Item 8. AND ITEM 15(a) (1)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX

	Page
Financial Statements:
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets as of September 30, 2018 and 2017	F-2
Consolidated Statements of Income for Fiscal Years Ended September 30, 2018, 2017 and 2016	F-3
Consolidated Statements of Comprehensive Income for Fiscal Years Ended September 30, 2018, 2017 and 2016	F-4
Consolidated Statements of Changes in Stockholders’ Deficit for Fiscal Years Ended September 30, 2018, 2017 and 2016	F-5
Consolidated Statements of Cash Flows for Fiscal Years Ended September 30, 2018, 2017 and 2016	F-6
Notes to Consolidated Financial Statements for Fiscal Years Ended September 30, 2018, 2017 and 2016	F-7 – F-43
Supplementary Data:
Valuation and Qualifying Accounts for the Fiscal Years Ended September 30, 2018, 2017 and 2016	F-44

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

TransDigm Group

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of TransDigm Group Incorporated (“the Company”) as of September 30, 2018 and 2017, the related consolidated statements of income, comprehensive income, changes in stockholders’ deficit, and cash flows for each of the three years in the period ended September 30, 2018, 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 consolidated financial position of the Company at September 30, 2018 and 2017, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 2018, 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, 2018, 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 9, 2018 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.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2004.

Cleveland, Ohio

November 9, 2018

F-1

TRANSDIGM GROUP INCORPORATED

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2018 AND 2017

(Amounts in thousands, except share amounts)

	2018				2017
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,073,017			$	650,561
Trade accounts receivable—Net	704,310				636,127
Inventories—Net	805,292				730,681
Assets held-for-sale	—				77,500
Prepaid expenses and other	74,668				38,683
Total current assets	3,657,287				2,133,552
PROPERTY, PLANT AND EQUIPMENT—Net	388,333				324,924
GOODWILL	6,223,290				5,745,338
OTHER INTANGIBLE ASSETS—Net	1,788,404				1,717,862
DERIVATIVE ASSETS	97,286				15,809
OTHER	42,867				38,176
TOTAL ASSETS	$	12,197,467			$	9,975,661
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt	$	75,817			$	69,454
Short-term borrowings—trade receivable securitization facility	299,519				299,587
Accounts payable	173,603				148,761
Accrued liabilities	351,443				335,888
Liabilities held-for-sale	—				17,304
Total current liabilities	900,382				870,994
LONG-TERM DEBT	12,501,946				11,393,620
DEFERRED INCOME TAXES	399,496				500,949
OTHER NON-CURRENT LIABILITIES	204,114				161,302
Total liabilities	14,005,938				12,926,865
STOCKHOLDERS’ DEFICIT:
Common stock—$.01 par value; authorized 224,400,000 shares; issued 56,895,686 and 56,093,659 shares at September 30, 2018 and 2017, respectively	569				561
Additional paid-in capital	1,208,742				1,095,319
Accumulated deficit	(2,246,578		)		(3,187,220		)
Accumulated other comprehensive income (loss)	4,100				(85,143		)
Treasury stock, at cost; 4,161,326 and 4,159,207 shares at September 30, 2018 and 2017, respectively	(775,304		)		(774,721		)
Total stockholders’ deficit	(1,808,471		)		(2,951,204		)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	12,197,467			$	9,975,661

See Notes to Consolidated Financial Statements

F-2

TRANSDIGM GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands, except per share amounts)

	Fiscal Years Ended September 30,
	2018				2017				2016
NET SALES	$	3,811,126			$	3,504,286			$	3,171,411
COST OF SALES	1,633,616				1,519,659				1,443,348
GROSS PROFIT	2,177,510				1,984,627				1,728,063
SELLING AND ADMINISTRATIVE EXPENSES	450,095				415,575				382,858
AMORTIZATION OF INTANGIBLE ASSETS	72,454				89,226				77,445
INCOME FROM OPERATIONS	1,654,961				1,479,826				1,267,760
INTEREST EXPENSE—Net	663,008				602,589				483,850
REFINANCING COSTS	6,396				39,807				15,794
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	985,557				837,430				768,116
INCOME TAX PROVISION	24,021				208,889				181,702
INCOME FROM CONTINUING OPERATIONS	961,536				628,541				586,414
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX	(4,474		)		(31,654		)		—
NET INCOME	957,062				596,887				586,414
NET INCOME APPLICABLE TO COMMON STOCK	$	900,914			$	437,630			$	583,414
Net earnings per share:
Net earnings per share from continuing operations—basic and diluted	$	16.28			$	8.45			$	10.39
Net loss per share from discontinued operations—basic and diluted	(0.08		)		(0.57		)		—
Net earnings per share	$	16.20			$	7.88			$	10.39
Cash dividends paid per common share	$	—			$	46.00			$	—
Weighted-average shares outstanding:
Basic and diluted	55,597				55,530				56,157

See Notes to Consolidated Financial Statements.

F-3

TRANSDIGM GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

	Fiscal Years Ended September 30,
	2018				2017				2016
Net income	$	957,062			$	596,887			$	586,414
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(10,253		)		22,241				(31,846		)
Interest rate swap and cap agreements	93,860				34,471				(9,648		)
Pension liability adjustments	5,636				7,932				(12,284		)
Other comprehensive income (loss), net of tax	89,243				64,644				(53,778		)
TOTAL COMPREHENSIVE INCOME	$	1,046,305			$	661,531			$	532,636

See Notes to Consolidated Financial Statements.

F-4

TRANSDIGM GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(Amounts in thousands, except share and per share amounts)

	Common Stock							Additional Paid-In Capital				Accumulated Deficit				Accumulated Other Comprehensive Income (Loss)				Treasury Stock
	Number of Shares			Common Stock				Number of Shares			Value				Total
BALANCE—September 30, 2015	55,100,094			$	551			$	950,324			$	(1,717,232	)		$	(96,009	)		(1,415,100	)		$	(175,940	)		$	(1,038,306	)
Accrued unvested dividend equivalent payments and other	—			—				—				(16,145		)		—				—			—				(16,145		)
Compensation expense recognized for employee stock options and restricted stock	—			—				48,306				—				—				—			—				48,306
Exercise of employee stock options and restricted stock activity, net	666,709			7				30,112				—				—				(2,548	)		(575		)		29,544
Treasury stock purchased	—			—				—				—				—				(1,015,387	)		(207,755		)		(207,755		)
Common stock issued	964			—				230				—				—				—			—				230
Net income	—			—				—				586,414				—				—			—				586,414
Interest rate swaps and caps, net of tax	—			—				—				—				(9,648		)		—			—				(9,648		)
Foreign currency translation adjustments	—			—				—				—				(31,846		)		—			—				(31,846		)
Pension liability adjustments, net of tax	—			—				—				—				(12,284		)		—			—				(12,284		)
BALANCE—September 30, 2016	55,767,767			558				1,028,972				(1,146,963		)		(149,787		)		(2,433,035	)		(384,270		)		(651,490		)
Dividends paid	—			—				—				(2,422,295		)		—				—			—				(2,422,295		)
Accrued unvested dividend equivalent payments and other	—			—				—				(214,849		)		—				—			—				(214,849		)
Compensation expense recognized for employee stock options and restricted stock	—			—				44,931				—				—				—			—				44,931
Exercise of employee stock options and restricted stock activity, net	324,908			3				21,177				—				—				(2,548	)		(630		)		20,550
Treasury stock purchased	—			—				—				—				—				(1,723,624	)		(389,821		)		(389,821		)
Common stock issued	984			—				239				—				—				—			—				239
Net income	—			—				—				596,887				—				—			—				596,887
Interest rate swaps and caps, net of tax	—			—				—				—				34,471				—			—				34,471
Foreign currency translation adjustments	—			—				—				—				22,241				—			—				22,241
Pension liability adjustments, net of tax	—			—				—				—				7,932				—			—				7,932
BALANCE—September 30, 2017	56,093,659			561				1,095,319				(3,187,220		)		(85,143		)		(4,159,207	)		(774,721		)		(2,951,204		)
Accrued unvested dividend equivalent payments and other	—			—				—				(16,420		)		—				—			—				(16,420		)
Compensation expense recognized for employee stock options and restricted stock	—			—				55,481				—				—				—			—				55,481
Exercise of employee stock options, restricted stock activity and other, net	800,955			8				57,583				—				—				(2,119	)		(583		)		57,008
Common stock issued	1,072			—				359				—				—				—			—				359
Net income	—			—				—				957,062				—				—			—				957,062
Interest rate swaps and caps, net of tax	—			—				—				—				93,860				—			—				93,860
Foreign currency translation adjustments	—			—				—				—				(10,253		)		—			—				(10,253		)
Pension liability adjustments, net of tax	—			—				—				—				5,636				—			—				5,636
BALANCE—September 30, 2018	56,895,686			$	569			$	1,208,742			$	(2,246,578	)		$	4,100			(4,161,326	)		$	(775,304	)		$	(1,808,471	)

See Notes to Consolidated Financial Statements.

F-5

TRANSDIGM GROUP INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

	Fiscal Years Ended September 30,
	2018				2017				2016
OPERATING ACTIVITIES:
Net income	$	957,062			$	596,887			$	586,414
Net loss from discontinued operations	4,474				31,654				—
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	56,397				50,937				43,455
Amortization of intangible assets	73,447				90,088				78,215
Amortization of debt issuance costs, original issue discount and premium	22,128				21,106				16,211
Refinancing costs	6,396				39,807				15,794
Non-cash equity compensation	58,481				45,524				48,306
Deferred income taxes	(151,640		)		(918		)		5,808
Changes in assets/liabilities, net of effects from acquisitions of businesses:
Trade accounts receivable	(43,811		)		(54,669		)		(80,114		)
Inventories	(10,808		)		5,127				(2,073		)
Income taxes receivable/payable	36,161				18,219				(12,299		)
Other assets	(4,813		)		(10,564		)		(4,919		)
Accounts payable	18,075				(10,354		)		(6,657		)
Accrued interest	14,368				(958		)		17,933
Accrued and other liabilities	(13,744		)		(33,153		)		(22,776		)
Net cash provided by operating activities	1,022,173				788,733				683,298
INVESTING ACTIVITIES:
Capital expenditures, net of disposals	(73,341		)		(71,013		)		(43,982		)
Payments made in connection with acquisitions	(667,619		)		(136,295		)		(1,399,064		)
Proceeds (payments made) in connection with the sale (purchase) of discontinued operations	57,383				(79,695		)		—
Net cash used in investing activities	(683,577		)		(287,003		)		(1,443,046		)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options	57,583				21,177				30,112
Dividends paid	(56,148		)		(2,581,552		)		(3,000		)
Treasury stock purchased	—				(389,821		)		(207,755		)
Proceeds from term loans, net	12,779,694				2,937,773				1,711,515
Repayment on term loans	(12,174,305		)		(1,284,698		)		(834,409		)
Proceeds from senior subordinated notes, net	489,608				300,386				939,584
Cash tender and redemption of senior subordinated notes due 2021, including premium	—				(528,847		)		—
Proceeds from trade receivable securitization facility, net	—				99,471				—
Financing fees and other	(10,832		)		(17,571		)		(3,580		)
Net cash provided by (used in) financing activities	1,085,600				(1,443,682		)		1,632,467
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	(1,740		)		5,519				242
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,422,456				(936,433		)		872,961
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	650,561				1,586,994				714,033
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,073,017			$	650,561			$	1,586,994
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	$	634,980			$	587,718			$	448,608
Cash paid during the period for income taxes	$	129,246			$	185,295			$	183,291

See Notes to Consolidated Financial Statements.

F-6

TRANSDIGM GROUP INCORPORATED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE BUSINESS

Description of the Business—TransDigm Group Incorporated (“TD Group”), through its wholly-owned subsidiary, TransDigm Inc., is a leading global designer, producer and supplier of highly engineered aircraft components for use on nearly every commercial and military aircraft in service today. TransDigm Inc., along with TransDigm Inc.’s wholly-owned and majority-owned subsidiaries for which it has a controlling interest (collectively, with TD Group, the “Company” or “TransDigm”), offers a broad range of proprietary aerospace components. 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.”

Major product offerings, substantially all of which are ultimately provided to end-users in the aerospace industry, include mechanical/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, NiCad batteries and chargers, engineered latching and locking devices, rods and locking devices, engineered connectors and elastomers, databus and power controls, cockpit security components and systems, specialized cockpit displays, aircraft audio systems, specialized lavatory components, seat belts and safety restraints, engineered interior surfaces and related components, lighting and control technology, military personnel parachutes, high performance hoists, winches and lifting devices, and cargo loading, handling and delivery systems.

2. ACQUISITIONS AND DIVESTITURES

During the last three fiscal years, the Company completed the acquisitions of Skandia, Extant, Kirkhill, three separate aerospace product lines (collectively, the “Third Quarter 2017 Acquisitions”), Y&F/Tactair, DDC and Breeze-Eastern. The Company accounted for the acquisitions using the acquisition method and included the results of operations of the acquisitions in its consolidated financial statements from the effective date of each acquisition. As of September 30, 2018, the one-year measurement period is open for Skandia, Extant, and Kirkhill; therefore, the assets acquired and liabilities assumed related to these acquisitions are subject to adjustment until the end of their respective one-year measurement periods. The Company is in the process of obtaining a third-party valuation of certain intangible assets and tangible assets and liabilities of Skandia, Extant and Kirkhill. Pro forma net sales and results of operations for the acquisitions had they occurred at the beginning of the applicable fiscal year ended September 30, 2018 or 2017, are not material and, accordingly, are not provided.

