the foregoing provisions of this Article 8. So long as any pledge of the Member’s membership interest is in effect, this provision shall inure to the benefit of such pledgee and its successors, assigns and designated agents, as an intended third party beneficiary, and no amendment, modification or waiver of, or consent with respect to this provision shall in any event be effective without the prior written consent of such pledgee. All of the foregoing shall be subject to the limitations and other provisions applicable to the exercise of remedies contained in each of the Collateral Agreements. For purposes of the foregoing, “Collateral Agreements” means (1) the Guarantee and Collateral Agreement, dated as of June 23, 2006, as amended and restated as of December 6, 2010, as further amended and restated as of February 14, 2011, and as further amended and restated as of February 28, 2013 (as further amended, restated, amended and restated, supplemented, or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and Goldman Sachs Bank USA, as collateral agent, (2) the Pledge and Security Agreement, dated as of February 13, 2019 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, (3) the Pledge and Security Agreement, dated as of February 24, 2023 (as amended, restated,
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amended and restated, supplemented or otherwise modified from time to time), among TransDigm Inc., certain affiliates of TransDigm Inc. and The Bank of New York Mellon Trust Company, N.A., as the U.S. collateral agent, and (4) other security agreements, guarantee agreements and pledge agreements that the Company may enter into from time to time.
ARTICLE IX
BOOKS AND RECORDS
The Company books shall be maintained at the Principal Office. The fiscal year of the Company shall end on such date in each year as shall be designated from time to time by the Member. The Member shall cause all known business transactions pertaining to the purpose of the Company to be entered properly and completely into said books. The Member will prepare and file on behalf of the Company all tax returns in a timely manner.
ARTICLE X
AMENDMENTS
This Agreement may be amended by a written instrument adopted by the Member and executed by the Member at any time, for any purpose, at the sole discretion of the Member.
ARTICLE XI
INDEMNIFICATION
To the fullest extent permitted by law, the Company shall defend, indemnify, and save harmless the Member and any officers of the Company (each an “Indemnified Person”) for all loss, liability, damage, cost, or expense (including reasonable attorneys’ fees) incurred by reason of any demands, claims, suits, actions, or proceedings arising out of (a) the Indemnified Person’s relationship to the Company or (b) such Indemnified Person’s capacity as an officer, except for such loss, liability, damage, cost, or expense as arises out of the theft, fraud, willful misconduct, or gross negligence by such Indemnified Person. To the fullest extent permitted by law, expenses incurred in defending a civil or criminal action, suit or proceeding shall be paid by the Company in advance of the final disposition of such action, suit or proceeding, and not less often than monthly upon receipt of an undertaking by and on behalf of the Indemnified Person to repay such amount if it shall be ultimately determined that he or she is not entitled to be indemnified by the Company. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article XI shall continue for a person who has ceased to be an officer and inures to the benefit of the heirs, executors and administrators of such a person.
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The Company may obtain, at the expense of the Company, directors and officers insurance coverage in an amount and on such terms as determined by the Member.
ARTICLE XII
BANKING
All funds of the Company shall be deposited in one or more Company checking accounts as shall be designated by the Member, and the Member is authorized to sign any such checks or withdrawal forms
ARTICLE XIII
APPLICABILITY OF UCC ARTICLE 8
The Company hereby irrevocably elects that all membership interests in the Company shall be securities governed by Article 8 of the Uniform Commercial Code. Each certificate evidencing membership interests in the Company shall bear the following legend:
“This certificate evidences an interest in Space Electronics LLC and shall be a security for purposes of Article 8 of the Uniform Commercial Code.”
No change to this provision shall be effective until all outstanding certificates have been surrendered for cancellation and any new certificates thereafter issued shall not bear the foregoing legend.
ARTICLE XIV
MISCELLANEOUS
This Agreement is made by the Member for the exclusive benefit of the Company, the Member, and its successors and assignees. This Agreement is expressly not intended for the benefit of any creditor of the Company or any other person or entity. Except and only to the extent provided by applicable statute or otherwise in this Agreement, no such creditor or third party shall have any rights under this Agreement or any agreement between the Company and the Member with respect to any capital contribution or otherwise.
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IN WITNESS WHEREOF, the Member has hereunto set its hand effective the day and year first written above.
Raptor Labs Intermediate, LLC, its sole member
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Its: | Secretary | ||||||||||
Exhibit 3.288
State of New Hampshire
Department of State
Department of State
OFFICE OF SECRETARY OF STATE
CERTIFIED COPY
I, David M. Scanlan, Secretary of State of the State of New Hampshire, do hereby certify that the attached is a true copy of BUSINESS FORMATION(07/25/1997) as a New Hampshire Profit Corporation of TESTVONICS, INC. as filed in this office and held in the custody of the Secretary of State. Documents may be subject to redactions according to New Hampshire RSA 91A.
Business ID: 276258
Certificate Number: 6747873
 | IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Seal of the State of New Hampshire, this 5th day of August A.D. 2024. /s/ David M. Scanlan David M. Scanlan Secretary of State | ||||
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STATE OF NEW HAMPSHIRE
| Fee for Form 11-A | $ 50.00 |  | ||||||
| Filing Fee | $ 35.00 | |||||||
| $ 85.00 | ||||||||
ARTICLES OF INCORPORATION
OF
TestVonics, Inc.
OF
TestVonics, Inc.
THE UNDERSIGNED, ACTING AS INCORPORATOR(S) OF A CORPORATION UNDER THE NEW HAMPSHIRE BUSINESS CORPORATION ACT, ADOPT(S) THE FOLLOWING ARTICLES OF INCORPORATION FOR SUCH CORPORATION:
FIRST: The name of the Corporation is TestVonics, Inc. (Note 1)
SECOND: The number of shares the corporation is authorized to issue: 300 shares
THIRD: The name of the corporation’s initial registered agent is Jeffrey R. Crocker and the street address (including zip code and post office box, if any) of its initial registered office is (agent’s business address) 47 Main Street, P.O. Box 510, Jaffrey, NH 03452 (Note 2).
FOURTH: The capital stock will be sold or offered for sale within the meaning of RSA 421-B. (New Hampshire Securities Act) (Note 3).
FIFTH: The corporation is empowered to transact any and all lawful business for which corporations may be incorporated under RSA 293:A and the principal purpose or purposes for which the corporation is organized are: (Note 5)
Consulting; independent marketing and sales; manufacturing, marketing and sales of avionics, test equipment and accessories for commercial and military end use; test equipment systems; independent business development services.
Other purposes include the right to:
To build, lease, purchase, acquire, own, hold, occupy, maintain, improve, use and operate shops, studios, factories, laboratories, farms, offices, buildings, structures and works suitable, necessary or convenient to any of the business of the corporation.
(continued on Page 2 through 3)
[if more space is needed, attach additional sheet(s)]
Page 1 of 4
To buy, rent, sell and own all types of manufacturing plants, equipment, establishments and warehouses.
To acquire by purchase, exchange, lease, grant, gift or otherwise to hold, enjoy, improve, to sell, pledge, mortgage, lease, license, or otherwise dispose of any property, real or personal, and all rights or interest therein, whether in this state or elsewhere, including but without limiting the generality of the foregoing, land or any interest therein, buildings, farms, factories, warehouses, stores, offices, and dwellings, incidental to the prosecution of the corporation, and also as a going business or otherwise, all or any part of the assets and good will of any person, firm, voluntary association or corporation engaged in whole or in part in any business in which the corporation is authorized to engage, or engaged in going business kindred to the business of this corporation; and in such case to assume all or any part of the liabilities of such person, firm, voluntary association or corporation.
To consolidate or merge on such terms and conditions as may be agreed upon by purchase or lease to, or by any other lawful method with any other corporation, joint stock company or other association.
To make contracts, incur liabilities, and borrow money on credit for the use of the company, to issue notes, bonds or other evidence of indebtedness and to secure the same, if it appears necessary or desirability by mortgaging or hypothecating all or any part of the property of the company.
To purchase, construct, lease or otherwise acquire, and to hold, enjoy, operate, deal in, develop, improve or otherwise use, sell, mortgage, pledge or otherwise dispose of merchandise and personal property of every kind and description, manufactured or partly manufactured articles, and all other property, tangible or intangible, of every kind and nature.
To act as a broker, sales agent, factor, general sales representative or in any other lawful capacity, for all forms, types, and kinds of products or manufactures.
To guarantee (a) the payment of dividends on any shares of capital stock (other than the shares of this corporation) now or hereafter issued, (b) the payment, as to principal and/or interest of bonds, debentures, evidences of indebtedness or obligations by whomsoever issued, and/or (c) the performance of the terms of any contract or obligation now or hereafter entered into by any parties hereto, but only insofar as such acting as guarantor is incidental to other valid purposes of the corporation.
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To purchase, subscribe for or otherwise acquire, register, hold, sell, assign, transfer, pledge or otherwise dispose of or deal in, so far as may be permitted by law, stocks, shares, bonds, notes and other securities and evidences of interest in or indebtedness of any persons, firms, or corporation of this or any other state, and while, the holder or owner thereof, to exercise all rights, powers and privileges of ownership in the same manner that individuals might do and in pursuance of and in accordance with Chapter 293-A, Section 6, of the New Hampshire Revised Statutes Annotated, and any amendments thereto, to purchase, take, receive or otherwise acquire, hold, own, pledge, transfer, or otherwise dispose of its shares; but purchase of its own shares, whether direct or indirect, shall be made only to the extent of unreserved and unrestricted earned surplus available for such purchase and to the extent of unreserved and unrestricted capital surplus; further provided, however, that this corporation shall in no case directly or indirectly vote upon any share of its own stock.
To carry on in connection with the foregoing any other business advantageous to the business of the corporation and, in general, to do and perform every other act and thing, and carry on every other business whatsoever convenient or proper for the accomplishment of any of the purposes or the carrying on of any of the business of the corporation; in the transaction of any business of the corporation, to act as either principal or agent and to use and exercise all the powers now or hereafter conferred by and to transact any and all lawful business for which corporations may be incorporated under New Hampshire Revised Statutes Annotated Chapter 293-A and any amendments thereto.
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| ARTICLES OF INCORPORATION OF TESTVONICS, INC. | Form No. 11 (cont.) | ||||
SIXTH: The name and address of each incorporator is:
| Name | Address | ||||
| Paul McCullough | 375 Jaffrey Road Peterborough, NH 03458 | ||||
Dated: 7-24-1997
/s/ Paul McCullough
Paul McCullough
Incorporator(s)
Paul McCullough
Incorporator(s)
Mail fees, ORIGINAL, ONE EXACT OR CONFORMED COPY AND FORM 11-A (Note 3) to: Secretary of State, Room 204, State House, 107 North Main Street, Concord, NH 03301-4989.
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Exhibit 3.289
SECOND AMENDED AND RESTATED BYLAWS
OF
TESTVONICS, INC.,
A NEW HAMPSHIRE CORPORATION
ARTICLE I
Meetings of Shareholders
Section 1. Annual Meetings. The annual meeting of shareholders shall be held at such time and place and on such date in each year as may be fixed by the board of directors and stated in the notice of the meeting, for the election of directors and the transaction of such other business as may properly come before the meeting.
Section 2. Special Meetings. Special meetings of the shareholders may be called upon the written request of the chairman of the board of directors, the chief executive officer, the president, the directors by action at a meeting, a majority of the directors acting without a meeting, or of the holders of shares entitling them to exercise a majority of the voting power of the Corporation entitled to vote thereat. Calls for such meetings shall specify the purposes thereof. No business other than that specified in the call shall be considered at any special meeting.
Section 3. Notices of Meetings. Unless waived, and except as otherwise required by law, written notice of each annual or special meeting stating the date, time, place and purposes thereof shall be given by personal delivery or by mail to each shareholder of record entitled to vote at or entitled to notice of the meeting, not more than sixty days nor less than ten days before any such meeting. If mailed, such notice shall be directed to the shareholder at the shareholder’s address as the same appears upon the records of the Corporation. Any shareholder, either before or after any meeting, may waive any notice required to be given by law or under these Bylaws.
Section 4. Place of Meetings. Meetings of shareholders shall be held at the principal office of the Corporation unless the board of directors determines that a meeting shall be held at some other place within or without the State of New Hampshire and causes the notice thereof to so state.
Section 5. Quorum. The holders of shares entitling them to exercise a majority of the voting power of the Corporation entitled to vote at any meeting, present in person or by proxy, shall constitute a quorum for the transaction of business to be considered at such meeting; provided, however, that no action required by law or by the Certificate of Incorporation or these Bylaws to be authorized or taken by the holders of a designated proportion of the shares of any particular class or of each class may be authorized or taken by a lesser proportion; and provided, further, that if a separate class vote is required with respect to any matter, the holders of a majority of the outstanding shares of such class, present in person or by proxy, shall constitute a quorum of such class, and the affirmative vote of the majority of shares of such class so present shall be the act of such class. The holders of a majority of the voting shares represented at a
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meeting, whether or not a quorum is present, may adjourn such meeting from time to time, until a quorum shall be present.
Section 6. Record Date. The board of directors may fix a record date for any lawful purpose, including, without limiting the generality of the foregoing, the determination of shareholders entitled to (i) receive notice of or to vote at any meeting of shareholders or any adjournment thereof or to express consent to corporate action in writing without a meeting, (ii) receive payment of any dividend or other distribution or allotment of any rights, or (iii) exercise any rights in respect of any change, conversion or exchange of shares. Such record date shall not precede the date on which the resolution fixing the record date is adopted by the board of directors. Such record date shall not be more than seventy days before the date of such meeting.
If a record date shall not be fixed in respect of any such matter, the record date shall be determined in accordance with the New Hampshire Business Corporation Act.
Section 7. Proxies. A person who is entitled to attend a shareholders’ meeting, to vote thereat, or to execute consents, waivers or releases, may be represented at such meeting or vote thereat, and execute consents, waivers and releases, and exercise any of the person’s other rights, by proxy or proxies appointed by a writing via an appointment form signed by such person or via an electronic transmission.
ARTICLE II
Directors
Section 1. Number of Directors. The number of directors constituting the board of directors of the Corporation, none of whom need be shareholders, shall be fixed from time to time by resolution of the shareholders or by vote of a majority of the board of directors then in office.
Section 2. Election of Directors. Directors shall be elected at the annual meeting of shareholders. At each meeting of shareholders for the election of directors, the persons receiving the greatest number of votes shall be directors.
Section 3. Term of Office. Each director shall hold office until the annual meeting next succeeding such director’s election and until such director’s successor is elected and qualified, or until such director’s earlier resignation, removal from office or death.
Section 4. Removal. Any individual director may be removed from office, without assigning any cause, by the vote of the holders of a majority of the voting power entitling them to elect directors in place of those to be removed.
Section 5. Vacancies. Vacancies in the board of directors may be filled by a majority vote of the remaining directors until an election to fill such vacancies is held. Shareholders entitled to elect directors shall have the right to fill any vacancy in the board (whether the same has been temporarily filled by the remaining directors or not) at any meeting
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of the shareholders called for that purpose, and any directors elected at any such meeting of shareholders shall serve until the next annual election of directors and until such director’s successor has been elected and qualified.
Section 6. Quorum and Transaction of Business. A majority of the whole authorized number of directors shall constitute a quorum for the transaction of business, except that a majority of the directors in office shall constitute a quorum for filling a vacancy on the board. Whenever less than a quorum is present at the time and place appointed for any meeting of the board, a majority of those directors present may adjourn the meeting from time to time, until a quorum shall be present. The act of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board.
Section 7. Annual Meeting. Annual meetings of the board of directors shall be held immediately following annual meetings of the stockholders, or as soon thereafter as is practicable. If no annual meeting of the stockholders is held, or if directors are not elected thereat, then the annual meeting of the board of directors shall be held immediately following any special meeting of the stockholders at which directors are elected, or as soon thereafter as is practicable. If such annual meeting of directors is held immediately following a meeting of the stockholders, it shall be held at the same place at which such stockholders’ meeting was held.
Section 8. Regular Meetings. Regular meetings of the board of directors shall be held at such times and places, within or without the State of New Hampshire, as the board of directors may, by resolution, from time to time determine. The secretary shall give notice of each such resolution to any director who was not present at the time the same was adopted, but no further notice of such regular meeting need be given.
Section 9. Special Meetings. Special meetings of the board of directors may be called by the chairman of the board, the chief executive officer, the president, any vice president or any two members of the board of directors, and shall be held at such times and places, within or without the State of New Hampshire, as may be specified in such call.
Section 10. Notice of Annual or Special Meetings. Notice of the time and place of each annual or special meeting shall be given to each director by the secretary or by the person or persons calling such meeting. Such notice need not specify the purpose or purposes of the meeting and may be given in any manner or method and at such time so that the director receiving it may have a reasonable opportunity to attend the meeting. Such notice shall, in all events, be deemed to have been properly and duly given if mailed at least three days prior to the meeting and directed to the residence of each director as shown upon the secretary’s records. The giving of notice shall be deemed to have been waived by any director who shall attend and participate in such meeting and may be waived, in writing, by any director either before or after such meeting.
Section 11. Compensation. The directors, as such, shall be entitled to receive such reasonable compensation, if any, for their services as may be fixed from time to time by resolution of the board, and expenses of attendance, if any, may be allowed for attendance at each annual, regular or special meeting of the board. Nothing herein contained shall be
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construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Directors who serve on the executive committee or on any standing or special committee may, by resolution of the board, be allowed such compensation for their services as the board may deem reasonable, and additional compensation may be allowed to directors for special services rendered.
ARTICLE III
Committees
Section 1. Executive Committee. The board of directors may from time to time, by resolution passed by a majority of the whole board, create an executive committee of one or more directors, the members of which shall be elected by the board of directors to serve during the pleasure of the board. If the board of directors does not designate a chairman of the executive committee, the executive committee shall elect a chairman from its own number. Except as otherwise provided herein, prohibited by law or in the resolution creating an executive committee, such committee shall, during the intervals between the meetings of the board of directors, possess and may exercise all of the powers of the board of directors in the management of the business and affairs of the Corporation. The committee may not: authorize or approve distributions, except according to a formula or method, or within limits, prescribed by the board of directors; approve or propose to shareholders action that requires be approved by shareholders; fill vacancies on the board of directors or on any of its committees; nor adopt, amend, or repeal bylaws. The executive committee shall keep full records and accounts of its proceedings and transactions. All action by the executive committee shall be reported to the board of directors at its meeting next succeeding such action and shall be subject to control, revision and alteration by the board of directors, provided that no rights of third persons shall be prejudicially affected thereby. Vacancies in the executive committee shall be filled by the directors, and the directors may appoint one or more directors as alternate members of the committee who may take the place of any absent member or members at any meeting.
Section 2. Meetings of Executive Committee. Subject to the provisions of these Bylaws, the executive committee shall fix its own rules of procedure and shall meet as provided by such rules or by resolutions of the board of directors, and it shall also meet at the call of the chairman of the board, the chief executive officer, the president, the chairman of the executive committee or any two members of the committee. Unless otherwise provided by such rules or by such resolutions, the provisions of Section 10 of Article II relating to the notice required to be given of meetings of the board of directors shall also apply to meetings of the members of the executive committee. A majority of the executive committee shall be necessary to constitute a quorum. The executive committee may act in writing without a meeting, but no such action of the executive committee shall be effective unless concurred in by all members of the committee.
Section 3. Other Committees. The board of directors may by resolution provide for such other standing or special committees as it deems desirable, and discontinue the same at its pleasure. Each such committee shall have such powers and perform such duties, not inconsistent with law, as may be delegated to it by the board of directors. The provisions of
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Section 1 and Section 2 of this Article shall govern the appointment and action of such committees so far as consistent, unless otherwise provided by the board of directors. Vacancies in such committees shall be filled by the board of directors or as the board of directors may provide.
ARTICLE IV
Officers
Section 1. General Provisions. The board of directors shall elect officers, which shall include a president, a secretary and a treasurer. The board of directors may also elect a chairman of the board of directors, a chief executive officer, such number of vice presidents, if any, may create such offices and appoint such other officers, subordinate officers and assistant officers as it may from time to time determine. The chairman of the board, if one is elected, shall be, but the other officers need not be, chosen from among the members of the board of directors. Any two or more of such offices may be held by the same person.
Section 2. Term of Office. The officers of the Corporation shall hold office during the pleasure of the board of directors, and, unless sooner removed by the board of directors, until the annual meeting of the board of directors following the date of their election and until their successors are chosen and qualified. The board of directors may remove any officer at any time, with or without cause. A vacancy in any office, however created, shall be filled by the board of directors.
ARTICLE V
Duties of Officers
Section 1. Chairman of the Board. The chairman of the board, if any, shall preside at all meetings of the board of directors and meetings of shareholders and shall have such other powers and duties as may be prescribed by the board of directors.
Section 2. Chief Executive Officer. The chief executive officer, if any, shall have, subject to the powers of the board of directors, charge of the overall general direction of the business and affairs of the Corporation, control of the general policies relating to all aspects of the Corporation’s business operations, and the power to fix the compensation of officers and the power to remove officers. In the absence of the chairman of the board, or if none is elected, the chief executive officer shall preside at meetings of shareholders. The chief executive officer may appoint and discharge agents and employees and perform such other duties as are incident to such office. The chief executive officer shall have such other powers and perform such other duties as may be prescribed by the board of directors or as may be provided in these Bylaws. In the absence or disability of the chief executive officer, or if no chief executive officer is elected or appointed, the president shall perform any and all duties of the chief executive officer.
