filings.toolsItem 1. FINANCIAL STATEMENTS
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Item 1. FINANCIAL STATEMENTS
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in millions, except share amounts)
(Unaudited)
| December 27, 2025 | September 30, 2025 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | 2,528 | $ | 2,808 | |||||||
| Trade accounts receivable—Net | 1,564 | 1,617 | |||||||||
| Inventories—Net | 2,373 | 2,095 | |||||||||
| Prepaid expenses and other | 506 | 492 | |||||||||
| Total current assets | 6,971 | 7,012 | |||||||||
| PROPERTY, PLANT AND EQUIPMENT—NET | 1,653 | 1,579 | |||||||||
| GOODWILL | 11,075 | 10,612 | |||||||||
| OTHER INTANGIBLE ASSETS—NET | 3,783 | 3,454 | |||||||||
| OTHER NON-CURRENT ASSETS | 275 | 252 | |||||||||
| TOTAL ASSETS | $ | 23,757 | $ | 22,909 | |||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Current portion of long-term debt | $ | 125 | $ | 124 | |||||||
| Short-term borrowings—trade receivable securitization facility | 724 | 724 | |||||||||
| Accounts payable | 385 | 368 | |||||||||
| Accrued and other current liabilities | 1,301 | 966 | |||||||||
| Total current liabilities | 2,535 | 2,182 | |||||||||
| LONG-TERM DEBT | 29,197 | 29,167 | |||||||||
| DEFERRED INCOME TAXES | 721 | 759 | |||||||||
| OTHER NON-CURRENT LIABILITIES | 567 | 480 | |||||||||
| Total liabilities | 33,020 | 32,588 | |||||||||
| TD GROUP STOCKHOLDERS’ DEFICIT: | |||||||||||
| Common stock - $.01 par value; authorized 224,400,000 shares; issued 62,573,115 and 62,465,317 at December 27, 2025 and September 30, 2025, respectively | 1 | 1 | |||||||||
| Additional paid-in capital | 3,187 | 3,135 | |||||||||
| Accumulated deficit | (10,168) | (10,606) | |||||||||
| Accumulated other comprehensive income (loss) | 22 | (10) | |||||||||
| Treasury stock, at cost; 6,174,887 and 6,089,675 shares at December 27, 2025 and September 30, 2025, respectively | (2,312) | (2,206) | |||||||||
| Total TD Group stockholders’ deficit | (9,270) | (9,686) | |||||||||
| NONCONTROLLING INTERESTS | 7 | 7 | |||||||||
| Total stockholders’ deficit | (9,263) | (9,679) | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 23,757 | $ | 22,909 |
See notes to condensed consolidated financial statements
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in millions, except per share amounts)
(Unaudited)
| Thirteen Week Periods Ended | |||||||||||||||||||||||
| December 27, 2025 | December 28, 2024 | ||||||||||||||||||||||
| NET SALES | $ | 2,285 | $ | 2,006 | |||||||||||||||||||
| COST OF SALES | 933 | 771 | |||||||||||||||||||||
| GROSS PROFIT | 1,352 | 1,235 | |||||||||||||||||||||
| SELLING AND ADMINISTRATIVE EXPENSES | 254 | 211 | |||||||||||||||||||||
| AMORTIZATION OF INTANGIBLE ASSETS | 56 | 50 | |||||||||||||||||||||
| INCOME FROM OPERATIONS | 1,042 | 974 | |||||||||||||||||||||
| INTEREST EXPENSE—NET | 475 | 378 | |||||||||||||||||||||
| OTHER INCOME | (5) | (23) | |||||||||||||||||||||
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 572 | 619 | |||||||||||||||||||||
| INCOME TAX PROVISION | 127 | 126 | |||||||||||||||||||||
| NET INCOME | 445 | 493 | |||||||||||||||||||||
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | — | — | |||||||||||||||||||||
| NET INCOME ATTRIBUTABLE TO TD GROUP | $ | 445 | $ | 493 | |||||||||||||||||||
| NET INCOME APPLICABLE TO TD GROUP COMMON STOCKHOLDERS | $ | 386 | $ | 444 | |||||||||||||||||||
| Earnings per share attributable to TD Group common stockholders: | |||||||||||||||||||||||
| Earnings per share | $ | 6.62 | $ | 7.62 | |||||||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||||||
| Basic and diluted | 58.2 | 58.3 |
See notes to condensed consolidated financial statements
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in millions)
(Unaudited)
| Thirteen Week Periods Ended | |||||||||||||||||||||||
| December 27, 2025 | December 28, 2024 | ||||||||||||||||||||||
| Net income | $ | 445 | $ | 493 | |||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | — | — | |||||||||||||||||||||
| Net income attributable to TD Group | $ | 445 | $ | 493 | |||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustment | 26 | (227) | |||||||||||||||||||||
| Unrealized gains on derivatives | 6 | 22 | |||||||||||||||||||||
| Pension and post-retirement benefit plans adjustment | — | — | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax, attributable to TD Group | 32 | (205) | |||||||||||||||||||||
| TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO TD GROUP | $ | 477 | $ | 288 |
See notes to condensed consolidated financial statements
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Amounts in millions, except share amounts)
(Unaudited)
| TD Group Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Par Value | Number of Shares | Value | Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—September 30, 2024 | 61,904,833 | $ | 1 | $ | 2,819 | $ | (7,362) | $ | (42) | (5,688,639) | $ | (1,706) | $ | 7 | $ | (6,283) | |||||||||||||||||||||||||||||||||||||
| Accrued unvested dividend equivalents and other | — | — | — | (8) | — | — | — | — | (8) | ||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense recognized for employee stock options | — | — | 33 | — | — | — | — | — | 33 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | 118,080 | — | 35 | — | — | — | — | — | 35 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases under repurchase program | — | — | — | — | — | (252,800) | (316) | — | (316) | ||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to TD Group | — | — | — | 493 | — | — | — | — | 493 | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | (227) | — | — | — | (227) | ||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | 22 | — | — | — | 22 | ||||||||||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefit plans adjustment, net of tax | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—December 28, 2024 | 62,022,913 | $ | 1 | $ | 2,887 | $ | (6,877) | $ | (247) | (5,941,439) | $ | (2,022) | $ | 7 | $ | (6,251) | |||||||||||||||||||||||||||||||||||||
| TD Group Stockholders | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | Par Value | Number of Shares | Value | Noncontrolling Interests | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—September 30, 2025 | 62,465,317 | $ | 1 | $ | 3,135 | $ | (10,606) | $ | (10) | (6,089,675) | $ | (2,206) | $ | 7 | $ | (9,679) | |||||||||||||||||||||||||||||||||||||
| Accrued unvested dividend equivalents and other | — | — | — | (7) | — | — | — | — | (7) | ||||||||||||||||||||||||||||||||||||||||||||
| Compensation expense recognized for employee stock options | — | — | 24 | — | — | — | — | — | 24 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation activity | 107,798 | — | 28 | — | — | — | — | — | 28 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock repurchases under repurchase program | — | — | — | — | — | (85,212) | (106) | — | (106) | ||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to TD Group | — | — | — | 445 | — | — | — | — | 445 | ||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment, net of tax | — | — | — | — | 26 | — | — | — | 26 | ||||||||||||||||||||||||||||||||||||||||||||
