Item 6. SELECTED FINANCIAL DATA

The following table sets forth selected historical consolidated financial and other data of TD Group for the fiscal years ended September 30, 2015 to 2019, which have been derived from TD Group’s audited consolidated financial statements.

Separate historical financial information of TransDigm Inc. is not presented since the 6.00% Senior Subordinated Notes issued in June 2014 (the “2022 Notes”), the 6.50% Senior Subordinated Notes issued June 2014 (the “2024 Notes”), the 6.50% Senior Subordinated Notes issued May 2015 (the “2025 Notes”), the 6.375% Senior Subordinated Notes issued June 2016 (the “6.375% 2026 Notes”), the 6.25% Senior Secured Notes issued in January 2019 (the “2026 Secured Notes”) and the 7.50% Senior Subordinated Notes issued February 2019 (the “2027 Notes”) (also together with the 2022 Notes, the 2024 Notes, the 2025 Notes, the 6.375% 2026 Notes, the 2026 Secured Notes and the 2027 Notes, the “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 information of TransDigm UK Holdings plc (“TransDigm UK”) is not presented because TransDigm UK’s 6.875% Senior Subordinated Notes issued in May 2018 (the “6.875% 2026 Notes”) are fully and unconditionally guaranteed on a senior subordinated basis by TD Group, TransDigm Inc., and all of TransDigm Inc.’s Domestic Restricted Subsidiaries.

Acquisitions of businesses and product lines completed by TD Group during the last five fiscal years are as follows:

Date	Acquisition
March 26, 2015	Telair Cargo Group (comprised of Telair International GmbH (“Telair Int’l”), Telair US LLC and Nordisk Aviation Products)
March 31, 2015	Franke Aquarotter GmbH (“Adams Rite Aerospace GmbH”)
May 14, 2015	Pexco LLC (“Pexco Aerospace”)
August 19, 2015	PneuDraulics, Inc. (“PneuDraulics”)
January 4, 2016	Breeze-Eastern Corporation (“Breeze-Eastern”)
June 23, 2016	Data Device Corporation (“DDC”)
September 23, 2016	Young & Franklin Inc. / Tactair Fluid Controls Inc. (“Y&F/Tactair”)
February 22, 2017	Schroth Safety Products Group (“Schroth”)
May 5, 2017, May 31, 2017 and June 1, 2017	North Hills Signal Processing Corp, Cablecraft Motion Controls LLC and Preece Incorporated (together, the “Third Quarter 2017 Acquisitions”)
March 15, 2018	Kirkhill Elastomers (“Kirkhill”)
April 24, 2018 et al.	Extant Components Group Holdings, Inc. (together with related subsequent product line acquisitions, “Extant”)
July 13, 2018	Skandia Inc. (“Skandia”)
March 14, 2019	Esterline Technologies Corporation (“Esterline”)

All of the acquisitions were accounted for using the acquisition method. The results of operations of the acquired businesses and product lines are included in TD Group’s consolidated financial statements from the effective date of each acquisition.

On July 21, 2019, TransDigm entered into a binding offer (the “Put Agreement”) with Eaton Corporation plc (“Eaton”) for the the acquisition by Eaton of the shares of Souriau SAS, Souriau USA Inc. and Sunbank Family of Companies LLC (collectively, “Souriau-Sunbank”). Pursuant to the terms of the Put Agreement, after completion of the consultation process with the Business’ French works council, TransDigm had the right to require Eaton to enter into a securities purchase agreement (the “Purchase Agreement”) providing for the purchase by Eaton from TransDigm of the shares of Souriau-Sunbank. The Purchase Agreement was entered into by the parties on October 28, 2019. Pursuant to the terms of the Purchase Agreement, Eaton will purchase the shares of the Souriau-Sunbank for a cash purchase price of approximately $920 million.

The transaction is subject to execution and delivery of the Purchase Agreement and other definitive agreements, the satisfaction or waiver of customary closing conditions and receipt of required regulatory approvals, all of which have been received other than

the French foreign investment approval. The parties expect to complete the transaction during the first quarter of fiscal 2020. Therefore, Souriau-Sunbank is classified as held-for-sale as of September 30, 2019. The results of operations of Souriau-Sunbank are presented in discontinued operations in the accompanying consolidated financial statements for all periods presented since the date acquired. Further disclosure related to Souriau-Sunbank’s discontinued operations is included within Note 23, “Discontinued Operations,” to the consolidated financial statements.

On September 20, 2019, TransDigm completed the divestiture of its Esterline Interface Technology (“EIT”) group of businesses to an affiliate of KPS Capital Partners, LP for approximately $190 million. EIT was acquired by TransDigm as part of its acquisition of Esterline Technologies Corporation in March 2019. The results of operations of EIT are presented in discontinued operations in the accompanying consolidated financial statements for all periods presented since the date acquired. Further disclosure related to EIT’s discontinued operations is included within Note 23, “Discontinued Operations,” to the consolidated financial statements.

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 fiscal 2017. 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 included a working capital adjustment of $0.3 million that was paid in July 2018. Further disclosure related to Schroth’s discontinued operations is included within Note 23, “Discontinued Operations,” to the consolidated financial statements.

The information presented below should be read together with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and accompanying notes included elsewhere herein.

	Fiscal Years Ended September 30,
	2019				2018				2017				2016				2015
	(in thousands, except per share amounts )
Statement of Income Data:
Net sales	$	5,223,203			$	3,811,126			$	3,504,286			$	3,171,411			$	2,707,115
Gross profit(1)	2,809,271				2,177,510				1,984,627				1,728,063				1,449,845
Selling and administrative expenses	747,773				449,676				412,555				383,319				324,097
Amortization of intangible assets	134,952				72,454				89,226				77,445				54,219
Income from operations(1)	1,926,546				1,655,380				1,482,846				1,267,299				1,071,529
Interest expense—net	859,753				663,008				602,589				483,850				418,785
Refinancing costs	3,013				6,396				39,807				15,794				18,393
Other expense (income)(2)	915				419				3,020				(461		)		(2,473		)
Income from continuing operations before income taxes	1,062,865				985,557				837,430				768,116				636,824
Income tax provision(3)	221,986				24,021				208,889				181,702				189,612
Income from continuing operations including noncontrolling interests	840,879				961,536				628,541				586,414				447,212
Income (loss) from discontinued operations, net of tax(4)	50,432				(4,474		)		(31,654		)		—				—
Net income including noncontrolling interests	891,311				957,062				596,887				586,414				447,212
Net income attributable to noncontrolling interests	(1,541		)		—				—				—				—
Net income attributable to TD Group	$	889,770			$	957,062			$	596,887			$	586,414			$	447,212
Net income applicable to TD Group common stock	$	778,749			$	900,914			$	437,630			$	583,414			$	443,847
Denominator for basic and diluted earnings per share under the two-class method:
Weighted-average common shares outstanding	53,091				52,345				52,517				53,326				53,112
Vested options deemed participating securities	3,174				3,252				3,013				2,831				3,494
Total shares for basic and diluted earnings per share	56,265				55,597				55,530				56,157				56,606
Net earnings per share:
Net earnings per share from continuing operations—basic and diluted	$	12.94			$	16.28			$	8.45			$	10.39			$	7.84
Net earnings (loss) per share from discontinued operations—basic and diluted	0.90				(0.08		)		(0.57		)		—				—
Net earnings per share(5)	$	13.84			$	16.20			$	7.88			$	10.39			$	7.84
Cash dividends paid per common share	$	30.00			$	—			$	46.00			$	—			$	—

	As of September 30,
	2019				2018				2017				2016				2015
	(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	1,467,486			$	2,073,017			$	650,561			$	1,586,994			$	714,033
Working capital(6,7)	3,326,491				2,756,905				1,262,558				2,178,094				1,128,993
Total assets(6,7)	16,254,731				12,197,467				9,975,661				10,726,277				8,303,935
Total debt(7)	16,898,953				12,877,282				11,762,661				10,195,607				8,349,602
TD Group stockholders’ deficit	(2,894,905		)		(1,808,471		)		(2,951,204		)		(651,490		)		(1,038,306		)

(1)	Gross profit and income from operations include the effect of charges relating to purchase accounting adjustments to inventory associated with the acquisition of various businesses and product lines for the fiscal years ended September 30, 2019, 2018, 2017, 2016 and 2015 of $76,927, $7,080, $20,621, $23,449, and $11,362, respectively.

(2)	The prior period operating data has been adjusted as a result of Accounting Standards Update ("ASU") 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost ("ASU 2017-07").

(3)

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. Income tax expense as a percentage of income before income taxes was approximately 20.9% for the fiscal year ended September 30, 2019 compared to 2.4% for the fiscal year ended September 30, 2018.