Section 3. President. The president shall be the chief operating officer of the Corporation and shall have such other powers and duties as may be prescribed by the board of
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directors or the chief executive officer. The president shall have authority to sign all certificates for shares and all deeds, mortgages, bonds, agreements, notes, and other instruments requiring the president’s signature; and shall have all the powers and duties prescribed by law and such others as the board of directors may from time to time assign.
Section 4. Vice Presidents. The vice presidents, if any, shall have such powers and duties as may from time to time be assigned to them by the board of directors, the chief executive officer or the president. At the request of the chief executive officer or the president, or in the case of such officer’s absence or disability, the vice president designated by the president (or in the absence of such designation, the vice president designated by the board) shall perform all the duties of the president and, when so acting, shall have all the powers of the president. The authority of vice presidents to sign in the name of the Corporation certificates for shares and deeds, mortgages, bonds, agreements, notes and other instruments shall be coordinate with like authority of the president.
Section 5. Secretary. The secretary shall keep minutes of all the proceedings of the shareholders and the board of directors and shall make proper record of the same, which shall be attested by the secretary; shall have authority to execute and deliver certificates as to any of such proceedings and any other records of the Corporation; shall have authority to sign all certificates for shares and all deeds, mortgages, bonds, agreements, notes and other instruments to be executed by the Corporation which require the secretary’s signature; shall give notice of meetings of shareholders and directors; shall produce on request at each meeting of shareholders a certified list of shareholders arranged in alphabetical order; shall keep such books and records as may be required by law or by the board of directors; and, in general, shall perform all duties incident to the office of secretary and such other duties as may from time to time be assigned by the board of directors, the chief executive officer or the president.
Section 6. Treasurer. The treasurer shall have general supervision of all finances; shall have in charge all money, bills, notes, deeds, leases, mortgages and similar property belonging to the Corporation, and shall do with the same as may from time to time be required by the board of directors. The treasurer shall cause to be kept adequate and correct accounts of the business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, stated capital and shares, together with such other accounts as may be required; and shall have such other powers and duties as may from time to time be assigned by the board of directors, the chief executive officer or the president.
Section 7. Assistant and Subordinate Officers. Each other officer shall perform such duties as the board of directors, the chief executive officer or the president may prescribe. The board of directors may, from time to time, authorize any officer to appoint and remove subordinate officers, to prescribe their authority and duties, and to fix their compensation.
Section 8. Duties of Officers May Be Delegated. In the absence of any officer of the Corporation, or for any other reason the board of directors may deem sufficient, the board of directors may delegate, for the time being, the powers or duties, or any of them, of such officers to any other officer or to any director.
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ARTICLE VI
Indemnification of Officers, Directors and Others
Section 1. Indemnification. The Corporation shall indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer of the Corporation against liabilities and expenses reasonably incurred or paid by such person in connection with such action, suit or proceeding. The Corporation may indemnify, to the full extent that it shall have power under applicable law to do so and in a manner permitted by such law, any person made or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against liabilities and expenses reasonably incurred or paid by such person in connection with such action, suit or proceeding. The words “liabilities” and “expenses” shall include, without limitation: liabilities, losses, damages, judgments, fines, penalties, amounts paid in settlement, expenses, attorneys’ fees and costs. The indemnification and advancement of expenses provided by or granted pursuant to this Article shall not be deemed exclusive of any other rights to which any person indemnified or being advanced expenses may be entitled under any statute, Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be such director, officer, employee or agent, and shall inure to the benefits of the heirs, executors and administrators of such person.
The Corporation may purchase and maintain insurance on behalf of any person referred to in the preceding paragraph against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article or otherwise.
For purposes of this Article, references to the “Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or who is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
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The provisions of this Article shall be deemed to be a contract between the Corporation and each director or officer who serves in any such capacity at any time while this Article and the relevant provisions of the New Hampshire Business Corporation Act or other applicable law, if any, are in effect, and any repeal or modification of any such law or of this Article shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon any such state of facts.
For purposes of this Article, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves the provision of services by, such director, officer, employee or agent with respect to an employee benefit plan and its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the Corporation.
The Corporation hereby acknowledges that a person entitled to indemnification pursuant to this Article (an “Indemnified Party”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by other sources. The Corporation hereby agrees (i) that it (or, to the extent applicable, its insurance provider) is the indemnitor of first resort (i.e., its obligations to an Indemnified Party are primary and any obligation of such other sources to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Indemnified Party are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by an Indemnified Party and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of these Bylaws without regard to any rights an Indemnified Party may have against such other sources, and (iii) irrevocably waives, relinquishes and releases such other sources from any and all claims against such other sources for contribution, subrogation or any other recovery of any kind in respect thereof. The Corporation further agrees that no advancement or payment by such other sources on behalf of an Indemnified Party with respect to any claim for which such Indemnified Party has sought indemnification from the Corporation shall affect the foregoing, and such other sources shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Indemnified Party against the Corporation. Any such other sources are express third party beneficiaries of this paragraph and, at the request of any Indemnified Party, the Corporation shall acknowledge its obligations under this paragraph to any such other sources.
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ARTICLE VII
Certificates for Shares
Section 1. Form and Execution. Certificates for shares, certifying the number of full-paid shares owned, shall be issued to each shareholder in such form as shall be approved by the board of directors. Such certificates shall be signed by any two of the following officers of the Corporation: the chairman or vice-chairman of the board of directors, the chief executive officer, the president, a vice president, the treasurer, an assistant treasurer, the secretary or an assistant secretary; provided, however, that the signatures of any of such officers and the seal of the Corporation upon such certificates may be facsimiles, engraved, stamped or printed. If any officer or officers who shall have signed, or whose facsimile signature shall have been used, printed or stamped on any certificate or certificates for shares, shall cease to be such officer or officers, because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates shall nevertheless be as effective in all respects as though signed by a duly elected, qualified and authorized officer or officers, and as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be an officer or officers of the Corporation.
Section 2. Registration of Transfer. Any certificate for shares of the Corporation shall be transferable in person or by attorney upon the surrender thereof to the Corporation or any transfer agent therefor (for the class of shares represented by the certificate surrendered) properly endorsed for transfer and accompanied by such assurances as the Corporation or such transfer agent may require as to the genuineness and effectiveness of each necessary endorsement.
Section 3. Lost, Destroyed or Stolen Certificates. A new share certificate or certificates may be issued in place of any certificate theretofore issued by the Corporation which is alleged to have been lost, destroyed or wrongfully taken upon (i) the execution and delivery to the Corporation by the person claiming the certificate to have been lost, destroyed or wrongfully taken of an affidavit of that fact, specifying whether or not, at the time of such alleged loss, destruction or taking, the certificate was endorsed, and (ii) the furnishing to the Corporation of indemnity and other assurances, if any, satisfactory to the Corporation and to all transfer agents and registrars of the class of shares represented by the certificate against any and all losses, damages, costs, expenses or liabilities to which they or any of them may be subjected by reason of the issue and delivery of such new certificate or certificates or in respect of the original certificate.
Section 4. Registered Shareholders. A person in whose name shares are of record on the books of the Corporation shall conclusively be deemed the unqualified owner and holder thereof for all purposes and to have capacity to exercise all rights of ownership. Neither the Corporation nor any transfer agent of the Corporation shall be bound to recognize any equitable interest in or claim to such shares on the part of any other person, whether disclosed upon such certificate or otherwise, nor shall they be obliged to see to the execution of any trust or obligation.
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ARTICLE VIII
Fiscal Year
The fiscal year of the Corporation shall end on such date in each year as shall be designated from time to time by the board of directors.
ARTICLE IX
Seal
The board of directors may provide a suitable seal containing the name of the Corporation. If deemed advisable by the board of directors, duplicate seals may be provided and kept for the purposes of the Corporation.
ARTICLE X
Amendments
These Bylaws shall be subject to alteration, amendment, repeal, or the adoption of new Bylaws either by the affirmative vote of a majority of the board of directors or by written consent of all members of the board of directors, or by the affirmative vote or written consent of the holders of record of a majority of the outstanding shares of the Corporation, present in person or represented by proxy and entitled to vote in respect thereof, given at an annual meeting or at any special meeting at which a quorum shall be present.
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Exhibit 10.25
FORM OF OPTION AGREEMENT (FY25) – NAMED EXECUTIVE OFFICER
STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT
TransDigm Group Incorporated, a Delaware corporation (the “Company”), pursuant to the TransDigm Group Incorporated 2019 Stock Option Plan (the “Plan”), hereby grants to the holder listed below (“Participant”), an option to purchase the number of shares of the Company’s common stock, par value $0.01 (“Stock”), set forth below (the “Option”). This Option is subject to all of the terms and conditions set forth herein and in the Stock Option Agreement, including any applicable country-specific terms, attached hereto as Exhibit A (the “Agreement”) and the Plan, which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option Agreement.
| Participant: | ________________________________________________________ | ||||
| Grant Date: | ________________________________________________________ | ||||
| Exercise Price per Share: | ________________________________________________________ | ||||
| Total Number of Shares Subject to the Option: | ________________________________________________ Shares | ||||
| Expiration Date: | ________________________________________________________ | ||||
| Type of Option: | Incentive Stock Option Non-Qualified Stock Option | |||||||
| Vesting Schedule: | Subject to the terms of the Stock Option Agreement (including without limitation all exhibits thereto), the Option shall be eligible to become exercisable upon the achievement of performance objectives over the period set forth in Exhibit B hereto (provided that the Participant is an Eligible Person (as defined in the Plan) at all times during the period beginning on the Grant Date and ending on the applicable vesting date): | |||||||
By his or her signature, the Participant agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement and this Grant Notice. The Participant has reviewed the Agreement, including any applicable country-specific terms, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. The Participant agrees that as a condition to receiving the Option, the Participant shall comply with the Stock Retention Guidelines set forth on Exhibit C. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or relating to the Option.
| TRANSDIGM GROUP INCORPORATED | PARTICIPANT | |||||||||||||||||||||||||
By: | By: | |||||||||||||||||||||||||
| Print Name: | Print Name: | |||||||||||||||||||||||||
Title: | ||||||||||||||||||||||||||
Address: | Address: | |||||||||||||||||||||||||
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EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement, including the Appendix containing any applicable country-specific provisions (together, this “Agreement”), is attached, TransDigm Group Incorporated, a Delaware corporation (the “Company”), has granted to the Participant an option (the “Option”)1 under the TransDigm Group Incorporated 2019 Stock Option Plan (the “Plan”) to purchase the number of shares of Stock indicated in the Grant Notice.
ARTICLE I.
GENERAL
1.1 Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and/or the Grant Notice.
(a) “Administrator” shall mean the Board or the Compensation Committee or other committee of the Board responsible for conducting the general administration of the Plan in accordance with Section 3 of the Plan; provided that if the Participant is an Independent Director, “Administrator” shall mean the Board.
(b) “Consultant” shall mean an individual who renders services to the Company as a consultant and has been so designated by the Committee.
(c) “Credit Agreement” shall mean that certain credit agreement dated as of June 4, 2014 among TransDigm, Inc., TransDigm Group Incorporated and the lenders party thereto, as in effect as of the Grant Date and without reference to any amendment to the Credit Agreement made following the Grant Date.
(d) “Diluted Shares” as of a given date shall mean the total diluted weighted-average of common shares of the Company outstanding as of such date.
(e) “EBITDA” for a given fiscal year of the Company shall mean Consolidated EBITDA (as defined in the Credit Agreement) of the Company for such fiscal year on a pro forma basis adjusted for acquisitions or divestitures.
(f) “Independent Director” shall mean a non-employee director of the Company.
(g) “Net Debt” shall mean, as of the last day of a given fiscal year of the Company, the excess of (i) Consolidated Total Indebtedness (as defined in the Credit Agreement) of the Company over (ii) the amount of cash and cash equivalents set forth on the Company’s balance sheet.
(h) “Termination of Consultancy” shall mean the time when the engagement of the Participant as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding: (i) terminations where there is a simultaneous employment or continuing employment of the Participant by the Company or any Subsidiary, and (ii) terminations where there is a simultaneous re-establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy.
1 For the avoidance of doubt, the term “Option” as used herein only describes options granted pursuant to the Stock Option Grant Notice to which this Agreement is an Exhibit.
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Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.
(i) “Termination of Directorship” shall mean the time when the Participant, if he or she is or becomes an Independent Director, ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors.
(j) “Termination of Employment” shall mean the time when the employee-employer relationship between the Participant and the Company or any Subsidiary is terminated for any reason, with or without Cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding: (i) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any Subsidiary, and (ii) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, notwithstanding any other provision of this Agreement, if this Option is an Incentive Stock Option, unless otherwise determined by the Administrator in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section.
(k) “Termination of Services” shall mean the time when (i) every relationship between the Participant and the Company has been terminated by a Termination of Consultancy, Termination of Directorship and/or Termination of Employment, as applicable, and (ii) the Participant is no longer an Eligible Person under the Plan. For purposes of the Option, the Participant’s Termination of Services will be deemed to occur as of the date the Participant is no longer actively providing services to the Company or any Subsidiary (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment or other laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment or service agreement, if any), and unless otherwise determined by the Company, (i) the Participant’s right to vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws or common law in the jurisdictions where the Participant provides services or the terms of the Participant’s employment or service agreement, if any); and (ii) the period (if any) during which the Participant may exercise the Option after such Termination of Services will commence on the date the Participant ceases to actively provide services and will not be extended by any notice period mandated under employment laws or common law in the jurisdiction where the Participant provides services or the terms of the Participant’s employment or service agreement, if any; the Company shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of the Options (including whether the Participant may still be considered to be providing services while on a leave of absence).
1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
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ARTICLE II.
GRANT OF OPTION
2.1 Grant of Option. In consideration of the Participant’s future employment with or service to the Company or a Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to the Participant the Option to purchase any part or all of an aggregate of the number of shares of Stock set forth in the Grant Notice, subject to the terms and conditions set forth in the Plan and this Agreement. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law.
2.2 Exercise Price. The exercise price of the shares of Stock subject to the Option shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that the price per share of the shares of Stock subject to the Option shall not be less than 100% of the Fair Market Value of a share of Stock on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an Incentive Stock Option and the Participant owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the price per share of the shares of Stock subject to the Option shall not be less than 110% of the Fair Market Value of a share of Stock on the Grant Date[.
CEO FORM: Notwithstanding anything to the contrary contained in this Option Agreement, the Plan or any applicable plan providing for cash dividend equivalent rights, if an extraordinary dividend is declared on the Stock following the date of the Agreement and if the holders of Options of the Company generally are entitled to receive dividend equivalent payments with respect thereto, then the exercise price of the Option shall be reduced by the amount per share of such extraordinary dividend; provided, however, that if as a result of the foregoing reduction, the exercise price would be below zero, then this provision will apply only to the extent the exercise price would be zero and the remainder of any dividend equivalents related to an extraordinary dividend will be paid in cash].
2.3 Consideration to the Company. In consideration of the grant of the Option by the Company, the Participant agrees to render faithful and efficient services to the Company or any Subsidiary. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and the Participant.
ARTICLE III.
PERIOD OF EXERCISABILITY
3.1 Commencement of Exercisability.
(a) Subject to Sections 3.1(b), 3.1(c), 3.1(d), and 3.3, the Option shall become vested and exercisable in such amounts and at such times as set forth in the Grant Notice.
(b) No portion of the Option which has not become vested and exercisable at the date of the Participant’s Termination of Services shall thereafter become vested and exercisable, except as follows or as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and the Participant:
If the Participant incurs a Termination of Services under any of the circumstances described in Section 5(a)(i) (death) of that certain Employment Agreement between the Participant and the Company effective _______________ (the “Employment Agreement”), Section 5(a)(ii) (Disability) of the Employment Agreement, Section 5(a)(iv) (Resignation for Good Reason of the Employment Agreement) or Section 5(a)(v) (Termination
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without Cause) of the Employment Agreement, or if the Participant incurs a voluntary Termination of Services at a time when the Participant’s years of continuous employment with or service to the Company or any Subsidiary (collectively, “Years of Service”) is equal to or exceeds ten years, the Participant has served six or more years in Participant's most senior role, and the combination of (i) the Participant’s age in years, plus (ii) the Participant’s Years of Service, equals at least 70 (and the Company at such time does not have grounds to terminate the Participant’s employment or service for “Cause”), then, in each such case, vesting will continue after such Termination of Services as provided below:
| Termination Date | Percent of Remaining Options That May Continue to Vest (“Continued Vesting Options”) | ||||
| Prior to October 1, 2025 | 0% | ||||
| On or after October 1, 2025 but prior to October 1, 2026 | 20% | ||||
| On or after October 1, 2026 but prior to October 1, 2027 | 40% | ||||
| On or after October 1, 2027 but prior to October 1, 2028 | 60% | ||||
| On or after October 1, 2028 but prior to October 1, 2029 | 80% | ||||
| On or after October 1, 2029 | 100% | ||||
The Continued Vesting Options will vest (subject to the terms of this Agreement) annually in equal portions over the remainder of the vesting period set forth in Exhibit B.
(c) Notwithstanding Section 3.1(a) of this Agreement and Section 6 of the Plan (but subject to Section 3.1(b) and Section 3.1(d) of this Agreement), unless otherwise determined by the Administrator, the following Change in Control provisions shall apply to the Option:
(i) In the event of a Change in Control occurring during the vesting of the Option and before the Participant incurs a Termination of Services, to the extent the Option has not been forfeited, the Option shall become fully vested and exercisable except to the extent that a Replacement Award is provided to the Participant for the Option.
(ii) For purposes of this Agreement, a “Replacement Award” means an award (A) of performance-based stock options, (B) that has a value at least equal to the value of the Option immediately prior to the provision of such Replacement Award, (C) that relates to publicly traded equity securities of the Company or its successor in the Change in Control (or another entity that is affiliated with the Company or such successor following the Change in Control) (the “Successor”), (D) the tax consequences of which, under the Code, if the Participant is subject to U.S. federal income tax under the Code, are not less favorable to the Participant than the tax consequences of the Option immediately prior to the provision of such Replacement Award, (E) that becomes fully vested and exercisable if the Participant incurs a Termination of Services (and/or, if applicable, a termination of all employment with and services to the Successor) for “Good Reason” by the Participant or without “Cause” by the Successor within a period of two years after the Change in Control, and (F) the other terms and conditions of which are not less favorable to the Participant than the terms and conditions of the Option immediately prior to the provision of such Replacement Award (including the provisions that would apply in the event of a subsequent Change in Control). Without limiting the generality of the foregoing, a Replacement Award may take the form of a continuation of the Option if the requirements of the preceding sentence are satisfied. The determination of whether the conditions of this Section 3.1(c)(ii) are satisfied will be made by the Administrator, as constituted immediately before the Change in Control, in its sole discretion.
(iii) For purposes of Section 3.1(c)(ii), “Good Reason” will be defined: (A) if the Participant has an employment (or substantially similar) agreement that defines “Good Reason,” as such term is so defined in such agreement; or (B) to mean a material diminution in the nature or scope of the
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responsibilities, authorities or duties of the Participant compared to those regarding the Participant’s position held immediately prior to the Change in Control, a change of more than 60 miles in the location of the Participant’s principal work location compared to that in effect immediately prior to the Change in Control, or a material reduction in the Participant’s remuneration upon or after the Change in Control compared to that in effect immediately prior to the Change in Control, provided, however, that no later than 90 days following an event constituting Good Reason, the Participant gives notice to the Successor of the occurrence of such event and the Successor fails to cure such event within 30 days following the receipt of such notice.
(iv) For purposes of Section 3.1(c)(ii), “Cause” will be defined: (A) if the Participant has an employment (or substantially similar) agreement that defines “Cause,” as such term is so defined in such agreement; or (B) to mean (1) acts of personal dishonesty, gross negligence or willful misconduct on the part of the Participant in the course of his or her employment or services, (2) the Participant’s engagement in conduct that results, or could be reasonably expected to result, in material injury to the reputation or business of the Successor or its affiliates, (3) misappropriation by the Participant of the assets or business opportunities of the Successor or its affiliates, (4) embezzlement or fraud committed by the Participant, at his or her direction, or with his or her personal knowledge, (5) the Participant’s conviction by a court of competent jurisdiction of, or pleading “guilty” or “no contest” to, (a) a felony, or (b) any other criminal charge (other than minor traffic violations) that has, or could be reasonably expected to have, an adverse impact on the performance of the Participant’s duties to the Successor or its affiliates, or (6) failure by the Participant to follow the lawful directions of a superior officer or the board of directors (or substantially similar body) of the Successor.
