TDG 10-K & 10-Q changes, risk factors and insider trading

Set forth belowBelow 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.

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

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 forat 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.environment. Sometimes we accept a fixed-price contract for a product that we have not yetpreviously produced, and this increasesmay increase 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. Furthermore, entering into fixed-price contracts with the United States Government (“U.S. Government”), particularly for small-quantity or spot purchases made without reliable forecasts, exposes us to the risk of cost overruns and reduced margins if production costs increase or economies of scale cannot be achieved.

A significant portion of our growth has occurred through acquisitions. Any futureFuture 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 ofmultiple 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.

InWe addition,have wea significant amount of indebtedness and 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.

All of the term loans under our term loan facility and the borrowingstrade underreceivable our revolving creditsecuritization 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,increases, 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 enteredenter into interest rate swap, cap, and collar agreements that cover a significant portion of the existing variable rate debt and may continue 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.

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 aremay currently significant inflationary and otherbe pressures on wages.

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,President and Chief Executive Officer and Director,Officer, 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,crisis 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 crisescrisis 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.

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.

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 from time to time to stay competitive.

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 resultChanges in newenvironmental and climate-related laws or regulations thaton greenhouse gas emissions 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, becauseBecause 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 future 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.basis. 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 net sales to foreign customers were approximately$3,296 $2.9 billionmillion for the fiscal year ended September 30, 2024.2025. 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 foreign and domestic 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.

We continue to monitor the ongoing conflictsgeopolitical betweenconflicts, Israelsuch and Hamas and betweenas Russia and UkraineUkraine, 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 Ukrainethese 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.

Most U.S. Government contracts can be terminated by the U.S. Government at its convenience without cause or 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.price where we take the risk of cost overruns. On contracts for which the price is not fixed but rather based on the reimbursement of costs, the U.S. Government may review ourincurred 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 ourthe reimbursement of 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 U.S. Department of Defense (“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,costs approved by the auditor, 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 uncoversalleges 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 ofmany 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.

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 othervarious privacy-related laws, rules and regulations (collectively, the “Data Protection Laws”),regulations, there can be no assurance that our controls and procedures will enable us to be fully compliant with all Datadata Protectionprotection Laws.laws. The rapid evolution and increased adoption of artificial intelligence (“AI”) technologies may intensify these risks. Any failure to comply with Data Protection Lawscomply, 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 and certain third parties’ 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.consequences; however, the use of isolated systems by our operating units mitigates the pervasiveness of this risk. 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.

Our business is subject to regulation under a variety of U.S. federal and state and non-U.S. laws, regulation and policies that require ongoing compliance efforts. 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, financial improprieties 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 ifby onethe impact of failure, misuse or quality issues of our products causes an aircraft to crash.products.

We produce highly engineered aircraft components, and accordingly, the adverse impact of product quality issues, actual or perceived, can be significant. 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.

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$3,454 $3.4 billionmillion at September 30, 2024,2025, representing approximately 13%15% of our total assets. Goodwill recognized in accounting for mergers and acquisitions was approximately$10,612 $10.4 billionmillion at September 30, 2024,2025, representing approximately 41%46% 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 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, 2024,2025, a handful ofmany 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.

Notwithstanding special cash dividends, of which the most recent declarationsspecial cash dividend declared by the Company’s Board of Directors was on SeptemberAugust 19,20, 2024 in the amount2025 of $75.00$90.00 per outstanding share of common stock, which was paid on OctoberSeptember 18,12, 2024 to stockholders of record as of October 4, 2024,2025, 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.

Our commercial business is directly affected by, among other factors, changes in RPKs,revenue passenger kilometers (“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.role, Forsuch example,as inpandemics, addition to the COVID-19 pandemic, past examples in which the airline industry has been negatively affected includegeneral 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,prices and conflicts abroad. Additional examples include future geopolitical or other worldwide events, such as war, terrorist acts, or additional worldwide infectious disease outbreaks.

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.