| Unrealized gain on derivatives, net of tax | — | — | — | — | 6 | — | — | — | 6 | ||||||||||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefit plans adjustment, net of tax | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—December 27, 2025 | 62,573,115 | $ | 1 | $ | 3,187 | $ | (10,168) | $ | 22 | (6,174,887) | $ | (2,312) | $ | 7 | $ | (9,263) | |||||||||||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements
TRANSDIGM GROUP INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in millions)
(Unaudited)
| Thirteen Week Periods Ended | |||||||||||
| December 27, 2025 | December 28, 2024 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 445 | $ | 493 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation | 44 | 40 | |||||||||
| Amortization of intangible assets and product certification costs | 56 | 50 | |||||||||
| Amortization of debt issuance costs and original issue discount | 11 | 9 | |||||||||
| Gain on sale of businesses, net | — | (19) | |||||||||
| Non-cash stock and deferred compensation expense | 27 | 25 | |||||||||
| Deferred income taxes | (1) | (2) | |||||||||
| Changes in assets/liabilities, net of effects from acquisitions and sales of businesses: | |||||||||||
| Trade accounts receivable | 94 | 80 | |||||||||
| Inventories | (96) | (72) | |||||||||
| Income taxes payable | 70 | 91 | |||||||||
| Other assets | (16) | (2) | |||||||||
| Accounts payable | (25) | (3) | |||||||||
| Accrued interest | 270 | 201 | |||||||||
| Accrued and other liabilities | (47) | (139) | |||||||||
| Net cash provided by operating activities | 832 | 752 | |||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures | (60) | (42) | |||||||||
| Acquisition of businesses, net of cash acquired | (907) | (29) | |||||||||
| Other investing transactions, net | (6) | 47 | |||||||||
| Net cash used in investing activities | (973) | (24) | |||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Proceeds from exercise of stock options | 29 | 35 | |||||||||
| Dividends and dividend equivalent payments | (59) | (4,396) | |||||||||
| Repurchases of common stock | (106) | (316) | |||||||||
| Proceeds from trade receivable securitization facility, net | — | 163 | |||||||||
| Financing costs and other, net | (5) | (2) | |||||||||
| Net cash used in financing activities | (141) | (4,516) | |||||||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 2 | (14) | |||||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (280) | (3,802) | |||||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 2,808 | 6,261 | |||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 2,528 | $ | 2,459 | |||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||||
| Cash paid during the period for interest, net | $ | 185 | $ | 162 | |||||||
| Cash paid during the period for income taxes, net of refunds | $ | 58 | $ | 37 |
See notes to condensed consolidated financial statements
TRANSDIGM GROUP INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THIRTEEN WEEK PERIODS ENDED DECEMBER 27, 2025 AND DECEMBER 28, 2024
(UNAUDITED)
1. BASIS OF PRESENTATION
As used in this Quarterly Report on Form 10-Q, unless the context otherwise indicates, the terms “the Company,” “TD Group,” “TransDigm,” “we,” “us,” “our,” and similar references refer to TransDigm Group Incorporated and its subsidiaries.
Principles of Consolidation
The financial information included herein is unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s condensed consolidated financial statements for the interim periods presented. These financial statements and notes should be read in conjunction with the financial statements and related notes for the fiscal year ended September 30, 2025 included in TD Group’s Annual Report on Form 10-K filed on November 12, 2025. As disclosed therein, the Company’s annual consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”). The September 30, 2025 condensed consolidated balance sheet was derived from TD Group’s audited financial statements. The results of operations for the thirteen week period ended December 27, 2025 are not necessarily indicative of the results to be expected for the full year.
Reclassifications
Certain reclassifications have been made to the prior year amounts to conform to the current year presentation, none of which are material.
New Accounting Pronouncements Adopted
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 expands disclosures about a public business entity's reportable segments and provides for more detailed information about a reportable segment's expenses. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. This standard is effective for annual periods beginning after December 15, 2023 (fiscal 2025) and interim periods within fiscal years beginning one year later (fiscal 2026). The Company adopted this standard in the fourth quarter of fiscal 2025. Refer to Note 12, “Segments,” for further information.
Recent Accounting Pronouncements Issued
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and disaggregated information about significant reconciling items by jurisdiction and by nature. The ASU also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. The standard makes several other changes to income tax disclosure requirements. This standard is effective for annual periods beginning after December 15, 2024 (fiscal 2026), and requires prospective application with the option to apply it retrospectively. The Company will adopt this standard in the fourth quarter of fiscal 2026 and expects to apply it prospectively. This standard will expand our annual income tax disclosures, but will not impact our consolidated balance sheets, results of operations or cash flows.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” Additionally, in January 2025, the FASB issued ASU 2025-01 to clarify the effective date of ASU 2024-03. The standard requires, among other items, additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the statement of income. The standard is effective for fiscal years beginning after December 15, 2026 (fiscal 2028), and for interim periods within fiscal years beginning after December 15, 2027 (fiscal 2029), on a retrospective or prospective basis, with early adoption permitted. The Company is currently evaluating this standard to determine its impact on our disclosures.
2. ACQUISITIONS
Subsequent Events – Jet Parts Engineering and Victor Sierra Aviation Holdings – On January 13, 2026, the Company entered into a definitive agreement to acquire all the outstanding stock of Jet Parts Engineering (“JPE”) and Victor Sierra Aviation Holdings (“VSA”), portfolio companies of Vance Street Capital, for approximately $2.2 billion in cash. The acquisition is expected to be financed using existing cash on hand and additional debt capacity available.
JPE, headquartered in Seattle, Washington, is a leading independent designer and manufacturer of aerospace aftermarket solutions, primarily proprietary original equipment manufacturer (“OEM”) alternative parts and repairs. JPE serves commercial, regional and cargo airline customers, as well as maintenance, repair and overhaul providers. JPE’s products are highly engineered, proprietary parts manufacturer approval (“PMA”) components with a strong presence across major commercial aerospace platforms. Nearly all of JPE’s revenue is derived from the commercial aftermarket. In addition to its engineering headquarters in Seattle, Washington, JPE has engineering and component repair locations in Texas, New York, Florida, Alabama and the United Kingdom.