The acquisitions 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 strategies (obtaining profitable new business, improving our cost structure, and providing highly engineered value-added products to customers). The purchase price paid for each acquisition reflects the current earnings before interest, taxes, depreciation and amortization (EBITDA) and cash flows, as well as the future EBITDA and cash flows expected to be generated by the business, 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.

Skandia – On July 13, 2018, the Company acquired all of the outstanding stock of Skandia Inc. ("Skandia") for a total purchase price of approximately $84.3 million, which is net of a $0.2 million working capital settlement paid in the fourth quarter of fiscal 2018. Skandia provides highly engineered seating foam, foam fabrication, flammability testing and acoustic solutions for the business jet market. Skandia is included as a product line within an existing reporting unit in TransDigm's Airframe segment. The Company expects that no goodwill recognized for the acquisition will be deductible for tax purposes.

Extant – On April 24, 2018, the Company acquired all of the outstanding stock of Extant for a total purchase price of approximately $532.5 million in cash, which is net of a $0.2 million working capital settlement received in the third quarter of fiscal 2018. Extant provides a broad range of proprietary aftermarket products and repair and overhaul services to the aerospace and defense end markets. Extant owns or exclusively licenses in excess of 2,500 assemblies and sub-assemblies on over 70 active platforms. Extant is included in TransDigm's Power and Control segment.

Prior to the Company's acquisition of Extant, Extant was owned by an equity fund sponsored by Warburg Pincus LLC. Michael Graff, a director of TransDigm, is a managing director of Warburg Pincus LLC and was chairman of the board of Extant. Robert Henderson, Vice Chairman of TransDigm, was also on the board of Extant and owned less than 2% of Extant on a fully diluted basis. In addition, Mr. Graff, W. Nicholas Howley, TransDigm's Executive Chairman, and Messrs. Douglas Peacock and David Barr, directors of TransDigm, each had minority interests of less than 1% in the Warburg Pincus LLC fund that owned Extant.

F-7

The total purchase price of Extant was allocated to the underlying assets acquired and liabilities assumed based upon management’s estimated fair values at the date of acquisition. To the extent the purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill. The following table summarizes the purchase price allocation of the estimated fair values of the assets acquired and liabilities assumed at the transaction date (in thousands).

Assets acquired:
Current assets, excluding cash acquired	$	56,122
Property, plant, and equipment	4,096
Intangible assets	105,000
Goodwill	402,412
Total assets acquired	567,630
Liabilities assumed:
Current liabilities	9,876
Other noncurrent liabilities	25,264
Total liabilities assumed	35,140
Net assets acquired	$	532,490

The Company expects that approximately $44 million of goodwill recognized for the acquisition will be deductible for tax purposes over 15 years and approximately $358 million of goodwill recognized for the acquisition will not be deductible for tax purposes.

Kirkhill – On March 15, 2018, the Company acquired the assets and certain liabilities of the Kirkhill elastomers business from Esterline Technologies for a total purchase price of approximately $49.3 million, which is net of a $0.6 million working capital settlement received in the third quarter of fiscal 2018. Kirkhill's products are primarily proprietary, sole source with significant aftermarket content and used in a broad variety of most major commercial transport and military platforms. Kirkhill is included in TransDigm's Airframe segment. The Company expects that no goodwill recognized for the acquisition will be deductible for tax purposes.

The Kirkhill acquisition includes loss contract reserves recorded at a fair value of approximately $39.2 million at September 30, 2018. Of the $39.2 million in loss contract reserves, $9.0 million is included accrued liabilities and $30.2 million is included in other non-current liabilities in the consolidated balance sheet at September 30, 2018. The Company is committed under certain existing Kirkhill agreements to supply products to our customers at selling prices that are not sufficient to cover the costs to produce such product. These agreements were existing at the time of the acquisition. The value of this reserve is analyzed and adjusted at each reporting period.

Third Quarter 2017 Acquisitions – The Third Quarter 2017 Acquisitions were acquired for an aggregate purchase price of approximately $106.7 million in cash, which includes working capital settlements totaling $1.0 million paid in the third and fourth quarters of fiscal 2017 and an earn-out of $0.4 million paid in the second quarter of fiscal 2018. All three product lines consist primarily of proprietary, sole source products with significant aftermarket content. The products include highly engineered aerospace controls, quick disconnect couplings, and communication electronics. Each product line acquired was consolidated into an existing TransDigm reporting unit within TransDigm's Power & Control segment. Approximately $66 million of goodwill recognized for the acquisitions is deductible for tax purposes over 15 years and approximately $9 million of goodwill recognized for the acquisitions is not deductible for tax purposes.

Schroth – On February 22, 2017, the Company acquired all of the outstanding stock of Schroth Safety Products GmbH and certain aviation and defense assets and liabilities from subsidiaries of Takata Corporation (collectively, "Schroth"), for a total purchase price of approximately $89.7 million, of which consisted primarily of $79.7 million paid in cash during fiscal 2017 and an approximately $9.0 million indemnity holdback, of which $8.5 million was paid in April 2018 and $0.5 million remains a reserve as of September 30, 2018.

In connection with the settlement of a Department of Justice investigation into the competitive effects of the acquisition, during the fourth quarter of 2017, the Company committed to dispose of the Schroth business. Therefore, Schroth was classified as held-for-sale beginning in the fourth quarter of 2017. The results of operations of Schroth are reflected as discontinued operations in the accompanying consolidated financial statements.

On January 26, 2018, the Company completed the sale of Schroth in a management buyout to a private equity fund and certain members of Schroth management for approximately $61.4 million, which includes a working capital adjustment of $0.3 million that was settled in July 2018. Further disclosure related to Schroth’s discontinued operations is included in Note 22.

F-8

Y&F/Tactair – On September 23, 2016, the Company acquired all of the outstanding stock of Young & Franklin, Inc., the parent company of Tactair Fluid Controls, Inc., for approximately $258.8 million in cash, which includes a working capital settlement of $2.7 million paid in the first quarter of 2017. Y&F/Tactair manufactures proprietary, highly engineered valves and actuators. Y&F/Tactair is included in TransDigm’s Power & Control segment. The purchase price includes approximately $74.5 million of tax benefits being realized by the Company over a 15-year period that began in the first quarter of fiscal 2017. Approximately $124 million of goodwill recognized for the acquisition is deductible for tax purposes over 15 years and approximately $8 million of goodwill recognized for the acquisition is not deductible for tax purposes.

Data Device Corporation – On June 23, 2016, the Company acquired all of the outstanding stock of ILC Holdings, Inc., the parent company of Data Device Corporation, for a total purchase price of approximately $997.7 million in cash, which includes a working capital settlement of $1.4 million received in the first quarter of fiscal 2017. TransDigm financed the acquisition of DDC with cash proceeds from the issuance of senior subordinated notes due in June 2026 and term loans. DDC is a supplier of databus and power controls and related products that are used primarily in military avionics, commercial aerospace and space applications. DDC is included in TransDigm’s Power & Control segment.

The total purchase price of DDC was allocated to the underlying assets acquired and liabilities assumed based upon management’s estimated fair values at the date of acquisition. To the extent the purchase price exceeded the estimated fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill. The following table summarizes the final purchase price allocation of the estimated fair values of the assets acquired and liabilities assumed at the transaction date (in thousands).

Assets acquired:
Current assets, excluding cash acquired	$	107,728
Property, plant, and equipment	20,818
Intangible assets	229,300
Goodwill	750,935
Other	2,036
Total assets acquired	1,110,817
Liabilities assumed:
Current liabilities	26,520
Other noncurrent liabilities	86,642
Total liabilities assumed	113,162
Net assets acquired	$	997,655

Approximately $740 million of goodwill recognized for the acquisition is not deductible for tax purposes and approximately $11 million of goodwill recognized for the acquisition is deductible for tax purposes over 15 years.

Breeze-Eastern – On January 4, 2016, the Company completed the tender offer for all of the outstanding stock of Breeze-Eastern for $19.61 per share in cash. The purchase price was approximately $205.9 million, of which $146.4 million (net of cash acquired of $30.8 million) was paid at closing and $34.9 million was paid to dissenting shareholders during the first fiscal quarter of 2017. Of the $34.9 million payment, $28.7 million related to the original merger consideration and $6.2 million represented the settlement reached with the dissenting shareholders resolving the dispute over the dissenting shareholders’ statutory appraisal action. Of the $6.2 million settlement, $4.9 million was recorded as selling and administrative expense and $1.3 million was recorded as interest expense for statutory interest arising under Delaware General Corporate Law. Once the Company paid the $34.9 million settlement to the dissenting shareholders on October 20, 2016, the dissenting stockholders fully released their claims against the Company. Breeze-Eastern manufactures high performance lifting and pulling devices for military and civilian aircraft, including rescue hoists, winches and cargo hooks, and weapons-lifting systems. Breeze-Eastern is included in TransDigm’s Power & Control segment. All of the approximately $115 million of goodwill recognized for the acquisition is not deductible for tax purposes.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation—The accompanying consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of TD Group and subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain reclassifications have been made to the prior year financial statements to conform to current year presentation related to an organizational realignment effective October 1, 2017 of certain businesses comprising the Power & Control and the Non-Aviation segments.

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Revenue Recognition and Related Allowances—Revenue is recognized from the sale of products when title and risk of loss passes to the customer, which is generally at the time of shipment. Substantially all product sales are made pursuant to firm, fixed-price purchase orders received from customers. Provisions for estimated returns, uncollectible accounts and the cost of repairs under contract warranty provisions are provided for in the same period as the related revenues are recorded and are principally based on historical results modified, as appropriate, by the most current information available. Due to uncertainties in the estimation process, it is possible that actual results may vary from the 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 years ended September 30, 2018, 2017 and 2016 was approximately $73.8 million, $73.8 million, and $58.6 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.

Allowance for Uncollectible Accounts—The Company reserves for amounts determined to be uncollectible based on specific identification of losses and estimated losses based on historical experience. The allowance also incorporates a provision for the estimated impact of disputes with customers. The determination of the amount of the allowance for uncollectible accounts is subject to significant levels of judgment and estimation by management. If circumstances change or economic conditions deteriorate or improve, the allowance for uncollectible accounts could increase or decrease.

Inventories—Inventories are stated at the lower of cost or net realizable value. Cost of inventories is generally determined by the average 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 and future sales forecasts.

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 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. 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.

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.

Debt Issuance Costs, Premiums and Discounts—The cost of obtaining financing as well as premiums and discounts are amortized using the effective interest method over the terms of the respective obligations as a component of interest expense within the consolidated statements of income. Debt issuance costs are presented in the consolidated balance sheets as a direct reduction from the carrying amount of the related debt liabilities.

Financial Instruments—Interest rate swap and cap agreements are used to manage interest rate risk associated with floating-rate borrowings under our credit facility. The interest rate swap and cap 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 through the expiration date of the interest rate swap and cap agreements, thereby reducing the impact of interest rate changes on future interest expense. 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. These derivative instruments qualify as effective cash flow hedges under GAAP.

For these cash flow hedges, the effective portion of the gain or loss from the financial instruments was 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 affected earnings. As the interest rate swap and cap 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.

Intangible Assets—Intangible assets consist of identifiable intangibles acquired or recognized in accounting for the acquisitions (trademarks, trade names, technology, order backlog and other intangible assets) and goodwill. Goodwill and intangible assets that have indefinite useful lives (i.e., trademarks and trade names) are subject to annual impairment testing. Management

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determines fair value using a discounted future cash flow analysis or other accepted valuation techniques. 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 current value.

At the time of goodwill impairment testing, 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 amount, and whether it is therefore necessary to perform the quantitative goodwill impairment test. The quantitative goodwill impairment test consists of two steps. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit (as defined) with its carrying amount, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, goodwill is not considered impaired, and the second step of the goodwill impairment test is unnecessary. The second step measures the amount of impairment, if any, by comparing the carrying value of the goodwill associated with a reporting unit to the implied fair value of the goodwill derived from the estimated overall fair value of the reporting unit and the individual fair values of the other assets and liabilities of the reporting unit.

GAAP requires that the annual, and any interim, impairment assessment be performed at the reporting unit level. The reporting unit level is one level below an operating segment. 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 assesses the recoverability of its amortizable intangible assets only when indicators of impairment are present by determining whether the amortization over their remaining lives can be recovered through projected, undiscounted cash flows from future operations. Amortization of amortizable intangible assets is computed using the straight-line method over the following estimated useful lives: technology from 20 to 22 years, order backlog over one year, and other intangible assets over 20 years.

Stock-Based Compensation—The Company records stock-based compensation expense using the fair value method of accounting. Compensation expense is recorded over the vesting periods of the stock options, restricted stock and other stock-based incentives. No expense is recognized for any stock options, restricted stock and other stock-based incentives ultimately forfeited because the recipients fail to meet vesting requirements.

Income Taxes—The Company accounts for income taxes using an asset and liability approach. Deferred taxes are recorded for the difference between the book and tax basis of various assets and liabilities. A valuation allowance is provided when it is more likely than not that some or all of a deferred tax asset will not be realized.

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. 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.

Estimates—The preparation of financial statements in conformity with 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.

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 and cap 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 are accumulated as a separate component of other comprehensive income (loss) for the period. Foreign currency gains or losses recognized currently in income from changes in exchange rates were immaterial to our results of operations.

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 dividends (“participating securities”). Our vested stock options are considered “participating securities” because they include non-forfeitable rights to dividends. In applying the two-class method, earnings are allocated to both common stock shares and participating securities based

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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; therefore, basic and diluted earnings per share are the same.

4. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, which created a new topic in the Accounting Standards Codification (“ASC”) 606, “Revenue from Contracts with Customers.” In addition to superseding and replacing nearly all existing U.S. GAAP revenue recognition guidance, including industry-specific guidance, ASC 606 requires an entity to recognize revenue in a manner that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard also specifies the accounting of some costs to obtain or fulfill a contract with a customer and expands the disclosure requirements around contracts with customers. The Company will adopt the standard beginning October 1, 2018 using the modified retrospective method.

We have established our accounting policy, provided training to the Company’s reporting units and completed our evaluation of the new standard, including the impact on our business processes, systems and controls, and differences in the timing and/or method of revenue recognition for our contracts. As a result of the evaluation, the Company identified changes to and modified certain of our accounting policies and practices. The Company also designed and implemented specific controls over the evaluation of the impact of the new standard, including the calculation of the cumulative effect of adopting the new standard. We determined that the revenue recognition for our products and services will remain largely unchanged; and therefore, the adoption of ASC 606 will not have a material impact on our consolidated financial statements. We will provide expanded disclosures as required under ASC 606 in the consolidated financial statements upon adoption.

In February 2016, the FASB issued ASU 2016-02, “Leases (ASC 842),” which will require that a lessee recognize assets and liabilities on the balance sheet for all leases with a lease term of more than twelve months, with the result being the recognition of a right of use asset and a lease liability. Additionally, in July 2018, the FASB issued ASU 2018-10, "Codification Improvements to ASC 842, Leases" which provides narrow amendments to clarify how to apply certain aspects of the new leases standard. The new leases standard guidance is effective for the Company for annual reporting periods, including interim periods therein, beginning October 1, 2019, with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (ASU 2016-13)," which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements and disclosures.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows—Classification of Certain Cash Receipts and Cash Payments," which clarifies existing guidance related to accounting for cash receipts and cash payments and classification on the statement of cash flows. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. The Company elected to early adopt this standard in the fourth quarter of fiscal 2017. The adoption of this standard did not have a material impact on its consolidated statement of cash flows.

In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment,” to eliminate Step 2 from the goodwill impairment test in order to simplify the subsequent measurement of goodwill. The guidance is effective for fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this standard is not expected to have a material impact on its consolidated financial statements and disclosures.

In March 2017, the FASB issued ASU 2017-07, "Compensation—Retirement Benefits (ASC 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost," that will change how employers that sponsor defined benefit and/or other postretirement benefit plans present the net periodic benefit cost in the income statement. Under the new guidance, employers will present the service cost component of the net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. Employers will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement.The standard is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within the fiscal year. Early adoption is permitted, including adoption in any interim

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period for which financial statements have not yet been issued. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, "Compensation—Stock Compensation (ASC 718): Scope of Modification Accounting," which provides clarity on which changes to the terms or conditions of share-based payment awards require an entity to apply the modification accounting provisions required in ASC 718. The standard is effective for all entities for annual periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (ASC 815): Targeted Improvements to Accounting for Hedging Activities,” which amends the FASB’s hedge accounting model to enable entities to better portray their risk management activities in financial statements. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. ASU 2017-12 is effective for the Company for annual reporting periods, including interim periods therein, beginning October 1, 2018, with early adoption permitted. As early adoption is permissible, the Company adopted the pronouncement beginning October 1, 2017. Changes were applied prospectively in accordance with the standard and prior periods were not adjusted. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.

In February 2018, the FASB issued ASU 2018-02, "Income Statement - Reporting Comprehensive Income (ASC 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income," which gives entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the "Act") into retained earnings. The guidance allows entities to reclassify from accumulated other comprehensive income to retained earnings stranded tax effects resulting from the Act's new federal corporate income tax rate. The guidance also allows entities to elect to reclassify other stranded tax effects that relate to the Act but do not directly relate to the change in the federal tax rate (e.g., state taxes, changing from a worldwide tax system to a territorial system). Tax effects that are stranded in accumulated other comprehensive income for other reasons (e.g., prior changes in tax law, a change in valuation allowance) may not be reclassified. The standard is effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within the fiscal year. Early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. Entities have the option to apply the guidance retrospectively or in the period of adoption. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In March 2018, the FASB issued ASU 2018-05, “Income Taxes (ASC 740), Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” The ASU adds various SEC paragraphs pursuant to the issuance of the December 2017 SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), which was effective immediately. The SEC issued SAB 118 to address concerns about reporting entities’ ability to timely comply with the accounting requirements to recognize all of the effects of the Tax Cuts and Jobs Act in the period of enactment. SAB 118 allows disclosure that timely determination of some or all of the income tax effects from the Tax Cuts and Jobs Act are incomplete by the due date of the financial statements and if possible to provide a reasonable estimate. We have accounted for the tax effects of the Tax Cuts and Jobs Act under the guidance of SAB 118, on a provisional basis. Our accounting for certain income tax effects is incomplete, but we have determined reasonable estimates for those effects and have recorded provisional amounts in our consolidated financial statements. Refer to Note 13, "Income Taxes," for further information.

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5. EARNINGS PER SHARE (TWO-CLASS METHOD)

The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):

	Fiscal Years Ended September 30,
	2018				2017				2016
Numerator for earnings per share:
Net income from continuing operations	$	961,536			$	628,541			$	586,414
Less dividends paid on participating securities	(56,148		)		(159,257		)		(3,000		)
	$	905,388			$	469,284			$	583,414
Net loss from discontinued operations	(4,474		)		(31,654		)		—
Net income applicable to common stock—basic and diluted	$	900,914			$	437,630			$	583,414
Denominator for basic and diluted earnings per share under the two-class method:
Weighted average common shares outstanding	52,345				52,517				53,326
Vested options deemed participating securities	3,252				3,013				2,831
Total shares for basic and diluted earnings per share	55,597				55,530				56,157
Net earnings per share from continuing operations—basic and diluted	$	16.28			$	8.45			$	10.39
Net loss per share from discontinued operations—basic and diluted	(0.08		)		(0.57		)		—
Net earnings per share	$	16.20			$	7.88			$	10.39

6. SALES AND TRADE ACCOUNTS RECEIVABLE

Sales—The Company’s sales and receivables are concentrated in the aerospace industry. TransDigm’s customers include: distributors of aerospace components; commercial airlines, large commercial transport and regional and business aircraft OEMs; various armed forces of the United States and friendly foreign governments; defense OEMs; system suppliers; and various other industrial customers.

In 2018, 2017 and 2016, two customers individually accounted for more than 10% of the Company’s net sales. One customer accounted for approximately 11%, 13% and 13% of the Company’s net sales for fiscal years ended 2018, 2017 and 2016, respectively. The other customer accounted for approximately 10%, 11% and 12% of the Company’s net sales for fiscal years ended 2018, 2017 and 2016, respectively. Sales to these customers were split approximately evenly between the Power & Control and Airframe segments. Sales to foreign customers, primarily in Western Europe, Canada and Asia, were $1,355.1 million, $1,318.9 million and $1,169.5 million during fiscal years ended 2018, 2017 and 2016.

Trade Accounts Receivable—Trade accounts receivable consist of the following at September 30 (in thousands):

	2018				2017
Trade accounts receivable—gross	$	708,984			$	639,946
Allowance for uncollectible accounts	(4,674		)		(3,819		)
Trade accounts receivable—net	$	704,310			$	636,127

At September 30, 2018, approximately 22% of the Company’s trade accounts receivable was due from two customers. One customer accounted for approximately 12% percent of the Company’s trade accounts receivable and the other customer accounted for approximately 10% of the Company’s trade accounts receivable. In addition, approximately 37% of the Company’s trade accounts receivable was due from entities that principally operate outside of the United States. Credit is extended based on an evaluation of each customer’s financial condition and collateral is generally not required.

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7. INVENTORIES

Inventories consist of the following at September 30 (in thousands):

	2018				2017
Raw materials and purchased component parts	$	540,290			$	496,899
Work-in-progress	237,335				187,009
Finished Goods	127,018				131,548
Total	904,643				815,456
Reserve for excess and obsolete inventory	(99,351		)		(84,775		)
Inventories—net	$	805,292			$	730,681

8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following at September 30 (in thousands):

	2018				2017
Land and improvements	$	77,455			$	56,554
Buildings and improvements	171,269				161,990
Machinery, equipment and other	448,014				376,659
Construction in progress	31,237				22,037
Total	727,975				617,240
Accumulated depreciation	(339,642		)		(292,316		)
Property, plant and equipment—net	$	388,333			$	324,924

9. INTANGIBLE ASSETS

Other intangible assets - net in the consolidated balance sheets consist of the following at September 30 (in thousands):

	2018												2017
	Gross Carrying Amount				Accumulated Amortization				Net				Gross Carrying Amount				Accumulated Amortization				Net
Trademarks and trade names	$	799,749			$	—			$	799,749			$	729,931			$	—			$	729,931
Technology	1,347,314				416,579				930,735				1,292,719				351,638				941,081
Order backlog	12,200				5,409				6,791				29,000				26,668				2,332
Other	73,434				22,305				51,129				63,599				19,081				44,518
Total	$	2,232,697			$	444,293			$	1,788,404			$	2,115,249			$	397,387			$	1,717,862

Information regarding the amortization expense of amortizable intangible assets is detailed below (in thousands):

Annual Amortization Expense:

Years ended September 30,
2018	$	72,454
2017	89,226
2016	77,445

Estimated Amortization Expense:

Years ending September 30,
2019	$	75,640
2020	70,307
2021	70,307
2022	70,307
2023	70,307

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Intangible assets acquired during the fiscal year ended September 30, 2018 were as follows (in thousands):

	Gross Amount				Amortization Period
Intangible assets not subject to amortization:
Goodwill	$	475,861
Trademarks and trade names	70,400
	546,261
Intangible assets subject to amortization:
Technology	58,400				20 years
Order backlog	9,500				1 year
Other	10,160				20 years
	78,060				17.7 years
Total	$	624,321

The changes in the carrying amount of goodwill by segment for the fiscal years ended September 30, 2017 and 2018 were as follows (in thousands):

	Power & Control				Airframe				Non- aviation				Total
Balance at September 30, 2016	$	3,209,584			$	2,376,593			$	93,275			$	5,679,452
Goodwill acquired during the year (Note 2)	70,369				58,783				—				129,152
Write-down of discontinued operations (Note 22)	—				(32,000		)		—				(32,000		)
Reclass of goodwill acquired to assets held-for-sale (Note 22)	—				(26,783		)		—				(26,783		)
Purchase price allocation adjustments	(9,972		)		—				—				(9,972		)
Currency translation adjustment	—				5,489				—				5,489
Balance at September 30, 2017	3,269,981				2,382,082				93,275				5,745,338
Goodwill acquired during the year (Note 2)	402,540				73,321				—				475,861
Purchase price allocation adjustments	5,354				—				—				5,354
Currency translation adjustment	—				(3,258		)		—				(3,258		)
Other	(192		)		187				—				(5		)
Balance at September 30, 2018	$	3,677,683			$	2,452,332			$	93,275			$	6,223,290

10. ACCRUED LIABILITIES

Accrued liabilities consist of the following at September 30 (in thousands):

	2018				2017
Compensation and related benefits	$	81,035			$	68,945
Interest	96,590				82,222
Interest rate swap agreements	528				20,740
Product warranties	21,056				22,971
Dividend equivalent payments—current (see Note 17)	24,200				56,506
Environmental and other litigation reserves	31,079				4,121
Other	96,955				80,383
Total	$	351,443			$	335,888

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11. DEBT

The Company’s debt consists of the following at September 30 (in thousands):

	2018
	Gross Amount				Debt Issuance Costs				Original Issue Discount or Premium				Net Amount
Short-term borrowings—trade receivable securitization facility	$	300,000			$	(481	)		$	—			$	299,519
Term loans	$	7,599,932			$	(69,697	)		$	(21,030	)		$	7,509,205
5.50% senior subordinated notes due 2020 (2020 Notes)	550,000				(2,187		)		—				547,813
6.00% senior subordinated notes due 2022 (2022 Notes)	1,150,000				(5,501		)		—				1,144,499
6.50% senior subordinated notes due 2024 (2024 Notes)	1,200,000				(6,866		)		—				1,193,134
6.50% senior subordinated notes due 2025 (2025 Notes)	750,000				(3,505		)		3,636				750,131
6.375% senior subordinated notes due 2026 (6.375% 2026 Notes)	950,000				(7,798		)		—				942,202
6.875% senior subordinated notes due 2026 (6.875% 2026 Notes)	500,000				(5,616		)		(3,605		)		490,779
	12,699,932				(101,170		)		(20,999		)		12,577,763
Less current portion	76,427				(610		)		—				75,817
Long-term debt	$	12,623,505			$	(100,560	)		$	(20,999	)		$	12,501,946

	2017
	Gross Amount				Debt Issuance Costs				Original Issue Discount or Premium				Net Amount
Short-term borrowings—trade receivable securitization facility	$	300,000			$	(413	)		$	—			$	299,587
Term loans	$	6,973,009			$	(64,104	)		$	(18,948	)		$	6,889,957
2020 Notes	550,000				(3,243		)		—				546,757
2022 Notes	1,150,000				(6,941		)		—				1,143,059
2024 Notes	1,200,000				(8,042		)		—				1,191,958
2025 Notes	750,000				(4,033		)		4,182				750,149
6.375% 2026 Notes	950,000				(8,806		)		—				941,194
	11,573,009				(95,169		)		(14,766		)		11,463,074
Less current portion	70,031				(577		)		—				69,454
Long-term debt	$	11,502,978			$	(94,592	)		$	(14,766	)		$	11,393,620

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. In August 2018, the Company amended the Securitization Facility to increase the borrowing capacity to $350 million and extend the maturity date to July 31, 2019. As of September 30, 2018, the Company has borrowed $300 million under the Securitization Facility. The Securitization Facility is collateralized by substantially all of the Company’s domestic operations’ trade accounts receivable.