(4)	The fiscal 2019 results include the divestitures of Souriau-Sunbank (expected first quarter of fiscal 2020) and EIT (September 2019). The fiscal 2018 and 2017 results include the divestiture of Schroth (January 2018). Refer to Note 23, “Discontinued Operations,” to the consolidated financial statements for further information.

(5)	Net earnings per share is calculated by dividing net income applicable to TD Group common stock by the basic and diluted weighted average common shares outstanding.

(6)	In connection with adopting ASU 2015-17, “Balance Sheet Classification of Deferred Taxes,” for reporting periods ended after October 1, 2015, the Company reclassified $45,375 from current deferred income tax assets in our consolidated balance sheets as of September 2015, to non-current deferred income tax liabilities.

(7)	In connection with adopting ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” for reporting periods ended after October 1, 2015, the Company reclassified $77,740 from debt issuance costs in our consolidated balance sheets as of September 2015, to the current portion of long-term and long-term-term debt.

Non-GAAP Financial Measures

We present below certain financial information based on our EBITDA and EBITDA As Defined. References to “EBITDA” mean earnings before interest, taxes, depreciation and amortization, and references to “EBITDA As Defined” mean EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliations of net income to EBITDA and EBITDA As Defined and the reconciliations of net cash provided by operating activities to EBITDA and EBITDA As Defined presented below.

Neither EBITDA nor EBITDA As Defined is a measurement of financial performance under accounting principles generally accepted in the United States of America (“GAAP”). We present EBITDA and EBITDA As Defined because we believe they are useful indicators for evaluating operating performance and liquidity.

Our management believes that EBITDA and EBITDA As Defined are useful as indicators of liquidity because securities analysts, investors, rating agencies and others use EBITDA to evaluate a company’s ability to incur and service debt. In addition, EBITDA As Defined is useful to investors because the revolving commitments under our senior secured credit facility requires compliance under certain circumstances, on a pro forma basis, with a financial covenant that measures the ratio of the amount of our secured indebtedness to the amount of our Consolidated EBITDA defined in the same manner as we define EBITDA As Defined herein.

In addition to the above, our management uses EBITDA As Defined to review and assess the performance of the management team in connection with employee incentive programs and to prepare its annual budget and financial projections. Moreover, our management uses EBITDA As Defined to evaluate acquisitions.

Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above, the use of these non-GAAP financial measures as analytical tools has limitations, and you should not consider any of them in isolation, or as a substitute for analysis of our results of operations as reported in accordance with GAAP. Some of these limitations are:

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

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

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

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

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

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

	Fiscal Years Ended September 30,
	2019				2018				2017				2016				2015
	(in thousands)
Other Financial Data:
Cash flows provided by (used in):
Operating activities	$	1,015,472			$	1,022,173			$	788,733			$	683,298			$	520,938
Investing activities	(3,888,980		)		(683,577		)		(287,003		)		(1,443,046		)		(1,679,149		)
Financing activities	2,271,353				1,085,600				(1,443,682		)		1,632,467				1,054,947
Depreciation and amortization	225,700				129,844				141,025				121,670				93,663
Capital expenditures	101,591				73,341				71,013				43,982				54,871
Ratio of earnings to fixed charges(1)	2.2x				2.5x				2.4x				2.6x				2.5x
Other Data:
EBITDA(2)	$	2,148,318			$	1,778,409			$	1,581,044			$	1,373,636			$	1,149,272
EBITDA As Defined(2)	$	2,418,801			$	1,876,558			$	1,710,563			$	1,495,196			$	1,233,654

(1)

For purposes of computing the ratio of earnings to fixed charges, earnings consist of earnings from continuing operations before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of debt issuance costs, original issue discount and premium and the portion (approximately 33%) of rental expense that management believes is representative of the interest component of rental expense.

(2)

EBITDA represents earnings from continuing operations before interest, taxes, depreciation and amortization. EBITDA As Defined represents EBITDA plus, as applicable for each relevant period, certain adjustments as set forth in the reconciliation of net income to EBITDA and EBITDA As Defined and the reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined presented below. See “Non-GAAP Financial Measures” for additional information and limitations regarding these non-GAAP financial measures.

The following table sets forth a reconciliation of net income to EBITDA and EBITDA As Defined:

	Fiscal Years Ended September 30,
	2019				2018				2017				2016				2015
	(in thousands)
Income from continuing operations	$	840,879			$	961,536			$	628,541			$	586,414			$	447,212
Adjustments:
Depreciation and amortization expense	225,700				129,844				141,025				121,670				93,663
Interest expense, net	859,753				663,008				602,589				483,850				418,785
Income tax provision	221,986				24,021				208,889				181,702				189,612
EBITDA	2,148,318				1,778,409				1,581,044				1,373,636				1,149,272
Adjustments:
Inventory purchase accounting adjustments(1)	76,927				7,080				20,621				23,449				11,362
Acquisition integration costs(2)	61,443				17,484				6,341				18,539				12,554
Acquisition transaction-related expenses(3)	30,528				3,886				4,229				15,711				12,289
Stock compensation expense(4)	93,362				58,481				45,524				48,306				31,500
Refinancing costs(5)	3,013				6,396				39,807				15,794				18,393
Other, net(6)	5,210				4,822				12,997				(239		)		(1,716		)
EBITDA As Defined	$	2,418,801			$	1,876,558			$	1,710,563			$	1,495,196			$	1,233,654

(1)	Represents accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold.

(2)	Represents costs incurred to integrate acquired businesses and product lines into TD Group’s operations, facility relocation costs and other acquisition-related costs.

(3)	Represents transaction-related costs comprising deal fees; legal, financial and tax due diligence expenses; and valuation costs that are required to be expensed as incurred.

(4)	Represents the compensation expense recognized by TD Group under our stock incentive plans.

(5)	Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements.

(6)	Primarily represents foreign currency transaction gains or losses, payroll withholding taxes on dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation and gains or losses on the sale of fixed assets.

The following table sets forth a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined:

	Fiscal Years Ended September 30,
	2019				2018				2017				2016				2015
	(in thousands)
Net cash provided by operating activities	$	1,015,472			$	1,022,173			$	788,733			$	683,298			$	520,938
Adjustments:
Changes in assets and liabilities, net of effects from acquisitions of businesses	205,112				4,936				83,753				110,905				24,322
Interest expense, net(1)	831,719				640,880				581,483				467,639				402,988
Income tax provision—current(2)	209,212				175,661				215,385				175,894				188,952
Stock compensation expense(3)	(93,362		)		(58,481		)		(45,524		)		(48,306		)		(31,500		)
Excess tax benefit from exercise of stock options(2)	—				—				—				—				61,965
Refinancing costs(4)	(3,013		)		(6,396		)		(39,807		)		(15,794		)		(18,393		)
EBITDA from discontinued operations(9)	(16,822		)		(364		)		(2,979		)		—				—
EBITDA	2,148,318				1,778,409				1,581,044				1,373,636				1,149,272
Adjustments:
Inventory purchase accounting adjustments(5)	76,927				7,080				20,621				23,449				11,362
Acquisition integration costs(6)	61,443				17,484				6,341				18,539				12,554
Acquisition transaction-related expenses(7)	30,528				3,886				4,229				15,711				12,289
Stock compensation expense(3)	93,362				58,481				45,524				48,306				31,500
Refinancing costs(4)	3,013				6,396				39,807				15,794				18,393
Other, net(8)	5,210				4,822				12,997				(239		)		(1,716		)
EBITDA As Defined	$	2,418,801			$	1,876,558			$	1,710,563			$	1,495,196			$	1,233,654

(1)	Represents interest expense excluding the amortization of debt issuance costs, original issue discount and premium.

(2)	Beginning with the fiscal year ended September 30, 2016, the income tax provision and excess tax benefit from exercise of stock options were impacted by the adoption of ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.”

(3)	Represents the compensation expense recognized by TD Group under our stock incentive plans.

(4)	Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements.

(5)	Represents accounting adjustments to inventory associated with acquisitions of businesses and product lines that were charged to cost of sales when the inventory was sold.

(6)	Represents costs incurred to integrate acquired businesses and product lines into TD Group’s operations, facility relocation costs and other acquisition-related costs.

(7)	Represents transaction-related costs comprising deal fees; legal, financial and tax due diligence expenses; and valuation costs that are required to be expensed as incurred.

(8)	Primarily represents foreign currency transaction gains or losses, payroll withholding taxes on dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation and gains or losses on the sale of fixed assets.

(9)	The fiscal 2019 results include the divestitures of Souriau-Sunbank (expected first quarter of fiscal 2020) and EIT (September 2019). The fiscal 2018 and 2017 results include the divestiture of Schroth (January 2018). Refer to Note 23, “Discontinued Operations,” to the consolidated financial statements for further information.

ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with “Selected Financial Data” and TD Group’s consolidated financial statements and the related notes included elsewhere in this report. The following discussion may contain predictions, estimates and other forward-looking statements that involve a number of risks and uncertainties, including those discussed under the heading entitled “Risk Factors” included elsewhere in this report. These risks could cause our actual results to differ materially from any future performance suggested below.

Overview

For fiscal year 2019, we generated net sales of $5,223.2 million, gross profit of $2,809.3 million or 53.8% of sales, and net income of $889.8 million. We believe we have achieved steady, long-term growth in sales and improvements in operating performance since our formation in 1993 due to our competitive strengths and through execution of our value-driven operating strategy. More specifically, focusing our businesses on our value-driven operating strategy of obtaining profitable new business, carefully controlling the cost structure and pricing our highly engineered value-added products to fairly reflect the value we provide and the resources required to do so has historically resulted in improvements in gross profit and income from operations over the long term.

Our selective acquisition strategy has also contributed to the growth of our business. The integration of certain acquisitions into our existing businesses combined with implementing our proven operating strategy has historically resulted in improvements of the financial performance of the acquired business.

We believe our key competitive strengths include:

Large and Growing Installed Product Base with Aftermarket Revenue Stream. We provide components to a large and growing installed base of aircraft to which we supply aftermarket products. We estimate that our products are installed on over 100,000 commercial transport, regional transport, military and general aviation fixed wing turbine aircraft and rotary wing aircraft.

Diversified Revenue Base. We believe that our diversified revenue base reduces our dependence on any particular product, platform or market channel and has been a significant factor in maintaining our financial performance. Our products are installed on almost all of the major commercial aircraft platforms now in production. We expect to continue to develop new products for military and commercial applications.

Barriers to Entry. We believe that the niche nature of our markets, the industry’s stringent regulatory and certification requirements, the large number of products that we sell and the investments necessary to develop and certify products create potential disincentives to competition for certain products.

Our business strategy is made up of two key elements: (1) a value-driven operating strategy focused around our three core value drivers and (2) a selective acquisition strategy.

Value-Driven Operating Strategy. Our three core value drivers are:

•	Obtaining Profitable New Business. We attempt to obtain profitable new business by using our technical expertise and application skill and our detailed knowledge of our customer base and the individual niche markets in which we operate. We have regularly been successful in identifying and developing both aftermarket and OEM products to drive our growth.

•	Improving Our Cost Structure. We are committed to maintaining and continuously improving our lean cost structure through detailed attention to the cost of each of the products that we offer and our organizational structure, with a focus on reducing the cost of each.

•

Providing Highly Engineered Value-Added Products to Customers. We focus on the engineering, manufacturing and marketing of a broad range of highly engineered niche products that we believe provide value to our customers. We believe we have been consistently successful in communicating to our customers the value of our products. This has generally enabled us to price our products to fairly reflect the value we provide and the resources required to do so.

Selective Acquisition Strategy. We selectively pursue the acquisition of proprietary aerospace component businesses when we see an opportunity to create value through the application of our three core value-driven operating strategies. The aerospace industry, in particular, remains highly fragmented, with many of the companies in the industry being small private businesses or small non-core operations of larger businesses. We have significant experience among our management team in executing acquisitions and integrating acquired businesses into our company and culture. As of the date of this report, we have successfully acquired approximately 85 businesses and/or product lines since our formation in 1993. Many of these acquisitions have been integrated into an existing TransDigm production facility, which enables a higher production capacity utilization, which in turn improves gross profit levels due to the ability to spread the fixed manufacturing overhead costs over higher production volume. In fiscal 2019, we completed our largest acquisition to date when we acquired Esterline. Esterline, through its subsidiaries, is an industry

leader in specialized manufacturing for the aerospace and defense industry, including significant aftermarket exposure, primarily within three core disciplines: advanced materials, avionics and controls and sensors and systems.

Acquisitions and divestitures during the most recent three fiscal years are more fully described in Note 2, “Acquisitions and Divestitures,” in the notes to the consolidated financial statements included herein.

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with GAAP, which often requires the judgment of management in the selection and application of certain accounting principles and methods. Management believes that the quality and reasonableness of our most critical policies enable the fair presentation of our financial position and results of operations. However, investors are cautioned that the sensitivity of financial statements to these methods, assumptions and estimates could create materially different results under different conditions or using different assumptions.

Below are those policies applied in preparing our financial statements that management believes are the most dependent on the application of estimates and assumptions. For additional accounting policies, see Note 3, “Summary of Significant Accounting Policies,” in the notes to the consolidated financial statements included herein.

Revenue Recognition**:** 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 adopted this standard in the first quarter of fiscal 2019 using the modified retrospective method. The adoption of this standard did not have a material impact on our consolidated results of operations, financial position or cash flows. The results for periods before fiscal 2019 were not restated for the new standard and the cumulative effect of the change in accounting was recognized through retained earnings at the date of adoption. Refer to Note 5, "Revenue Recognition," for additional disclosures relating to ASC 606.

Revenue is recognized from the sale of products when control transfers to the customer, which is demonstrated by our right to payment, a transfer of title, a transfer of the risk and rewards of ownership, or the customer acceptance, but most frequently upon shipment where the customer obtains physical possession of the goods. The majority of the Company's revenue is recorded at a point in time. Sales recognized over time are generally accounted for using an input measure to determine progress completed at the end of the period. Sales for service contracts generally are recognized as the services are provided. For agreements with multiple performance obligations, judgment is required to determine whether performance obligations specified in these agreements are distinct and should be accounted for as separate revenue transactions for recognition purposes.

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. Because the Company sells products that are installed on airframes that can be in-service for 25 or more years, it must keep a supply of such products on hand while the airframes are in use. Where management estimated that the net realizable value was below cost or determined that future demand was lower than current inventory levels, based on historical experience, current and projected market demand, current and projected volume trends and other relevant current and projected factors associated with the current economic conditions, a reduction in inventory cost to estimated net realizable value was made by recording a provision included in cost of sales. Although management believes that the Company’s estimates of excess and obsolete inventory are reasonable, actual results may differ materially from the estimates and additional provisions may be required in the future. In addition, in accordance with industry practice, all inventories are classified as current assets as all inventories are available and necessary to support current sales, even though a portion of the inventories may not be sold within one year. Historically, changes in estimates in the net realizable value of inventories have not been significant.

Goodwill and Other Intangible Assets**:** In accordance with ASC 805, “Business Combinations,” the Company uses the acquisition method of accounting to allocate costs of acquired businesses to the assets acquired and liabilities assumed based on their estimated fair values at the dates of acquisition. The excess costs of acquired businesses over the fair values of the assets acquired and liabilities assumed were recognized as goodwill. The valuations of the acquired assets and liabilities will impact the determination of future operating results. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, revenue growth rates, discount rates, customer attrition rates, royalty rates, asset lives and market multiples, among other items. We determine the fair values of intangible assets acquired generally in consultation with third-party valuation advisors. Fair value adjustments to the Company’s assets and liabilities are recognized and the results of operations of the acquired business are included in our consolidated financial statements from the effective date of the merger or acquisition.

Intangible assets other than goodwill are recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed or exchanged, regardless of the Company’s intent to do so. Goodwill and identifiable intangible assets are recorded at their estimated fair value on the date of acquisition and are reviewed at least annually for impairment based on cash flow projections and fair value estimates.

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.

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 necessary to perform the quantitative goodwill impairment test. The quantitative test is required only if the Company concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount, or if the Company elects not to perform a qualitative assessment of a reporting unit. For the quantitative test, management determines the estimated fair value through the use of a discounted cash flow valuation model incorporating discount rates commensurate with the risks involved for each reporting unit. If the calculated estimated fair value is less than the current carrying value, impairment of goodwill of the reporting unit may exist. The use of a discounted cash flow valuation model to determine estimated fair value is common practice in impairment testing. The key assumptions used in the discounted cash flow valuation model for impairment testing includes discount rates, growth rates, cash flow projections and terminal value rates. Discount rates are set by using the Weighted Average Cost of Capital (“WACC”) methodology. The WACC methodology considers market and industry data as well as company specific risk factors for each reporting unit in determining the appropriate discount rates to be used. The discount rate utilized for each reporting unit is indicative of the return an investor would expect to receive for investing in such a business.

Management, considering industry and company-specific historical and projected data, develops growth rates, sales projections and cash flow projections for each reporting unit. Terminal value rate determination follows common methodology of capturing the present value of perpetual cash flow estimates beyond the last projected period assuming a constant WACC and low long-term growth rates. As an indicator that each reporting unit has been valued appropriately through the use of the discounted cash flow valuation model, the aggregate of all reporting unit’s estimated fair value is reconciled to the total market capitalization of the Company.