VSA is a leading designer, manufacturer, and distributor of proprietary PMA and other aftermarket parts serving the commercial aerospace end market – primarily the general aviation and business aviation sectors. VSA is a leading collection of brands including McFarlane Aviation, Tempest Aero Group, and Aviation Products Systems. VSA offers a complete line of highly engineered PMA, custom design and OEM products, as well as service and repair stations. Nearly all of VSA’s revenue is derived from the commercial aftermarket. VSA primarily operates out of three facilities: Baldwin City, Kansas; Burlington, North Carolina; and Granite City, Illinois. Additional satellite facilities are in Illinois, Texas, Kentucky and Washington to provide support and strategic proximity to customers.
The acquisition of JPE and VSA is subject to regulatory approvals in the United States and customary closing conditions.
Subsequent Events – Stellant Systems, Inc. – On December 30, 2025, the Company entered into a definitive agreement to acquire all the outstanding stock of Stellant Systems, Inc. (“Stellant”), a portfolio company of Arlington Capital Partners, for approximately $960 million in cash. The acquisition is expected to be financed using existing cash on hand and additional debt capacity available.
Stellant, headquartered in Torrance, California, is a leading global designer and manufacturer of high-power electronic components and subsystems serving the aerospace and defense end market. Stellant’s products are highly engineered, proprietary components with substantial aftermarket content and a strong presence across major aerospace and defense platforms, adding new products and services to TransDigm's portfolio.
The acquisition of Stellant is subject to regulatory approvals in the United States and customary closing conditions.
Simmonds Precision Products, Inc. – On October 6, 2025, the Company completed the acquisition of all the outstanding stock of the Simmonds Precision Products, Inc. Business (“Simmonds”) of Goodrich Corporation from RTX Corporation for approximately $757 million in cash. The acquisition was financed through existing cash on hand. Simmonds, headquartered in Vergennes, Vermont, is a leading global designer and manufacturer of fuel & proximity sensing and structural health monitoring solutions for the aerospace and defense end markets. Simmonds' products are highly engineered, proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms. The operating results of Simmonds are included within TransDigm's Power & Control segment.
Based on the fair value of the assets acquired and liabilities assumed, all of the $391 million of goodwill and $329 million of other intangible assets recognized for the acquisition as of December 27, 2025 is expected to be deductible for tax purposes over 15 years. As of December 27, 2025, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed are subject to adjustment until the end of the measurement period.
Servotronics, Inc. – On June 2, 2025, the Company launched a tender offer to acquire all the issued and outstanding stock of Servotronics, Inc. (“Servotronics”), at a price of $47.00 per share in cash. On July 1, 2025, the tender offer expired, resulting in all issued and outstanding stock of Servotronics being canceled and Servotronics becoming a wholly owned subsidiary of the Company. The total purchase price was approximately $133 million in cash, which was financed through existing cash on hand. Servotronics, headquartered in Elma, New York, is a leading global designer and manufacturer of servo controls and other advanced technology components for aerospace and defense applications. Its products are highly engineered, proprietary components with significant aftermarket content and a strong presence across major aerospace and defense platforms. The operating results of Servotronics are included within TransDigm's Power & Control segment.
Based on the fair value of the assets acquired and liabilities assumed, $75 million of goodwill and $46 million of other intangible assets was recognized for the acquisition as of December 27, 2025, none of which is expected to be deductible for tax purposes. As of December 27, 2025, the measurement period (not to exceed one year) is open; therefore, the assets acquired and liabilities assumed are subject to adjustment until the end of the measurement period.
Other Acquisitions – For the thirteen week period ended December 27, 2025, the Company completed several acquisitions consisting of substantially all of the assets and technical data rights of certain product lines or all the outstanding stock of certain businesses (collectively, referred to herein as the “Other Acquisitions”), each meeting the definition of a business, for a total aggregate purchase price of $151 million in cash. Each of the acquisitions was financed through existing cash on hand. These acquisitions represent bolt-ons to existing TransDigm operating units. The Company expects that all of the $58 million of goodwill and $50 million of other intangible assets recognized as of December 27, 2025 for the acquisitions will be deductible for tax purposes over 15 years. As of December 27, 2025, the measurement period (not to exceed one year) is open for certain Other Acquisitions; therefore, the assets acquired and liabilities assumed are subject to adjustment until the end of the respective measurement period.
For the fiscal year ended September 30, 2025, the Company completed a number of Other Acquisitions, each meeting the definition of a business, for a total aggregate purchase price of $284 million in cash. Each of the acquisitions was financed through existing cash on hand. These acquisitions represent bolt-ons to existing TransDigm operating units. The Company expects that all of the approximately $126 million of goodwill and $90 million of other intangible assets recognized for the acquisitions will be deductible for tax purposes over 15 years.
Pro forma net sales and results of operations for the acquisitions, had they occurred at the beginning of the thirteen week periods ended December 27, 2025 or December 28, 2024 are not material.
The acquisitions completed by the Company strengthen and expand the Company’s position to design, produce and supply highly engineered proprietary aerospace components in niche markets with significant aftermarket content and provide opportunities to create value through the application of our three core value-driven operating strategy (obtaining profitable new business, continually improving our cost structure, and providing highly engineered value-added products to customers). The purchase prices paid reflect the current EBITDA As Defined and cash flows, as well as the future EBITDA As Defined and cash flows expected to be generated by the businesses, which are driven in most cases by the recurring aftermarket consumption over the life of a particular aircraft, estimated to be approximately 25 to 30 years.
3. REVENUE RECOGNITION
TransDigm's sales are concentrated in the aerospace and defense industry. The Company’s customers include: distributors of aerospace components, commercial airlines, large commercial transport and regional and business aircraft OEMs, various armed forces of the United States (“U.S.”) and friendly foreign governments, defense OEMs, system suppliers, and various other industrial customers.
The Company recognizes revenue from contracts with customers using the five step model prescribed in ASC 606. A substantial portion of the Company's revenue is recorded at a point in time basis. Revenue is recognized from the sale of products or services when obligations under the terms of the contract are satisfied and control of promised goods or services has transferred to the customer. Control is transferred when the customer has the ability to direct the use of and obtain benefits from the goods or services. Revenue is measured at the amount of consideration the Company expects to be paid in exchange for goods or services.
In a limited number of contracts, control transfers to the customer over time, primarily in contracts where the customer is required to pay for the cost of both the finished and unfinished goods at the time of cancellation plus a reasonable profit relative to the work performed for products that were customized for the customer. Therefore, we recognize revenue over time for those agreements that have a right to margin and where the products being produced have no alternative use.
Based on our production cycle, it is generally expected that goods related to the revenue will be shipped and billed within twelve months. For revenue recognized over time, we estimate the amount of revenue attributable to a contract earned at a given point during the production cycle based on certain costs, such as materials and labor incurred to date, plus the expected profit, which is a cost-to-cost input method.