(d) Notwithstanding Section 3.1(c), the Administrator may, in good faith and in such manner as it may deem equitable, in its sole discretion, adjust the foregoing Fair Market Value requirements and other Option terms in the event of a dividend or other distribution (whether in the form of cash, Stock, other securities or property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or any unusual or nonrecurring transactions or events affecting the Company or the financial statements of the Company if the adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option. For purposes of this Section 3.1, shall take into account the consideration received by the stockholders in connection with a Change in Control or in connection with any other sale of common stock or other equity interests in the Company or any Subsidiary, after taking into account all post-closing adjustments relating to a Change in Control, and assuming the exercise of all vested options and warrants outstanding as of the effective date of such Change in Control (after giving effect to any dilution of securities or instruments arising in connection with such Change in Control); provided however, that if the stockholders retain any portion of the common stock following such Change in Control or other sale, the Fair Market Value of such portion of the retained common stock immediately following such Change in Control or other sale shall be deemed “consideration received” for purposes of calculating the proceeds and provided further that the Fair Market Value of any non-cash consideration (including stock) received in connection with a Change in Control shall be determined as of the date of such Change in Control.
3.2 Duration of Exercisability. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3.
3.3 Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The expiration of ten years from the Grant Date; or
(b) If this Option is designated as an Incentive Stock Option and the Participant owned (within the meaning of Section 424(d) of the Code), at the time the Option was granted, more than 10% of the total combined
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voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the expiration of five years from the Grant Date; or
(c) The opening of business on the day of the Participant’s Termination of Services by reason of a termination by the Company or a Subsidiary for Cause (as defined in the Participant’s employment agreement, if applicable), unless the Committee, in its discretion, determines that a longer period is appropriate; or
(d) The expiration of six months from the date of the Participant’s Termination of Services, unless such termination occurs by reason of (i) the Participant’s death, (ii) the Participant’s Disability, (iii) the Participant’s retirement (pursuant to Section 3.3(e) or Section 3.3(f)(iii)), (iv) the Participant’s termination for Cause (as defined in the Participant’s employment agreement, if applicable), (v) if the Participant has an employment agreement that defines a termination for “cause” and/or “Good Reason,” a termination by the Company or a Subsidiary without Cause (as defined in the Participant’s employment agreement) or a termination by the Participant for Good Reason (as defined in the Participant’s employment agreement, if applicable), or (vi) is under Section 3.1(c)(ii)(E) of this Agreement, provided, however, that any portion of this Option that is an Incentive Stock Option shall cease to be an Incentive Stock Option on the expiration of three months from the Participant’s Termination of Services (and shall thereafter be a Non-Qualified Stock Option), provided, further, that to the extent that the Participant is prohibited from selling shares of Stock pursuant to the Company’s insider trading policy at all times during such six-month period, with the exception of an open trading window of less than seven days, the Option shall expire on the seventh day following the opening of the first open trading window thereafter; or
(e) The expiration of one year from the date of the Participant’s Termination of Services by reason of the retirement, after a minimum of ten years of service, of a Participant who is at least 55 years old (unless Section 3.3(f)(iii) applies), provided, however, that to the extent that the Participant is prohibited from selling shares of Stock pursuant to the Company’s insider trading policy at all times during such one-year period, with the exception of an open trading window of less than seven days, the Option shall expire on the seventh day following the opening of the first open trading window thereafter; or
(f) The expiration date set forth in clause (a), (i) if the Participant has an employment agreement that defines a termination for “Cause” and/or “Good Reason,” and upon a Participant’s Termination of Services by the Company or a Subsidiary without Cause (as defined in Participant’s employment agreement) or a Termination of Services by the Participant for Good Reason (as defined in Participant’s employment agreement), or (ii) upon the Participant’s death or Disability, or (iii) upon the Participant’s voluntary Termination of Services at a time when the Participant’s Years of Service is equal to or exceeds ten years , the Participant has served six or more years in Participant's most senior role, and the combination of (A) the Participant’s age in years, plus (B) the Participant’s Years of Service, equals at least 70 (and the Company at such time does not have grounds to terminate the Participant’s employment or service for “Cause”), or (iv) after a Change in Control under Section 3.1(c).
Notwithstanding the foregoing, if any Option vests after the Participant’s Termination of Services for reasons set forth herein pursuant to Section 3.1 and the Participant has a limit of six months or one year following such Termination of Services to exercise the Option pursuant to paragraph (d) or (e), the Participant shall have six months after the Option vests to exercise such Option.
3.4 Tax Obligations. The Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options, including the Option, are exercisable for the first time by the Participant in any calendar year exceeds $100,000, the Option and such other options shall be Non-Qualified Stock Options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. The Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder. The Participant acknowledges that an Incentive Stock Option exercised more than three months after the Participant’s Termination of Employment, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option.
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Regardless of any action the Company or Participant’s employer, whether it be the Company or a Subsidiary (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits, payment on account or other tax related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option, including, but not limited to, the grant, vesting or exercise of the Option, the subsequent sale of shares of Stock acquired pursuant to such exercise and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Company and/or the Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, the Participant will pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (i) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer; or (ii) withholding from proceeds of the sale of shares of Stock acquired at exercise of the Option either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); or (iii) withholding in shares of Stock to be issued at exercise of the Option.
Depending on the withholding method, the Company and/or the Employer may withhold or account for Tax-Related Items by considering statutory withholding rates or other withholding rates, including maximum applicable rates in the Participant’s jurisdiction. If the Tax-Related Items are satisfied by withholding in shares of Stock, for tax purposes, the Participant will be deemed to have been issued the full number of shares of Stock subject to the exercised Option, notwithstanding that a number of shares of Stock are held back solely for the purpose of satisfying the Tax-Related Items.
Finally, the Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the shares of Stock or the proceeds of the sale of shares of Stock, if the Participant fails to comply with his or her obligations in connection with the Tax-Related Items.
ARTICLE IV.
EXERCISE OF OPTION
4.1 Person Eligible to Exercise. Except as provided in Section 5.2(b), during the lifetime of the Participant, only the Participant may exercise the Option or any portion thereof. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3.
4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person or entity designated by the
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Company) of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3:
(a) An Exercise Notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator;
(b) The receipt by the Company of full payment for the shares of Stock with respect to which the Option or portion thereof is exercised, including payment of any applicable Tax-Related Items, which may be in one or more of the forms of consideration permitted under Section 4.4;
(c) Any other written representations as may be required in the Administrator’s reasonable discretion to evidence compliance with the Securities Act or any other applicable law, rule, or regulation; and
(d) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option.
Notwithstanding any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.
4.4 Method of Payment. Payment of the exercise price, and any applicable Tax-Related Items, shall be by any of the following, or a combination thereof, at the election of the Participant:
(a) Cash;
(b) Check;
(c) Broker Assisted Cashless Exercise. With the consent of the Administrator, delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate exercise price; provided, that payment of such proceeds is then made to the Company upon settlement of such sale;
(d) Share Surrender. With the consent of the Administrator, surrender of other shares of Stock which (i) in the case of shares of Stock acquired from the Company, have been owned by the Participant for more than six months on the date of surrender (or such other minimum length of time as the Administrator determines from time to time to be necessary to avoid adverse accounting consequences or violation of any applicable law, rule or regulation), and (ii) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares of Stock with respect to which the Option or portion thereof is being exercised; or
(e) Net Exercise. With the consent of the Administrator, surrendered shares of Stock issuable upon the exercise of the Option having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the shares of Stock with respect to which the Option or portion thereof is being exercised.
4.5 Conditions to Issuance of Stock Certificates. The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares of Stock or issued shares of Stock which have then been reacquired by the Company. Such shares of Stock shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares of Stock to listing on all stock exchanges on which such Stock is then listed;
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(b) The completion of any registration or other qualification of such shares of Stock under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The receipt by the Company of full payment for such shares of Stock, including payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4; and
(e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience.
4.6 Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares of Stock purchasable upon the exercise of any part of the Option unless and until such shares of Stock shall have been issued by the Company to such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the shares of Stock are issued, except as provided in Section 6 of the Plan.
ARTICLE V.
OTHER PROVISIONS
5.1 Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option.
5.2 Option Transferability.
(a) Except as otherwise set forth in Section 5.2(b), (i) the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the shares of Stock underlying the Option have been issued, and all restrictions applicable to such shares of Stock have lapsed. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence; and (ii) during the lifetime of the Participant, only the Participant may exercise the Option or any portion thereof. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
(b) Notwithstanding the foregoing, with respect to participants who are corporate officers or operating presidents, the Administrator may permit any portion of the Option that is not an Incentive Stock Option to be transferred to, exercised by and paid to certain persons or entities related to such Participant, including but not limited to members of such Participant’s family, charitable institutions or trusts or other entities whose beneficiaries or beneficial owners are members of such Participant’s family and/or charitable institutions, or to such other persons
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or entities as may be expressly approved by the Administrator, pursuant to such conditions and procedures as the Administrator may establish. Any permitted transfer shall be subject to the condition that the Administrator receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with such Participant’s termination of employment or service with the Company or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities.
5.3 Adjustments. The Participant acknowledges that the Option is subject to modification and termination in certain events as provided in this Agreement and Section 6 of the Plan.
5.4 Appendix. Notwithstanding any provisions in this Agreement, the Option grant shall be subject to any additional or different terms and conditions set forth in the attached Appendix to this Option Agreement for the Participant’s country (the “Appendix”). Moreover, if the Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable to comply with local law or facilitate the administration of the Plan. The Appendix constitutes part of this Agreement.
5.5 Insider Trading/Market Abuse Laws. The Participant understands that he or she may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including but not limited to the United States, the Participant’s country, the Service Provider’s country, and the country in which the shares of Stock may be listed, which may affect the Participant’s ability, directly or indirectly, to purchase or sell or attempt to sell or otherwise dispose of shares of Stock, rights to shares of Stock (e.g., Options), or rights linked to the value of shares of Stock, during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws and/or regulation in the applicable jurisdiction(s)). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before possessing inside information. Furthermore, the Participant may be prohibited from (a) disclosing inside information to any third party, including fellow employees or service providers (other than on a “need to know” basis) and (b) “tipping” third parties or causing them to otherwise buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. The Participant is responsible for ensuring compliance with any applicable restrictions and the Participant should consult with his or her personal legal advisor on this matter.
5.6 No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making recommendations regarding the Participant’s participation in the Plan, or the Participant’s acquisition or sale of shares of Stock acquired upon exercise. The Participant should consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any actions related to the Plan.
5.7 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company, and any notice to be given to the Participant shall be addressed to the Participant at the most recent address set forth in the Company’s books and records. By a notice given pursuant to this Section 5.7, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to exercise his or her Option pursuant to Section 4.1 by written notice under this Section 5.7. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
5.8 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
5.9 Governing Law and Venue; Severability. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall
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be governed, construed and interpreted in accordance with the laws of the state of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the state of Delaware and agree that any such litigation shall be conducted only in the courts of Delaware or the federal courts of the United States located in Delaware and no other courts. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect.
5.10 Conformity to Securities Laws. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the U.S. Securities Act and the Exchange Act and any and all regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder, and any U.S. or non-U.S. securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
5.11 Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material way without the prior written consent of the Participant.
5.12 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 5.2, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.
5.13 Notification of Disposition. If this Option is designated as an Incentive Stock Option, the Participant shall give prompt notice to the Company of any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made (a) within two years from the Grant Date with respect to such shares of Stock or (b) within one year after the transfer of such shares of Stock to him. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer.
5.14 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
5.15 Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee or other service provider of the Company or any of its Subsidiaries. The terms of the Participant’s employment or service relationship are determined by the Company or the Employer’s policy, and by the terms of any employment or service contract to which the Participant might be party. This Agreement creates no rights to continued employment, or any other service relationship, nor does it limit the discretion the Company or the Employer would otherwise have to terminate Participant’s employment or other service relationship, with or without Cause. The Option and any shares of Stock acquired pursuant to the Plan (including any value assigned at grant, any acquisition gain at exercise, any capital gains upon sale of the shares of Stock and any income or earnings from holding the shares of Stock) are not part of normal or expected compensation or salary, including, but not limited to, for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments.
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5.16 Electronic Delivery and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or any third party designated by the Company.
5.17 Imposition of Other Requirements; Clawback Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Options and on any shares of Stock acquired upon exercise of the Option, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing. Notwithstanding anything in this Agreement to the contrary, to the extent the Participant is a person subject to the requirements of Rule 10D-1 under the Exchange Act, the Participant acknowledges and agrees that this Agreement and any compensation or other benefits or amounts described herein are subject to the terms and conditions of the Company’s clawback policy or policies (if any) as may be in effect from time to time, including specifically to implement Section 10D of the Exchange Act and any applicable rules or regulations promulgated thereunder (including applicable rules and regulations of any national securities exchange on which the Company’s securities may be traded) (collectively, the “Compensation Recovery Policy”), and that applicable sections of this Agreement and/or any related documents shall be, as applicable, deemed superseded by and subject to the terms and conditions of the Compensation Recovery Policy from and after the effective date thereof. Further, by signing this Agreement, the Participant acknowledges and agrees that the Participant consents to be bound by the terms of the Agreement, including its clawback provisions (and consents to fully cooperate with the Company in connection with any of the undersigned’s obligations pursuant to the Agreement and its clawback provisions).
5.18 No Right to Damages. Nothing in the Grant Notice, this Agreement or the Plan gives the Participant a right to receive damages for any portion of the Option that Participant might lose due to Company, Subsidiary or Committee decisions. The loss of potential profit from the Option will not constitute an element of damages in the event of Participant’s Termination of Services for any reason, even if such Termination of Services violates an obligation of the Company or a Subsidiary.
5.19 Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
5.20 Waiver. The Participant acknowledges that a waiver by the Company of any provision, or breach thereof, of this Agreement on any occasion shall not operate or be construed as a waiver of such provision on any other occasion or as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other participant.
5.21 Section 409A. Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the U.S. Internal Revenue Code of 1986, as amended (together with any U.S. Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). The Committee reserves the right (without the obligation to do so or to indemnify the Participant for the failure to do so) to adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate to exempt the Option from Section 409A or to comply with the requirements of Section 409A and thereby avoid the penalty taxes under Section 409A.
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APPENDIX
COUNTRY-SPECIFIC PROVISIONS TO THE
STOCK OPTION AGREEMENT
Terms and Conditions
This Appendix includes additional terms and conditions that govern the Option granted to the Participant under the Plan if the Participant resides or works in one of the countries listed below. If the Participant is a citizen or resident (or is considered as such for local law purposes) of a country other than the country in which the Participant is currently residing and/or working, or if the Participant relocates to another country after the grant of the Option, the Company shall, in its discretion, determine to what extent the country-specific terms contained herein shall be applicable to the Participant. Certain capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or the Agreement.
Notifications
This Appendix also includes information regarding exchange controls and certain other issues of which the Participant should be aware with respect to the Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws as of October 2019; however, such laws are often complex and change frequently. As a result, the Company strongly recommends that the Participant does not rely on the information in this Appendix as the only source of information relating to the consequences of the Participant’s participation in the Plan because the information may be out of date at the time that Participant exercises the Option or sell shares of Stock acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to the Participant’s particular situation and the Company is not in a position to assure the Participant of any particular result. Accordingly, the Participant is advised to seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to the Participant’s situation.
Finally, the Participant understands that if he or she is a citizen or resident of a country other than the one in which Participant is currently working, transfers employment after the grant date, or is considered a resident of another country for local law purposes, the information contained herein may not apply to the Participant, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.
ALL COUNTRIES OUTSIDE OF THE UNITED STATES
Terms and Conditions
1. Nature of Grant. In accepting the Option, the Participant acknowledges and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the Options is voluntary and occasional and does not create any contractual or other right to receive future grants of stock options, or benefits in lieu of stock options, even if stock options have been granted in the past;
(c) all decision with respect to future stock options or other grants, if any, will be at the sole discretion of the Company;
(d) the Participant’s participation in the Plan shall not create a right to further employment or service relationship with the Company or the Employer and shall not interfere with the ability of the Company or the Employer to terminate the Participant’s employment or service relationship at any time;
(e) the Participant is voluntarily participating in the Plan;
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(f) the Options and the shares of Stock subject to the Options, and any value of the shares of Stock, and any income or earnings from holding the shares of Stock, are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which is outside the scope of the Participant’s employment or service contract, if any;
(g) the Options and the shares of Stock subject to the Options, and the income and value of the same are not intended to replace any pension rights or compensation;
(h) the Options and the shares of Stock subject to the Options, and the income and value of the same, are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, leave-related payments, pension or retirement or welfare benefits or similar mandatory payments and in no event should be considered compensation for, or relating to, past services for the Company, the Employer of any Subsidiary;
(i) the Option grant and the Participant’s participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company or a Subsidiary;
(j) unless otherwise agreed with the Company, the Options and the shares of Stock subject to the Option, and the income and value of the same, are not granted as consideration for, or in connection with, any service the Participant may provide as a director of a Subsidiary;
(k) the future value of the underlying shares of Stock is unknown, indeterminable and cannot be predicted with certainty;
(l) if the underlying shares of Stock do not increase in value, the Option will have no value;
(m) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the Participant’s Termination of Services (for any reason whatsoever, and whether or not later found to be invalid or in breach of employment or other laws in the jurisdiction where the Participant renders services or the terms of the Participant’s employment or service agreement, if any);
(n) unless otherwise provided in the Plan or by the Company in its sole discretion, the Options and the benefits evidenced by this Agreement do not create any entitlement to have the Options or any such benefit transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of Stock of the Company; and
(o) neither the Company, the Employer, nor any other Subsidiary shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the U.S. Dollar that may affect the value of the Option or of any amounts due to the Participant upon exercise of the Options or the subsequent sale of any shares of Stock acquired upon settlement.
2. Language. The Participant acknowledges that the Participant is sufficiently proficient in English or has consulted with an advisor who is sufficiently proficient in English so as to allow the Participant to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document(s) related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
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Data Privacy Information and Consent.
(a) Declaration of Consent. The Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data (as defined below) by the Company and the transfer of Data to the recipients mentioned below, including recipients located in countries which may not have a similar level of protection from the perspective of the Participant's country’s data protection laws.
(b) Data Collection and Usage. The Company and the Employer collect, process and use certain personal information about the Participant, including but not limited to his or her name, home address, telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, any shares of Stock, details of all stock options granted under the Plan or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for purposes of implementing, administering and managing the Plan. The legal basis, where required, for the collection and processing of Data is the Participant’s consent.
(c) Stock Plan Administration Service Providers. The Company may transfer Data, or parts thereof, to a third-party stock plan administrator/broker (“Service Provider”) which may assist the Company, presently or in the future, with the implementation, administration and management of the Plan. The Participant acknowledges and understands that the Service Provider will open an account for the Participant to receive and trade shares of Stock acquired under the Plan and the Participant may be asked to agree on separate terms and data processing practices with the Service Provider, with such agreement being a condition to the Participant's ability to participate in the Plan. Where required, the legal basis for the transfer of Data to the Service Provider is the Participant’s consent.
(d) International Data Transfers. The Company is, and the Service Provider may be, based in the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued only a limited adequacy finding with respect to the United States that applies only if and to the extent companies self-certify and remain self-certified under the EU-U.S. Privacy Shield program, which is open to companies subject to the jurisdiction of the Federal Trade Commission. The Company has currently not registered for the EU-U.S. Privacy Shield program. The Company’s legal basis for the transfer of data, where required, is the Participant’s consent.
(e) Data Retention. The Company will hold and use Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations including under tax, exchange control, labor and securities laws. This may mean Data is retained until after the Participant’s employment or service relationship ends. When the Company or the Employer no longer need Data for any of the above purposes, they will cease processing it in this context and remove it from all of their systems used for such purposes, to the fullest extent possible.
(f) Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. The Participant understands that he or she may request to stop the transfer and processing of the Data for purposes of his or her participation in the Plan and that the Participant’s compensation from or service relationship with the Employer will not be affected. The only consequence of refusing or withdrawing consent is that the Company would not be able to allow the Participant to participate in the Plan. The Participant understands that his or her Data will still be processed in relation to the Participant’s employment or service relationship for record-keeping purposes.
(g) Data Subject Rights. The Participant may have a number of rights under the data privacy laws in his or her jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) request access to or copies of Data the Company processes, (ii) rectify incorrect Data, (iii) delete Data, (iv) restrict the processing of Data, (v) restrict the portability of Data, (iv) lodge complaints with the competent authorities in the Participant’s jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of Data. To receive clarification regarding these rights or to exercise these rights, the Participant can contact his or her human resources representative.
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By signing below, the Participant declares that he or she agrees with the data processing practices as described above. The Participant understands and acknowledges that the Participant may withdraw his or her consent at any time with future effect for any or no reason as described in sub-section (f) above.
Submitted by:
PARTICIPANT
Signature
_____________
Print Name
Print Name
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CANADA
Terms and Conditions
Manner of Exercise. The following provision supplements Section 4.3 the Agreement:
Notwithstanding anything in the Plan, the Participant agrees to pay the exercise price and any Tax-Related Items solely by means of (i) cash, (ii) check or other instrument acceptable to the Company or (ii) a broker-assisted cashless exercise, whereby the broker sells some or all of the shares of Common Stock to be issued upon exercise to pay the exercise price, brokerage fees and any applicable Tax-Related Items. To the extent that tax regulatory requirements change, the Company reserves the right to permit the Participant to exercise the Option and pay the exercise price and any applicable Tax-Related Items in shares of Stock to the extent permitted by the Plan.