The Company had 54 reporting units with goodwill as of the first day of the fourth quarter of fiscal 2019, the date of the last annual impairment test. The estimated fair values of each of the reporting units was substantially in excess of their respective carrying values, and therefore, no goodwill impairment was recorded. The Company performed a sensitivity analysis on the discount rate, which is a significant assumption in the calculation of fair values. With a one percentage point increase in the discount rate, all of the reporting units would continue to have fair values in excess of their respective carrying values.

Management tests indefinite-lived intangible assets for impairment at the asset level, as determined by appropriate asset valuation at the time of acquisition. The impairment test for indefinite-lived intangible assets consists of a comparison between the estimated fair values and carrying values. If the carrying amounts of intangible assets that have indefinite useful lives exceed their estimated fair values, an impairment loss will be recognized in an amount equal to the difference. Management utilizes the royalty savings valuation method to determine the estimated fair value for each indefinite-lived intangible asset. In this method, management estimates the royalty savings arising from the ownership of the intangible asset. The key assumptions used in estimating the royalty savings for impairment testing include discount rates, royalty rates, growth rates, sales projections and terminal value rates. Discount rates used are similar to the rates developed by the WACC methodology considering any differences in company-specific risk factors between reporting units and the indefinite-lived intangible assets. Royalty rates are established by management with the advice of valuation experts and periodically substantiated by valuation experts. Management, considering industry and company-specific historical and projected data, develops growth rates and sales projections for each significant intangible asset. Terminal value rate determination follows common methodology of capturing the present value of perpetual sales estimates beyond the last projected period assuming a constant WACC and low long-term growth rates.

The discounted cash flow and royalty savings valuation methodologies require management to make certain assumptions based upon information available at the time the valuations are performed. Actual results could differ from these assumptions. Management believes the assumptions used are reflective of what a market participant would have used in calculating fair value considering the current economic conditions.

Stock-Based Compensation**:** The cost of the Company’s stock-based compensation is recorded in accordance with ASC 718, “Stock Compensation.” The Company uses a Black-Scholes pricing model to estimate the grant-date fair value of the stock options awarded. The Black-Scholes pricing model requires assumptions regarding the expected volatility of the Company’s common shares, the risk-free interest rate, the expected life of the stock options award and the Company’s dividend yield. The Company utilizes historical data in determining these assumptions. An increase or decrease in the assumptions or economic events outside of management’s control could have an impact on the Black-Scholes pricing model.

Income Taxes**:** The Company estimates income taxes in each jurisdiction in which it operates. This involves estimating taxable earnings, specific taxable and deductible items, the likelihood of generating sufficient future taxable income to utilize deferred tax assets and possible exposures related to future tax audits. To the extent these estimates change, adjustments to deferred and accrued income taxes are made in the period in which the changes occur. Historically, such adjustments have not been significant.

Results of Operations

The following table sets forth, for the periods indicated, certain operating data of the Company, including presentation of the amounts as a percentage of net sales (amounts in thousands):

	Fiscal Years Ended September 30,
	2019				2019 % of Sales			2018				2018 % of Sales			2017				2017 % of Sales
Net sales	$	5,223,203			100.0	%		$	3,811,126			100.0	%		$	3,504,286			100.0	%
Cost of sales	2,413,932				46.2	%		1,633,616				42.9	%		1,519,659				43.4	%
Selling and administrative expenses	747,773				14.3	%		449,676				11.8	%		412,555				11.8	%
Amortization of intangible assets	134,952				2.6	%		72,454				1.9	%		89,226				2.5	%
Income from operations	1,926,546				36.9	%		1,655,380				43.4	%		1,482,846				42.3	%
Interest expense—net	859,753				16.5	%		663,008				17.4	%		602,589				17.2	%
Refinancing costs	3,013				0.1	%		6,396				0.2	%		39,807				1.1	%
Other expense	915				—	%		419				—	%		3,020				0.1	%
Income tax provision	221,986				4.2	%		24,021				0.6	%		208,889				6.0	%
Income from continuing operations including noncontrolling interests	840,879				16.1	%		961,536				25.2	%		628,541				17.9	%
Income (loss) from discontinued operations, net of tax	50,432				1.0	%		(4,474		)		(0.1	)%		(31,654		)		(0.9	)%
Net income including noncontrolling interests	891,311				17.1	%		957,062				25.1	%		596,887				17.0	%
Net income attributable to noncontrolling interests	(1,541		)		—	%		—				—	%		—				—	%
Net income attributable to TD Group	$	889,770			17.0	%		$	957,062			25.1	%		$	596,887			17.0	%

Fiscal year ended September 30, 2019 compared with fiscal year ended September 30, 2018

Total Company

•	Net Sales**.** Net organic sales and acquisition sales and the related dollar and percentage changes for the fiscal years ended September 30, 2019 and 2018 were as follows (amounts in millions):

	Fiscal Years Ended								Change				% Change Total Sales
	September 30, 2019				September 30, 2018
Organic sales	$	4,212.7			$	3,811.1			$	401.6			10.5	%
Acquisition sales	1,010.5				—				1,010.5				26.5	%
	$	5,223.2			$	3,811.1			$	1,412.1			37.0	%

The increase in organic sales for the fiscal year ended September 30, 2019 compared with fiscal year ended September 30, 2018, is primarily related to an increase in defense sales ($180.8 million, an increase of 13.6%), commercial OEM sales ($115.1 million, an increase of 11.9%) and commercial aftermarket sales ($105.5 million, an increase of 7.9%).

Acquisition sales represent sales of acquired businesses for the period up to one year subsequent to their respective acquisition dates. The amount of acquisition sales displayed in the table above for the fiscal year ended September 30, 2019 are attributable to the acquisitions of Esterline (March 2019), Skandia (July 2018), Extant (April 2018) and Kirkhill (March 2018).

•	Cost of Sales and Gross Profit**.** Cost of sales increased by $780.3 million, or 47.8%, to $2,413.9 million for the fiscal year ended September 30, 2019 compared to $1,633.6 million for the fiscal year ended September 30, 2018. Cost of sales and the related percentage of total sales for the fiscal years ended September 30, 2019 and 2018 were as follows (amounts in millions):

	Fiscal Years Ended								Change				% Change
	September 30, 2019				September 30, 2018
Cost of sales—excluding costs below	$	2,319.4			$	1,607.2			$	712.2			44.3	%
% of total sales	44.4		%		42.2		%
Inventory acquisition accounting adjustments	76.9				7.1				69.8				983.1	%
% of total sales	1.5		%		0.2		%
Stock compensation expense	9.3				5.9				3.4				57.6	%
% of total sales	0.2		%		0.2		%
Acquisition integration costs	13.1				13.8				(0.7		)		(5.1	)%
% of total sales	0.3		%		0.4		%
Foreign currency gain	(4.8		)		(0.4		)		(4.4		)		(1,100.0	)%
% of total sales	(0.1		)%		—		%
Total cost of sales	$	2,413.9			$	1,633.6			$	780.3			47.8	%
% of total sales	46.2		%		42.9		%
Gross profit	$	2,809.3			$	2,177.5			$	631.8			29.0	%
Gross profit percentage	53.8		%		57.1		%		(3.3		)%

The net increase in the dollar amount of cost of sales during the fiscal year ended September 30, 2019 was primarily due to increased sales volume, both organic and from recent acquisitions, an increase in inventory acquisition accounting adjustments resulting from the Esterline acquisition, and an increase in stock compensation expense. The increases were partially offset by a decrease in acquisition integration costs and higher foreign currency gains as presented in the table above.

Gross profit as a percentage of sales decreased by 3.3 percentage points to 53.8% for the fiscal year ended September 30, 2019 from 57.1% for the fiscal year ended September 30, 2018. The dollar amount of gross profit increased by $631.8 million, or 29.0%, for the fiscal year ended September 30, 2019 compared to the fiscal year ended September 30, 2018 due to the following items:

•	Gross profit on the sales from the acquisitions (excluding acquisition-related costs) was approximately $416.1 million for the fiscal year ended September 30, 2019, which represented gross profit of approximately 41% of the acquisition sales.

•	Organic sales growth described above, application of our three core value-driven operating strategies and positive leverage on our fixed overhead costs spread over a higher production volume resulted in an increase in gross profit of approximately $283.8 million for the fiscal year ended September 30, 2019.

•	Offsetting increases in gross profit by $68.1 million compared to the prior fiscal year was attributable to increased inventory acquisition accounting adjustments, increased stock compensation expense, partially offset by a decrease in acquisition integration costs and higher foreign currency gains.