We consider the contractual consideration payable by the customer and assess variable consideration that may affect the total transaction price. Variable consideration is included in the estimated transaction price when there is a basis to reasonably estimate the amount, including whether the estimate should be constrained in order to avoid a significant reversal of revenue in a future period. These estimates are based on historical experience, anticipated performance under the terms of the contract and our best judgment at the time.
When contracts are modified to account for changes in contract specifications and requirements, the Company considers whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification to an existing contract on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
The Company’s payment terms vary by the type and location of the customer and the products or services offered. The Company does not offer any payment terms that would meet the requirements for consideration as a significant financing component.
Shipping and handling fees and costs incurred in connection with products sold are recorded in cost of sales in the consolidated statements of income, and are not considered a performance obligation to our customers.
The Company pays sales commissions that relate to contracts for products or services that are satisfied at a point in time or over a period of one year or less and are expensed as incurred. These costs are reported as a component of selling and administrative expenses in the condensed consolidated statements of income.
We have elected to adopt the practical expedient to not disclose the aggregate amount of transaction price allocated to performance obligations that are unsatisfied as of the end of the reporting period for performance obligations that are part of a contract with an original expected duration of one year or less.
Contract Assets and Liabilities – Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing or reimbursable costs related to a specific contract. Contract liabilities (Deferred revenue) relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. The following table summarizes our contract assets and liabilities balances (in millions):
| December 27, 2025 | September 30, 2025 | ||||||||||
| Contract assets, current (1) | $ | 306 | $ | 280 | |||||||
| Contract assets, non-current (2) | 104 | 94 | |||||||||
| Total contract assets | 410 | 374 | |||||||||
| Contract liabilities, current (3) | 164 | 143 | |||||||||
| Contract liabilities, non-current (4) | 7 | 7 | |||||||||
| Total contract liabilities | 171 | 150 | |||||||||
| Net contract assets | $ | 239 | $ | 224 |
(1)Included in prepaid expenses and other on the condensed consolidated balance sheets.
(2)Included in other non-current assets on the condensed consolidated balance sheets.
(3)Included in accrued and other current liabilities on the condensed consolidated balance sheets.
(4)Included in other non-current liabilities on the condensed consolidated balance sheets.
For the thirteen week period ended December 27, 2025, the revenue recognized that was included in the contract liability balance at the beginning of the fiscal year was approximately $37 million.
Refer to Note 12, “Segments,” for disclosures related to the disaggregation of revenue.
Allowance for Credit Losses – The Company's allowance for credit losses is the allowance for uncollectible accounts. The allowance for uncollectible accounts reduces the trade accounts receivable balance to the estimated net realizable value equal to the amount that is expected to be collected. As of December 27, 2025 and September 30, 2025, the allowance for uncollectible accounts was $29 million and $25 million, respectively.
4. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data) using the two-class method:
| Thirteen Week Periods Ended | |||||||||||||||||||||||
| December 27, 2025 | December 28, 2024 | ||||||||||||||||||||||
| Numerator for earnings per share: | |||||||||||||||||||||||
| Net income | $ | 445 | $ | 493 | |||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | — | — | |||||||||||||||||||||
| Net income attributable to TD Group | 445 | 493 | |||||||||||||||||||||
| Less: Dividends paid on participating securities | (59) | (49) | |||||||||||||||||||||
| Net income applicable to TD Group common stockholders—basic and diluted | $ | 386 | $ | 444 | |||||||||||||||||||
| Denominator for basic and diluted earnings per share under the two-class method: | |||||||||||||||||||||||
| Weighted-average common shares outstanding | 56.4 | 56.2 | |||||||||||||||||||||
| Vested options deemed participating securities | 1.8 | 2.1 | |||||||||||||||||||||
| Total shares for basic and diluted earnings per share | 58.2 | 58.3 | |||||||||||||||||||||
| Earnings per share—basic and diluted (1) | $ | 6.62 | $ | 7.62 |
(1)Figures in the table may not recalculate exactly due to rounding. Earnings per share is calculated using unrounded numbers.
5. STOCK REPURCHASE PROGRAM
On January 27, 2022, the Board of Directors of the Company (the “Board”) authorized a new stock repurchase program permitting repurchases of our outstanding shares not to exceed $2.2 billion in the aggregate (referred to herein as the “existing stock repurchase program”), subject to any restrictions specified in the Second Amended and Restated Credit Agreement dated as of June 4, 2014 (the “Credit Agreement”) and indentures governing the existing Subordinated and Secured Notes, replacing the $650 million stock repurchase program. In November 2025, the Board authorized an additional $5.0 billion in share repurchases of common stock permissible under the Company’s existing stock repurchase program. There is no expiration date for the existing stock repurchase program.
For the thirteen week period ended December 27, 2025, the Company repurchased 85,212 shares of common stock at an average price of $1,249.73 per share for a total amount of $106 million. The repurchased shares of common stock are classified as treasury stock in the statement of changes in stockholders' deficit. As of December 27, 2025, $5,681 million remains available for repurchase under the existing stock repurchase program.
6. 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.
Inventories consist of the following (in millions):
| December 27, 2025 | September 30, 2025 | ||||||||||
| Raw materials and purchased component parts | $ | 1,458 | $ | 1,295 | |||||||
| Work-in-progress | 643 | 543 | |||||||||
| Finished goods | 272 | 257 | |||||||||
| Inventories—Net | $ | 2,373 | $ | 2,095 |
7. GOODWILL AND INTANGIBLE ASSETS
The following is a summary of changes in the carrying value of goodwill by segment from September 30, 2025 through December 27, 2025 (in millions):
| Power & Control | Airframe | Non-aviation | Total | ||||||||||||||||||||
| Balance at September 30, 2025 | $ | 5,273 | $ | 5,260 | $ | 79 | $ | 10,612 | |||||||||||||||
| Goodwill acquired during the period | 410 | 39 | — | 449 | |||||||||||||||||||
| Currency translation adjustments and other | 4 | 10 | — | 14 | |||||||||||||||||||
| Balance at December 27, 2025 | $ | 5,687 | $ | 5,309 | $ | 79 | $ | 11,075 |
Other intangible assets–net in the condensed consolidated balance sheets consist of the following (in millions):
| December 27, 2025 | September 30, 2025 | ||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net | Gross Carrying Amount | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||
| Trademarks and trade names | $ | 1,214 | $ | — | $ | 1,214 | $ | 1,162 | $ | — | $ | 1,162 | |||||||||||||||||||||||
| Technology | 2,788 | 1,171 | 1,617 | 2,647 | 1,137 | 1,510 | |||||||||||||||||||||||||||||
| Order backlog | 68 | 36 | 32 | 59 | 28 | 31 | |||||||||||||||||||||||||||||
| Customer relationships | 1,155 | 240 | 915 | 971 | 225 | 746 | |||||||||||||||||||||||||||||
| Other | 12 | 7 | 5 | 12 | 7 | 5 | |||||||||||||||||||||||||||||
| Total | $ | 5,237 | $ | 1,454 | $ | 3,783 | $ | 4,851 | $ | 1,397 | $ | 3,454 |
The estimated fair value of the net identifiable tangible and intangible assets acquired is based on the acquisition method of accounting. The fair value of the net identifiable tangible and intangible assets acquired will be finalized within the measurement period (not to exceed one year). Intangible assets acquired during the thirteen week period ended December 27, 2025 are summarized in the table below (in millions):
| Gross Amount | Amortization Period | ||||||||||
| Intangible assets not subject to amortization: | |||||||||||
| Trademarks and trade names | $ | 51 | |||||||||
| Intangible assets subject to amortization: | |||||||||||
| Technology & Other | 138 | 10 to 20 years | |||||||||
| Order backlog | 8 | 1 to 3 years | |||||||||
| Customer relationships | 182 | 10 to 20 years | |||||||||
| 328 | |||||||||||
| Total | $ | 379 |
The Company performs its 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 events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We have assessed the changes in events and circumstances through the first quarter of fiscal 2026 and concluded that no triggering events occurred that required an interim test.