Termination of Services. Notwithstanding any provision in the Agreement to the contrary, for purposes of the Option, and except as expressly required by applicable legislation, the Participant’s Termination of Services (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where the Participant is employed or providing services, or the terms of the Participant’s employment or service agreement, if any) will be deemed to occur as of the date that is the earlier of: (1) the date that the Participant is no longer actively employed by the Company or any Subsidiary, or at the discretion of the Committee, or (2) the date the Participant receives notice of Termination of Services, regardless of any notice period or period of pay in lieu of such notice required under local law (including, but not limited to statutory law, regulatory law and/or common law); the Company shall have the exclusive discretion to determine when Participant is no longer employed for purposes of the Option grant (including when Participant is no longer considered as providing active service while on a leave of absence).
The following provisions will apply if the Participant is a resident of Quebec:
French Language Provision.
The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.
Les parties reconnaissent avoir exigé la rédaction en anglais de la convention, ainsi que de tous documents exécutés, avis donnés et procedures judiciaries intentées, directement ou indirectement, relativement à la présente convention.
Data Privacy. This provision supplements the Data Privacy for All Countries Outside of the United States in this Appendix:
The Participant hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. The Participant further authorizes the Company, any Subsidiaries and the Committee to disclose and discuss the Plan with their advisors. The Participant further authorizes the Company or its Subsidiaries to record such information and to keep such information in the Participant’s employee file.
Notifications
Securities Law Notice. The Participant is permitted to sell shares of Stock acquired through the Plan through the designated broker appointed under the Plan, if any, provided the resale of shares of Stock acquired under the Plan takes place outside of Canada through the facilities of a stock exchange on which the shares of Stock are listed. The Company’s shares of Stock are currently listed on the New York Stock Exchange.
Foreign Asset/Account Reporting Information. The Participant is required to report any foreign specified property on Form T1135 (Foreign Income Verification Statement) if the total value of the foreign specified property exceeds C$100,000 at any time during the year. Foreign specified property includes shares of Stock acquired under the Plan, and may include the Option. The Option must be reported (generally at a nil cost) if the C$100,000 cost threshold is exceeded because of other foreign property the Participant holds. If shares of Stock are acquired, their cost generally is the adjusted cost base (“ACB”) of the shares of Stock. The ACB ordinarily would equal the fair market value of the shares of Stock at the time of acquisition, but if the Participant owns other shares of Stock, this ACB may have to be averaged with the ACB of the other shares of Stock. The Form must be filed by April 30 of the following year. The Participant should consult with a personal advisor to ensure that the Participant complies with the applicable requirements.
FRANCE
Terms and Conditions
Option Type. The Option is not intended to qualify for specific tax or social security treatment in France.
Consent to Receive Information in English. By accepting the Option, the Participant confirms having read and understood the Plan and this Agreement, including all terms and conditions included therein, which were provided in the English language. The Participant accepts the terms of those documents accordingly.
En acceptant cette Option, vous confirmez avoir lu et compris le Plan et cette convention, incluant tous leurs termes et conditions, qui ont été transmis en langue anglaise. Vous acceptez les dispositions de ces documents en connaissance de cause.
Notifications
Foreign Asset/Account Reporting Information. French residents and non-residents must declare to the Customs Authorities the cash and securities they import or export without the use of a financial institution when the value of such cash or securities exceeds €10,000. French residents with foreign account balances exceeding €1,000,000 must report any transactions carried out on those accounts to the Bank of France on a monthly basis. French residents must also report all foreign bank and brokerage accounts on an annual basis (included accounts opened or closed during the tax year) on a specific form together with the income tax return. Failure to comply could trigger significant penalties.
GERMANY
Notifications
Exchange Control Notification. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank. If Participant makes or receives a payment in excess of this amount, Participant must report the payment to the German Federal Bank electronically using the “General Statistics Reporting Portal” (“Allgemeines Meldeportal Statistik”) available via the German Federal Bank’s website (www.bundesbank.de).
UNITED KINGDOM
Terms and Conditions
Taxes and Other Deductions. The following supplements Section 3.4 of the Agreement:
If payment or withholding of the income tax due is not made within ninety (90) days of the end of the tax year in which the event giving rise to the liability occurred or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003 (the “Due Date”), the amount of any uncollected tax liability shall
constitute a loan owed by the Participant to the Company or the Employer, as applicable, effective as of the Due Date. The Participant agrees that the loan will bear interest at the then-current official rate of Her Majesty’s Revenue & Customs (“HMRC”), it will be immediately due and repayable, and the Company or the Employer, as applicable, may recover it at any time thereafter by any of the means referred to in Section 3.4 of the Agreement.
Notwithstanding the foregoing, if the Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the U.S. Securities and Exchange Act of 1934, as amended), the Participant shall not be eligible for a loan as described above. In the event that the Participant is a director or executive officer and the amount of any income tax is not collected from or paid by the Participant by the Due Date, the amount of any uncollected tax liability may constitute a benefit to the Participant on which additional income tax and National Insurance contributions (“NICs”) may be payable. The Participant understands that he or she will be responsible for reporting any income tax and NICs due on this additional benefit directly to HMRC under the self-assessment regime and for reimbursing the Company or the Employer, as applicable, for the value of any NICs due on this additional benefit.
EXHIBIT B
FOR USE WITH NAMED EXECUTIVE OFFICER FIVE YEAR AWARDS
VESTING
Annual Operational Performance per Diluted Share1
| Minimum Vesting (10% Growth) | Maximum Vesting (17.5% Growth) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fiscal Year (A) | % of Shares Vesting (B) | YE Operating Performance (per Diluted Share) (C) | % of Shares Vesting (D) | YE Operating Performance (per Diluted Share) (E) | ||||||||||||||||||||||||||||||||||||||||||||||
2025 | 5 | % | $ | 610.25 | 20 | % | $ | 651.86 | ||||||||||||||||||||||||||||||||||||||||||
2026 | 5 | % | $ | 671.27 | 20 | % | $ | 765.93 | ||||||||||||||||||||||||||||||||||||||||||
2027 | 5 | % | $ | 738.4 | 20 | % | $ | 899.97 | ||||||||||||||||||||||||||||||||||||||||||
2028 | 5 | % | $ | 812.24 | 20 | % | $ | 1,057.47 | ||||||||||||||||||||||||||||||||||||||||||
2029 | 5 | % | $ | 893.47 | 20 | % | $ | 1,242.52 | ||||||||||||||||||||||||||||||||||||||||||
1. Annual Operational Performance Vesting. Effective as of the last day of each of the Company’s fiscal years 2025-2029 there shall become vested the percentage of shares covered by the Option which is equal to the Annual Amount (as described below). The Options shall become vested and exercisable as of the date that the Administrator verifies the AOP (as defined below); provided, however, the vesting hereunder will be effective as to Participant as of the end of the fiscal year to which such Annual Amount relates (notwithstanding any termination of Participant’s employment during the period between the end of such fiscal year and the verification of the AOP and, in such case, notwithstanding the provisions of Section 3.1(b)). For each such fiscal year, the Administrator shall verify the AOP, and shall notify the Company’s Chief Executive Officer of its determination with respect thereto, within ten business days after the Administrator receives the Company’s audited financial statements for that fiscal year.
X. For each year (the “Performance Year”), the Annual Amount is zero if the Annual Operational Performance per Diluted Share (“AOP”)2 with respect to such year is less than the amount indicated for such year in column (C). Otherwise the Annual Amount shall be equal to the amount indicated for such year in column (B) plus the product of (a) the excess of (1) the amount indicated for such year in column (D) over (2) the amount indicated for such year in column (B) and (b) the ratio of (1) the excess of (x) the AOP with respect to the year (but not more than the amount indicated in Column (E) for such year) over (y) the amount indicated for such year in column (C) to (2) the excess of (x) the amount indicated for such year in column (E) over (y) the amount indicated for such year in column (C).
Y. In calculating the AOP in Section X above for any Performance Year there shall also be taken into account any AOP in any of the two prior Performance Years (starting in fiscal year 2025) which was in excess of the amount indicated in Column (E) for such prior year and has not previously been taken into account hereunder but only if doing so would increase the Annual Amount in such Performance Year; provided, however that the excess applied under this Section Y and Section Z below shall be limited in any given year to $100. If the Participant is subsequently awarded options vesting in 2030 and 2031, any AOP during 2028 and 2029 in excess of the amount indicated in Column (E) (and not previously taken into account hereunder) may be used in one or more of the next two following years by treating such excess as AOP in the Performance Year under the option agreement granting said options; provided, however that the excess applied in this sentence shall be limited in any given year to $100.
2 As of a given date, the Company’s “Annual Operational Performance per Diluted Share” shall mean the ratio of (1) the excess of (a) the product of (i) EBITDA and (ii) the Fixed Market Multiple (as defined below) over (b) Net Debt to (2) the Company’s number of Diluted Shares as of such date, where “EBITDA,” “Net Debt” and “Diluted Shares” have the meanings set forth in the Stock Option Agreement set forth on Exhibit A. For purposes of this Exhibit B, the Fixed Market Multiple shall mean 12.100, as adjusted for the weighted EBITDA multiple of future acquisitions as determined by the Committee.
Z. If the Annual Amount in any Performance Year is less than the amount indicated in column (D) for such year then an amount equal to the excess of (1) the amount indicated in column (D) for the applicable Performance Year less (2) the actual Annual Amount for such Performance Year (the “Shortfall Amount”) may vest in one or more of the next two following years. If there is an excess of AOP in one or more of the next two following years, such excess can be applied up to the Shortfall Amount not to exceed the amount indicated in column (E) for the Performance Year to which the Shortfall Amount relates; provided, however that the excess applied under this Section Z and Section Y above shall be limited in any given year to $100. The portion of any excess AOP amount which is so used may not be used more than once.
2. Adjustments of Operational Performance Objectives. The Operational Performance targets specified in this Exhibit B are based upon certain revenue and expense assumptions about the future business of the Company as of the date the Option is granted. Accordingly, in the event that, after such date, the Administrator determines, in its sole discretion, that any acquisition or disposition of any business by the Company or any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), repurchase of securities, recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, any unusual or nonrecurring transactions or events affecting the Company, or the financial statements of the Company, or change in applicable laws, regulations, or accounting principles occurs such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option, then the Administrator may, in good faith and in such manner as it may deem equitable, adjust the amounts set forth on this Exhibit B (and/or adjust the definitions of EBITDA and Net Debt) to reflect the projected effect of such transaction(s) or event(s) on Operational Performance. Further, in the event that the Company pays a special dividend or repurchases shares, the AOP targets shall be adjusted as determined by the Administrator in accordance with past practice.
EXHIBIT B
FOR USE WITH NAMED EXECUTIVE OFFICER EXTENSION GRANTS
VESTING
Annual Operational Performance per Diluted Share1
| Minimum Vesting (10% Growth) | Maximum Vesting (17.5% Growth) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fiscal Year (A) | % of Shares Vesting (B) | YE Operating Performance (per Diluted Share) (C) | % of Shares Vesting (D) | YE Operating Performance (per Diluted Share) (E) | ||||||||||||||||||||||||||||||||||||||||||||||
2028 | 12.5 | % | $ | 812.24 | 50 | % | $ | 1,057.47 | ||||||||||||||||||||||||||||||||||||||||||
2029 | 12.5 | % | $ | 893.47 | 50 | % | $ | 1,242.52 | ||||||||||||||||||||||||||||||||||||||||||
1. Annual Operational Performance Vesting. Effective as of the last day of each of the Company’s fiscal years 2028-2029 there shall become vested the percentage of shares covered by the Option which is equal to the Annual Amount (as described below). The Options shall become vested and exercisable as of the date that the Administrator verifies the AOP (as defined below); provided, however, the vesting hereunder will be effective as to Participant as of the end of the fiscal year to which such Annual Amount relates (notwithstanding any termination of Participant’s employment during the period between the end of such fiscal year and the verification of the AOP and, in such case, notwithstanding the provisions of Section 3.1(b)). For each such fiscal year, the Administrator shall verify the AOP, and shall notify the Company’s Chief Executive Officer of its determination with respect thereto, within ten business days after the Administrator receives the Company’s audited financial statements for that fiscal year.
X. For each year (the “Performance Year”), the Annual Amount is zero if the Annual Operational Performance per Diluted Share3 (“AOP”) with respect to such year is less than the amount indicated for such year in column (C). Otherwise, the Annual Amount shall be equal to the amount indicated for such year in column (B) plus the product of (a) the excess of (1) the amount indicated for such year in column (D) over (2) the amount indicated for such year in column (B) and (b) the ratio of (1) the excess of (x) the AOP with respect to the year (but not more than the amount indicated in Column (E) for such year) over (y) the amount indicated for such year in column (C) to (2) the excess of (x) the amount indicated for such year in column (E) over (y) the amount indicated for such year in column (C).
Y. In calculating the AOP in Section X above for any Performance Year there shall also be taken into account any AOP in any of the two prior Performance Years (starting in fiscal year 2028) which was in excess of the amount indicated in Column (E) for such prior year and has not previously been taken into account hereunder but only if doing so would increase the Annual Amount in such Performance Year; provided, however that the excess applied under this Section Y and Section Z below shall be limited in any given year to $100. If the Participant is subsequently awarded options vesting in 2030 and 2031, any AOP during 2028 and 2029 in excess of the amount indicated in Column (E) (and not previously taken into account hereunder) may be used in one or more of the next two following years by treating such excess as AOP in the Performance Year under the option agreement granting said options; provided, however that the excess applied in this sentence shall be limited in any given year to $100.
Z. If the Annual Amount in any Performance Year is less than the amount indicated in column (D) for such year then an amount equal to the excess of (1) the amount indicated in column (D) for the applicable Performance Year
3 As of a given date, the Company’s “Annual Operational Performance per Diluted Share” shall mean the ratio of (1) the excess of (a) the product of (i) EBITDA and (ii) the Fixed Market Multiple (as defined below) over (b) Net Debt to (2) the Company’s number of Diluted Shares as of such date, where “EBITDA,” “Net Debt” and “Diluted Shares” have the meanings set forth in the Stock Option Agreement set forth on Exhibit A. For purposes of this Exhibit B, the Fixed Market Multiple shall mean 12.100, as adjusted for the weighted EBITDA multiple of future acquisitions as determined by the Committee.
less (2) the actual Annual Amount for such Performance Year (the “Shortfall Amount”) may vest in one or more of the next two following years. If there is an excess of AOP in one or more of the next two following years, such excess can be applied up to the Shortfall Amount not to exceed the amount indicated in column (E) for the Performance Year to which the Shortfall Amount relates; provided, however that the excess applied under this Section Z and Section Y above shall be limited in any given year to $100. The portion of any excess AOP amount which is so used may not be used more than once.
2. Adjustments of Operational Performance Objectives. The Operational Performance targets specified in this Exhibit B are based upon certain revenue and expense assumptions about the future business of the Company as of the date the Option is granted. Accordingly, in the event that, after such date, the Administrator determines, in its sole discretion, that any acquisition or disposition of any business by the Company or any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), repurchase of securities, recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, any unusual or nonrecurring transactions or events affecting the Company, or the financial statements of the Company, or change in applicable laws, regulations, or accounting principles occurs such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option, then the Administrator may, in good faith and in such manner as it may deem equitable, adjust the amounts set forth on this Exhibit B (and/or adjust the definitions of EBITDA and Net Debt) to reflect the projected effect of such transaction(s) or event(s) on Operational Performance. Further, in the event that the Company pays a special dividend or repurchases shares, the AOP targets shall be adjusted as determined by the Administrator in accordance with past practice.
EXHIBIT B
FOR USE WITH K. STEIN AWARD
VESTING
Annual Operational Performance per Diluted Share1
| Minimum Vesting (10% Growth) | Maximum Vesting (17.5% Growth) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fiscal Year (A) | % of Shares Vesting (B) | YE Operating Performance (per Diluted Share) (C) | % of Shares Vesting (D) | YE Operating Performance (per Diluted Share) (E) | ||||||||||||||||||||||||||||||||||||||||||||||
2029 | 25 | % | $ | 893.47 | 100 | % | $ | 1,242.52 | ||||||||||||||||||||||||||||||||||||||||||
1. Annual Operational Performance Vesting. Effective as of the last day of each of the Company’s fiscal year 2029 there shall become vested the percentage of shares covered by the Option which is equal to the Annual Amount (as described below). The Options shall become vested and exercisable as of the date that the Administrator verifies the AOP (as defined below); provided, however, the vesting hereunder will be effective as to Participant as of the end of the fiscal year to which such Annual Amount relates (notwithstanding any termination of Participant’s employment during the period between the end of such fiscal year and the verification of the AOP and, in such case, notwithstanding the provisions of Section 3.1(b)). For such fiscal year, the Administrator shall verify the AOP, and shall notify the Company’s Chief Executive Officer of its determination with respect thereto, within ten business days after the Administrator receives the Company’s audited financial statements for that fiscal year.
X. For each year (the “Performance Year”), the Annual Amount is zero if the Annual Operational Performance per Diluted Share4 (“AOP”) with respect to such year is less than the amount indicated for such year in column (C). Otherwise, the Annual Amount shall be equal to the amount indicated for such year in column (B) plus the product of (a) the excess of (1) the amount indicated for such year in column (D) over (2) the amount indicated for such year in column (B) and (b) the ratio of (1) the excess of (x) the AOP with respect to the year (but not more than the amount indicated in Column (E) for such year) over (y) the amount indicated for such year in column (C) to (2) the excess of (x) the amount indicated for such year in column (E) over (y) the amount indicated for such year in column (C).
Y. In calculating the AOP in Section X above for any Performance Year there shall also be taken into account any AOP in any of the two prior Performance Years (starting in fiscal year 2029) which was in excess of the amount indicated in Column (E) for such prior year and has not previously been taken into account hereunder but only if doing so would increase the Annual Amount in such Performance Year; provided, however that the excess applied under this Section Y and Section Z below shall be limited in any given year to $100. If the Participant is subsequently awarded options vesting in 2030 and 2031, any AOP during 2029 in excess of the amount indicated in Column (E) (and not previously taken into account hereunder) may be used in one or more of the next two following years by treating such excess as AOP in the Performance Year under the option agreement granting said options; provided, however that the excess applied in this sentence shall be limited in any given year to $100.
Z. If the Annual Amount in 2029 is less than the amount indicated in column (D) for 2029 then an amount equal to the excess of (1) the amount indicated in column (D) for 2029 less (2) the actual Annual Amount for 2029 (the
4 As of a given date, the Company’s “Annual Operational Performance per Diluted Share” shall mean the ratio of (1) the excess of (a) the product of (i) EBITDA and (ii) the Fixed Market Multiple (as defined below) over (b) Net Debt to (2) the Company’s number of Diluted Shares as of such date, where “EBITDA,” “Net Debt” and “Diluted Shares” have the meanings set forth in the Stock Option Agreement set forth on Exhibit A. For purposes of this Exhibit B, the Fixed Market Multiple shall mean 12.100, as adjusted for the weighted EBITDA multiple of future acquisitions as determined by the Committee.
“Shortfall Amount”) may vest in one or both of 2030 and 2031. If there is an excess of AOP in one or both of 2030 and 2031, such excess can be applied up to the Shortfall Amount not to exceed the amount indicated in column (E) for 2029. The portion of any excess AOP amount which is so used may not be used more than once; provided, however that the excess applied under this Section Z and Section Y above shall be limited in any given year to $100.
2. Adjustments of Operational Performance Objectives. The Operational Performance targets specified in this Exhibit B are based upon certain revenue and expense assumptions about the future business of the Company as of the date the Option is granted. Accordingly, in the event that, after such date, the Administrator determines, in its sole discretion, that any acquisition or disposition of any business by the Company or any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), repurchase of securities, recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, any unusual or nonrecurring transactions or events affecting the Company, or the financial statements of the Company, or change in applicable laws, regulations, or accounting principles occurs such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option, then the Administrator may, in good faith and in such manner as it may deem equitable, adjust the amounts set forth on this Exhibit B (and/or adjust the definitions of EBITDA and Net Debt) to reflect the projected effect of such transaction(s) or event(s) on Operational Performance. Further, in the event that the Company pays a special dividend or repurchases shares, the AOP targets shall be adjusted as determined by the Administrator in accordance with past practice.
EXHIBIT C
STOCK RETENTION GUIDELINES
As a condition to receiving the Option grant, Participant acknowledges and agrees to hold a number of shares and/or options with such value and for such period of time as set forth below:
(a) At all times during Participant’s continued employment by the Company, Participant shall hold an aggregate amount of Company equity with a value equal to or greater than $ [●] (the “Retention Limit”), one-half of which must be held in stock. This Retention Limit will supersede any Retention Limit in any prior dated option agreement between the Company and Participant pursuant to the Plan.
For purposes of this Exhibit C, Company equity shall be equal to (i) the Fair Market Value of any Common Stock held by the Participant plus (ii) the value of vested options then held by Participant, whether granted pursuant to the Plan, the Company’s 2014 Stock Option Plan, the Company’s 2006 Stock Incentive Plan, the Company’s 2003 Stock Option Plan or otherwise, which will be equal to the Fair Market Value of the Common Stock underlying the options over the exercise price.
(b) If at any time after the date hereof the aggregate amount of Company equity held by Participant falls below the Retention Limit because of a decline in the Fair Market Value of the Common Stock, Participant will have three years to reach the Retention Limit before the Administrator may exercise any remedies under paragraph (d).