Amendment No. 4 to the Second Amended and Restated Credit Agreement

On November 30, 2017, the Company entered into Amendment No. 4 to the Second Amended and Restated Credit Agreement. Pursuant to Amendment No. 4, TransDigm, among other things, incurred new tranche E term loans and new Tranche F term loans in aggregate principal amounts equal to $1,503 million and $2,857 million, respectively, and repaid in full all of the existing tranche E term loans and Tranche F term loans outstanding under the Second Amended and Restated Credit Agreement immediately prior to the refinancing facility agreement. Additionally, pursuant to Amendment No. 4, TransDigm converted approximately $798 million of existing tranche D term loans into additional tranche F term loans. The refinancing facility agreement also decreased the margin applicable to the existing tranche E term loans and tranche F term loans to LIBO rate plus 2.75% per annum. The terms

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and conditions (other than maturity date and pricing) that apply to the tranche E and tranche F term loans are substantially the same as the terms and conditions that apply to the tranche D term loans immediately prior to Amendment No. 4.

In addition to the incremental discount of $1.0 million recorded for the tranche F term loans, the Company capitalized $2.9 million and expensed $0.7 million of refinancing costs representing debt issuance costs associated with Amendment No. 4 during the fiscal year ended September 30, 2018. The Company also wrote off $0.5 million in unamortized debt issuance costs related to the tranche D term loans that were converted to tranche F term loans and wrote off $0.2 million in unamortized debt issuance costs related to the tranche F terms loans.

Refinancing Facility Agreement to the Second Amended and Restated Credit Agreement

On February 22, 2018, the Company entered into a refinancing facility agreement. TransDigm, among other things, incurred new tranche G term loans in an aggregate principal amount equal to $1,810 million and repaid in full all of the existing tranche G term loans outstanding under the Second and Amended Restated Credit Agreement immediately prior to the refinancing facility agreement. The refinancing facility agreement also decreased the margin applicable to the tranche G term loans to LIBO rate plus 2.5% per annum. The terms and conditions that apply to the tranche G term loans other than pricing are substantially the same as the terms and conditions that apply to the tranche G term loans immediately prior to the refinancing facility agreement.

The Company capitalized $0.5 million and expensed $0.3 million of refinancing costs representing debt issuance costs associated with the refinancing facility agreement during the fiscal year ended September 30, 2018. Additionally, the Company wrote off $0.2 million in unamortized debt issuance costs related to the tranche G terms loans.

Issuance of Senior Subordinated Notes

On May 8, 2018, TransDigm UK Holdings plc, a wholly-owned, indirect subsidiary of TD Group, issued $500 million in aggregate principal amount of new 6.875% 2026 Notes at an issue price of 99.24% of the principal amount. The 2026 Notes bear interest at the rate of 6.875% per annum, which accrues from May 8, 2018 and is payable semiannually in arrears on May 15 and November 15 of each year, commencing on November 15, 2018. The 2026 Notes mature on May 15, 2026, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the indentures governing the 6.875% 2026 Notes.

In addition to the discount of $3.8 million recorded upon the issuance of the 6.875% 2026 Notes, the Company capitalized $5.9 million and expensed $0.7 million in refinancing costs representing fees associated with the issuance of the 6.875% 2026 Notes during the fiscal year ended September 30, 2018.

Amendment No. 5 to the Second Amended and Restated Credit Agreement

On May 30, 2018, the Company entered into Amendment No. 5 to the Second Amended and Restated Credit Agreement. The Company capitalized $7.2 million and expensed $0.2 million of refinancing costs representing fees associated with the execution of Amendment No. 5 during the fiscal year ended September 30, 2018.

Pursuant to Amendment No. 5, the Company, among other things, incurred new tranche E term loans in an aggregate principal amount equal to $1,322 million, and repaid in full all of the existing tranche E term loans outstanding under the Second Amended and Restated Credit Agreement immediately prior to Amendment No. 5. The Company also incurred incremental tranche E term loans in an aggregate principal amount equal to $933 million. The new tranche E term loans and incremental tranche E term loans mature on May 30, 2025. Amendment No. 5 also decreased the margin applicable to the new tranche E term loans to LIBO rate plus 2.5% per annum. The terms and conditions that apply to the tranche E term loans, other than the maturity date and margin, are substantially the same as the terms and conditions that apply to the tranche E term loans immediately prior to Amendment No. 5. In addition to the discount of $4.7 million recorded for the tranche E term loans, the Company capitalized $7.0 million and expensed $2.7 million of refinancing costs representing debt issuance costs associated with tranche E term loans during the fiscal year ended September 30, 2018. The Company also wrote off $0.3 million in unamortized debt issuance costs related to the tranche E terms loans.

Additionally, pursuant to Amendment No. 5, the Company incurred new tranche F term loans in an aggregate principal amount equal to $3,578 million, and repaid in full all of the existing tranche F term loans outstanding under the Second Amended and Restated Credit Agreement immediately prior to Amendment No. 5. Amendment No. 5 also decreased the margin applicable to the tranche F term loans to LIBO rate plus 2.5% per annum. The Company capitalized $2.0 million of refinancing costs representing debt issuance costs associated with the tranche F term loans during the fiscal year ended September 30, 2018. Additionally, the Company wrote off $0.3 million in unamortized debt issuance costs related to the tranche F term loans.

Finally, under the terms of Amendment No. 5, the maturity date of our $600 million revolving credit facility was extended to December 28, 2022. The terms and conditions that apply to the revolving credit facility, other than the maturity date, are substantially the same as the terms and conditions that applied to the revolving credit facility immediately prior to Amendment No. 5. At September 30, 2018, the Company had $17.5 million in letters of credit outstanding and $582.5 million of borrowings available under the revolving commitments. During the fiscal year ended September 30, 2018, the Company capitalized $0.4

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million and expensed $0.3 million representing debt issuance costs expensed in conjunction with the refinancing of the revolving credit facility.

Term Loans

As of September 30, 2018 and 2017, TransDigm had $7,599.9 million and $6,973.0 million in fully drawn term loans and $600 million in revolving commitments. The term loans consist of three tranches as of September 30, 2018 and four tranches as of September 30, 2017 as follows (in millions):

Term Loan Facility		Maturity Date		Interest Rate		Aggregate Principal as of September 30,
			2018				2017
Tranche D		Not applicable		Not applicable		$	—			$	798.1
Tranche E		May 30, 2025		LIBO rate + 2.50%		$	2,243.7			$	1,503.4
Tranche F		June 9, 2023		LIBO rate + 2.50%		$	3,559.9			$	2,857.0
Tranche G		August 22, 2024		LIBO rate + 2.50%		$	1,796.3			$	1,814.5

The interest rates per annum applicable to all of the existing tranches of term loans are, at TransDigm’s option, equal to either an alternate base rate or an adjusted LIBO rate for one, two, three or six-month (or to the extent agreed to by each relevant lender, nine or twelve-month) interest periods chosen by TransDigm, in each case plus an applicable margin percentage. The adjusted LIBO rate is not subject to a floor. At September 30, 2018 and 2017, the applicable interest rates were as follows:

Term Loan Facility		Interest Rate as of September 30,
	2018			2017
Tranche D		—	%		4.24	%
Tranche E		4.58	%		4.24	%
Tranche F		4.58	%		4.24	%
Tranche G		4.58	%		4.26	%

Debt Issuance Costs, Premiums and Discounts

During the fiscal year ended September 30, 2018, the Company recorded refinancing costs of $6.4 million representing the refinancing of tranche D, E, F & G term loans, and issuance of the $500 million 6.875% Senior Subordinated Notes. During the fiscal year ended September 30, 2017, the Company recorded refinancing costs of $39.8 million representing debt issuance costs and premium expensed in conjunction with the new tranche G term loans, the refinancing of the tranche C term loans, and additional $300 million tack-on to the 6.375% Notes. During the fiscal year ended September 30, 2016, the Company recorded refinancing costs of $15.8 million representing debt issuance costs expensed in conjunction with the refinancing of the tranche C term loans.

Interest Rate Swap and Cap Agreements

See Note 20, “Derivatives and Hedging Activities,” for information about how our interest rate swap and cap agreements are used to manage interest rate risk associated with floating-rate borrowings under our credit facilities.

Senior Subordinated Notes

Senior Subordinated Notes		Aggregate Principal		Maturity Date		Interest Rate
2020 Notes		$550 million		October 15, 2020		5.50%
2022 Notes		$1,150 million		July 15, 2022		6.00%
2024 Notes		$1,200 million		July 15, 2024		6.50%
2025 Notes		$750 million		May 15, 2025		6.50%
6.875% 2026 Notes		$500 million		May 15, 2026		6.875%
6.375% 2026 Notes		$950 million		June 15, 2026		6.375%

The Notes are subordinated to all of TransDigm’s existing and future senior debt, rank equally with all of its existing and future senior subordinated debt and rank senior to all of its future debt that is expressly subordinated to the Notes. The Notes are guaranteed on a senior subordinated unsecured basis by TD Group and its 100%-owned domestic subsidiaries named in the indentures. The guarantees of the 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 Notes. See Note 25, “Supplemental Guarantor Information,” for further details. The Notes are structurally

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subordinated to all of the liabilities of TD Group’s non-guarantor subsidiaries. The Notes contain many of the restrictive covenants included in the Restated Credit Agreement. TransDigm is in compliance with all the covenants contained in the Notes.

At September 30, 2018, future maturities of long-term debt are as follows (in thousands):

Fiscal years ended September 30,
2019	$	76,427
2020	76,427
2021	626,427
2022	1,226,427
2023	3,457,393
Thereafter	7,236,831
	$	12,699,932

12. RETIREMENT PLANS

Defined Contribution Plans—The Company sponsors certain defined contribution employee savings plans that cover substantially all of the Company’s non-union 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, 2018, 2017 and 2016 was approximately $14.9 million, $14.6 million and $12.7 million, respectively.

Defined Benefit Pension Plans—The Company maintains certain non-contributory defined benefit pension plans. The Company’s funding policy is to contribute actuarially 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 maintains certain qualified, non-contributory defined benefit pension plans, which together cover certain union employees. The plans provide benefits of stated amounts for each year of service. The plan assets as of September 30, 2018 and 2017 were approximately $68.5 million and $69.9 million, respectively. The Company’s projected benefit obligation for these defined benefit pension plans at September 30, 2018 and 2017 was $84.1 million and $91.7 million, respectively. The total liability recognized at September 30, 2018 and 2017 was $15.6 million and $21.8 million, respectively. The decrease in the total liability at September 30, 2018 compared to September 30, 2017 is primarily attributable to the change in pension assumptions, particularly a higher discount rate, for the AmSafe Bridport Limited pension plan.

The net periodic pension cost recognized in the consolidated statements of income for the fiscal years ended September 30, 2018, 2017, and 2016 was $1.0 million, $1.7 million, and $1.0 million, respectively.

The Company has a non-qualified, non-contributory defined benefit pension plan, which covers certain retired employees. The plan is unfunded and provides defined benefits based on the final average salary of the employees as defined in the plan. The projected benefit obligation for this defined benefit pension plan and the total liability recognized in the Consolidated Balance Sheet at September 30, 2018 and 2017 was approximately $8.1 million and $8.8 million, respectively. The net periodic pension cost recognized in the consolidated statements of income for each of the fiscal years ended September 30, 2018, 2017 and 2016 was $0.4 million.

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13. INCOME TAXES

The Company’s income from continuing operations before income taxes includes the following components for the periods shown below (in thousands):

	Fiscal Years Ended September 30,
	2018				2017				2016
United States	$	826,539			$	698,201			$	641,395
Foreign	159,018				139,229				126,721
	$	985,557			$	837,430			$	768,116

The Company’s income tax provision on income from continuing operations consists of the following for the periods shown below (in thousands):

	Fiscal Years Ended September 30,
	2018				2017				2016
Current
Federal	$	136,651			$	179,884			$	153,957
State	11,771				8,596				9,234
Foreign	27,239				21,327				12,703
	175,661				209,807				175,894
Deferred	(151,640		)		(918		)		5,808
	$	24,021			$	208,889			$	181,702

The differences between the income tax provision on income from continuing operations at the federal statutory income tax rate and the tax provision shown in the accompanying consolidated statements of income for the periods shown below are as follows (in thousands):

	Fiscal Years Ended September 30,
	2018				2017				2016
Tax at statutory rate of 24.5% (35% for fiscal 2017 and 2016)	$	241,853			$	293,129			$	268,841
Stock compensation	(50,796		)		(50,314		)		(43,565		)
Domestic manufacturing deduction	(15,091		)		(17,832		)		(16,902		)
US tax reform (1)	(146,380		)		—				—
Foreign rate differential	(13,770		)		(29,685		)		(30,079		)
Other—net	8,205				13,591				3,407
Income tax provision	$	24,021			$	208,889			$	181,702

(1)

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings from certain foreign subsidiaries that were previously deferred as well as other changes. We recorded provisional tax benefits of $176.4 million related to the remeasurement of our net U.S. deferred tax liabilities to reflect the reduction in the corporate tax rate. We also recorded a provisional tax expense of $30.0 million related to the one-time transition tax.