ForWe fiscal year 2024,believe we generatedare neta salesleading global designer, producer and supplier of $7,940highly million,engineered grossproprietary profitaerospace ofcomponents $4,672with millionsignificant oraftermarket 58.8%content. ofWe netseek sales,to develop highly customized products to solve specific needs for aircraft operators and netmanufacturers. incomeWe attributableattempt to TDdifferentiate Groupourselves ofbased $1,714on million.engineering, service and manufacturing capabilities. We believe that our products have strong brand names within the industry and that we have a reputation for high quality, reliability and strong customer support. We believe we have achieved steady, long-term growth in sales and improvements in operating performance we believe that due to our competitive strengths and through execution of our value-driven operating strategy. More specifically, we believe that 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.

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.content where we see a clear path to value creation through the application of our three core value drivers. 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.

Our commercial transport OEM shipments and revenues generally run ahead of aircraft delivery schedules. Consistent with prior years, our fiscal 2025 shipments will bewere 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,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.and Duelabor challenges persist, along with geopolitical challenges, though progress continues to thesebe factors,made itin isthe difficultbuild rates. Airbus has also encountered difficulties in ramping up production. For fiscal 2025, the impact across TransDigm's operating units was uneven and varied, resulting in consolidated commercial OEM sales decreasing compared to accuratelyfiscal predict the OEM build rates for 2025.2024.

Our militarydefense 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 conflictsgeopolitical betweenconflicts. Russia and Ukraine and Israel and Hamas. Also,Likewise, delays in government spending outlays and government funding reprioritization,reprioritization suchcan asimpact shifting funds to efforts to assist friendly countries in conflicts, provides for further unpredictability in the military spending outlook.demand. For a variety of reasons, the military spending outlook is very uncertain, though recent DOD budgets have trended upwards.upwards due to recent geopolitical challenge and conflicts, and current military modernization efforts. Defense sales in fiscal 2025 increased compared to fiscal 2024 primarily due to continued U.S. Government defense spend outlays.

(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. Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated using unrounded numbers.

For the secondthird quarter of fiscal 2026, we generated net sales of $2,544$2,741 million and net income attributable to TD Group of $535$539 million. EBITDA As Defined was $1,337$1,447 million, or 52.6%52.8% of net sales. Refer to the “Non-GAAP Financial Measures” section for certain information regarding EBITDA and EBITDA As Defined, including reconciliations of EBITDA and EBITDA As Defined to net income and net cash provided by operating activities.

TheCommercial aftermarket sales increased in the first nine months of fiscal 2026 compared to fiscal 2025 primarily due to the overall demand for air travel - both domestic and international in the first nine months of the fiscal year. Passenger load factors remain strong. Our commercial aftermarket demand remains strong despite the softening in overall industry capacity and RPMs arising from the conflict in the Middle East. We are monitoring the ongoing conflict in the Middle East couldand leadthe adverse impact to significant disruption of global energy supplies and increases in global energy prices, adversely affect global supply chains, heighten inflationary pressures and adversely affect commercial air travel. To date, we have not seen a significant change in commercial aftermarket orderingorder activity relative to levels prior to the start of the conflict. We are continuingcontinue to monitor the evolving macroeconomic environment,environment; howeverhowever, at this time we do not expect these factors to result in a material adverse effect on our business, financial condition and results of operations.operations for at least the duration of fiscal 2026.

(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. No special dividends were declared or paid on participating securities, including dividend equivalent payments, for the thirteen week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025.

(1)Net income applicable to TD Group common stockholders represents net income attributable to TD Group less special dividends declared or paid on participating securities, including dividend equivalent payments of $59 million and $49 million for the twenty-sixthirty-nine week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively.

Thirteen week period ended MarchJune 28,27, 2026 compared with the thirteen week period ended MarchJune 29,28, 2025

•Net Sales. Net organic sales and acquisition sales and the related dollar and percentage changes for the thirteen week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

The increase in organic sales of $238$284 million for the thirteen week period ended MarchJune 28,27, 2026 compared to the thirteen week period ended MarchJune 29,28, 2025 is related to increases in defense, commercial aftermarket andaftermarket, commercial OEM and defense sales.