(c) Participant shall not be obligated to comply with the Retention Limit until five years from the date of grant; provided, however, that notwithstanding the foregoing, Participant may not make any sales of vested Options until the Retention Limit is reached, and thereafter, only to the extent that Participant would, at the time of the sale, be in compliance with the Retention Limit, except that Participants may make sales under 10b5-1 plans in existence on the date hereof so long as such sales would be in compliance with any preexisting Retention Limit.
(d) Participant’s failure to hold that number of shares and/or vested options set forth in this Exhibit C shall result in Participant’s forfeiture of all unvested Options unless otherwise determined by the Administrator, in its sole discretion.
Exhibit 10.26
FORM OF OPTION AGREEMENT (FY25) – DIRECTORS
STOCK OPTION GRANT NOTICE AND STOCK OPTION AGREEMENT
TransDigm Group Incorporated, a Delaware corporation (the “Company”), pursuant to its 2019 Stock Option Plan (the “Plan”), hereby grants to the holder listed below (“Participant”), an option to purchase the number of shares of the Company’s common stock, par value $0.01 (“Stock”), set forth below (the “Option”). This Option is subject to all of the terms and conditions set forth herein and in the Stock Option Agreement, including any applicable country-specific terms, attached hereto as Exhibit A (the “Agreement”) and the Plan, which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option Agreement.
| Participant: | _____________________________________________________________________________ | ||||||||||
| Grant Date: | _____________________________________________________________________________ | ||||||||||
| Exercise Price per Share: | $____________________________________________________________________________ | ||||||||||
| Total Number of Shares Subject to the Option: | ______________________________________________________________________Shares | ||||||||||
| Expiration Date: | _____________________________________________________________________________ | ||||||||||
| Type of Option: | Incentive Stock Option Non-Qualified Stock Option | |||||||
| Vesting Schedule: | Subject to the terms of the Stock Option Agreement (including without limitation all exhibits thereto), the Option shall be eligible to become exercisable upon the achievement of performance objectives over the period set forth in Exhibit B hereto (provided that the Participant is an Eligible Person (as defined in the Plan) at all times during the period beginning on the Grant Date and ending on the applicable vesting date): | |||||||
By his or her signature, the Participant agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement and this Grant Notice. The Participant has reviewed the Agreement, including any applicable country-specific terms, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. The Participant agrees that as a condition to receiving the Option, the Participant shall comply with the Stock Retention Guidelines set forth on Exhibit C. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or relating to the Option.
| TRANSDIGM GROUP INCORPORATED | PARTICIPANT | |||||||||||||||||||||||||
By: | By: | |||||||||||||||||||||||||
| Print Name: | Print Name: | |||||||||||||||||||||||||
Title: | ||||||||||||||||||||||||||
Address: | Address: | |||||||||||||||||||||||||
1
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement, including the Appendix containing any applicable country-specific provisions (together, this “Agreement”), is attached, TransDigm Group Incorporated, a Delaware corporation (the “Company”), has granted to the Participant an option (the “Option”)1 under the Company’s 2019 Stock Option Plan (the “Plan”) to purchase the number of shares of Stock indicated in the Grant Notice.
ARTICLE I.
GENERAL
1.1Defined Terms. Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and/or the Grant Notice.
(a)“Administrator” shall mean the Board or the Compensation Committee or other committee of the Board responsible for conducting the general administration of the Plan in accordance with Section 3 of the Plan; provided that if the Participant is an Independent Director, “Administrator” shall mean the Board.
(b)“Consultant” shall mean an individual who renders services to the Company as a consultant and has been so designated by the Committee.
(c)“Credit Agreement” shall mean that certain credit agreement dated as of June 4, 2014 among TransDigm, Inc., TransDigm Group Incorporated and the lenders party thereto, as in effect as of the Grant Date and without reference to any amendment to the Credit Agreement made following the Grant Date.
(d)“Diluted Shares” as of a given date shall mean the total diluted weighted-average of common shares of the Company outstanding as of such date.
(e)“EBITDA” for a given fiscal year of the Company shall mean Consolidated EBITDA (as defined in the Credit Agreement) of the Company for such fiscal year on a pro forma basis adjusted for acquisitions or divestitures.
(f)“Independent Director” shall mean a non-employee director of the Company.
(g)“Net Debt” shall mean, as of the last day of a given fiscal year of the Company, the excess of (a) Consolidated Total Indebtedness (as defined in the Credit Agreement) of the Company over (b) the amount of cash and cash equivalents set forth on the Company’s balance sheet.
(h)“Termination of Consultancy” shall mean the time when the engagement of the Participant as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement, but excluding: (i) terminations where there is a simultaneous employment or continuing employment of the Participant by the Company or any Subsidiary, and (ii) terminations where there is a simultaneous re-establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy.
1 For the avoidance of doubt, the term “Option” as used herein only describes options granted pursuant to the Stock Option Grant Notice to which this Agreement is an Exhibit.
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Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.
(i)“Termination of Directorship” shall mean the time when the Participant, if he or she is or becomes an Independent Director, ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors.
(j)“Termination of Employment” shall mean the time when the employee-employer relationship between the Participant and the Company or any Subsidiary is terminated for any reason, with or without Cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding: (i) terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any Subsidiary, and (ii) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship between the Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, notwithstanding any other provision of this Agreement, if this Option is an Incentive Stock Option, unless otherwise determined by the Administrator in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section.
(k)“Termination of Services” shall mean the time when (i) every relationship between the Participant and the Company has been terminated by a Termination of Consultancy, Termination of Directorship and/or Termination of Employment, as applicable, and (ii) the Participant is no longer an Eligible Person under the Plan. For purposes of the Option, the Participant’s Termination of Services will be deemed to occur as of the date the Participant is no longer actively providing services to the Company or any Subsidiary (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment or other laws in the jurisdiction where the Participant is employed or the terms of the Participant’s employment or service agreement, if any), and unless otherwise determined by the Company, (i) the Participant’s right to vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period (e.g., the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws or common law in the jurisdictions where the Participant provides services or the terms of the Participant’s employment or service agreement, if any); and (ii) the period (if any) during which the Participant may exercise the Option after such Termination of Services will commence on the date the Participant ceases to actively provide services and will not be extended by any notice period mandated under employment laws or common law in the jurisdiction where the Participant provides services or the terms of the Participant’s employment or service agreement, if any; the Company shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of the Options (including whether the Participant may still be considered to be providing services while on a leave of absence).
1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ARTICLE II.
GRANT OF OPTION
2.1Grant of Option. In consideration of the Participant’s future employment with or service to the Company or a Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to the Participant the Option to purchase any part or all
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of an aggregate of the number of shares of Stock set forth in the Grant Notice, subject to the terms and conditions set forth in the Plan and this Agreement. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law.
2.2Exercise Price. The exercise price of the shares of Stock subject to the Option shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that the price per share of the shares of Stock subject to the Option shall not be less than 100% of the Fair Market Value of a share of Stock on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an Incentive Stock Option and the Participant owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the price per share of the shares of Stock subject to the Option shall not be less than 110% of the Fair Market Value of a share of Stock on the Grant Date.
Notwithstanding anything to the contrary contained in this Option Agreement, the Plan or any applicable plan providing for cash dividend equivalent rights, if an extraordinary dividend is declared on the Stock following the date of this Agreement and if the holders of Options of the Company generally are entitled to receive dividend equivalent payments with respect thereto, then the exercise price of the Option shall be reduced by the amount per share of such extraordinary dividend; provided, however, that if as a result of the foregoing reduction, the exercise price would be below zero, then this provision will apply only to the extent the exercise price would be zero and the remainder of any dividend equivalents related to an extraordinary dividend will be paid in cash.
2.3Consideration to the Company. In consideration of the grant of the Option by the Company, the Participant agrees to render faithful and efficient services to the Company or any Subsidiary. Nothing in the Plan or this Agreement shall confer upon the Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and the Participant.
ARTICLE III.
PERIOD OF EXERCISABILITY
3.1Commencement of Exercisability.
(a)Subject to Sections 3.1(b), 3.1(c) and 3.3, the Option shall become vested and exercisable in such amounts and at such times as set forth in the Grant Notice.
(b)No portion of the Option which has not become vested and exercisable at the date of the Participant’s Termination of Services shall thereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and the Participant.
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(c)Notwithstanding Section 3.1(a) of this Agreement and Section 8 of the Plan (but subject to Section 3.1(b) of this Agreement), in the event of a Change in Control, Options shall become fully vested and exercisable. Notwithstanding the foregoing, the Administrator may, in good faith and in such manner as it may deem equitable, in its sole discretion, adjust the foregoing Fair Market Value requirements in the event of a dividend or other distribution (whether in the form of cash, Stock, other securities or property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, or any unusual or nonrecurring transactions or events affecting the Company or the financial statements of the Company if the adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option. For purposes of this Section 3.1, shall take into account the consideration received by the stockholders in connection with a Change in Control or in connection with any other sale of common stock or
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other equity interests in the Company or any Subsidiary, after taking into account all post-closing adjustments relating to a Change in Control, and assuming the exercise of all vested options and warrants outstanding as of the effective date of such Change in Control (after giving effect to any dilution of securities or instruments arising in connection with such Change in Control); provided however, that if the stockholders retain any portion of the common stock following such Change in Control or other sale, the Fair Market Value of such portion of the retained common stock immediately following such Change in Control or other sale shall be deemed “consideration received” for purposes of calculating the proceeds and provided further that the Fair Market Value of any non-cash consideration (including stock) received in connection with a Change in Control shall be determined as of the date of such Change in Control.
3.2Duration of Exercisability. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3.
3.3Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a)The expiration of ten years from the Grant Date; or
(b)If this Option is designated as an Incentive Stock Option and the Participant owned (within the meaning of Section 424(d) of the Code), at the time the Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the expiration of five years from the Grant Date; or
(c)The opening of business on the day of the Participant’s Termination of Services by reason of a termination by the Company or a Subsidiary for Cause; or
(d)The expiration of six months from the date of the Participant’s Termination of Services, unless such termination occurs by reason of the Participant’s death, Disability or retirement (pursuant to Section 3.3(e)) or is a termination by the Company or a Subsidiary for Cause (as defined in Participant’s employment or service agreement, if applicable), provided, however, that any portion of this Option that is an Incentive Stock Option shall cease to be an Incentive Stock Option on the expiration of three months from the Participant’s Termination of Services (and shall thereafter be a Non-Qualified Stock Option), provided, further, that to the extent that the Participant is prohibited from selling shares of Stock pursuant to the Company’s insider trading policy at all times during such six-month period, with the exception of an open trading window of less than seven days, the Option shall expire on the later of (i) the seventh day following the opening of the first open trading window thereafter or (ii) the first anniversary of the Participant’s Termination of Services; or
(e)The expiration of one year from the date of the Participant’s Termination of Services by reason of (i) the Participant’s death or Disability; or (ii) the retirement of the Participant at a time when the Participant’s years of continuous employment with or service to the Company or any Subsidiary (collectively, “Years of Service”) is equal to or exceeds ten years and the combination of (i) the Participant’s age in years, plus (ii) the Participant’s Years of Service, equals at least 70 (and the Company at such time does not have grounds to terminate the Participant’s employment or service for “Cause”), provided, however, that to the extent that the Participant is prohibited from selling shares of Stock pursuant to the Company’s insider trading policy at all times during such one-year period, with the exception of an open trading window of less than seven days, the Option shall expire on the seventh day following the opening of the first open trading window thereafter.
3.4Tax Obligations. The Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time the Option is granted) of all shares of Stock with respect to which Incentive Stock Options, including the Option, are exercisable for the first time by the Participant in any calendar year exceeds
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$100,000, the Option and such other options shall be Non-Qualified Stock Options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. The Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder. The Participant acknowledges that an Incentive Stock Option exercised more than three months after the Participant’s Termination of Employment, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option.
Regardless of any action the Company or Participant’s employer, whether it be the Company or a Subsidiary (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, fringe benefits, payment on account or other tax related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”), the Participant acknowledges that the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer. The Participant further acknowledges that the Company and/or the Employer (a) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option, including, but not limited to, the grant, vesting or exercise of the Option, the subsequent sale of shares of Stock acquired pursuant to such exercise and the receipt of any dividends; and (b) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant has become subject to tax in more than one jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, the Participant acknowledges that the Company and/or the Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
Prior to the relevant taxable or tax withholding event, as applicable, the Participant will pay or make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following: (i) withholding from the Participant’s wages or other cash compensation paid to the Participant by the Company and/or the Employer; or (ii) withholding from proceeds of the sale of shares of Stock acquired at exercise of the Option either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); or (iii) withholding in shares of Stock to be issued at exercise of the Option.
Depending on the withholding method, the Company and/or the Employer may withhold or account for Tax-Related Items by considering statutory withholding rates or other withholding rates, including maximum applicable rates in the Participant’s jurisdiction. If the Tax-Related Items are satisfied by withholding in shares of Stock, for tax purposes, the Participant will be deemed to have been issued the full number of shares of Stock subject to the exercised Option, notwithstanding that a number of shares of Stock are held back solely for the purpose of satisfying the Tax-Related Items.
Finally, the Participant shall pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the shares of Stock or the proceeds of the sale of shares of Stock, if the Participant fails to comply with his or her obligations in connection with the Tax-Related Items.
ARTICLE IV.
EXERCISE OF OPTION
4.1Person Eligible to Exercise. Except as provided in Section 5.2(b), during the lifetime of the Participant, only the Participant may exercise the Option or any portion thereof. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3,
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be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
4.2Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3.
4.3Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person or entity designated by the Company) of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3:
(a)An Exercise Notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator;
(b)The receipt by the Company of full payment for the shares of Stock with respect to which the Option or portion thereof is exercised, including payment of any applicable Tax-Related Items, which may be in one or more of the forms of consideration permitted under Section 4.4;
(c)Any other written representations as may be required in the Administrator’s reasonable discretion to evidence compliance with the Securities Act or any other applicable law, rule, or regulation; and
(d)In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option.
Notwithstanding any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.
4.4Method of Payment. Payment of the exercise price, and any applicable Tax-Related Items, shall be by any of the following, or a combination thereof, at the election of the Participant:
(a)Cash;
(b)Check;
(c)Broker Assisted Cash less Exercise. With the consent of the Administrator, delivery of a notice that the Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the aggregate exercise price; provided, that payment of such proceeds is then made to the Company upon settlement of such sale;
(d)Share Surrender. With the consent of the Administrator, surrender of other shares of Stock which (i) in the case of shares of Stock acquired from the Company, have been owned by the Participant for more than six months on the date of surrender (or such other minimum length of time as the Administrator determines from time to time to be necessary to avoid adverse accounting consequences or violation of any applicable law, rule or regulation), and (ii) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the shares of Stock with respect to which the Option or portion thereof is being exercised; or
(e)Net Exercise. With the consent of the Administrator, surrendered shares of Stock issuable upon the exercise of the Option having a Fair Market Value on the date of exercise equal to the aggregate exercise price of the shares of Stock with respect to which the Option or portion thereof is being exercised.
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4.5Conditions to Issuance of Stock Certificates. The shares of Stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares of Stock or issued shares of Stock which have then been reacquired by the Company. Such shares of Stock shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any shares of Stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:
(a)The admission of such shares of Stock to listing on all stock exchanges on which such Stock is then listed;
(b)The completion of any registration or other qualification of such shares of Stock under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c)The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d)The receipt by the Company of full payment for such shares of Stock, including payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4; and
(e)The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience.
4.6Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares of Stock purchasable upon the exercise of any part of the Option unless and until such shares of Stock shall have been issued by the Company to such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the shares of Stock are issued, except as provided in Section 8 of the Plan.
ARTICLE V.
OTHER PROVISIONS
5.1Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option.
5.2Option Transferability.
(a)Except as otherwise set forth in Section 5.2(b), (i) the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the shares of Stock underlying the Option have been issued, and all restrictions applicable to such shares of Stock have lapsed. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence; and (ii) during the lifetime of the Participant, only the Participant may exercise the Option or any portion thereof. After the death of the Participant, any exercisable portion
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of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
(b)Notwithstanding the foregoing, with respect to participants who are corporate officers or operating presidents, the Administrator may permit any portion of the Option that is not an Incentive Stock Option to be transferred to, exercised by and paid to certain persons or entities related to such Participant, including but not limited to members of such Participant’s family, charitable institutions or trusts or other entities whose beneficiaries or beneficial owners are members of such Participant’s family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the Administrator, pursuant to such conditions and procedures as the Administrator may establish. Any permitted transfer shall be subject to the condition that the Administrator receive evidence satisfactory to it that the transfer is being made for estate and/or tax planning purposes (or to a “blind trust” in connection with such Participant’s termination of employment or service with the Company or a Subsidiary to assume a position with a governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the Company’s lawful issue of securities.
5.3Adjustments. The Participant acknowledges that the Option is subject to modification and termination in certain events as provided in this Agreement and Section 8 of the Plan.
5.4Appendix. Notwithstanding any provisions in this Agreement, the Option grant shall be subject to any additional or different terms and conditions set forth in the attached Appendix to this Option Agreement for the Participant’s country (the “Appendix”). Moreover, if the Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to the Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable to comply with local law or facilitate the administration of the Plan. The Appendix constitutes part of this Agreement.
5.5Insider Trading/Market Abuse Laws. The Participant understands that he or she may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, including but not limited to the United States, the Participant’s country, the Service Provider’s country, and the country in which the shares of Stock may be listed, which may affect the Participant’s ability, directly or indirectly, to purchase or sell or attempt to sell or otherwise dispose of shares of Stock, rights to shares of Stock (e.g., Options), or rights linked to the value of shares of Stock, during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws and/or regulation in the applicable jurisdiction(s)). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before possessing inside information. Furthermore, the Participant may be prohibited from (i) disclosing inside information to any third party, including fellow employees or service providers (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them to otherwise buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. The Participant is responsible for ensuring compliance with any applicable restrictions and the Participant should consult with his or her personal legal advisor on this matter.
5.6No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making recommendations regarding the Participant’s participation in the Plan, or the Participant’s acquisition or sale of shares of Stock acquired upon exercise. The Participant should consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any actions related to the Plan.
5.7Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company, and any notice to be given to the Participant shall be addressed to the Participant at the most recent address set forth in the Company’s books and records. By a notice given pursuant to this Section 5.7, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to exercise his or her Option pursuant to Section 4.1 by written notice under this Section 5.7. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt
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requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
5.8Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
5.9Governing Law and Venue; Severability. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the state of Delaware, without giving effect to principles of conflicts of law. For purposes of litigating any dispute that may arise directly or indirectly from this Agreement, the parties hereby submit and consent to the exclusive jurisdiction of the state of Delaware and agree that any such litigation shall be conducted only in the courts of Delaware or the federal courts of the United States located in Delaware and no other courts. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect.
5.10 Conformity to Securities Laws. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the U.S. Securities Act and the Exchange Act and any and all regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder, and any U.S. or non-U.S. securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
5.11 Amendments, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee or the Board, provided, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material way without the prior written consent of the Participant.
5.12 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 5.2, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.
5.13 Notification of Disposition. If this Option is designated as an Incentive Stock Option, the Participant shall give prompt notice to the Company of any disposition or other transfer of any shares of Stock acquired under this Agreement if such disposition or transfer is made (a) within two years from the Grant Date with respect to such shares of Stock or (b) within one year after the transfer of such shares of Stock to him. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer.
5.14 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
5.15 Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee or other service provider of the Company or any of its Subsidiaries. The terms of the Participant’s employment or service relationship are determined by the Company or the Employer’s policy, and by the terms of any employment or service contract to which the Participant might be party. This Agreement creates no rights to continued employment, or any other service relationship, nor does it limit the discretion the Company or the Employer would otherwise have to terminate Participant’s employment or other
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service relationship, with or without Cause. The Option and any shares of Stock acquired pursuant to the Plan (including the value and income of the same) are not part of normal or expected compensation or salary, including, but not limited to, for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments.
5.16 Electronic Delivery and Participation. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or any third party designated by the Company.
5.17 Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the Options and on any shares of Stock acquired upon exercise of the Option, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
5.18 No Right to Damages. Nothing in the Grant Notice, this Agreement or the Plan gives the Participant a right to receive damages for any portion of the Option that Participant might lose due to Company, Subsidiary or Committee decisions. The loss of potential profit from the Option will not constitute an element of damages in the event of Participant’s Termination of Services for any reason, even if such Termination of Services violates an obligation of the Company or a Subsidiary.
5.19 Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
5.20 Waiver. The Participant acknowledges that a waiver by the Company of any provision, or breach thereof, of this Agreement on any occasion shall not operate or be construed as a waiver of such provision on any other occasion or as a waiver of any other provision of this Agreement, or of any subsequent breach by the Participant or any other participant.
5.21 Section 409A. Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the U.S. Internal Revenue Code of 1986, as amended (together with any U.S. Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). The Committee reserves the right (without the obligation to do so or to indemnify the Participant for the failure to do so) to adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Committee determines are necessary or appropriate to exempt the Option from Section 409A or to comply with the requirements of Section 409A and thereby avoid the penalty taxes under Section 409A.