8. DEBT
The Company’s debt consists of the following (in millions):
| December 27, 2025 | |||||||||||||||||||||||
| Gross Amount | Debt Issuance Costs | Original Issue Discount | Net Amount | ||||||||||||||||||||
| Short-term borrowings—trade receivable securitization facility | $ | 725 | $ | (1) | $ | — | $ | 724 | |||||||||||||||
| Term loans | $ | 11,124 | $ | (42) | $ | (33) | $ | 11,049 | |||||||||||||||
| 6.750% secured notes due 2028 (“2028 Secured Notes”) | 2,100 | (10) | (5) | 2,085 | |||||||||||||||||||
| 4.625% senior subordinated notes due 2029 (“4.625% 2029 Notes”) | 1,200 | (4) | — | 1,196 | |||||||||||||||||||
| 6.375% secured notes due 2029 (“2029 Secured Notes”) | 2,750 | (16) | (1) | 2,733 | |||||||||||||||||||
| 4.875% senior subordinated notes due 2029 (“4.875% 2029 Notes”) | 750 | (3) | — | 747 | |||||||||||||||||||
| 6.875% secured notes due 2030 (“2030 Secured Notes”) | 1,450 | (10) | — | 1,440 | |||||||||||||||||||
| 7.125% secured notes due 2031 (“2031 Secured Notes”) | 1,000 | (7) | (6) | 987 | |||||||||||||||||||
| 6.625% secured notes due 2032 (“2032 Secured Notes”) | 2,200 | (16) | — | 2,184 | |||||||||||||||||||
| 6.000% secured notes due 2033 (“2033 Secured Notes”) | 1,500 | (12) | — | 1,488 | |||||||||||||||||||
| 6.375% senior subordinated notes due 2033 (“6.375% 2033 Notes”) | 2,650 | (13) | (19) | 2,618 | |||||||||||||||||||
| 6.250% secured notes due 2034 (“2034 Secured Notes”) | 500 | (4) | — | 496 | |||||||||||||||||||
| 6.750% senior subordinated notes due 2034 (“6.750% 2034 Notes”) | 2,000 | (18) | — | 1,982 | |||||||||||||||||||
| Government refundable advances | 13 | — | — | 13 | |||||||||||||||||||
| Finance lease obligations | 304 | — | — | 304 | |||||||||||||||||||
| 29,541 | (155) | (64) | 29,322 | ||||||||||||||||||||
| Less: current portion | 126 | (1) | — | 125 | |||||||||||||||||||
| Long-term debt | $ | 29,415 | $ | (154) | $ | (64) | $ | 29,197 |
Accrued interest, which is classified as a component of accrued and other current liabilities on the condensed consolidated balance sheets, was $478 million and $208 million as of December 27, 2025 and September 30, 2025, respectively.
9. INCOME TAXES
At the end of each reporting period, TD Group makes an estimate of its annual effective income tax rate. The estimate used in the year-to-date period may change in subsequent periods.
During the thirteen week periods ended December 27, 2025 and December 28, 2024, the effective income tax rate was 22.2% and 20.4%, respectively. The Company’s higher effective income tax rate for the thirteen week period ended December 27, 2025 was primarily due to a less significant benefit associated with share-based payments when compared to the same period in fiscal 2025. The Company’s effective income tax rate for the thirteen week period ended December 27, 2025 was higher than the federal statutory tax rate of 21% primarily due to an increase in the valuation allowance applicable to the Company’s net interest deduction limitation, a higher effective tax rate on non-U.S. earnings, offset by the discrete impact of excess tax benefits associated with share-based payments.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. The Company is no longer subject to U.S. federal examinations for years before fiscal 2022. The Company is currently under examination for its federal income taxes in Canada for fiscal years 2013 through 2019, in France for fiscal years 2020 through 2022, and in Germany for fiscal years 2017 through 2019. In addition, the Company is subject to state income tax examinations for fiscal years 2015 and later.
Unrecognized tax benefits at December 27, 2025 and September 30, 2025 were not material.
On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act (the “Act”) was signed into law. It contains a broad range of tax reform provisions affecting businesses. The majority of these provisions will impact us starting in fiscal year 2027. We continue to evaluate the future effects of the Act on our effective tax rate and cash tax position. The impact of the legislation on our operating results for the thirteen week period ended December 27, 2025 was not material.
10. FAIR VALUE MEASUREMENTS
The following table presents our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.