•Cost of Sales and Gross Profit. Cost of sales increased by $157$208 million, or 17.9%,23.0%, to $1,033$1,113 million for the thirteen week period ended MarchJune 28,27, 2026 compared to $876$905 million for the thirteen week period ended MarchJune 29,28, 2025. Cost of sales and the related percentage of net sales for the thirteen week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

Cost of sales during the thirteen week period ended MarchJune 28,27, 2026 decreasedslightly increased as a percentage of net sales. This was primarily drivendue byto the dilutive impact of the fiscal 2026 and 2025 acquisitions. Excluding the dilutive impact from these acquisitions, cost of sales as a percentage of net sales decreased due to sales mix (higher commercial aftermarket sales as a percentage of net sales compared to prior year), 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 spread over a higher production volume; partially offset by the dilutive impact of the recent acquisitions.volume.

•Selling and Administrative Expenses. Selling and administrative expenses increased by $37$90 million to $273$332 million for the thirteen week period ended MarchJune 28,27, 2026. The related percentage of net sales for the thirteen week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

Selling and administrative expenses during the thirteen week period ended June 27, 2026 increased as a percentage of net salessales. forThis the thirteen week period ended March 28, 2026 decreased as a percentage of net saleswas primarily due to the decrease in non-cash stock and deferred compensation expense; partially offset by thedilutive impact of the fiscal 2026 and 2025 acquisitions and costs incurred to support the higher net sales,sales higher research and developmentgrowth and general and administrative expenses.

•Interest Expense-net. Interest expense-net includes interest on borrowings outstanding, amortization of debt issuance costs, original issue discount, premium, revolving credit facility fees, finance leases, interest income and the impact of interest rate swaps and collars designated and qualifying as cash flow hedges. Interest expense-net increased $106$117 million, or 28.0%,29.5%, to $484$514 million for the thirteen week period ended MarchJune 28,27, 2026 from $378$397 million for the comparable thirteen week period in the prior fiscal year. The increase in interest expense-net was primarily due to an increase in outstanding borrowings. The weighted average interest rate for cash interest payments on total borrowings outstanding was 6.2% and 6.1% for the thirteen week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively.2025.

•Income Tax Provision. Income tax expense as a percentage of income before income taxes was approximately 23.4%24.3% for the thirteen week period ended MarchJune 28,27, 2026 compared to 23.0%22.4% for the thirteen week period ended MarchJune 29,28, 2025. Refer to Note 9, “Income Taxes”, in the notes to the condensed consolidated financial statements included herein for additional information.

•Earnings per Share. Basic and diluted earnings per share was $9.20$9.39 for the thirteen week period ended MarchJune 28,27, 2026 and $8.24$8.47 for the thirteen week period ended MarchJune 29,28, 2025.

•Segment Net Sales. Net sales by segment for the thirteen week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

Net sales for the Power & Control segment increased $258$370 million primarily from increases in sales in defense,commercial aftermarket, commercial aftermarketOEM and commercial OEM.defense.

Net sales for the Airframe segment increased $131$128 million primarily from increases in sales in commercial aftermarket, defensecommercial OEM and commercial OEM.defense.

•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 thirteen week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

Twenty-sixThirty-nine week period ended MarchJune 28,27, 2026 compared with the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025

•Net Sales. Net organic sales and acquisition sales and the related dollar and percentage changes for the twenty-sixthirty-nine week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

The increase in organic sales of $386$669 million for the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 compared to the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025 is related to increases in defense, commercial aftermarket andaftermarket, commercial OEM and defense sales.

•Cost of Sales and Gross Profit. Cost of sales increased by $318$525 million, or 19.3%,20.6%, to $1,965$3,078 million for the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 compared to $1,647$2,553 million for the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025. Cost of sales and the related percentage of net sales for the twenty-sixthirty-nine week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

Cost of sales during the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 increased as a percentage of net sales. This was primarily drivendue byto the dilutive impact of the recentfiscal 2026 and 2025 acquisitions. Excluding the dilutive impact from these acquisitions, cost of sales as a percentage of net sales decreased due to sales mix (higher commercial aftermarket sales as a percentage of net sales compared to prior year), 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 spread over a higher production volume.

