Transdigm Group Incorporated (TDG)

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data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .

From 10-Q filed 2026-05-05 (period ending 2026-03-28).

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

The following discussion of the Company’s financial condition and results of operations should be read together with TD Group’s condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. References in this section to “TransDigm,” “the Company,” “we,” “us,” “our,” and similar references refer to TD Group, TransDigm Inc. and TransDigm Inc.’s subsidiaries, unless the context otherwise indicates.

This Quarterly Report on Form 10-Q contains both historical and “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 27A of the Securities Act of 1933, as amended. All statements other than statements of historical fact included that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements, including, in particular, the statements about our plans, objectives, strategies and prospects regarding, among other things, our financial condition, results of operations and business. We have identified some of these forward-looking statements with words like “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” or “continue” and other words and terms of similar meaning. These forward-looking statements may be contained throughout this Quarterly Report on Form 10-Q. These forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to, among other things, our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including the risks described in Item 1A, “Risk Factors,” of the Annual Report on Form 10-K. Since our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, we cannot give any assurance that any of the events anticipated by these forward-looking statements will occur or, if any of them does occur, what impact they will have on our business, results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. We do not undertake any obligation to update these forward-looking statements or the risk factors contained in this Quarterly Report on Form 10-Q to reflect new information, future events or otherwise, except as may be required under federal securities laws.

Important factors that could cause actual results to differ materially from the forward-looking statements made in this Quarterly Report on Form 10-Q include but are not limited to: 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 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 and potential changes in trade policies and tariffs; potential environmental liabilities; liabilities arising in connection with litigation; risks and costs associated with our international sales and operations; and other factors. Refer to Part II, Item 1A included in this Quarterly Report on Form 10-Q and to Part I, Item 1A of the Annual Report on Form 10-K for additional information regarding the foregoing factors that may affect our business.

Overview

We believe we are a leading global designer, producer and supplier of highly engineered proprietary aerospace components with significant aftermarket content. We seek to develop highly customized products to solve specific needs for aircraft operators and manufacturers. We attempt to differentiate ourselves based on engineering, service and manufacturing capabilities. We believe that our products have strong brand names within the industry and that we have a reputation for high quality, reliability and strong customer support. We believe we have achieved steady, long-term growth in sales and improvements in operating performance 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.

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 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.

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For the second quarter of fiscal 2026, we generated net sales of $2,544 million and net income attributable to TD Group of $535 million. EBITDA As Defined was $1,337 million, or 52.6% 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.

For the first half of fiscal 2026, demand for air travel remained strong both domestically and internationally. Commercial aftermarket sales increased in the first half of fiscal 2026 compared to fiscal 2025 primarily due to the overall demand for air travel - both domestic and international. Passenger load factors remain strong.

Our commercial transport original equipment manufacturer (“OEM”) shipments and revenues generally run ahead of aircraft delivery schedules. Consistent with prior years, our first half of fiscal 2026 shipments were a function of, among other things, the estimated 2025 and 2026 commercial aircraft production rates for Boeing and Airbus. Airline demand for new aircraft remains high and the OEMs continue to increase aircraft production. Commercial OEM sales increased in the first half of fiscal 2026 compared to fiscal 2025 partially due to the prior year Boeing union strike adversely impacting fiscal 2025 OEM sales, as well as overall increases beginning in the latter half of fiscal 2025 and thus far in fiscal 2026 in aircraft production and deliveries by the OEMs.

Our defense 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 War (“DOW”) procurement policy and the extent of global conflicts. Likewise, delays in government spending outlays and government funding reprioritization can impact demand. For a variety of reasons, the military spending outlook is very uncertain, though recent DOW budgets have trended upwards due to recent geopolitical challenge and conflicts, and current military modernization efforts. Defense sales increased in the first half of fiscal 2026 compared to fiscal 2025 primarily due to continued growth in defense spending in both domestic and international markets.

The ongoing conflict in the Middle East could lead 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 ordering activity relative to levels prior to the start of the conflict. We are continuing to monitor the evolving macroeconomic environment, however 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.

Critical Accounting Policies and Estimates

The preparation and fair presentation of the consolidated unaudited interim financial statements and accompanying notes included in this report are the responsibility of management. The financial statements and footnotes have been prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial statements and contain certain amounts that were based upon management’s best estimates, judgments and assumptions that were believed to be reasonable under the circumstances. On an ongoing basis, we evaluate the accounting policies and estimates used to prepare financial statements. Estimates are based on historical experience, judgments and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates used by management.

A comprehensive discussion of the Company’s critical accounting policies and management estimates and significant accounting policies followed in the preparation of the financial statements is included in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed on November 12, 2025. Refer to Note 1, “Basis of Presentation,” in the notes to the condensed consolidated financial statements included herein for further disclosure of accounting standards recently adopted or required to be adopted in the future.