The following summarizes the carrying amounts and fair values of financial instruments (in millions):
| December 27, 2025 | September 30, 2025 | ||||||||||||||||||||||||||||
| Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
| Cash and cash equivalents | 1 | $ | 2,528 | $ | 2,528 | $ | 2,808 | $ | 2,808 | ||||||||||||||||||||
| Interest rate swap agreements (1) | 2 | 1 | 1 | 3 | 3 | ||||||||||||||||||||||||
| Interest rate collar agreements (1) | 2 | 3 | 3 | 4 | 4 | ||||||||||||||||||||||||
| Interest rate swap agreements (2) | 2 | 10 | 10 | 5 | 5 | ||||||||||||||||||||||||
| Interest rate collar agreements (2) | 2 | 4 | 4 | 3 | 3 | ||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
| Foreign currency forward exchange contracts (3) | 2 | 1 | 1 | 2 | 2 | ||||||||||||||||||||||||
| Interest rate collar agreements (4) | 2 | 2 | 2 | 3 | 3 | ||||||||||||||||||||||||
| Short-term borrowings - trade receivable securitization facility (5) | 2 | 724 | 724 | 724 | 724 | ||||||||||||||||||||||||
| Long-term debt, including current portion: | |||||||||||||||||||||||||||||
| Term loans (5) | 2 | 11,049 | 11,169 | 11,048 | 11,120 | ||||||||||||||||||||||||
| 2028 Secured Notes (5) | 1 | 2,085 | 2,139 | 2,083 | 2,139 | ||||||||||||||||||||||||
| 4.625% 2029 Notes (5) | 1 | 1,196 | 1,190 | 1,195 | 1,175 | ||||||||||||||||||||||||
| 2029 Secured Notes (5) | 1 | 2,733 | 2,833 | 2,732 | 2,812 | ||||||||||||||||||||||||
| 4.875% 2029 Notes (5) | 1 | 747 | 747 | 747 | 739 | ||||||||||||||||||||||||
| 2030 Secured Notes (5) | 1 | 1,440 | 1,513 | 1,440 | 1,501 | ||||||||||||||||||||||||
| 2031 Secured Notes (5) | 1 | 987 | 1,049 | 986 | 1,041 | ||||||||||||||||||||||||
| 2032 Secured Notes (5) | 1 | 2,184 | 2,283 | 2,183 | 2,263 | ||||||||||||||||||||||||
| 2033 Secured Notes (5) | 1 | 1,488 | 1,532 | 1,488 | 1,517 | ||||||||||||||||||||||||
| 6.375% 2033 Notes (5) | 1 | 2,618 | 2,716 | 2,616 | 2,686 | ||||||||||||||||||||||||
| 2034 Secured Notes (5) | 1 | 496 | 518 | 495 | 514 | ||||||||||||||||||||||||
| 6.750% 2034 Notes (5) | 1 | 1,982 | 2,083 | 1,982 | 2,068 | ||||||||||||||||||||||||
| Government refundable advances | 2 | 13 | 13 | 12 | 12 | ||||||||||||||||||||||||
| Finance lease obligations | 2 | 304 | 304 | 284 | 284 |
(1)Included in prepaid expenses and other on the condensed consolidated balance sheets.
(2)Included in other non-current assets on the condensed consolidated balance sheets.
(3)Included in accrued and other current liabilities on the condensed consolidated balance sheets.
(4)Included in other non-current liabilities on the condensed consolidated balance sheets.
(5)The carrying amount of the debt instrument is presented net of debt issuance costs and original issue discount.
The Company values its financial instruments using an industry standard market approach, in which prices and other relevant information are generated by market transactions involving identical or comparable assets or liabilities. No financial instruments were recognized or disclosed using unobservable inputs (i.e., Level 3).
The Company’s derivatives consist of interest rate swap and collar agreements and foreign currency exchange contracts. The fair values of the interest rate swap and collar agreements were derived by taking the net present value of the expected cash flows using observable market inputs (Level 2) such as SOFR rate curves, futures, volatilities and basis spreads (when applicable). The fair values of the foreign currency exchange contracts were derived by using Level 2 inputs based on observable spot and forward exchange rates in active markets. There has not been any impact to the fair value of derivative liabilities due to the Company's own credit risk. Similarly, there has not been any material impact to the fair value of derivative assets based on the Company's evaluation of counterparties' credit risks.
The estimated fair value of the Company’s term loans was based on information provided by the agent under the Company’s Credit Agreement. The estimated fair values of the Company’s notes were based upon quoted market prices.
The fair value of cash and cash equivalents, trade accounts receivable-net and accounts payable approximated carrying value due to the short-term nature of these instruments at December 27, 2025 and September 30, 2025.
11. DERIVATIVES AND HEDGING ACTIVITIES
The Company is exposed to, among other things, the impact of changes in foreign currency exchange rates and interest rates in the normal course of business. The Company’s risk management program is designed to manage the exposure and volatility arising from these risks, and utilizes derivative financial instruments to offset a portion of these risks. The Company uses derivative financial instruments only to the extent necessary to hedge identified business risks and does not enter into such transactions for trading purposes. The Company generally does not require collateral or other security with counterparties to these financial instruments and is therefore subject to credit risk in the event of nonperformance; however, the Company monitors credit risk and currently does not anticipate nonperformance by other parties. These derivative financial instruments do not subject the Company to undue risk, as gains and losses on these instruments generally offset gains and losses on the underlying assets, liabilities, or anticipated transactions that are being hedged. The Company has agreements with each of its swap, cap and collar counterparties that contain a provision whereby if the Company defaults on the Credit Agreement, the Company could also be declared in default on its swaps, cap and collars resulting in an acceleration of settlement under the swaps, cap and collars.
All derivative financial instruments are recorded at fair value in the condensed consolidated balance sheets. For a derivative that has not been designated as an accounting hedge, the change in the fair value is recognized immediately through earnings. For a derivative that has been designated as an accounting hedge of an existing asset or liability (a fair value hedge), the change in the fair value of both the derivative and underlying asset or liability is recognized immediately through earnings. For a derivative designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the condensed consolidated balance sheets in accumulated other comprehensive loss to the extent the derivative is effective in mitigating the exposure related to the anticipated transaction. The change in the fair value related to the ineffective portion of the hedge, if any, is immediately recognized in earnings. The amount recorded within accumulated other comprehensive loss is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings.
Interest Rate Swap, Cap and Collar Agreements – Interest rate swap, cap and collar agreements are used to manage interest rate risk associated with floating rate borrowings, specifically the term loans, under our Credit Agreement. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the term of the agreements without an exchange of the underlying principal amount. The agreements utilized by the Company effectively modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating rate debt to a fixed rate basis from the effective date through the maturity date of the respective interest rate swap, cap and collar agreements, thereby reducing the impact of interest rate movements on future interest expense.
During the fourth quarter of fiscal 2025, we entered into forward starting interest rate collar agreements and interest rate swap agreements. The interest rate collar agreements, aggregating to a notional amount of $2,750 million, establish a range where we will pay the counterparties if the three-month Term SOFR rate falls below the established floor rate, and the counterparties will pay us if the three-month Term SOFR rate exceeds the ceiling rate as summarized in the table below. The collar will settle quarterly from the effective date through the maturity date. No payments or receipts will be exchanged on the interest rate collar contracts unless interest rates rise above or fall below the contracted ceiling or floor rates. The interest rate swap agreements hedge the variable interest rates on the Company's floating rate debt exposures for a fixed rate based on an aggregate notional amount of $2,750 million. The swap will settle quarterly from the effective date through the maturity date. The Company does not have any interest rate cap agreements as of December 27, 2025.
The tables below summarize the key terms of the swaps and collars as of December 27, 2025 (aggregated by effective date).