•Selling and Administrative Expenses. Selling and administrative expenses increased by $80$170 million to $527$859 million for the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026. The related percentage of net sales for the twenty-sixthirty-nine week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

Selling and administrative expenses as a percentage of net sales forduring the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 increased as a percentage of net sales,sales. comparedThis towas the twenty-six week period ended March 29, 2025primarily due to the dilutive impact of the fiscal 2026 and 2025 acquisitions and costs incurred to support the higher net sales,sales the recent acquisitions and higher research and developmentgrowth and general and administrative expenses. This was partially offset by lower non-cash stock and deferred compensation expense.

•Interest Expense-net. Interest expense-net includes interest on borrowings outstanding, amortization of debt issuance costs, original issue discount, premium, revolving credit facility fees, finance leases, interest income and the impact of interest rate swaps and collars designated and qualifying as cash flow hedges. Interest expense-net increased $203$320 million, or 26.9%,27.8%, to $959$1,472 million for the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 from $756$1,152 million for the comparable twenty-sixthirty-nine week period in the prior fiscal year. The increase in interest expense-net was primarily due to an increase in outstanding borrowings and a decrease in interest income.borrowings. The weighted average interest rate for cash interest payments on total borrowings outstanding was 6.3% and 6.2% for the twenty-sixthirty-nine week periodperiods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, respectively.2025.

•Income Tax Provision. Income tax expense as a percentage of income before income taxes was approximately 22.9%23.4% for the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 compared to 21.7%21.9% for the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025. Refer to Note 9, “Income Taxes”, in the notes to the condensed consolidated financial statements included herein for additional information.

•Earnings per Share. Basic and diluted earnings per share was $15.82$25.20 for the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 and $15.86$24.31 for the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025. Net income attributable to TD Group for the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 of $980$1,519 million was decreased by dividend equivalent payments of $59 million, or $1.02 per share, resulting in net income applicable to TD Group common stockholders of $921$1,460 million. Net income attributable to TD Group for the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025 of $972$1,464 million was decreased by dividend equivalent payments of $49 million, or $0.83 per share, resulting in net income applicable to TD Group common stockholders of $923$1,415 million.

•Segment Net Sales. Net sales by segment for the twenty-sixthirty-nine week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

Net sales for the AirframePower & Control segment increased $204$825 million primarily from increases in sales in commercial OEM,aftermarket, commercial aftermarketOEM and defense.

•EBITDA As Defined. Refer to “Non-GAAP Financial Measures” in this discussion and analysis for additional information and limitations regarding these non-GAAP financial measures, including a reconciliation to the comparable U.S. GAAP financial measure. EBITDA As Defined by segment for the twenty-sixthirty-nine week periods ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 were as follows (amounts in millions):

Unallocated corporate EBITDA As Defined consists primarily of corporate expenses which includes compensation, benefits, professional services and other administrative costs incurred by our corporate offices. The decrease from prior year is attributable to the expiration of a deferred compensation program that was not renewed.

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

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

•On April 7, 2026, the Company completed the acquisition of approximately 95% of the outstanding stock of Jet Parts Engineering (“JPE”) and approximately 96% of the outstanding stock of Victor Sierra Aviation Holdings (“VSA”) for approximately $2.2 billion in cash. The definitive agreement to acquire JPE and VSA from Vance Street Capital was entered into on January 13, 2026. The acquisition was financed using cash on hand and the net proceeds from the debt offerings completed in February 2026 (as further described below).

•During the first halfnine months of fiscal 2026, the Company completed several acquisitions consisting of substantially all of the assets and technical data rights of certain product lines or all the outstanding stock of certain businesses (collectively, referred to herein as the “Other Acquisitions”), each meeting the definition of a business, for a total aggregate purchase price of $243$257 million in cash. These acquisitions represent bolt-ons to existing TransDigm operating units. Each of the acquisitions was financed using cash on hand.