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APPENDIX
COUNTRY-SPECIFIC PROVISIONS TO THE
STOCK OPTION AGREEMENT
Terms and Conditions
This Appendix includes additional terms and conditions that govern the Option granted to the Participant under the Plan if the Participant resides or works in one of the countries listed below. If the Participant is a citizen or resident (or is considered as such for local law purposes) of a country other than the country in which the Participant is currently residing and/or working, or if the Participant relocates to another country after the grant of the Option, the Company shall, in its discretion, determine to what extent the country-specific terms contained herein shall be applicable to the Participant. Certain capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or the Agreement.
Notifications
This Appendix also includes information regarding exchange controls and certain other issues of which the Participant should be aware with respect to the Participant’s participation in the Plan. The information is based on the securities, exchange control and other laws as of October 2019; however, such laws are often complex and change frequently. As a result, the Company strongly recommends that the Participant does not rely on the information in this Appendix as the only source of information relating to the consequences of the Participant’s participation in the Plan because the information may be out of date at the time that Participant exercises the Option or sell shares of Stock acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to the Participant’s particular situation and the Company is not in a position to assure the Participant of any particular result. Accordingly, the Participant is advised to seek appropriate professional advice as to how the relevant laws in the Participant’s country may apply to the Participant’s situation.
Finally, the Participant understands that if he or she is a citizen or resident of a country other than the one in which Participant is currently working, transfers employment after the grant date, or is considered a resident of another country for local law purposes, the information contained herein may not apply to the Participant, and the Company shall, in its discretion, determine to what extent the terms and conditions contained herein shall apply.
ALL COUNTRIES OUTSIDE OF THE UNITED STATES
Terms and Conditions
1.Nature of Grant. In accepting the Option, the Participant acknowledges and agrees that:
(a)the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b)the grant of the Options is voluntary and occasional and does not create any contractual or other right to receive future grants of stock options, or benefits in lieu of stock options, even if stock options have been granted in the past;
(c)all decision with respect to future stock options or other grants, if any, will be at the sole discretion of the Company;
(d)the Participant’s participation in the Plan shall not create a right to further employment or service relationship with the Company or the Employer and shall not interfere with the ability of the Company or the Employer to terminate the Participant’s employment or service relationship at any time;
(e)the Participant is voluntarily participating in the Plan;
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(f)the Options and the shares of Stock subject to the Options, and the income and value of the same, are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which is outside the scope of the Participant’s employment or service contract, if any;
(g)the Options and the shares of Stock subject to the Options, and the income and value of the same are not intended to replace any pension rights or compensation;
(h)the Options and the shares of Stock subject to the Options, and the income and value of the same, are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, holiday pay, bonuses, long-service awards, leave-related payments, pension or retirement or welfare benefits or similar mandatory payments and in no event should be considered compensation for, or relating to, past services for the Company, the Employer of any Subsidiary;
(i)the Option grant and the Participant’s participation in the Plan will not be interpreted to form an employment or service contract or relationship with the Company or a Subsidiary;
(j)unless otherwise agreed with the Company, the Options and the shares of Stock subject to the Option, and the income and value of the same, are not granted as consideration for, or in connection with, any service the Participant may provide as a director of a Subsidiary;
(k)the future value of the underlying shares of Stock is unknown, indeterminable and cannot be predicted with certainty;
(l)if the underlying shares of Stock do not increase in value, the Option will have no value;
(m)no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the Participant’s Termination of Services (for any reason whatsoever, and whether or not later found to be invalid or in breach of employment or other laws in the jurisdiction where the Participant renders services or the terms of the Participant’s employment or service agreement, if any);
(n)unless otherwise provided in the Plan or by the Company in its sole discretion, the Options and the benefits evidenced by this Agreement do not create any entitlement to have the Options or any such benefit transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of Stock of the Company; and
(o)neither the Company, the Employer, nor any other Subsidiary shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the U.S. Dollar that may affect the value of the Option or of any amounts due to the Participant upon exercise of the Options or the subsequent sale of any shares of Stock acquired upon settlement.
2.Language. The Participant acknowledges that the Participant is sufficiently proficient in English or has consulted with an advisor who is sufficiently proficient in English so as to allow the Participant to understand the terms and conditions of this Agreement. Further, if the Participant has received this Agreement or any other document(s) related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
Data Privacy Information and Consent.
(a)Declaration of Consent. The Participant is declaring that he or she agrees with the data processing practices described herein and consents to the collection, processing and use of Data (as defined below) by the Company and the transfer of Data to the recipients mentioned below, including recipients located in countries
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which may not have a similar level of protection from the perspective of the Participant's country’s data protection laws.
(b)Data Collection and Usage. The Company and the Employer collect, process and use certain personal information about the Participant, including but not limited to his or her name, home address, telephone number, email address, date of birth, social insurance number, passport or other identification number, salary, nationality, any shares of Stock, details of all stock options granted under the Plan or any other entitlement to shares awarded, canceled, exercised, vested, unvested or outstanding in the Participant’s favor (“Data”), for purposes of implementing, administering and managing the Plan. The legal basis, where required, for the collection and processing of Data is the Participant’s consent.
(c)Stock Plan Administration Service Providers. The Company may transfer Data, or parts thereof, to a third-party stock plan administrator/broker (“Service Provider”) which may assist the Company, presently or in the future, with the implementation, administration and management of the Plan. The Participant acknowledges and understands that the Service Provider will open an account for the Participant to receive and trade shares of Stock acquired under the Plan and the Participant may be asked to agree on separate terms and data processing practices with the Service Provider, with such agreement being a condition to the Participant's ability to participate in the Plan. Where required, the legal basis for the transfer of Data to the Service Provider is the Participant’s consent.
(d)International Data Transfers. The Company is, and the Service Provider may be, based in the United States. The Participant’s country or jurisdiction may have different data privacy laws and protections than the United States. For example, the European Commission has issued only a limited adequacy finding with respect to the United States that applies only if and to the extent companies self-certify and remain self-certified under the EU-U.S. Privacy Shield program, which is open to companies subject to the jurisdiction of the Federal Trade Commission. The Company has currently not registered for the EU-U.S. Privacy Shield program. The Company’s legal basis for the transfer of data, where required, is the Participant’s consent.
(e)Data Retention. The Company will hold and use Data only as long as is necessary to implement, administer and manage the Participant’s participation in the Plan, or as required to comply with legal or regulatory obligations including under tax, exchange control, labor and securities laws. This may mean Data is retained until after the Participant’s employment or service relationship ends. When the Company or the Employer no longer need Data for any of the above purposes, they will cease processing it in this context and remove it from all of their systems used for such purposes, to the fullest extent possible.
(f)Voluntariness and Consequences of Consent Denial or Withdrawal. Participation in the Plan is voluntary and the Participant is providing the consents herein on a purely voluntary basis. The Participant understands that he or she may request to stop the transfer and processing of the Data for purposes of his or her participation in the Plan and that the Participant’s compensation from or service relationship with the Employer will not be affected. The only consequence of refusing or withdrawing consent is that the Company would not be able to allow the Participant to participate in the Plan. The Participant understands that his or her Data will still be processed in relation to the Participant’s employment or service relationship for record-keeping purposes.
(g)Data Subject Rights. The Participant may have a number of rights under the data privacy laws in his or her jurisdiction. Depending on where the Participant is based, such rights may include the right to (i) request access to or copies of Data the Company processes, (ii) rectify incorrect Data, (iii) delete Data, (iv) restrict the processing of Data, (v) restrict the portability of Data, (iv) lodge complaints with the competent authorities in the Participant’s jurisdiction, and/or (vii) receive a list with the names and addresses of any potential recipients of Data. To receive clarification regarding these rights or to exercise these rights, the Participant can contact his or her human resources representative.
By signing below, the Participant declares that he or she agrees with the data processing practices as described above. The Participant understands and acknowledges that the Participant may withdraw his or her consent at any time with future effect for any or no reason as described in sub-section (f) above.
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Submitted by:
PARTICIPANT
Signature
_____________
Print Name
Print Name
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EXHIBIT B
VESTING
Annual Operational Performance per Diluted Share1
| Minimum Vesting (10% Growth) | Maximum Vesting (17.5% Growth) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fiscal Year (A) | % of Shares Vesting (B) | YE Operating Performance (per Diluted Share) (C) | % of Shares Vesting (D) | YE Operating Performance (per Diluted Share) (E) | ||||||||||||||||||||||||||||||||||||||||||||||
2025 | 5 | % | $ | 610.25 | 20 | % | $ | 651.86 | ||||||||||||||||||||||||||||||||||||||||||
2026 | 5 | % | $ | 671.27 | 20 | % | $ | 765.93 | ||||||||||||||||||||||||||||||||||||||||||
2027 | 5 | % | $ | 738.4 | 20 | % | $ | 899.97 | ||||||||||||||||||||||||||||||||||||||||||
2028 | 5 | % | $ | 812.24 | 20 | % | $ | 1,057.47 | ||||||||||||||||||||||||||||||||||||||||||
2029 | 5 | % | $ | 893.47 | 20 | % | $ | 1,242.52 | ||||||||||||||||||||||||||||||||||||||||||
1. Annual Operational Performance Vesting. Effective as of the last day of each of the Company’s fiscal years 2025-2029 there shall become vested the percentage of shares covered by the Option which is equal to the Annual Amount (as described below). The Options shall become vested and exercisable as of the date that the Administrator verifies the AOP (as defined below); provided, however, the vesting hereunder will be effective as to Participant as of the end of the fiscal year to which such Annual Amount relates (notwithstanding any termination of Participant’s employment during the period between the end of such fiscal year and the verification of the AOP and, in such case, notwithstanding the provisions of Section 3.1(b)). For each such fiscal year, the Administrator shall verify the AOP, and shall notify the Company’s Chief Executive Officer of its determination with respect thereto, within ten business days after the Administrator receives the Company’s audited financial statements for that fiscal year.
X. For each year (the “Performance Year”), the Annual Amount is zero if the Annual Operational Performance per Diluted Share (“AOP”)2 with respect to such year is less than the amount indicated for such year in column (C). Otherwise the Annual Amount shall be equal to the amount indicated for such year in column (B) plus the product of (a) the excess of (1) the amount indicated for such year in column (D) over (2) the amount indicated for such year in column (B) and (b) the ratio of (1) the excess of (x) the AOP with respect to the year (but not more than the amount indicated in Column (E) for such year) over (y) the amount indicated for such year in column (C) to (2) the excess of (x) the amount indicated for such year in column (E) over (y) the amount indicated for such year in column (C).
Y. In calculating the AOP in Section X above for any Performance Year there shall also be taken into account any AOP in any of the two prior Performance Years (starting in fiscal year 2025) which was in excess of the amount indicated in Column (E) for such prior year and has not previously been taken into account hereunder but only if doing so would increase the Annual Amount in such Performance Year; provided, however that the excess applied under this Section Y and Section Z below shall be limited in any given year to $100. If the Participant is subsequently awarded options vesting in 2030 and 2031, any AOP during 2028 and 2029 in excess of the amount indicated in Column (E) (and not previously taken into account hereunder) may be used in one or more of the next two following years by treating such excess as AOP in the Performance Year under the option agreement granting said options; provided, however that the excess applied in this sentence shall be limited in any given year to $100.
2 As of a given date, the Company’s “Annual Operational Performance per Diluted Share” shall mean the ratio of (1) the excess of (a) the product of (i) EBITDA and (ii) the Fixed Market Multiple (as defined below) over (b) Net Debt to (2) the Company’s number of Diluted Shares as of such date, where “EBITDA,” “Net Debt” and “Diluted Shares” have the meanings set forth in the Stock Option Agreement set forth on Exhibit A. For purposes of this Exhibit B, the Fixed Market Multiple shall mean 12.100, as adjusted for the weighted EBITDA multiple of future acquisitions as determined by the Committee.
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Z. If the Annual Amount in any Performance Year is less than the amount indicated in column (D) for such year then an amount equal to the excess of (1) the amount indicated in column (D) for the applicable Performance Year less (2) the actual Annual Amount for such Performance Year (the “Shortfall Amount”) may vest in one or more of the next two following years. If there is an excess of AOP in one or more of the next two following years, such excess can be applied up to the Shortfall Amount not to exceed the amount indicated in column (E) for the Performance Year to which the Shortfall Amount relates; provided, however that the excess applied under this Section Z and Section Y above shall be limited in any given year to $100. The portion of any excess AOP amount which is so used may not be used more than once.
2. Adjustments of Operational Performance Objectives. The Operational Performance targets specified in this Exhibit B are based upon certain revenue and expense assumptions about the future business of the Company as of the date the Option is granted. Accordingly, in the event that, after such date, the Administrator determines, in its sole discretion, that any acquisition or disposition of any business by the Company or any dividend or other distribution (whether in the form of cash, Stock, other securities or other property), repurchase of securities, recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Stock or other securities of the Company, issuance of warrants or other rights to purchase Stock or other securities of the Company, any unusual or nonrecurring transactions or events affecting the Company, or the financial statements of the Company, or change in applicable laws, regulations, or accounting principles occurs such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to the Option, then the Administrator may, in good faith and in such manner as it may deem equitable, adjust the amounts set forth on this Exhibit B (and/or adjust the definitions of EBITDA and Net Debt) to reflect the projected effect of such transaction(s) or event(s) on Operational Performance. Further, in the event that the Company pays a special dividend or repurchases shares, the AOP targets shall be adjusted as determined by the Administrator in accordance with past practice.
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EXHIBIT C
STOCK RETENTION GUIDELINES
As a condition to receiving the Option grant, Participant acknowledges and agrees to hold a number of shares and/or options with such value and for such period of time as set forth below:
(a) At all times during Participant’s continued employment by the Company, Participant shall hold an aggregate amount of Company equity with a value equal to or greater than $250,000 (the “Retention Limit”). This Retention Limit will supersede any Retention Limit in any prior dated option agreement between the Company and Participant pursuant to the Plan.
For purposes of this Exhibit C, Company equity shall be equal to (i) the Fair Market Value of any Common Stock held by the Participant plus (ii) the value of vested options then held by Participant, whether granted pursuant to the Plan, the Company’s 2006 Stock Incentive Plan, the Company’s 2003 Stock Option Plan or otherwise, which will be equal to the Fair Market Value of the Common Stock underlying the options over the exercise price.
(b) If at any time after the date hereof the aggregate amount of Company equity held by Participant falls below the Retention Limit because of a decline in the Fair Market Value of the Common Stock, Participant will have three years to reach the Retention Limit before the Administrator may exercise any remedies under paragraph (d).
(c) Participant shall not be obligated to comply with the Retention Limit until five years from the date of grant; provided, however, that notwithstanding the foregoing, Participant may not make any sales of vested Options until the Retention Limit is reached, and thereafter, only to the extent that Participant would, at the time of the sale, be in compliance with the Retention Limit, except that Participants may make sales under 10b5-1 plans in existence on the date hereof so long as such sales would be in compliance with any preexisting Retention Limit.
(d) Participant’s failure to hold that number of shares and/or vested options set forth in this Exhibit C shall result in Participant’s forfeiture of all unvested Options unless otherwise determined by the Administrator, in its sole discretion.
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Exhibit 10.67
EXECUTION VERSION
SIXTEENTH AMENDMENT TO THE
RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT
This SIXTEENTH AMENDMENT TO THE RECEIVABLES PURCHASE AGREEMENT (this “Amendment”), dated as of May 28, 2024, is entered into by and among the following parties:
(i)TRANSDIGM RECEIVABLES LLC, a Delaware limited liability company, as Seller;
(ii)TRANSDIGM INC., a Delaware corporation, as Servicer;
(iii)PNC BANK, NATIONAL ASSOCIATION, as a Committed Purchaser, as Purchaser Agent for its Purchaser Group and as Administrator (“PNC”); and
(iv)WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as a Committed Purchaser and as Purchaser Agent for its Purchaser Group.
Capitalized terms used but not otherwise defined herein (including such terms used above) have the respective meanings assigned thereto in the Receivables Purchase Agreement described below.
BACKGROUND
A. The parties hereto and PNC Capital Markets LLC, as structuring agent, have entered into a Receivables Purchase Agreement, dated as of October 21, 2013 (as amended, restated, amended and restated, supplemented or otherwise modified through the date hereof, the “Receivables Purchase Agreement”).
B. The parties hereto desire to amend the Receivables Purchase Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1.Amendments to the Receivables Purchase Agreement. The Receivables Purchase Agreement is hereby amended as follows:
(a)Section 1(h) of Exhibit III of the Receivables Purchase Agreement is hereby replaced in its entirety with the following:
(h) Names and Location. The Seller has not used any company names, trade names or assumed names other than its name set forth on the signature pages of this Agreement. The Seller is “located” (as such term is defined in the applicable UCC) in Delaware. As of March 18, 2024, the office where the Seller keeps its records
765032485.4 | ||
concerning the Receivables is at the address of such party set forth on Schedule V hereto or such other location provided in writing to the Administrator from time to time.
(b)Schedule IV of the Receivables Purchase Agreement is hereby replaced in its entirety with the schedule attached hereto as Schedule IV.
(c)Schedule V of the Receivables Purchase Agreement is hereby replaced in its entirety with the schedule attached hereto as Schedule V.
SECTION 2.Representations and Warranties of the Seller and Servicer. Each of the Seller and the Servicer hereby represents and warrants, as to itself, to the Administrator, each Purchaser and each Purchaser Agent, as follows:
(a)Representations and Warranties. Immediately after giving effect to this Amendment, the representations and warranties made by such Person in the Transaction Documents to which it is a party are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date).
(b)Enforceability. This Amendment and each other Transaction Document to which it is a party, as amended hereby, constitute the legal, valid and binding obligation of such Person enforceable against such Person in accordance with its respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether enforceability is considered in a proceeding in equity or at law.
(c)No Termination Event. No event has occurred and is continuing, or would result from the transactions contemplated hereby, that constitutes a Purchase and Sale Termination Event, an Unmatured Purchase and Sale Termination Event, a Termination Event or an Unmatured Termination Event.
SECTION 3.Effect of Amendment. All provisions of the Receivables Purchase Agreement and the other Transaction Documents, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Receivables Purchase Agreement (or in any other Transaction Document) to “this Receivables Purchase Agreement”, “this Agreement”, “hereof”, “herein” or words of similar effect referring to the Receivables Purchase Agreement shall be deemed to be references to the Receivables Purchase Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of the Receivables Purchase Agreement other than as set forth herein.
SECTION 4.Effectiveness. This Amendment shall become effective as of the date hereof upon the satisfaction of the following conditions precedent:
(a)The Administrator shall have received counterparts of this Amendment, duly executed by each of the parties hereto.
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765032485.4 | ||
(b)The Administrator shall have received counterparts of the Third Amendment to the First Tier Purchase and Sale Agreement duly executed by each of the parties thereto.
SECTION 5.Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or e-mail transmission shall be effective as delivery of a manually executed counterpart hereof.
SECTION 6.GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).
SECTION 7.Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, the Receivables Purchase Agreement or any provision hereof or thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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765032485.4 | ||
IN WITNESS WHEREOF, the parties hereto have executed this Amendment by their duly authorized officers as of the date first above written.
TRANSDIGM RECEIVABLES LLC,
as Seller
as Seller
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Title: | Secretary | ||||||||||
TRANSDIGM INC.,
as Initial Servicer
as Initial Servicer
| By: | /s/ Jessica L. Warren | ||||||||||
| Name: | Jessica L. Warren | ||||||||||
| Title: | General Counsel, Chief Compliance Officer and Secretary | ||||||||||
S-1
Sixteenth Amendment to the
Receivables Purchase Agreement
PNC BANK, NATIONAL ASSOCIATION,
as a Committed Purchaser, as a Purchaser Agent and as Administrator
| By: | /s/ Christopher Blaney | ||||||||||
| Name: | Christopher Blaney | ||||||||||
| Title: | Senior Vice President | ||||||||||
S-2
Sixteenth Amendment to the
Receivables Purchase Agreement
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
as a Committed Purchaser and as Purchaser Agent for its Purchaser Group
| By: | /s/ Chance Hausler | ||||||||||
| Name: | Chance Hausler | ||||||||||
| Title: | Director | ||||||||||
S-3
Sixteenth Amendment to the
Receivables Purchase Agreement
SCHEDULE IV
ADDRESSES FOR NOTICES
The Seller:
US Bank Centre
1350 Euclid Avenue, Suite 1600
Cleveland, OH 44115
Attn: Liza Sabol
Tel: 216.706.2945
Email: lizas@transdigm.com
TransDigm:
US Bank Centre
1350 Euclid Avenue, Suite 1600
Cleveland, OH 44115
Attn: Liza Sabol
Tel: 216.706.2945
Email: lizas@transdigm.com
PNC Bank, National Association, as Administrator as a Purchaser Agent and Committed Purchaser:
PNC Bank, National Association
The Tower at PNC Plaza
300 Fifth Avenue, 11th Floor
Pittsburgh, PA 15222
Attention: Brian Stanley
Telephone: 412-768-2001
Facsimile: 412-803-7142
Email: brian.stanley@pnc.com
ABFAdmin@pnc.com
765032485.4 | Schedule IV-1 | |||||||
SCHEDULE V
LOCATION OF RECORDS
TransDigm Receivables LLC
US Bank Centre
1350 Euclid Avenue, Suite 1600
Cleveland, OH 44115
Schedule V-1
765032485.4 | ||
Exhibit 19.1
TransDigm Group Incorporated
Amended and Restated Insider Trading and Confidentiality Policy Statement
April 2023
General Obligations of All Company Personnel Regarding Insider Trading
This statement represents the Insider Trading and Confidentiality Policy adopted by the Board of Directors of TransDigm Group Incorporated (the “Company”) with respect to (i) the trading of securities issued by the Company, including, without limitation, common stock, convertible or derivative securities and debt securities (collectively, “Company Securities”), and (ii) the receipt and use of material non-public information by officers, directors and employees of the Company and its subsidiaries (collectively, “Company Personnel”). This Policy also applies to family members, other members of a person’s household and entities controlled by a person covered by this Policy, as described below.