Acquisitions

Recent acquisitions are described in Note 2, “Acquisitions,” in the notes to the condensed consolidated financial statements included herein.

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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):

	Thirteen Week Periods Ended
	March 28, 2026			% of Net Sales		March 29, 2025			% of Net Sales
Net sales	$	2,544		100.0	%	$	2,150		100.0	%
Cost of sales	1,033			40.6	%	876			40.7	%
Selling and administrative expenses	273			10.7	%	236			11.0	%
Amortization of intangible assets	60			2.4	%	47			2.2	%
Income from operations	1,178			46.3	%	991			46.1	%
Interest expense-net	484			19.0	%	378			17.6	%
Other income	(6)			(0.2)	%	(9)			(0.4)	%
Income tax provision	164			6.4	%	143			6.7	%
Income from continuing operations	536			21.1	%	479			22.3	%
Less: Net income attributable to noncontrolling interests	(1)			—	%	—			—	%
Net income attributable to TD Group	$	535		21.0	%	$	479		22.3	%
Net income applicable to TD Group common stockholders	$	535	(1)	21.0	%	$	479	(1)	22.3	%
Earnings per share attributable to TD Group common stockholders:
Basic and diluted	$	9.20	(2)			$	8.24	(2)
Weighted-average shares outstanding—basic and diluted	58.2					58.1
Other Data:
EBITDA	$	1,289	(3)			$	1,089	(3)
EBITDA As Defined	$	1,337	(3)	52.6	%	$	1,162	(3)	54.0	%

(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 March 28, 2026 and March 29, 2025.

(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.

(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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	Twenty-Six Week Periods Ended
	March 28, 2026			% of Net Sales		March 29, 2025			% of Net Sales
Net sales	$	4,828		100.0	%	$	4,156		100.0	%
Cost of sales	1,965			40.7	%	1,647			39.6	%
Selling and administrative expenses	527			10.9	%	447			10.8	%
Amortization of intangible assets	116			2.4	%	97			2.3	%
Income from operations	2,220			46.0	%	1,965			47.3	%
Interest expense-net	959			19.9	%	756			18.2	%
Other income	(11)			(0.2)	%	(32)			(0.8)	%
Income tax provision	291			6.0	%	269			6.5	%
Income from continuing operations	981			20.3	%	972			23.4	%
Less: Net income attributable to noncontrolling interests	(1)			—	%	—			—	%
Net income attributable to TD Group	$	980		20.3	%	$	972		23.4	%
Net income applicable to TD Group common stockholders	$	921	(1)	19.1	%	$	923	(1)	22.2	%
Earnings per share attributable to TD Group common stockholders:
Basic and diluted	$	15.82	(2)			$	15.86	(2)
Weighted-average shares outstanding—basic and diluted	58.2					58.2
Other Data:
EBITDA	$	2,436	(3)			$	2,176	(3)
EBITDA As Defined	$	2,534	(3)	52.5	%	$	2,224	(3)	53.5	%

(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-six week periods ended March 28, 2026 and March 29, 2025, respectively.

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Changes in Results of Operations

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

Total Company

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

	Thirteen Week Periods Ended						% Change Net Sales
	March 28, 2026		March 29, 2025		Change
Organic sales	$	2,388	$	2,150	$	238	11.0	%
Acquisition sales	156		—		156		7.3	%
Net sales	$	2,544	$	2,150	$	394	18.3	%

Organic sales represent net sales from existing businesses owned by the Company, excluding sales from acquisitions. Acquisition sales represent net sales from acquired businesses for the period up to one year from the respective acquisition date. We believe this measure provides investors with a supplemental understanding of underlying sales trends by providing sales growth on a consistent basis. Refer to Note 2, “Acquisitions,” in the notes to the condensed consolidated financial statements included herein for information on the Company's recent acquisitions.

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

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

	Thirteen Week Periods Ended
	March 28, 2026			March 29, 2025			Change		% Change
Cost of sales - excluding costs below	$	999		$	830		$	169	20.4	%
% of net sales	39.3		%	38.6		%
Depreciation	35			31			4		12.9	%
% of net sales	1.4		%	1.4		%
Non-cash stock and deferred compensation expense	2			5			(3)		60.0	%
% of net sales	0.1		%	0.2		%
Foreign currency (gains) losses	(3)			10			(13)		(130.0)	%
% of net sales	(0.1)		%	0.5		%
Total cost of sales	$	1,033		$	876		$	157	17.9	%
% of net sales	40.6		%	40.7		%
Gross profit (Net sales less Total cost of sales)	$	1,511		$	1,274		$	237	18.6	%
Gross profit percentage (Gross profit / Net sales)	59.4		%	59.3		%

Cost of sales during the thirteen week period ended March 28, 2026 decreased as a percentage of net sales. This was primarily driven by the application of our three core value-driven operating strategy (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers) coupled with fixed overhead costs spread over a higher production volume; partially offset by the dilutive impact of the recent acquisitions.