•

Selling and Administrative Expenses. Selling and administrative expenses increased by $298.6 million to $748.7 million, or 14.3% of sales, for the fiscal year ended September 30, 2019 from $450.1 million, or 11.8% of sales, for the comparable period last year. Selling and administrative expenses and the related percentage of total sales for the fiscal years ended September 30, 2019 and 2018 were as follows (amounts in millions):

	Fiscal Years Ended								Change				% Change
	September 30, 2019				September 30, 2018
Selling and administrative expenses—excluding costs below	$	585.9			$	389.9			$	196.0			50.3	%
% of total sales	11.2		%		10.2		%
Acquisition-related expenses	78.8				7.6				71.2				936.8	%
% of total sales	1.5		%		0.2		%
Stock compensation expense	84.0				52.6				31.4				59.7	%
% of total sales	1.6		%		1.4		%
Total selling and administrative expenses	$	748.7			$	450.1			$	298.6			66.3	%
% of total sales	14.3		%		11.8		%

The increase in the dollar amount of selling and administrative expenses during the fiscal year ended September 30, 2019 is primarily due to higher acquisition-related expenses of $71.2 million, higher stock compensation expense of $31.4 million and higher selling and administrative expenses resulting from primarily the acquisition of Esterline in March 2019. Also contributing to the increase in selling and administrative expenses was a $16.1 million payment of a voluntary refund to several U.S. Department of Defense agencies that occurred in the third quarter of fiscal 2019.

•

Amortization of Intangible Assets. Amortization of intangible assets was $135.0 million for the fiscal year ended September 30, 2019 compared to $72.5 million for the fiscal year ended September 30, 2018. The increase in amortization expense of $62.5 million was primarily due to the amortization expense on the definite-lived intangible assets recorded in connection with the fiscal 2019 acquisition of Esterline.

•

Refinancing Costs. Refinancing costs of $3.0 million were recorded for the fiscal year ended September 30, 2019 and primarily related to the debt financing activities that occurred in the second quarter of fiscal 2019. Refinancing costs of $6.4 million were recorded for the fiscal year ended September 30, 2018 representing debt issuance costs expensed in connection with the fiscal 2018 debt financing activity.

•

Interest Expense-net. Interest expense-net includes interest on borrowings outstanding, amortization of debt issuance costs, original issue discount and premium and revolving credit facility fees slightly offset by interest income. Interest expense-net increased $196.8 million, or 29.7%, to $859.8 million for the fiscal year ended September 30, 2019 from $663.0 million for the comparable period last year. The net increase in interest expense-net was primarily due to an increase in the weighted average level of outstanding borrowings, which was approximately $15.5 billion for the fiscal year ended September 30, 2019 compared to approximately $12.6 billion for the fiscal year ended September 30, 2018. The increase in weighted average level of borrowings was primarily due to the activity in the second quarter of fiscal 2019 consisting of the issuance of $4.0 billion in 2026 Secured Notes and $550 million in 2027 Notes and the activity in the third quarter of fiscal 2018 consisting of issuing additional term loans of $700 million (gross) and issuing $500 million in 6.875% 2026 Notes. The increases in new debt described above were partially offset by principal payments on the term loans over the comparable period and redemption of the 2020 Notes. The weighted average interest rate for cash interest payments on total borrowings outstanding at September 30, 2019 was 5.6%.

•

Income Taxes. Income tax expense as a percentage of income before income taxes was approximately 20.9% for the fiscal year ended September 30, 2019 compared to 2.4% for the fiscal year ended September 30, 2018. The Company’s higher effective tax rate for the fiscal year ended September 30, 2019 was primarily due benefits recognized in the fiscal year ended September 30, 2018 related to the enactment of the Tax Cuts and Jobs Act along with additional taxes recognized in the fiscal year ended September 30, 2019 as described in Note 14, “Income Taxes.”

•

Income (Loss) from Discontinued Operations**.** On July 21, 2019, the Company entered into a binding offer for the acquisition by Eaton Corporation plc of the shares of Souriau-Sunbank for approximately $920 million. The parties are expected to complete the transaction during the first quarter of fiscal 2020. Therefore, Souriau-Sunbank is classified as held-for-sale as of September 30, 2019. The results of operations of Souriau-Sunbank are presented in discontinued operations in the accompanying consolidated financial statements for all periods presented since the date acquired. On September 20, 2019, the Company completed the divestiture of its EIT group of businesses to an affiliate of KPS Capital Partners, LP for approximately $190 million. The income from discontinued operations was $50.4 million for the fiscal year ended September 30, 2019, which includes the operating results for Souriau-Sunbank and EIT. On January 26, 2018, the Company completed the sale of Schroth in a management buy out to a private equity fund and certain members of Schroth management for approximately $61.4 million which included a working capital adjustment of $0.3 million paid in July 2018. The loss from discontinued operations was $(4.5) million for the fiscal year ended September 30, 2018.

•	Net Income Attributable to TD Group**.** Net income attributable to TD Group decreased $67.3 million, or 7.0%, to $889.8 million for the fiscal year ended September 30, 2019 compared to net income attributable to TD Group of $957.1 million for the fiscal year ended September 30, 2018, primarily as a result of the factors referred to above.

•

Earnings per Share**.** Basic and diluted earnings per share from continuing operations and discontinued operations were $12.94 and $0.90, respectively for the fiscal year ended September 30, 2019. For the fiscal year ended September 30, 2018, basic and diluted earnings (loss) per share from continuing operations and discontinued operations were $16.28 and $(0.08), respectively. Net income attributable to TD Group for the fiscal year ended September 30, 2019 of $889.8 million was decreased by dividend equivalent payments of $111.0 million, or $1.97 per share, resulting in net income available to common shareholders of $778.7 million, or $13.84 per share. Net income attributable to TD Group for the fiscal year ended September 30, 2018 of $957.1 million was decreased by dividend equivalent payments of $56.1 million, or $1.01 per share, resulting in net income available to common shareholders of $900.9 million, or $16.20 per share. The decrease of $2.36 per share is a result of the factors referred to above.

Business Segments

•	Segment Net Sales**.** Net sales by segment for the fiscal years ended September 30, 2019 and 2018 were as follows (amounts in millions):

	Fiscal Years Ended September 30,														Change				% Change
	2019				% of Sales			2018				% of Sales
Power & Control	$	2,735.6			52.4	%		$	2,139.1			56.1	%		$	596.5			27.9	%
Airframe	2,329.4				44.6	%		1,530.9				40.2	%		798.5				52.2	%
Non-aviation	158.2				3.0	%		141.0				3.7	%		17.2				12.2	%
	$	5,223.2			100.0	%		$	3,811.0			100.0	%		$	1,412.2			37.1	%

Acquisition sales for the Power & Control segment totaled $359.3 million, or an increase of 16.8%, resulting from the acquisitions of Esterline and Extant. Organic sales for the Power & Control segment increased $237.2 million, an increase of 11.1%, for the fiscal year ended September 30, 2019 compared to the fiscal year ended September 30, 2018. The organic sales increase resulted primarily from an increase in defense sales ($128.0 million, an increase of 12.8%), an increase in commercial aftermarket sales ($59.3 million, an increase of 9.4%) and an increase in commercial OEM sales ($52.4 million, an increase of 11.5%).

Acquisition sales for the Airframe segment totaled $639.2 million, or an increase of 41.7%, resulting from the acquisitions of Esterline, Kirkhill and Skandia. Organic sales for the Airframe segment increased $159.3 million, an increase of 10.4%, for the fiscal year ended September 30, 2019 compared to the fiscal year ended September 30, 2018. The organic sales increase resulted primarily from an increase in commercial OEM sales ($61.9 million, an increase of 12.5%), an increase in defense sales ($52.4 million, an increase of 16.3%) and an increase in commercial aftermarket sales ($46.2 million, an increase of 6.6%).

Acquisition sales for the Non-aviation segment totaled $12.0 million, or an increase of 8.5%, resulting from the acquisition of Esterline. Organic sales for the Non-aviation segment increased by $5.2 million, an increase of 3.6%, for the fiscal year ended September 30, 2019 compared to the fiscal year ended September 30, 2018.

•	EBITDA As Defined**.** EBITDA As Defined by segment for the fiscal years ended September 30, 2019 and 2018 were as follows (amounts in millions):

	Fiscal Years Ended September 30,														Change				% Change
	2019				% of Segment Sales			2018				% of Segment Sales
Power & Control	$	1,395.1			51.0	%		$	1,114.4			52.1	%		$	280.7			25.2	%
Airframe	1,062.7				45.6	%		759.3				49.6	%		303.4				40.0	%
Non-aviation	50.6				32.0	%		44.3				31.4	%		6.3				14.2	%
	$	2,508.4			48.0	%		$	1,918.0			50.3	%		$	590.4			30.8	%

EBITDA As Defined for the Power & Control segment from the acquisitions of Esterline and Extant was approximately $107.5 million for the fiscal year ended September 30, 2019. Organic EBITDA As Defined for the Power & Control segment increased approximately $173.2 million, an increase of 15.5%, resulting from organic sales growth in defense, commercial aftermarket and commercial OEM, along with the application of our three core value-driven operating strategies and positive leverage on our fixed overhead costs spread over a higher production volume.