As an essential part of their work for the Company and its subsidiaries, Company Personnel use or have access to material non-public information about the Company or other entities with which the Company and its subsidiaries do business. Those persons who possess or monitor such information hold a special position of trust and confidence toward it. Court decisions and Securities and Exchange Commission (“SEC”) administrative decisions interpreting the anti-fraud provisions of the securities laws generally make it illegal for any person to purchase or sell securities while aware of, or in possession of, material non-public information. It is also illegal to disclose such information (“tipping”) to others who may trade in Company Securities or securities of the Company’s and its subsidiaries’ business partners. Under the Insider Trading and Securities Fraud Enforcement Act of 1988, individuals trading on or “tipping” material non- public information are subject to the following penalties:
•A civil penalty of up to three times the profit gained or loss avoided;
•A criminal fine of up to $5 million (no matter how small the profit gained or loss avoided); and
•A jail term of up to 20 years.
The Company has adopted this Policy to address the Company’s obligation to prevent improper insider trading and to help Company Personnel avoid the consequences associated with insider trading violations and the misuse of material non-public information. In addition, this Policy is intended to help prevent even the appearance of improper conduct on the part of anyone employed by or associated with the Company, not just so-called “insiders.”
Information is “non-public” if it has not been previously disclosed or made available to the public by means of a press release, SEC filing or other media providing for broad public access.
Information is “material” if there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision or if it would significantly alter the total mix of information available to the investing public. Positive or negative information that could reasonably be expected to have a substantial effect on the price of Company Securities should
1 | ||
be considered material for purposes of this Policy. There is no bright-line standard for assessing materiality; rather, materiality is based on an assessment of all of the facts and circumstances, and is often evaluated by enforcement authorities with the benefit of hindsight. While it is not possible to compile an exhaustive list, information concerning any of the following items should be reviewed carefully to determine whether such information is material:
•Undisclosed quarterly earnings, including estimates of future earnings
•Dividend actions
•Significant mergers, acquisitions, divestitures, tender offers, joint ventures or changes in assets
•Significant developments regarding customers or suppliers (including the acquisition or loss of an important contract)
•The introduction of significant new product lines
•Changes in control
•Changes in the composition of the Company’s Board of Directors or senior management
•A change in auditors or auditor notification that the Company may no longer rely on an audit report
•Financings and other events regarding Company Securities (e.g., defaults on debt securities, and public or private sales of additional securities)
•Significant litigation
•Significant cybersecurity incidents or other significant disruptions in operations
We emphasize that this list is merely illustrative; courts have historically given a broad interpretation to what is deemed “material” information.
Company Personnel are prohibited from transacting directly or indirectly in Company Securities while in possession of material non-public information regarding the Company or any subsidiary thereof, except as expressly permitted by this Policy, including pursuant to the terms of a Trading Plan (as defined below). Similarly, Company Personnel may not transact directly or indirectly in the securities of any business partner of the Company or any subsidiary thereof if he or she is aware of, or in possession of, material non-public information regarding that entity, and Company Personnel may not tip any material non-public information regarding the Company, any subsidiary thereof or any such business partner to another person until the information becomes public or is no longer material.
On occasion, it may be necessary to disclose material non-public information regarding the Company or a subsidiary thereof to persons outside the Company for legitimate business
2 | ||
reasons. In such circumstances, the information should not be conveyed until an understanding, preferably in writing, has been reached that such information is to be treated confidentially, is not to be used for trading purposes and may not be further disclosed other than for legitimate business reasons; provided, that such understanding need not be reached in connection with the disclosure of such information to the Company’s legal counsel or independent auditors in connection with their provision of services to the Company or its subsidiaries.
In addition to the above restrictions relating to the receipt and use of material non-public information, Company Personnel are required to transact in Company Securities in strict accordance with the guidelines set forth herein, including as to the types of Company Securities that Company Personnel are permitted to trade and, for certain Company Personnel, the timing of such transactions.
Transactions by Family Members and Others
This Policy applies to the “Family Members” of Covered Personnel. “Family Members” of Covered Personnel include that person’s family members who reside with that person, anyone else who lives in that person’s household and any family members who do not live in that person’s household but whose transactions in Company Securities are directed by that person or are subject to that person’s influence or control (such as parents or children who consult with that person before they trade in Company Securities). Covered Personnel are responsible for the transactions of these other persons and therefore should make them aware of the need to confer with Covered Personnel before they trade in Company Securities, and Covered Personnel should treat all such transactions for the purposes of this Policy and applicable securities laws as if the transactions were for their own account. This Policy does not, however, apply to personal securities transactions of Family Members where the purchase or sale decision is made by a third party not controlled by, influenced by or related to Covered Personnel or their Family Members.
This Policy also applies to any entities that Covered Personnel influence or control, including any corporations, partnerships or trusts (collectively referred to as “Controlled Entities”). Covered Personnel should treat all transactions by Controlled Entities for the purposes of this Policy and applicable securities laws as if they were transactions for their own account.
Prohibition on Short Sales and Speculative Transactions for all Company Personnel
The Company considers it improper and inappropriate for Company Personnel to engage in short-term or speculative transactions in Company Securities. Therefore, it is the Company’s policy that Company Personnel may not engage in any of the following transactions:
Short Sales. A “short sale” is when a seller sells a security that he does not yet own, on the presumption that he can buy it at a price less than that for which he is selling. Short sales of Company Securities evidences an expectation on the part of the seller that the securities will decline in value, and therefore signal to the market that the seller lacks confidence in the Company and its short-term prospects. In addition, short sales may reduce the seller’s incentive to improve the Company’s performance. For these reasons, short sales of Company Securities by Company Personnel are strictly prohibited.
3 | ||
Publicly Traded Options. A transaction in options on an exchange (not stock options issued by the Company for compensatory reasons) is, in effect, a bet on the short-term movement of the Company’s stock price and therefore creates the appearance that a person is trading based on inside information. Transactions in options also may focus the attention of Company Personnel on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions by Company Personnel in puts, calls or other derivative securities, on an exchange or in any other organized market, are strictly prohibited.
Hedging Transactions. Certain forms of hedging or monetization transactions, such as zero-cost collars and forward sale contracts, allow a director or an employee to lock in much of the value of his or her stock holdings, often in exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the director or employee to continue to own the covered securities, but without the full risks and rewards of ownership. When that occurs, the director or employee may no longer have the same objectives as the Company's other shareholders. Therefore, the Company engaging in such transactions are strictly prohibited.
Margin Accounts and Pledges. Securities held in a margin account may be sold by the broker without the customer's consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the pledgor is aware of material non-public information or otherwise is not permitted to trade in Company Securities, Company Personnel are prohibited from holding Company Securities in a margin account or pledging Company Securities as collateral for a loan.
Trading Plans
Any Covered Personnel may enter into a Trading Plan, in which case, restrictions on trading otherwise applicable under this Policy will not apply to the extent transactions are executed in compliance with such Trading Plan and applicable law. A “Trading Plan” is a plan for personal securities trading activity designed to comply with the provisions of Rule 10b5-1 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) to provide an affirmative defense to insider trading liability for anyone who sells or purchases stock or other securities at a time when they are in possession of material non-public information, provided that certain conditions are met.
The compliance of any Trading Plan with applicable law is the responsibility of the person entering into such Trading Plan. Guidelines applicable to Trading Plans are set forth in Exhibit A attached to this Policy.
Obligation for Certain Company Personnel to Trade Only During “Window Periods”
Those particular Company Personnel listed on Exhibit B (“Designated Window Personnel”), as well as the Family Members and Controlled Entities of such Designated Window Personnel, are permitted to transact in Company Securities only during four yearly “window periods,” except as expressly permitted by this Policy. The four window periods are the periods generally commencing on the second trading day following the date of release to the public of the
4 | ||
Company’s earnings for the prior fiscal quarter and ending on the 15th day of the last month of the fiscal quarter. For example, if the earnings for the fiscal quarter ended on March 31st are released on May 8th, trades may be made only during the period commencing on May 10th (assuming May 8, 9 and 10 are trading days that year) and ending on June 15th.
Obligation for Certain Company Personnel to Pre-Clear Transactions
Those particular Company Personnel listed on Exhibit C (“Designated Pre-Clearance Personnel”), as well as the Family Members and Controlled Entities of such Designated Pre-Clearance Personnel, are required to contact in writing the Company’s Chief Financial Officer or General Counsel or his or her designee (and any request by the Chief Financial Officer to transact in Company Securities must be submitted to the, and any request by the General Counsel to transact in Company Securities must be submitted to the Chief Financial Officer), prior to any transaction in Company Securities even if such transaction is made during a window period. Designated Pre-Clearance Personnel contemplating a transaction should contact the Company’s Chief Financial Officer or General Counsel in writing at least two business days in advance to pre-clear a transaction. This requirement applies to gifts, cashless stock option exercises and sales of stock acquired on exercise of options.
The Chief Financial Officer or General Counsel, as applicable, or his or her designee shall not have any liability to any Designated Pre-Clearance Personnel for any failure to approve or disapprove the contemplated transaction within two business days.
Designated Pre-Clearance Personnel who receive pre-clearance for a transaction may buy or sell the stock within five business days after clearance is granted or when the window closes, whichever is shorter, but only if they are not aware of material non-public information. If for any reason the transaction is not completed within such period, including pursuant to a standing limit order, pre-clearance must be obtained again before the transaction may occur.
If, after requesting clearance, a Designated Pre-Clearance Personnel member is advised that he or she may not trade in Company Securities, he or she may not engage in any trade of any type under any circumstances, nor may that person inform anyone that he or she has been advised not to trade.
Please note that the pre-clearance requirement is also necessary so that appropriate filings with the SEC can be coordinated. Note, however, any officer or director, and not the Company, has the responsibility to ensure that required filings are made on a timely basis. The Company is happy to assist officers and directors in this regard.
5 | ||
General Applicability
Please note that the restrictions outlined above do not apply to or affect the ability of Company Personnel to exercise stock options; however, they do apply to the sale of the shares issued upon exercise of such stock options, including any sale of stock as part of a broker-assisted cashless exercise of any option.
Please note that this Policy continues to apply to your transactions in Company Securities even after your employment with, or tenure as a director of, the Company has terminated. If you are in possession of material non-public information when your employment, or tenure as a director, terminates, you may not trade in Company Securities until that information has been publicly released for at least one full business day.
If there are any questions relating to this Policy, or the applicability or interpretation of the standards discussed in this Policy, please feel free to contact the Company’s Chief Financial Officer or General Counsel for clarification and guidance prior to trading or the disclosure of any information. We expect the strictest compliance with these procedures by all Company Personnel at every level. A failure by you to follow the terms of this Policy would be considered a matter of extreme seriousness and could affect your employment and could lead to dismissal for cause. Upon request, Company Personnel must certify that, among other things, such persons are currently, and will continue to be, in compliance with this Policy.
6 | ||
EXHIBIT A
TRADING PLANS
TRADING PLANS
The following guidelines are applicable to Trading Plans subject to this Policy.
Form of Plan:
•The person entering into a Trading Plan must affirm his or her intent for the Trading Plan to comply with Rule 10b5-1.
•The counter-party to any Trading Plan must be a brokerage firm designated by the Company.
•Subject to certain exceptions specified in Rule 10b5-1, no person may have more than one Trading Plan in effect at one time.
•Subject to certain exceptions specified in Rule 10b5-1, a Trading Plan designed to effect the open-market purchase or sale of the total amount of Company Securities subject to such plan as a single transaction would be limited to one single-trade Trading Plan per twelve-month period.
Material non-public information and good faith:
•The person entering into, modifying or terminating a Trading Plan must not be in possession of any material non-public information regarding the Company or Company Securities as of the date of entering into, modifying or terminating the Trading Plan.
•A Trading Plan of an officer or a director must include a certification by such person that (a) he or she is not aware of any material non-public information about the Company or Company Securities and (b) he or she is adopting the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Section 10(b) of the Exchange Act or Rule 10b-5 promulgated under the Exchange Act.
•The person entering into a Trading Plan must enter into the plan in good faith and not as part of a plan or scheme to evade the prohibitions of Section 10(b) of the Exchange Act or Rule 10b-5 promulgated under the Exchange Act.
•Once a person enters into a Trading Plan, the person must act in good faith with respect to the plan.
7 | ||
Timing:
•A Trading Plan may only be entered into, modified or terminated during a window period (to the extent the person is a Designated Window Personnel member)
•The person entering into or modifying a Trading Plan must include a cooling-off period, between the date of executing the Trading Plan or modification and the first trade executed thereunder that, at a minimum, meets the requirements of Rule 10b5-1 as follows:
A Trading Plan entered into or modified by an officer or a director must include a cooling-off period of at least the later of: 90 days after the adoption of the Trading Plan and two business days following the disclosure of the Company’s financial results in a Form 10-Q or Form 10-K for the fiscal quarter in which the plan was adopted or modified; provided, however, such cooling-off period need not exceed 120 days; and
A Trading Plan entered into or modified by any other individual subject to this Policy must include a cooling-off period of at least 30 days.
Company Oversight and Disclosure:
•A Trading Plan entered into, modified or terminated by an officer or a director must be submitted to and approved by the Chief Financial Officer or the General Counsel or her or his designee at least two weeks before such plan, modification or termination is to become effective. A Trading Plan entered into, modified or terminated by the Chief Financial Officer or the General Counsel before it becomes effective must be submitted to and approved by the General Counsel (with respect to a Trading Plan of the Chief Financial Officer) or the Chief Financial Officer (with respect to a Trading Plan of the General Counsel) or his or her designee at least two weeks before such plan, modification or termination is to become effective.
•A Trading Plan shall be terminated or suspended during its term if the Company’s Board of Directors or any authorized committee of the Company’s Board of Directors, or the Chief Executive Officer, determines such termination to be in the best interests of the Company and so notifies the person who has entered into the Trading Plan.
•The person entering into, or trading pursuant to, a Trading Plan must cooperate with the Company’s decisions regarding public disclosure of such Trading Plan, including disclosure in accordance with requirements imposed by the SEC.
8 | ||
EXHIBIT B
DESIGNATED WINDOW PERSONNEL
All TransDigm officers (as defined in Rule 16a-1(f) under the Exchange Act)
All members of TransDigm’s Board of Directors
All TransDigm corporate office employees
All business unit Presidents and their direct managerial reports (i.e., Director of Sales, Director of Engineering, Director of Operations, Controller, division General Manager and similar positions)
9 | ||
EXHIBIT C
DESIGNATED PRE-CLEARANCE PERSONNEL
DESIGNATED PRE-CLEARANCE PERSONNEL
All TransDigm officers (as defined in Rule 16a-1(f) under the Exchange Act)
All members of TransDigm’s Board of Directors
All TransDigm corporate office employees
All business unit Presidents
10 | ||
Exhibit 21.1
SUBSIDIARIES OF TRANSDIGM GROUP INCORPORATED
TransDigm Inc. is a 100% owned subsidiary of TransDigm Group Incorporated. TransDigm Inc. owns directly or indirectly the following subsidiaries:
Name of Subsidiary | Jurisdiction of Incorporation or Organization | ||||||||||
| 4455 Genesee Properties, LLC | Delaware | ||||||||||
| 4455 Genesee Street, LLC | Delaware | ||||||||||
| 17111 Waterview Pkwy LLC | Delaware | ||||||||||
| Acme Aerospace, Inc. | Delaware | ||||||||||
| Adams Rite Aerospace GmbH | Germany | ||||||||||
| Adams Rite Aerospace, Inc. | California | ||||||||||
| Advanced Inflatable Products Limited | United Kingdom | ||||||||||
| AeroControlex Group, Inc. | Delaware | ||||||||||
| Aerosonic LLC | Delaware | ||||||||||
| Airborne Acquisition, Inc. | Delaware | ||||||||||
| Airborne Global, Inc. | Delaware | ||||||||||
| Airborne Holdings, Inc. | Delaware | ||||||||||
| Airborne Systems Canada Ltd. | Canada | ||||||||||
| Airborne Systems Group Limited | United Kingdom | ||||||||||
| Airborne Systems Holdings Limited | United Kingdom | ||||||||||
| Airborne Systems Limited | United Kingdom | ||||||||||
| Airborne Systems NA Inc. | Delaware | ||||||||||
| Airborne Systems North America Inc. | Delaware | ||||||||||
| Airborne Systems North America of CA Inc. | Delaware | ||||||||||
| Airborne Systems North America of NJ Inc. | New Jersey | ||||||||||
| Airborne Systems Pension Trust Limited | United Kingdom | ||||||||||
| Airborne UK Acquisition Limited | United Kingdom | ||||||||||
| Airborne UK Parent Limited | United Kingdom | ||||||||||