•On February 13, 2026, the Company completed $2,000 million in new debt issuances. The new debt was comprised of $1,200 million in aggregate principal amount of senior subordinated notes due 2034 at an issue price of 100% that bear interest at a rate of 6.125% (the “Initial$1,200 million 6.125% 2034 Notes”) and $800 million of Tranche N term loans (the “Initial Tranche N term loans”) that bear interest at a rate of Term SOFR plus 2.50%. Original issue discount of 0.25%, or $1 million, was paid to the lenders of the Initial Tranche N term loans. The net proceeds from the February 13, 2026 new debt issuances were used, along with cash on hand, to fund the purchase price of the acquisition of JPE and VSA and for related transaction fees and expenses.

•On April 17, 2026, the Company completed $1,500 million in new debt issuances. The new debt was comprised of an additional $500 million in aggregate principal amount of additional senior subordinated notes due 2034 at an issue price of 100.375%, or a premium of approximately $2 million, that bear interest at a rate of 6.125% (the “New$500 million 6.125% 2034 Notes” which collectively; along with the $1,200 million 6.125% 2034 Notes, are referred to herein as the “6.125% 2034 Notes”) and $1,000 million in new Tranche N term loans (the “NewAdditional Tranche N term loans”) that bear interest at a rate of Term SOFR plus 2.50%.2.50% Original issue discount of 0.25%, or approximately $1 million, was paid to(collectively, the lenders of the NewAdditional Tranche N term loans.loans The net proceeds fromand the AprilInitial 17,Tranche 2026N newterm debt issuancesloans are intendedreferred to beherein used, along with cash on hand, to fundas the purchase“Tranche priceN ofterm the expected acquisition of Stellant and for general corporate purposes, including replenishment on our balance sheet of a portion of the cash used to fund the common stock repurchases (as further described belowloans”) and for related transaction fees and expenses..

•InFor Aprilthe thirty-nine week period ended June 27, 2026, the Company repurchasedrepurchased, 66,537in aggregate, 1,496,383 shares of common stock at an average price of $1,138.88$1,207.50 per share for a total amount of $76$1,807 million. The repurchased shares of common stock are classified as treasury stock in the statement of changes in stockholders’ deficit. Whether the Company undertakes additional stock repurchases or other aforementioned activities will depend on prevailing market conditions, the Company'sCompany’s liquidity requirements, contractual restrictions and other factors.

The Company'sCompany’s objective is to maintain an allocation of at least 75% fixed rate and 25% variable rate debt thereby limiting its exposure to changes in near-term interest rates. Interest rate swaps, caps and collars used to hedge and offset, respectively, the variable interest rates on our term loans are further described in Note 11, “Derivatives and Hedging Activities,” in the notes to the condensed consolidated financial statements included herein. As of MarchJune 28,27, 2026, approximately 75% of our gross debt was fixed rate.

As of MarchJune 28,27, 2026, the Company has significant cash liquidity as illustrated in the table presented below (in millions):

In connection with the continued application of our three core value-driven operating strategy, we expect our efforts will continue to generate strong margins and provide sufficient cash provided byfrom 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 dividends to our shareholders and make opportunistic investments in our own stock, subject to any restrictions in our existing Second Amended and Restated Credit Agreement dated as of June 4, 2014 (the “Credit Agreement”) and market conditions.

Operating Activities. The Company generated $967$1,691 million of net cash from operating activities during the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 compared to $900$1,531 million during the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025.

The change in accounts receivable during the twenty-sixthirty-nine week periodperiods ended MarchJune 27, 2026 and June 28, 20262025 was a use of cash of $65$126 million compared to a use of cash of $66 million during the twenty-six week period ended March 29, 2025. The change is primarily attributabledue to the timing of sales and related cash receipts.collections. The Company actively manages its accounts receivable, the related agings and collection efforts.

The change in inventories during the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 was a use of cash of $145$232 million compared to a use of cash of $116$158 million during the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025. The increase is due to an increase in raw materials to support the fiscal 2026 sales demand. The Company manages inventory levels in support of customer needs.

The change in accounts payable during the twenty-sixthirty-nine week period ended MarchJune 28,27, 2026 was a source of cash of $15$7 million compared to a usesource of cash of $2$1 million during the twenty-sixthirty-nine week period ended MarchJune 29,28, 2025. The change is due to the timing of payments to suppliers.