EBITDA As Defined for the Airframe segment from the acquisitions of Esterline, Kirkhill and Skandia was approximately $191.5 million for the fiscal year ended September 30, 2019. Organic EBITDA As Defined for the Airframe segment increased approximately $111.9 million, an increase of 14.7%, resulting from organic sales growth in commercial OEM, defense and commercial aftermarket, along with the application of our three core value-driven operating strategies and positive leverage on our fixed overhead costs spread over a higher production volume.

EBITDA As Defined for the Non-aviation segment from the acquisition of Esterline was approximately $1.2 million for the fiscal year ended September 30, 2019. Organic EBITDA As Defined for the Non-aviation segment increased approximately $5.1 million, an increase of 11.5%.

Fiscal year ended September 30, 2018 compared with fiscal year ended September 30, 2017

For our results of operations for fiscal 2018 compared with fiscal 2017, refer to the discussion in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Form 10-K for the fiscal year ended September 30, 2018, as filed with the Securities and Exchange Commission on November 9, 2018.

Backlog

For information about our backlog, see Item 1. “Business.”

Foreign Operations

Our direct sales to foreign customers were approximately $1,778.4 million, $1,355.1 million, and $1,318.9 million for the fiscal years 2019, 2018 and 2017, respectively. Sales to foreign customers are subject to numerous additional risks, including foreign currency fluctuations, the impact of foreign government regulations, political uncertainties and differences in business practices. There can be no assurance that foreign governments will not adopt regulations or take other action that would have a direct or indirect adverse impact on the business or market opportunities of the Company within such governments’ countries. Furthermore, there can be no assurance that the political, cultural and economic climate outside the United States will be favorable to our operations and growth strategy.

Inflation

Many of the Company’s raw materials and operating expenses are sensitive to the effects of inflation, which could result in changing operating costs. Furthermore, recently implemented changes to U.S. and other countries’ tariff and import/export regulations may have an unfavorable impact on raw materials pricing. The effects of inflation on the Company’s businesses during the fiscal years 2019, 2018 and 2017 were immaterial.

Liquidity and Capital Resources

We have historically maintained a capital structure comprising a mix of equity and debt financing. We vary our leverage both to optimize our equity return and to pursue acquisitions. We expect to meet our current debt obligations as they come due through internally generated funds from current levels of operations and/or through refinancing in the debt markets prior to the maturity dates of our debt.

We continually evaluate our debt facilities to assess whether they most efficiently and effectively meet the current and future needs of our business. The Company evaluates from time to time the appropriateness of its current leverage, taking into consideration the Company’s debt holders, equity holders, credit ratings, acquisition opportunities and other factors. The Company’s debt leverage ratio, which is computed as total debt divided by EBITDA As Defined for the applicable twelve-month period, has varied widely during the Company’s history, ranging from approximately 3.5 to 7.2. Our debt leverage ratio at September 30, 2019 was approximately 7.0.

If the Company has excess cash, it generally prioritizes allocating the excess cash in the following manner: (1) capital spending at existing businesses, (2) acquisitions of businesses, (3) payment of a special dividend and/or repurchases of our common stock and (4) prepayment of indebtedness or repurchase of debt. Whether the Company undertakes common stock repurchases or other aforementioned activities will depend on prevailing market conditions, the Company's liquidity requirements, contractual restrictions and other factors. The amounts involved may be material. In addition, the Company may issue additional debt if prevailing market conditions are favorable to doing so.

The Company’s ability to make scheduled interest payments on, or to refinance, the Company’s indebtedness, or to fund non-acquisition related capital expenditures and research and development efforts, will depend on the Company’s ability to generate cash in the future. This is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control.

As a result of the debt financing transactions completed during the fiscal year ended September 30, 2019 as described in Note 12, “Debt,” to the consolidated financial statements, and completed in the first quarter of fiscal 2020 as described in the paragraphs below and in Note 26, "Subsequent Events," to the consolidated financial statements, interest payments will increase going forward in accordance with the terms of the related debt agreements. However, in connection with the continued application of our three core value-driven operating strategies (obtaining profitable new business, continually improving our cost structure and providing highly engineered value-added products to customers), we expect our efforts will continue to generate strong margins and provide more than sufficient cash provided by operating activities to meet our interest obligations and liquidity needs. We believe our cash provided by operating activities and available borrowing capacity will enable us to make strategic business combinations, pay dividends to our shareholders and/or make opportunistic investments in our own stock.

On October 29, 2019, the Company entered into a purchase agreement in connection with a private offering of $2.65 billion aggregate principal amount in 5.50% senior subordinated notes due November 15, 2027. The settlement of the debt financing transaction occurred on November 13, 2019. The notes were issued at a price of 100% of their principal amount. The Company will use a portion of the net proceeds from the offering of the notes to redeem all of its outstanding (aggregate principal amount of $1.15 billion) 6.000% senior subordinated notes due 2022. The remaining net proceeds will be used for general corporate purposes, which may include potential future acquisitions, dividends or repurchases under its stock repurchase program.

Two recent divestitures of businesses within the Non-aviation segment are expected to provide approximately $1.1 billion in gross cash proceeds to TransDigm. On September 20, 2019, TransDigm completed the divestiture of its Esterline Interface Technology (“EIT”) group of businesses to an affiliate of KPS Capital Partners, LP for approximately $190 million. EIT was acquired by TransDigm as part of its approximately $4.0 billion acquisition of Esterline in March 2019. In the first quarter of fiscal 2020, TransDigm is expected to complete the sale of the shares of the Souriau-Sunbank Companies (“Souriau-Sunbank”) to Eaton Corporation plc for approximately $920 million. Souriau-Sunbank was also acquired by TransDigm as part of its acquisition of Esterline.

On August 23, 2019, the Company paid a special cash dividend of $30.00 on each outstanding share of common stock and cash dividend equivalent payments on options granted under its stock incentive plans. The total cash payments related to the special dividend and dividend equivalent payments in fiscal 2019 were approximately $1.7 billion.

We do not anticipate declaring regular quarterly or annual cash dividends on our common stock in the near future. Any declaration of special cash dividends on our common stock in the future will be at the discretion of our Board of Directors and will depend upon our results of operations, earnings, capital requirements, financial condition, future prospects, contractual restrictions under the senior secured credit facility and Indentures, the availability of surplus under Delaware law and other factors deemed relevant by our Board of Directors. TD Group is a holding company and conducts all of its operations through direct and indirect subsidiaries. Unless TD Group receives dividends, distributions, advances, transfers of funds or other payments from our subsidiaries, TD Group will be unable to pay any dividends on our common stock in the future. The ability of any subsidiaries to take any of the

foregoing actions is limited by the terms of our senior secured credit facility and Indentures and may be limited by future debt or other agreements that we may enter into.

In the future, the Company may increase its borrowings in connection with acquisitions, if cash flow from operating activities becomes insufficient to fund current operations or for other short-term cash needs or for stock repurchases or dividends. Our future leverage will also be impacted by the then current conditions of the credit markets.

Operating Activities. The Company generated $1,015.5 million of net cash from operating activities during fiscal 2019 compared to $1,022.2 million during fiscal 2018.

The change in trade accounts receivable during fiscal 2019 was a use of $82.3 million in cash compared to a use of cash of $43.8 million in fiscal 2018. The increase in the use of cash of $38.5 million is primarily attributable to an increase in sales and related timing of receipt of payment from customers.

The change in inventories during fiscal 2019 was a use of cash of $35.7 million compared to a use of cash of $17.9 million in fiscal 2018. The increase in the use of cash of $17.8 million compared to prior year relates to the building up of inventories at certain reporting units during the fourth fiscal quarter of 2019 based on existing backlog for the first quarter of fiscal 2020.

The change in accounts payable during fiscal 2019 was a use of cash of $1.6 million compared to a source of cash of $18.1 million in fiscal 2018 with the increase in the use of cash due to the timing of payments made to certain suppliers.

The Company generated $1,022.2 million of net cash from operating activities during fiscal 2018 compared to $788.7 million during fiscal 2017. The net increase of $233.5 million is primarily attributable to an increase in income from continuing operations of $156.6 million (excludes the non-cash effects of the adjustments resulting from the Tax Cuts and Jobs Act of $176.4 million). Changes in inventories, accounts payable and trade accounts receivable improved by approximately $23.4 million compared to the prior year.