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The components of the deferred taxes consist of the following at September 30 (in thousands):

	2018				2017
Deferred tax liabilities:
Intangible assets	$	(469,939	)		$	(647,140	)
Property, plant and equipment	(26,615		)		(29,240		)
Interest rate swaps and caps	(20,052		)		15,961
Unremitted foreign earnings	(4,488		)		(10,784		)
Employee benefits	73,906				107,195
Net operating losses	46,487				33,462
Inventories	20,916				31,077
Environmental reserves	8,551				15,518
Product warranty reserves	4,471				7,419
Other	14,516				8,797
Total	(352,247		)		(467,735		)
Add: Valuation allowance	(47,249		)		(33,214		)
Total net deferred tax liabilities	$	(399,496	)		$	(500,949	)

At September 30, 2018, the Company has United Kingdom net operating loss carryforwards of approximately $23.0 million, German net operating loss carryforwards of approximately $10.1 million and state net operating loss carryforwards of approximately $1,011.0 million that expire in various years from 2018 to 2038. A valuation allowance has been established equal to the amount of the net operating losses that the Company believes will not be utilized. The Company had state tax credit carryforwards of $3.1 million that expire from 2029 to 2034.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions, as well as foreign jurisdictions located in Belgium, Canada, China, France, Germany, Hong Kong, Hungary, Japan, Malaysia, Mexico, Norway, Singapore, Sri Lanka, Sweden and the United Kingdom. The Company is no longer subject to U.S. federal examinations for years before fiscal 2014. The Company is currently under examination in the U.S. for its fiscal 2014 federal taxes. The Company expects the examinations to be completed during fiscal 2019. In addition, the Company is subject to state income tax examinations for fiscal years 2009 and later.

The Act’s one-time repatriation tax liability effectively taxed the undistributed earnings previously deferred from U.S. income taxes. We have provided for foreign withholding taxes in jurisdictions in which we are not considered definitely reinvested, however, such amounts are not significant.

At September 30, 2018, we have not completed our accounting for the tax effects of enactment of the Act; however we have made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax in accordance with U.S. Securities and Exchange Commission Staff Accounting Bulletin No. 118. We are still analyzing certain aspects of the Act and refining our calculations, which could potentially result in changes to our current estimates. Any revisions to the impacts of the Act will be finalized by the first quarter of the fiscal year ending September 30, 2019.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2018				2017
Balance at beginning of period	$	8,655			$	8,706
Additions based on tax positions related to the prior year	4,637				1,643
Additions based on tax positions related to the current year	2,390				500
Reductions based on tax positions related to the prior year	(100		)		(963		)
Settlement with tax authorities	(66		)		—
Lapse in statute of limitations	(1,436		)		(1,231		)
Balance at end of period	$	14,080			$	8,655

Unrecognized tax benefits at September 30, 2018 and 2017, the recognition of which would have an effect on the effective tax rate for each fiscal year, amounted to $14.1 million and 8.7 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, 2018, 2017 and 2016.

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As of September 30, 2018 and 2017, the Company accrued $1.9 million and $1.2 million, respectively, for the potential payment of interest and penalties. The Company anticipates no significant changes to its total unrecognized tax benefits through fiscal 2019.

14. 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.

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.

The Company’s consolidated balance sheets includes environmental remediation obligations at September 30, 2018 and 2017 of $39.1 million and $39.9 million, respectively.

15. CAPITAL STOCK

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, 2018 and 2017 was 56,895,686 and 56,093,659, respectively. The total number of shares held in treasury at September 30, 2018 and 2017 were 4,161,326 and 4,159,207, respectively. There were no shares of preferred stock outstanding at September 30, 2018 and 2017. The terms of the preferred stock have not been established.

On November 8, 2017, our Board of Directors, authorized a new stock repurchase program replacing the previous $600 million program and permitting repurchases of our outstanding shares not to exceed $650 million in the aggregate, subject to any restrictions specified in the Credit Agreement and/or Indentures governing the existing Notes. No repurchases were made under the program during the fiscal year ended September 30, 2018.

16. 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/electro-mechanical actuators and controls, ignition systems and engine technology, specialized pumps and valves, power conditioning devices, specialized AC/DC electric motors and generators, databus and power controls, high performance hoists, winches and lifting devices and cargo loading and handling systems. Primary

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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, rods and locking devices, engineered connectors and elastomers, cockpit security components and systems, aircraft audio systems, specialized lavatory components, seat belts and safety restraints, engineered interior surfaces and related components, lighting and control technology, military personnel parachutes and cargo delivery systems. 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/electro-mechanical actuators and controls for space applications, and refueling systems for heavy equipment used in mining, construction and other industries. Primary customers of this segment are off-road vehicle suppliers and subsystem suppliers, child restraint system suppliers, satellite and space system suppliers and manufacturers of heavy equipment used in mining, construction and other industries.

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 refinancing costs, acquisition-related costs, transaction-related costs and non-cash compensation charges incurred in connection with the Company’s stock option plans. Acquisition-related costs represent accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold; costs incurred to integrate acquired businesses and product lines into the Company’s operations, facility relocation costs and other acquisition-related costs; transaction related costs comprising deal fees; legal, financial and tax diligence expenses and valuation costs that are required to be expensed as incurred and other acquisition accounting adjustments.

EBITDA As Defined is not a measurement of financial performance under 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 GAAP.

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 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 insignificant for the periods presented below. Certain corporate-level expenses are allocated to the operating segments.

Effective October 1, 2017, the Company made an organizational realignment of certain businesses comprising the Power & Control, Airframe and the Non-Aviation segments. Operating results for the years ended September 30, 2018, 2017 and 2016, and total assets as of September 30, 2018 and 2017 were reclassified to conform to the presentation for the fiscal year ended September 30, 2018.

The following table presents net sales by reportable segment (in thousands):

	Fiscal Years Ended September 30,
	2018				2017				2016
Net sales to external customers
Power & Control	$	2,139,135			$	1,927,244			$	1,621,741
Airframe	1,530,942				1,442,073				1,447,894
Non-aviation	141,049				134,969				101,776
	$	3,811,126			$	3,504,286			$	3,171,411

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The following table reconciles EBITDA As Defined by segment to consolidated income from continuing operations before income taxes (in thousands):

	Fiscal Years Ended September 30,
	2018				2017				2016
EBITDA As Defined
Power & Control	$	1,114,464			$	980,046			$	787,418
Airframe	759,253				726,630				709,858
Non-aviation	44,310				42,475				28,228
Total segment EBITDA As Defined	1,918,027				1,749,151				1,525,504
Unallocated corporate expenses	41,469				38,588				30,308
Total Company EBITDA As Defined	1,876,558				1,710,563				1,495,196
Depreciation and amortization	129,844				141,025				121,670
Interest expense, net	663,008				602,589				483,850
Acquisition-related costs	28,450				31,191				57,699
Stock compensation expense	58,481				45,524				48,306
Refinancing costs	6,396				39,807				15,794
Other, net	4,822				12,997				(239		)
Income from continuing operations before income taxes	$	985,557			$	837,430			$	768,116

The following table presents capital expenditures and depreciation and amortization by segment (in thousands):

	Fiscal Years Ended September 30,
	2018				2017				2016
Capital expenditures
Power & Control	$	38,762			$	32,424			$	25,120
Airframe	32,028				34,526				16,498
Non-aviation	2,156				3,981				2,169
Corporate	395				82				195
	$	73,341			$	71,013			$	43,982
Depreciation and amortization
Power & Control	$	67,721			$	85,681			$	65,488
Airframe	55,732				51,440				52,198
Non-aviation	5,276				2,745				2,860
Corporate	1,115				1,159				1,124
	$	129,844			$	141,025			$	121,670

The following table presents total assets by segment (in thousands):

	September 30, 2018				September 30, 2017
Total assets
Power & Control	$	5,698,524			$	5,135,459
Airframe	4,091,011				3,923,172
Non-aviation	234,770				224,936
Corporate	2,173,162				614,594
Assets of discontinued operations	—				77,500
	$	12,197,467			$	9,975,661

The Company’s sales principally originate from the United States, and the Company’s long-lived assets are principally located in the United States.

17. STOCK-BASED COMPENSATION

The Company’s stock 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

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aligning the interests of these individuals with those of the Company’s stockholders. The Company’s stock compensation plans provide for the granting of stock options and other stock-based incentives.

Non-cash stock compensation expense recognized by the Company during the fiscal years ended September 30, 2018, 2017 and 2016 was $58.5 million, $45.5 million and $48.3 million, respectively.

The weighted-average grant date fair value of options granted during the fiscal years ended September 30, 2018, 2017 and 2016 was $81.04, $67.11 and $57.47, respectively.

Compensation expense is recognized based upon probability assessments of awards that are expected to vest in future periods. Such probability assessments are subject to revision and, therefore, unrecognized compensation expense is subject to future changes in estimate. As of September 30, 2018, there was approximately $74.3 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 2.5 years.

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

	Fiscal Years Ended September 30,
	2018		2017		2016
Risk-free interest rate	2.01% to 2.84%		1.56% to 2.01%		1.33% to 1.73%
Expected life of options	5.2 years		5.0 years		5.0 years
Expected dividend yield of stock	—		—		—
Expected volatility of stock	25%		25%		25%

The risk-free interest rate is based upon the Treasury bond rates as of the grant date. The average expected life of stock-based awards is based on the Company’s actual historical exercise experience. Expected volatility of stock was calculated using a rate based upon the historical volatility of TransDigm’s common stock. 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 rate assumption is used.

The total fair value of options vested during fiscal years ended September 30, 2018, 2017 and 2016 was $44.4 million, $42.9 million and $36.6 million, respectively.

2014 Stock Option Plan

In July 2014, the Board of Directors of TD Group adopted a new stock option plan, which was subsequently approved by stockholders on October 2, 2014. The 2014 stock option plan permits TD Group to award our key employees, directors or consultants stock options. 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.

Performance Vested Stock Options—All of the options granted through September 30, 2018 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, 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, 2018:

	Number of Options			Weighted-Average Exercise Price Per Option				Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at September 30, 2017	862,059			$	260.20
Granted	1,411,399			297.07
Exercised	(9,570	)		255.07
Forfeited	(148,910	)		274.43
Expired	(1,700	)		269.42
Outstanding at September 30, 2018	2,113,278			$	283.84			8.8 years		$	186,943,914
Expected to vest	1,064,431			$	283.53			8.8 years		$	94,486,726
Exercisable at September 30, 2018	355,333			$	275.41			8.5 years		$	34,428,384

At September 30, 2018, there were 2,876,222 remaining shares available for award under TD Group’s 2014 stock option plan.

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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 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.

Restricted Stock—The Company granted 17,700 restricted stock units with a weighted-average grant date fair value of $189.97 during the fiscal year ended September 30, 2015. During the fiscal year ended September 30, 2018, 4,333 restricted stock units vested and 1,567 restricted stock units forfeited. No restricted stock units were outstanding at 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, 2018:

	Number of Options			Weighted-Average Exercise Price Per Option				Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at September 30, 2017	4,786,114			$	135.95
Granted	—			—
Exercised	(792,952	)		69.37
Forfeited	(115,035	)		205.81
Expired	—			—
Outstanding at September 30, 2018	3,878,127			$	147.50			4.6 years		$	871,815,253
Expected to vest	672,123			$	212.01			6.7 years		$	107,735,342
Exercisable at September 30, 2018	3,085,780			$	131.25			4.1 years		$	743,827,783

The 2006 stock incentive plan expired on March 14, 2016 and no further shares were granted under the plan thereafter.

2003 Stock Option Plan

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

TD Group reserved a total of 9,339,453 shares of its common stock for issuance to the Company’s employees under the plan, which had all been issued as of September 30, 2013.

Time Vested Stock Options—During the fiscal year ended September 30, 2016, 5,486 of the Company’s time vested stock-based options, with a weighted-average exercise price per option of $39.88, were exercised. There were no remaining options outstanding as of September 30, 2016.

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Performance Vested Stock Options—The following table summarizes the activity, pricing and other information for the Company’s performance vested stock-based award activity during the fiscal year ended September 30, 2018:

	Number of Options			Weighted-Average Exercise Price Per Option				Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at September 30, 2017	77,829			$	130.09
Granted	—			—
Exercised	—			—
Outstanding at September 30, 2018	77,829			$	130.09			4.1 years		$	18,850,962
Exercisable at September 30, 2018	77,829			$	130.09			4.1 years		$	18,850,962

The total intrinsic value of time, performance and rollover options exercised during the fiscal years ended September 30, 2018, 2017 and 2016 was $192.5 million, $61.1 million and $133.2 million, respectively.

In addition to shares issued pursuant to options exercised, during the fiscal year ended September 30, 2018, 1,072 shares of common stock were issued with a weighted-average grant date fair value of $335.13 as payment to directors in lieu of cash.

Dividend Equivalent Plans

Pursuant to the Third Amended and Restated TransDigm Group Incorporated 2003 Stock Option Plan Dividend Equivalent Plan, the Second Amended and Restated TransDigm Group Incorporated 2006 Stock Incentive Plan Dividend Equivalent Plan and the 2014 Stock Option Plan Dividend Equivalent Plan, all of the options granted under the 2003 stock option plan, the 2006 stock incentive plan and the 2014 stock option plan are entitled to certain dividend equivalent payments in the event of the declaration of a dividend by the Company.

Dividend equivalent payments on vested options were $56.1 million, $19.5 million and $3.0 million during the years ended September 30, 2018, 2017 and 2016, respectively. At September 30, 2018, there was $24.2 million recorded in accrued liabilities and $32.2 million accrued in other non-current liabilities on the consolidated balance sheets related to the future dividend equivalent payments.