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

	Thirteen Week Periods Ended
	March 28, 2026			March 29, 2025			Change		% Change
Selling and administrative expenses - excluding costs below	$	240		$	188		$	52	27.7	%
% of net sales	9.4		%	8.7		%
Non-cash stock and deferred compensation expense	24			43			(19)		(44.2)	%
% of net sales	0.9		%	2.0		%
Acquisition transaction and integration-related expenses	9			5			4		80.0	%
% of net sales	0.4		%	0.2		%
Total selling and administrative expenses	$	273		$	236		$	37	15.7	%
% of net sales	10.7		%	11.0		%

Selling and administrative expenses as a percentage of net sales for the thirteen week period ended March 28, 2026 decreased as a percentage of net sales primarily due to the decrease in non-cash stock and deferred compensation expense; partially offset by the impact of higher net sales, higher research and development and general and administrative expenses.

•Interest Expense-net. Interest expense-net includes interest on borrowings outstanding, amortization of debt issuance costs, original issue discount, 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 million, or 28.0%, to $484 million for the thirteen week period ended March 28, 2026 from $378 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 March 28, 2026 and March 29, 2025, respectively.

•Income Tax Provision. Income tax expense as a percentage of income before income taxes was approximately 23.4% for the thirteen week period ended March 28, 2026 compared to 23.0% for the thirteen week period ended March 29, 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 for the thirteen week period ended March 28, 2026 and $8.24 for the thirteen week period ended March 29, 2025.

Business Segments

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

	Thirteen Week Periods Ended
	March 28, 2026		% of Net Sales		March 29, 2025		% of Net Sales		Change		% Change
Power & Control	$	1,366	53.7	%	$	1,108	51.5	%	$	258	23.3	%
Airframe	1,133		44.5	%	1,002		46.6	%	131		13.1	%
Non-aviation	45		1.8	%	40		1.9	%	5		12.5	%
Net sales	$	2,544	100.0	%	$	2,150	100.0	%	$	394	18.3	%

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

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

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•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 March 28, 2026 and March 29, 2025 were as follows (amounts in millions):

Thirteen Week Periods Ended

March 28, 2026

% of Segment
Net Sales

March 29, 2025

% of Segment
Net Sales

Change

% Change

Power & Control

734

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Held by

holders ( registered funds via N-PORT, institutional investors via 13F). Showing top by dollar value.

Holder	Type	ETF	MF	Position ($)	% of holder	Δ % of holder	Holder AUM

Recent insider activity

Last 90 days. Open-market trades (purchases & sales) by directors, officers, and 10%+ owners. 5 transactions across 2 insiders. Net: -38,196 shares, -$46,566,994.

Date	Insider	Role	Action	Shares	Price	Value
2026-05-18	Howley W Nicholas indirect	Director	Sell	-10,132 ×25	$1,180.82	-$11,964,054
2026-05-15	Reiss Joel	Co-Chief Operating Officer	Sell	-3,900 ×27	$1,154.09	-$4,500,951
2026-04-20	Howley W Nicholas indirect	Director	Sell	-10,132 ×11	$1,265.06	-$12,817,572
2026-04-15	Reiss Joel	Co-Chief Operating Officer	Sell	-3,900 ×17	$1,280.46	-$4,993,787
2026-03-18	Howley W Nicholas indirect	Director	Sell	-10,132 ×23	$1,213.05	-$12,290,630

Source: SEC Form 4 filings.

Next expected filings

~2026-08-04 10-Q expected by 2026-08-06 (in 50 days)
~2026-11-11 10-K expected by 2026-12-01 (in 149 days)
~2027-02-02 10-Q expected by 2027-02-04 (in 232 days)
~2027-05-04 10-Q expected by 2027-05-06 (in 323 days)

Predicted from historical filing cadence; not an SEC commitment.

Recent SEC filings

2026-05-05 8-K Earnings Release; Financial Statements and Exhibits
2026-05-05 10-Q Quarterly Report
2026-04-17 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
2026-04-14 8-K Earnings Release; Regulation FD Disclosure
2026-04-07 8-K Other Events; Financial Statements and Exhibits
2026-02-13 8-K Material Agreement Entered; Material Financial Obligation; Financial Statements and Exhibits
2026-02-03 10-Q Quarterly Report
2026-02-03 8-K Earnings Release; Financial Statements and Exhibits
2026-01-16 8-K Other Events; Financial Statements and Exhibits
2025-12-31 8-K Other Events; Financial Statements and Exhibits
2025-11-12 10-K Annual Report
2025-11-12 8-K Earnings Release; Financial Statements and Exhibits
2025-10-23 8-K Officer/Director Change
2025-10-06 8-K Other Events; Financial Statements and Exhibits
2025-10-03 8-K Officer/Director Change; Financial Statements and Exhibits

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