Investing Activities. Net cash used in investing activities was $3,889.0 million during fiscal 2019, primarily consisting of capital expenditures of $101.6 million and payments for acquisitions, net of cash acquired, of $3,976.2 million which is primarily comprised of the acquisitions of Esterline for $3,923.9 million and NavCom for $27.0 million partially offset by the net cash proceeds received from the sale of EIT of $188.8 million. The Company estimates its capital expenditures in fiscal year 2020 to be between $160 million and $190 million with the increase from previous years attributable to the Esterline businesses being under TransDigm ownership for the entire fiscal year period. The Company’s capital expenditures incurred from year to year are primarily for projects that are consistent with our three core value-driven operating strategies (obtaining profitable new business, continually improve our cost structure and providing highly engineered value-added products to customers). In the first quarter of fiscal 2020, we expect to complete the sale of Souriau-Sunbank and receive approximately $920 million in gross cash proceeds from the sale.

Net cash used in investing activities was $683.6 million during fiscal 2018, primarily consisting of cash paid in connection with the acquisitions of Kirkhill, Extant, and Skandia of $667.6 million and capital expenditures of $73.3 million slightly offset by the net cash proceeds received from the sale of Schroth of $57.4 million.

Net cash used in investing activities was $287.0 million during fiscal 2017, primarily consisting of cash paid for the Third Quarter 2017 Acquisitions of $106.3 million, the cash settlement of the Breeze-Eastern dissenting shares litigation of $28.7 million, the acquisition of Schroth of $79.7 million and capital expenditures of $71.0 million.

Financing Activities. Net cash provided by financing activities during the fiscal year ended September 30, 2019 was $2,271.4 million. The source of cash was primarily attributable to $4,479.8 million in net proceeds from the completion of the 2026 Secured Notes and 2027 Notes offerings in the second quarter of fiscal 2019 and $81.9 million in proceeds from stock option exercises. Sources were partially offset by the cash tender and redemption of the 2020 Notes for $550.0 million, repayment on term loans of $76.4 million, and the payment of $1,712.2 million in special dividend and dividend equivalent payments in fiscal 2019. In the first quarter of fiscal 2020, the Company received gross cash proceeds of approximately $2.65 billion from the completion of the 5.50% senior subordinated Notes offering. The Company will use a portion of the proceeds from the offering of the notes to redeem all of its outstanding (aggregate principal amount of $1.15 billion) 6.000% senior subordinated notes due 2022. The remaining net proceeds will be used for general corporate purposes, which may include potential future acquisitions, dividends or repurchases under its stock repurchase program.

Net cash provided by financing activities during the fiscal year ended September 30, 2018 was $1,085.6 million. The source of cash was primarily due to the net proceeds of $678.6 million from the fiscal 2018 term loans activity and net proceeds of $489.6 million from the issuance of the 6.875% 2026 Notes in the third quarter of fiscal 2018, along with $57.8 million in proceeds from stock option exercises. Partially offsetting these sources of cash were $56.1 million in dividend equivalent payments made in the first quarter of fiscal 2018.

Net cash used in financing activities during the fiscal year ended September 30, 2017 was $1,443.7 million. The use of cash was primarily related to the aggregate payment of $2,581.6 million for a $24.00 per share special dividend declared and paid during the first quarter of fiscal 2017 and a $22.00 per share special dividend declared and paid in the fourth quarter of fiscal 2017 and

dividend equivalent payments. Also contributing to the use of cash was $1,284.7 million in debt service payments on the existing term loans and the remaining principal on the tranche C term loans, redemption and related premium paid on the 2021 Notes aggregating to $528.8 million and $389.8 million related to treasury stock purchases under the Company's share repurchase program. Slightly offsetting the uses of cash were net proceeds from the 2017 term loans (tranche F and tranche G term loans) of $2,937.7 million and the additional 2025 Notes offering of $300.4 million, $99.5 million in net proceeds from an additional A/R Securitization draw in the fourth quarter of fiscal 2017 and $21.2 million in proceeds from stock option exercises.

Description of Senior Secured Term Loans and Indentures

Senior Secured Credit Facilities

TransDigm has $7,523.5 million in fully drawn term loans (the “Term Loans Facility”) and a $760.0 million revolving credit facility. The Term Loans Facility consists of three tranches of term loans as follows (aggregate principal amount disclosed is as of September 30, 2019):

Term Loans Facility		Aggregate Principal		Maturity Date		Interest Rate
Tranche E		$2,221.2 million		May 30, 2025		LIBO rate + 2.5%
Tranche F		$3,524.1 million		June 9, 2023		LIBO rate + 2.5%
Tranche G		$1,778.2 million		August 22, 2024		LIBO rate + 2.5%

The Term Loans Facility requires quarterly aggregate principal payments of $19.1 million. The revolving commitments consist of two tranches which include up to $151.5 million of multicurrency revolving commitments. At September 30, 2019, the Company had $41.5 million in letters of credit outstanding and $718.5 million in borrowings available under the revolving commitments.

The interest rates per annum applicable to the loans under the Credit Agreement 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 related to tranche E, tranche F and tranche G term loans are not subject to a floor. For the fiscal year ended September 30, 2019, the applicable interest rates ranged from approximately 4.7% to 5.0% on the existing term loans. Interest rate swaps and caps used to hedge and offset, respectively, the variable interest rates on the credit facility are described in Note 21, “Derivatives and Hedging Activities,” to the consolidated financial statements.

Recent Amendments to the Credit Agreement

On March 14, 2019, the Company entered into Amendment No. 6 to the Second Amended and Restated Credit Agreement ("Amendment No. 6"). Under the terms of Amendment No. 6, the capacity of the revolving credit facility increased from $600.0 million to $760.0 million. The revolving commitments consist of two tranches which include up to $151.5 million of multicurrency revolving commitments. The terms and conditions that apply to the revolving credit facility, other than the additional revolving credit commitments, are substantially the same as the terms and conditions that applied to the revolving credit facility immediately prior to Amendment No. 6.

Indentures

Senior Subordinated Notes		Aggregate Principal		Maturity Date		Interest Rate
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%
2026 Secured Notes		$4,000 million		March 15, 2026		6.25%
6.875% 2026 Notes		$500 million		May 15, 2026		6.875%
6.375% 2026 Notes		$950 million		June 15, 2026		6.375%
2027 Notes		$550 million		March 15, 2027		7.50%

The 2022 Notes, the 2024 Notes, the 6.375% 2026 Notes and the 2027 Notes (the “TransDigm Inc. Notes”) were issued at a price of 100% of the principal amount. The initial $450 million offering of the 2025 Notes (also considered to be part of the “TransDigm Inc. Notes”) were issued at a price of 100% of the principal amount and the subsequent $300 million offering of 2025 Notes in the second quarter of fiscal 2017 were issued at a price of 101.5% of the principal amount, resulting in gross proceeds of $304.5 million. The 6.875% 2026 Notes (the "TransDigm UK Notes" and together with the TransDigm Inc. Notes, the "Notes") offered in May 2018 were issued at a price of 99.24% of the principal amount, resulting in gross proceeds of $496.2 million. The initial $3,800 million offering of the 2026 Secured Notes (the "Secured Notes") were issued at a price of 100% of their principal amount and the subsequent $200 million offering of the 2026 Secured Notes in the second quarter of fiscal 2019 were issued at a price of 101% of their principal amount, resulting in gross proceeds of $4,002 million.

The Notes do not require principal payments prior to their maturity. Interest under the Notes is payable semi-annually. The Notes represent our unsecured obligations ranking subordinate to our senior debt, as defined in the applicable indentures.

The Notes are subordinated to all of our existing and future senior debt, rank equally with all of our existing and future senior subordinated debt and rank senior to all of our future debt that is expressly subordinated to the Notes. The TransDigm Inc. Notes are guaranteed on a senior subordinated unsecured basis by TD Group and TransDigm Inc.'s domestic restricted subsidiaries. The TransDigm UK Notes are guaranteed on a senior subordinated basis by TransDigm Inc., TD Group and TransDigm Inc.'s domestic restricted subsidiaries. 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. The Notes are structurally subordinated to all of the liabilities of TD Group’s non-guarantor subsidiaries. The Notes contain many of the restrictive covenants included in the Credit Agreement. TransDigm is in compliance with all of the covenants contained in the Notes.

On January 30, 2019, the Company entered into a purchase agreement in connection with a private offering of $3.8 billion aggregate principal amount in 6.25% senior secured notes due 2026. In addition, on February 1, 2019, the Company entered into a purchase agreement in connection with a private offering of $200 million aggregate principal amount of 6.25% senior secured notes due 2026. All $4.0 billion aggregate principal amount of the secured notes constituted a single class and were issued under a single indenture (herein the "2026 Secured Notes"). The notes in the first secured notes offering were issued at a price of 100% of their principal amount and the notes in the second secured notes offering were issued at a price of 101% of their principal amount. The Notes are guaranteed, with certain exceptions, by TransDigm Group, TransDigm UK and all of TransDigm Inc.’s existing U.S. subsidiaries on a senior secured basis. The 2026 Secured Notes offerings closed on February 13, 2019 and mature on March 15, 2026.