18. LEASES

TransDigm leases certain manufacturing facilities, offices, equipment and vehicles. Such leases, some of which are noncancelable and, in many cases, include renewals, expire at various dates. Rental expense during the fiscal years ended September 30, 2018, 2017 and 2016 was $19.2 million, $19.0 million and $18.3 million, respectively.

Future minimum rental commitments at September 30, 2018 under operating leases having initial or remaining non-cancelable lease terms exceeding one year are $19.3 million in fiscal 2019, $16.3 million in fiscal 2020, $13.9 million in fiscal 2021, $12.2 million in fiscal 2022, $9.7 million in fiscal 2023, and $27.1 million thereafter.

F-28

19. FAIR VALUE MEASUREMENTS

The following tables present 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 thousands):

				September 30, 2018								September 30, 2017
	Level			Carrying Amount				Fair Value				Carrying Amount				Fair Value
Assets:
Cash and cash equivalents	1			$	2,073,017			$	2,073,017			$	650,561			$	650,561
Interest rate cap agreements (1)	2			36,160				36,160				12,904				12,904
Interest rate swap agreements (2)	2			11,634				11,634				—				—
Interest rate swap agreements (1)	2			61,126				61,126				2,905				2,905
Liabilities:
Interest rate swap agreements (3)	2			528				528				20,740				20,740
Interest rate swap agreements (4)	2			142				142				9,731				9,731
Short-term borrowings - trade receivable securitization facility (5)	1			299,519				299,519				299,587				299,587
Long-term debt, including current portion:
Term loans (5)	2			7,509,205				7,607,323				6,889,957				6,965,628
5.50% 2020 Notes (5)	1			547,813				548,625				546,757				558,250
6.00% 2022 Notes (5)	1			1,144,499				1,155,750				1,143,059				1,178,750
6.50% 2024 Notes (5)	1			1,193,134				1,215,000				1,191,958				1,236,000
6.50% 2025 Notes (5)	1			750,131				757,500				750,149				776,807
6.375% 2026 Notes (5)	1			942,202				942,875				941,194				971,375
6.875% 2026 Notes (5)	1			490,779				507,500				—				—

(1)	Included in other non-current assets on the consolidated balance sheet.

(2)	Included in prepaid expenses and other on the consolidated balance sheet.

(3)	Included in accrued liabilities on the consolidated balance sheet.

(4)	Included in other non-current liabilities on the consolidated balance sheet.

(5)	The carrying amount of the debt instrument is presented net of the debt issuance costs. Refer to Note 11, “Debt”, for gross carrying amounts.

The Company values its financial instruments using an industry standard market approach, in which prices and other relevant information is generated by market transactions involving identical or comparable assets or liabilities. No financial instruments were recognized using unobservable inputs.

Interest rate swaps were measured at fair value using quoted market prices for the swap interest rate indexes over the term of the swap discounted to present value versus the fixed rate of the contract. The interest rate caps were measured at fair value using implied volatility rates of each individual caplet and the yield curve for the related periods. The estimated fair value of the Company’s term loans was based on information provided by the agent under the Company’s senior secured credit facility. The estimated fair values of the Company’s notes were based upon quoted market prices. 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 impact to the fair value of derivative assets based on the Company’s evaluation of counterparties’ credit risks.

The fair value of cash and cash equivalents, trade accounts receivable-net and accounts payable approximated book value due to the short-term nature of these instruments at September 30, 2018 and 2017.

F-29

20. DERIVATIVES AND HEDGING ACTIVITIES

The Company is exposed to, among other things, the impact of changes in 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. The Company has agreements with each of its swap and cap counterparties that contain a provision whereby if the Company defaults on the credit facility the Company could also be declared in default on its swaps and caps, resulting in an acceleration of payment under the swaps and caps.

Interest rate swap and cap agreements are used to manage interest rate risk associated with floating-rate borrowings under our credit facility. The interest rate swap and cap 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 through the expiration date of the interest rate swap and cap agreements, thereby reducing the impact of interest rate changes on future interest expense. 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. These derivative instruments qualify as effective cash flow hedges under GAAP. For these cash flow hedges, the effective portion of the gain or loss from the financial instruments was initially reported as a component of accumulated other comprehensive income (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 and cap 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.

The following table summarizes the Company’s interest rate swap agreements:

Aggregate Notional Amount (in millions)	Start Date	End Date	Related Term Loans	Conversion of Related Variable Rate Debt to Fixed Rate of:
$750	3/31/2016	6/30/2020	Tranche E	5.3% (2.8% plus the 2.5% margin percentage)
$500	6/29/2018	3/31/2025	Tranche E	5.5% (3.0% plus the 2.5% margin percentage)
$750	6/30/2020	6/30/2022	Tranche E	5.0% (2.5% plus the 2.5% margin percentage)
$1,500	6/30/2022	3/31/2025	Tranche E	5.6% (3.1% plus the 2.5% margin percentage)
$1,000	9/30/2014	6/28/2019	Tranche F	4.9% (2.4% plus the 2.5% margin percentage)
$1,000	6/28/2019	6/30/2021	Tranche F	4.3% (1.8% plus the 2.5% margin percentage)
$1,400	6/30/2021	3/31/2023	Tranche F	5.5% (3.0% plus the 2.5% margin percentage)
$500	12/30/2016	12/31/2021	Tranche G	4.4% (1.9% plus the 2.5% margin percentage)
$400	9/30/2017	9/30/2022	Tranche G	4.4% (1.9% plus the 2.5% margin percentage)
$900	12/31/2021	6/28/2024	Tranche G	5.6% (3.1% plus the 2.5% margin percentage)
$400	9/30/2022	6/28/2024	Tranche G	5.5% (3.0% plus the 2.5% margin percentage)

The following table summarizes the Company’s interest rate cap agreements:

Aggregate Notional Amount (in millions)	Start Date	End Date	Related Debt	Offsets Variable Rate Debt Attributable to Fluctuations Above:
$750	9/30/2015	6/30/2020	Tranche E	Three month LIBO rate of 2.5%
$750	6/30/2020	6/30/2022	Tranche E	Three month LIBO rate of 2.5%
$400	6/30/2016	6/30/2021	Tranche F	Three month LIBO rate of 2.0%
$400	12/30/2016	12/30/2021	Tranche G	Three month LIBO rate of 2.5%

F-30

All interest rate swap and cap agreements are recognized in our consolidated balance sheets at fair value. 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 sheet and the net amounts of assets and liabilities presented therein.

		September 30, 2018								September 30, 2017
		Asset				Liability				Asset				Liability
Interest rate cap agreements		$	36,160			$	—			$	12,904			$	—
Interest rate swap agreements		72,090				—				9,235				(36,801		)
Total		108,250				—				22,139				(36,801		)
Effect of counterparty netting		670				(670		)		(6,330		)		6,330
Net derivatives as classified in the balance sheet (1)		$	108,920			$	(670	)		$	15,809			$	(30,471	)

(1)	Refer to Note 19, "Fair Value Measurements," for the consolidated balance sheet classification of our interest rate swap and cap agreements.

Based on the fair value amounts of the interest rate swap and cap agreements determined as of September 30, 2018, the estimated net amount of existing gains and losses and caplet amortization expected to be reclassified into interest expense within the next twelve months is approximately $7.3 million.

Effective September 30, 2016, the Company redesignated the interest rate cap agreements related to the $400 million and the $750 million aggregate notional amount with cap rates of 2.0% and 2.5%, respectively, based on the expected probable cash flows associated with the 2016 term loans and 2015 term loans in consideration of the Company’s ability to select one-month, two-month, three-month, or six-month LIBO rate set forth in the Second Amended and Restated Credit Agreement. Accordingly, amounts previously recorded as a component of accumulated other comprehensive income (loss) in stockholder’s deficit amortized into interest expense was $4.0 million and $3.8 million for the fiscal years ended September 30, 2018 and 2017, respectively. The accumulated other comprehensive income to be reclassified into interest expense over the remaining term of the cap agreements is $11.0 million with a related tax benefit of $2.6 million as of September 30, 2018.

Effective December 30, 2017, the Company redesignated the existing interest rate swap agreements related to the $750 million, $500 million, $1,000 million and $750 million aggregate notional amounts with swap rates of 5.0%, 4.4%, 4.3% and 5.3%, respectively, based on the expected probable cash flows associated with certain term loans in consideration of the Company’s removal of the LIBO rate floor on the certain term loans as set forth in Amendment No. 4 to the Second Amended and Restated Credit Agreement. Accordingly, the amount recorded as a component of accumulated other comprehensive income in stockholders’ deficit related to these redesignated interest rate swap hedges will be amortized into earnings based on the original maturity date of the related interest rate swap agreements. Amounts previously recorded as a component of accumulated other comprehensive income in stockholder’s deficit amortized into interest expense was $0.8 million for the fiscal year ended September 30, 2018. The accumulated other comprehensive income to be reclassified into interest expense over the remaining term of the swap agreements is immaterial.

Effective March 31, 2018, the Company redesignated the existing interest rate swap agreements related to the $1,000 million and the $400 million aggregate notional amount with swap rates of 4.9% and 4.4%, respectively, based on the expected probable cash flows associated with certain term loans in consideration of the Company’s removal of the LIBO rate floor on the certain term loans as set forth in the refinancing facility agreement dated February 22, 2018 related to the Second Amended and Restated Credit Agreement. Accordingly, the amount recorded as a component of accumulated other comprehensive income in stockholders’ deficit related to these redesignated interest rate swap hedges will be amortized into earnings based on the original maturity date of the related interest rate swap agreements. Amounts previously recorded as a component of accumulated other comprehensive income in stockholder’s deficit amortized into interest income was $1.4 million for the fiscal year ended September 30, 2018. The accumulated other comprehensive income to be reclassified into interest income over the remaining term of the swaps agreements is $11.4 million with a related tax expense of $2.7 million as of September 30, 2018.

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21. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the components of “Accumulated other comprehensive income (loss)” (“AOCI”) in the consolidated balance sheets, net of taxes, for the fiscal years ended September 30, 2018, 2017 and 2016 (in thousands):

	Unrealized (loss) gain on derivatives designated and qualifying as cash flow hedges (2)				Defined benefit pension plan activity (3)				Currency translation adjustment				Total
Balance at September 30, 2016	$	(61,140	)		$	(24,297	)		$	(64,350	)		$	(149,787	)
Other comprehensive gain before reclassification	32,072				7,932				22,241				62,245
Amounts reclassified from AOCI related to interest rate swap agreements (1)	2,399				—				—				2,399
Net current-period other comprehensive gain	$	34,471			$	7,932			$	22,241			$	64,644
Balance at September 30, 2017	$	(26,669	)		$	(16,365	)		$	(42,109	)		$	(85,143	)
Other comprehensive gain (loss) before reclassification	91,226				5,636				(10,253		)		86,609
Amounts reclassified from AOCI related to interest rate swap agreements (1)	2,634				—				—				2,634
Net current-period other comprehensive gain (loss)	$	93,860			$	5,636			$	(10,253	)		$	89,243
Balance at September 30, 2018	$	67,191			$	(10,729	)		$	(52,362	)		$	4,100

(1)	This component of AOCI is included in interest expense (see Note 20, “Derivatives and Hedging Activities,” for additional details).

(2)	Unrealized (loss) gain represents interest rate swap and cap agreements, net of taxes of $(33,923), $(20,663) and $6,868 for the fiscal years ended September 30, 2018, 2017 and 2016, respectively.

(3)	Defined benefit pension plan activity represent pension liability adjustments, net of taxes of $(1,487), $(4,130) and $6,017, respectively.

A summary of reclassifications out of AOCI for the fiscal years ended September 30, 2018 and 2017 is provided below (in thousands):

		Amount Reclassified
		Fiscal Years Ended September 30,
Description of reclassifications out of accumulated other comprehensive income (loss)		2018				2017
Amortization from redesignated interest rate swap and cap agreements (1)		$	3,443			$	3,829
Deferred tax benefit from redesignated interest rate swap and cap agreements		(809		)		(1,430		)
Losses reclassified into earnings, net of tax		$	2,634			$	2,399

(1)	This component of AOCI is included in interest expense (see Note 20, “Derivatives and Hedging Activity,” for additional information).

F-32

22. DISCONTINUED OPERATIONS

In connection with the settlement of a Department of Justice investigation into the competitive effects of the acquisition, during the fourth quarter of 2017, the Company committed to dispose of the Schroth business. Therefore, Schroth was classified as held-for-sale as of September 30, 2017. The results of operations of Schroth are reflected as discontinued operations in the accompanying consolidated financial statements for all periods presented. On January 26, 2018, the Company completed the sale of Schroth in a management buyout to a private equity fund and certain members of Schroth management for approximately $61.4 million, which includes a working capital adjustment of $0.3 million that was settled on July 6, 2018. The Company previously acquired Schroth in February 2017 (refer to Note 2, “Acquisitions and Divestitures”).