| Aircraft Materials Limited | United Kingdom | ||||||||||
| Air-Sea Survival Equipment Trustee Limited | United Kingdom | ||||||||||
| AmSafe Aviation (Chongqing), Ltd. | China | ||||||||||
| AmSafe Bridport (Kunshan) Co., Ltd. | China | ||||||||||
| AmSafe Bridport (Private) Ltd. | Sri Lanka | ||||||||||
| AmSafe Bridport Ltd. | United Kingdom | ||||||||||
| AmSafe Global Holdings, Inc. | Delaware | ||||||||||
| AmSafe Global Services (Private) Limited | Sri Lanka | ||||||||||
| AmSafe, Inc. | Delaware | ||||||||||
| Angus Electronics Co. | Delaware | ||||||||||
| Apical Industries, Inc. | California | ||||||||||
| ARA Deutschland GmbH | Germany | ||||||||||
| ARA Holding GmbH | Germany | ||||||||||
| Arkwin Industries, Inc. | New York | ||||||||||
| Armtec Countermeasures Co. | Delaware | ||||||||||
| Armtec Countermeasures TNO Co. | Delaware | ||||||||||
Name of Subsidiary | Jurisdiction of Incorporation or Organization | ||||||||||
| Armtec Defense Products Co. | Delaware | ||||||||||
| Ashford Properties, LLC | Delaware | ||||||||||
| Auxitrol SAS | France | ||||||||||
| Auxitrol Weston Mexico, S. de R.L. de C.V. | Mexico | ||||||||||
| Auxitrol Weston Singapore Pte. Ltd. | Singapore | ||||||||||
| Auxitrol Weston USA, Inc. | Delaware | ||||||||||
| Aviation Technologies, Inc. | Delaware | ||||||||||
| Avionic Instruments LLC | Delaware | ||||||||||
| Avionics Specialties, Inc. | Virginia | ||||||||||
| AvtechTyee, Inc. | Washington | ||||||||||
| Beta Transformer Mexico, S. de R.L. de C.V. | Mexico | ||||||||||
| Beta Transformer Technology LLC | Delaware | ||||||||||
| Breeze-Eastern LLC | Delaware | ||||||||||
| Bridport Erie Aviation, Inc. | Delaware | ||||||||||
| Bridport Holdings, Inc. | Delaware | ||||||||||
| Bridport Ltd. | United Kingdom | ||||||||||
| Bridport-Air Carrier, Inc. | Washington | ||||||||||
| Bruce Aerospace Inc. | Delaware | ||||||||||
| Calspan Air Facilities, LLC | New York | ||||||||||
| Calspan Air Services, LLC | New York | ||||||||||
| Calspan ASE Portugal, Inc. | Minnesota | ||||||||||
| Calspan Holdings, LLC | New York | ||||||||||
| CALSPAN JETS LLC | Delaware | ||||||||||
| Calspan Technology Acquisition LLC | Delaware | ||||||||||
| Calspan, LLC | New York | ||||||||||
| CDA InterCorp LLC | Florida | ||||||||||
| CEF Industries, LLC | Delaware | ||||||||||
| Champion Aerospace LLC | Delaware | ||||||||||
| Chelton Avionics Holdings, Inc. | Delaware | ||||||||||
| Chelton Avionics, Inc. | Delaware | ||||||||||
| Chelton CTS Limited | United Kingdom | ||||||||||
| Chelton Defence Communications Limited | United Kingdom | ||||||||||
| Chelton Defense Products, Inc. | Delaware | ||||||||||
| Chelton Limited | United Kingdom | ||||||||||
| CMC Electronics Aurora LLC | Delaware | ||||||||||
| CMC Electronics Inc. | Canada | ||||||||||
| CMC Electronics ME Inc. | Canada | ||||||||||
| CPI Intermediate Holdings, Inc. | Delaware | ||||||||||
| CPI International, Inc. | Delaware | ||||||||||
| CPI TMD Technologies Limited | United Kingdom | ||||||||||
| CTHC LLC | New York | ||||||||||
| Darchem Engineering Limited | United Kingdom | ||||||||||
| Darchem Holdings Limited | United Kingdom | ||||||||||
Name of Subsidiary | Jurisdiction of Incorporation or Organization | ||||||||||
| Dart Aerospace B.V. | Netherlands | ||||||||||
| Dart Aerospace Company | Canada | ||||||||||
| Dart Aerospace ULC | Canada | ||||||||||
| Dart Aerospace USA, Inc. | Washington | ||||||||||
| Dart Buyer, Inc. | Delaware | ||||||||||
| Dart Helicopter Services, Inc. | Delaware | ||||||||||
| Dart Intermediate, Inc. | Delaware | ||||||||||
| Dart TopCo, Inc. | Delaware | ||||||||||
| Data Device Corporation | Delaware | ||||||||||
| DDC Electronics K.K. | Japan | ||||||||||
| DDC Electronics Private Limited | India | ||||||||||
| DDC Elektronik, GmbH | Germany | ||||||||||
| Dukes Aerospace, Inc. | Delaware | ||||||||||
| Edlaw Limited | United Kingdom | ||||||||||
| Electromech Technologies LLC | Delaware | ||||||||||
| Elektro-Metall Export GmbH | Germany | ||||||||||
| Elektro-Metall Paks KFT | Hungary | ||||||||||
| EST Defence Company UK Limited | United Kingdom | ||||||||||
| Esterline Acquisition Ltd | United Kingdom | ||||||||||
| Esterline do Brasil Assessoria e Intermediação Ltda | Brazil | ||||||||||
| Esterline Europe Company LLC | Delaware | ||||||||||
| Esterline Foreign Sales Corporation | US Virgin Islands | ||||||||||
| Esterline International Company | Delaware | ||||||||||
| Esterline Technologies Corporation | Delaware | ||||||||||
| Esterline Technologies Europe Limited | United Kingdom | ||||||||||
| Esterline Technologies Global Limited | United Kingdom | ||||||||||
| Esterline Technologies Holdings Limited | United Kingdom | ||||||||||
| Esterline Technologies SGIP LLC | Delaware | ||||||||||
| Esterline Technologies Unlimited | United Kingdom | ||||||||||
| European Antennas Limited | United Kingdom | ||||||||||
| FPT Industries LLC | Delaware | ||||||||||
| F.P.T. Industries Ltd. | United Kingdom | ||||||||||
| Genesee Holdings II, LLC | New York | ||||||||||
| Genesee Holdings III, LLC | New York | ||||||||||
| Genesee Holdings, LLC | New York | ||||||||||
| GQ Parachutes Limited | United Kingdom | ||||||||||
| HarcoSemco LLC | Connecticut | ||||||||||
| Hartwell Corporation | California | ||||||||||
| Heli Tech, Inc. | Oregon | ||||||||||
| Hytek Finishes Co. | Delaware | ||||||||||
| Iceman Holdco, Inc. | Delaware | ||||||||||
| ILC Holdings, Inc. | Delaware | ||||||||||
| Irvin Aerospace Limited | United Kingdom | ||||||||||
Name of Subsidiary | Jurisdiction of Incorporation or Organization | ||||||||||
| IrvinGQ France SAS | France | ||||||||||
| IrvinGQ Limited | United Kingdom | ||||||||||
| Janco Corporation | California | ||||||||||
| Johnson Liverpool LLC | Delaware | ||||||||||
| King Nutronics, LLC | Delaware | ||||||||||
| Kirkhill Inc. | Delaware | ||||||||||
| Korry Electronics Co. | Delaware | ||||||||||
| Kunshan Shield Restraint Systems, Ltd. | China | ||||||||||
| Leach Holding Corporation | Delaware | ||||||||||
| Leach International Asia-Pacific Ltd | Hong Kong | ||||||||||
| Leach International Corporation | Delaware | ||||||||||
| Leach International Europe S.A.S. | France | ||||||||||
| Leach International Germany GmbH | Germany | ||||||||||
| Leach International Mexico S. de R. L. de C. V. | Mexico | ||||||||||
| Leach International UK Ltd | United Kingdom | ||||||||||
| Leach Mexico Holding LLC | Delaware | ||||||||||
| Leach Technology Group, Inc. | Delaware | ||||||||||
| MarathonNorco Aerospace, Inc. | Delaware | ||||||||||
| Mason Electric Co. | Delaware | ||||||||||
| McKechnie Aerospace (Europe) Ltd. | United Kingdom | ||||||||||
| McKechnie Aerospace DE, Inc. | Delaware | ||||||||||
| McKechnie Aerospace DE, LP | United Kingdom | ||||||||||
| McKechnie Aerospace Holdings, Inc. | Delaware | ||||||||||
| McKechnie Aerospace US LLC | Delaware | ||||||||||
| Mecanismos de Matamoros S. de R.L. de C.V. | Mexico | ||||||||||
| Medtherm Labs, LLC | Delaware | ||||||||||
| Microwave Power Products, Inc. | Delaware | ||||||||||
| NAT Seattle Inc. | Delaware | ||||||||||
| NMC Aerospace, S. de R.L. de C.V. | Mexico | ||||||||||
| NMC Group, Inc. | California | ||||||||||
| Nordisk Asia Pacific Limited | Hong Kong | ||||||||||
| Nordisk Asia Pacific Pte Ltd | Singapore | ||||||||||
| Nordisk Aviation Products (Kunshan) Ltd. | China | ||||||||||
| Nordisk Aviation Products AS | Norway | ||||||||||
| Nordisk Aviation Products LLC | Delaware | ||||||||||
| North Hills Signal Processing Corp. | Delaware | ||||||||||
| North Hills Signal Processing Overseas LLC | Delaware | ||||||||||
| Norwich Aero Products Inc. | New York | ||||||||||
| Offshore Helicopter Support Services, Inc. | Louisiana | ||||||||||
| Palomar Products, Inc. | Delaware | ||||||||||
| Paravion Technology, Inc. | Colorado | ||||||||||
| Pexco Aerospace, Inc. | Delaware | ||||||||||
| PneuDraulics, Inc. | California | ||||||||||
Name of Subsidiary | Jurisdiction of Incorporation or Organization | ||||||||||
| Power Device Corporation | New York | ||||||||||
| Power Device UK Limited | United Kingdom | ||||||||||
| Pressure Systems International Ltd | United Kingdom | ||||||||||
| Raptor Labs HoldCo, LLC | Delaware | ||||||||||
| Raptor Labs Intermediate, LLC | Delaware | ||||||||||
| Schneller Asia Pte. Ltd. | Singapore | ||||||||||
| Schneller LLC | Delaware | ||||||||||
| Schneller S.A.R.L. | France | ||||||||||
| SEI Industries LTD. | Canada | ||||||||||
| Semco Instruments, Inc. | Delaware | ||||||||||
| Sensor Concepts, LLC | Delaware | ||||||||||
| Shield Restraint Systems Ltd. | United Kingdom | ||||||||||
| Shield Restraint Systems, Inc. | Delaware | ||||||||||
| Signal Processing Matamoros S.A. de C.V. | Mexico | ||||||||||
| Simplex Manufacturing Co. | Oregon | ||||||||||
| Skandia, Inc. | Illinois | ||||||||||
| Skurka Aerospace Inc. | Delaware | ||||||||||
| Space Electronics LLC | Delaware | ||||||||||
| Symetrics Industries, LLC | Florida | ||||||||||
| TA Aerospace Co. | California | ||||||||||
| TA Mfg Limited | United Kingdom | ||||||||||
| Tactair Fluid Controls, Inc. | New York | ||||||||||
| TDG Dart Limited | United Kingdom | ||||||||||
| TDG ESL Holdings Inc. | Delaware | ||||||||||
| TDG France Ultimate Parent SAS | France | ||||||||||
| TDG Germany GmbH | Germany | ||||||||||
| TEAC Aerospace Technologies, Inc. | Delaware | ||||||||||
| Telair International GmbH | Germany | ||||||||||
| Telair Management Services GmbH | Germany | ||||||||||
| Telair US LLC | Delaware | ||||||||||
| TestVonics, Inc. | New Hampshire | ||||||||||
| Texas Rotronics, Inc. | Texas | ||||||||||
| TMD Holdings Limited | United Kingdom | ||||||||||
| TMD Technologies Limited | United Kingdom | ||||||||||
| TransDigm Canada ULC | Canada | ||||||||||
| TransDigm European Holdings Limited | United Kingdom | ||||||||||
| TransDigm Ireland Ltd. | Ireland | ||||||||||
| TransDigm Microwave Limited | United Kingdom | ||||||||||
| TransDigm Receivables LLC | Delaware | ||||||||||
| TransDigm Technologies India Private Limited | India | ||||||||||
| TransDigm UK Holdings Limited | United Kingdom | ||||||||||
| Transicoil (Malaysia) Sendirian Berhad | Malaysia | ||||||||||
| Transicoil LLC | Delaware | ||||||||||
Name of Subsidiary | Jurisdiction of Incorporation or Organization | ||||||||||
| Wallop Defence UK Limited | United Kingdom | ||||||||||
| Weston Aerospace Ltd | United Kingdom | ||||||||||
| Whippany Actuation Systems, LLC | Delaware | ||||||||||
| XCEL Power Systems Ltd. | United Kingdom | ||||||||||
| Young & Franklin Inc. | New York | ||||||||||
Exhibit 22.1
LISTING OF SUBSIDIARY GUARANTORS
The following series of senior subordinated and secured notes issued by TransDigm Inc., a wholly owned subsidiary of TransDigm Group Incorporated, are unconditionally guaranteed, on a joint and several basis, by TransDigm Group Incorporated and each of the subsidiaries listed below under “Subsidiary Guarantors.”
| Description | |||||
| 5.50% senior subordinated notes due 2027 (“5.50% 2027 Notes”) | |||||
| 6.75% senior secured notes due 2028 (“2028 Secured Notes”) | |||||
| 4.625% senior subordinated notes due 2029 (“4.625% 2029 Notes”) | |||||
| 4.875% senior subordinated notes due 2029 (“4.875% 2029 Notes”) | |||||
| 6.375% senior secured notes due 2029 (“2029 Secured Notes”) | |||||
| 6.875% senior secured notes due 2030 (“2030 Secured Notes”) | |||||
| 7.125% senior secured notes due 2031 (“2031 Secured Notes”) | |||||
| 6.625% senior secured notes due 2032 (“2032 Secured Notes”) | |||||
| 6.00% senior secured notes due 2033 (“2033 Secured Notes”) | |||||
Subsidiary Guarantors | Jurisdiction of Incorporation or Organization | ||||||||||
| 4455 Genesee Properties, LLC | Delaware | ||||||||||
| 4455 Genesee Street, LLC | Delaware | ||||||||||
| 17111 Waterview Pkwy LLC | Delaware | ||||||||||
| Acme Aerospace, Inc. | Delaware | ||||||||||
| Adams Rite Aerospace, Inc. | California | ||||||||||
| AeroControlex Group, Inc. | Delaware | ||||||||||
| Aerosonic LLC | Delaware | ||||||||||
| Airborne Acquisition, Inc. | Delaware | ||||||||||
| Airborne Global, Inc. | Delaware | ||||||||||
| Airborne Holdings, Inc. | Delaware | ||||||||||
| Airborne Systems NA Inc. | Delaware | ||||||||||
| Airborne Systems North America Inc. | Delaware | ||||||||||
| Airborne Systems North America of CA Inc. | Delaware | ||||||||||
| Airborne Systems North America of NJ Inc. | New Jersey | ||||||||||
| AmSafe Global Holdings, Inc. | Delaware | ||||||||||
| AmSafe, Inc. | Delaware | ||||||||||
| Angus Electronics Co. | Delaware | ||||||||||
| Apical Industries, Inc. | California | ||||||||||
| Arkwin Industries, Inc. | New York | ||||||||||
| Armtec Countermeasures Co. | Delaware | ||||||||||
| Armtec Countermeasures TNO Co. | Delaware | ||||||||||
| Armtec Defense Products Co. | Delaware | ||||||||||
| Ashford Properties, LLC | Delaware | ||||||||||
| Auxitrol Weston USA, Inc. | Delaware | ||||||||||
| Aviation Technologies, Inc. | Delaware | ||||||||||
| Avionic Instruments LLC | Delaware | ||||||||||
| Avionics Specialties, Inc. | Virginia | ||||||||||
| AvtechTyee, Inc. | Washington | ||||||||||
| Beta Transformer Technology LLC | Delaware | ||||||||||
| Breeze-Eastern LLC | Delaware | ||||||||||
| Bridport Erie Aviation, Inc. | Delaware | ||||||||||
Subsidiary Guarantors | Jurisdiction of Incorporation or Organization | ||||||||||
| Bridport Holdings, Inc. | Delaware | ||||||||||
| Bridport-Air Carrier, Inc. | Washington | ||||||||||
| Bruce Aerospace Inc. | Delaware | ||||||||||
| Calspan Air Facilities, LLC | New York | ||||||||||
| Calspan Air Services, LLC | New York | ||||||||||
| Calspan ASE Portugal, Inc. | Minnesota | ||||||||||
| Calspan Holdings, LLC | New York | ||||||||||
| CALSPAN JETS LLC | Delaware | ||||||||||
| Calspan Technology Acquisition LLC | Delaware | ||||||||||
| Calspan, LLC | New York | ||||||||||
| CDA InterCorp LLC | Florida | ||||||||||
| CEF Industries, LLC | Delaware | ||||||||||
| Champion Aerospace LLC | Delaware | ||||||||||
| Chelton Avionics Holdings, Inc. | Delaware | ||||||||||
| Chelton Avionics, Inc. | Delaware | ||||||||||
| Chelton Defense Products, Inc. | Delaware | ||||||||||
| CMC Electronics Aurora LLC | Delaware | ||||||||||
| CPI Intermediate Holdings, Inc. | Delaware | ||||||||||
| CPI International, Inc. | Delaware | ||||||||||
| CTHC LLC | New York | ||||||||||
| Dart Aerospace USA, Inc. | Washington | ||||||||||
| Dart Buyer, Inc. | Delaware | ||||||||||
| Dart Helicopter Services, Inc. | Delaware | ||||||||||
| Dart Intermediate, Inc. | Delaware | ||||||||||
| Dart TopCo, Inc. | Delaware | ||||||||||
| Data Device Corporation | Delaware | ||||||||||
| Dukes Aerospace, Inc. | Delaware | ||||||||||
| Electromech Technologies LLC | Delaware | ||||||||||
| Esterline Europe Company LLC | Delaware | ||||||||||
| Esterline International Company | Delaware | ||||||||||
| Esterline Technologies Corporation | Delaware | ||||||||||
| Esterline Technologies SGIP LLC | Delaware | ||||||||||
| FPT Industries LLC | Delaware | ||||||||||
| Genesee Holdings II, LLC | New York | ||||||||||
| Genesee Holdings III, LLC | New York | ||||||||||
| Genesee Holdings, LLC | New York | ||||||||||
| HarcoSemco LLC | Connecticut | ||||||||||
| Hartwell Corporation | California | ||||||||||
| Heli Tech, Inc. | Oregon | ||||||||||
| Hytek Finishes Co. | Delaware | ||||||||||
| Iceman Holdco, Inc. | Delaware | ||||||||||
| ILC Holdings, Inc. | Delaware | ||||||||||
| Janco Corporation | California | ||||||||||
| Johnson Liverpool LLC | Delaware | ||||||||||
Subsidiary Guarantors | Jurisdiction of Incorporation or Organization | ||||||||||
| King Nutronics, LLC | Delaware | ||||||||||
| Kirkhill Inc. | Delaware | ||||||||||
| Korry Electronics Co. | Delaware | ||||||||||
| Leach Holding Corporation | Delaware | ||||||||||
| Leach International Corporation | Delaware | ||||||||||
| Leach Mexico Holding LLC | Delaware | ||||||||||
| Leach Technology Group, Inc. | Delaware | ||||||||||
| MarathonNorco Aerospace, Inc. | Delaware | ||||||||||
| Mason Electric Co. | Delaware | ||||||||||
| McKechnie Aerospace DE, Inc. | Delaware | ||||||||||
| McKechnie Aerospace Holdings, Inc. | Delaware | ||||||||||
| McKechnie Aerospace US LLC | Delaware | ||||||||||
| Medtherm Labs, LLC | Delaware | ||||||||||
| Microwave Power Products, Inc. | Delaware | ||||||||||
| NAT Seattle Inc. | Delaware | ||||||||||
| NMC Group, Inc. | California | ||||||||||
| Nordisk Aviation Products LLC | Delaware | ||||||||||
| North Hills Signal Processing Corp. | Delaware | ||||||||||
| North Hills Signal Processing Overseas LLC | Delaware | ||||||||||
| Norwich Aero Products Inc. | New York | ||||||||||
| Offshore Helicopter Support Services, Inc. | Louisiana | ||||||||||
| Palomar Products, Inc. | Delaware | ||||||||||
| Paravion Technology, Inc. | Colorado | ||||||||||
| Pexco Aerospace, Inc. | Delaware | ||||||||||
| PneuDraulics, Inc. | California | ||||||||||
| Power Device Corporation | New York | ||||||||||
| Raptor Labs HoldCo, LLC | Delaware | ||||||||||
| Raptor Labs Intermediate, LLC | Delaware | ||||||||||
| Schneller LLC | Delaware | ||||||||||
| Semco Instruments, Inc. | Delaware | ||||||||||
| Sensor Concepts, LLC | Delaware | ||||||||||
| Shield Restraint Systems, Inc. | Delaware | ||||||||||
| Simplex Manufacturing Co. | Oregon | ||||||||||
| Skandia, Inc. | Illinois | ||||||||||
| Skurka Aerospace Inc. | Delaware | ||||||||||
| Space Electronics LLC | Delaware | ||||||||||
| Symetrics Industries, LLC | Florida | ||||||||||
| TA Aerospace Co. | California | ||||||||||
| Tactair Fluid Controls, Inc. | New York | ||||||||||
| TDG ESL Holdings Inc. | Delaware | ||||||||||
| TEAC Aerospace Technologies, Inc. | Delaware | ||||||||||
| Telair US LLC | Delaware | ||||||||||
| TestVonics, Inc. | New Hampshire | ||||||||||
| Texas Rotronics, Inc. | Texas | ||||||||||
Subsidiary Guarantors | Jurisdiction of Incorporation or Organization | ||||||||||
| TransDigm UK Holdings Limited | United Kingdom | ||||||||||
| Transicoil LLC | Delaware | ||||||||||
| Whippany Actuation Systems, LLC | Delaware | ||||||||||
| Young & Franklin Inc. | New York | ||||||||||
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
| (1) | Registration Statement (Form S-8 No. 333-269621) pertaining to the TransDigm Group Incorporated 2019 Stock Option Plan; | ||||
| (2) | Registration Statements (Form S-8 No. 333-174122 and Form S-8 No. 333-152847) pertaining to the TransDigm Group Incorporated 2006 Stock Incentive Plan; | ||||
| (3) | Registration Statement (Form S-8 No. 333-132808) pertaining to the TransDigm Group Incorporated 2006 Stock Incentive Plan and the TransDigm Group Fourth Amended and Restated 2003 Stock Option Plan, as amended; and | ||||
| (4) | Registration Statement (Form S-8 No. 333-200204) pertaining to the TransDigm Group 2014 Stock Option Plan; | ||||
of our reports dated November 7, 2024, with respect to the consolidated financial statements and schedule of TransDigm Group Incorporated and the effectiveness of internal control over financial reporting of TransDigm Group Incorporated included in this Annual Report (Form 10-K) of TransDigm Group Incorporated for the fiscal year ended September 30, 2024.
/s/ Ernst & Young LLP
Cleveland, Ohio
November 7, 2024
Exhibit 31.1
CERTIFICATION
I, Kevin Stein, certify that:
1.I have reviewed this annual report on Form 10-K 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 internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)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
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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 the registrant’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: November 7, 2024
| /s/ Kevin Stein | ||
| Name: Kevin Stein | ||
| Title: President, Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
Exhibit 31.2
CERTIFICATION
I, Sarah Wynne, certify that:
1.I have reviewed this annual report on Form 10-K 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 internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)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
(d)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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 the registrant’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: November 7, 2024
| /s/ Sarah Wynne | ||
| Name: Sarah Wynne | ||
| Title: Chief Financial Officer | ||
| (Principal Financial Officer) | ||
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 Annual Report on Form 10-K of TransDigm Group Incorporated (the “Company”) for the fiscal year ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kevin Stein, President, Chief Executive Officer and Director (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 as of the dates indicated and results of operations of the Company for the periods indicated.
Date: November 7, 2024
| /s/ Kevin Stein | ||
| Name: Kevin Stein | ||
| Title: President, Chief Executive Officer and Director | ||
| (Principal Executive Officer) | ||
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 Annual Report on Form 10-K of TransDigm Group Incorporated (the “Company”) for the fiscal year ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sarah Wynne, Chief Financial Officer (Principal Financial 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 as of the dates indicated and results of operations of the Company for the periods indicated.
Date: November 7, 2024
| /s/ Sarah Wynne | ||
| Name: Sarah Wynne | ||
| Title: Chief Financial Officer | ||
| (Principal Financial Officer) | ||