On February 13, 2019, the Company announced a cash tender offer for any and all of Esterline’s outstanding 2020 Notes. On March 15, 2019, the Company redeemed the principal amount of $550 million in 2020 Notes, plus accrued and unpaid interest of approximately $12.6 million. The Company wrote off $1.7 million in unamortized debt issuance costs during the fiscal year ended September 30, 2019 in conjunction with the redemption of the 2020 Notes.

On March 14, 2019, in connection with the closing of the acquisition of Esterline, the Company announced a cash tender offer for any and all of its outstanding 2023 Notes. On April 15, 2019, the Company redeemed the principal amount of approximately $373.8 million (€330.0 million as the 2023 Notes were denominated in Euros), plus accrued interest of approximately $6.8 million, the early redemption premium of $6.8 million and fees of approximately $0.2 million.

On October 29, 2019, the Company entered into a purchase agreement in connection with a private offering of $2.65 billion aggregate principal amount in 5.50% senior subordinated notes due November 15, 2027. The settlement of the debt financing transaction occurred on November 13, 2019. The notes were issued at a price of 100% of their principal amount. The Company will use a portion of the net proceeds from the offering of the notes to redeem all of its outstanding 2022 Notes. The remaining net proceeds will be used for general corporate purposes, which may include potential future acquisitions, dividends or repurchases under its stock repurchase program.

Certain Restrictive Covenants in Our Debt Documents

The Credit Agreement and the Indentures governing the Notes contain restrictive covenants that, among other things, limit the incurrence of additional indebtedness, the payment of special dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, liens and encumbrances, and prepayments of certain other indebtedness.

The restrictive covenants included in the Credit Agreement are subject to amendments executed periodically. The most recent amendment that impacted the restrictive covenants contained in the Credit Agreement is Amendment No. 6 which is described above in the Recent Amendments to the Credit Agreement section.

Under the terms of the Credit Agreement, TransDigm is entitled, on one or more occasions, to request additional term loans or additional revolving commitments to the extent that the existing or new lenders agree to provide such incremental term loans or additional revolving commitments provided that, among other conditions, our consolidated net leverage ratio would be no greater than 7.25 to 1.00 and the consolidated secured net debt ratio would be no greater than 5.00 to 1.00, in each case, after giving effect to such incremental term loans or additional revolving commitments.

The Credit Agreement requires mandatory prepayments of principal based on certain percentages of Excess Cash Flow (as defined in the Credit Agreement), commencing 90 days after the end of each fiscal year, subject to certain exceptions. In addition, subject to certain exceptions (including, with respect to asset sales, the reinvestment in productive assets), TransDigm will be required to prepay the loans outstanding under the Credit Agreement at 100% of the principal amount thereof, plus accrued and unpaid interest, with the net cash proceeds of certain asset sales and issuance or incurrence of certain indebtedness. No matters mandating prepayments occurred during the quarter ended September 30, 2019.

In addition, under the Credit Agreement, if the usage of the revolving credit facility exceeds 35% of the total revolving commitments, the Company will be required to maintain a maximum consolidated net leverage ratio of net debt, as defined, to trailing four-

quarter EBITDA As Defined. A breach of any of the covenants or an inability to comply with the required leverage ratio could result in a default under the Credit Agreement or the Indentures.

If any such default occurs, the lenders under the Credit Agreement and the holders of the Notes may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable. The lenders under the Credit Agreement also have the right in these circumstances to terminate any commitments they have to provide further borrowings. In addition, following an event of default under the Credit Agreement, the lenders thereunder will have the right to proceed against the collateral granted to them to secure the debt, which includes our available cash, and they will also have the right to prevent us from making debt service payments on the Notes.

As of September 30, 2019, the Company was in compliance with all of its debt covenants.

Trade Receivables Securitization

During fiscal 2014, the Company established a trade receivable securitization facility (the “Securitization Facility”). The Securitization Facility effectively increases the Company’s borrowing capacity depending on the amount of the domestic operations’ trade accounts receivable. The Securitization Facility includes the right for the Company to exercise annual one year extensions as long as there have been no termination events as defined by the agreement. The Company uses the proceeds from the Securitization Facility as an alternative to other forms of debt, effectively reducing borrowing costs. On July 30, 2019, the Company amended the Securitization Facility to extend the maturity date to July 31, 2020. As of September 30, 2019, the Company has borrowed $350 million under the Securitization Facility, which bears interest at a rate of 0.9% plus LIBOR. At September 30, 2019, the applicable interest rate was 2.94%. The Securitization Facility is collateralized by substantially all of the Company’s domestic operations’ trade accounts receivable.

Stock Repurchase Program

On November 8, 2017, our Board of Directors, authorized a stock repurchase program 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 years ended September 30, 2019 and 2018. As of September 30, 2019, $650 million in repurchases are allowable under the program subject to any restrictions specified in the Credit Agreement and/or Indentures governing the existing Notes.

Contractual Obligations

The following is a summary of contractual cash obligations as of September 30, 2019 (in millions):

	2020				2021				2022				2023				2024				2025 and thereafter				Total
Senior Secured Term Loans(1)	$	76.4			$	76.4			$	76.4			$	3,457.4			$	1,728.4			$	2,108.4			$	7,523.4
2022 Notes(2)	—				—				1,150.0				—				—				—				1,150.0
2024 Notes	—				—				—				—				1,200.0				—				1,200.0
2025 Notes	—				—				—				—				—				750.0				750.0
6.875% 2026 Notes	—				—				—				—				—				500.0				500.0
6.375% 2026 Notes	—				—				—				—				—				950.0				950.0
2026 Secured Notes	—				—				—				—				—				4,000.0				4,000.0
2027 Notes	—				—				—				—				—				550.0				550.0
Securitization Facility	350.0				—				—				—				—				—				350.0
Scheduled Interest Payments(3)	912.9				888.0				906.3				837.5				703.5				730.4				4,978.6
Government Refundable Advances	3.0				3.2				3.3				3.5				3.7				22.5				39.2
Operating Leases	22.3				31.5				17.2				14.1				12.5				27.8				125.4
Capital Leases	1.5				2.4				2.4				1.6				1.6				40.3				49.8
Pension Funding Minimums	9.1				7.8				7.6				7.7				7.8				39.5				79.5
Purchase Obligations	631.0				57.7				19.0				6.5				2.2				14.4				730.8
Total Contractual Cash Obligations	$	2,006.2			$	1,067.0			$	2,182.2			$	4,328.3			$	3,659.7			$	9,733.3			$	22,976.7

(1)	The tranche E term loans mature in May 2025, the tranche F term loans mature in June 2023, and the tranche G term loans mature in August 2024. The term loans require quarterly principal payments totaling $19.1 million.

(2)	The 2022 Notes will be fully redeemed in the first quarter of fiscal 2020 in connection with the issuance of $2,650.0 million of new 2027 notes. Since this transaction occurred after September 30, 2019, it is not reflected in the contractual obligations table.

(3)

Assumes that the variable interest rate on our tranche E, tranche F and tranche G borrowings under our Senior Secured Term Loans range from approximately 4.7% to 5.0% based on anticipated movements in the LIBO rate. In addition, interest payments include the impact of the existing interest rate swap and cap agreements described in Note 21, “Derivatives and Hedging Activities” to the consolidated financial statements herein.

In addition to the contractual obligations set forth above, the Company incurs capital expenditures for the purpose of maintaining and replacing existing equipment and facilities and, from time to time, for facility expansion. Capital expenditures totaled approximately $101.6 million, $73.3 million, and $71.0 million during fiscal years 2019, 2018, and fiscal 2017, respectively. The Company estimates its capital expenditures in fiscal year 2020 to be between $160 million and $190 million with the increase from previous years attributable to the Esterline businesses being under TransDigm ownership for the entire fiscal year period.

Off-Balance Sheet Arrangements

The Company utilizes letters of credit to back certain payment and performance obligations. Letters of credit are subject to limits based on amounts outstanding under the Company’s revolving credit facility. As of September 30, 2019, the Company had $41.5 million in letters of credit outstanding.

New Accounting Standards

For information about new accounting standards, see Note 4, “Recent Accounting Pronouncements,” to our consolidated financial statements included herein.

Additional Disclosure Required by Indentures

Separate financial statements of TransDigm Inc. are not presented because TransDigm Inc.’s 2022 Notes, 2024 Notes, 2025 Notes, 6.375% 2026 Notes, 2026 Secured Notes and 2027 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.