Interest rate swap agreements:
| Aggregate Notional Amount (in millions) | Effective Date | Maturity Date | Conversion of Related Variable Rate Debt subject to Term SOFR to Fixed Rate of: | |||||||||||||||||
| $700 | 9/30/2025 | 9/30/2027 | 3.22% plus applicable margin percentage | |||||||||||||||||
| $125 | 9/30/2027 | 9/30/2029 | 3.11% plus applicable margin percentage | |||||||||||||||||
| $1,025 | 9/30/2027 | 9/30/2029 | 3.12% plus applicable margin percentage | |||||||||||||||||
| $900 | 9/30/2027 | 9/30/2029 | 3.14% plus applicable margin percentage |
Interest rate collar agreements:
| Aggregate Notional Amount (in millions) | Effective Date | Maturity Date | Offsets Variable Rate Debt Attributable to Fluctuations Below and Above: | |||||||||||||||||
| $1,100 | 3/31/2025 | 9/30/2026 | Three-month Term SOFR rate of 2.00% (floor) and 3.50% (cap) | |||||||||||||||||
| $500 | 9/30/2025 | 9/30/2026 | Three-month Term SOFR rate of 2.00% (floor) and 3.50% (cap) | |||||||||||||||||
| $1,338 | 9/30/2025 | 9/30/2027 | Three-month Term SOFR rate of 2.50% (floor) and 4.50% (cap) | |||||||||||||||||
| $700 | 9/30/2025 | 9/30/2027 | Three-month Term SOFR rate of 2.00% (floor) and 3.91% (cap) | |||||||||||||||||
| $1,550 | 9/30/2026 | 9/30/2027 | Three-month Term SOFR rate of 2.50% (floor) and 4.50% (cap) | |||||||||||||||||
| $2,050 | 9/30/2027 | 9/30/2029 | Three-month Term SOFR rate of 2.21% (floor) and 4.25% (cap) |
These derivative instruments qualify as effective cash flow hedges under U.S. GAAP. For our cash flow hedges, the effective portion of the gain or loss from the financial instruments is initially reported as a component of accumulated other comprehensive loss in stockholders’ deficit and subsequently reclassified into earnings in the same line as the hedged item in the same period or periods during which the hedged item affects earnings. As the interest rate swap, cap and collar agreements are used to manage interest rate risk, any gains or losses from the derivative instruments that are reclassified into earnings are recognized in interest expense-net in the condensed consolidated statements of income. Cash flows related to the derivative contracts are included in cash flows from operating activities on the condensed consolidated statements of cash flows.
Certain derivative asset and liability balances are offset where master netting agreements provide for the legal right of setoff. For classification purposes, we record the net fair value of each type of derivative position that is expected to settle in less than one year with each counterparty as a net current asset or liability and each type of long-term position as a net non-current asset or liability. The amounts shown in the table below represent the gross amounts of recognized assets and liabilities, the amounts offset in the condensed consolidated balance sheets and the net amounts of assets and liabilities presented therein (in millions):
| December 27, 2025 | September 30, 2025 | |||||||||||||||||||||||||
| Asset | Liability | Asset | Liability | |||||||||||||||||||||||
| Interest rate collar agreements | $ | 7 | $ | 2 | $ | 7 | $ | 3 | ||||||||||||||||||
| Interest rate swap agreements | 11 | — | 8 | — | ||||||||||||||||||||||
| Net derivatives as classified in the condensed consolidated balance sheets (1) | $ | 18 | $ | 2 | $ | 15 | $ | 3 |
(1)Refer to Note 10, “Fair Value Measurements,” for the condensed consolidated balance sheets classification of the Company's interest rate swap and collar agreements.
Based on the fair value amounts determined as of December 27, 2025, the estimated net amount of existing losses (gains) and caplet amortization expected to be reclassified into interest expense-net within the next twelve months is approximately $7 million.
Foreign Currency Forward Exchange Contracts – The Company transacts business in various foreign currencies, which subjects the Company’s cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates, and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. At December 27, 2025, the Company has outstanding foreign currency forward exchange contracts to sell U.S. dollars with notional amounts of $89 million. The maximum duration of the Company’s foreign currency cash flow hedge contracts at December 27, 2025 is nine months. These notional values consist of contracts for the Canadian dollar and the euro and are stated in U.S. dollar equivalents at spot exchange rates at the respective trade dates. Amounts related to foreign currency forward exchange contracts included in accumulated other comprehensive loss in stockholders' deficit are reclassified into net sales when the hedged transaction settles. As of December 27, 2025, the Company expects to record a net loss of approximately $1 million on foreign currency forward exchange contracts designated as cash flow hedges to net sales over the next twelve months.
12. SEGMENTS
The Company’s businesses are organized and managed in three reporting segments: Power & Control, Airframe and Non-aviation. Refer to Note 15, “Segments,” in Part IV, Item 15. Exhibits and Financial Statement Schedules, of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed on November 12, 2025, for further information on the composition of the Company's segments.
The Company’s segments are reported on the same basis used internally by our Chief Operating Decision Maker (“CODM”) for evaluating performance and for allocating resources. The Company’s CODM is collectively the President and Chief Executive Officer and Co-Chief Operating Officers. The primary measurement used internally by our CODM and management to review and assess the operating performance of each segment is EBITDA As Defined. Actual results are compared to plan, forecast and prior year on a monthly basis. The Company defines EBITDA As Defined as earnings before interest, taxes, depreciation and amortization plus certain non-operating items recorded as corporate expenses including non-cash compensation charges incurred in connection with the Company’s stock incentive or deferred compensation plans, foreign currency gains and losses, acquisition-integration costs, acquisition transaction-related expenses, and refinancing costs. Acquisition transaction and integration-related expenses represent costs incurred to integrate acquired businesses into TD Group’s operations; facility relocation costs and other acquisition-related costs; transaction and valuation-related costs for acquisitions comprising deal fees, legal, financial and tax due diligence expenses; amortization expense of inventory step-up recorded in connection with the purchase accounting of acquired businesses.
EBITDA As Defined is not a measurement of financial performance under U.S. GAAP. Although the Company uses EBITDA As Defined to assess the performance of its business and for various other purposes, the use of this non-GAAP financial measure as an analytical tool has limitations, and it should not be considered in isolation or as a substitute for analysis of the Company’s results of operations as reported in accordance with U.S. GAAP.
The accounting policies for each segment are the same as those described in Note 1, “Summary of Significant Accounting Policies,” in Part IV, Item 15. Exhibits and Financial Statement Schedules, of our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed on November 12, 2025. Intersegment sales and transfers are recorded at values based on market prices, which creates intercompany profit on intersegment sales or transfers that is eliminated in consolidation. Intersegment sales were immaterial for the periods presented below. Corporate consists of our corporate offices. Corporate expenses consist primarily of compensation, benefits, professional services and other administrative costs incurred by the corporate offices. Corporate assets consist primarily of cash and cash equivalents. Corporate expenses and assets reconcile reportable segment data to the consolidated totals. An immaterial amount of corporate expenses is allocated to the operating segments.