The loss from discontinued operations was $4.5 million and $31.7 million in the consolidated statements of income for the fiscal years ended September 30, 2018 and 2017, respectively. Previously, in the fourth quarter of fiscal 2017, the Company recorded a $32.0 million impairment charge to write down the Schroth assets to fair value. The impairment charge was based on an internal assessment of the recovery of Schroth’s assets. The following is the summarized operating results for Schroth for the years ended September 30, 2018 and 2017 (in thousands):

	Fiscal Years Ended September 30,
	2018				2017
Net sales	$	11,808			$	24,590
Income (loss) from discontinued operations before income taxes	354				(5,709		)
Loss on classification as held-for-sale before income taxes	—				(32,000		)
Income tax benefit	2,016				6,055
Income (loss) from discontinued operations, net of tax	2,370				(31,654		)
Net loss of sale of discontinued operations, net of tax	(6,844		)		—
Loss from discontinued operations	$	(4,474	)		$	(31,654	)

23. QUARTERLY FINANCIAL DATA (UNAUDITED)

	First Quarter Ended December 30, 2017				Second Quarter Ended March 31, 2018				Third Quarter Ended June 30, 2018				Fourth Quarter Ended September 30, 2018
	(in thousands, except per share amounts)
Fiscal Year Ended September 30, 2018(1)
Net sales(2)	$	847,960			$	933,070			$	980,662			$	1,049,434
Gross profit(2)	476,650				534,074				569,520				597,266
Income from continuing operations(2)	312,011				201,840				217,391				230,294
Loss from discontinued operations(2)	2,764				(5,562		)		(145		)		(1,531		)
Net income(2)	314,775				196,278				217,246				228,763
Net earnings per share from continuing operations—basic and diluted(3)	$	4.60			$	3.63			$	3.91			$	4.14
Net earnings (loss) per share from discontinued operations—basic and diluted(3)	0.05				(0.10		)		—				(0.03		)
Net earnings per share—basic and diluted(3)	$	4.65			$	3.53			$	3.91			$	4.11

F-33

	First Quarter Ended December 31, 2016				Second Quarter Ended April 1, 2017				Third Quarter Ended July 1, 2017				Fourth Quarter Ended September 30, 2017
	(in thousands, except per share amounts)
Fiscal Year Ended September 30, 2017(1)
Net sales(2)	$	814,018			$	868,728			$	897,655			$	923,885
Gross profit(2)	444,255				489,437				519,696				531,239
Income from continuing operations(2)	118,871				155,691				169,832				184,147
Loss from discontinued operations(2)	—				(186		)		(779		)		(30,689		)
Net income(2)	118,871				155,505				169,053				153,458
Net earnings per share from continuing operations—basic and diluted	$	0.41			$	2.78			$	3.09			$	2.21
Net loss per share from discontinued operations —basic and diluted	—				—				(0.01		)		(0.56		)
Net earnings per share—basic and diluted(3)	$	0.41			$	2.78			$	3.08			$	1.65

(1)	Results adjusted to reflect amounts reclassified to discontinued operations due to the Company’s classification of Schroth as discontinued operations at September 30, 2017. See Note 22, “Discontinued Operations,” for additional information.

(2)	The Company’s operating results include the results of operations of acquisitions from the effective date of each acquisition. See Note 2 “Acquisitions,” for additional details.

(3)	The sum of the earnings per share for the four quarters in a year does not necessarily equal the total year earnings per share.

24. SUBSEQUENT EVENTS

On October 1, 2018, Extant completed the acquisition of substantially all of the assets and technical data rights from the Corona, California operations of NavCom Defense Electronics, Inc. (“NavCom”) for approximately $27 million in cash. NavCom is a product line of Extant and therefore will be included in TransDigm’s Power and Control segment.

On October 9, 2018, the Company entered into a merger agreement with Esterline, under which the Company agreed to acquire Esterline. Under the terms of the merger agreement, the Company will purchase each share of Esterline common stock outstanding for $122.50 per share in cash. TransDigm anticipates that the total transaction value will be approximately $4 billion, representing the $122.50 price paid per share for common stock outstanding plus existing debt. The Company expects the acquisition to be financed primarily through existing cash on hand and the incurrence of new term loans. In connection with the merger agreement, the Company entered into a commitment letter for a senior secured term facility up to $3.7 billion. The actual amount and timing of the new senior secured term facility is subject to the closing of the Esterline acquisition and the cash on hand at that time. The Company currently expects that the merger will be completed in 2019, subject to approval of Esterline’s shareholders, as well as other customary closing conditions, including the receipt of required regulatory approvals.

F-34

25. SUPPLEMENTAL GUARANTOR INFORMATION

TransDigm Inc.’s 2020 Notes, 2022 Notes, 2024 Notes, 2025 Notes and 6.375% 2026 Notes are jointly and severally guaranteed, on a senior subordinated basis, by TD Group, TransDigm UK Holdings plc ("TransDigm UK") and TransDigm Inc.’s Domestic Restricted Subsidiaries, as defined in the applicable Indentures. TransDigm UK's 6.875% 2026 Notes are jointly and severally guaranteed, on a senior subordinated basis, by TD Group, TransDigm Inc. and TransDigm Inc.'s Domestic Restricted Subsidiaries as defined in the applicable indenture. The following supplemental condensed consolidating financial information presents, in separate columns, the balance sheets of the Company as of September 30, 2018 and September 30, 2017 and its statements of income and comprehensive income and cash flows for the fiscal years ended September 30, 2018, 2017 and 2016 for (i) TransDigm Group on a parent only basis with its investment in subsidiaries recorded under the equity method, (ii) TransDigm Inc. including its directly owned operations and non-operating entities, excluding TransDigm UK, (iii) TransDigm UK (iv) the Subsidiary Guarantors (other than TransDigm UK) on a combined basis, (v) Non-Guarantor Subsidiaries and (vi) the Company on a consolidated basis.

Separate financial statements of TransDigm Inc. are not presented because TransDigm Inc.’s 2020 Notes, 2022 Notes, 2024 Notes, 2025 Notes and 6.375% 2026 Notes are fully and unconditionally guaranteed on a senior subordinated basis by TD Group, TransDigm UK and all of TransDigm Inc's Domestic Restricted Subsidiaries and because TD Group has no significant operations or assets separate from its investment in TransDigm Inc.

Separate financial statements of TransDigm UK are not presented because TransDigm UK's 6.875% 2026 Notes, issued in May 2018, are fully and unconditionally guaranteed on a senior subordinated basis by TD Group, TransDigm Inc. and all of TransDigm Inc.'s Domestic Restricted Subsidiaries.

F-35

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2018

(Amounts in Thousands)

	TransDigm Group				TransDigm Inc.				Transdigm UK				Subsidiary Guarantors				Non-Guarantor Subsidiaries				Eliminations				Total Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	389			$	1,821,437			$	125			$	(1,763	)		$	252,829			$	—			$	2,073,017
Trade accounts receivable—Net	—				—				—				40,916				663,394				—				704,310
Inventories—Net	—				45,262				—				648,574				115,913				(4,457		)		805,292
Prepaid expenses and other	—				16,231				—				47,020				11,417				—				74,668
Total current assets	389				1,882,930				125				734,747				1,043,553				(4,457		)		3,657,287
INVESTMENT IN SUBSIDIARIES AND INTERCOMPANY BALANCES	(1,808,860		)		10,459,497				1,099,886				8,928,726				2,160,236				(20,839,485		)		—
PROPERTY, PLANT AND EQUIPMENT—Net	—				15,562				—				319,567				53,204				—				388,333
GOODWILL	—				97,002				—				5,466,148				660,140				—				6,223,290
OTHER INTANGIBLE ASSETS—Net	—				31,362				—				1,514,983				242,059				—				1,788,404
DERIVATIVE ASSETS	—				97,286				—				—				—				—				97,286
OTHER	—				7,347				—				29,805				5,715				—				42,867
TOTAL ASSETS	$	(1,808,471	)		$	12,590,986			$	1,100,011			$	16,993,976			$	4,164,907			$	(20,843,942	)		$	12,197,467
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt	$	—			$	75,817			$	—			$	—			$	—			$	—			$	75,817
Short-term borrowings—trade receivable securitization facility	—				—				—				—				299,519				—				299,519
Accounts payable	—				18,470				—				115,735				39,398				—				173,603
Accrued liabilities	—				118,600				13,274				162,618				56,951				—				351,443
Total current liabilities	—				212,887				13,274				278,353				395,868				—				900,382
LONG-TERM DEBT	—				12,011,166				490,780				—				—				—				12,501,946
DEFERRED INCOME TAXES	—				345,357				—				(2,329		)		56,468				—				399,496
OTHER NON-CURRENT LIABILITIES	—				77,573				—				104,829				21,712				—				204,114
Total liabilities	—				12,646,983				504,054				380,853				474,048				—				14,005,938
STOCKHOLDERS’ (DEFICIT) EQUITY	(1,808,471		)		(55,997		)		595,957				16,613,123				3,690,859				(20,843,942		)		(1,808,471		)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	(1,808,471	)		$	12,590,986			$	1,100,011			$	16,993,976			$	4,164,907			$	(20,843,942	)		$	12,197,467

F-36

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2017

(Amounts in Thousands)

	TransDigm Group				TransDigm Inc.				TransDigm UK				Subsidiary Guarantors				Non-Guarantor Subsidiaries				Eliminations				Total Consolidated
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,416			$	439,473			$	—			$	(203	)		$	208,875			$	—			$	650,561
Trade accounts receivable—Net	—				—				—				25,069				652,807				(41,749		)		636,127
Inventories—Net	—				47,051				—				571,712				114,018				(2,100		)		730,681
Assets held-for-sale	—				—				—				6,428				71,072				—				77,500
Prepaid expenses and other	—				4,746				—				24,141				9,796				—				38,683
Total current assets	2,416				491,270				—				627,147				1,056,568				(43,849		)		2,133,552
INVESTMENT IN SUBSIDIARIES AND INTERCOMPANY BALANCES	(2,953,620		)		10,263,999				—				7,599,210				966,675				(15,876,264		)		—
PROPERTY, PLANT AND EQUIPMENT—Net	—				16,032				—				261,434				47,458				—				324,924
GOODWILL	—				85,905				—				4,996,034				663,399				—				5,745,338
OTHER INTANGIBLE ASSETS—Net	—				27,620				—				1,438,006				252,236				—				1,717,862
DERIVATIVE ASSETS	—				15,809				—				—				—				—				15,809
OTHER	—				4,507				—				27,567				6,102				—				38,176
TOTAL ASSETS	$	(2,951,204	)		$	10,905,142			$	—			$	14,949,398			$	2,992,438			$	(15,920,113	)		$	9,975,661
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt	$	—			$	69,454			$	—			$	—			$	—			$	—			$	69,454
Short-term borrowings—trade receivable securitization facility	—				—				—				—				299,587				—				299,587
Accounts payable	—				14,712				—				137,948				37,667				(41,566		)		148,761
Accrued liabilities	—				180,916				—				103,902				51,070				—				335,888
Liabilities held-for-sale	—				—				—				—				17,304				—				17,304
Total current liabilities	—				265,082				—				241,850				405,628				(41,566		)		870,994
LONG-TERM DEBT	—				11,393,620				—				—				—				—				11,393,620
DEFERRED INCOME TAXES	—				442,415				—				(99		)		58,633				—				500,949
OTHER NON-CURRENT LIABILITIES	—				61,347				—				73,245				26,710				—				161,302
Total liabilities	—				12,162,464				—				314,996				490,971				(41,566		)		12,926,865
STOCKHOLDERS’ (DEFICIT) EQUITY	(2,951,204		)		(1,257,322		)		—				14,634,402				2,501,467				(15,878,547		)		(2,951,204		)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	(2,951,204	)		$	10,905,142			$	—			$	14,949,398			$	2,992,438			$	(15,920,113	)		$	9,975,661

F-37

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEAR ENDED SEPTEMBER 30, 2018

(Amounts in thousands)

	TransDigm Group				TransDigm Inc.				TransDigm UK				Subsidiary Guarantors				Non-Guarantor Subsidiaries				Eliminations				Total Consolidated
NET SALES	$	—			$	163,348			$	—			$	3,118,032			$	610,688			$	(80,942	)		$	3,811,126
COST OF SALES	—				94,387				—				1,253,018				367,153				(80,942		)		1,633,616
GROSS PROFIT	—				68,961				—				1,865,014				243,535				—				2,177,510
SELLING AND ADMINISTRATIVE EXPENSES	—				108,687				—				269,452				71,956				—				450,095
AMORTIZATION OF INTANGIBLE ASSETS	—				1,261				—				62,915				8,278				—				72,454
(LOSS) INCOME FROM OPERATIONS	—				(40,987		)		—				1,532,647				163,301				—				1,654,961
INTEREST EXPENSE (INCOME)—Net	—				678,155				6,943				1,308				(23,398		)		—				663,008
REFINANCING COSTS	—				6,300				96				—				—				—				6,396
EQUITY IN INCOME OF SUBSIDIARIES	(957,062		)		(1,306,511		)		—				—				—				2,263,573				—
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	957,062				581,069				(7,039		)		1,531,339				186,699				(2,263,573		)		985,557
INCOME TAX PROVISION	—				(375,993		)		—				379,665				20,349				—				24,021
INCOME FROM CONTINUING OPERATIONS	957,062				957,062				(7,039		)		1,151,674				166,350				(2,263,573		)		961,536
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX	—				—				—				(2,427		)		(2,047		)		—				(4,474		)
NET INCOME	$	957,062			$	957,062			$	(7,039	)		$	1,149,247			$	164,303			$	(2,263,573	)		$	957,062
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	89,243				95,076				—				8,491				(17,837		)		(85,730		)		89,243
TOTAL COMPREHENSIVE INCOME	$	1,046,305			$	1,052,138			$	(7,039	)		$	1,157,738			$	146,466			$	(2,349,303	)		$	1,046,305

F-38

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEAR ENDED SEPTEMBER 30, 2017

(Amounts in Thousands)