The following table sets forth, for the periods indicated, certain financial information by reportable segment, which includes a reconciliation of EBITDA As Defined to consolidated income from continuing operations before income taxes (in millions):
| Thirteen Week Period Ended December 27, 2025 | ||||||||||||||||||||||||||
| Power & Control | Airframe | Non-aviation | Total | |||||||||||||||||||||||
| Net sales to external customers | ||||||||||||||||||||||||||
| Commercial and non-aerospace OEM | $ | 253 | $ | 294 | $ | 547 | ||||||||||||||||||||
| Commercial and non-aerospace aftermarket | 368 | 360 | 728 | |||||||||||||||||||||||
| Defense | 603 | 367 | 970 | |||||||||||||||||||||||
| Non-aviation | — | — | 40 | 40 | ||||||||||||||||||||||
| Net Sales | 1,224 | 1,021 | 40 | 2,285 | ||||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||
| Other segment expenses (1) | 569 | 471 | 24 | |||||||||||||||||||||||
| Total segment EBITDA As Defined | 655 | 550 | 16 | 1,221 | ||||||||||||||||||||||
| Less: Unallocated corporate EBITDA As Defined | 24 | |||||||||||||||||||||||||
| Depreciation and amortization expense | 100 | |||||||||||||||||||||||||
| Interest expense-net | 475 | |||||||||||||||||||||||||
| Acquisition transaction and integration-related expenses | 12 | |||||||||||||||||||||||||
| Non-cash stock and deferred compensation expense | 27 | |||||||||||||||||||||||||
| Other, net | 11 | |||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 572 |
(1)Primarily represents cost of sales, selling expenses, general and administrative expenses, research and development, and miscellaneous income or expense. Excludes depreciation and amortization; non-cash stock and deferred compensation expense; foreign currency transaction losses; acquisition transaction and integration-related expenses and payroll withholding taxes related to dividend equivalent payments.
| Thirteen Week Period Ended December 28, 2024 | ||||||||||||||||||||||||||
| Power & Control | Airframe | Non-aviation | Total | |||||||||||||||||||||||
| Net sales to external customers | ||||||||||||||||||||||||||
| Commercial and non-aerospace OEM | $ | 194 | $ | 278 | $ | 472 | ||||||||||||||||||||
| Commercial and non-aerospace aftermarket | 338 | 333 | 671 | |||||||||||||||||||||||
| Defense | 495 | 335 | 830 | |||||||||||||||||||||||
| Non-aviation | — | — | 33 | 33 | ||||||||||||||||||||||
| Net Sales | 1,027 | 946 | 33 | $ | 2,006 | |||||||||||||||||||||
| Less: | ||||||||||||||||||||||||||
| Other segment expenses (1) | 442 | 430 | 21 | |||||||||||||||||||||||
| Total segment EBITDA As Defined | 585 | 516 | 12 | 1,113 | ||||||||||||||||||||||
| Less: Unallocated corporate EBITDA As Defined | 52 | |||||||||||||||||||||||||
| Depreciation and amortization expense | 90 | |||||||||||||||||||||||||
| Interest expense-net | 378 | |||||||||||||||||||||||||
| Acquisition transaction and integration-related expenses | 13 | |||||||||||||||||||||||||
| Non-cash stock and deferred compensation expense | 25 | |||||||||||||||||||||||||
| Other, net | (64) | |||||||||||||||||||||||||
| Income from continuing operations before income taxes | $ | 619 |
(1)Primarily represents cost of sales, selling expenses, general and administrative expenses, research and development, and miscellaneous income or expense. Excludes depreciation and amortization; non-cash stock and deferred compensation expense; foreign currency transaction gains; acquisition transaction and integration-related expenses and payroll withholding taxes related to dividend equivalent payments.
The following table presents capital expenditures and depreciation and amortization by segment (in millions):
| Thirteen Week Periods Ended | |||||||||||
| December 27, 2025 | December 28, 2024 | ||||||||||
| Capital expenditures | |||||||||||
| Power & Control | $ | 30 | $ | 20 | |||||||
| Airframe | 24 | 21 | |||||||||
| Non-aviation | 6 | 1 | |||||||||
| $ | 60 | $ | 42 | ||||||||
| Depreciation and amortization | |||||||||||
| Power & Control | 53 | 43 | |||||||||
| Airframe | 46 | 46 | |||||||||
| Non-aviation | 1 | 1 | |||||||||
| $ | 100 | $ | 90 |
The following table presents total assets by segment (in millions):
| December 27, 2025 | September 30, 2025 | ||||||||||
| Total assets | |||||||||||
| Power & Control | $ | 10,916 | $ | 9,859 | |||||||
| Airframe | 10,346 | 10,267 | |||||||||
| Non-aviation | 199 | 202 | |||||||||
| Corporate (1) | 2,296 | 2,581 | |||||||||
| $ | 23,757 | $ | 22,909 |
(1)Corporate consists of our corporate offices and does not constitute an operating segment. These amounts are included to reconcile to total consolidated assets.
13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents the total changes by component in accumulated other comprehensive income (loss), net of taxes, for the thirteen week periods ended December 27, 2025 and December 28, 2024 (in millions):
| Unrealized losses on derivatives (1) | Pension and post-retirement benefit plans adjustment (2) | Foreign currency translation adjustment (3) | Total | ||||||||||||||||||||
| Balance at September 30, 2025 | $ | (4) | $ | (2) | $ | (4) | $ | (10) | |||||||||||||||
| Net current-period other comprehensive income (4) | 6 | — | 26 | 32 | |||||||||||||||||||
| Balance at December 27, 2025 | $ | 2 | $ | (2) | $ | 22 | $ | 22 | |||||||||||||||
| Balance at September 30, 2024 | $ | 19 | $ | 1 | $ | (62) | $ | (42) | |||||||||||||||
| Net current-period other comprehensive income (loss) (4) | 22 | — | (227) | (205) | |||||||||||||||||||
| Balance at December 28, 2024 | $ | 41 | $ | 1 | $ | (289) | $ | (247) |
(1)Represents unrealized gains (losses) on derivatives designated and qualifying as cash flow hedges, net of tax (expense) benefit, of $2 million and $7 million for the thirteen week periods ended December 27, 2025 and December 28, 2024, respectively.
(2)There were no material pension liability adjustments, net of taxes, related to activity for the defined pension plans and postretirement benefit plans for the thirteen week periods ended December 27, 2025 and December 28, 2024.
(3)Represents gains (losses) resulting from foreign currency translation of financial statements, including gains (losses) from certain intercompany transactions, into U.S. dollars at the rates of exchange in effect at the balance sheet dates.
(4)Presented net of reclassifications out of accumulated other comprehensive income (loss) into earnings, specifically net sales and interest expense-net, for realized (losses) gains on derivatives designated and qualifying as cash flow hedges of $(1) million (net of taxes of less than $(1) million) and $1 million (net of taxes of $1 million), respectively, for the thirteen week period ended December 27, 2025 and less than $(1) million (net of taxes of less than $(1) million) and $1 million (net of taxes of less than $1 million), respectively, for the thirteen week period ended December 28, 2024.
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