	TransDigm Group				TransDigm Inc.				TransDigm UK				Subsidiary Guarantors				Non-Guarantor Subsidiaries				Eliminations				Total Consolidated
NET SALES	$	—			$	143,631			$	—			$	2,911,950			$	535,129			$	(86,424	)		$	3,504,286
COST OF SALES	—				79,403				—				1,191,770				333,985				(85,499		)		1,519,659
GROSS PROFIT	—				64,228				—				1,720,180				201,144				(925		)		1,984,627
SELLING AND ADMINISTRATIVE EXPENSES	69				97,677				—				284,819				33,010				—				415,575
AMORTIZATION OF INTANGIBLE ASSETS	—				1,003				—				80,053				8,170				—				89,226
(LOSS) INCOME FROM OPERATIONS	(69		)		(34,452		)		—				1,355,308				159,964				(925		)		1,479,826
INTEREST EXPENSE (INCOME)—Net	—				614,353				—				(1,248		)		(10,516		)		—				602,589
REFINANCING COSTS	—				39,807				—				—				—				—				39,807
EQUITY IN INCOME OF SUBSIDIARIES	(596,956		)		(1,318,945		)		—				—				—				1,915,901				—
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	596,887				630,333				—				1,356,556				170,480				(1,916,826		)		837,430
INCOME TAX PROVISION	—				33,377				—				156,251				19,261				—				208,889
INCOME FROM CONTINUING OPERATIONS	596,887				596,956				—				1,200,305				151,219				(1,916,826		)		628,541
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX	—				—				—				(9,496		)		(22,158		)		—				(31,654		)
NET INCOME	$	596,887			$	596,956			$	—			$	1,190,809			$	129,061			$	(1,916,826	)		$	596,887
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX	64,644				31,603				—				16,310				58,856				(106,769		)		64,644
TOTAL COMPREHENSIVE INCOME	$	661,531			$	628,559			$	—			$	1,207,119			$	187,917			$	(2,023,595	)		$	661,531

F-39

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEAR ENDED SEPTEMBER 30, 2016

(Amounts in Thousands)

	TransDigm Group				TransDigm Inc.				TransDigm UK				Subsidiary Guarantors				Non-Guarantor Subsidiaries				Eliminations				Total Consolidated
NET SALES	$	—			$	132,407			$	—			$	2,580,091			$	486,198			$	(27,285	)		$	3,171,411
COST OF SALES	—				75,521				—				1,105,893				289,219				(27,285		)		1,443,348
GROSS PROFIT	—				56,886				—				1,474,198				196,979				—				1,728,063
SELLING AND ADMINISTRATIVE EXPENSES	—				114,546				—				210,209				58,103				—				382,858
AMORTIZATION OF INTANGIBLE ASSETS	—				684				—				65,299				11,462				—				77,445
(LOSS) INCOME FROM OPERATIONS	—				(58,344		)		—				1,198,690				127,414				—				1,267,760
INTEREST EXPENSE (INCOME)—Net	—				490,974				—				259				(7,383		)		—				483,850
REFINANCING COSTS	—				15,794				—				—				—				—				15,794
EQUITY IN INCOME OF SUBSIDIARIES	(586,414		)		(1,044,371		)		—				—				—				1,630,785				—
INCOME BEFORE INCOME TAXES	586,414				479,259				—				1,198,431				134,797				(1,630,785		)		768,116
INCOME TAX PROVISION	—				(107,155		)		—				285,887				2,970				—				181,702
NET INCOME	$	586,414			$	586,414			$	—			$	912,544			$	131,827			$	(1,630,785	)		$	586,414
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX	(53,778		)		6,381				—				(9,598		)		(39,461		)		42,678				(53,778		)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	532,636			$	592,795			$	—			$	902,946			$	92,366			$	(1,588,107	)		$	532,636

F-40

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED SEPTEMBER 30, 2018

(Amounts in thousands)

	TransDigm Group				TransDigm Inc.				TransDigm UK				Subsidiary Guarantors				Non-Guarantor Subsidiaries				Eliminations				Total Consolidated
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	—			$	(386,152	)		$	6,598			$	1,216,263			$	183,290			$	2,174			$	1,022,173
INVESTING ACTIVITIES:
Capital expenditures	—				(2,001		)		—				(61,896		)		(9,444		)		—				(73,341		)
Payments made in connection with acquisitions	—				(667,619		)		—				—				—				—				(667,619		)
Proceeds in connection with sale of discontinued operations	—				57,383				—				—				—				—				57,383
Net cash used in investing activities	—				(612,237		)		—				(61,896		)		(9,444		)		—				(683,577		)
FINANCING ACTIVITIES:
Intercompany activities	(3,462		)		1,785,796				(496,081		)		(1,155,927		)		(128,152		)		(2,174		)		—
Proceeds from exercise of stock options	57,583				—				—				—				—				—				57,583
Dividends paid	(56,148		)		—				—				—				—				—				(56,148		)
Proceeds from term loans, net	—				12,779,694				—				—				—				—				12,779,694
Repayment on term loans	—				(12,174,305		)		—				—				—				—				(12,174,305		)
Proceeds from senior subordinated notes, net	—				—				489,608				—				—				—				489,608
Financing fees and other	—				(10,832		)		—				—				—				—				(10,832		)
Net cash (used in) provided by financing activities	(2,027		)		2,380,353				(6,473		)		(1,155,927		)		(128,152		)		(2,174		)		1,085,600
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—				—				—				—				(1,740		)		—				(1,740		)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(2,027		)		1,381,964				125				(1,560		)		43,954				—				1,422,456
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	2,416				439,473				—				(203		)		208,875				—				650,561
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	389			$	1,821,437			$	125			$	(1,763	)		$	252,829			$	—			$	2,073,017

F-41

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED SEPTEMBER 30, 2017

(Amounts in Thousands)

	TransDigm Group				TransDigm Inc.				TransDigm UK				Subsidiary Guarantors				Non-Guarantor Subsidiaries				Eliminations				Total Consolidated
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(69	)		$	(587,800	)		$	—			$	1,334,099			$	42,028			$	475			$	788,733
INVESTING ACTIVITIES:
Capital expenditures	—				(1,984		)		—				(63,305		)		(5,724		)		—				(71,013		)
Payments made in connection with acquisitions	—				(136,295		)		—				—				—				—				(136,295		)
Payments made in connection with acquisition of discontinued operations	—				(79,695		)		—				—				—				—				(79,695		)
Net cash used in investing activities	—				(217,974		)		—				(63,305		)		(5,724		)		—				(287,003		)
FINANCING ACTIVITIES:
Intercompany activities	2,939,121				(1,682,518		)		—				(1,279,805		)		23,677				(475		)		—
Proceeds from exercise of stock options	21,177				—				—				—				—				—				21,177
Dividends paid	(2,581,552		)		—				—				—				—				—				(2,581,552		)
Treasury stock purchased	(389,821		)		—				—				—				—				—				(389,821		)
Proceeds from term loans, net	—				2,937,773				—				—				—				—				2,937,773
Repayment on term loans	—				(1,284,698		)		—				—				—				—				(1,284,698		)
Proceeds from senior subordinated notes, net	—				300,386				—				—				—				—				300,386
Cash tender and redemption of senior subordinated notes due 2021, including premium	—				(528,847		)		—				—				—				—				(528,847		)
Proceeds from trade receivable securitization facility, net	—				99,471				—				—				—				—				99,471
Financing fees and other	—				(17,571		)		—				—				—				—				(17,571		)
Net cash (used in) provided by financing activities	(11,075		)		(176,004		)		—				(1,279,805		)		23,677				(475		)		(1,443,682		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—				—				—				—				5,519				—				5,519
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(11,144		)		(981,778		)		—				(9,011		)		65,500				—				(936,433		)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	13,560				1,421,251				—				8,808				143,375				—				1,586,994
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,416			$	439,473			$	—			$	(203	)		$	208,875			$	—			$	650,561

F-42

TRANSDIGM GROUP INCORPORATED

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED SEPTEMBER 30, 2016

(Amounts in Thousands)

	TransDigm Group				TransDigm Inc.				TransDigm UK				Subsidiary Guarantors				Non-Guarantor Subsidiaries				Eliminations				Total Consolidated
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	—			$	(230,931	)		$	—			$	944,152			$	(25,496	)		$	(4,427	)		$	683,298
INVESTING ACTIVITIES:
Capital expenditures	—				(1,716		)		—				(32,608		)		(9,658		)		—				(43,982		)
Payments made in connection with acquisitions	—				(1,399,064		)		—				—				—				—				(1,399,064		)
Net cash used in investing activities	—				(1,400,780		)		—				(32,608		)		(9,658		)		—				(1,443,046		)
FINANCING ACTIVITIES:
Intercompany activities	192,703				580,487				—				(910,647		)		133,030				4,427				—
Proceeds from exercise of stock options	30,112				—				—				—				—				—				30,112
Dividends paid	(3,000		)		—				—				—				—				—				(3,000		)
Treasury stock purchased	(207,755		)		—				—				—				—				—				(207,755		)
Proceeds from term loans, net	—				1,711,515				—				—				—				—				1,711,515
Repayment on term loans	—				(834,409		)		—				—				—				—				(834,409		)
Proceeds from senior subordinated notes, net	—				939,584				—				—				—				—				939,584
Financing fees and other	—				(3,580		)		—				—				—				—				(3,580		)
Net cash provided by (used in) financing activities	12,060				2,393,597				—				(910,647		)		133,030				4,427				1,632,467
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	—				—				—				—				242				—				242
NET INCREASE IN CASH AND CASH EQUIVALENTS	12,060				761,886				—				897				98,118				—				872,961
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	1,500				659,365				—				7,911				45,257				—				714,033
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	13,560			$	1,421,251			$	—			$	8,808			$	143,375			$	—			$	1,586,994

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F-43

TRANSDIGM GROUP INCORPORATED

VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED SEPTEMBER 30, 2018, 2017, AND 2016

(Amounts in Thousands)

Column A	Column B				Column C								Column D				Column E
	Balance at Beginning of Period				Additions								Deductions from Reserve(1)				Balance at End of Period
Description	Charged to Costs and Expenses				Acquisitions
Year Ended September 30, 2018
Allowance for uncollectible accounts	$	3,819			$	1,498			$	989			$	(1,632	)		$	4,674
Reserve for excess and obsolete inventory	79,775				14,998				10,764				(11,039		)		94,498
Valuation allowance for deferred tax assets	33,214				14,035				—				—				47,249
Year Ended September 30, 2017
Allowance for uncollectible accounts	$	4,414			$	1,095			$	363			$	(2,053	)		$	3,819
Reserve for excess and obsolete inventory	80,039				17,361				4,254				(21,879		)		79,775
Valuation allowance for deferred tax assets	27,286				5,928				—				—				33,214
Year Ended September 30, 2016
Allowance for uncollectible accounts	$	3,801			$	1,043			$	724			$	(1,154	)		$	4,414
Reserve for excess and obsolete inventory	64,158				26,407				—				(10,526		)		80,039
Valuation allowance for deferred tax assets	17,645				9,641				—				—				27,286

(1)	The amounts in this column represent charge-offs net of recoveries and the impact of foreign currency translation adjustments.

F-44

EXHIBIT INDEX

TO FORM 10-K FOR THE YEAR ENDED SEPTEMBER 30, 2018

EXHIBIT NO.		DESCRIPTION
3.50		Amended and Restated Certificate of Incorporation of Aviation Technologies, Inc.
3.52		Certificate of Formation, effective June 29, 2007, of Avionic Instruments LLC
3.54		Articles of Incorporation, filed December 29, 1992, of Avionics Specialties, Inc.
3.81		Articles of Organization of CDA InterCorp LLC
3.95		Fourth Amended and Restated Limited Liability Agreement of Electromech Technologies LLC
3.96		Articles of Organization, as amended, of HarcoSemco LLC
3.97		First Amended and Restated Limited Liability Company Agreement of HarcoSemco LLC
3.104		Bylaws, as amended, of ILC Holdings, Inc.
3.139		Bylaws, as amended, of Skurka Aerospace Inc.
3.142		By-laws, as amended, of Tactair Fluid Controls, Inc.
3.148		Bylaws, as amended, of Texas Rotronics, Inc.
3.154		By-laws, as amended, of Young & Franklin Inc.
4.17		Fifteenth Supplemental Indenture, dated as of July 31, 2018, among TransDigm, Inc., TransDigm Group Incorporated, the guarantors listed on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.30		Twelfth Supplemental Indenture, dated as of July 31, 2018, among TransDigm, Inc., TransDigm Group Incorporated, the guarantors listed on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.43		Twelfth Supplemental Indenture, dated as of July 31, 2018, among TransDigm, Inc., TransDigm Group Incorporated, the guarantors listed on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.55		Eleventh Supplemental Indenture, dated as of July 31, 2018, among TransDigm, Inc., TransDigm Group Incorporated, the guarantors listed on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.64		Eighth Supplemental Indenture, dated as of July 31, 2018, among TransDigm, Inc., TransDigm Group Incorporated, the guarantors listed on the signature pages thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee
4.67		Second Supplemental Indenture, dated as of July 31, 2018, among TransDigm UK Holdings plc, as issuer, TransDigm Group Incorporated and TransDigm Inc., as guarantors, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as Trustee
10.6		Third Amended and Restated Employment Agreement, dated November 6, 2018, between TransDigm Group Incorporated and Robert Henderson*
10.31		Form of Stock Option Agreement for options awarded in fiscal 2018*
21.1		Subsidiaries of TransDigm Group Incorporated
23.1		Consent of Independent Registered Public Accounting Firm
31.1		Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification by Principal Executive Officer of TransDigm Group Incorporated pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification by Principal Financial Officer of TransDigm Group Incorporated pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Financial Statements and Notes to Consolidated Financial Statements formatted in XBRL.

*	Indicates management contract or compensatory plan contract or arrangement.